UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________

FORM 10-Q

_________________________________



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~November 2, 2019~~October 31, 2020



☐			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

_________________________________

L BRANDS, INC.

(Exact name of registrant as specified in its charter)

_______________________________



Delaware		31-1029810
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
Three Limited Parkway
Columbus,	Ohio	43230
(Address of principal executive offices)		(Zip Code)
(614)	415-7000
(Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate website, if any,~~ every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer		☒			Accelerated filer		☐

~~Large accelerated filer~~		☒	~~Accelerated filer~~	☐

Non-accelerated filer	☐ (Do not check if a smaller reporting company)		Smaller reporting company			☐

					Emerging growth company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.50 Par Value	LB	The New York Stock Exchange

As of November ~~29, 2019,~~27, 2020, the number of outstanding shares of the Registrant’s common stock, was ~~276,474,678~~278,108,563 shares.

Table of Contents

L BRANDS, INC.

TABLE OF CONTENTS


		Page No.
Part I. Financial Information

		~~Page No.~~
~~Part I. Financial Information~~

Item 1. Financial Statements *

Consolidated Statements of Income (Loss) for the Thirteen-Weeks and Thirty-Nine-Weeks Ended October 31, 2020 and November 2, 2019 ~~and November 3, 2018~~ (Unaudited)		3

Consolidated Statements of Comprehensive Income (Loss) for the Thirteen-Weeks and Thirty-Nine-Weeks Ended October 31, 2020 and November 2, 2019 ~~and November 3, 2018~~ (Unaudited)		3

Consolidated Balance Sheets as of October 31, 2020 (Unaudited), February 1, 2020 and November 2, 2019 (Unaudited)~~, February 2, 2019 and November 3, 2018 (Unaudited)~~		4

Consolidated Statements of Total Equity (Deficit) for the Thirteen-Weeks and Thirty-Nine-Weeks Ended October 31, 2020 and November 2, 2019 ~~and November 3, 2018~~ (Unaudited)		5

Consolidated Statements of Cash Flows for the Thirty-Nine-Weeks Ended October 31, 2020 and November 2, 2019 ~~and November 3, 2018~~ (Unaudited)		7

Notes to Consolidated Financial Statements (Unaudited)		8

Report of Independent Registered Public Accounting Firm		3522

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995		3623

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		3724

Item 3. Quantitative and Qualitative Disclosures About Market Risk		5543

Item 4. Controls and Procedures		5644

Part II. Other Information		5745

Item 1. Legal Proceedings		5745

Item 1A. Risk Factors		5745

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		5746

Item 3. Defaults Upon Senior Securities		5746

Item 4. Mine Safety Disclosures		5746

Item 5. Other Information		5746

Item 6. Exhibits		5847

~~Signature~~	59



* Signature			48


*			The Company's fiscal year ends on the Saturday nearest to January 31. As used herein, “third quarter of ~~2019”~~2020” and “third quarter of ~~2018”~~2019” refer to the thirteen-week periods ended October 31, 2020 and November 2, 2019, respectively. “Year-to-date 2020” and ~~November 3, 2018, respectively. "Year-to-date 2019" and "year-to-date 2018"~~“year-to-date 2019” refer to the thirty-nine-week periods ending October 31, 2020 and November 2, 2019, ~~and November 3, 2018,~~ respectively.

Table of Contents

PART I—FINANCIAL INFORMATION


~~Item 1.~~	Item 1. FINANCIAL STATEMENTS

L BRANDS, INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in millions except per share amounts)

(Unaudited)


	Third Quarter						Year-to-Date							Third Quarter				Year-to-Date
	2019			2018			2019			2018				2020		2019		2020		2019
Net Sales	$	2,677		$	2,775		$	8,207		$	8,385		Net Sales	$	3,055	$	2,677	$	7,029	$	8,207
Costs of Goods Sold, Buying and Occupancy	(1,936		)	(1,847		)	(5,550		)	(5,454		)	Costs of Goods Sold, Buying and Occupancy	(1,696)		(1,936)		(4,669)		(5,550)
Gross Profit	741			928			2,657			2,931			Gross Profit	1,359		741		2,360		2,657
General, Administrative and Store Operating Expenses	(892		)	(874		)	(2,480		)	(2,494		)	General, Administrative and Store Operating Expenses	(778)		(892)		(2,053)		(2,480)
Operating Income (Loss)	(151		)	54			177			437			Operating Income (Loss)	581		(151)		307		177
Interest Expense	(92		)	(96		)	(286		)	(292		)	Interest Expense	(121)		(92)		(322)		(286)
Other Income (Loss)	(34		)	1			(66		)	1
Other Loss													Other Loss	(50)		(34)		(48)		(66)
Income (Loss) Before Income Taxes	(277		)	(41		)	(175		)	146			Income (Loss) Before Income Taxes	410		(277)		(63)		(175)
Provision (Benefit) for Income Taxes	(25		)	2			(1		)	42			Provision (Benefit) for Income Taxes	79		(25)		(47)		(1)
Net Income (Loss)	$	(252	)	$	(43	)	$	(174	)	$	104		Net Income (Loss)	$	331	$	(252)	$	(16)	$	(174)
Net Income (Loss) Per Basic Share	$	(0.91	)	$	(0.16	)	$	(0.63	)	$	0.37		Net Income (Loss) Per Basic Share	$	1.19	$	(0.91)	$	(0.06)	$	(0.63)
Net Income (Loss) Per Diluted Share	$	(0.91	)	$	(0.16	)	$	(0.63	)	$	0.37
Net Income (Loss) Per Dilutive Share													Net Income (Loss) Per Dilutive Share	$	1.17	$	(0.91)	$	(0.06)	$	(0.63)
Dividends Per Share	$	0.30		$	0.60		$	0.90		$	1.80		Dividends Per Share	$	0	$	0.30	$	0.30	$	0.90

L BRANDS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

(Unaudited)


	Third Quarter				Year-to-Date
	2020		2019		2020		2019
Net Income (Loss)	$	331	$	(252)	$	(16)	$	(174)
Other Comprehensive Income (Loss), Net of Tax:
Foreign Currency Translation	(1)		6		(4)		(5)
Unrealized Gain (Loss) on Cash Flow Hedges	0		(2)		2		2
Reclassification of Cash Flow Hedges to Earnings	0		0		(2)		(3)
Total Other Comprehensive Income (Loss), Net of Tax	(1)		4		(4)		(6)
Total Comprehensive Income (Loss)	$	330	$	(248)	$	(20)	$	(180)

Third Quarter Year-to-Date
2019 2018 2019 2018
Net Income (Loss) $ (252 ) $ (43 ) $ (174 ) $ 104
Other Comprehensive Income (Loss), Net of Tax:
   Foreign Currency Translation 6
(2 ) (5 ) (24 )
   Unrealized Gain (Loss) on Cash Flow Hedges (2 ) 1
2
10
   Reclassification of Cash Flow Hedges to Earnings —
—
(3 ) 3
Total Other Comprehensive Income (Loss), Net of Tax 4
(1 )
(6 )
(11 )
Total Comprehensive Income (Loss) $ (248 ) $ (44 ) $ (180 ) $ 93

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

Table of Contents

L BRANDS, INC.

CONSOLIDATED BALANCE SHEETS

(in millions except par value amounts)

November 2,
2019 February 2,
2019 November 3,
2018
(Unaudited) (Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 340
$ 1,413
$ 348
Accounts Receivable, Net 295
367
321
Inventories 2,032
1,248
1,963
Other 259
232
301
Total Current Assets 2,926
3,260
2,933
Property and Equipment, Net 2,571
2,818
2,934
Operating Lease Assets 3,130
—
—
Goodwill 1,318
1,348
1,348
Trade Names 411
411
411
Deferred Income Taxes 63
62
20
Other Assets 211
191
183
Total Assets $ 10,630
$ 8,090
$ 7,829
LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable $ 1,024
$ 711
$ 1,060
Accrued Expenses and Other 980
1,082
1,018
Current Debt 75
72
56
Current Operating Lease Liabilities 460
—
—
Income Taxes 4
121
8
Total Current Liabilities 2,543
1,986
2,142
Deferred Income Taxes 246
226
234
Long-term Debt 5,477
5,739
5,814
Long-term Operating Lease Liabilities 3,108
—
—
Other Long-term Liabilities 494
1,004
951
Shareholders’ Equity (Deficit):
Preferred Stock - $1.00 par value; 10 shares authorized; none issued —
—
—
Common Stock - $0.50 par value; 1,000 shares authorized; 284, 283 and 283 shares issued; 276, 275 and 275 shares outstanding, respectively 142
141
142
Paid-in Capital 828
771
747
Accumulated Other Comprehensive Income 53
59
11
Retained Earnings (Deficit) (1,907 ) (1,482 ) (1,856 )
Less: Treasury Stock, at Average Cost; 8, 8 and 8 shares, respectively (358 ) (358 ) (358 )
Total L Brands, Inc. Shareholders’ Equity (Deficit) (1,242 ) (869 ) (1,314 )
Noncontrolling Interest 4
4
2
Total Equity (Accumulated Deficit) (1,238 ) (865 ) (1,312 )
Total Liabilities and Equity (Deficit) $ 10,630
$ 8,090
$ 7,829


	October 31, 2020		February 1, 2020		November 2, 2019
	(Unaudited)				(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents	$	2,622	$	1,499	$	340
Accounts Receivable, Net	297		306		295
Inventories	1,865		1,287		2,032
Other	143		153		259
Total Current Assets	4,927		3,245		2,926
Property and Equipment, Net	2,231		2,486		2,571
Operating Lease Assets	2,558		3,053		3,130
Goodwill	628		628		1,318
Trade Names	411		411		411
Deferred Income Taxes	69		84		63
Other Assets	337		218		211
Total Assets	$	11,161	$	10,125	$	10,630
LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable	$	1,101	$	647	$	1,024
Accrued Expenses and Other	1,479		1,052		980
Current Debt	11		61		75
Current Operating Lease Liabilities	625		478		460
Income Taxes	114		134		4
Total Current Liabilities	3,330		2,372		2,543
Deferred Income Taxes	191		219		246
Long-term Debt	6,451		5,487		5,477
Long-term Operating Lease Liabilities	2,566		3,052		3,108
Other Long-term Liabilities	187		490		494
Shareholders’ Equity (Deficit):
Preferred Stock - $1.00 par value; 10 shares authorized; none issued	0		0		0
Common Stock - $0.50 par value; 1,000 shares authorized; 286, 285 and 284 shares issued; 278, 277 and 276 shares outstanding, respectively	143		142		142
Paid-in Capital	879		847		828
Accumulated Other Comprehensive Income	48		52		53
Retained Earnings (Deficit)	(2,280)		(2,182)		(1,907)
Less: Treasury Stock, at Average Cost; 8, 8 and 8 shares, respectively	(358)		(358)		(358)
Total L Brands, Inc. Shareholders’ Equity (Deficit)	(1,568)		(1,499)		(1,242)
Noncontrolling Interest	4		4		4
Total Equity (Accumulated Deficit)	(1,564)		(1,495)		(1,238)
Total Liabilities and Equity (Deficit)	$	11,161	$	10,125	$	10,630

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

Table of Contents

L BRANDS, INC.

CONSOLIDATED STATEMENTS OF TOTAL EQUITY (DEFICIT)

(in millions except per share amounts)

(Unaudited)

Third Quarter 2020


	Common Stock			Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings (Accumulated Deficit)		Treasury Stock, at Average Cost		Noncontrolling Interest		Total Equity (Deficit)
	Shares Outstanding	Par Value
Balance, August 1, 2020	278	$	143	$	869	$	49	$	(2,611)	$	(358)	$	4	$	(1,904)
Net Income	—	0		0		0		331		0		0		331
Other Comprehensive Loss	—	0		0		(1)		0		0		0		(1)
Total Comprehensive Income	—	0		0		(1)		331		0		0		330


Share-based Compensation and Other	0	0		10		0		0		0		0		10
Balance, October 31, 2020	278	$	143	$	879	$	48	$	(2,280)	$	(358)	$	4	$	(1,564)

Third Quarter 2019

Common Stock
Paid-In
Capital

Accumulated
Other
Comprehensive
Income

Retained
Earnings (Accumulated Deficit)

Treasury
Stock, at
Average
Cost
Noncontrolling Interest Total Equity (Deficit)
Shares
Outstanding

Par
Value
Balance, August 3, 2019 276
$ 142
$ 806
$ 49
$ (1,572 ) $ (358 ) $ 4
$ (929 )
Net Loss —
—
—
—
(252 ) —
—
(252 )
Other Comprehensive Income —
—
—
4
—
—
—
4
Total Comprehensive Income (Loss) —
—
—
4
(252 ) —
—
(248 )
Cash Dividends ($0.30 per share) —
—
—
—
(83 ) —
—
(83 )
Share-based Compensation and Other —
—
22
—
—
—
—
22
Balance, November 2, 2019 276
$ 142
$ 828
$ 53
$ (1,907 ) $ (358 ) $ 4
$ (1,238 )


	Common Stock			Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings (Accumulated Deficit)		Treasury Stock, at Average Cost		Noncontrolling Interest		Total Equity (Deficit)
	Shares Outstanding	Par Value
Balance, August 3, 2019	276	$	142	$	806	$	49	$	(1,572)	$	(358)	$	4	$	(929)
Net Loss	—	0		0		0		(252)		0		0		(252)
Other Comprehensive Income	—	0		0		4		0		0		0		4
Total Comprehensive Loss	—	0		0		4		(252)		0		0		(248)
Cash Dividends ($0.30 per share)	—	0		0		0		(83)		0		0		(83)

Share-based Compensation and Other	0	0		22		0		0		0		0		22
Balance, November 2, 2019	276	$	142	$	828	$	53	$	(1,907)	$	(358)	$	4	$	(1,238)

~~Third Quarter 2018~~

Common Stock
Paid-In
Capital

Accumulated
Other
Comprehensive
Income

Retained
Earnings (Accumulated Deficit)

Treasury
Stock, at
Average
Cost
Noncontrolling Interest Total Equity (Deficit)
Shares
Outstanding

Par
Value
Balance, August 4, 2018 275
$ 142
$ 718
$ 12
$ (1,648 ) $ (348 ) $ 2
$ (1,122 )
Net Loss —
—
—
—
(43 ) —
—
(43 )
Other Comprehensive Loss —
—
—
(1 ) —
—
—
(1 )
Total Comprehensive Loss —
—
—
(1 ) (43 ) —
—
(44 )
Cash Dividends ($0.60 per share) —
—
—
—
(165 ) —
—
(165 )
Repurchase of Common Stock —
—
—
—
—
(10 ) —
(10 )
Share-based Compensation and Other —
—
29
—
—
—
—
29
Balance, November 3, 2018 275
$ 142
$ 747
$ 11
$ (1,856 ) $ (358 ) $ 2
$ (1,312 )

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

Table of Contents

L BRANDS, INC.

CONSOLIDATED STATEMENTS OF TOTAL EQUITY (DEFICIT)

(in millions except per share amounts)

(Unaudited)

Year-to-Date 2020


	Common Stock			Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings (Accumulated Deficit)		Treasury Stock, at Average Cost		Noncontrolling Interest		Total Equity (Deficit)
	Shares Outstanding	Par Value
Balance, February 1, 2020	277	$	142	$	847	$	52	$	(2,182)	$	(358)	$	4	$	(1,495)
Net Loss	—	0		0		0		(16)		0		0		(16)
Other Comprehensive Loss	—	0		0		(4)		0		0		0		(4)
Total Comprehensive Loss	—	0		0		(4)		(16)		0		0		(20)
Cash Dividends ($0.30 per share)	—	0		0		0		(83)		0		0		(83)
Share-based Compensation and Other	1	1		32		0		0		0		0		33
Balance, October 31, 2020	278	$	143	$	879	$	48	$	(2,280)	$	(358)	$	4	$	(1,564)

Year-to-Date 2019


	Common Stock			Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings (Accumulated Deficit)		Treasury Stock, at Average Cost		Noncontrolling Interest		Total Equity (Deficit)
	Shares Outstanding	Par Value
Balance, February 2, 2019	275	$	141	$	771	$	59	$	(1,482)	$	(358)	$	4	$	(865)
Cumulative Effect of Accounting Change	—	0		0		0		(2)		0		0		(2)
Balance, February 3, 2019	275	141		771		59		(1,484)		(358)		4		(867)
Net Loss	—	0		0		0		(174)		0		0		(174)
Other Comprehensive Loss	—	0		0		(6)		0		0		0		(6)
Total Comprehensive Loss	—	0		0		(6)		(174)		0		0		(180)
Cash Dividends ($0.90 per share)	—	0		0		0		(249)		0		0		(249)
Share-based Compensation and Other	1	1		57		0		0		0		0		58
Balance, November 2, 2019	276	$	142	$	828	$	53	$	(1,907)	$	(358)	$	4	$	(1,238)

Common Stock
Paid-In
Capital

Accumulated
Other
Comprehensive
Income

Retained
Earnings (Accumulated Deficit)

Treasury
Stock, at
Average
Cost
Noncontrolling Interest Total Equity (Deficit)
Shares
Outstanding

Par
Value
Balance, February 2, 2019 275
$ 141
$ 771
$ 59
$ (1,482 ) $ (358 ) $ 4
$ (865 )
Cumulative Effect of Accounting Change —
—
—
—
(2 ) —
—
(2 )
Balance, February 3, 2019 275
141
771
59
(1,484 ) (358 ) 4
(867 )
Net Loss —
—
—
—
(174 ) —
—
(174 )
Other Comprehensive Loss —
—
—
(6 ) —
—
—
(6 )
Total Comprehensive Loss —
—
—
(6 ) (174 ) —
—
(180 )
Cash Dividends ($0.90 per share) —
—
—
—
(249 ) —
—
(249 )
Share-based Compensation and Other 1
1
57
—
—
—
—
58
Balance, November 2, 2019 276
$ 142
$ 828
$ 53
$ (1,907 ) $ (358 ) $ 4
$ (1,238 )

~~Year-to-Date 2018~~

Common Stock
Paid-In
Capital

Accumulated
Other
Comprehensive
Income

Retained
Earnings (Accumulated Deficit)

Treasury
Stock, at
Average
Cost
Noncontrolling Interest Total Equity (Deficit)
Shares
Outstanding

Par
Value
Balance, February 3, 2018 280
$ 141
$ 678
$ 24
$ (1,434 ) $ (162 ) $ 2
$ (751 )
Cumulative Effect of Accounting Changes —
—
—
(2 ) (26 ) —
—
(28 )
Balance, February 4, 2018 280
141
678
22
(1,460 ) (162 ) 2
(779 )
Net Income —
—
—
—
104
—
—
104
Other Comprehensive Loss —
—
—
(11 ) —
—
—
(11 )
Total Comprehensive Income (Loss) —
—
—
(11 ) 104
—
—
93
Cash Dividends ($1.80 per share) —
—
—
—
(500 ) —
—
(500 )
Repurchase of Common Stock (5 ) —
—
—
—
(196 ) —
(196 )
Share-based Compensation and Other —
1
69
—
—
—
—
70
Balance, November 3, 2018 275
$ 142
$ 747
$ 11
$ (1,856 ) $ (358 ) $ 2
$ (1,312 )

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

Table of Contents

L BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)


	Year-to-Date
	2020		2019
Operating Activities:
Net Loss	$	(16)	$	(174)
Adjustments to Reconcile Net Loss to Net Cash Provided by (Used for) Operating Activities:
Depreciation of Long-lived Assets	393		443
Victoria's Secret Asset Impairments	214		248
Loss on Extinguishment of Debt	53		40
Share-based Compensation Expense	39		67
Deferred Income Taxes	(14)		19
Gain from Hong Kong Store Closure and Lease Termination	(39)		0
Gain related to formation of Victoria's Secret U.K. Joint Venture	(30)		0
La Senza Charges	0		37
Gains on Distributions from Easton Investments	0		(4)
Changes in Assets and Liabilities:
Accounts Receivable	9		41
Inventories	(590)		(785)
Accounts Payable, Accrued Expenses and Other	591		210
Income Taxes Payable	(29)		(198)
Other Assets and Liabilities	125		(34)
Net Cash Provided by (Used for) Operating Activities	706		(90)
Investing Activities:
Capital Expenditures	(200)		(392)

Other Investing Activities	17		(16)
Net Cash Used for Investing Activities	(183)		(408)
Financing Activities:
Proceeds from Issuance of Long-Term Debt, Net of Issuance Costs	2,219		486
Payments of Long-term Debt	(1,307)		(799)
Borrowing from Credit Agreement	950		0
Repayment of Credit Agreement	(950)		0
Borrowings from Foreign Facilities	34		36
Repayments of Foreign Facilities	(91)		(21)
Dividends Paid	(83)		(249)

Tax Payments related to Share-based Awards	(8)		(12)
Other Financing Activities	(35)		(11)
Net Cash Provided by (Used for) Financing Activities	729		(570)
Effects of Exchange Rate Changes on Cash and Cash Equivalents and Restricted Cash	(1)		(5)
Net Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash	1,251		(1,073)
Cash and Cash Equivalents and Restricted Cash, Beginning of Period	1,499		1,413
Cash and Cash Equivalents and Restricted Cash, End of Period	$	2,750	$	340

Year-to-Date
2019 2018
Operating Activities:
Net Income (Loss) $ (174 ) $ 104
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used for) Operating Activities:
Depreciation of Long-lived Assets 443
444
Amortization of Landlord Allowances —
(32 )
Asset Impairment 248
81
Share-based Compensation Expense 67
75
Loss on Extinguishment of Debt 40
—
La Senza Charges 37
—
Deferred Income Taxes 19
(3 )
Gains on Distributions from Easton Investments (4 ) (7 )
Unrealized Losses on Marketable Equity Securities —
8
Changes in Assets and Liabilities:
Accounts Receivable 41
(8 )
Inventories (785 ) (731 )
Accounts Payable, Accrued Expenses and Other 210
300
Income Taxes Payable (198 ) (260 )
Other Assets and Liabilities (34 ) 42
Net Cash Provided by (Used for) Operating Activities (90 ) 13
Investing Activities:
Capital Expenditures (392 ) (561 )
Other Investing Activities (16 ) 23
Net Cash Used for Investing Activities (408 ) (538 )
Financing Activities:
Proceeds from Issuance of Long-Term Debt, Net of Issuance Costs 486
—
Payments of Long-term Debt (799 ) (52 )
Borrowing from Secured Revolving Facility —
85
Borrowings from Foreign Facilities 36
110
Repayments of Foreign Facilities (21 ) (71 )
Dividends Paid (249 ) (500 )
Repurchases of Common Stock —
(198 )
Tax Payments related to Share-based Awards (12 ) (13 )
Financing Costs and Other (11 ) (4 )
Net Cash Used for Financing Activities (570 ) (643 )
Effects of Exchange Rate Changes on Cash and Cash Equivalents (5 ) 1
Net Decrease in Cash and Cash Equivalents (1,073 ) (1,167 )
Cash and Cash Equivalents, Beginning of Period 1,413
1,515
Cash and Cash Equivalents, End of Period $ 340
$ 348

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

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L BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business and Basis of Presentation

Description of Business

L Brands, Inc. (the "Company”) operates in the highly competitive specialty retail business. The Company is a specialty retailer of home fragrance products, body care, soaps and sanitizers, women’s intimate and other apparel, and personal ~~care,~~and beauty ~~and home fragrance~~care products. The Company sells its merchandise through ~~company-owned~~company-operated specialty retail stores in the ~~United States (“~~U.S.”), Canada ~~the United Kingdom (“U.K.”), Ireland~~ and Greater China, ~~(China and Hong Kong),~~ and through its websites and other channels. The Company's ~~other~~ international operations are primarily through franchise, license, wholesale and ~~wholesale~~joint venture partners. The Company currently operates the following retail brands:

~~Victoria’s Secret~~

~~PINK~~

•Bath & Body Works

•Victoria’s Secret

•PINK

On February 20, 2020, the Company and an affiliate of Sycamore Partners Management, L.P. ("Sycamore"), entered into a Transaction Agreement (the "Transaction Agreement") pursuant to which, among other things, the Company would have sold a 55% interest in the Company's Victoria's Secret and PINK businesses (collectively, "Victoria's Secret"). On May 4, 2020, the Company and Sycamore mutually agreed to terminate the Transaction Agreement.

The Company remains committed to establishing Bath & Body Works as a pure-play public company and is taking the necessary steps to prepare Victoria's Secret to operate as a separate standalone company. Management is actively engaged in implementing a comprehensive profit improvement plan that will enable more effective and faster decision making and set each business up independently, allowing for a more efficient future separation.

During the second quarter of 2020, the Company completed its comprehensive review of the home office organizations in order to achieve meaningful reductions in overhead expenses and decentralize significant shared functions and services to support the creation of standalone companies. This resulted in a reduction of the home office headcount by approximately 15%, or about 850 associates. For additional information, see Note 4, “Restructuring."

The Company is actively working to reduce operating losses in the Victoria's Secret U.K. business. The Company entered into "Light Administration" in June 2020 to restructure store lease agreements. During the third quarter of 2020, the Company entered into a joint venture with Next PLC for the Victoria’s Secret business in the United Kingdom and Ireland (“Victoria’s Secret U.K.”). Under this agreement, the Company will own 49% of the joint venture, and Next will own 51% and assume responsibility for operations. Subsequent to closing, the Company will account for its investment in the joint venture of the Victoria's Secret U.K. business under the equity method of accounting. For additional information, see Note 4, “Restructuring."

Segment Reporting

In the third quarter of 2020, the Company changed its segment reporting as a result of leadership changes, actions taken and the ongoing efforts to separate Bath & Body Works and Victoria’s Secret into separate businesses. The Company now has 2 reportable segments: Bath & Body Works and Victoria’s Secret. Accordingly, the Company will no longer report a Victoria’s Secret and Bath & Body Works International segment as these businesses are now included with their respective brand. Additionally, the Bath & Body Works and Victoria’s Secret segments now include sourcing and production functions (formerly known as Mast) and certain other corporate functions that directly support each brand. These functions were previously included within Other.

While this reporting change did not impact the Company's consolidated results, segment data has been recast to be consistent for all periods presented. For additional information, see Note 15, “Segment Information."

Impacts of COVID-19

In March 2020, the coronavirus pandemic ("COVID-19") was declared a global pandemic by the World Health Organization. This pandemic has negatively affected the U.S. and global economies, disrupted global supply chains and financial markets, and led to significant travel and transportation restrictions, including mandatory closures and orders to “shelter-in-place.” The situation and preventative or protective actions that governments around the world have taken to contain the spread of COVID-19 have resulted in a period of disruption, including closure of the Company's stores, limited store operating hours, reduced customer traffic and consumer spending and delays in manufacturing and shipping of products and raw materials. During this period, the Company is focused on protecting the health and safety of its customers, employees, contractors, suppliers, and other business partners. The Company is also working with its suppliers to minimize potential disruptions, while managing the Company's business in response to a changing dynamic.

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The Company's business operations and financial performance for 2020 have been materially impacted by the COVID-19 pandemic. All the Company's stores in North America were closed on March 17th, but the Company was able to re-open the majority of its stores as of the beginning of the third quarter. Operations for Victoria’s Secret Direct were temporarily suspended for approximately one week in late March, while Bath & Body Works Direct has remained open for the duration of 2020. Additionally, the Company has dedicated resources to maximize capacity in its direct fulfillment centers to meet increased customer demand, while focusing on distribution, fulfillment and call center safety. There remains a high level of uncertainty around the pandemic and the potential for further restrictions.

In response to the global COVID-19 crisis, the Company took prudent actions to manage expenses and to maintain its solid cash position and financial flexibility through the pandemic, including:

•Furloughed most store associates as of April 5 during the temporary store closures, while continuing to provide healthcare benefits for eligible associates;

•Suspended associate merit increases;

•Temporarily reduced salaries for senior vice presidents and above by 20%;

•Temporarily suspended cash compensation for all members of the Board of Directors;

•Reduced 2020 forecasted capital expenditures from $550 million to approximately $250 million;

•Actively managed inventory to adjust for the impact of channel shifts to meet customer demand;

•Suspended the quarterly cash dividend beginning in the second quarter of fiscal 2020;

•Suspended many store and select office rent payments during the temporary closures. The Company has made progress on negotiations with nearly all landlords, the result being a combination of rent waivers or abatements relating to closure periods, rent relief relating to the post-reopening “recovery” period given traffic declines, and rent deferrals;

•Converted the revolving credit facility to an asset-backed loan facility, issued $2.25 billion in new notes and extinguished $1.259 billion of notes primarily with near-term maturities; and

•Extended payment terms to vendors.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which, among other things, provides employer payroll tax credits for wages paid to employees who are unable to work during the coronavirus outbreak and options to defer payroll tax payments. Year-to-date the Company has recognized $55 million of qualified payroll tax credits.

For many stores and select office locations, beginning in April, rent was not paid, or was only partially paid, due to the COVID-19 pandemic. Negotiations are ongoing with landlords to determine any potential rent credits or payment deferrals related to COVID-19. As of October 31, 2020, the Company fully accrued to the original contractual rent due to landlords under the leases unless an executed lease amendment was in place. For leases with executed lease amendments, the rent expense and rent accruals have been recognized according to the terms of the executed deal. The Financial Accounting Standards Board (“FASB”) issued guidance in April, which allows COVID-19-related rent concessions to be treated as variable rent.

Fiscal Year

The Company’s fiscal year ends on the Saturday nearest to January 31. As used herein, “~~third~~“third quarter of ~~2019~~”2020” and “~~third~~“third quarter of ~~2018~~”2019” refer to the ~~thirteen-week~~thirteen-week periods ended October 31, 2020 and November 2, 2019, ~~and~~ ~~November 3, 2018~~, respectively. ~~“Year-to-date 2019”~~“Year-to-Date 2020” and “year-to-date ~~2018”~~2019” refer to the thirty-nine-week periods ending October 31, 2020 and November 2, 2019, ~~and November 3, 2018,~~ respectively.

Basis of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company accounts for investments in unconsolidated entities where it exercises significant influence, but does not have control, using the equity method. Under the equity method of accounting, the Company recognizes its share of the investee's net income or loss. Losses are only recognized to the extent the Company has positive carrying value related to the investee. Carrying values are only reduced below zero if the Company has an obligation to provide funding to the investee. The Company’s share of net income or loss of unconsolidated entities from which the Company purchases merchandise or merchandise components is included in Costs of Goods Sold, Buying and Occupancy in the Consolidated Statements of Income (Loss). The Company’s share of net income or loss from its investment in the Victoria's Secret U.K. joint venture with Next PLC will be included in General, Administrative and Store Operating Expenses in the Consolidated Statements of Income

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(Loss). The Company’s share of net income or loss of all other unconsolidated entities is included in Other Income (Loss) in the Consolidated Statements of Income (Loss). The Company’s equity method investments are required to be reviewed for impairment when it is determined there may be an other-than-temporary loss in value.

~~On January 6, 2019, the Company completed the sale of the La Senza business. For additional information, see Note 5, "Restructuring Activities."~~

Interim Financial Statements

The Consolidated Financial Statements as of and for the periods ended October 31, 2020 and November 2, 2019 ~~and~~ ~~November 3, 2018~~ are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in the Company’s ~~2018~~2019 Annual Report on Form 10-K.

In the opinion of management, the accompanying Consolidated Financial Statements reflect all adjustments, which are of a normal recurring nature and necessary for a fair presentation of the results for the interim periods.

~~Seasonality~~Due to the impacts of ~~Business~~

~~Due to~~COVID-19 and seasonal variations in the retail industry, the results of operations for ~~any~~the interim period ~~are~~is not necessarily indicative of the results expected for the full fiscal year.

Goodwill

Goodwill is reviewed for impairment at the reporting unit level each year in the fourth quarter, and may be reviewed more frequently if certain events occur or circumstances change. The Company has the option to either first perform a qualitative assessment to determine whether it is more likely than not that each reporting unit's fair value is less than its carrying value (including goodwill), or to proceed directly to the quantitative assessment which requires a comparison of the reporting unit's fair value to its carrying value (including goodwill). If the Company determines that the fair value of a reporting unit is less than its carrying value, the Company recognizes an impairment charge equal to the difference, not to exceed the total amount of goodwill allocated to the reporting unit. The Company's reporting units are determined in accordance with the provisions of ASC 350, Intangibles - Goodwill and Other.

As of November 2, 2019, the Company performed a quantitative interim impairment assessment and concluded that the fair value of the Greater China reporting unit did not exceed its carrying value. Accordingly, the Company recognized a goodwill impairment charge of $30 million in the third quarter of 2019 related to the Greater China reporting unit, due to its estimated future cash flows. This charge is included in General, Administrative and Store Operating Expenses in the 2019 Consolidated Statements of Loss.

Restricted Cash

During 2020, the Company placed cash on deposit with certain financial institutions as collateral for lending commitments. The amount of collateral required reduces over time as the Company makes certain paydowns. For additional information, see Note 10, "Long-term Debt and Borrowing Facilities."

These deposits, totaling $128 million, are recorded in Other Assets on the October 31, 2020 Consolidated Balance Sheet. The Company's total Cash and Cash Equivalents and Restricted Cash was $2.750 billion as of October 31, 2020.

Derivative Financial Instruments

The Company uses derivative financial instruments to manage exposure to foreign currency exchange rates. The Company does not use derivative instruments for trading purposes. All derivative instruments are recorded on the Consolidated Balance Sheets at fair value.

The earnings of the Company's wholly owned foreign operations are subject to exchange rate risk as substantially all the merchandise is sourced through U.S. dollar transactions. The Company uses foreign currency forward contracts designated as cash flow hedges to mitigate this foreign currency exposure for its Canadian operations. Amounts are reclassified from accumulated other comprehensive income (loss) upon sale of the hedged merchandise to the customer. These gains and losses are recognized in Costs of Goods Sold, Buying and Occupancy in the Consolidated Statements of Income (Loss). The fair value of designated cash flow hedges is not significant as of October 31, 2020.

Concentration of Credit Risk

The Company maintains cash and cash equivalents, restricted cash and derivative contracts with various major financial institutions. The Company monitors the relative credit standing of financial institutions with whom the Company transacts and limits the amount of credit exposure with any one entity. ~~Typically, the~~The Company’s investment portfolio is primarily comprised of U.S. government obligations, U.S. Treasury and AAA-rated money market funds, commercial paper and bank deposits.

The Company also periodically reviews the relative credit standing of franchise, license and wholesale partners and other entities to which the Company grants credit terms in the normal course of business. The Company records an allowance for uncollectable accounts when it becomes probable that the counterparty will be unable to pay.

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Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ from those estimates, and the Company revises its estimates and assumptions as new information becomes available.

2. New Accounting Pronouncements

~~Leases~~

~~In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) 842,~~ ~~Leases~~, which requires companies classified as lessees to account for most leases on their balance sheets but recognize expenses on their income statements in a manner similar to legacy accounting. The standard also requires enhanced quantitative and qualitative disclosures, including significant judgments made by management, to provide greater insight into the extent of expense recognized and expected to be recognized from existing leases. In July 2018, the FASB approved an amendment to the standard that provides companies a modified retrospective transition option that did not require earlier periods to be restated upon adoption.

The Company adopted the standard in the first quarter of 2019 under the modified retrospective approach. As allowed by the new standard, the Company elected the package of transition practical expedients but elected to not apply the hindsight practical expedient to its leases at transition.

Upon adoption at the beginning of 2019, the Company recorded operating lease liabilities of $3.7 billion and operating lease assets for its leases of $3.3 billion. The operating lease assets are net of $470 million of liabilities for deferred rent and unamortized landlord construction allowances that were previously recorded as Other Long-term Liabilities on the Consolidated Balance Sheet. The Company also recorded a decrease to opening retained earnings, net of tax, of $2 million. The adoption of the standard did not materially impact the Consolidated Statements of Income (Loss) or Cash Flows. See Note 9, “Leases” for additional disclosure required by the new standard.

~~Hedging Activities~~

~~In August 2017, the FASB issued Accounting Standards Update ("ASU") 2017-12,~~ ~~Targeted Improvements to Accounting for Hedging Activities~~, which is intended to better align risk management activities and financial reporting for hedging relationships. The standard eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. It also eases certain documentation and assessment requirements. The Company adopted the standard in the first quarter of fiscal 2019. The adoption of this standard did not have a material impact on the Company's consolidated results of operations, financial position or cash flows.

~~Goodwill~~

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Simplifying the Test for Goodwill Impairment~~, which simplifies the subsequent measurement of goodwill. The standard eliminates the second step from the goodwill impairment test, which requires a hypothetical purchase price allocation to determine the implied fair value of goodwill. Under the new standard, the goodwill impairment charge will be the excess of the reporting unit's carrying value over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The Company adopted this standard in the third quarter of 2019 and performed the interim goodwill impairment assessment in accordance with ASU 2017-04. For additional information, see Note 8, "Goodwill and Trade Names."

Credit Losses

In June 2016, the FASB issued ~~ASU~~Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses, which requires the use of a forward-looking expected loss impairment model for accounts receivable and certain other financial instruments. ~~This guidance will be effective beginning in fiscal 2020, with early adoption permitted.~~ The Company ~~is currently evaluating~~adopted the ~~impact~~standard in the first quarter of 2020. The adoption of this ~~standard.~~standard did not have a material impact on the Company's consolidated results of operations, financial position or cash flows.

Guarantor Reporting

In March 2020, the SEC issued a final rule, Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities, that simplifies the disclosure requirements related to registered securities under Rule 3-10 of Regulation S-X. The rule replaces the requirement to provide condensed consolidating financial information with a requirement to present summarized financial information of the issuers and guarantors. It also requires qualitative disclosures with respect to information about guarantors, the terms and conditions of guarantees and the factors that may affect payment. These disclosures may be provided outside the footnotes to the Company’s consolidated financial statements. The Company early adopted the reporting requirements of the rule in the first quarter of 2020 and elected to provide these disclosures in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

3. Revenue Recognition

Accounts receivable, net from revenue-generating activities were $176 million as of October 31, 2020, $152 million as of February 1, 2020 and $147 million as of November 2, ~~2019, $150 million as of February 2, 2019 and $160 million as of November 3, 2018.~~2019. Accounts receivable primarily relate to amounts due from the Company's franchise, license and wholesale partners. Under these arrangements, payment terms are typically 60 to 90 days. As a result of the COVID-19 pandemic, the Company has extended the payment terms for certain partners.

The Company records deferred revenue when cash payments are received in advance of transfer of control of goods or services. Deferred revenue primarily relates to gift cards, loyalty and private label credit card programs and direct channel shipments, ~~not yet delivered,~~ which are all impacted by seasonal and holiday-related sales patterns. Deferred revenue was $313 million as of October 31, 2020, $342 million as of February 1, 2020 and $280 million as of November 2, ~~2019, $331 million as of February 2, 2019 and $271 million as of November 3, 2018.~~2019. The Company recognized ~~$190~~$163 million as revenue year-to-date ~~in 2019~~2020 from amounts recorded as deferred revenue at the beginning of the ~~period.~~year. As of ~~November 2, 2019,~~October 31, 2020, the Company recorded deferred revenue of ~~$267~~$302 million within Accrued Expenses and Other, and ~~$13~~$11 million within Other Long-term Liabilities on the Consolidated Balance Sheet.

The following table provides a disaggregation of Net Sales for the third quarter and year-to-date ~~2019~~2020 and ~~2018:~~2019:


										Third Quarter				Year-to-Date
	Third Quarter				Year-to-Date					2020		2019		2020		2019
	2019		2018		2019		2018			(in millions)
	(in millions)
Victoria’s Secret Stores (a)	$	1,081	$	1,178	$	3,462	$	3,778
Bath & Body Works Stores - U.S. and Canada									Bath & Body Works Stores - U.S. and Canada	$	1,202	$	872	$	2,304	$	2,468
Bath & Body Works Direct									Bath & Body Works Direct	446		192		1,254		527
Bath & Body Works International (a)									Bath & Body Works International (a)	54		35		158		129
Total Bath & Body Works									Total Bath & Body Works	1,702		1,099		3,716		3,124
Victoria’s Secret Stores - U.S. and Canada									Victoria’s Secret Stores - U.S. and Canada	755		1,081		1,633		3,462
Victoria’s Secret Direct	331		351		1,067		1,065		Victoria’s Secret Direct	470		331		1,391		1,067
Victoria’s Secret International (b)									Victoria’s Secret International (b)	128		166		289		504
Total Victoria’s Secret	1,412		1,529		4,529		4,843		Total Victoria’s Secret	1,353		1,578		3,313		5,033
Bath & Body Works Stores (a)	872		808		2,469		2,281
Bath & Body Works Direct	192		148		527		399
Total Bath & Body Works	1,064		956		2,996		2,680
Victoria's Secret and Bath & Body Works International (b)	134		134		423		415
Other (c)	67		156		259		447		Other (c)	0		0		0		50
Total Net Sales	$	2,677	$	2,775	$	8,207	$	8,385	Total Net Sales	$	3,055	$	2,677	$	7,029	$	8,207

_______________


~~(a)~~	~~Includes company-owned stores in the U.S. and Canada.~~


~~(b)~~	~~Includes company-owned stores in the U.K., Ireland and Greater China, direct sales in Greater China and wholesale sales, royalties and other fees associated with non-company owned stores.~~


~~(c)~~	~~Includes wholesale revenues from the Company's sourcing function. Results for 2018 also include store and direct sales for La Senza and Henri Bendel.~~

(a)Results include royalties associated with franchised stores and wholesale sales.

(b)Results include company-operated stores in the U.K. (pre-joint venture) and Greater China, royalties associated with franchised stores and wholesale sales.

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(c)Results include wholesale revenues to La Senza subsequent to the Company's divestiture of the business in 2018.

4. ~~Earnings Per Share and Shareholders’ Equity (Deficit)~~

~~Earnings Per Share~~

Earnings per basic share is computed based on the weighted-average number of outstanding common shares. Earnings per diluted share include the weighted-average effect of dilutive options and restricted stock on the weighted-average shares outstanding.

~~The following table provides shares utilized for the calculation of basic and diluted earnings per share for the~~ ~~third~~ ~~quarter and year-to-date 2019 and~~ ~~2018~~:

Third Quarter Year-to-Date
2019 2018 2019 2018
(in millions)
Weighted-average Common Shares:
Issued Shares 284
283
284
283
Treasury Shares (8 ) (8 ) (8 ) (6 )
Basic Shares 276
275

276

277
Effect of Dilutive Options and Restricted Stock (a) —
—
—
2
Diluted Shares 276
275

276

279
Anti-dilutive Options and Awards (a) 2
2
2
5

~~_______________~~


~~(a)~~	These options and awards were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. For 2019 and the third quarter 2018, the dilutive impact of outstanding options and awards were excluded from dilutive shares as a result of the Company's net loss for the respective periods.

~~Shareholders’ Equity (Deficit)~~

~~Common Stock Share Repurchases~~Restructuring

The Company ~~did not repurchase any shares during year-to-date 2019.~~

~~Under~~remains committed to establishing Bath & Body Works as a pure-play public company and is taking the ~~authority~~necessary steps to prepare Victoria's Secret to operate as a separate standalone company. Management of the ~~Company’s Board of Directors,~~Company is actively engaged in implementing a comprehensive profit improvement plan that will better position the Company ~~repurchased shares~~to evaluate the next steps for the separation of the Victoria's Secret business. During the second quarter of 2020, the Company completed its comprehensive review of its ~~common stock under~~home office organizations in order to achieve meaningful reductions in overhead expenses and decentralize significant shared functions and services to support the ~~following repurchase programs during~~creation of standalone companies. This resulted in a reduction of the home office headcount by approximately 15%, or about 850 associates. Pre-tax severance and related costs associated with these reductions, totaling $81 million, are included in General, Administrative and Store Operating Expenses in the year-to-date ~~2018~~:2020 Consolidated Statement of Loss. Costs of $51 million and $12 million are recorded within the Victoria's Secret and Bath & Body Works segments, respectively, while the remaining $18 million is recorded within Other.

Amount
Authorized

Shares
Repurchased

Amount
Repurchased
Average Stock Price of Shares Repurchased within Program
Repurchase Program
(in millions) (in thousands) (in millions)
March 2018 $ 250
4,852
$ 171
$ 35.29
September 2017 250
527
25
$ 46.98
Total 5,379
$ 196

During the third quarter, the Company made payments of $33 million and, as of October 31, 2020, a liability, after accrual adjustments, of $56 million related to these costs, is included in Accrued Expenses and Other on the Consolidated Balance Sheet.

~~In March 2018,~~Victoria's Secret U.K.

On October 18, 2020, the ~~Company's Board~~Company and Next PLC formed a joint venture for Victoria's Secret U.K. with Next PLC owning 51% and the Company owning 49%. The joint venture acquired the majority of ~~Directors approved a $250 million repurchase program, which included~~ the ~~$23 million~~operating assets, primarily inventory, of Victoria’s Secret U.K. Effective October 19, 2020, the newly formed joint venture began operating all Victoria’s Secret stores in the U.K. and Ireland. As of October 31, 2020, the leases for twelve stores in the U.K. were restructured and transferred to the joint venture. Negotiations with landlords to restructure the remaining ~~under~~store leases in the ~~September 2017 repurchase program.~~U.K. are in process as part of the ongoing Administration proceedings. The joint venture will begin operating the U.K. direct business starting Spring 2021.

The ~~March 2018 repurchase program had $79~~Company recognized a pre-tax gain of $30 million ~~remaining~~ as ~~of November 2, 2019.~~

~~Dividends~~

~~Under the authority and declaration~~a result of the ~~Board~~transaction, primarily related to the derecognition of ~~Directors,~~operating lease liabilities in excess of operating lease assets for the ~~Company paid~~twelve store leases that were restructured and transferred to the ~~following dividends during year-to-date 2019~~joint venture. This gain is included in General, Administrative and ~~2018:~~

Ordinary Dividends Total Paid
(per share) (in millions)
2019
Third Quarter $ 0.30
$ 83
Second Quarter 0.30
83
First Quarter 0.30
83
Total $ 0.90
$ 249
2018
Third Quarter $ 0.60
$ 165
Second Quarter 0.60
167
First Quarter 0.60
168
Total $ 1.80
$ 500

~~5. Restructuring Activities~~Store Operating Expenses in the 2020 Consolidated Statements of Income (Loss).

La Senza

~~On January 6, 2019, in an effort to increase shareholder value and in order to focus on its larger core businesses,~~In fiscal 2018, the Company divested its ownership interest in La Senza to an affiliate of Regent LP, a global private equity firm. Regent LP assumed La Senza’s operating assets and liabilities in exchange for potential future consideration upon the sale or other monetization of La Senza, as defined in the agreement. In the fourth quarter of 2018, the Company recognized a pre-tax loss on the divestiture of $99 million, primarily related to $45 million of accumulated foreign currency translation adjustments reclassified into earnings that were previously recognized as a component of equity, as well as losses related to the transfer of the net working capital and long-lived store assets to the buyer. The after-tax loss on the divestiture was $55 million, which includes $44 million of tax benefits primarily associated with the recognition of previously unrecognized deferred tax assets. In 2019, the Company received cash proceeds of $12 million related to a net working capital settlement from the divestiture. These proceeds are included within the Investing Activities section of the 2019 Consolidated Statement of Cash Flows.

In conjunction with the transaction, certain of the Company's subsidiaries have remaining contingent obligations related to La Senza lease payments under the terms of existing noncancelable ~~leases, and the Company has certain other contingent obligations related to La Senza for a period of time.~~leases. In the third quarter of 2019, the Company ~~and its subsidiaries~~ recognized pre-tax non-cash charges of $37 million ~~related~~ to ~~the~~ increase in the reserves for ~~these~~ potential ~~exposures~~exposure related to the La Senza business. These charges are included in Other ~~Income (Loss)~~Loss in the 2019 Consolidated Statements of ~~Income (Loss).~~Loss. For additional information, see Note ~~16,~~13, "Commitments and Contingencies."

~~Additionally,~~

5. Earnings (Loss) Per Share and Shareholders’ Equity (Deficit)

Earnings (Loss) Per Share

Earnings (Loss) per basic share is computed based on the ~~Company continues to provide technology~~weighted-average number of outstanding common shares. Earnings (Loss) per diluted share include the weighted-average effect of dilutive options and ~~other operational support to La Senza for a period~~restricted stock on the weighted-average shares outstanding.

Table of ~~time expected to continue into fiscal 2020.~~Contents

~~Henri Bendel~~

The ~~Company announced~~following table provides the ~~closure~~weighted-average shares utilized for the calculation of ~~Henri Bendel in~~basic and diluted earnings (loss) per share for the third quarter and year-to-date 2020 and 2019:


	Third Quarter		Year-to-Date
	2020	2019	2020	2019
	(in millions)

Common Shares	287	284	286	284
Treasury Shares	(8)	(8)	(8)	(8)
Basic Shares	279	276	278	276
Effect of Dilutive Options and Restricted Stock	4	0	0	0
Diluted Shares	283	276	278	276
Anti-dilutive Options and Awards (a)	4	14	11	14

_______________

(a)These options and awards were excluded from the calculation of ~~2018. As~~diluted earnings per share because their inclusion would have been anti-dilutive. For 2019 and year-to-date 2020, the dilutive impact of outstanding options and awards were excluded from dilutive shares as a result of the Company's net loss for the periods.

Shareholders’ Equity (Deficit)

Common Stock Share Repurchases

In March 2018, the Company's Board of Directors approved a $250 million repurchase program, which had $79 million remaining as of October 31, 2020. The Company did not repurchase any shares during 2020 or 2019.

Dividends

Under the authority and declaration of the Board of Directors, the Company ~~recognized a pre-tax charge, primarily~~paid the following dividends during year-to-date 2020 and 2019:


	Ordinary Dividends			Total Paid
	(per share)		(in millions)
2020
Third Quarter	$	0		$	0
Second Quarter	0			0
First Quarter	0.30			83
Total	$	0.30		$	83
2019
Third Quarter	$	0.30		$	83
Second Quarter	0.30			83
First Quarter	0.30			83
Total	$	0.90		$	249

The Board of Directors suspended the quarterly cash ~~consisting of lease termination costs, severance and other costs of $20 million~~dividend beginning in the ~~third~~second quarter of 2018. In the fourth quarter of 2018, the Company recognized an additional pre-tax charge of $3 million, primarily related to contract termination and employee retention costs. In the fourth quarter of 2018, the Company closed all Henri Bendel stores and ceased selling merchandise online.2020.

6. Inventories

The following table provides details of inventories as of October 31, 2020, February 1, 2020 and November 2, ~~2019,~~ ~~February 2, 2019~~ ~~and~~ ~~November 3, 2018~~:2019:

November 2,
2019 February 2,
2019 November 3,
2018
(in millions)
Finished Goods Merchandise $ 1,854
$ 1,107
$ 1,774
Raw Materials and Merchandise Components 178
141
189
Total Inventories $ 2,032
$ 1,248
$ 1,963


	October 31, 2020		February 1, 2020		November 2, 2019
	(in millions)
Finished Goods Merchandise	$	1,632	$	1,152	$	1,854
Raw Materials and Merchandise Components	233		135		178
Total Inventories	$	1,865	$	1,287	$	2,032

Inventories are principally valued at the lower of cost, on a weighted-average cost basis, or net realizable value.

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7. ~~Property and Equipment, Net~~Long-Lived Assets

The following table provides details of property and equipment, net as of October 31, 2020, February 1, 2020 and November 2, ~~2019~~, ~~February 2, 2019~~ ~~and~~ ~~November 3, 2018~~:2019:


	October 31, 2020		February 1, 2020		November 2, 2019
	(in millions)
Property and Equipment, at Cost	$	6,312	$	6,613	$	6,449
Accumulated Depreciation and Amortization	(4,081)		(4,127)		(3,878)
Property and Equipment, Net	$	2,231	$	2,486	$	2,571

November 2,
2019 February 2,
2019 November 3,
2018
(in millions)
Property and Equipment, at Cost $ 6,449
$ 6,733
$ 6,827
Accumulated Depreciation and Amortization (3,878 ) (3,915 ) (3,893 )
Property and Equipment, Net $ 2,571
$ 2,818
$ 2,934

Depreciation expense was $127 million and $148 million for ~~both~~ the third quarter of 2020 and 2019, ~~and 2018.~~respectively. Depreciation expense was ~~$443~~$393 million and ~~$444~~$443 million for year-to-date ~~2019~~2020 and ~~2018,~~2019, respectively.

~~Long-Lived Store Assets~~

Long-lived store assets, which ~~includes~~include leasehold improvements, ~~store-related~~store related assets and operating ~~leases (subsequent to the adoption of ASC 842,~~ ~~Leases~~),lease assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Store assets are grouped at the lowest level for which they are largely independent of other assets or asset groups. If the estimated undiscounted future cash flows related to the asset group are less than the carrying value, the Company recognizes a loss equal to the difference between the carrying value and the estimated fair value, determined by the estimated discounted future cash flows of the asset group. ~~An individual asset within an asset group is not impaired below its estimated fair value.~~ For operating lease assets, the Company determines the fair value of the assets by comparing the contractual rent payments to estimated market rental rates. ~~These~~An individual asset within an asset group is not impaired below its estimated fair value. The fair value ~~measurements qualify as level~~of long-lived store assets are determined using Level 3 ~~measurements in~~inputs within the fair value hierarchy.

InThe Company remains committed to taking the ~~third quarter of 2019,~~necessary steps to prepare the Victoria's Secret business to operate as a separate, standalone company. Management is actively working on implementing a comprehensive profit improvement plan that will better position the Company ~~concluded~~to evaluate the next steps for the separation of the Victoria's Secret business. A component of the profit improvement plan includes a rationalization of the Victoria’s Secret company-operated store footprint. The Company expects that it will close approximately 240 stores in North America in 2020. Given the closures as well as the negative operating results ~~for~~of certain ~~of its~~ Victoria's Secret stores ~~were an indicator of potential impairment of~~in 2020 and 2019, the ~~related store asset groups. The~~ Company determined that the estimated undiscounted future cash flows were less than the carrying values for certain Victoria's Secret asset groups and, as a result, determined the estimated fair values of the store asset groups using estimated discounted future cash ~~flows. Accordingly,~~flows and estimated market rental rates. Long-lived store asset impairment charges are included within the Victoria's Secret segment, in Costs of Goods Sold, Buying and Occupancy in the Consolidated Statements of Income (Loss).

The following table provides pre-tax long-lived store asset impairment charges included in the Consolidated Statement of Income (Loss) for 2020 and 2019:


Store Asset Impairment								Operating Lease Asset Impairment								Total Impairments
Third Quarter				Year-to-Date				Third Quarter				Year-to-Date				Third Quarter				Year-to-Date
2020		2019		2020		2019		2020		2019		2020		2019		2020		2019		2020		2019
(in millions)
$	0	$	188	$	111	$	188	$	0	$	30	$	103	$	30	$	0	$	218	$	214	$	218

Victoria's Secret Hong Kong

During the second quarter of 2020, the Company closed its unprofitable Victoria's Secret flagship store in Hong Kong. As a result of the store closure, the Company recognized a ~~loss equal~~non-cash pre-tax gain of $39 million, primarily due to terminating the ~~difference between~~store lease and the ~~carrying value~~related write-off of ~~an asset group and its estimated fair value but did not impair any individual store asset below its estimated fair value. For leasehold improvements and store-related assets,~~ the Company recognized impairment charges of $188 million. Impairment charges of $151 million related to stores in Greater China, the U.K. and Ireland, and impairment charges of $37 million related to stores in the U.S. and Canada. For operating lease ~~assets,~~liability in excess of the ~~Company recognized impairment charges of $30 million. Impairment charges of $26 million related to stores~~operating lease asset, which was partially impaired in ~~the U.K., and impairment charges of $4 million related to stores in the U.S.~~

~~In total, the Company recognized impairment charges of $218 million for long-lived store assets, which are~~fiscal 2019. This gain is included in Costs of Goods Sold, Buying &and Occupancy in the ~~2019~~year-to-date 2020 Consolidated ~~Statements~~Statement of Income (Loss). Impairment charges of $177 million, related to store assets in Greater China, the U.K. and Ireland, were recorded within the Victoria's Secret and Bath & Body Works International segment. Impairment charges of $41 million, related to store assets in the U.S. and Canada, were recorded within the Victoria's Secret segment.

In the third quarter of 2018, the Company concluded that the negative operating results for certain of its Victoria's Secret stores were an indicator of potential impairment of the related store asset groups.Loss. The Company ~~determined that the estimated undiscounted future cash flows were less than the carrying values~~also recorded $3 million of severance and ~~as a result, determined the estimated fair values of the store asset groups using estimated discounted future cash flows. Accordingly, the Company recognized a loss equal to the~~

~~difference between the carrying value of an asset group and its estimated fair value but did not impair any individual store asset below its estimated fair value.~~

The Company recognized impairment charges of $81 million, which are included in Costs of Goods Sold, Buying & Occupancy in the 2018 Consolidated Statements of Income (Loss). Impairment charges of $50 million, related to store assets in the U.S. and Canada, were recorded within the Victoria's Secret segment. Impairment charges of $31 million, related to store assets in the U.K., were recorded within the Victoria's Secret and Bath & Body Works International segment.

~~8. Goodwill and Trade Names~~

~~Goodwill~~

Goodwill is reviewed for impairment each year in the fourth quarter and may be reviewed more frequently if certain events occur or circumstances change. If the Company determines that the fair value of a reporting unit is less than its carrying value, an impairment charge is recognized equal to the difference, not to exceed the total amount of goodwill allocated to the reporting unit. The Company's reporting units that have goodwill are Victoria's Secret, Bath & Body Works and Greater China, which is included within the Victoria's Secret and Bath & Body Works International reportable segment.

~~The following table provides detail regarding the composition of goodwill as of November 2, 2019, February 2, 2019 and November 3, 2018:~~

November 2,
2019 February 2,
2019 November 3,
2018
(in millions)
Victoria's Secret $ 690
$ 690
$ 690
Bath & Body Works 628
628
628
Victoria's Secret's Secret and Bath & Body Works International —
30
30
Goodwill $ 1,318
$ 1,348
$ 1,348

As of November 2, 2019, the Company performed a quantitative interim impairment assessment over the Victoria's Secret and Greater China reporting units. An interim assessment was performed in consideration of the negative performance of these reporting units and their impact on the sustained decline in the Company's market capitalization. Further, for the Greater China reporting unit, the Company considered the results of the long-lived store asset impairment assessment.

The interim assessment concluded that the fair value of the Victoria's Secret reporting unit exceeded its carrying value. However, the fair value of the Greater China reporting unit did not exceed its carrying value. Accordingly, the Company recognized a goodwill impairment charge of $30 million in the third quarter of 2019 related to the Greater China reporting unit, due to its estimated future cash flows. This charge iscosts, included in General, Administrative and Store Operating Expenses in the ~~2019 Consolidated Statements of Income (Loss).~~

The estimated fair value of the Victoria's Secret reporting unit was based on a weighted average of the income and market approaches, while the estimated fair value of the Greater China reporting unit was based on the income approach. The income approach is based on estimated discounted future cash flows, while the market approach is based on earnings multiples of selected guideline public companies. The approaches, which qualify as level 3 in the fair value hierarchy, incorporated a number of significant assumptions and judgments including, but not limited to, estimated future cash flows, discount rates, income tax rates, terminal growth rates, multiples of earnings of similar public companies and an implied control premium relative to the Company's market capitalization.

~~Intangible Assets - Indefinite Lives~~

Intangible assets with indefinite lives represent the Victoria’s Secret and Bath & Body Works trade names. Intangible assets with indefinite lives are reviewed for impairment each year in the fourth quarter and may be reviewed more frequently if certain events occur or circumstances change. The following table provides detail regarding the composition of trade names as of November 2, 2019, February 2, 2019 and November 3, 2018:

November 2,
2019 February 2,
2019 November 3,
2018
(in millions)
Victoria's Secret $ 246
$ 246
$ 246
Bath & Body Works 165
165
165
Trade Names $ 411
$ 411
$ 411

As of November 2, 2019, the Company performed a quantitative interim impairment assessment of the Victoria's Secret trade name. An interim assessment was performed in consideration of the negative performance of Victoria's Secret. To estimate the fair value of the Victoria's Secret trade name, the Company used the relief from royalty method under the income approach. The interim assessment concluded that the fair value of the Victoria's Secret trade name exceeded its carrying value.

~~9. Leases~~

~~In the first quarter of 2019, the Company adopted ASC 842,~~ ~~Leases~~, using the modified retrospective approach. Results for 2019 are presented under ASC 842, while prior period consolidated financial statements have not been adjusted and continue to be presented under the accounting standard in effect at that time.

The Company leases retail space, office space, warehouse facilities, storage space, equipment and certain other items under operating leases. A substantial portion of the Company’s leases are operating leases for its stores, which generally have an initial term of 10 years. Annual store rent consists of a fixed minimum amount and/or variable rent based on a percentage of sales exceeding a stipulated amount. Store lease terms generally also require additional payments covering certain operating costs such as common area maintenance, utilities, insurance and taxes. Certain leases contain predetermined fixed escalations of minimum rentals or require periodic adjustments of minimum rentals depending on an index or rate. Additionally, certain leases contain incentives, such as construction allowances from landlords and/or rent abatements subsequent to taking possession of the leased property.

At lease commencement, the Company recognizes an asset for the right to use the leased asset and a liability based on the present value of the unpaid fixed lease payments. Operating lease costs are recognized on a straight-line basis as lease expense over the lease term. Variable lease payments associated with the Company's leases are recognized upon occurrence of the event or circumstance on which the payments are assessed. Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet, and lease expense is recognized on a straight-line basis over the lease term.

~~The Company uses its incremental borrowing rate, adjusted for collateral, to determine the present value of its unpaid lease payments.~~

The Company’s store leases often include options to extend the initial term or to terminate the lease prior to the end of the initial term. The exercise of these options is typically at the sole discretion of the Company. These options are included in determining the initial lease term at lease commencement if the Company is reasonably certain to exercise the option. Additionally, the Company may operate stores for a period of time on a month-to-month basis after the expiration of the lease term.

For leases entered into or reassessed after the adoption of the new standard, the Company has elected the practical expedient allowed by the standard to account for all fixed consideration in a lease as a single lease component. Therefore, the lease payments used to measure the lease liability for these leases include fixed minimum rentals along with fixed operating costs such as common area maintenance and utilities.

~~The Company has provided residual value guarantees in connection with noncancelable operating leases of certain assets. For additional information, see Note 16, “Commitments and Contingencies.”~~

~~The following table provides the components of lease cost for operating leases for the third quarter and~~ year-to-date ~~2019:~~

Third Quarter Year-to-Date
(in millions)
Operating Lease Costs (a) $ 206
$ 557
Variable Lease Costs 27
67
Short-term Lease Costs 9
19
Total Lease Cost $ 242
$ 643

~~_______________~~


~~(a)~~	As discussed in Note 7, “Property and Equipment, Net," the Company recognized operating lease asset impairment charges of $30 million during the third quarter of 2019. These charges are included as additional operating lease costs for the third quarter and year-to-date 2019.

~~The following table provides future maturities of operating lease liabilities as of the third quarter of 2019:~~

Fiscal Year (in millions)
2019 $ 115
2020 720
2021 676
2022 605
2023 546
Thereafter 1,907
Total Lease Payments $ 4,569
Less: Interest (1,001 )
Present Value of Operating Lease Liabilities $ 3,568

~~As of November 2, 2019, the Company has additional operating lease commitments that have not yet commenced of approximately $49 million.~~

~~The following table provides the weighted-average remaining lease term and discount rate for operating leases with lease liabilities as of the third quarter of 2019:~~



~~Weighted Average Remaining Lease Term (years)~~	~~7.4~~
~~Weighted Average Discount Rate~~	~~6.2~~	%

~~Year-to-date 2019, the Company paid $528 million for operating lease liabilities recorded on the balance sheet. These payments are included within the Operating Activities section of the 2019~~2020 Consolidated Statement of ~~Cash Flows.~~Loss.

~~Year-to-date 2019, the Company obtained $248 million of additional lease assets as a result of new operating lease obligations.~~

~~Disclosures for 2018~~

~~The following table provides rent expense, as presented under the prior accounting standard, for the third quarter and year-to-date 2018:~~

Third Quarter Year-to-Date
(in millions)
Store Rent:
Fixed Minimum $ 167
$ 500
Contingent 15
45
Total Store Rent 182
545
Office, Equipment and Other 25
69
Total Rent Expense $ 207
$ 614

The following table provides future minimum rent commitments under noncancelable operating leases in the next five fiscal years and the remaining years thereafter, as determined under the prior accounting standard, as of February 2, 2019:

Fiscal Year (a) (in millions)
2019 $ 698
2020 676
2021 630
2022 562
2023 504
Thereafter $ 1,738

~~_______________~~


~~(a)~~	~~Excludes additional payments covering taxes, common area costs and certain other expenses generally required by store lease terms.~~

~~Finance Leases~~

The Company leases certain fulfillment equipment under finance leases that expire at various dates through 2023. The Company records finance lease assets, net of accumulated amortization, in Property and Equipment, Net on the Consolidated Balance Sheet. Additionally, the Company records finance lease liabilities in Accrued Expenses and Other and Other Long-term Liabilities on the Consolidated Balance Sheet. Finance lease costs are comprised of the straight-line amortization of the lease asset and the accretion of interest expense under the effective interest method.

The Company recorded $23 million and $28 million of finance lease assets, net of accumulated amortization, in Property and Equipment, Net on the November 2, 2019 and November 3, 2018 Consolidated Balance Sheets, respectively. Additionally, the Company recorded finance lease liabilities of $8 million and $8 million in Accrued Expenses and Other and $15 million and $21 million in Other Long-term Liabilities, on the November 2, 2019 and November 3, 2018 Consolidated Balance Sheets, respectively.

~~Asset Retirement Obligations~~

The Company has asset retirement obligations related to certain company-owned stores that contractually obligate the Company to remove leasehold improvements at the end of a lease. The Company’s liability for asset retirement obligations totaled $22 million as of November 2, 2019 and $17 million as of November 3, 2018. These liabilities are included in Other Long-term Liabilities on the Consolidated Balance Sheets.

~~10.~~8. Equity Investments

The Company has land and other investments in Easton, a planned community in Columbus, Ohio, that integrates office, hotel, retail, residential and recreational space. These investments, totaling $125 million as of October 31, 2020, $118 million as of February 1, 2020 and $112 million as of November 2, 2019, ~~and $89 million as of February 2, 2019 and November 3, 2018,~~ are recorded in Other Assets on the Consolidated Balance Sheets.

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

The Company received cash distributions of $5 million and $15 million from certain of its Easton investments year-to-date 2019 and 2018, respectively, which are included within Investing Activities of the Consolidated Statements of Cash Flows.

~~11.~~9. Income Taxes

The Company has historically calculated the provision for income taxes ~~is based~~ on the current estimate of the annual effective tax rate and is adjusted as necessary for quarterly events. Due to the impacts of the COVID-19 pandemic, the income tax expense for the thirty-nine-weeks ended October 31, 2020 was computed on a year-to-date basis.

For the third quarter of ~~2019,~~2020, the Company’s effective tax rate was ~~9.1%~~19.3% compared to ~~(3.9%)~~9.1% in the third quarter of ~~2018.~~2019. The third quarter ~~rates were~~of 2020 rate was lower than the Company's combined estimated federal and state statutory rate primarily due to tax matters associated with foreign investments and recent changes in tax legislation, which resulted in a $23 million net tax benefit. The third quarter of 2019 rate was lower than the Company's combined federal and state statutory rate primarily due to the Victoria's Secret impairment charges, which ~~generate~~generated no tax benefit for certain foreign subsidiaries.

For year-to-date ~~2019,~~2020, the ~~Company’s~~Company's effective tax rate was ~~0.4%~~74.8% compared to ~~29.0%~~0.4% year-to-date ~~2018.~~2019. The year-to-date 2020 rate was higher than the Company's combined estimated federal and state statutory rate primarily due to the resolution of certain tax matters partially offset by foreign losses with no tax benefit. The impact of these items has a greater impact on the effective tax rate at lower levels of pre-tax loss. The year-to-date 2019 ~~year-to-date~~ rate was lower than the Company's combined estimated federal and state statutory rate primarily due to the Victoria's Secret impairment charges, which ~~generate~~generated no tax benefit for ~~certain foreign subsidiaries. The 2018 year-to-date rate was higher than the Company's estimated federal and state statutory rate primarily due to losses related to~~ certain foreign subsidiaries.

Income taxes paid were ~~$27~~$9 million and ~~$40~~$27 million for the third quarter of ~~2019~~2020 and ~~2018,~~2019, respectively. Income taxes paid were ~~$208~~$31 million and ~~$306~~$208 million for year-to-date ~~2019~~2020 and ~~2018,~~2019, respectively.

Uncertain Tax Positions

The Company had unrecognized tax benefits of ~~$114~~$88 million as of February ~~2, 2019,~~1, 2020, of which ~~$104~~$81 million, if recognized, would reduce the effective income tax rate. Through ~~November 2, 2019,~~October 31, 2020, the Company had a net decrease to gross unrecognized tax benefits of ~~$24~~$29 million, primarily due to the resolution of certain tax matters. The changes to the unrecognized tax benefits resulted in ~~an $18~~a $28 million benefit to the Company’s year-to-date Provision for Income ~~Taxes year-to-date.~~Taxes.

Of the total unrecognized tax benefits as of ~~November 2, 2019,~~October 31, 2020, it is reasonably possible that ~~$66~~$28 million could change in the next 12 months due to audit settlements, expiration of statute of limitations or other resolution of uncertainties. Due to the uncertain and complex application of tax regulations, it is possible that the ultimate resolution of audits may result in amounts which could be different from this estimate. In such case, the Company will record additional tax expense or tax benefit in the period in which such matters are effectively settled.

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~~12.~~10. Long-term Debt and Borrowing Facilities

The following table provides the Company’s outstanding debt balance, net of unamortized debt issuance costs and discounts, as of October 31, 2020, February 1, 2020 and November 2, ~~2019~~, ~~February 2, 2019~~ ~~and~~ ~~November 3, 2018~~:2019:

November 2,
2019 February 2,
2019 November 3,
2018
(in millions)
Senior Debt with Subsidiary Guarantee
$1 billion, 6.875% Fixed Interest Rate Notes due November 2035 (“2035 Notes”) $ 991

$ 990

$ 990
$860 million, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”) 857

952

951
$700 million, 6.75% Fixed Interest Rate Notes due July 2036 (“2036 Notes”) 693

693

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

498

498
$500 million, 5.25% Fixed Interest Rate Notes due February 2028 (“2028 Notes”) 496
496
495
$500 million, 7.50% Fixed Interest Rate Notes due June 2029 ("2029 Notes") 487
—
—
$450 million, 6.625% Fixed Interest Rate Notes due April 2021 (“2021 Notes”) 449
776
776
$297 million, 6.694% Fixed Interest Rate Notes due January 2027 (“2027 Notes”) 275
273
273
$338 million, 7.00% Fixed Interest Rate Notes due May 2020 (“2020 Notes”) —
337
337
Secured Revolving Facility —
—
85
Secured Foreign Facilities 95
91
94
Total Senior Debt with Subsidiary Guarantee $ 4,841

$ 5,106

$ 5,192
Senior Debt
$350 million, 6.95% Fixed Interest Rate Debentures due March 2033 (“2033 Notes”) $ 348

$ 348

$ 348
$300 million, 7.60% Fixed Interest Rate Notes due July 2037 (“2037 Notes”) 298

297

297
Unsecured Foreign Facilities 65

60

33
Total Senior Debt $ 711

$ 705

$ 678
Total $ 5,552

$ 5,811

$ 5,870
Current Debt (75 )
(72 )
(56 )
Total Long-term Debt, Net of Current Portion $ 5,477

$ 5,739

$ 5,814


	October 31, 2020		February 1, 2020		November 2, 2019
	(in millions)
Senior Secured Debt with Subsidiary Guarantee
$750 million, 6.875% Fixed Interest Rate Secured Notes due July 2025 ("2025 Secured Notes")	$	740	$	0	$	0

Secured Foreign Facilities	98		103		95
Total Senior Secured Debt with Subsidiary Guarantee	$	838	$	103	$	95
Senior Debt with Subsidiary Guarantee
$1 billion, 6.625% Fixed Interest Rate Notes due April 2021 (“2021 Notes”)	$	0	$	450	$	449
$285 million, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”)	284		858		857
$320 million, 5.625% Fixed Interest Rate Notes due October 2023 (“2023 Notes”)	319		498		498
$500 million, 9.375% Fixed Interest Rate Notes due July 2025 ("2025 Notes")	493		0		0
$297 million, 6.694% Fixed Interest Rate Notes due January 2027 (“2027 Notes”)	277		276		275
$500 million, 5.25% Fixed Interest Rate Notes due February 2028 (“2028 Notes”)	496		496		496
$500 million, 7.50% Fixed Interest Rate Notes due June 2029 ("2029 Notes")	488		487		487
$1 billion, 6.625% Fixed Interest Rate Notes due October 2030 ("2030 Notes")	988		0		0
$1 billion, 6.875% Fixed Interest Rate Notes due November 2035 (“2035 Notes”)	991		991		991
$700 million, 6.75% Fixed Interest Rate Notes due July 2036 (“2036 Notes”)	694		693		693
Total Senior Debt with Subsidiary Guarantee	$	5,030	$	4,749	$	4,746
Senior Debt
$350 million, 6.95% Fixed Interest Rate Debentures due March 2033 (“2033 Notes”)	$	348	$	348	$	348
$247 million, 7.60% Fixed Interest Rate Notes due July 2037 (“2037 Notes”)	246		298		298
Unsecured Foreign Facilities	0		50		65
Total Senior Debt	$	594	$	696	$	711
Total	$	6,462	$	5,548	$	5,552
Current Debt	(11)		(61)		(75)
Total Long-term Debt, Net of Current Portion	$	6,451	$	5,487	$	5,477

Issuance of Notes

In ~~June 2019,~~September 2020, the Company issued $1 billion of 6.625% senior notes due October 2030 (the “2030 Notes”). The obligation to pay principal and interest on these notes is jointly and severally guaranteed on a full and unconditional basis by the Company and certain of the Company's 100% owned subsidiaries. The proceeds from the issuance were $988 million, which were net of issuance costs of $12 million. The issuance costs are being amortized through the maturity date and are included within Long-term Debt on the October 31, 2020 Consolidated Balance Sheet.

In June 2020, the Company issued $750 million of 6.875% senior secured notes due July 2025 (the “2025 Secured Notes”). The obligation to pay principal and interest on these notes is jointly and severally guaranteed on a full and unconditional basis by the Company and certain of the Company's 100% owned subsidiaries. The 2025 Secured Notes are secured on a first-priority lien basis by substantially all of the assets of the Company and the guarantors, and on a second-priority lien basis by certain collateral securing the asset-backed revolving credit facility (“ABL Facility”), in each case, subject to certain exceptions. The proceeds from the issuance were $739 million, which were net of issuance costs of $11 million. The issuance costs are being amortized through the maturity date and are included within Long-term Debt on the October 31, 2020 Consolidated Balance Sheet.

In June 2020, the Company also issued $500 million of ~~7.50%~~9.375% notes due in ~~June 2029 ("2029~~July 2025 (the "2025 Notes"). The obligation to pay principal and interest on these notes is jointly and severally guaranteed on a full and unconditional basis by the Company and certain of the Company's 100% owned ~~subsidiaries (the “Guarantors”).~~subsidiaries. The proceeds from the issuance were ~~$486~~$492 million, which were net of ~~discounts and~~

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issuance costs of ~~$14~~$8 million. The ~~discounts and~~ issuance costs are being amortized through the maturity date and are included within Long-term Debt on the ~~November 2, 2019~~October 31, 2020 Consolidated Balance Sheet.

Repurchases of Notes

In October 2020, the Company settled tender offers to repurchase $576 million of outstanding 2022 Notes, $180 million of outstanding 2023 Notes and $53 million of outstanding 2037 Notes for $844 million. The Company used the proceeds from the 2030 Notes to fund the purchase price of the tender offers. Additionally, utilizing cash on hand, the Company redeemed the remaining $450 million of outstanding 2021 Notes for $463 million. The Company recognized a pre-tax loss related to this extinguishment of debt of $53 million (after-tax loss of $40 million), which includes redemption fees and the write-offs of unamortized issuance costs. This loss is included in Other Income (Loss) in the 2020 Consolidated Statements of Income (Loss).

In June 2019, the Company completed the early settlement of tender offers to repurchase $212 million of outstanding 2020 Notes, $330 million of outstanding 2021 Notes and $96 million of outstanding 2022 Notes for $669 million. The Company used the proceeds from the 2029 Notes, together with cash on hand, to fund the purchase price for the tender offers. Additionally, in July 2019, the Company redeemed the remaining $126 million of outstanding 2020 Notes for $130 million.

~~In the second quarter of 2019, the~~ The Company recognized a pre-tax loss onrelated to this extinguishment of debt of $40 million (after-tax loss of $30 million), which includes redemption fees and the write-offs of unamortized issuance ~~costs and redemption fees.~~costs. This loss is included in Other Income (Loss) in the 2019 year-to-date ~~2019~~ Consolidated Statement of ~~Income (Loss).~~Loss.

~~Exchange of Notes~~

In June 2018, the Company completed private offers to exchange $62 million, $220 million and $44 million of outstanding 2020 Notes, 2021 Notes and 2022 Notes, respectively, for $297 million of newly issued 6.694% notes due in January 2027 ("2027 Notes") and $52 million in cash consideration, which included a $24 million exchange premium. The exchange was treated as a modification under ASC 470, ~~Debt,~~ ~~and no gain or loss was recognized. The exchange premium is being amortized through the maturity date of January 2027 and is included within Long-term Debt on the Consolidated Balance Sheets. The~~

~~obligation to pay principal and interest on the 2027 Notes is jointly and severally guaranteed on a full and unconditional basis by the Guarantors.~~

~~Secured~~ Revolving Credit Facility

The Company and certain of the ~~Guarantors~~Company's 100% owned subsidiaries guarantee and pledge collateral to secure a revolving credit facility ("~~Secured Revolving Facility"~~Credit Agreement"). The Secured Revolving Facility has aggregate availability of $1 billion. The Secured Revolving Facility allows the Company and certain of the Company's non-U.S. subsidiaries to borrow and obtain letters of credit in U.S. dollars, Canadian dollars, Euros, Hong Kong dollars or British pounds.

In ~~August 2019,~~April 2020, the Company entered into an amendment and restatement (“Amendment”) of the ~~Secured Revolving Facility.~~Credit Agreement to convert the Company’s credit facility into an asset-backed revolving credit facility. The Amendment ~~maintained~~maintains the aggregate ~~availability under the Secured Revolving Facility~~commitments at $1 billion, and ~~extended~~maintains the expiration date ~~from May 2022 to~~in August of 2024. The ~~Amendment also raised~~ABL Facility allows borrowings and letters of credit in U.S. dollars or Canadian dollars.

Availability under the ~~threshold~~ABL Facility is the lesser of (i) the borrowing base, determined primarily based on the Company's eligible U.S. and Canadian credit card receivables, accounts receivable, inventory and eligible real property, or (ii) the aggregate commitment. If at any time, the outstanding amount under the ABL Facility exceeds the lesser of (i) the borrowing base and (ii) the aggregate commitment, the Company will be required to prepay the outstanding amounts under the ABL Facility to the extent of such excess. In addition, at any time that the Company's consolidated ~~debt~~cash balance exceeds $350 million, it will be required to prepay outstanding amounts under the ABL Facility to the extent of such excess. As of October 31, 2020, the Company's borrowing base was $1.453 billion and it was unable to draw upon the ABL Facility as its consolidated ~~EBITDA in which investments and restricted payments may be made without limitation to 3.50 to 1.00.~~cash balance exceeded $350 million.

The ABL Facility supports the Company’s letter of credit program. The Company ~~incurred fees related to~~had $63 million of outstanding letters of credit as of October 31, 2020 that reduced its availability under the Amendment of $5 million, which were capitalized and recorded in Other Assets on the November 2, 2019 Consolidated Balance Sheet and are being amortized over the remaining term of the Secured RevolvingABL Facility.

As of ~~November 2, 2019,~~October 31, 2020, the ~~Secured Revolving~~ABL Facility fees related to committed and unutilized amounts were ~~0.25%~~0.30% per annum, and the fees related to outstanding letters of credit were ~~1.50%~~1.75% per annum. In addition, the interest rate on outstanding U.S. dollar borrowings was the London Interbank Offered Rate ~~(“LIBOR”)~~ plus ~~1.50%~~1.75% per annum. The interest rate on outstanding ~~foreign-denominated~~Canadian dollar-denominated borrowings was the ~~applicable benchmark rate~~Canadian Dollar Offered Rate plus ~~1.50%~~1.75% per annum.

The ~~Secured Revolving~~ABL Facility ~~contains fixed charge coverage and debt to EBITDA financial covenants. The~~requires the Company ~~is required~~ to maintain a fixed charge coverage ratio of not less than ~~1.75~~1.00 to 1.00 and a consolidated debt to consolidated EBITDA ratio not exceeding 4.00 to 1.00 for the most recent four-quarter period. Additionally, the Secured Revolving Facility provided that investments and restricted payments may be made, without limitationduring an event of default or any period commencing on ~~amount, if (a) at the time of and after giving effect to such investment or restricted payment, the ratio of consolidated debt to consolidated EBITDA for the most recent four-quarter period~~any day when specified excess availability is less than ~~3.50 to 1.00 and (b) no default~~the greater of (1) $100 million or ~~event~~(2) 15% of ~~default exists.~~the maximum borrowing amount. As of ~~November 2, 2019,~~October 31, 2020, the Company was not required to maintain this ratio.

In March 2020, in ~~compliance with both~~an abundance of caution and as a proactive measure in response to the COVID-19 pandemic, the Company elected to borrow $950 million from its ~~financial covenants, and~~revolving facility, which was repaid upon the ~~ratio~~completion of ~~consolidated debt to consolidated EBITDA was less than 3.50 to 1.00.~~

the Amendment. As of ~~November 2, 2019,~~October 31, 2020, there were 0 borrowings outstanding under the ~~Secured Revolving~~ABL Facility.

~~The Secured Revolving Facility supports the Company’s letter~~

Table of ~~credit program. The Company had $10 million of outstanding letters of credit as of November 2, 2019 that reduced its availability under the Secured Revolving Facility.~~Contents

~~Secured~~ Foreign Facilities

~~The Company and~~Certain of the ~~Guarantors guarantee and pledge collateral to secure~~Company's China subsidiaries utilize revolving and term loan bank facilities ~~("Secured Foreign Facilities") used by certain of the Company's Greater China subsidiaries~~ to support their ~~operations.~~operations ("Foreign Facilities"). The ~~Secured~~ Foreign Facilities ~~which~~ allow borrowings in U.S. dollars and Chinese Yuan, ~~have availability totaling $150 million. The~~and interest rates on outstanding borrowings are based upon the applicable benchmark rate for the currency of each borrowing. Certain of these facilities are guaranteed by the Company and certain of the Company's 100% owned subsidiaries ("Secured Foreign Facilities"), and certain of these facilities were guaranteed by the Company only ("Unsecured Foreign Facilities").

The Secured Foreign Facilities have availability totaling $128 million. During ~~2019,~~2020, the Company borrowed ~~$16~~$21 million and made payments of $8$28 million under the Secured Foreign Facilities. ~~The maximum daily amount~~As of October 31, 2020, there were borrowings of $98 million outstanding ~~at any point in time during 2019 was $96 million.~~under the Secured Foreign Facilities, of which $11 million is included within Current Debt on the Consolidated Balance Sheet. Borrowings on the Secured Foreign Facilities mature between ~~December 2019~~March 2021 and August 2024. As

During 2020, the Company placed cash on deposit with certain financial institutions as collateral for their lending commitments under the Secured Foreign Facilities. The amount of ~~November 2, 2019, borrowings of $10~~collateral required reduces over time as the Company makes certain paydowns. These deposits, totaling $128 million, are ~~included within Current Debt~~recorded in Other Assets on the October 31, 2020 Consolidated Balance ~~Sheet, and the remaining borrowings are included within Long-term Debt.~~Sheet.

~~Unsecured Foreign Facilities~~

The Company guarantees unsecured revolving and term loan bank facilities ("Unsecured Foreign Facilities") used by certain of the Company's Greater China subsidiaries to support their operations. The Unsecured Foreign Facilities, which allow borrowings in U.S. dollars and Chinese Yuan, have availability totaling $87 million. The interest rates on outstanding borrowings are based upon the applicable benchmark rate for the currency of each borrowing. During ~~2019,~~2020, the Company borrowed ~~$20~~$13 million and made payments of ~~$13~~$63 million under the Unsecured Foreign Facilities. ~~The maximum daily amount~~During the second quarter of 2020, with 0 borrowings outstanding, ~~at any point in time during 2019 was $73 million. Borrowings on~~the Company terminated the Unsecured Foreign ~~Facilities mature between November 2019 and January 2020. As of November 2, 2019, borrowings of $65 million are included within Current Debt on the Consolidated Balance Sheet.~~Facilities.

~~13. Derivative Financial Instruments~~

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

The Company uses foreign currency forward contracts to mitigate the impact of fluctuations in foreign currency exchange rates relative to recognized payable balances denominated in non-functional currencies. The fair value of these non-designated foreign currency forward contracts is not significant as of November 2, 2019.

~~The following table provides the U.S. dollar notional amount of outstanding foreign currency derivative financial instruments as of November 2, 2019, February 2, 2019 and November 3, 2018:~~

November 2,
2019 February 2,
2019 November 3,
2018
(in millions)
Notional Amount $ 130
$ 147
$ 198

The following table provides a summary of the fair value and balance sheet classification of outstanding derivative financial instruments designated as foreign currency cash flow hedges as of November 2, 2019, February 2, 2019 and November 3, 2018:

November 2,
2019 February 2,
2019 November 3,
2018
(in millions)
Other Current Assets $ 1
$ 2
$ 3
Accrued Expenses and Other 1
—
—

The following table provides a summary of the pre-tax financial statement effect of the gains and losses on derivative financial instruments designated as foreign currency cash flow hedges for the third quarter and year-to-date 2019 and 2018:

Third Quarter Year-to-Date
2019 2018 2019 2018
(in millions)
Gain (Loss) Recognized in Accumulated Other Comprehensive Income $ (2 ) $ 1
$ 2
$ 11
(Gain) Loss Reclassified from Accumulated Other Comprehensive Income into Costs of Goods Sold, Buying and Occupancy Expense (1 ) —
(4 ) 3

The Company estimates that $1 million of net gains included in accumulated other comprehensive income as of November 2, 2019 related to foreign currency forward contracts designated as cash flow hedges will be reclassified into earnings within the following 12 months. Actual amounts ultimately reclassified depend on the exchange rates in effect when derivative contracts that are currently outstanding mature.

~~14.~~11. Fair Value Measurements

~~The following table provides a summary~~Cash and Cash Equivalents and Restricted Cash include cash on hand, deposits with financial institutions and highly liquid investments with original maturities of ~~assets and liabilities measured in the consolidated financial statements at fair value on a recurring basis as of November 2, 2019, February 2, 2019 and November 3, 2018:~~

Level 1 Level 2 Level 3 Total
(in millions)
As of November 2, 2019
Assets:
Cash and Cash Equivalents $ 340
$ —
$ —
$ 340
Marketable Equity Securities 1
—
—
1
Foreign Currency Cash Flow Hedges —
1
—
1
Liabilities:
Foreign Currency Cash Flow Hedges —
1
—
1
As of February 2, 2019
Assets:
Cash and Cash Equivalents $ 1,413
$ —
$ —
$ 1,413
Marketable Equity Securities 11
—
—
11
Foreign Currency Cash Flow Hedges —
2
—
2
As of November 3, 2018
Assets:
Cash and Cash Equivalents $ 348
$ —
$ —
$ 348
Marketable Equity Securities 9
—
—
9
Foreign Currency Cash Flow Hedges —
3
—
3

less than 90 days. The Company's Cash and Cash Equivalents and Restricted Cash are considered Level 1 fair value measurements ~~use~~as they are valued using unadjusted quoted prices in active markets for identical assets. The Company's marketable equity securities are classified as Level 1 fair value measurements as they are traded with sufficient frequency and volume to enable the Company to obtain pricing information on an ongoing basis. During year-to-date 2019, the Company received cash proceeds of $9 million related to sales of its marketable equity securities, which are included within Investing Activities of the 2019 Consolidated Statement of Cash Flows.

The Company’s Level 2 fair value measurements use market approach valuation techniques. The primary inputs to these techniques include foreign currency exchange rates, as applicable to the underlying instruments.

The following table provides a summary of the principal value and estimated fair value of outstanding publicly traded debt as of October 31, 2020, February 1, 2020 and November 2, ~~2019, February 2, 2019 and November 3, 2018:~~2019:

November 2,
2019 February 2,
2019 November 3,
2018
(in millions)
Principal Value $ 5,458
$ 5,722
$ 5,722
Fair Value, Estimated (a) 5,156
5,340
5,301


	October 31, 2020		February 1, 2020		November 2, 2019
	(in millions)
Principal Value	$	6,449	$	5,458	$	5,458
Fair Value, Estimated (a)	6,678		5,555		5,156

_______________


~~(a)~~	(a)The estimated fair value of the Company’s publicly traded debt is based on reported transaction prices, which are considered Level 2 inputs in accordance with ASC 820, Fair Value Measurement. The estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

Management believes that the carrying values of accounts receivable, accounts payable and accrued expenses ~~and current debt~~ approximate fair value because of their short maturity.

~~15.~~12. Comprehensive Income

The following table provides the rollforward of accumulated other comprehensive income for year-to-date ~~2019:~~2020:


	Foreign Currency Translation		Cash Flow Hedges		Accumulated Other Comprehensive Income
	(in millions)
Balance as of February 1, 2020	$	52	$	0	$	52
Other Comprehensive Income (Loss) Before Reclassifications	(4)		2		(2)
Amounts Reclassified from Accumulated Other Comprehensive Income	0		(2)		(2)
Tax Effect	0		0		0
Current-period Other Comprehensive Income (Loss)	(4)		0		(4)
Balance as of October 31, 2020	$	48	$	0	$	48

Foreign Currency Translation Cash Flow Hedges Accumulated Other Comprehensive Income
(in millions)
Balance as of February 2, 2019 $ 57
$ 2
$ 59
Other Comprehensive Income (Loss) Before Reclassifications (5 ) 2
(3 )
Amounts Reclassified from Accumulated Other Comprehensive Income —
(4 ) (4 )
Tax Effect —
1
1
Current-period Other Comprehensive Income (Loss) (5 ) (1 ) (6 )
Balance as of November 2, 2019 $ 52
$ 1
$ 53

Table of Contents

The following table provides the rollforward of accumulated other comprehensive income for year-to-date ~~2018:~~2019:


	Foreign Currency Translation		Cash Flow Hedges		Accumulated Other Comprehensive Income
	(in millions)
Balance as of February 2, 2019	$	57	$	2	$	59
Other Comprehensive Income (Loss) Before Reclassifications	(5)		2		(3)
Amounts Reclassified from Accumulated Other Comprehensive Income	0		(4)		(4)
Tax Effect	0		1		1
Current-period Other Comprehensive Income (Loss)	(5)		(1)		(6)
Balance as of November 2, 2019	$	52	$	1	$	53

Foreign Currency Translation Cash Flow Hedges Marketable Equity Securities Accumulated Other Comprehensive Income
(in millions)
Balance as of February 3, 2018 $ 32
$ (10 ) $ 2
$ 24
Amount reclassified to Retained Earnings upon adoption of ASC 321, Investments - Equity Securities
—
—
(2 ) (2 )
Balance as of February 4, 2018 32
(10 ) —
22
Other Comprehensive Income (Loss) Before Reclassifications (24 ) 11
—
(13 )
Amounts Reclassified from Accumulated Other Comprehensive Income —
3
—
3
Tax Effect —
(1 ) —
(1 )
Current-period Other Comprehensive Income (Loss) (24 ) 13
—
(11 )
Balance as of November 3, 2018 $ 8
$ 3
$ —
$ 11

~~16.~~13. Commitments and Contingencies

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

In July 2019, a plaintiff shareholder filed a putative class action complaint in the U.S. District Court for the Southern District of Ohio alleging that the Company made false and/or misleading statements relating to the November 2018 announcement that the Company was reducing its quarterly dividend. In September 2019, a different plaintiff shareholder filed a second putative class action complaint in the U.S. District Court for the Southern District of Ohio containing substantially the same allegations and seeking substantially the same relief. In October 2019, the Court issued an order consolidating the two putative class actions, appointing a lead plaintiff, and approving that lead plaintiff’s selection of lead counsel. The ~~deadline for~~lead plaintiff filed a consolidated amended complaint on December 20, 2019 that asserted substantially the same allegations and sought substantially the same relief as the initial complaint. The Company filed a motion to dismiss the consolidated amended complaint on February 18, 2020, the lead plaintiff filed an opposition to the Company's motion to dismiss on May 4, 2020, and the Company filed a reply brief in further support of its motion to dismiss on June 3, 2020. The court heard oral argument on the motion to dismiss on September 23, 2020. On October 16, 2020, the court granted the motion to dismiss, denied the lead plaintiff’s request for leave to amend the complaint, and dismissed all claims with prejudice. The lead plaintiff did not file ~~an amended~~any notice of appeal by the November 16, 2020 deadline.

On February 19, 2020, a plaintiff shareholder filed a complaint ~~is December 20, 2019.~~in the U.S. District Court for the Southern District of Ohio alleging derivative claims on behalf of the Company against certain of its current and former directors and officers. The Company ~~views~~was named as nominal defendant. The lawsuit asserts claims for breach of fiduciary duty, corporate waste and unjust enrichment in connection with alleged misstatements about the Company's quarterly dividend prior to the announced reduction of the dividend in November 2018. On July 21, 2020, the court so-ordered a stipulation staying all proceedings in this lawsuit, pending resolution of the motion to dismiss that the Company filed on February 18, 2020 in the putative class action lawsuit described above. Following the dismissal of the putative class action lawsuit described above, the parties filed a joint stipulation to dismiss the derivative claims without prejudice on November 5, 2020.

On May 19, 2020, a purported shareholder filed a derivative lawsuit on behalf of L Brands, Inc. in the Court of Common Pleas for Franklin County, Ohio. The complaint names as ~~meritless~~defendants certain current and ~~intends~~former directors and officers of L Brands, Inc. and alleges, among other things, that these defendants breached their fiduciary duties by violating law and/or company policies relating to ~~defend~~workplace conduct. The Company was named as nominal defendant only, and there are no claims asserted against ~~this~~it. On June 16, 2020, the lawsuit ~~vigorously.~~ was removed to the United States District Court for the Southern District of Ohio. On July 6, 2020, the court so-ordered a stipulation staying the lawsuit until December 29, 2020.

La Senza

In connection with the sale of La Senza in the fourth quarter of 2018, certain of the Company's subsidiaries have remaining contingent obligations of ~~$44~~$34 million related to lease payments under the current terms of noncancelable leases expiring at various dates through 2028. These obligations include minimum rent and additional payments covering taxes, common area costs and certain other expenses and relate to leases that commenced prior to the disposition of the business. As ~~part~~ of October 31, 2020, the ~~sale, a liability~~Company has recorded reserves of $5$35 million,~~was recorded for these obligations. During the third quarter of 2019, an additional reserve of $19 million was recorded related to these obligations. This liability is~~ primarily included inwithin Other Long-term Liabilities on the ~~November 2, 2019~~ Consolidated Balance ~~Sheet.~~

~~Additionally, the Company has~~Sheet, related to these lease-related obligations and certain other ~~contingent~~ obligations related to the La Senza ~~for a period~~business.

Table of time. A reserve of $17 million was recorded during the third quarter of 2019 related to these obligations, which is included in Other Long-term Liabilities on the November 2, 2019 Consolidated Balance Sheet.Contents

~~Other~~

In connection with the disposition of a certain other business, the Company has remaining guarantees of $5 million related to lease payments under the current terms of a noncancelable lease expiring in 2021, which may remain in effect if the term is extended. The Company has not recorded a liability with respect to this guarantee obligation as of November 2, 2019, February 2, 2019 or November 3, 2018 as it concluded that payments under this guarantee were not probable.

In connection with noncancelable operating leases of certain assets, the Company provided residual value guarantees to the lessor if the leased assets cannot be sold for an amount in excess of a specified minimum value at the conclusion of the lease term. The leases expire at various dates through 2021, and the total amount of the guarantees is $94 million. The Company recorded a liability of $11 million as of November 2, 2019 and February 2, 2019, and $3 million as of November 3, 2018 related to these guarantee obligations. This liability is included in Current Operating Lease Liabilities on the November 2, 2019 Consolidated Balance Sheet, and in Other Long-term Liabilities on the February 2, 2019 and November 3, 2018 Consolidated Balance Sheets.

~~17.~~14. Retirement Benefits

The Company sponsors a tax-qualified defined contribution retirement plan ~~and a non-qualified supplemental retirement plan~~ for substantially all its associates within the U.S. Participation ~~in the tax-qualified plan~~ is available to associates who meet certain age and service requirements. ~~Participation in the non-qualified plan is available to associates who meet certain age, service, job level and compensation requirements.~~

The qualified plan permits participating associates to elect contributions up to the maximum limits allowable under the Internal Revenue Code. The Company matches associate contributions according to a predetermined formula and contributes additional amounts based on a percentage of the associates’ eligible annual compensation and years of service. Associate contributions and Company matching contributions vest immediately. Additional Company contributions and the related investment earnings are subject to vesting based on years of service. Total expense recognized related to the qualified plan was $16 million for the third quarter of 2020 and $19 million for the third quarter of ~~2019 and $18 million for the third quarter of 2018.~~2019. Total expense recognized related to the qualified plan was $55 million for year-to-date 2020 and $58 million for year-to-date ~~2019 and $56 million for year-to-date 2018.~~2019.

The Company sponsors a non-qualified supplemental retirement plan. The non-qualified plan is an unfunded plan, which provides benefits beyond the Internal Revenue Code limits for qualified defined contribution plans. ~~The plan permits participating associates to elect contributions up to a maximum percentage of eligible compensation. The Company matches associate contributions according to a predetermined formula~~On June 27, 2020 (the “Termination Date”), the Human Capital and contributes additional amounts based on a percentage of the associates’ eligible compensation and years of service. The plan also permits participating associates to defer additional compensation up to a maximum amount, which the Company does not match. Associates’ accounts are credited with interest using a fixed rate determined by the Company and reviewed by the Compensation Committee of the Board of Directors ~~prior~~authorized the termination of the non-qualified plan. Subsequent to the ~~beginning of each year. Associate~~Termination Date, no additional employee contributions ~~and~~may be made to the related interest vest immediately. Company contributions, along with related interest, are subject to vesting based on years of service. Associates may elect in-service distributions for the unmatched additional deferred compensation component only.non-qualified plan. The remaining ~~vested portion~~benefits and obligations are expected to be paid out in full approximately one year following the Termination Date. Accordingly, the liability of ~~associates’ accounts in~~$258 million related to the non-qualified plan ~~will be distributed upon termination of employment in either a lump sum or in annual installments over a specified period of up to 10 years.~~is included within Accrued Expenses and Other on the October 31, 2020 Consolidated Balance Sheet. Total expense recognized related to the non-qualified plan was $3 million for the third quarter of 2020 and $8 million for the third quarter of ~~2019 and $7 million for the third quarter of 2018.~~2019. Total expense recognized related to the non-qualified plan was $11 million for year-to-date 2020 and $20 million for year-to-date ~~2019 and $18 million for year-to-date 2018.~~2019.

~~18.~~15. Segment Information

In the third quarter of 2020, the Company changed its segment reporting as a result of leadership changes, actions taken and the ongoing efforts to separate Victoria’s Secret and Bath & Body Works into separate businesses. The Company has 32 reportable segments: ~~Victoria’s Secret,~~ Bath & Body Works and Victoria's ~~Secret and Bath & Body Works International.~~

~~The Victoria’s Secret~~Secret. While this reporting change did not impact the Company's consolidated results, segment sells women’s intimate and other apparel, personal care and beauty products under the Victoria’s Secret and PINK brand names. Victoria’s Secret merchandise is sold online and through retail stores located in the U.S. and Canada.data has been recast to be consistent for all periods presented.

The Bath & Body Works segment sells body care, home fragrance products, soaps and sanitizers under the Bath & Body Works, White Barn, C.O. Bigelow and other brand names. Bath & Body Works merchandise is sold online and at retail stores located in the U.S. and ~~Canada.~~

~~The Victoria's Secret~~Canada, and Bath & Body Works International segment includes the Victoria's Secret and Bath & Body Works company-owned and partner-operated stores located outside of the U.S. and Canada, as well as the online business in Greater China. This segment includes the following:

~~Victoria's Secret International, comprised of company-owned stores in the U.K., Ireland and Greater China, as well as stores operated by partners under franchise and license arrangements;~~

~~Victoria's Secret Beauty and Accessories, comprised of company-owned stores in Greater China, as well as~~international stores operated by partners under franchise, license and wholesale ~~arrangements, which feature Victoria's Secret branded beauty and accessories products in travel retail and other locations; and~~

arrangements. Additionally, this segment includes the Bath & Body Works ~~International stores operated by partners under franchise, license and wholesale arrangements.~~

~~Other includes Mast Global, a~~ merchandise sourcing and production function serving the Company and its international partners.

The Victoria’s Secret segment sells women’s intimate and other apparel, personal care and beauty products under the Victoria’s Secret and PINK brand names. Victoria’s Secret and PINK merchandise is sold online and through retail stores located in the U.S., Canada and Greater China, and international stores operated by partners under franchise, license, wholesale and joint venture arrangements. Additionally, this segment includes the Victoria's Secret and PINK merchandise sourcing and production function serving the Company and its international partners.

Other includes Corporate infrastructure and support functions, including non-core real estate, equity investments and other governance functions such as treasury and ~~tax. Results for 2018 also include La Senza~~tax, and ~~Henri Bendel.~~other non-recurring charges and benefits that are deemed to be corporate in nature.

Table of Contents

The following table provides the Company’s segment information for the third quarter and year-to-date ~~2019~~2020 and ~~2018~~:2019:

Victoria’s
Secret

Bath &
Body Works

Victoria’s Secret
and
Bath & Body Works International
Other Total
(in millions)
2019
Third Quarter:
Net Sales $ 1,412
$ 1,064
$ 134
$ 67
$ 2,677
Operating Income (Loss) (a) (122 ) 196
(215 ) (10 ) $ (151 )
Year-to-Date:
Net Sales $ 4,529
$ 2,996
$ 423
$ 259
$ 8,207
Operating Income (Loss) (a) (73 ) 531
(220 ) (61 ) 177
2018
Third Quarter:
Net Sales $ 1,529
$ 956
$ 134
$ 156
$ 2,775
Operating Income (Loss) (b) (36 ) 178
(42 ) (46 ) 54
Year-to-Date:

Net Sales $ 4,843
$ 2,680
$ 415
$ 447
$ 8,385
Operating Income (Loss) (b) 162
470
(56 ) (139 ) 437


	Bath & Body Works		Victoria’s Secret		Other		Total
	(in millions)
2020
Third Quarter:
Net Sales	$	1,702	$	1,353	$	0	$	3,055
Operating Income (Loss) (a)	494		145		(58)		581
Year-to-Date:
Net Sales	$	3,716	$	3,313	$	0	$	7,029
Operating Income (Loss) (a) (b)	907		(427)		(173)		307
2019
Third Quarter:
Net Sales	$	1,099	$	1,578	$	0	$	2,677
Operating Income (Loss) (c)	209		(318)		(42)		(151)
Year-to-Date:
Net Sales	$	3,124	$	5,033	$	50	$	8,207
Operating Income (Loss) (c)	560		(250)		(133)		177

_______________


~~(a)~~	Victoria's Secret and Victoria's Secret and Bath & Body Works International includes store asset impairment charges of $41 million and $177 million, respectively. Additionally, Victoria's Secret and Bath & Body Works International includes a goodwill impairment charge of $30 million. For additional information see Note 7, “Property and Equipment, Net" and Note 8, "Goodwill and Trade Names."


~~(b)~~	Victoria's Secret and Victoria's Secret and Bath & Body Works International includes store asset impairment charges of $50 million and $31 million, respectively, and Other includes Henri Bendel closure costs of $20 million. For additional information see Note 7, “Property and Equipment, Net" and Note 5, “Restructuring Activities."

(a)Victoria's Secret includes a $30 million pre-tax gain related to the establishment of a joint venture for the Victoria’s Secret U.K. and Ireland business with Next PLC. For additional information, see Note 4, “Restructuring."

(b)Victoria's Secret includes store and lease asset impairment charges of $214 million and a $36 million net pre-tax gain related to the closure and lease termination of the Hong Kong flagship store. For additional information, see Note 7, “Long-Lived Assets." Bath & Body Works, Victoria's Secret and Other includes severance and related charges of $12 million, $51 million and $18 million, respectively. For additional information, see Note 4, “Restructuring."

(c)Victoria's Secret includes store and lease asset impairment charges of $218 million and goodwill impairment charges of $30 million. For additional information, see Note 7, “Long-Lived Assets."

The ~~Company's~~Company’s international net sales include sales from ~~company-owned~~company-operated stores, royalty revenue from franchise and license arrangements, wholesale revenues and direct sales shipped internationally. Certain of these sales are subject to the impact of fluctuations in foreign currency. The Company’s international net sales ~~across all segments~~ totaled ~~$318~~$320 million and ~~$387~~$318 million for the third quarter of ~~2019~~2020 and ~~2018,~~2019, respectively. The Company's international net sales across all segments totaled ~~$1.024 billion~~$738 million and ~~$1.146~~$1.024 billion for year-to-date ~~2019~~2020 and ~~2018,~~2019, respectively.

~~19. Supplemental Guarantor Financial Information~~

The Company’s 2021 Notes, 2022 Notes, 2023 Notes, 2027 Notes, 2028 Notes, 2029 Notes, 2035 Notes, 2036 Notes, Secured Revolving Facility and Secured Foreign Facilities are jointly and severally guaranteed on a full and unconditional basis by the Guarantors. The Company is a holding company, and its most significant assets are the stock of its subsidiaries. The Guarantors represent: (a) substantially all of the sales of the Company’s domestic subsidiaries, (b) more than 90% of the assets owned by the Company’s domestic subsidiaries, other than real property, certain other assets and intercompany investments and balances and (c) more than 95% of the accounts receivable and inventory directly owned by the Company’s domestic subsidiaries.

~~The following supplemental financial information sets forth for the Company and its guarantor and non-guarantor subsidiaries: the Condensed Consolidating Balance Sheets as of~~ ~~November 2, 2019~~, ~~February 2, 2019~~ ~~and~~ ~~November 3, 2018~~ ~~and the Condensed Consolidating Statements of Income (Loss), Comprehensive Income (Loss) and Cash Flows for the periods ended~~ ~~November 2, 2019~~ ~~and~~ ~~November 3, 2018~~.

~~L BRANDS, INC.~~

~~CONDENSED CONSOLIDATING BALANCE SHEET~~

~~(in millions)~~

~~(Unaudited)~~

November 2, 2019
L Brands, Inc.
Guarantor
Subsidiaries

Non-
guarantor
Subsidiaries
Eliminations
Consolidated
L Brands, Inc.
ASSETS
Current Assets:
Cash and Cash Equivalents $ —
$ 186
$ 154
$ —
$ 340
Accounts Receivable, Net —
191
104
—
295
Inventories —
1,864
168
—
2,032
Other 9
53
197
—
259
Total Current Assets 9
2,294
623
—
2,926
Property and Equipment, Net —
1,823
748
—
2,571
Operating Lease Assets —
2,587
543
—
3,130
Goodwill —
1,318
—
—
1,318
Trade Names —
411
—
—
411
Net Investments in and Advances to/from Consolidated Affiliates 4,095
20,095
2,835
(27,025 ) —
Deferred Income Taxes —
9
54
—
63
Other Assets 130
10
700
(629 ) 211
Total Assets $ 4,234
$ 28,547
$ 5,503
$ (27,654 ) $ 10,630
LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable $ 1
$ 576
$ 447
$ —
$ 1,024
Accrued Expenses and Other 69
587
324
—
980
Current Debt —
—
75
—
75
Current Operating Lease Liabilities —
377
83
—
460
Income Taxes —
—
4
—
4
Total Current Liabilities 70
1,540
933
—
2,543
Deferred Income Taxes 1
(41 ) 286
—
246
Long-term Debt 5,392
615
85
(615 ) 5,477
Long-term Operating Lease Liabilities —
2,579
529
—
3,108
Other Long-term Liabilities 62
397
49
(14 ) 494
Total Equity (Deficit) (1,291 ) 23,457
3,621
(27,025 ) (1,238 )
Total Liabilities and Equity (Deficit) $ 4,234
$ 28,547
$ 5,503
$ (27,654 ) $ 10,630
21

~~L BRANDS, INC.~~

~~CONDENSED CONSOLIDATING BALANCE SHEET~~

~~(in millions)~~

February 2, 2019
L Brands, Inc.
Guarantor
Subsidiaries

Non-
guarantor
Subsidiaries
Eliminations
Consolidated
L Brands, Inc.
ASSETS
Current Assets:
Cash and Cash Equivalents $ —
$ 997
$ 416
$ —
$ 1,413
Accounts Receivable, Net —
241
126
—
367
Inventories —
1,093
155
—
1,248
Other —
139
93
—
232
Total Current Assets —
2,470
790
—
3,260
Property and Equipment, Net —
1,922
896
—
2,818
Goodwill —
1,318
30
—
1,348
Trade Names —
411
—
—
411
Net Investments in and Advances to/from Consolidated Affiliates 4,755
19,737
2,047
(26,539 ) —
Deferred Income Taxes —
9
53
—
62
Other Assets 127
15
670
(621 ) 191
Total Assets $ 4,882
$ 25,882
$ 4,486
$ (27,160 ) $ 8,090
LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable $ —
$ 363
$ 348
$ —
$ 711
Accrued Expenses and Other 92
597
393
—
1,082
Current Debt —
—
72
—
72
Income Taxes (7 ) 100
28
—
121
Total Current Liabilities 85
1,060
841
—
1,986
Deferred Income Taxes 1
(44 ) 269
—
226
Long-term Debt 5,661
606
79
(607 ) 5,739
Other Long-term Liabilities 59
852
107
(14 ) 1,004
Total Equity (Deficit) (924 ) 23,408
3,190
(26,539 ) (865 )
Total Liabilities and Equity (Deficit) $ 4,882
$ 25,882
$ 4,486
$ (27,160 ) $ 8,090

~~L BRANDS, INC.~~

~~CONDENSED CONSOLIDATING BALANCE SHEET~~

~~(in millions)~~

~~(Unaudited)~~

November 3, 2018
L Brands, Inc.
Guarantor
Subsidiaries

Non-
guarantor
Subsidiaries
Eliminations
Consolidated
L Brands, Inc.
ASSETS
Current Assets:
Cash and Cash Equivalents $ —
$ 167
$ 181
$ —
$ 348
Accounts Receivable, Net —
212
109
—
321
Inventories —
1,700
263
—
1,963
Other 15
165
121
—
301
Total Current Assets 15
2,244
674
—
2,933
Property and Equipment, Net —
2,019
915
—
2,934
Goodwill —
1,318
30
—
1,348
Trade Names —
411
—
—
411
Net Investments in and Advances to/from Consolidated Affiliates 4,396
19,442
2,386
(26,224 ) —
Deferred Income Taxes —
9
11
—
20
Other Assets 127
14
683
(641 ) 183
Total Assets $ 4,538
$ 25,457
$ 4,699
$ (26,865 ) $ 7,829
LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable $ —
$ 585
$ 475
$ —
$ 1,060
Accrued Expenses and Other 62
583
373
—
1,018
Current Debt —
—
56
—
56
Income Taxes —
—
8
—
8
Total Current Liabilities 62
1,168
912
—
2,142
Deferred Income Taxes (2 ) (43 ) 279
—
234
Long-term Debt 5,743
627
71
(627 ) 5,814
Other Long-term Liabilities 58
810
97
(14 ) 951
Total Equity (Deficit) (1,323 ) 22,895
3,340
(26,224 ) (1,312 )
Total Liabilities and Equity (Deficit) $ 4,538
$ 25,457
$ 4,699
$ (26,865 ) $ 7,829

~~L BRANDS, INC.~~

~~CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)~~

~~(in millions)~~

~~(Unaudited)~~

Third Quarter 2019
L Brands, Inc.
Guarantor
Subsidiaries

Non-
guarantor
Subsidiaries
Eliminations
Consolidated
L Brands, Inc.
Net Sales $ —
$ 2,583
$ 887
$ (793 ) $ 2,677
Costs of Goods Sold, Buying and Occupancy —
(1,761 ) (887 ) 712
(1,936 )
Gross Profit —
822
—
(81 ) 741
General, Administrative and Store Operating Expenses (1 ) (831 ) (118 ) 58
(892 )
Operating Income (Loss) (1 ) (9 ) (118 ) (23 ) (151 )
Interest Expense (90 ) (23 ) (2 ) 23
(92 )
Other Income (Loss) —
(16 ) (18 ) —
(34 )
Income (Loss) Before Income Taxes (91 ) (48 ) (138 ) —
(277 )
Provision (Benefit) for Income Taxes —
(4 ) (21 ) —
(25 )
Equity in Earnings (Loss), Net of Tax (161 ) (176 ) (55 ) 392
—
Net Income (Loss) $ (252 ) $ (220 ) $ (172 ) $ 392
$ (252 )

~~L BRANDS, INC.~~

~~CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)~~

~~(in millions)~~

~~(Unaudited)~~

Third Quarter 2019
L Brands, Inc.
Guarantor
Subsidiaries

Non-
guarantor
Subsidiaries
Eliminations
Consolidated
L Brands, Inc.
Net Income (Loss) $ (252 ) $ (220 ) $ (172 ) $ 392
$ (252 )
Other Comprehensive Income (Loss), Net of Tax:
Foreign Currency Translation —
—
6
—
6
Unrealized Gain (Loss) on Cash Flow Hedges —
—
(2 ) —
(2 )
Total Other Comprehensive Income (Loss), Net of Tax —
—
4
—
4
Total Comprehensive Income (Loss) $ (252 ) $ (220 ) $ (168 ) $ 392
$ (248 )

~~L BRANDS, INC.~~

~~CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)~~

~~(in millions)~~

~~(Unaudited)~~

Third Quarter 2018
L Brands, Inc.
Guarantor
Subsidiaries

Non-
guarantor
Subsidiaries
Eliminations
Consolidated
L Brands, Inc.
Net Sales $ —
$ 2,644
$ 965
$ (834 ) $ 2,775
Costs of Goods Sold, Buying and Occupancy —
(1,786 ) (838 ) 777
(1,847 )
Gross Profit —
858
127
(57 ) 928
General, Administrative and Store Operating Expenses (2 ) (785 ) (127 ) 40
(874 )
Operating Income (Loss) (2 ) 73
—
(17 ) 54
Interest Expense (94 ) (19 ) —
17
(96 )
Other Income (Loss) —
2
(1 ) —
1
Income (Loss) Before Income Taxes (96 ) 56
(1 ) —
(41 )
Provision (Benefit) for Income Taxes 1
(1 ) 2
—
2
Equity in Earnings (Loss), Net of Tax 54
(92 ) (103 ) 141
—
Net Income (Loss) $ (43 ) $ (35 ) $ (106 ) $ 141
$ (43 )

~~L BRANDS, INC.~~

~~CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)~~

~~(in millions)~~

~~(Unaudited)~~

Third Quarter 2018
L Brands, Inc.
Guarantor
Subsidiaries

Non-
guarantor
Subsidiaries
Eliminations
Consolidated
L Brands, Inc.
Net Income (Loss) $ (43 ) $ (35 ) $ (106 ) $ 141
$ (43 )
Other Comprehensive Income (Loss), Net of Tax:
Foreign Currency Translation —
—
(2 ) —
(2 )
Unrealized Gain (Loss) on Cash Flow Hedges —
—
1
—
1
Total Other Comprehensive Income (Loss), Net of Tax —
—
(1 ) —
(1 )
Total Comprehensive Income (Loss) $ (43 ) $ (35 ) $ (107 ) $ 141
$ (44 )

~~L BRANDS, INC.~~

~~CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)~~

~~(in millions)~~

~~(Unaudited)~~

Year-to-Date 2019
L Brands, Inc.
Guarantor
Subsidiaries

Non-
guarantor
Subsidiaries
Eliminations
Consolidated
L Brands, Inc.
Net Sales $ —
$ 7,831
$ 2,407
$ (2,031 ) $ 8,207
Costs of Goods Sold, Buying and Occupancy —
(5,275 ) (2,070 ) 1,795
(5,550 )
Gross Profit —
2,556
337
(236 ) 2,657
General, Administrative and Store Operating Expenses (9 ) (2,345 ) (293 ) 167
(2,480 )
Operating Income (Loss) (9 ) 211
44
(69 ) 177
Interest Expense (280 ) (70 ) (5 ) 69
(286 )
Other Income (Loss) (40 ) (5 ) (21 ) —
(66 )
Income (Loss) Before Income Taxes (329 ) 136
18
—
(175 )
Provision (Benefit) for Income Taxes (8 ) 2
5
—
(1 )
Equity in Earnings (Loss), Net of Tax 147
82
80
(309 ) —
Net Income (Loss) $ (174 ) $ 216
$ 93
$ (309 ) $ (174 )

~~L BRANDS, INC.~~

~~CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)~~

~~(in millions)~~

~~(Unaudited)~~

Year-to-Date 2019
L Brands, Inc.
Guarantor
Subsidiaries

Non-
guarantor
Subsidiaries
Eliminations
Consolidated
L Brands, Inc.
Net Income (Loss) $ (174 ) $ 216
$ 93
$ (309 ) $ (174 )
Other Comprehensive Income (Loss), Net of Tax:
Foreign Currency Translation —
—
(5 ) —
(5 )
Unrealized Gain (Loss) on Cash Flow Hedges —
—
2
—
2
Reclassification of Cash Flow Hedges to Earnings —
—
(3 ) —
(3 )
Total Other Comprehensive Income (Loss), Net of Tax —
—
(6 ) —
(6 )
Total Comprehensive Income (Loss) $ (174 ) $ 216
$ 87
$ (309 ) $ (180 )

~~L BRANDS, INC.~~

~~CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)~~

~~(in millions)~~

~~(Unaudited)~~

Year-to-Date 2018
L Brands, Inc.
Guarantor
Subsidiaries

Non-
guarantor
Subsidiaries
Eliminations
Consolidated
L Brands, Inc.
Net Sales $ —
$ 7,907
$ 2,555
$ (2,077 ) $ 8,385
Costs of Goods Sold, Buying and Occupancy —
(5,243 ) (2,157 ) 1,946
(5,454 )
Gross Profit —
2,664
398
(131 ) 2,931
General, Administrative and Store Operating Expenses (8 ) (2,228 ) (354 ) 96
(2,494 )
Operating Income (Loss) (8 ) 436
44
(35 ) 437
Interest Expense (288 ) (37 ) (5 ) 38
(292 )
Other Income (Loss) —
8
(7 ) —
1
Income (Loss) Before Income Taxes (296 ) 407
32
3
146
Provision (Benefit) for Income Taxes (1 ) 32
11
—
42
Equity in Earnings (Loss), Net of Tax 399
340
294
(1,033 ) —
Net Income (Loss) $ 104
$ 715
$ 315
$ (1,030 ) $ 104

~~L BRANDS, INC.~~

~~CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)~~

~~(in millions)~~

~~(Unaudited)~~

Year-to-Date 2018
L Brands, Inc.
Guarantor
Subsidiaries

Non-
guarantor
Subsidiaries
Eliminations
Consolidated
L Brands, Inc.
Net Income (Loss) $ 104
$ 715
$ 315
$ (1,030 ) $ 104
Other Comprehensive Income (Loss), Net of Tax:
Foreign Currency Translation —
—
(24 ) —
(24 )
Unrealized Gain (Loss) on Cash Flow Hedges —
—
10
—
10
Reclassification of Cash Flow Hedges to Earnings —
—
3
—
3
Total Other Comprehensive Income (Loss), Net of Tax —
—
(11 ) —
(11 )
Total Comprehensive Income (Loss) $ 104
$ 715
$ 304
$ (1,030 ) $ 93

~~L BRANDS, INC.~~

~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~

~~(in millions)~~

~~(Unaudited)~~

Year-to-Date 2019
L Brands, Inc.
Guarantor
Subsidiaries

Non-
guarantor
Subsidiaries
Eliminations
Consolidated
L Brands, Inc.
Net Cash Provided by (Used for) Operating Activities $ (345 ) $ (377 ) $ 632
$ —
$ (90 )
Investing Activities:
Capital Expenditures —
(245 ) (147 ) —
(392 )
Net Investments in Consolidated Affiliates —
—
(137 ) 137
—
Other Investing Activities —
12
(28 ) —
(16 )
Net Cash Provided by (Used for) Investing Activities —
(233 ) (312 ) 137
(408 )
Financing Activities:
Proceeds from Issuance of Long-term Debt, Net of Issuance Costs 486
—
—
—
486
Payments of Long-term Debt (799 ) —
—
—
(799 )
Borrowings from Foreign Facilities —
—
36
—
36
Repayments of Foreign Facilities —
—
(21 ) —
(21 )
Dividends Paid (249 ) —
—
—
(249 )
Tax Payments related to Share-based Awards (12 ) —
—
—
(12 )
Financing Costs and Other (6 ) (5 ) —
—
(11 )
Net Financing Activities and Advances to/from Consolidated Affiliates 925
(196 ) (592 ) (137 ) —
Net Cash Provided by (Used for) Financing Activities 345

(201 )
(577 )
(137 )
(570 )
Effects of Exchange Rate Changes on Cash and Cash Equivalents —
—
(5 ) —
(5 )
Net Increase (Decrease) in Cash and Cash Equivalents —
(811 ) (262 ) —
(1,073 )
Cash and Cash Equivalents, Beginning of Period —
997
416
—
1,413
Cash and Cash Equivalents, End of Period $ —
$ 186
$ 154
$ —
$ 340

~~L BRANDS, INC.~~

~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~

~~(in millions)~~

~~(Unaudited)~~

Year-to-Date 2018
L Brands, Inc.
Guarantor
Subsidiaries

Non-
guarantor
Subsidiaries
Eliminations
Consolidated
L Brands, Inc.
Net Cash Provided by (Used for) Operating Activities $ (361 ) $ 295
$ 79
$ —
$ 13
Investing Activities:
Capital Expenditures —
(367 ) (194 ) —
(561 )
Net Investments in Consolidated Affiliates —
—
(181 ) 181
—
Other Investing Activities —
6
17
—
23
Net Cash Provided by (Used for) Investing Activities —
(361 ) (358 ) 181
(538 )
Financing Activities:
Payments of Long-term Debt (52 ) —
—
—
(52 )
Borrowing from Secured Revolving Facility 85
—
—
—
85
Borrowings from Foreign Facilities —
—
110
—
110
Repayments of Foreign Facilities —
—
(71 ) —
(71 )
Dividends Paid (500 ) —
—
—
(500 )
Repurchases of Common Stock (198 ) —
—
—
(198 )
Tax Payments related to Share-based Awards (13 ) —
—
—
(13 )
Financing Costs and Other (2 ) (2 ) —
—
(4 )
Net Financing Activities and Advances to/from Consolidated Affiliates 1,041
(929 ) 69
(181 ) —
Net Cash Provided by (Used for) Financing Activities 361
(931 ) 108
(181 ) (643 )
Effects of Exchange Rate Changes on Cash and Cash Equivalents —
—
1
—
1
Net Increase (Decrease) in Cash and Cash Equivalents —
(997 ) (170 ) —
(1,167 )
Cash and Cash Equivalents, Beginning of Period —
1,164
351
—
1,515
Cash and Cash Equivalents, End of Period $ —
$ 167
$ 181
$ —
$ 348

Table of Contents

Report of Independent Registered Public Accounting Firm

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

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheets of L Brands, Inc. (the Company) as of October 31, 2020 and November 2, 2019, ~~and November 3, 2018,~~ and the related consolidated statements of income (loss), comprehensive income (loss), and total equity (deficit) for the thirteen and thirty-nine week periods ended October 31, 2020 and November 2, 2019, ~~and November 3, 2018,~~ and the consolidated statements of cash flows for the thirty-nine week periods ended October 31, 2020 and November 2, 2019, ~~and November 3, 2018,~~ and the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of February ~~2, 2019,~~1, 2020, and the related consolidated statements of income (loss), comprehensive income (loss), total equity (deficit), and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated March ~~22, 2019,~~27, 2020, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of February ~~2, 2019,~~1, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ Ernst & Young LLP

Grandview Heights, Ohio

December ~~6, 2019~~4, 2020

Table of Contents

SAFE HARBOR STATEMENT UNDER THE PRIVATE

SECURITIES LITIGATION ACT OF 1995

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

We caution that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this report or made by our company or our management involve risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. Accordingly, our future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “planned,” “potential” and any similar expressions may identify forward-looking statements. Risks associated with the following factors, among others, in some cases have affected and in the future could affect our financial performance and actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements included in this report or otherwise made by our company or our management:

•general economic conditions, consumer confidence, consumer spending patterns and market disruptions including pandemics or significant health hazards, severe weather conditions, natural disasters, ~~health hazards,~~ 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, ~~significant health hazards,~~ environmental hazards or natural disasters;

•significant health hazards or pandemics, which could result in closed factories, closed stores, 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;

•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;

Table of Contents

•shareholder activism matters;

~~our ability to retain key personnel;~~

~~our ability to attract, develop and retain qualified associates and manage labor-related costs;~~

•the ability of our vendors to deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations;

•fluctuations in product input costs;

•our ability to adequately protect our assets from loss and theft;

•fluctuations in energy costs;

•increases in the costs of mailing, paper and printing;

•claims arising from our self-insurance;

~~liabilities arising from divested businesses;~~

•our ability to implement and maintain information technology systems and to protect associated data;

•our ability to maintain the security of customer, associate, third-party or company information;

•our ability to comply with 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 report to reflect circumstances existing after the date of this report or to reflect the occurrence of future events even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized. Additional information regarding these and other factors can be found in “Item 1A. Risk Factors” in this Form 10-Q and in our ~~2018~~2019 Annual Report on Form 10-K.


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

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

The following discussion and analysis of financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The following information should be read in conjunction with our financial statements and the related notes included in Item 1. Financial Statements.

In the third quarter of 2020, we changed our segment reporting as a result of leadership changes, actions taken and the ongoing efforts to separate Bath & Body Works and Victoria’s Secret into separate businesses. We now have two reportable segments: Bath & Body Works and Victoria’s Secret. Accordingly, we will no longer report a Victoria’s Secret and Bath & Body Works International segment as these businesses are now included with their respective brand. Additionally, the Bath & Body Works and Victoria’s Secret segments now include sourcing and production functions (formerly known as Mast) and certain other corporate functions that directly support each brand. These functions were previously included within Other. While this reporting change did not impact our consolidated results, the segment data has been recast to be consistent for all periods presented.

Executive Overview

In the third quarter of ~~2019,~~2020, our operating income ~~(loss) decreased $205~~increased $732 million to ~~a loss of $151~~$581 million, and our operating income ~~(loss)~~ rate ~~decreased~~increased to 19.0% from (5.6%) ~~from 2.0%~~. Net sales ~~decreased $98~~increased $378 million, or 14%, to $2.677 billion, comparable sales decreased 2% and comparable store sales decreased 3%. Our performance was mixed. At Victoria's Secret, net sales decreased 8%, and the operating loss, which includes store asset impairment charges of $41 million, increased $86 million.$3.055 billion. At Bath & Body Works, net sales increased ~~11%~~$603 million, or 55%, to $1.702 billion and operating income increased ~~$18~~$285 million, or 137%, to $494 million. At Victoria's Secret, ~~and Bath & Body Works International,~~ net sales ~~were flat,~~decreased $225 million, or 14%, to $1.353 billion and operating income increased $462 million to $145 million. Victoria's Secret operating income included a $30 million pre-tax gain related to the ~~operating loss, which includes store and goodwill impairment charges~~establishment of ~~$207 million, increased by $173 million.~~ the Victoria's Secret U.K. joint venture with Next PLC.

For additional information related to our third quarter ~~2019~~2020 financial performance, see “Results of Operations.” ~~For~~

Go-forward Plan for Victoria's Secret

During the third quarter, we took a number of important steps to improve performance at Victoria's Secret and to prepare Victoria’s Secret and Bath & Body Works to operate as standalone separate companies, including:

•We retained financial advisors on the separation of Bath & Body Works and Victoria’s Secret;

•We closed on the Victoria’s Secret U.K. and Next PLC joint venture during the quarter. Under this agreement, we will own 49% of the joint venture, and Next PLC will own 51% and assume responsibility for operations. We expect this arrangement, along with the restructuring of lease terms occurring through the Administration process, to meaningfully improve our results in the U.K. and provide us with additional ~~information related~~growth opportunities through Next PLC's stores and online platform;

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•In Greater China, in addition to the second quarter closure of the Hong Kong flagship, we restructured lease terms on the two mainland flagship stores and have implemented a significant overhead expense reduction plan;

•We managed inventories with discipline, including working with suppliers to identify opportunities to reduce merchandise costs in order to increase merchandise margin rates at Victoria’s Secret and PINK. Victoria’s Secret total inventories ended the quarter down 19%. We will continue to manage inventories with discipline and chase back into merchandise that our ~~impairment charges, see Note 7, “Property~~customers are responding to; and ~~Equipment, Net"~~

•We continued to execute our previously announced plan to close approximately 240 Victoria’s Secret stores in 2020 while also negotiating with landlords for ongoing rent relief. Year-to-date, we have closed 239 Victoria’s Secret stores in the United States and ~~Note 8, "Goodwill~~Canada.

We continue to execute against our previously announced profit improvement plan and ~~Trade Names" included~~are on track to deliver $400 million in ~~Item 1. Financial Statements.~~annual savings, including savings from the second quarter home office headcount reductions and actions to reduce Victoria’s Secret store selling costs through changes in the management structure and labor model.

Impacts of COVID-19

In March 2020, COVID-19 was declared a global pandemic by the World Health Organization. This pandemic has negatively affected the U.S. and global economies, disrupted global supply chains and financial markets, and led to significant travel and transportation restrictions, including mandatory closures and orders to “shelter-in-place.” The situation and preventative or protective actions that governments around the world have taken to contain the spread of COVID-19 have resulted in a period of disruption, including closure of our stores, limited store operating hours, reduced customer traffic and consumer spending and delays in manufacturing and shipping of products and raw materials. During this period, we are focused on protecting the health and safety of our customers, employees, contractors, suppliers, and other business partners. We are also working with our suppliers to minimize potential disruptions, while managing our business in response to a changing dynamic.

Our business operations and financial performance for 2020 have been materially impacted by the COVID-19 pandemic. All of our stores in North America were closed on March 17th, but we were able to re-open the majority of our stores as of the beginning of the third quarter. Operations for Victoria’s Secret Direct were temporarily suspended for approximately one week in late March, while Bath & Body Works Direct has remained open for the duration of 2020. Additionally, we have dedicated resources to maximize capacity in our direct fulfillment centers to meet increased customer demand, while focusing on distribution, fulfillment and call center safety. There remains a high level of uncertainty around the pandemic and the potential for further restrictions.

The ~~global~~third quarter of 2020 continued to be an unprecedented time for the world, the retail ~~sector~~industry and our ~~business continue~~business. Our first priority continues to ~~face~~be our associates’ and customers’ safety. Our new operating models in our stores are focused on providing a safe environment, while also providing an ~~uncertain~~engaging shopping experience. Additionally, we remain focused on the safe operations of our distribution, fulfillment and call centers while maximizing our direct businesses.

In response to the global COVID-19 crisis, we took prudent actions to manage expenses and to maintain our solid cash position and financial flexibility through the pandemic, including:

•Furloughed most store associates as of April 5 during the temporary store closures, while continuing to provide healthcare benefits for eligible associates;

•Suspended associate merit increases;

•Temporarily reduced salaries for senior vice presidents and above by 20%;

•Temporarily suspended cash compensation for all members of the Board of Directors;

•Reduced 2020 forecasted capital expenditures from $550 million to approximately $250 million;

•Actively managed our inventory to adjust for the impact of channel shifts to meet customer demand. The current environment requires unprecedented agility, and we are leveraging the speed that we have in our supply chain, our close partnerships with our suppliers and the capabilities of our sourcing, production and logistics teams to respond quickly;

•Suspended the quarterly cash dividend beginning in the second quarter of fiscal 2020;

•Suspended many store and select office rent payments during the temporary closures. We have made progress on negotiations with nearly all landlords, the result being a combination of rent waivers or abatements relating to closure periods, rent relief relating to the post-reopening “recovery” period given traffic declines, and rent deferrals;

•Converted the revolving credit facility to an asset-backed loan facility, issued $2.25 billion in new notes and extinguished $1.259 billion of notes primarily with near-term maturities; and

•Extended payment terms to vendors.

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We have a cautious view of the fourth quarter, given the high level of uncertainty around the pandemic and the potential for further restrictions. While we are optimistic about our Holiday product assortment and our continued strong execution in stores and online, we expect significant challenges in generating store channel sales growth.

Our typical Holiday volumes are about three times larger per week than the average week in the third quarter historically, and the current capacity limitations at 25 to 50% of normal will not allow us to see the same number of customers on peak days that we did in prior years. The situation remains fluid, as additional capacity limits have been recently announced, and further restrictions may occur. Additionally, the hours which stores are permitted to be open are fewer than last year and we were closed on Thanksgiving Day this year.

We also have additional constraints in direct channel fulfillment and shipping capacity.

As a result, we will ~~continue~~be taking action to ~~manage~~spread our ~~business thoughtfully,~~big promotions, which historically have occurred on single days, over a longer time period. We have also added additional registers to stores in both businesses.

We expect continued increased cost pressures in the fourth quarter as a result of higher store selling costs, safety equipment and wesupply costs, increased fulfillment expense and higher parcel carrier surcharges in the direct channel.

We will ~~focus on the execution of the retail fundamentals.~~

~~At the same time, we are aggressively focusing on bringing compelling merchandise assortments, marketing and store and online experiences~~stay close to our ~~customers. We will look for,~~customers and ~~seek~~leverage the speed and agility that we have in the business to ~~capitalize on, those opportunities available to us.~~optimize our fourth quarter results.

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Adjusted Financial Information

In addition to our results provided in accordance with GAAP above and throughout this Form 10-Q, provided below are non-GAAP measurements which present net income (loss) and earnings (loss) per share in ~~2019~~2020 and ~~2018~~2019 on an adjusted basis, which remove certain special items. We believe that these special items are not indicative of our ongoing operations due to their size and nature. We use adjusted financial information as key performance measures of results of operations for the purpose of evaluating performance internally. These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Instead, we believe that the presentation of adjusted financial information provides additional information to investors to facilitate the comparison of past and present operations. Further, our definition of adjusted financial information may differ from similarly titled measures used by other companies. The table below reconciles the GAAP financial measures to the non-GAAP financial measures.


	Third Quarter						Year-to-Date							Third Quarter						Year-to-Date
(in millions, except per share amounts)	2019			2018			2019			2018			(in millions, except per share amounts)	2020			2019			2020			2019
Detail of Special Items included in Operating Income (Loss)
Victoria's Secret Asset Impairment (a)	$	(248	)	$	(81	)	$	(248	)	$	(81	)
Henri Bendel Closure Costs (b)	—			(20		)	—			(20		)
Total Special Items included in Operating Income (Loss)	$	(248	)	$	(101	)	$	(248	)	$	(101	)

Detail of Special Items included in Other Income (Loss)
Detail of Special Items - Income (Expense)													Detail of Special Items - Income (Expense)
Victoria's Secret Asset Impairments (a)													Victoria's Secret Asset Impairments (a)	$	—		$	(248)		$	(214)		$	(248)
Restructuring Charges (b)													Restructuring Charges (b)	—			—			(81)			—
Hong Kong Store Closure and Lease Termination (c)													Hong Kong Store Closure and Lease Termination (c)	—			—			36			—
Establishment of Victoria's Secret U.K. and Ireland Joint Venture with Next PLC (d)													Establishment of Victoria's Secret U.K. and Ireland Joint Venture with Next PLC (d)	30			—			30			—
Special Items included in Operating Income (Loss)													Special Items included in Operating Income (Loss)	30			(248)			(228)			(248)
Loss on Extinguishment of Debt (e)													Loss on Extinguishment of Debt (e)	(53)			—			(53)			(40)
La Senza Charges ~~(c)~~(f)	$	(37	)	$	—		$	(37	)	$	—		—			(37)			—			(37)
Loss on Extinguishment of Debt (d)	—			—			(40		)	—
Total Special Items included in Other Income (Loss)	$	(37	)	$	—		$	(77	)	$	—

Detail of Special Items included in Provision (Benefit) for Income Taxes
Tax Effect of Special Items	$	27		$	13		$	37		$	13
Special Items included in Other Loss													Special Items included in Other Loss	(53)			(37)			(53)			(77)
Net Tax Benefit from the Resolution of Certain Tax Matters and Changes in Tax Legislation (g)													Net Tax Benefit from the Resolution of Certain Tax Matters and Changes in Tax Legislation (g)	23			—			94			—
Tax Effect of Special Items included in Operating Income (Loss) and Other Loss													Tax Effect of Special Items included in Operating Income (Loss) and Other Loss	10			27			57			37
Special Items included in Net Income (Loss)													Special Items included in Net Income (Loss)	$	10		$	(258)		$	(130)		$	(288)

Reconciliation of Reported Operating Income (Loss) to Adjusted Operating Income													Reconciliation of Reported Operating Income (Loss) to Adjusted Operating Income
Reported Operating Income (Loss)	$	(151	)	$	54		$	177		$	437		Reported Operating Income (Loss)	$	581		$	(151)		$	307		$	177
Special Items included in Operating Income (Loss)	248			101			248			101			Special Items included in Operating Income (Loss)	(30)			248			228			248
Adjusted Operating Income	$	97		$	155		$	425		$	538		Adjusted Operating Income	$	551		$	97		$	536		$	425

Reconciliation of Reported Net Income (Loss) to Adjusted Net Income													Reconciliation of Reported Net Income (Loss) to Adjusted Net Income
Reported Net Income (Loss)	$	(252	)	$	(43	)	$	(174	)	$	104		Reported Net Income (Loss)	$	331		$	(252)		$	(16)		$	(174)
Special Items included in Net Income (Loss)	258			88			288			88			Special Items included in Net Income (Loss)	(10)			258			130			288
Adjusted Net Income	$	6		$	45		$	114		$	192		Adjusted Net Income	$	320		$	6		$	114		$	114

Reconciliation of Reported Earnings Per Diluted Share to Adjusted Earnings Per Diluted Share
Reconciliation of Reported Earnings (Loss) Per Diluted Share to Adjusted Earnings Per Diluted Share													Reconciliation of Reported Earnings (Loss) Per Diluted Share to Adjusted Earnings Per Diluted Share
Reported Earnings (Loss) Per Diluted Share	$	(0.91	)	$	(0.16	)	$	(0.63	)	$	0.37		Reported Earnings (Loss) Per Diluted Share	$	1.17		$	(0.91)		$	(0.06)		$	(0.63)
Special Items included in Earnings (Loss) Per Diluted Share	0.93			0.32			1.04			0.31			Special Items included in Earnings (Loss) Per Diluted Share	(0.04)			0.93			0.46			1.04
Adjusted Earnings Per Diluted Share	$	0.02		$	0.16		$	0.41		$	0.69		Adjusted Earnings Per Diluted Share	$	1.13		$	0.02		$	0.41		$	0.41

________________

~~(a)~~

We recognized a $248 million pre-tax impairment charge ($230 million after-tax) in the third quarter of 2019 and an $81 million pre-tax impairment charge ($73 million after-tax) in the third quarter of 2018 related to certain Victoria's Secret assets. For additional information see Note 7, “Property and Equipment, Net" and Note 8, "Goodwill and Trade Names" included in Item 1. Financial Statements.


~~(b)~~	In the third quarter of 2018, we recognized $20 million ($15 million after-tax) of closure costs related to the closure of the Henri Bendel business. For additional information see Note 5, “Restructuring Activities" included in Item 1. Financial Statements.

(a)We recognized pre-tax impairment charges of $117 million ($99 million after tax) and $97 million ($72 million after tax) related to certain Victoria's Secret store and lease assets in the second and first quarter of 2020, respectively. We recognized pre-tax impairment charges of $218 million ($200 million after-tax) related to certain Victoria's Secret store and lease assets in the third quarter of 2019. For additional information see Note 7, "Long-Lived Assets" included in Item 1. Financial Statements. Additionally, in the third quarter of 2019, we recognized a $30 million goodwill impairment charge (no tax impact) related to the Greater China reporting unit.


~~(c)~~	In the third quarter of 2019, we recognized $37 million of pre-tax charges ($28 million after-tax) to increase reserves related to ongoing contingent obligations for the La Senza business, which was sold in the fourth quarter of 2018. For additional information see Note 5, “Restructuring Activities" and Note 16, "Commitments and Contingencies" included in Item 1. Financial Statements.


~~(d)~~	In the second quarter of 2019, we redeemed $764 million of outstanding notes maturing between 2020 and 2022, resulting in a pre-tax loss on extinguishment of $40 million (after-tax loss of $30 million). For additional information see Note 12, "Long-term Debt and Borrowing Facilities" included in Item 1. Financial Statements.

~~Company-Owned~~(b)In the second quarter of 2020, we recognized pre-tax severance charges of $81 million ($65 million after tax) related to headcount reductions as a result of restructuring activities. For additional information, see Note 4, “Restructuring" included in Item 1. Financial Statements.

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(c)In the second quarter of 2020, we recognized a net pre-tax gain of $36 million ($25 million after tax) related to the closure and termination of our lease for the Victoria’s Secret Hong Kong flagship store. For additional information, see Note 7, "Long-Lived Assets" included in Item 1. Financial Statements.

(d)In the third quarter of 2020, we recognized a pre-tax gain of $30 million ($27 million after tax) related to the establishment of a joint venture for the Victoria’s Secret U.K. and Ireland business with Next PLC. For additional information, see Note 4, “Restructuring" included in Item 1. Financial Statements.

(e)In the third quarter of 2020, we early extinguished $1.259 billion of outstanding notes, resulting in a pre-tax loss on extinguishment of $53 million (after-tax loss of $40 million). In the second quarter of 2019, we redeemed $764 million of outstanding notes, resulting in a pre-tax loss on extinguishment of $40 million (after-tax loss of $30 million). For additional information see Note 10, "Long-term Debt and Borrowing Facilities" included in Item 1. Financial Statements.

(f)In the third quarter of 2019, we recognized $37 million of pre-tax charges ($28 million after-tax) to increase reserves related to ongoing contingent obligations for the La Senza business, which was sold in the fourth quarter of 2018. For additional information, see Note 4, “Restructuring" included in Item 1. Financial Statements.

(g)In the third quarter of 2020, we recognized a $23 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, we recognized a $21 million income tax benefit related to recent changes in tax legislation included in the CARES Act. In the first quarter of 2020, we recognized a $50 million tax benefit related to the resolution of certain tax matters. For additional information see Note 9, "Income Taxes" included in Item 1. Financial Statements.

Company-Operated Store Data

The following table compares the third quarter of ~~2019 company-owned~~2020 company-operated store data to the third quarter of ~~2018~~2019 and year-to-date ~~2019~~2020 store data to year-to-date ~~2018:~~2019:


	Third Quarter						Year-to-Date
	2020		2019		% Change		2020		2019		% Change
Sales per Average Selling Square Foot (a)
Bath & Body Works U.S.	$	258	$	190	36	%	$	497	$	546	(9	%)
Victoria’s Secret U.S.	120		145		(17	%)	241		460		(48	%)
Sales per Average Store (in thousands) (a)
Bath & Body Works U.S.	$	683	$	497	38	%	$	1,314	$	1,421	(8	%)
Victoria’s Secret U.S.	831		948		(12	%)	1,617		2,997		(46	%)
Average Store Size (selling square feet)
Bath & Body Works U.S.	2,654		2,621		1	%
Victoria’s Secret U.S.	6,932		6,542		6	%
Total Selling Square Feet (in thousands)
Bath & Body Works U.S.	4,360		4,301		1	%
Victoria’s Secret U.S.	5,871		6,973		(16	%)

________________

(a)Sales per average selling square foot and sales per average store, which are indicators of store productivity, are calculated based on store sales for the period divided by the average, including the beginning and end of period, of total square footage and store count, respectively. As a result of the COVID-19 pandemic, all our stores in the U.S. were closed on March 17th with the majority having been re-opened as of the beginning of the third quarter. As a result, comparisons of year-over-year trends are not a meaningful way to discuss our operating results.

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Third Quarter Year-to-Date
2019 2018 % Change 2019 2018 % Change
Sales per Average Selling Square Foot
Victoria’s Secret U.S. $ 145
$ 152
(5 %) $ 460
$ 492
(7 %)
Bath & Body Works U.S. 190
182
4 % 546
520
5 %
Sales per Average Store (in thousands)
Victoria’s Secret U.S. $ 948
$ 982
(4 %) $ 2,997
$ 3,167
(5 %)
Bath & Body Works U.S. 497
466
7 % 1,421
1,328
7 %
Average Store Size (selling square feet)
Victoria’s Secret U.S. 6,542
6,454
1 %
Bath & Body Works U.S. 2,621
2,575
2 %
Total Selling Square Feet (in thousands)
Victoria’s Secret U.S. 6,973
7,216
(3 %)
Bath & Body Works U.S. 4,301
4,177
3 %
The following table represents company-operated store data for year-to-date 2020:


	Stores at			Transferred to	Stores at
	February 1, 2020	Opened	Closed	Joint Venture (a)	October 31, 2020
Bath & Body Works U.S.	1,637	24	(18)	—	1,643
Bath & Body Works Canada	102	1	—	—	103
Total Bath & Body Works	1,739	25	(18)	—	1,746
Victoria’s Secret U.S.	1,053	20	(226)	—	847
Victoria’s Secret Canada	38	—	(13)	—	25
Victoria's Secret U.K. / Ireland	26	—	—	(26)	—
Victoria's Secret Beauty and Accessories	41	1	(4)	—	38
Victoria's Secret Greater China	23	3	(1)	—	25
Total Victoria's Secret	1,181	24	(244)	(26)	935
Total L Brands Stores	2,920	49	(262)	(26)	2,681

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(a) For additional information see Note 4, "Restructuring" included in Item 1. Financial Statements.

The following table represents ~~company-owned store data for~~ ~~year-to-date~~ ~~2019:~~

Stores Operating at Stores Operating at
February 2, 2019 Opened Closed November 2, 2019
Victoria’s Secret U.S. 1,098
6
(38 ) 1,066
Victoria’s Secret Canada 45
—
—
45
Total Victoria's Secret 1,143
6
(38 ) 1,111
Bath & Body Works U.S. 1,619
34
(12 ) 1,641
Bath & Body Works Canada 102
1
—
103
Total Bath & Body Works 1,721
35
(12 ) 1,744
Victoria's Secret U.K. / Ireland 26
—
—
26
Victoria's Secret Beauty and Accessories 38
9
(5 ) 42
Victoria's Secret Greater China 15
6
—
21
Total Victoria's Secret and Bath & Body Works International 79
15
(5 ) 89
Total L Brands Stores 2,943
56
(55 ) 2,944

~~The following table represents company-owned store data for~~ ~~year-to-date~~ ~~2018:~~

Stores Operating at Stores Operating at
February 3, 2018 Opened Closed November 3, 2018
Victoria’s Secret U.S. 1,124
1
(7 ) 1,118
Victoria’s Secret Canada 46
—
(1 ) 45
Total Victoria's Secret 1,170
1
(8 ) 1,163
Bath & Body Works U.S. 1,592
47
(17 ) 1,622
Bath & Body Works Canada 102
1
—
103
Total Bath & Body Works 1,694
48
(17 ) 1,725
Victoria's Secret U.K. / Ireland 24
1
—
25
Victoria's Secret Beauty and Accessories 29
4
(3 ) 30
Victoria's Secret Greater China 7
7
—
14
Total Victoria's Secret and Bath & Body Works International 60

12

(3 )
69
Henri Bendel 27
—
(4 ) 23
La Senza Canada 119
—
(1 ) 118
La Senza U.S. 5
6
—
11
Total L Brands Stores 3,075
67
(33 ) 3,109

~~Noncompany-Owned Store Data~~

~~The following table represents noncompany-owned~~company-operated store data for year-to-date 2019:


	Stores at			Stores at
	February 2, 2019	Opened	Closed	November 2, 2019
Bath & Body Works U.S.	1,619	34	(12)	1,641
Bath & Body Works Canada	102	1	—	103
Total Bath & Body Works	1,721	35	(12)	1,744
Victoria’s Secret U.S.	1,098	6	(38)	1,066
Victoria’s Secret Canada	45	—	—	45
Victoria's Secret U.K. / Ireland	26	—	—	26
Victoria's Secret Beauty and Accessories	38	9	(5)	42
Victoria's Secret Greater China	15	6	—	21
Total Victoria's Secret	1,222	21	(43)	1,200
Total L Brands Stores	2,943	56	(55)	2,944

Stores Operating at Stores Operating at
February 2, 2019 Opened Closed November 2, 2019
Victoria’s Secret Beauty & Accessories 383
20
(29 ) 374
Victoria's Secret 56
15
—
71
Bath & Body Works 235
24
(4 ) 255
Total 674
59
(33 ) 700
Partner-Operated Store Data

The following table represents ~~noncompany-owned~~partner-operated store data for year-to-date ~~2018:~~2020:


	Stores at			Transferred to	Stores at
	February 1, 2020	Opened	Closed	Joint Venture (a)	October 31, 2020
Bath & Body Works	278	11	(3)	—	286
Victoria’s Secret Beauty & Accessories	360	4	(25)	—	339
Victoria's Secret	84	10	(2)	26	118

Total	722	25	(30)	26	743

_______________

(a) For additional information see Note 4, "Restructuring" included in Item 1. Financial Statements.

The following table represents partner-operated store data for year-to-date 2019:


	Stores at			Stores at
	February 2, 2019	Opened	Closed	November 2, 2019
Bath & Body Works	235	24	(4)	255
Victoria’s Secret Beauty & Accessories	383	20	(29)	374
Victoria's Secret	56	15	—	71
Total	674	59	(33)	700

Stores Operating at Stores Operating at
February 3, 2018 Opened Closed November 3, 2018
Victoria’s Secret Beauty & Accessories 397
25
(25 ) 397
Victoria's Secret 37
13
—
50
Bath & Body Works 185
35
(4 ) 216
La Senza 194
2
(10 ) 186
Total 813
75
(39 ) 849

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Results of Operations

Third Quarter of ~~2019~~2020 Compared to Third Quarter of ~~2018~~2019

Operating Income (Loss)

The following table provides our segment operating income (loss) and operating income (loss) rates (expressed as a percentage of net sales) for the third quarter of ~~2019~~2020 in comparison to the third quarter of ~~2018~~:2019:


							Operating Income (Loss) Rate									Operating Income (Loss) Rate
	2019			2018			2019		2018			2020		2019		2020		2019
Third Quarter	(in millions)										Third Quarter	(in millions)
Bath & Body Works											Bath & Body Works	$	494	$	209	29.0	%	19.0	%
Victoria’s Secret	$	(122	)	$	(36	)	(8.7	%)	(2.3	%)	Victoria’s Secret	145		(318)		10.7	%	(20.1	%)
Bath & Body Works	196			178			18.4	%	18.6	%
Victoria’s Secret and Bath & Body Works International	(215		)	(42		)	(161.3	%)	(31.2	%)
Other (a)	(10		)	(46		)	(14.2	%)	(29.4	%)	Other (a)	(58)		(42)		—	%	—	%
Total Operating Income (Loss)	$	(151	)	$	54		(5.6	%)	2.0	%	Total Operating Income (Loss)	$	581	$	(151)	19.0	%	(5.6	%)

_______________


~~(a)~~	~~Includes Mast Global and corporate functions. Results for 2018 also include La Senza and Henri Bendel.~~

(a)Includes Corporate infrastructure and support functions, including non-core real estate, equity investments and other governance functions such as treasury and tax, and other non-recurring charges and benefits that are deemed to be corporate in nature.

For the third quarter of ~~2019~~,2020, operating income (loss) ~~decreased $205~~increased $732 million, to ~~a loss of $151~~$581 million, and the operating income (loss) rate ~~decreased~~increased to 19.0% from (5.6%) ~~from~~ ~~2.0%~~. The drivers of the operating income (loss) results are discussed in the following sections.

Net Sales

The following table provides net sales for the third quarter of ~~2019~~2020 in comparison to the third quarter of ~~2018~~:2019:


	2019		2018		% Change			2020		2019		% Change
Third Quarter	(in millions)						Third Quarter	(in millions)
Victoria’s Secret Stores (a)	$	1,081	$	1,178	(8	%)
Bath & Body Works Stores - U.S. and Canada							Bath & Body Works Stores - U.S. and Canada	$	1,202	$	872	38	%
Bath & Body Works Direct							Bath & Body Works Direct	446		192		132	%
Bath & Body Works International (a)							Bath & Body Works International (a)	54		35		55	%
Total Bath & Body Works							Total Bath & Body Works	1,702		1,099		55	%
Victoria’s Secret Stores - U.S. and Canada							Victoria’s Secret Stores - U.S. and Canada	755		1,081		(30	%)
Victoria’s Secret Direct	331		351		(6	%)	Victoria’s Secret Direct	470		331		42	%
Victoria’s Secret International (b)							Victoria’s Secret International (b)	128		166		(23	%)
Total Victoria’s Secret	1,412		1,529		(8	%)	Total Victoria’s Secret	1,353		1,578		(14	%)
Bath & Body Works Stores (a)	872		808		8	%
Bath & Body Works Direct	192		148		30	%
Total Bath & Body Works	1,064		956		11	%
Victoria’s Secret and Bath & Body Works International (b)	134		134		—	%
Other (c)	67		156		(57	%)

Total Net Sales	$	2,677	$	2,775	(4	%)	Total Net Sales	$	3,055	$	2,677	14	%

_______________


~~(a)~~	~~Includes company-owned stores in the U.S. and Canada.~~


~~(b)~~	~~Includes company-owned stores in the U.K., Ireland and Greater China, direct sales in Greater China and wholesale sales, royalties and other fees associated with non-company owned stores.~~


~~(c)~~	~~Includes wholesale revenues from our sourcing function. Results for 2018 also include store and direct sales for La Senza and Henri Bendel.~~

(a)Results include royalties associated with franchised stores and wholesale sales.

(b)Results include company-operated stores in the U.K. (pre-joint venture) and Greater China, royalties associated with franchised stores and wholesale sales.

The following table provides a reconciliation of net sales for the third quarter of ~~2019~~2020 to the third quarter of ~~2018:~~2019:


	Bath & Body Works		Victoria’s Secret		Total
Third Quarter	(in millions)
2019 Net Sales	$	1,099	$	1,578	$	2,677
Comparable Store Sales	310		(88)		222
Sales Associated with New, Closed and Non-comparable Remodeled Stores, Net	20		(248)		(228)
Foreign Currency Translation	—		3		3
Direct Channels	254		139		393
Private Label Credit Card	—		(10)		(10)
International Wholesale, Royalty and Other	19		(21)		(2)
2020 Net Sales	$	1,702	$	1,353	$	3,055

Table of Contents

Victoria’s
Secret

Bath &
Body Works

Victoria’s Secret
and
Bath & Body Works International
Other Total
Third Quarter (in millions)
2018 Net Sales $ 1,529
$ 956
$ 134
$ 156
$ 2,775
Comparable Store Sales (87 ) 36
(13 ) —
(64 )
Sales Associated with New, Closed and Non-comparable Remodeled Stores, Net (6 ) 29
9
—
32
Divested/Closed Businesses —
—
—
(77 ) (77 )
Foreign Currency Translation (1 ) (1 ) (2 ) —
(4 )
Direct Channels (19 ) 44
(1 ) —
24
Private Label Credit Card (4 ) —
—
—
(4 )
International Wholesale, Royalty and Other —
—
7
(12 ) (5 )
2019 Net Sales $ 1,412
$ 1,064
$ 134
$ 67
$ 2,677

The following table compares the third quarter of ~~2019~~2020 comparable sales to the third quarter of ~~2018~~:2019:


Third Quarter	2019		2018		Third Quarter	2020			2019
Comparable Sales (Stores and Direct) (a)					Comparable Sales (Stores and Direct) (a)
Bath & Body Works (b)					Bath & Body Works (b)	56	%		9	%
Victoria's Secret ~~(b)~~(c)	(7	%)	(2	%)	4	%		(8	%)
Bath & Body Works (b)	9	%	13	%
Total Comparable Sales	(2	%)	4	%	Total Comparable Sales	28	%		(2	%)

Comparable Store Sales (a)					Comparable Store Sales (a)
Victoria’s Secret (b)	(8	%)	(6	%)
Bath & Body Works (b)	5	%	10	%	Bath & Body Works (b)	38	%		5	%
Victoria's Secret (c)					Victoria's Secret (c)	(10	%)		(9	%)
Total Comparable Store Sales	(3	%)	—	%	Total Comparable Store Sales	13	%		(3	%)

________

~~(a)~~

The percentage change in comparable sales represents direct and comparable store sales. The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. A store is typically included in the calculation of comparable sales when it has been open or owned 12 months or more and it has not had a change in selling square footage of 20% or more. Additionally, stores of a given brand are excluded if total selling square footage for the brand in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales is calculated on a comparable calendar period as opposed to a fiscal basis. Comparable sales attributable to our international stores are calculated on a constant currency basis.


~~(b)~~	~~Includes company-owned stores in the U.S. and Canada.~~

(a)The percentage change in comparable sales represents direct and comparable store sales. The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. A store is typically included in the calculation of comparable sales when it has been open 12 months or more and it has not had a change in selling square footage of 20% or more. Stores are excluded from the comparable sales calculation if they have been closed for four consecutive days or more. Therefore, comparable sales results for the third quarter of 2020 exclude stores that were closed for four consecutive days or more as a result of the COVID-19 pandemic. Additionally, stores of a given brand are excluded if total selling square footage for the brand in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales is calculated on a comparable calendar period as opposed to a fiscal basis. Comparable sales attributable to our international stores are calculated on a constant currency basis.

(b)Includes company-operated stores in the U.S. and Canada.

(c)Includes company-operated stores in the U.S., Canada, the U.K. (pre-joint venture) and Greater China.

The results by segment are as follows:

~~Victoria's Secret~~

For the third quarter of 2019, net sales decreased $117 million to $1.412 billion, comparable sales decreased 7%, and comparable store sales decreased 8%. Victoria's Secret Lingerie comparable sales decreased low-double digits, principally driven by a decline in bras, and partially as a result of a decrease in promotional activity. PINK comparable sales decreased in the mid-single digit range as a decline in apparel, principally driven by a decline in tops, was only partially offset by increases in intimate apparel, driven by growth in sport bras, bralettes and panties. Victoria's Secret Beauty comparable sales increased in the low-single digit range due to growth in prestige fragrance, driven by a strong launch of Bombshell Intense, the mist collection and PINK beauty.

~~The decrease in comparable sales was driven by declines in average unit retail prices and store traffic.~~

Bath & Body Works

For the third quarter of ~~2019,~~2020, net sales increased ~~$108~~$603 million to ~~$1.064~~$1.702 billion, comparable sales increased ~~9%,~~56% and comparable store sales increased 5%38%. Net sales ~~increased~~were strong across all regions, store types and merchandise categories. In both the company-operated stores and direct channels, we achieved double-digit growth in all ~~major~~categories. Two-thirds of our dollar growth came from our Home Fragrance and Body Care categories, ~~including home fragrance, body care~~with one-third of the growth coming from Soaps and ~~soaps~~Sanitizers. In our direct channel, third quarter sales increased by 132%, to $446 million. We have focused on increasing our fulfillment capacity to meet the increase in demand, and, ~~sanitizers, which incorporated newness, innovation and fashion.~~as a result, are achieving increased productivity while maintaining standard delivery times for our customers.

The increase in comparable sales was driven by increases in ~~both~~digital traffic, conversion and ~~conversion.~~average unit retail, partially offset by a decline in store traffic.

Victoria's Secret ~~and Bath & Body Works International~~

For the third quarter of ~~2019, net sales remained flat at $134 million as the increases from new stores opened by our partners were offset by declines in the Victoria's Secret U.K. and Greater China businesses.~~

~~Other~~

~~For the third quarter of 2019,~~2020, net sales decreased ~~$89~~$225 million to ~~$67 million~~$1.353 billion, comparable sales increased 4% and comparable store sales decreased 10%. Net sales decreased due to ~~the sale of La Senza~~store closures and ~~closure of Henri Bendel~~declines in ~~the fourth quarter of 2018,~~store traffic. These declines were partially offset by an increase in Victoria's Secret Direct channel sales, which increased 42%, to $470 million, reflecting significant growth in Lingerie, PINK and Beauty.

The increase in comparable sales was driven by increases in digital traffic, conversion and average unit retail, partially offset by a ~~decrease~~decline in ~~wholesale sales to our international partners.~~store traffic.

Gross Profit

For the third quarter of ~~2019,~~2020, our gross profit ~~decreased $187~~increased $618 million to ~~$741 million,~~$1.359 billion, and our gross profit rate (expressed as a percentage of net sales) ~~decreased~~increased to ~~27.7%~~44.5% from ~~33.5%~~27.7%, primarily driven by the following:

Bath & Body Works

For the third quarter of 2020, the gross profit increase was due to increased merchandise margin dollars related to the increase in net sales and a strategic pull back on promotional activity and marketing related offers, partially offset by higher occupancy expenses due to increased direct channel fulfillment and shipping costs.

The gross profit rate increase was driven by buying and occupancy leverage on higher net sales and an increase in the merchandise margin rate reflecting a meaningful pullback in promotional activity.

Table of Contents

Victoria's Secret

For the third quarter of ~~2019,~~2020, the gross profit ~~decrease~~increase was due to store and lease asset impairment charges of $218 million recognized in the third quarter of 2019, lower occupancy expenses due to the store closures and COVID-19-related rent concessions and an improved inventory management and customer response to our merchandise assortment which enabled us to reduce promotional activity. These increases were partially offset by lower merchandise margin dollars related to the decrease in net ~~sales, partially offset by a reduction in store asset impairment charges, from $50 million in the third quarter of 2018 to $41 million in the third quarter of 2019.~~sales.

The gross profit rate ~~decrease~~increase was primarily driven by the store and lease asset impairment charges in the prior year, a higher merchandise margin rate reflecting a meaningful pullback in promotional activity and leverage on buying and occupancy ~~deleverage on lower net sales and a decline~~expenses in the ~~merchandise margin rate due to sourcing cost concessions received from vendors in 2018.~~

~~Bath & Body Works~~

For the third quarter of 2019, the gross profit increase was due to higher merchandise margin dollars related to the increase in net sales, partially offset by higher occupancy expenses due to investments in store real estate.

~~The gross profit rate decrease was driven by a decline in the merchandise margin rate due to increases in supply chain and sourcing costs and the sales mix shift into the~~ direct ~~business, which has a lower merchandise margin rate than the stores~~ channel.

~~Victoria's Secret and Bath & Body Works International~~

For the third quarter of 2019, the gross profit decrease was due to the increase in store asset impairment charges from $31 million in the third quarter of 2018 to $177 million in the third quarter of 2019, which were related to stores in Greater China, the U.K. and Ireland.

~~The gross profit (loss) rate decrease was driven by the increase in store asset impairment charges.~~

General, Administrative and Store Operating Expenses

For the third quarter of ~~2019,~~2020, our general, administrative and store operating expenses ~~increased $18~~decreased $114 million to ~~$892~~$778 million due to meaningful reductions at Victoria's Secret driven by lower store selling and marketing expense as a result our profit improvement plan and disciplined expense management, a $30 million pre-tax gain recognized on the establishment of the Victoria's Secret U.K. joint venture and a $30 million goodwill impairment charge ~~related to Greater China and higher selling expenses related to higher sales volume at~~recognized in the third quarter of 2019. These decreases were partially offset by increases in Bath & Body Works ~~partially offset by declines~~store selling expenses due to the ~~elimination of the La Senza~~increase in net sales and ~~Henri Bendel businesses.~~to support COVID-19 guidelines.

The general, administrative and store operating expense rate ~~increased~~decreased to ~~33.3%~~25.5% from ~~31.5%~~33.3% due to leverage on the increase in Bath & Body Works net sales, savings realized on our profit improvement plan, the Victoria's Secret U.K. gain and goodwill impairment ~~charge and deleverage on lower net sales.~~recognized in the prior year.

Other Income and Expense

Interest Expense

The following table provides the average daily borrowings and average borrowing rates for the third quarter of ~~2019~~2020 and ~~2018:~~2019:


Third Quarter	2019			2018			Third Quarter	2020			2019
Average daily borrowings (in millions)	$	5,614		$	5,844		Average daily borrowings (in millions)	$	6,922		$	5,614
Average borrowing rate (in percentages)	6.6		%	6.6		%	Average borrowing rate (in percentages)	7.0		%	6.6		%

For the third quarter of ~~2019,~~2020, our interest expense ~~decreased $4~~increased $29 million to ~~$92~~$121 million due to ~~lower~~both higher average daily ~~borrowings.~~

borrowings and average borrowing rate.

Other ~~Income (Loss)~~Loss

For the third quarter of ~~2019,~~2020, our other ~~income (loss) decreased $35~~loss increased $16 million to ~~a $34~~$50 million ~~loss~~primarily due to a $53 million pre-tax loss associated with the early extinguishment of outstanding notes in the third quarter of 2020 as compared to a $37 million ~~of charges~~charge to increase reserves related to ongoing contingent obligations for the La Senza business ~~which was sold~~recognized in the ~~fourth~~third quarter of ~~2018.~~2019.

Provision (Benefit) for Income Taxes

For the third quarter of ~~2019,~~2020, our effective tax rate was ~~9.1%~~19.3% compared to ~~(3.9%)~~9.1% in the third quarter of ~~2018.~~2019. The third quarter ~~rates were~~of 2020 rate was lower than the Company's combined estimated federal and state statutory rate primarily due to tax matters associated with foreign investments and recent changes in tax legislation, which resulted in a $23 million net tax benefit. The third quarter of 2019 rate was lower than the Company's combined estimated federal and state statutory rate primarily due to the Victoria's Secret impairment charges, which ~~generate~~generated no tax benefit for certain foreign subsidiaries.

Table of Contents

Results of Operations

Year-to-Date ~~2019~~2020 Compared to Year-to-Date ~~2018~~2019

Operating Income (Loss)

The following table provides our segment operating income (loss) and operating income (loss) rates (expressed as a percentage of net sales) for year-to-date ~~2019~~2020 in comparison to year-to-date ~~2018:~~2019:


							Operating Income (Loss) Rate									Operating Income (Loss) Rate
	2019			2018			2019		2018			2020		2019		2020		2019
Year-to-Date	(in millions)										Year-to-Date	(in millions)
Bath & Body Works											Bath & Body Works	$	907	$	560	24.4	%	17.9	%
Victoria’s Secret	$	(73	)	$	162		(1.6	%)	3.3	%	Victoria’s Secret	(427)		(250)		(12.9	%)	(5.0	%)
Bath & Body Works	531			470			17.7	%	17.5	%
Victoria’s Secret and Bath & Body Works International	(220		)	(56		)	(52.1	%)	(13.5	%)
Other (a)	(61		)	(139		)	(23.4	%)	(31.0	%)	Other (a)	(173)		(133)		—	%	—	%
Total Operating Income	$	177		$	437		2.2	%	5.2	%	Total Operating Income	$	307	$	177	4.4	%	2.2	%

_______________


~~(a)~~	~~Includes Mast Global and corporate functions. Results for 2018 also include La Senza and Henri Bendel.~~

For year-to-date ~~2019,~~2020, operating income ~~decreased $260~~increased $130 million, or ~~59%~~74%, to ~~$177~~$307 million, and the operating income rate ~~decreased~~increased to ~~2.2%~~4.4% from ~~5.2%~~2.2%. The drivers of the operating income results are discussed in the following sections.

Net Sales

The following table provides net sales for year-to-date ~~2019~~2020 in comparison to year-to-date ~~2018:~~2019:


	2019		2018		% Change			2020		2019		% Change
Year-to-Date	(in millions)						Year-to-Date	(in millions)
Victoria’s Secret Stores (a)	$	3,462	$	3,778	(8	%)
Bath & Body Works Stores - U.S. and Canada							Bath & Body Works Stores - U.S. and Canada	$	2,304	$	2,468	(7	%)
Bath & Body Works Direct							Bath & Body Works Direct	1,254		527		138	%
Bath & Body Works International (a)							Bath & Body Works International (a)	158		129		23	%
Total Bath & Body Works							Total Bath & Body Works	3,716		3,124		19	%
Victoria’s Secret Stores - U.S. and Canada							Victoria’s Secret Stores - U.S. and Canada	1,633		3,462		(53	%)
Victoria’s Secret Direct	1,067		1,065		—	%	Victoria’s Secret Direct	1,391		1,067		30	%
Victoria’s Secret International (b)							Victoria’s Secret International (b)	289		504		(43	%)
Total Victoria’s Secret	4,529		4,843		(6	%)	Total Victoria’s Secret	3,313		5,033		(34	%)
Bath & Body Works Stores (a)	2,469		2,281		8	%
Bath & Body Works Direct	527		399		32	%
Total Bath & Body Works	2,996		2,680		12	%
Victoria’s Secret and Bath & Body Works International (b)	423		415		2	%
Other (c)	259		447		(42	%)	Other (c)	—		50		—	%
Total Net Sales	$	8,207	$	8,385	(2	%)	Total Net Sales	$	7,029	$	8,207	(14	%)

_______________


~~(a)~~	~~Includes company-owned stores in the U.S. and Canada.~~


~~(b)~~	~~Includes company-owned stores in the U.K., Ireland and Greater China, direct sales in Greater China and wholesale sales, royalties and other fees associated with non-company owned stores.~~


~~(c)~~	~~Includes wholesale revenues from our sourcing function. Results for 2018 also include store and direct sales for La Senza and Henri Bendel.~~

(a)Results include royalties associated with franchised stores and wholesale sales.

(b)Results include company-operated stores in the U.K. (pre-joint venture) and Greater China, royalties associated with franchised stores and wholesale sales.

(c)Results include wholesale revenues to La Senza subsequent to the Company's divestiture of the business in 2018.

The following table provides a reconciliation of net sales for year-to-date ~~2019~~2020 to year-to-date ~~2018:~~2019:


	Bath & Body Works		Victoria's Secret		Other		Total
Year-to-Date	(in millions)
2019 Net Sales	$	3,124	$	5,033	$	50	$	8,207
Comparable Store Sales	670		(248)		—		422
Sales Associated with New, Closed and Non-comparable Remodeled Stores, Net	(833)		(1,640)		—		(2,473)

Foreign Currency Translation	(1)		(1)		—		(2)
Direct Channels	727		322		—		1,049
Private Label Credit Card	—		(45)		—		(45)
International Wholesale, Royalty and Other	29		(108)		(50)		(129)
2020 Net Sales	$	3,716	$	3,313	$	—	$	7,029

Victoria’s
Secret

Bath &
Body Works

Victoria’s Secret
and
Bath & Body Works International
Other Total
Year-to-Date (in millions)
2018 Net Sales $ 4,843
$ 2,680
$ 415
$ 447
$ 8,385
Comparable Store Sales (281 ) 111
(28 ) —
(198 )
Sales Associated with New, Closed and Non-comparable Remodeled Stores, Net (39 ) 80
45
—
86
Divested/Closed Businesses —
—
—
(222 ) (222 )
Foreign Currency Translation (3 ) (3 ) (12 ) —
(18 )
Direct Channels (2 ) 128
4
—
130
Private Label Credit Card 11
—
—
—
11
International Wholesale, Royalty and Other —
—
(1 ) 34
33
2019 Net Sales $ 4,529
$ 2,996
$ 423
$ 259
$ 8,207

Table of Contents

The following table compares year-to-date ~~2019~~2020 comparable sales to year-to-date ~~2018:~~2019:


Year-to-Date	2019		2018		Year-to-Date	2020			2019
Comparable Sales (Stores and Direct) (a)					Comparable Sales (Stores and Direct) (a)
Bath & Body Works (b)					Bath & Body Works (b)	70	%		10	%
Victoria's Secret ~~(b)~~(c)	(6	%)	(1	%)	3	%		(6	%)
Bath & Body Works (b)	10	%	10	%
Total Comparable Sales	(1	%)	3	%	Total Comparable Sales	30	%		(1	%)

Comparable Store Sales (a)					Comparable Store Sales (a)
Victoria’s Secret (b)	(8	%)	(5	%)
Bath & Body Works (b)	5	%	8	%	Bath & Body Works (b)	45	%		5	%
Victoria's Secret (c)					Victoria's Secret (c)	(13	%)		(8	%)
Total Comparable Store Sales	(3	%)	(1	%)	Total Comparable Store Sales	13	%		(3	%)

________

~~(a)~~


~~(b)~~	~~Includes company-owned stores in the U.S. and Canada.~~

(a)The percentage change in comparable sales represents direct and comparable store sales. The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. A store is typically included in the calculation of comparable sales when it has been open 12 months or more and it has not had a change in selling square footage of 20% or more. Stores are excluded from the comparable sales calculation if they have been closed for four consecutive days or more. Therefore, comparable sales results for 2020 exclude stores that were closed for four consecutive days or more as a result of the COVID-19 pandemic. Additionally, stores of a given brand are excluded if total selling square footage for the brand in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales is calculated on a comparable calendar period as opposed to a fiscal basis. Comparable sales attributable to our international stores are calculated on a constant currency basis.

(b)Includes company-operated stores in the U.S. and Canada.

(c)Includes company-operated stores in the U.S., Canada, the U.K. (pre-joint venture) and Greater China.

The results by segment are as follows:

~~Victoria's Secret~~

For year-to-date 2019, net sales decreased $314 million to $4.529 billion, comparable sales decreased 6%, and comparable store sales decreased 8%. PINK comparable sales decreased in the low-double digit range, due to merchandise performance in apparel and the exit of the swim business, partially offset by growth in sports bras. Victoria's Secret Lingerie comparable sales were down in the high-single digit range, due to declines in bras and apparel, driven by merchandise performance. Victoria's Secret Beauty comparable sales increased in the low-single digit range, as growth in accessories was partially offset by a decline in the lip business.

~~The decrease in comparable sales was driven by declines in average unit retail prices and store traffic.~~

Bath & Body Works

For year-to-date ~~2019,~~2020, net sales increased ~~$316~~$592 million to ~~$2.996~~$3.716 billion, comparable sales increased ~~10%,~~70% and comparable store sales increased 5%45% (during the period the stores were open). ~~Net~~The Bath & Body Works Direct channel, which remained open throughout the period, grew sales by 138% to $1.254 billion as we have focused on increasing our fulfillment capacity to meet the increase in demand, and as a result are achieving increased inproductivity while maintaining standard delivery times for our customers. In both channels, sales were strong across all ~~major~~regions, store types and merchandise categories, ~~including home fragrance, body care and~~driven by continued high demand for soaps and sanitizers ~~which incorporated newness, innovation~~ and ~~fashion.~~also strong sales performance in home fragrance and body care. These increases were partially offset by a decrease as a result of the COVID-19-related store closures.

The increase in comparable sales was driven by increases in ~~store~~digital traffic, conversion and ~~digital~~average unit retail, partially offset by a decline in store traffic.

Victoria's Secret ~~and Bath & Body Works International~~

For year-to-date ~~2019,~~2020, net sales decreased $1.720 billion to $3.313 billion, comparable sales increased ~~$8 million to $423 million~~3% and comparable store sales decreased 13% (during the period the stores were open). Net sales decreased due to the ~~increase from new company-owned Victoria's Secret~~store closures impacting company-operated and partner-operated stores ~~in Greater China, partially offset by~~and as a result of declines in ~~the Victoria's Secret International business.~~

~~Other~~

~~For year-to-date 2019, net sales decreased $188 million to $259 million due to the sale of La Senza and closure of Henri Bendel in the fourth quarter of 2018,~~store traffic. These declines were partially offset by an increase in ~~wholesale~~Victoria's Secret Direct channel sales, which increased 30% to ~~our international partners.~~$1.391 billion despite a temporary suspension of operations in March, reflecting significant growth in Lingerie, PINK and Beauty.

The increase in comparable sales was driven by increases in digital traffic, conversion and average unit retail, partially offset by a decline in store traffic.

Other

For year-to-date 2020, net sales decreased $50 million as we no longer provide sourcing services to La Senza, a company we divested in fiscal 2018.

Gross Profit

For year-to-date ~~2019,~~2020, our gross profit decreased ~~$274~~$297 million to ~~$2.657~~$2.360 billion, and our gross profit rate (expressed as a percentage of net sales) ~~decreased~~increased to ~~32.4%~~33.6% from ~~35.0%~~32.4%, primarily driven by the following:

Table of Contents

Bath & Body Works

For year-to-date 2020, the gross profit increase was due to increased merchandise margin dollars related to the increase in net sales and a strategic pull back on promotional activity and marketing related offers, partially offset by higher occupancy expenses due to increased direct channel fulfillment and shipping costs.

The gross profit rate increase was driven by an increase in the merchandise margin rate reflecting a meaningful pullback in promotional activity and buying and occupancy leverage on higher net sales.

Victoria's Secret

For year-to-date ~~2019,~~2020, the gross profit decrease was ~~primarily~~ due to lower merchandise margin dollars related to the decrease in net sales ~~and increased promotional activity~~due to ~~drive traffic and clear inventory,~~store closures. These decreases were partially offset by reduced occupancy expenses due to the store closures, and a ~~reduction~~meaningful pullback in ~~store asset impairment charges from $50 million year-to-date 2018 to $41 million year-to-date 2019.~~promotional activity.

The gross profit rate decrease was driven by ~~a decline in the merchandise margin rate due to increased promotional activity and sourcing cost concessions received from vendors in 2018, and~~ buying and occupancy ~~expense~~ deleverage on lower ~~net sales.~~

~~Bath & Body Works~~

~~For year-to-date 2019, the gross profit increase was due to higher merchandise margin dollars related to the increase in~~ net sales partially offset by ~~higher occupancy expenses due to investments in store real estate.~~

~~The gross profit rate decrease was driven by~~ a ~~decline in the~~higher merchandise margin rate ~~due to increases~~reflecting a meaningful pullback in ~~supply chain and sourcing costs and the sales mix shift into the direct business, which has a lower merchandise margin rate than the stores channel.~~

~~Victoria's Secret and Bath & Body Works International~~

For year-to-date 2019, the gross profit decrease was due to the increase in store asset impairment charges from $31 million year-to-date 2018 to $177 million year-to-date 2019 related to stores in Greater China, the U.K., and Ireland partially offset by higher merchandise margin dollars related to the increase in net sales in Greater China.

~~The gross profit (loss) rate decrease was driven by the increase in store asset impairment charges.~~promotional activity.

General, Administrative and Store Operating Expenses

For year-to-date ~~2019,~~2020, our general, administrative and store operating expenses decreased ~~$14~~$427 million to ~~$2.480~~$2.053 billion due to ~~the elimination of the La Senza and Henri Bendel businesses and lower marketing expenses~~meaningful reductions at Victoria's Secret ~~partially offset~~driven by ~~higher~~lower store selling ~~expenses related to higher sales volume at Bath & Body Works~~and marketing expense as a result our profit improvement plan and disciplined expense management, a $30 million pre-tax gain recognized on the establishment of the Victoria's Secret U.K. joint venture and a $30 million goodwill impairment charge recognized in the third quarter of 2019. These decreases were partially offset by severance and related costs associated with headcount reductions totaling $81 million and increases in Bath & Body Works store selling expenses due to ~~Greater China.~~the increase in net sales and to support COVID-19 guidelines.

The general, administrative and store operating expense rate ~~increased~~decreased to ~~30.2%~~29.2% from ~~29.7%~~30.2% due to savings realized on our profit improvement plan, the Victoria's Secret U.K. gain and goodwill impairment recognized in the prior year partially offset by deleverage at Victoria's Secret on lower net sales and the ~~goodwill impairment charge.~~severance and related costs.

Other Income and Expense

Interest Expense

The following table provides the average daily borrowings and average borrowing rates for year-to-date ~~2019~~2020 and ~~2018:~~2019:


Year-to-Date	2019			2018			Year-to-Date	2020			2019
Average daily borrowings (in millions)	$	5,761		$	5,843		Average daily borrowings (in millions)	$	6,391		$	5,761
Average borrowing rate (in percentages)	6.6		%	6.6		%	Average borrowing rate (in percentages)	6.7		%	6.6		%

For year-to-date ~~2019,~~2020, our interest expense ~~decreased $6~~increased $36 million to ~~$286~~$322 million due to ~~lower~~both higher average daily ~~borrowings.~~

borrowings and average borrowing rate.

Other ~~Income (Loss)~~Loss

For year-to-date 2020, our other loss was $48 million primarily due to a $53 million pre-tax loss associated with the early extinguishment of outstanding notes recognized in the third quarter of 2020. For year-to-date 2019, our other ~~income (loss) decreased $67 million to a~~loss was $66 million ~~loss~~primarily due to a $40 million pre-tax loss associated with the early extinguishment of ~~$764 million in~~ outstanding notes ~~maturing between 2020~~recognized in the second quarter of 2019 and ~~2022 and~~a $37 million ~~of charges~~charge to increase reserves related to ongoing contingent obligations for the La Senza business ~~which was sold~~recognized in the ~~fourth~~third quarter of ~~2018.~~2019, partially offset by interest income received on invested cash.

Provision (Benefit) for Income Taxes

For year-to-date ~~2019,~~2020, our effective tax rate was ~~0.4%~~74.8% compared to ~~29.0%~~0.4% year-to-date ~~2018.~~2019. The year-to-date 2020 rate was higher than the Company's combined estimated federal and state statutory rate primarily due to the resolution of certain tax matters partially offset by foreign losses with no tax benefit. The impact of these items has a greater impact on the effective tax rate at lower levels of pre-tax loss. The year-to-date 2019 ~~year-to-date~~ rate was lower than the Company's combined estimated federal and state statutory rate primarily due to the Victoria's Secret impairment charges, which ~~generate~~generated no tax benefit for certain foreign subsidiaries. ~~The 2018 year-to-date rate was higher than the Company's estimated federal and state statutory rate primarily due to losses related to certain foreign subsidiaries.~~

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FINANCIAL CONDITION

Liquidity and Capital Resources

Liquidity, or access to cash, is an important factor in determining our financial stability. We are committed to maintaining adequate liquidity. Cash generated from our operating activities provides the primary resources to support current operations, growth initiatives, seasonal funding requirements and capital expenditures. Our cash provided from operations is impacted by our net income (loss) and working capital changes. Our net income (loss) is impacted by, among other things, sales volume, seasonal sales patterns, success of new product introductions, profit margins and income taxes. Historically, sales are higher during the fourth quarter of the fiscal year due to seasonal and holiday-related sales patterns. Generally, our need for working capital peaks during the summer and fall months as inventory builds in anticipation of the holiday period. Our cash and cash equivalents held by foreign subsidiaries were ~~$149~~$194 million as of ~~November 2, 2019.~~October 31, 2020.

COVID-19 Response

In response to the global COVID-19 crisis, we took prudent actions to manage expenses and to maintain our solid cash position and financial flexibility through the pandemic, including:

•Furloughed most store associates as of April 5 during the temporary store closures, while continuing to provide healthcare benefits for eligible associates;

•Suspended associate merit increases;

•Temporarily reduced salaries for senior vice presidents and above by 20%;

•Temporarily suspended cash compensation for all members of the Board of Directors;

•Reduced 2020 forecasted capital expenditures from $550 million to approximately $250 million;

•Suspended the quarterly cash dividend beginning in the second quarter of fiscal 2020;

•Converted the revolving credit facility to an asset-backed loan facility and issued $2.25 billion in new notes and extinguished $1.259 billion of notes primarily with near-term maturities; and

•Extended payment terms to vendors.

As of October 31, 2020, we had $2.6 billion in cash and cash equivalents with no outstanding borrowings on our ABL Facility. In the third quarter, we issued $1 billion in new notes, called all $450 million of our outstanding 2021 Notes and retired an additional $808 million of our 2022, 2023 and 2037 Notes through a tender offer.

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Working Capital and Capitalization

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

The following table provides a summary of our working capital position and capitalization as of October 31, 2020, February 1, 2020 and November 2, 2019:


	October 31, 2020		February 1, 2020		November 2, 2019
	(in millions)
Net Cash Provided by (Used for) Operating Activities (a)	$	706	$	1,236	$	(90)
Capital Expenditures (a)	200		458		392
Working Capital	1,597		873		383
Capitalization:
Long-term Debt	6,451		5,487		5,477
Shareholders’ Equity (Deficit)	(1,568)		(1,499)		(1,242)
Total Capitalization	$	4,883	$	3,988	$	4,235
Amounts Available Under the Credit Agreement (b)	$	—	$	981	$	990

_______________

(a)The February 1, 2020 amounts represent a fifty-two-week period, and the October 31, 2020 and November 2, 2019 amounts represent thirty-nine-week periods.

(b)As of October 31, 2020, our borrowing base was $1.453 billion and we were unable to draw upon the Credit Agreement as our consolidated cash balance exceeded $350 million. We had outstanding letters of credit, which reduce our availability under the Credit Agreement, of $63 million as of October 31, 2020, $19 million as of February 1, 2020 and $10 million as of November 2, ~~2019 and November 3, 2018:~~

November 2,
2019 February 2,
2019 November 3,
2018
(in millions)
Net Cash Provided by (Used for) Operating Activities (a) $ (90 ) $ 1,377
$ 13
Capital Expenditures (a) 392
629
561
Working Capital (b) 383
1,274
791
Capitalization:
Long-term Debt 5,477
5,739
5,814
Shareholders’ Equity (Deficit) (1,242 ) (869 ) (1,314 )
Total Capitalization $ 4,235
$ 4,870
$ 4,500
Amounts Available Under Credit Agreements (c) $ 990
$ 991
$ 991

~~_______________~~2019.


~~(a)~~	~~The February 2, 2019 amounts represent a fifty-two-week period, and the November 2, 2019 and November 3, 2018 amounts represent thirty-nine-week periods.~~


~~(b)~~	~~The November 2, 2019 amount includes Current Operating Lease Liabilities as a result of our adoption of ASC 842,~~ ~~Leases, in the first quarter of 2019.~~


~~(c)~~	Letters of credit issued reduce our availability under the Secured Revolving Facility. We had outstanding letters of credit that reduced our availability under the Secured Revolving Facility of $10 million as of November 2, 2019, and $9 million as of February 2, 2019 and November 3, 2018.

Cash Flow

The following table provides a summary of our cash flow activity for year-to-date ~~2019~~2020 and ~~2018:~~2019:

Year-to-Date
2019 2018
(in millions)
Cash and Cash Equivalents, Beginning of Period $ 1,413
$ 1,515
Net Cash Flows Provided by (Used for) Operating Activities (90 ) 13
Net Cash Flows Used for Investing Activities (408 ) (538 )
Net Cash Flows Used for Financing Activities (570 ) (643 )
Effects of Exchange Rate Changes on Cash and Cash Equivalents (5 ) 1
Net Decrease in Cash and Cash Equivalents (1,073 ) (1,167 )
Cash and Cash Equivalents, End of Period $ 340
$ 348


	Year-to-Date
	2020		2019
	(in millions)
Cash and Cash Equivalents and Restricted Cash, Beginning of Period	$	1,499	$	1,413
Net Cash Flows Provided by (Used for) Operating Activities	706		(90)
Net Cash Flows Used for Investing Activities	(183)		(408)
Net Cash Flows Provided by (Used for) Financing Activities	729		(570)
Effects of Exchange Rate Changes on Cash and Cash Equivalents and Restricted Cash	(1)		(5)
Net Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash	1,251		(1,073)
Cash and Cash Equivalents and Restricted Cash, End of Period	$	2,750	$	340

Operating Activities

Net cash provided by operating activities in 2020 was $706 million, including a net loss of $16 million. Net loss included depreciation of $393 million, store and lease asset impairment charges of $214 million, loss on extinguishment of debt of $53 million, non-cash gain from Victoria's Secret Hong Kong store closure and lease termination of $39 million, share-based compensation expense of $39 million and gain from establishment of the Victoria's Secret U.K. and Ireland joint venture of $30 million. Other changes in assets and liabilities represent items that had a current period cash flow impact, such as changes in working capital. The most significant item in working capital was the seasonal change in Inventories (and related increases in Accounts Payable), as we build our inventory levels in anticipation of the holiday season, which generates a substantial portion of our operating cash flow for the year.

Net cash used for operating activities in 2019 was $90 million, including a net loss of $174 million. Net loss included depreciation of $443 million, asset impairment charges of $248 million, share-based compensation expense of $67 million, loss on extinguishment of debt of $40 million and La Senza charges of $37 million. Other changes in assets and liabilities represent items that had a current period cash flow impact, such as changes in working capital. The most significant items in working capital ~~were~~was the seasonal ~~changes~~change in Inventories (and related increases in Accounts Payable), as we build our inventory levels in anticipation of the holiday season, which generates a substantial portion of our operating cash flow for the year. In addition, our Income Taxes Payable decrease was due to seasonal tax payments.

~~Net cash provided by operating activities in 2018 was $13 million, including net income~~

Table of $104 million. Net income included depreciation of $444 million, asset impairment charges of $81 million and share-based compensation expense of $75 million. Other changes in assets and liabilities represent items that had a current period cash flow impact, such as changes in working capital. The most significant items in working capital were the seasonal changes in Inventories (and related increases in Accounts Payable). In addition, our Income Taxes Payable decrease was due to seasonal tax payments.Contents

Investing Activities

Net cash used for investing activities in 2020 was $183 million consisting primarily of capital expenditures of $200 million. The capital expenditures were primarily related to spending on technology and logistics to support our digital businesses and other retail capabilities. Capital expenditures of $68 million related to the opening of new stores or the remodeling and improving of existing stores, primarily for Bath & Body Works.

Net cash used for investing activities in 2019 was $408 million consisting primarily of capital expenditures of $392 million. The capital expenditures included $222 million for opening new stores and remodeling and improving existing stores. Remaining capital expenditures were primarily related to spending on technology and logistics to support our digital businesses and other retail capabilities.

Financing Activities

Net cash ~~used for investing~~provided by financing activities in ~~2018~~2020 was ~~$538~~$729 million consisting primarily of ~~capital expenditures~~net proceeds of ~~$561 million~~$2.219 billion from the issuance of new notes, partially offset by ~~a $15~~$1.307 billion in payments for the early extinguishment of outstanding notes maturing in 2021 through 2023 and 2037, dividend payments of $0.30 per share, or $83 million, ~~return~~and $57 million of ~~capital from certain of~~net repayments under our ~~Easton investments. The capital expenditures included $452~~Foreign Facilities. We also borrowed and repaid $950 million ~~for opening new stores and remodeling and improving existing stores. Remaining capital expenditures were primarily related to spending on technology and infrastructure to support growth.~~

We anticipate spending approximately $500 million for capital expenditures in 2019 relating to remodeling and improving existing stores and opening new stores, as well as investments in technology and logistics for initiatives supportingunder our ~~direct businesses and other retail capabilities.~~

~~Financing Activities~~Credit Agreement during 2020.

Net cash used for financing activities in 2019 was $570 million consisting primarily of $799 million in payments for the early extinguishment of outstanding notes maturing between 2020 and 2022, quarterly dividend payments of $0.90 per share, or $249 million, and tax payments related to share-based awards of $12 million, partially offset by the net proceeds of $486 million from the issuance of the 2029 Notes and $15 million of net new borrowings under our Foreign Facilities.

Net cash used for financing activities in 2018 was $643 million consisting primarily of quarterly dividend payments of $1.80 per share, or $500 million, payments for repurchases of common stock of $198 million, payment of long-term debt related to our exchange of notes of $52 million and tax payments related to share-based awards of $13 million, partially offset by an $85 million borrowing from our Secured Revolving Facility and $39 million of net new borrowings under our Foreign Facilities.

Common Stock Share Repurchases

Our Board of Directors will determine share repurchase authorizations, giving consideration to our levels of profit and cash flow, capital requirements, current and forecasted liquidity, the restrictions placed upon us by our borrowing arrangements as well as financial and other conditions existing at the time. We use cash flow generated from operating and financing activities to fund our share repurchase programs. The timing and amount of any repurchases will be made at our discretion, taking into account a number of factors, including market conditions.

~~We did not repurchase any shares during year-to-date 2019.~~

~~Under the authority of our Board of Directors, we repurchased shares of our common stock under the following repurchase programs during year-to-date 2018:~~

In March 2018, our Board of Directors approved a $250 million repurchase program, which ~~included the $23 million remaining under the September 2017 repurchase program.~~

~~The March 2018 repurchase program~~ had $79 million remaining as of ~~November 2,~~October 31, 2020. We did not repurchase any shares during 2020 or 2019.

Dividend Policy and Procedures

Our Board of Directors will determine future dividends after giving consideration to our levels of profit and cash flow, capital requirements, current and forecasted liquidity, the restrictions placed upon us by our borrowing arrangements as well as financial and other conditions existing at the time. We use cash flow generated from operating and financing activities to fund our ~~dividends~~dividends.

Our Board of Directors suspended our quarterly cash dividend beginning in the second quarter of fiscal 2020 as a proactive measure to strengthen our financial flexibility and ~~share repurchase programs.~~manage through the COVID-19 pandemic.

Under the authority and declaration of our Board of Directors, we paid the following dividends during year-to-date ~~2019~~2020 and ~~2018:~~2019:


	Ordinary Dividends			Total Paid
	(per share)		(in millions)
2020
Third Quarter	$	—		$	—
Second Quarter	—			—
First Quarter	0.30			83
Total	$	0.30		$	83
2019
Third Quarter	$	0.30		$	83
Second Quarter	0.30			83
First Quarter	0.30			83
Total	$	0.90		$	249

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Long-term Debt and Borrowing Facilities

The following table provides our outstanding debt balance, net of unamortized debt issuance costs and discounts, as of October 31, 2020, February 1, 2020 and November 2, ~~2019, February 2, 2019 and November 3, 2018:~~

2019:


											October 31, 2020		February 1, 2020		November 2, 2019
	November 2, 2019			February 2, 2019			November 3, 2018				(in millions)
Senior Secured Debt with Subsidiary Guarantee										Senior Secured Debt with Subsidiary Guarantee
$750 million, 6.875% Fixed Interest Rate Secured Notes due July 2025 ("2025 Secured Notes")										$750 million, 6.875% Fixed Interest Rate Secured Notes due July 2025 ("2025 Secured Notes")	$	740	$	—	$	—
	(in millions)
Secured Foreign Facilities										Secured Foreign Facilities	98		103		95
Total Senior Secured Debt with Subsidiary Guarantee										Total Senior Secured Debt with Subsidiary Guarantee	$	838	$	103	$	95
Senior Debt with Subsidiary Guarantee										Senior Debt with Subsidiary Guarantee
$1 billion, 6.875% Fixed Interest Rate Notes due November 2035 (“2035 Notes”)	$	991		$	990		$	990
$860 million, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”)	857			952			951
$700 million, 6.75% Fixed Interest Rate Notes due July 2036 (“2036 Notes”)	693			693			693
$500 million, 5.625% Fixed Interest Rate Notes due October 2023 (“2023 Notes”)	498			498			498
$1 billion, 6.625% Fixed Interest Rate Notes due April 2021 (“2021 Notes”)										$1 billion, 6.625% Fixed Interest Rate Notes due April 2021 (“2021 Notes”)	$	—	$	450	$	449
$285 million, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”)										$285 million, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”)	284		858		857
$320 million, 5.625% Fixed Interest Rate Notes due October 2023 (“2023 Notes”)										$320 million, 5.625% Fixed Interest Rate Notes due October 2023 (“2023 Notes”)	319		498		498
$500 million, 9.375% Fixed Interest Rate Notes due July 2025 ("2025 Notes")										$500 million, 9.375% Fixed Interest Rate Notes due July 2025 ("2025 Notes")	493		—		—
$297 million, 6.694% Fixed Interest Rate Notes due January 2027 (“2027 Notes”)										$297 million, 6.694% Fixed Interest Rate Notes due January 2027 (“2027 Notes”)	277		276		275
$500 million, 5.25% Fixed Interest Rate Notes due February 2028 (“2028 Notes”)	496			496			495			$500 million, 5.25% Fixed Interest Rate Notes due February 2028 (“2028 Notes”)	496		496		496
$500 million, 7.50% Fixed Interest Rate Notes due June 2029 ("2029 Notes")	487			—			—			$500 million, 7.50% Fixed Interest Rate Notes due June 2029 ("2029 Notes")	488		487		487
$450 million, 6.625% Fixed Interest Rate Notes due April 2021 (“2021 Notes”)	449			776			776
$297 million, 6.694% Fixed Interest Rate Notes due January 2027 (“2027 Notes”)	275			273			273
$338 million, 7.00% Fixed Interest Rate Notes due May 2020 (“2020 Notes”)	—			337			337
Secured Revolving Facility	—			—			85
Secured Foreign Facilities	95			91			94
$1 billion, 6.625% Fixed Interest Rate Notes due October 2030 ("2030 Notes")										$1 billion, 6.625% Fixed Interest Rate Notes due October 2030 ("2030 Notes")	988		—		—
$1 billion, 6.875% Fixed Interest Rate Notes due November 2035 (“2035 Notes”)										$1 billion, 6.875% Fixed Interest Rate Notes due November 2035 (“2035 Notes”)	991		991		991
$700 million, 6.75% Fixed Interest Rate Notes due July 2036 (“2036 Notes”)										$700 million, 6.75% Fixed Interest Rate Notes due July 2036 (“2036 Notes”)	694		693		693
Total Senior Debt with Subsidiary Guarantee	$	4,841		$	5,106		$	5,192		Total Senior Debt with Subsidiary Guarantee	$	5,030	$	4,749	$	4,746
Senior Debt										Senior Debt
$350 million, 6.95% Fixed Interest Rate Debentures due March 2033 (“2033 Notes”)	$	348		$	348		$	348		$350 million, 6.95% Fixed Interest Rate Debentures due March 2033 (“2033 Notes”)	$	348	$	348	$	348
$300 million, 7.60% Fixed Interest Rate Notes due July 2037 (“2037 Notes”)	298			297			297
$247 million, 7.60% Fixed Interest Rate Notes due July 2037 (“2037 Notes”)										$247 million, 7.60% Fixed Interest Rate Notes due July 2037 (“2037 Notes”)	246		298		298
Unsecured Foreign Facilities	65			60			33			Unsecured Foreign Facilities	—		50		65
Total Senior Debt	$	711		$	705		$	678		Total Senior Debt	$	594	$	696	$	711
Total	$	5,552		$	5,811		$	5,870		Total	$	6,462	$	5,548	$	5,552
Current Debt	(75		)	(72		)	(56		)	Current Debt	(11)		(61)		(75)
Total Long-term Debt, Net of Current Portion	$	5,477		$	5,739		$	5,814		Total Long-term Debt, Net of Current Portion	$	6,451	$	5,487	$	5,477

Issuance of Notes

In ~~June 2019,~~September 2020, we issued ~~$500 million~~$1 billion of ~~7.50%~~6.625% senior notes due ~~in June 2029.~~October 2030. The obligation to pay principal and interest on these notes is jointly and severally guaranteed on a full and unconditional basis by us and certain of our 100% owned ~~subsidiaries (the “Guarantors”).~~subsidiaries. The proceeds from the issuance were ~~$486~~$988 million, which were net of ~~discounts and~~ issuance costs of ~~$14~~$12 million. The ~~discounts and~~ issuance costs are being amortized through the maturity date and are included within Long-term Debt on the ~~November 2, 2019~~October 31, 2020 Consolidated Balance Sheet.

In June 2020, we issued $750 million of 6.875% senior secured notes due July 2025. The obligation to pay principal and interest on these notes is jointly and severally guaranteed on a full and unconditional basis by us and certain of our 100% owned subsidiaries. The 2025 Secured Notes are secured on a first-priority lien basis by substantially all of the assets of ours and the guarantors, and on a second-priority lien basis by certain collateral securing the ABL Facility, in each case, subject to certain exceptions. The proceeds from the issuance were $739 million, which were net of issuance costs of $11 million. The issuance costs are being amortized through the maturity date and are included within Long-term Debt on the October 31, 2020 Consolidated Balance Sheet.

In June 2020, we also issued $500 million of 9.375% notes due in July 2025. The obligation to pay principal and interest on these notes is jointly and severally guaranteed on a full and unconditional basis by us and certain of our 100% owned subsidiaries. The proceeds from the issuance were $492 million, which were net of issuance costs of $8 million. The issuance

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costs are being amortized through the maturity date and are included within Long-term Debt on the October 31, 2020 Consolidated Balance Sheet.

Repurchases of Notes

In October 2020, we settled tender offers to repurchase $576 million of outstanding 2022 Notes, $180 million of outstanding 2023 Notes and $53 million of outstanding 2037 Notes for $844 million. We used the proceeds from the 2030 Notes to fund the purchase price of the tender offers. Additionally, utilizing cash on hand, we redeemed the remaining $450 million of outstanding 2021 Notes for $463 million. We recognized a pre-tax loss related to this extinguishment of debt of $53 million (after-tax loss of $40 million), which includes redemption fees and the write-offs of unamortized issuance costs. This loss is included in Other Income (Loss) in the 2020 Consolidated Statements of Income (Loss).

In June 2019, we completed the early settlement of tender offers to repurchase $212 million of outstanding 2020 Notes, $330 million of outstanding 2021 Notes and $96 million of outstanding 2022 Notes for $669 million. We used the proceeds from the 2029 Notes, together with cash on hand, to fund the purchase price for the tender offers. Additionally, in July 2019, we redeemed the remaining $126 million of outstanding 2020 Notes for $130 million.

~~In the second quarter of 2019, we~~ We recognized a pre-tax loss onrelated to this extinguishment of debt of $40 million (after-tax loss of $30 million), which includes redemption fees and the write-offs of unamortized issuance ~~costs and redemption fees.~~costs. This loss is included in Other Income (Loss) in the 2019 year-to-date ~~2019~~ Consolidated Statement of ~~Income (Loss).~~Loss.

~~Exchange of Notes~~

In June 2018, we completed private offers to exchange $62 million, $220 million and $44 million of outstanding 2020 Notes, 2021 Notes and 2022 Notes, respectively, for $297 million of newly issued 6.694% notes due in January 2027 and $52 million in cash consideration, which included a $24 million exchange premium. The exchange was treated as a modification under ASC 470, ~~Debt,~~ and no gain or loss was recognized. The exchange premium is being amortized through the maturity date of January 2027 and is included within Long-term Debt on the Consolidated Balance Sheets. The obligation to pay principal and interest on the 2027 Notes is jointly and severally guaranteed on a full and unconditional basis by the Guarantors.

~~Secured~~ Revolving Credit Facility

We and ~~the Guarantors~~certain of our 100% owned subsidiaries guarantee and pledge collateral to secure a revolving credit facility. The Secured Revolving Facility has aggregate availability of $1 billion. The Secured Revolving Facility allows us and certain of our non-U.S. subsidiaries to borrow and obtain letters of credit in U.S. dollars, Canadian dollars, Euros, Hong Kong dollars or British pounds.

In ~~August 2019,~~April 2020, we entered into an amendment and restatement of the ~~Secured Revolving Facility.~~Credit Agreement to convert our credit facility into an asset-backed revolving credit facility. The Amendment ~~maintained~~maintains the aggregate ~~availability under the Secured Revolving Facility~~commitments at $1 billion, and ~~extended~~maintains the expiration date ~~from May 2022 to~~in August of 2024. The ~~Amendment also raised~~ABL Facility allows borrowings and letters of credit in U.S. dollars or Canadian dollars.

Availability under the ~~threshold~~ABL Facility is the lesser of ~~consolidated debt~~(i) the borrowing base, determined primarily based on our eligible U.S. and Canadian credit card receivables, accounts receivable, inventory and eligible real property, or (ii) the aggregate commitment. If at any time, the outstanding amount under the ABL Facility exceeds the lesser of (i) the borrowing base and (ii) the aggregate commitment, we will be required to ~~consolidated EBITDA in which investments and restricted payments may be made without limitation to 3.50 to 1.00.~~

~~We incurred fees related~~prepay the outstanding amounts under the ABL Facility to the ~~Amendment~~extent of $5such excess. In addition, at any time that our consolidated cash balance exceeds $350 million, ~~which~~we will be required to prepay outstanding amounts under the ABL Facility to the extent of such excess. As of October 31, 2020, our borrowing base was $1.453 billion and we were ~~capitalized and recorded in Other Assets on~~unable to draw upon the ~~November 2, 2019 Consolidated Balance Sheet and are being amortized over~~ABL Facility as our consolidated cash balance exceeded $350 million.

The ABL Facility supports our letter of credit program. We had $63 million of outstanding letters of credit as of October 31, 2020 that reduced our availability under the ~~remaining term of the Secured Revolving~~ABL Facility.

As of ~~November 2, 2019,~~October 31, 2020, the ~~Secured Revolving~~ABL Facility fees related to committed and unutilized amounts were ~~0.25%~~0.30% per annum, and the fees related to outstanding letters of credit were ~~1.50%~~1.75% per annum. In addition, the interest rate on outstanding U.S. dollar borrowings was the ~~LIBOR~~London Interbank Offered Rate plus ~~1.50%~~1.75% per annum. The interest rate on outstanding ~~foreign-denominated~~Canadian dollar-denominated borrowings was the ~~applicable benchmark rate~~Canadian Dollar Offered Rate plus ~~1.50%~~1.75% per annum.

The ~~Secured Revolving~~ABL Facility ~~contains fixed charge coverage and debt to EBITDA financial covenants. We are required~~requires us to maintain a fixed charge coverage ratio of not less than ~~1.75~~1.00 to 1.00 and a consolidated debt to consolidated EBITDA ratio not exceeding 4.00 to 1.00 for the most recent four-quarter period. Additionally, the Secured Revolving Facility provided that investments and restricted payments may be made, without limitationduring an event of default or any period commencing on ~~amount, if (a) at the time of and after giving effect to such investment or restricted payment, the ratio of consolidated debt to consolidated EBITDA for the most recent four-quarter period~~any day when specified excess availability is less than ~~3.50 to 1.00 and (b) no default~~the greater of (1) $100 million or ~~event~~(2) 15% of ~~default exists.~~the maximum borrowing amount. As of ~~November 2, 2019,~~October 31, 2020, we were not required to maintain this ratio.

In March 2020, in ~~compliance with both~~an abundance of caution and as a proactive measure in response to the COVID-19 pandemic, we elected to borrow $950 million from our ~~financial covenants, and~~revolving facility, which was repaid upon the ~~ratio~~completion of ~~consolidated debt to consolidated EBITDA was less than 3.50 to 1.00.~~

the Amendment. As of ~~November 2, 2019,~~October 31, 2020, there were no borrowings outstanding under the ~~Secured Revolving~~ABL Facility.

The Secured Revolving Facility supports our letter of credit program. We had $10 million of outstanding letters of credit as of November 2, 2019 that reduced our availability under the Secured Revolving Facility.

~~Secured~~ Foreign Facilities

~~We and the Guarantors guarantee and pledge collateral to secure~~Certain of our China subsidiaries utilize revolving and term loan bank facilities ~~used by certain of our Greater China subsidiaries~~ to support their operations. The ~~Secured~~ Foreign Facilities ~~which~~ allow borrowings in U.S. dollars and Chinese Yuan, ~~have availability totaling $150 million. The~~and interest rates on outstanding borrowings are based upon the applicable benchmark rate for the currency of each borrowing. Certain of these facilities are guaranteed by us and certain of our 100% owned subsidiaries, and certain of these facilities were guaranteed by us only.

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The Secured Foreign Facilities have availability totaling $128 million. During ~~2019,~~2020, we borrowed ~~$16~~$21 million and made payments of $8$28 million under the Secured Foreign Facilities. ~~The maximum daily amount~~As of October 31, 2020, there were borrowings of $98 million outstanding ~~at any point in time during 2019 was $96 million.~~under the Secured Foreign Facilities, of which $11 million is included within Current Debt on the Consolidated Balance Sheet. Borrowings on the Secured Foreign Facilities mature between ~~December 2019~~March 2021 and August 2024. As

During 2020, we placed cash on deposit with certain financial institutions as collateral for their lending commitments under the Secured Foreign Facilities. The amount of ~~November 2, 2019, borrowings of $10~~collateral required reduces over time as we make certain paydowns. These deposits, totaling $128 million, are ~~included within Current Debt~~recorded in Other Assets on the October 31, 2020 Consolidated Balance ~~Sheet, and the remaining borrowings are included within Long-term Debt.~~Sheet.

~~Unsecured Foreign Facilities~~

We guarantee unsecured revolving and term loan bank facilities used by certain of our Greater China subsidiaries to support their operations. The Unsecured Foreign Facilities, which allow borrowings in U.S. dollars and Chinese Yuan, have availability totaling $87 million. The interest rates on outstanding borrowings are based upon the applicable benchmark rate for the currency of each borrowing. During ~~2019,~~2020, we borrowed ~~$20~~$13 million and made payments of ~~$13~~$63 million under the Unsecured Foreign Facilities. ~~The maximum daily amount~~During the second quarter of 2020, with no borrowings outstanding, ~~at any point in time during 2019 was $73 million. Borrowings on~~we terminated the Unsecured Foreign ~~Facilities mature between November 2019 and January 2020. As of November 2, 2019, borrowings of $65 million are included within Current Debt on the Consolidated Balance Sheet.~~Facilities.

Credit Ratings

Our borrowing costs under our Secured Revolving Facility and Secured Foreign Facilities are linked to our credit ratings. If we receive an upgrade or downgrade to our corporate credit ratings, the borrowing costs could decrease or increase, respectively. The guarantees of our obligations under the Secured Revolving Facility and Secured Foreign Facilities by the Guarantors, and the security interests granted in our and the Guarantors’ collateral securing such obligations, are released if our credit ratings are higher than a certain level. Additionally, the restrictions imposed under the Secured Revolving Facility and Secured Foreign Facilities on our ability to make investments and to make restricted payments cease to apply if our credit ratings are higher than certain levels. Credit rating downgrades by any of the agencies do not accelerate the repayment of any of our debt.

The following table provides our credit ratings as of ~~November 2, 2019:~~

October 31, 2020:



	Moody’s	S&P
~~Corporate~~Senior Secured Debt	~~Ba1~~Ba2	BB
Corporate	B2	B+
Senior Unsecured Debt with Subsidiary Guarantee	~~Ba1~~B2	BBB+
Senior Unsecured Debt	~~Ba2~~Caa1	B+B-
Outlook	Negative	~~Negative~~Stable

Subsequent to ~~November 2, 2019, S&P downgraded our Corporate and Senior Unsecured Debt with Subsidiary Guarantee ratings to BB-, our Senior Unsecured Debt rating to B and~~October 31, 2020, Moody's updated our outlook to ~~Stable.~~Positive.

Guarantor Summarized Financial Information

Certain of our subsidiaries, which are listed on Exhibit 22 to this Quarterly Report on Form 10-Q, have guaranteed our obligations under the 2022 Notes, 2023 Notes, 2025 Notes, 2027 Notes, 2028 Notes, 2029 Notes, 2030 Notes, 2035 Notes and the 2036 Notes (collectively, the "Unsecured Notes") and the 2025 Secured Notes (the “Secured Notes” and together with the Unsecured Notes, the “Notes”).

The Notes have been issued by L Brands, Inc. (the “Parent Company”). The Unsecured Notes are its senior unsecured obligations and the Secured Notes are its senior secured obligations. The Unsecured Notes rank equally in right of payment with all of our existing and future senior unsecured obligations, senior to any of our future subordinated indebtedness, are effectively subordinated to all of our existing and future indebtedness that is secured by a lien and are structurally subordinated to all existing and future obligations of each of our subsidiaries that do not guarantee the Unsecured Notes. The Secured Notes rank equally in right of payment with all of our existing and future senior obligations, senior to any of our future subordinated indebtedness, are effectively senior to all of our existing and future indebtedness that is secured by a lien on collateral that ranks junior to the lien on such collateral securing the Secured Notes, are effectively senior to all of our existing and future unsecured indebtedness to the extent of the value of the assets securing the Secured Notes, are effectively subordinated to all of our existing and future indebtedness that is secured by a lien on assets that do not constitute collateral or that is secured by a first-priority lien on certain collateral, in each case to the extent of the value of such assets, and structurally subordinated to all existing and future obligations of each of our subsidiaries that do not guarantee the Unsecured Notes.

The Notes are fully and unconditionally guaranteed on a joint and several basis by certain of our wholly-owned subsidiaries, including each subsidiary that also guarantees our obligations under certain of our senior secured credit facilities (such guarantees, the “Guarantees”; and, such guaranteeing subsidiaries, the “Subsidiary Guarantors”). The Guarantees of the Subsidiary Guarantors are subject to release in limited circumstances only upon the occurrence of certain customary conditions. Each Guarantee is limited, by its terms, to an amount not to exceed the maximum amount that can be guaranteed by the applicable Subsidiary Guarantor subject to avoidance under applicable fraudulent conveyance provisions of U.S. and non-U.S. law.

The following tables set forth summarized financial information for the Parent Company and the Subsidiary Guarantors on a combined basis after elimination of (i) intercompany transactions and balances among the Parent Company and the Subsidiary Guarantors and (ii) investments in and equity in the earnings of non-Guarantor subsidiaries:

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SUMMARIZED BALANCE SHEETS	October 31, 2020		February 1, 2020
	(in millions)
ASSETS
Current Assets (a)	$	5,874	$	3,728
Noncurrent Assets (b)	4,910		5,357

LIABILITIES
Current Liabilities (c)	$	5,421	$	4,163
Noncurrent Liabilities (d)	9,394		8,772

_______________

(a)Includes amounts due from non-Guarantor subsidiaries of $1.556 billion and $1.091 billion as of October 31, 2020 and February 1, 2020, respectively.

(b)Includes amounts due from non-Guarantor subsidiaries of $4 million as of October 31, 2020.

(c)Includes amounts due to non-Guarantor subsidiaries of $2.932 billion and $2.684 billion as of October 31, 2020 and February 1, 2020, respectively.

(d)Includes amounts due to non-Guarantor subsidiaries of $476 million as of both October 31, 2020 and February 1, 2020.


SUMMARIZED STATEMENT OF LOSS	Year-to-Date
	2020
	(in millions)
Net Sales (a)	$	6,726
Gross Profit	2,227
Operating Income	277
Loss Before Income Taxes	(223)
Net Loss (b)	(156)

_______________

(a)Includes net sales of $340 million to non-Guarantor subsidiaries.

(b)Includes net loss of $19 million related to transactions with non-Guarantor subsidiaries.

In addition to the Subsidiary Guarantors, a certain subsidiary, which is listed on Exhibit 22 to this Quarterly Report on Form 10-Q, has only guaranteed our obligations under the 2025 Notes, 2025 Secured Notes and 2030 Notes. This subsidiary had assets, all of which were noncurrent, of $239 million and $244 million as of October 31, 2020 and February 1, 2020, respectively. In addition, this subsidiary had current liabilities of $119 million as of February 1, 2020, which included $93 million due to the Subsidiary Guarantors. Year-to-date 2020 Statement of Loss activity for this subsidiary is immaterial.

Contingent Liabilities and Contractual Obligations

La Senza

In connection with the sale of La Senza in the fourth quarter of 2018, certain of our subsidiaries have remaining contingent obligations of ~~$44~~$34 million related to lease payments under the current terms of noncancelable leases expiring at various dates through 2028. These obligations include minimum rent and additional payments covering taxes, common area costs and certain other expenses and relate to leases that commenced prior to the disposition of the business. As ~~part~~ of ~~the sale, a liability~~October 31, 2020, we recorded reserves of $5$35 million,~~was recordedfor these obligations. During the third quarter of 2019, an additional reserve of $19 million was recorded related to these obligations. This liability is~~ primarily included inwithin Other Long-term Liabilities on the ~~November 2, 2019~~ Consolidated Balance ~~Sheet.~~

~~Additionally, we have~~Sheet, related to these lease-related obligations and certain other ~~contingent~~ obligations related to the La Senza ~~for a period~~business.

~~Other~~

In connection with the disposition of a certain other business, we have remaining guarantees of $5 million related to lease payments under the current terms of a noncancelable lease expiring in 2021, which may remain in effect if the term is extended. We have not recorded a liability with respect to this guarantee obligation as of November 2, 2019, February 2, 2019 or November 3, 2018 as we concluded that payments under this guarantee were not probable.

In connection with noncancelable operating leases of certain assets, we provided residual value guarantees to the lessor if the leased assets cannot be sold for an amount in excess of a specified minimum value at the conclusion of the lease term. The leases expire at various dates through 2021, and the total amount of the guarantees is $94 million. We recorded a liability of $11 million as of November 2, 2019 and February 2, 2019, and $3 million as of November 3, 2018 related to these guarantee obligations. This liability is included in Current Operating Lease Liabilities on the November 2, 2019 Consolidated Balance Sheet, and in Other Long-term Liabilities on the February 2, 2019 and November 3, 2018 Consolidated Balance Sheets.

Contractual Obligations

Our contractual obligations primarily consist of long-term debt and the related interest payments, operating leases, purchase orders for merchandise inventory and other long-term obligations. These contractual obligations impact our short-term and long-term liquidity and capital resource needs. There have been no material changes in our contractual obligations since February ~~2, 2019,~~1, 2020, as discussed in “Contingent Liabilities and Contractual Obligations” in our ~~2018~~2019 Annual Report on Form 10-K, other than the newly issued ~~2029~~2025 Secured Notes, 2025 Notes and 2030 Notes, the repurchase of the ~~2020~~2021 Notes and repurchases of certain of the ~~2021~~outstanding 2022, 2023 and ~~2022~~2037 Notes. Certain of our contractual obligations may fluctuate during the normal course of business (primarily changes in our merchandise inventory-related purchase obligations, which fluctuate throughout the year as a result of the seasonal nature of our operations).

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

~~Leases~~

~~In February 2016, the FASB issued ASC 842,~~ ~~Leases~~, which requires companies classified as lessees to account for most leases on their balance sheets but recognize expenses on their income statements in a manner similar to legacy accounting. The standard also requires enhanced quantitative and qualitative disclosures, including significant judgments made by management, to provide greater insight into the extent of expense recognized and expected to be recognized from existing leases. In July 2018, the FASB approved an amendment to the standard that provides companies a modified retrospective transition option that did not require earlier periods to be restated upon adoption.

We adopted the standard in the first quarter of 2019 under the modified retrospective approach. As allowed by the new standard, we elected the package of transition practical expedients but elected to not apply the hindsight practical expedient to our leases at transition.

Upon adoption at the beginning of 2019, we recorded operating lease liabilities of $3.7 billion and operating lease assets for our leases of $3.3 billion. The operating lease assets are net of $470 million of liabilities for deferred rent and unamortized landlord construction allowances that were previously recorded as Other Long-term Liabilities on the Consolidated Balance Sheet. We also recorded a decrease to opening retained earnings, net of tax, of $2 million. The adoption of the standard did not materially impact the Consolidated Statements of Income (Loss) or Cash Flows.

~~Hedging Activities~~

~~In August 2017, the FASB issued ASU 2017-12,~~ ~~Targeted Improvements to Accounting for Hedging Activities~~, which is intended to better align risk management activities and financial reporting for hedging relationships. The standard eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. It also eases certain documentation and assessment requirements. We adopted the standard in the first quarter of fiscal 2019. The adoption of this standard did not have a material impact on our consolidated results of operations, financial position or cash flows.

~~Goodwill~~

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Simplifying the Test for Goodwill Impairment~~, which simplifies the subsequent measurement of goodwill. The standard eliminates the second step from the goodwill impairment test, which requires a hypothetical purchase price allocation to determine the implied fair value of goodwill. Under the new standard, the goodwill impairment charge will be the excess of the reporting unit's carrying value over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. We adopted this standard in the third quarter of 2019 and performed our interim goodwill impairment assessment in accordance with ASU 2017-04.

Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which requires the use of a forward-looking expected loss impairment model for accounts receivable and certain other financial instruments. ~~This guidance will be effective beginning~~We adopted the standard in ~~fiscal 2020, with early~~the first quarter of 2020. The adoption ~~permitted. We are currently evaluating the impact~~ of this ~~standard.~~standard did not have a material impact on our consolidated results of operations, financial position or cash flows.

Guarantor Reporting

In March 2020, the SEC issued a final rule, Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities, that simplifies the disclosure requirements related to registered securities under Rule 3-10 of Regulation S-X. The rule replaces the requirement to provide condensed consolidating financial information with a requirement to present summarized financial information of the issuers and guarantors. It also requires qualitative disclosures with respect to information about guarantors, the terms and conditions of guarantees and the factors that may affect payment. These disclosures may be provided outside the footnotes to our consolidated financial statements. We early adopted the reporting requirements of the rule in the first quarter of 2020 and elected to provide these disclosures in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

IMPACT OF INFLATION

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies related to estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, management evaluates its accounting policies, estimates and judgments, including those related to inventories, long-lived assets, claims and contingencies, income taxes and revenue recognition. Management bases our estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

There have been no material changes to the critical accounting policies and estimates disclosed in our ~~2018~~2019 Annual Report on Form ~~10-K, other than the adoption of ASC 842,~~ ~~Leases,~~ ~~and ASU 2017-04,~~ ~~Simplifying the Test for Goodwill Impairment.~~10-K.

~~Valuation of Long-Lived Assets~~

~~Long-Lived Store Assets~~

~~Long-lived store assets, which includes leasehold improvements, store-related assets and operating leases (subsequent to the adoption of ASC 842,~~ ~~Leases~~), are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Store assets are grouped at the lowest level for which they are largely independent of other assets or asset groups. If the estimated undiscounted future cash flows related to the asset group are less than the carrying value, we recognize a loss equal to the difference between the carrying value and the estimated fair value, determined by the estimated discounted future cash flows of the asset group. An individual asset within an asset group is not impaired below its estimated fair value. For operating lease assets, we determine the fair value of the assets by comparing the

~~contractual rent payments to estimated market rental rates. These fair value measurements qualify as level 3 measurements in the fair value hierarchy.~~

In the third quarter of 2019, we concluded that the negative operating results for certain of our Victoria's Secret stores were an indicator of potential impairment of the related store asset groups. We determined that the estimated undiscounted future cash flows were less than the carrying values and, as a result, determined the estimated fair values of the store asset groups using estimated discounted future cash flows. Accordingly, we recognized a loss equal to the difference between the carrying value of an asset group and its estimated fair value but did not impair any individual store asset below its estimated fair value. For leasehold improvements and store-related assets, we recognized impairment charges of $188 million. Impairment charges of $151 million related to stores in Greater China, the U.K. and Ireland, and impairment charges of $37 million related to stores in the U.S. and Canada. For operating lease assets, we recognized impairment charges of $30 million. Impairment charges of $26 million related to stores in the U.K., and impairment charges of $4 million related to stores in the U.S.

In total, we recognized impairment charges of $218 million for long-lived store assets, which are included in Costs of Goods Sold, Buying & Occupancy in the 2019 Consolidated Statements of Income (Loss). Impairment charges of $177 million, related to store assets in Greater China, the U.K. and Ireland, were recorded within the Victoria's Secret and Bath & Body Works International segment. Impairment charges of $41 million, related to store assets in the U.S. and Canada, were recorded within the Victoria's Secret segment.

Our fair value estimates incorporated significant assumptions and judgments including, but not limited to, estimated future cash flows, discount rates and market rental rates. The use of different assumptions or judgments in our assessment could materially increase or decrease the fair value of our store assets and, accordingly, could materially increase or decrease any related impairment charge. Further sustained declines in our business performance could result in a material impairment charge in a future period.

~~Goodwill~~

Goodwill is reviewed for impairment each year in the fourth quarter and may be reviewed more frequently if certain events occur or circumstances change. We have the option to either first perform a qualitative assessment to determine whether it is more likely than not that each reporting unit's fair value is less than its carrying value (including goodwill), or to proceed directly to the quantitative assessment which requires a comparison of the reporting unit's fair value to its carrying value (including goodwill). If we determine that the fair value of a reporting unit is less than its carrying value, we recognize an impairment charge equal to the difference, not to exceed the total amount of goodwill allocated to the reporting unit. Our reporting units are determined in accordance with the provisions of ASC 350, ~~Intangibles - Goodwill and Other~~. Our reporting units that have goodwill are Victoria's Secret, Bath & Body Works and Greater China, which is included within the Victoria's Secret and Bath & Body Works International reportable segment.

As of November 2, 2019, we performed a quantitative interim impairment assessment over the Victoria's Secret and Greater China reporting units. An interim assessment was performed in consideration of the negative performance of these reporting units and their impact on the sustained decline in our market capitalization. Further, for the Greater China reporting unit, we considered the results of the long-lived store asset impairment assessment.

The interim assessment concluded that the fair value of the Victoria's Secret reporting unit exceeded its carrying value by approximately 24%, and that the fair value of the Greater China reporting unit did not exceed its carrying value. Accordingly, we recognized a goodwill impairment charge of $30 million in the third quarter of 2019 related to the Greater China reporting unit. This charge is included in General, Administrative and Store Operating Expenses in the 2019 Consolidated Statements of Income (Loss).

The use of different assumptions or judgments in our goodwill impairment assessment, including with respect to the estimated future cash flows of our reporting units, the discount rate used to discount such estimated future cash flows to their net present value, and the reasonableness of the implied control premium relative to our market capitalization, could materially increase or decrease the fair value of our reporting units and, accordingly, could materially increase or decrease any related impairment charge. Further sustained declines in our market capitalization or in our business performance could result in a material impairment charge in a future period.

~~Intangible Assets - Indefinite Lives~~

As of November 2, 2019, we performed a quantitative interim impairment assessment of the Victoria's Secret trade name. An interim assessment was performed in consideration of the negative performance of Victoria's Secret. To estimate the fair value of the Victoria's Secret trade name, we used the relief from royalty method under the income approach. The interim assessment concluded that the fair value of the Victoria's Secret trade name exceeded its carrying value.


~~Item 3.~~	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

The market risk inherent in our financial instruments represents the potential loss in fair value, earnings or cash flows arising from adverse changes in foreign currency exchange rates or interest rates. We may use derivative financial instruments like ~~cross-currency swaps,~~ foreign currency forward contracts, cross-currency swaps and interest rate swap arrangements to manage exposure to market risks. We do not use derivative financial instruments for trading purposes.

Foreign Exchange Rate Risk

We have operations in foreign countries which expose us to market risk associated with foreign currency exchange rate fluctuations. Our Canadian dollar ~~British pound,~~and Chinese Yuan ~~Hong Kong dollar and Euro~~ denominated earnings are subject to exchange rate risk as substantially all our merchandise sold in Canada ~~the U.K., Ireland~~ and Greater China is sourced through U.S. dollar transactions. Although we utilize foreign currency forward contracts to partially offset risks associated with our operations in Canada, ~~and the U.K.,~~ these measures may not succeed in

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offsetting all the short-term impact of foreign currency rate movements and generally may not be effective in offsetting the long-term impact of sustained shifts in foreign currency rates.

Further, although our royalty arrangements with our international partners are denominated in U.S. dollars, the royalties we receive in U.S. dollars are calculated based on sales in the local currency. As a result, our royalties in these arrangements are exposed to foreign currency exchange rate fluctuations.

Interest Rate Risk

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

Excluding our Foreign Facilities, all of our ~~long-term~~ debt as of ~~November 2, 2019~~October 31, 2020 has fixed interest rates. We will from time to time adjust our exposure to interest rate risk by entering into interest rate swap arrangements. Our exposure to interest rate changes is limited to the fair value of the debt issued, which would not have a material impact on our earnings or cash flows.

Fair Value of Financial Instruments

As of ~~November 2, 2019,~~October 31, 2020, we believe that the carrying values of accounts receivable, accounts payable and accrued expenses ~~and current debt~~ approximate fair value because of their short maturity.

The following table provides a summary of the principal value and estimated fair value of outstanding publicly traded debt ~~and other financial instruments~~ as of October 31, 2020, February 1, 2020 and November 2, ~~2019, February 2, 2019 and November 3, 2018:~~2019:

November 2,
2019 February 2,
2019 November 3,
2018
(in millions)
Long-term Debt:
Principal Value $ 5,458
$ 5,722
$ 5,722
Fair Value, Estimated (a) 5,156
5,340
5,301
Foreign Currency Cash Flow Hedges (b) —
(2 ) (3 )
Marketable Equity Securities (b) (1 ) (11 ) (9 )


	October 31, 2020		February 1, 2020		November 2, 2019
	(in millions)
Principal Value	$	6,449	$	5,458	$	5,458
Fair Value, Estimated (a)	6,678		5,555		5,156

_______________


~~(a)~~	~~The estimated fair value is based on reported transaction prices. The estimates presented are not necessarily indicative of the amounts that we could realize in a current market exchange.~~


~~(b)~~	~~Financial instruments are in a net asset position.~~

(a)The estimated fair value is based on reported transaction prices. The estimates presented are not necessarily indicative of the amounts that we could realize in a current market exchange.

Concentration of Credit Risk

We maintain cash and cash equivalents, restricted cash and derivative contracts with various major financial institutions. We monitor the relative credit standing of financial institutions with whom we transact and limit the amount of credit exposure with any one entity. ~~Typically, our~~Our investment portfolio is primarily comprised of U.S. government obligations, U.S. Treasury and AAA-rated money market funds, commercial paper and bank deposits. We also periodically review the relative credit standing of franchise, license and wholesale partners and other entities to which we grant credit terms in the normal course of business.


~~Item 4.~~	~~CONTROLS AND PROCEDURES~~

Item 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective and designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting that occurred in the third quarter of ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION


~~Item 1.~~	~~LEGAL PROCEEDINGS~~

Item 1. LEGAL PROCEEDINGS

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

In July 2019, a plaintiff shareholder filed a putative class action complaint in the U.S. District Court for the Southern District of Ohio alleging that we made false and/or misleading statements relating to the November 2018 announcement that the we were reducing our quarterly dividend. In September 2019, a different plaintiff shareholder filed a second putative class action complaint in the U.S. District Court for the Southern District of Ohio containing substantially the same allegations and seeking substantially the same relief. In October 2019, the Court issued an order consolidating the two putative class actions, appointing a lead plaintiff, and approving that lead plaintiff’s selection of lead counsel. The ~~deadline for~~lead plaintiff filed a consolidated amended complaint on December 20, 2019 that asserted substantially the same allegations and sought substantially the same relief as the initial complaint. We filed a motion to dismiss the consolidated amended complaint on February 18, 2020, the lead plaintiff filed an opposition to our motion to dismiss on May 4, 2020, and we filed a reply brief in further support of its motion to dismiss on June 3, 2020. The court heard oral argument on the motion to dismiss on September 23, 2020. On October 16, 2020, the court granted the motion to dismiss, denied the lead plaintiff’s request for leave to amend the complaint, and dismissed all claims with prejudice. The lead plaintiff did not file ~~an amended~~any notice of appeal by the November 16, 2020 deadline.

On February 19, 2020, a plaintiff shareholder filed a complaint ~~is December 20, 2019.~~in the U.S. District Court for the Southern District of Ohio alleging derivative claims on our behalf against certain of our current and former directors and officers. We ~~view~~were named as nominal defendant. The lawsuit asserts claims for breach of fiduciary duty, corporate waste and unjust enrichment in connection with alleged misstatements about our quarterly dividend prior to the announced reduction of the dividend in November 2018. On July 21, 2020, the court so-ordered a stipulation staying all proceedings in this lawsuit, pending resolution of the motion to dismiss that we filed on February 18, 2020 in the putative class action lawsuit described above. Following the dismissal of the putative class action lawsuit described above, the parties filed a joint stipulation to dismiss the derivative claims without prejudice on November 5, 2020.

On May 19, 2020, a purported shareholder filed a derivative lawsuit on behalf of L Brands, Inc. in the Court of Common Pleas for Franklin County, Ohio. The complaint names as ~~meritless~~defendants certain current and ~~intend~~former directors and officers of L Brands, Inc. and alleges, among other things, that these defendants breached their fiduciary duties by violating law and/or company policies relating to ~~defend~~workplace conduct. We were named as nominal defendant only, and there are no claims asserted against ~~this~~us. On June 16, 2020, the lawsuit ~~vigorously.~~ was removed to the United States District Court for the Southern District of Ohio. On July 6, 2020, the court so-ordered a stipulation staying the lawsuit until December 29, 2020.


~~Item 1A.~~	~~RISK FACTORS~~

Item 1A. RISK FACTORS

The following information supplements the risk factors ~~that affect our business and financial results are discussed~~described in “Item 1A: Risk Factors” in our ~~2018~~2019 Annual Report on Form 10-K and should be read in conjunction with the risk factors described in the 2019 Annual Report on Form 10-K. We wish to caution the reader that the risk factors discussed in “Item 1A: Risk Factors” in our ~~2018~~2019 Annual Report on Form 10-K and those described ~~elsewhere~~ in this report or other SEC filings could cause actual results to differ materially from those stated in any forward-looking statements.

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.

We continually assess the shareholder value and the strategic fit of our existing businesses, and may divest or otherwise dispose of businesses that are deemed not to fit with our strategic plan, or are not achieving the desired shareholder value or return on investment. These transactions, including any divestiture of Victoria’s Secret and related operations, pose risks and challenges that could negatively impact our business. For example, we may be unable to do so on satisfactory terms within our anticipated timeframe or at all, and even after reaching a definitive agreement to sell or dispose a business, the sale is typically subject to satisfaction of pre-closing conditions which may not become satisfied. In addition, divestitures or other dispositions may dilute our earnings per share, have other adverse financial and accounting impacts and distract management, and disputes may arise with buyers. In addition, we may be required to indemnify buyers against known and unknown contingent liabilities related to any businesses we have sold or disposed of. The resolution of these contingencies may have a material effect on our financial statements. Uncertainty about the effect of any potential divestiture of Victoria’s Secret on employees, commercial partners and

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vendors may have an adverse effect on us. These uncertainties may impair our ability to retain and motivate key personnel and could cause commercial partners, vendors and others that deal with us to defer or decline entering into contracts with us or seek to change existing business relationships with us. In addition, if key employees depart because of uncertainty about their future roles and the potential complexities of any potential divestiture of Victoria’s Secret, our business could be harmed. If we are unable to divest any such businesses, including Victoria’s Secret, we will continue to be subject to the risks of operating such businesses.


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

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

The following table provides our repurchases of our common stock during the third quarter of ~~2019:~~2020:

Period
Total
Number of
Shares
Purchased (a)

Average Price
Paid per
Share (b)
Total Number of Shares Purchased as Part of Publicly Announced Programs (c) Maximum Number of Shares (or Approximate Dollar Value) that May Yet be Purchased Under the Programs (c)
(in thousands) (in thousands)
August 2019 21
$ 21.62
—
$ 78,677
September 2019 7
17.97
—
78,677
October 2019 18
16.87
—
78,677
Total 46
—


Period	Total Number of Shares Purchased (a)	Average Price Paid per Share (b)		Total Number of Shares Purchased as Part of Publicly Announced Programs (c)	Maximum Number of Shares (or Approximate Dollar Value) that May Yet be Purchased Under the Programs (c)
	(in thousands)			(in thousands)
August 2020	8	$	28.20	—	$	78,677
September 2020	41	31.15		—	78,677
October 2020	8	32.00		—	78,677
Total	57			—

_______________


~~(a)~~	The total number of shares repurchased includes shares repurchased in connection with tax payments due upon vesting of employee restricted stock awards and the use of our stock to pay the exercise price on employee stock options.


~~(b)~~	~~The average price paid per share includes any broker commissions.~~


~~(c)~~	~~For additional share repurchase program information, see Note 4, “Earnings Per Share and Shareholders' Equity (Deficit)” included in Item 1. Financial Statements.~~

(a)The total number of shares repurchased includes shares repurchased in connection with tax payments due upon vesting of employee restricted stock awards and the use of our stock to pay the exercise price on employee stock options.

(b)The average price paid per share includes any broker commissions.

(c)For additional share repurchase program information, see Note 5, “Earnings (Loss) Per Share and Shareholders' Equity (Deficit)” included in Item 1. Financial Statements.


~~Item 3.~~	~~DEFAULTS UPON SENIOR SECURITIES~~

Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.


~~Item 4.~~	~~MINE SAFETY DISCLOSURES~~

Item 4. MINE SAFETY DISCLOSURES

Not applicable.


~~Item 5.~~	~~OTHER INFORMATION~~

Item 5. OTHER INFORMATION

None.

Table of Contents

Item 6. EXHIBITS



Exhibits

15						Letter re: Unaudited Interim Financial Information re: Incorporation of Report of Independent Registered Public Accounting Firm.

~~31.1~~22						List of Guarantor Subsidiaries.

31.1						Section 302 Certification of CEO.

31.2						Section 302 Certification of CFO.

32						Section 906 Certification (by CEO and CFO).

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						Inline XBRL Taxonomy Definition Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			L BRANDS, INC.
			(Registrant)
			By:			/s/ STUART B. BURGDOERFER
						Stuart B. Burgdoerfer Executive Vice President and Chief Financial Officer *

Date: December ~~6, 2019~~


*	~~Mr. Burgdoerfer is the principal financial officer and the principal accounting officer and has been duly authorized to sign on behalf of the Registrant.~~

4, 2020

* Mr. Burgdoerfer is the principal financial officer and the principal accounting officer and has been duly authorized to sign on behalf of the Registrant.



	Amount Authorized		Shares Repurchased	Amount Repurchased		Average Stock Price of Shares Repurchased within Program
Repurchase Program	Amount Authorized		Shares Repurchased	Amount Repurchased		Average Stock Price of Shares Repurchased within Program
	(in millions)		(in thousands)	(in millions)
March 2018	$	250	4,852	$	171	$	35.29
September 2017	250		527	25		$	46.98
Total			5,379	$	196



Fiscal Year (a)	(in millions)
2019	$	698
2020	676
2021	630
2022	562
2023	504
Thereafter	$	1,738



	Level 1		Level 2		Level 3		Total
	(in millions)
As of November 2, 2019
Assets:
Cash and Cash Equivalents	$	340	$	—	$	—	$	340
Marketable Equity Securities	1		—		—		1
Foreign Currency Cash Flow Hedges	—		1		—		1
Liabilities:
Foreign Currency Cash Flow Hedges	—		1		—		1
As of February 2, 2019
Assets:
Cash and Cash Equivalents	$	1,413	$	—	$	—	$	1,413
Marketable Equity Securities	11		—		—		11
Foreign Currency Cash Flow Hedges	—		2		—		2
As of November 3, 2018
Assets:
Cash and Cash Equivalents	$	348	$	—	$	—	$	348
Marketable Equity Securities	9		—		—		9
Foreign Currency Cash Flow Hedges	—		3		—		3



	Victoria’s Secret			Bath & Body Works		Victoria’s Secret and Bath & Body Works International			Other			Total
	(in millions)
2019
Third Quarter:
Net Sales	$	1,412		$	1,064	$	134		$	67		$	2,677
Operating Income (Loss) (a)	(122		)	196		(215		)	(10		)	$	(151	)
Year-to-Date:
Net Sales	$	4,529		$	2,996	$	423		$	259		$	8,207
Operating Income (Loss) (a)	(73		)	531		(220		)	(61		)	177
2018
Third Quarter:
Net Sales	$	1,529		$	956	$	134		$	156		$	2,775
Operating Income (Loss) (b)	(36		)	178		(42		)	(46		)	54
Year-to-Date:
Net Sales	$	4,843		$	2,680	$	415		$	447		$	8,385
Operating Income (Loss) (b)	162			470		(56		)	(139		)	437



	November 2, 2019
	L Brands, Inc.			Guarantor Subsidiaries			Non- guarantor Subsidiaries		Eliminations			Consolidated L Brands, Inc.
ASSETS
Current Assets:
Cash and Cash Equivalents	$	—		$	186		$	154	$	—		$	340
Accounts Receivable, Net	—			191			104		—			295
Inventories	—			1,864			168		—			2,032
Other	9			53			197		—			259
Total Current Assets	9			2,294			623		—			2,926
Property and Equipment, Net	—			1,823			748		—			2,571
Operating Lease Assets	—			2,587			543		—			3,130
Goodwill	—			1,318			—		—			1,318
Trade Names	—			411			—		—			411
Net Investments in and Advances to/from Consolidated Affiliates	4,095			20,095			2,835		(27,025		)	—
Deferred Income Taxes	—			9			54		—			63
Other Assets	130			10			700		(629		)	211
Total Assets	$	4,234		$	28,547		$	5,503	$	(27,654	)	$	10,630
LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable	$	1		$	576		$	447	$	—		$	1,024
Accrued Expenses and Other	69			587			324		—			980
Current Debt	—			—			75		—			75
Current Operating Lease Liabilities	—			377			83		—			460
Income Taxes	—			—			4		—			4
Total Current Liabilities	70			1,540			933		—			2,543
Deferred Income Taxes	1			(41		)	286		—			246
Long-term Debt	5,392			615			85		(615		)	5,477
Long-term Operating Lease Liabilities	—			2,579			529		—			3,108
Other Long-term Liabilities	62			397			49		(14		)	494
Total Equity (Deficit)	(1,291		)	23,457			3,621		(27,025		)	(1,238		)
Total Liabilities and Equity (Deficit)	$	4,234		$	28,547		$	5,503	$	(27,654	)	$	10,630



	November 3, 2018
	L Brands, Inc.			Guarantor Subsidiaries			Non- guarantor Subsidiaries		Eliminations			Consolidated L Brands, Inc.
ASSETS
Current Assets:
Cash and Cash Equivalents	$	—		$	167		$	181	$	—		$	348
Accounts Receivable, Net	—			212			109		—			321
Inventories	—			1,700			263		—			1,963
Other	15			165			121		—			301
Total Current Assets	15			2,244			674		—			2,933
Property and Equipment, Net	—			2,019			915		—			2,934
Goodwill	—			1,318			30		—			1,348
Trade Names	—			411			—		—			411
Net Investments in and Advances to/from Consolidated Affiliates	4,396			19,442			2,386		(26,224		)	—
Deferred Income Taxes	—			9			11		—			20
Other Assets	127			14			683		(641		)	183
Total Assets	$	4,538		$	25,457		$	4,699	$	(26,865	)	$	7,829
LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable	$	—		$	585		$	475	$	—		$	1,060
Accrued Expenses and Other	62			583			373		—			1,018
Current Debt	—			—			56		—			56
Income Taxes	—			—			8		—			8
Total Current Liabilities	62			1,168			912		—			2,142
Deferred Income Taxes	(2		)	(43		)	279		—			234
Long-term Debt	5,743			627			71		(627		)	5,814
Other Long-term Liabilities	58			810			97		(14		)	951
Total Equity (Deficit)	(1,323		)	22,895			3,340		(26,224		)	(1,312		)
Total Liabilities and Equity (Deficit)	$	4,538		$	25,457		$	4,699	$	(26,865	)	$	7,829



	Third Quarter 2018
	L Brands, Inc.			Guarantor Subsidiaries			Non- guarantor Subsidiaries			Eliminations			Consolidated L Brands, Inc.
Net Sales	$	—		$	2,644		$	965		$	(834	)	$	2,775
Costs of Goods Sold, Buying and Occupancy	—			(1,786		)	(838		)	777			(1,847		)
Gross Profit	—			858			127			(57		)	928
General, Administrative and Store Operating Expenses	(2		)	(785		)	(127		)	40			(874		)
Operating Income (Loss)	(2		)	73			—			(17		)	54
Interest Expense	(94		)	(19		)	—			17			(96		)
Other Income (Loss)	—			2			(1		)	—			1
Income (Loss) Before Income Taxes	(96		)	56			(1		)	—			(41		)
Provision (Benefit) for Income Taxes	1			(1		)	2			—			2
Equity in Earnings (Loss), Net of Tax	54			(92		)	(103		)	141			—
Net Income (Loss)	$	(43	)	$	(35	)	$	(106	)	$	141		$	(43	)



	Year-to-Date 2018
	L Brands, Inc.			Guarantor Subsidiaries			Non- guarantor Subsidiaries			Eliminations			Consolidated L Brands, Inc.
Net Sales	$	—		$	7,907		$	2,555		$	(2,077	)	$	8,385
Costs of Goods Sold, Buying and Occupancy	—			(5,243		)	(2,157		)	1,946			(5,454		)
Gross Profit	—			2,664			398			(131		)	2,931
General, Administrative and Store Operating Expenses	(8		)	(2,228		)	(354		)	96			(2,494		)
Operating Income (Loss)	(8		)	436			44			(35		)	437
Interest Expense	(288		)	(37		)	(5		)	38			(292		)
Other Income (Loss)	—			8			(7		)	—			1
Income (Loss) Before Income Taxes	(296		)	407			32			3			146
Provision (Benefit) for Income Taxes	(1		)	32			11			—			42
Equity in Earnings (Loss), Net of Tax	399			340			294			(1,033		)	—
Net Income (Loss)	$	104		$	715		$	315		$	(1,030	)	$	104



	Stores Operating at				Stores Operating at
	February 2, 2019	Opened	Closed		November 2, 2019
Victoria’s Secret U.S.	1,098	6	(38	)	1,066
Victoria’s Secret Canada	45	—	—		45
Total Victoria's Secret	1,143	6	(38	)	1,111
Bath & Body Works U.S.	1,619	34	(12	)	1,641
Bath & Body Works Canada	102	1	—		103
Total Bath & Body Works	1,721	35	(12	)	1,744
Victoria's Secret U.K. / Ireland	26	—	—		26
Victoria's Secret Beauty and Accessories	38	9	(5	)	42
Victoria's Secret Greater China	15	6	—		21
Total Victoria's Secret and Bath & Body Works International	79	15	(5	)	89
Total L Brands Stores	2,943	56	(55	)	2,944



	Stores Operating at				Stores Operating at
	February 3, 2018	Opened	Closed		November 3, 2018
Victoria’s Secret U.S.	1,124	1	(7	)	1,118
Victoria’s Secret Canada	46	—	(1	)	45
Total Victoria's Secret	1,170	1	(8	)	1,163
Bath & Body Works U.S.	1,592	47	(17	)	1,622
Bath & Body Works Canada	102	1	—		103
Total Bath & Body Works	1,694	48	(17	)	1,725
Victoria's Secret U.K. / Ireland	24	1	—		25
Victoria's Secret Beauty and Accessories	29	4	(3	)	30
Victoria's Secret Greater China	7	7	—		14
Total Victoria's Secret and Bath & Body Works International	60	12	(3	)	69
Henri Bendel	27	—	(4	)	23
La Senza Canada	119	—	(1	)	118
La Senza U.S.	5	6	—		11
Total L Brands Stores	3,075	67	(33	)	3,109