Company Quick10K Filing
L Brands
Price18.43 EPS1
Shares276 P/E14
MCap5,087 P/FCF-57
Net Debt5,137 EBIT868
TEV10,224 TEV/EBIT12
TTM 2019-11-02, in MM, except price, ratios
10-Q 2020-05-02 Filed 2020-06-03
10-K 2020-02-01 Filed 2020-03-30
10-Q 2019-11-02 Filed 2019-12-06
10-Q 2019-08-03 Filed 2019-09-06
10-Q 2019-05-04 Filed 2019-06-04
10-K 2019-02-02 Filed 2019-03-22
10-Q 2018-11-03 Filed 2018-12-04
10-Q 2018-08-04 Filed 2018-09-07
10-Q 2018-05-05 Filed 2018-06-07
10-K 2018-02-03 Filed 2018-03-23
10-Q 2017-10-28 Filed 2017-12-01
10-Q 2017-07-29 Filed 2017-09-01
10-Q 2017-04-29 Filed 2017-06-02
10-K 2017-01-28 Filed 2017-03-17
10-Q 2016-10-29 Filed 2016-12-02
10-Q 2016-07-30 Filed 2016-09-02
10-Q 2016-04-30 Filed 2016-06-03
10-K 2016-01-30 Filed 2016-03-18
10-Q 2015-10-31 Filed 2015-12-04
10-Q 2015-08-01 Filed 2015-09-04
10-Q 2015-05-02 Filed 2015-06-05
10-K 2015-01-31 Filed 2015-03-20
10-Q 2014-11-01 Filed 2014-12-05
10-Q 2014-08-02 Filed 2014-09-05
10-Q 2014-05-03 Filed 2014-06-06
10-K 2014-02-01 Filed 2014-03-21
10-Q 2013-08-03 Filed 2013-09-06
10-Q 2013-05-04 Filed 2013-06-07
10-K 2013-02-02 Filed 2013-03-22
10-Q 2012-10-27 Filed 2012-11-30
10-Q 2012-07-28 Filed 2012-08-31
10-Q 2012-04-28 Filed 2012-06-01
10-K 2012-01-28 Filed 2012-03-23
10-Q 2011-10-29 Filed 2011-12-02
10-Q 2011-07-30 Filed 2011-08-31
10-Q 2011-04-30 Filed 2011-06-03
10-K 2011-01-29 Filed 2011-03-18
10-Q 2010-10-30 Filed 2010-12-03
10-Q 2010-07-31 Filed 2010-09-07
10-Q 2010-05-01 Filed 2010-06-03
10-K 2010-01-30 Filed 2010-03-26
8-K 2020-07-28 Exit Costs, Other Events, Exhibits
8-K 2020-06-27 Officers
8-K 2020-06-18
8-K 2020-06-18
8-K 2020-06-08
8-K 2020-05-29
8-K 2020-05-20
8-K 2020-05-19
8-K 2020-05-14
8-K 2020-05-04
8-K 2020-04-30
8-K 2020-04-22
8-K 2020-03-27
8-K 2020-03-19
8-K 2020-02-26
8-K 2020-02-20
8-K 2020-02-20
8-K 2020-01-09
8-K 2019-11-20
8-K 2019-08-21
8-K 2019-08-13
8-K 2019-06-20
8-K 2019-06-05
8-K 2019-05-22
8-K 2019-05-16
8-K 2019-04-18
8-K 2019-02-27
8-K 2019-02-07
8-K 2019-01-06
8-K 2018-12-12
8-K 2018-11-19
8-K 2018-11-08
8-K 2018-09-13
8-K 2018-08-22
8-K 2018-08-09
8-K 2018-06-14
8-K 2018-05-31
8-K 2018-05-23
8-K 2018-05-17
8-K 2018-05-10
8-K 2018-03-08
8-K 2018-02-28
8-K 2018-02-08
8-K 2018-01-23
8-K 2018-01-23
8-K 2018-01-04
8-K 2018-01-03

LB 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 ltd-202052ex101.htm
EX-10.2 ltd-202052ex102.htm
EX-10.3 ltd-202052ex103.htm
EX-10.4 ltd-202052ex104.htm
EX-10.5 ltd-202052ex105.htm
EX-15 ltd-202052ex15.htm
EX-22 ltd-202052ex22.htm
EX-31.1 ltd-202052ex311.htm
EX-31.2 ltd-202052ex312.htm
EX-32 ltd-202052ex32.htm

L Brands Earnings 2020-05-02

Balance SheetIncome StatementCash Flow
25191493-12012201420172020
Assets, Equity
4.93.92.81.80.7-0.32012201420172020
Rev, G Profit, Net Income
1.71.20.60.1-0.5-1.02012201420172020
Ops, Inv, Fin

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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 May 2, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 1-8344
 _________________________________
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 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
 
 
 
 
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 May 29, 2020, the number of outstanding shares of the Registrant’s common stock, was 277,829,273 shares.
 



L BRANDS, INC.
TABLE OF CONTENTS
 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 1A. Risk Factors
 
 
 
 
 
 
 
 
 
 
Item 6. Exhibits
 
 
 
*
The Company's fiscal year ends on the Saturday nearest to January 31. As used herein, “first quarter of 2020” and “first quarter of 2019” refer to the thirteen-week periods ended May 2, 2020 and May 4, 2019, respectively.


2


PART I—FINANCIAL INFORMATION
 
Item 1.
FINANCIAL STATEMENTS

L BRANDS, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in millions except per share amounts)
(Unaudited)
 
 
First Quarter
 
2020
 
2019
Net Sales
$
1,654

 
$
2,629

Costs of Goods Sold, Buying and Occupancy
(1,366
)
 
(1,695
)
Gross Profit
288

 
934

General, Administrative and Store Operating Expenses
(606
)
 
(781
)
Operating Income (Loss)
(318
)
 
153

Interest Expense
(97
)
 
(99
)
Other Income
3

 
6

Income (Loss) Before Income Taxes
(412
)
 
60

Provision (Benefit) for Income Taxes
(115
)
 
20

Net Income (Loss)
$
(297
)
 
$
40

Net Income (Loss) Per Basic Share
$
(1.07
)
 
$
0.15

Net Income (Loss) Per Dilutive Share
$
(1.07
)
 
$
0.14

Dividends Per Share
$
0.30

 
$
0.30



L BRANDS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
(Unaudited)
 
First Quarter
 
2020
 
2019
Net Income (Loss)
$
(297
)
 
$
40

Other Comprehensive Income (Loss), Net of Tax:
 
 
 
   Foreign Currency Translation
(6
)
 
(4
)
   Unrealized Gain on Cash Flow Hedges
5

 
2

   Reclassification of Cash Flow Hedges to Earnings

 
(2
)
Total Other Comprehensive Loss, Net of Tax
(1
)
 
(4
)
Total Comprehensive Income (Loss)
$
(298
)
 
$
36




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

3


L BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
(in millions except par value amounts)
 
 
May 2,
2020
 
February 1,
2020
 
May 4,
2019
 
(Unaudited)
 
 
 
(Unaudited)
ASSETS
 
 
 
 
 
Current Assets:
 
 
 
 
 
Cash and Cash Equivalents
$
957

 
$
1,499

 
$
1,146

Accounts Receivable, Net
229

 
306

 
274

Inventories
1,491

 
1,287

 
1,357

Other
172

 
153

 
170

Total Current Assets
2,849

 
3,245

 
2,947

Property and Equipment, Net
2,299

 
2,486

 
2,794

Operating Lease Assets
2,947

 
3,053

 
3,271

Goodwill
628

 
628

 
1,348

Trade Names
411

 
411

 
411

Deferred Income Taxes
84

 
84

 
61

Other Assets
221

 
218

 
166

Total Assets
$
9,439

 
$
10,125

 
$
10,998

LIABILITIES AND EQUITY (DEFICIT)
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
Accounts Payable
$
715

 
$
647

 
$
688

Accrued Expenses and Other
826

 
1,052

 
872

Current Debt
468

 
61

 
72

Current Operating Lease Liabilities
590

 
478

 
443

Income Taxes
84

 
134

 
122

Total Current Liabilities
2,683

 
2,372

 
2,197

Deferred Income Taxes
198

 
219

 
238

Long-term Debt
5,034

 
5,487

 
5,749

Long-term Operating Lease Liabilities
2,945

 
3,052

 
3,234

Other Long-term Liabilities
437

 
490

 
478

Shareholders’ Equity (Deficit):
 
 
 
 
 
Preferred Stock - $1.00 par value; 10 shares authorized; none issued

 

 

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
865

 
847

 
786

Accumulated Other Comprehensive Income
51

 
52

 
55

Retained Earnings (Deficit)
(2,562
)
 
(2,182
)
 
(1,527
)
Less: Treasury Stock, at Average Cost; 8, 8 and 8 shares, respectively
(358
)
 
(358
)
 
(358
)
Total L Brands, Inc. Shareholders’ Equity (Deficit)
(1,861
)
 
(1,499
)
 
(902
)
Noncontrolling Interest
3

 
4

 
4

Total Equity (Accumulated Deficit)
(1,858
)
 
(1,495
)
 
(898
)
Total Liabilities and Equity (Deficit)
$
9,439

 
$
10,125

 
$
10,998


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

4


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

First 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, February 1, 2020
277

 
$
142

 
$
847

 
$
52

 
$
(2,182
)
 
$
(358
)
 
$
4

 
$
(1,495
)
Net Loss

 

 

 

 
(297
)
 

 

 
(297
)
Other Comprehensive Loss

 

 

 
(1
)
 

 

 

 
(1
)
Total Comprehensive Loss

 

 

 
(1
)
 
(297
)
 

 

 
(298
)
Cash Dividends ($0.30 per share)

 

 

 

 
(83
)
 

 

 
(83
)
Share-based Compensation and Other
1

 
1

 
18

 

 

 

 
(1
)
 
18

Balance, May 2, 2020
278

 
$
143

 
$
865

 
$
51

 
$
(2,562
)
 
$
(358
)
 
$
3

 
$
(1,858
)

First 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, 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 Income

 

 

 

 
40

 

 

 
40

Other Comprehensive Loss

 

 

 
(4
)
 

 

 

 
(4
)
Total Comprehensive Income

 

 

 
(4
)
 
40

 

 

 
36

Cash Dividends ($0.30 per share)

 

 

 

 
(83
)
 

 

 
(83
)
Share-based Compensation and Other
1

 
1

 
15

 

 

 

 

 
16

Balance, May 4, 2019
276

 
$
142

 
$
786

 
$
55

 
$
(1,527
)
 
$
(358
)
 
$
4

 
$
(898
)

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

5


L BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
 
Year-to-Date
 
2020
 
2019
Operating Activities:
 
 
 
Net Income (Loss)
$
(297
)
 
$
40

Adjustments to Reconcile Net Income (Loss) to Net Cash Used for Operating Activities:
 
 
 
Long-lived Store Asset Impairment Charges
97

 

Depreciation of Long-lived Assets
139

 
145

Share-based Compensation Expense
20

 
23

Deferred Income Taxes
(25
)
 
12

Gains on Distributions from Easton Investments

 
(2
)
Changes in Assets and Liabilities:
 
 
 
Accounts Receivable
77

 
65

Inventories
(208
)
 
(110
)
Accounts Payable, Accrued Expenses and Other
(155
)
 
(231
)
Income Taxes Payable
(56
)
 
4

Other Assets and Liabilities
66

 
(19
)
Net Cash Used for Operating Activities
(342
)
 
(73
)
Investing Activities:
 
 
 
Capital Expenditures
(55
)
 
(123
)
Other Investing Activities
(5
)
 
17

Net Cash Used for Investing Activities
(60
)
 
(106
)
Financing Activities:
 
 
 
Borrowing from Credit Agreement
950

 

Payment of Credit Agreement
(950
)
 

Borrowings from Foreign Facilities
23

 
21

Repayments of Foreign Facilities
(69
)
 
(14
)
Dividends Paid
(83
)
 
(83
)
Tax Payments related to Share-based Awards
(5
)
 
(9
)
Financing Costs and Other
(4
)
 
(1
)
Net Cash Used for Financing Activities
(138
)
 
(86
)
Effects of Exchange Rate Changes on Cash and Cash Equivalents
(2
)
 
(2
)
Net Decrease in Cash and Cash Equivalents
(542
)
 
(267
)
Cash and Cash Equivalents, Beginning of Period
1,499

 
1,413

Cash and Cash Equivalents, End of Period
$
957

 
$
1,146


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

6


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 and beauty care products. The Company sells its merchandise through company-owned specialty retail stores in the U.S., Canada, 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 and wholesale partners. The Company currently operates the following retail brands:
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 April 22, 2020, the Company received a notice from Sycamore purporting to terminate the Transaction Agreement. Sycamore also filed a lawsuit in the Court of Chancery of the State of Delaware on April 22, 2020 seeking a declaratory judgment that its termination of the Transaction Agreement was valid.  
On May 4, 2020, the Company and Sycamore mutually agreed to terminate the Transaction Agreement. In connection with the termination of the Transaction Agreement, the Company and Sycamore agreed to settle all pending litigation in connection with the transactions contemplated by the Transaction Agreement and mutually release all claims in connection with the transactions contemplated by the Transaction Agreement. The Company did not incur any termination penalties in connection with the termination of 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 better position the Company to evaluate the next steps for the separation of the Victoria's Secret business. The Company determined that Victoria's Secret did not meet the held for sale criteria as of May 2, 2020.
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 in the U.S., China and other countries. 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.
The Company's business operations and financial performance for the first quarter of 2020 were materially impacted by the COVID-19 pandemic. All the Company's stores in North America were closed on March 17th, and only approximately 20 Bath & Body Works stores were opened as of the end of the first quarter. Additionally, operations for Victoria’s Secret Direct were temporarily suspended for approximately one week in late March, while Bath & Body Works Direct remained open for the duration of the first quarter. Since the global COVID-19 crisis began, the Company has taken prudent actions to manage expenses and to maintain its solid cash position and financial flexibility through the pandemic, including:
Furloughing most store associates as of April 5, while continuing to provide healthcare benefits for eligible associates;
Suspending associate merit increases;
Reducing salaries for senior vice presidents and above by 20%;
Suspending cash compensation for the Company's former Chairman and CEO, Leslie H. Wexner, and for all members of the Board of Directors;

7


Reducing capital expenditures forecast from $550 million to approximately $250 million;
Reducing Spring (first and second quarter) inventory receipts versus last year by approximately 45% at Victoria's Secret and PINK, and by approximately 20% at Bath & Body Works;
Suspending the quarterly cash dividend beginning in the second quarter of fiscal 2020;
Suspending store rent payments beginning in April. The Company is in active discussions with its landlords to negotiate with respect to these rent payments and go-forward occupancy costs;
Amending its revolving credit facility to an asset-backed loan revolving credit facility that does not contain a leverage ratio financial maintenance covenant; and
Extending payment terms to vendors.
The Company remains committed to managing inventory, expenses and capital conservatively to preserve cash and maximize liquidity.
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. Based on the Company's evaluation of the CARES Act, it qualifies for certain employer payroll tax credits, which will offset operating expenses. During the first quarter of 2020, the Company recognized $52 million of qualified payroll tax credits that reduced its store operating expenses.
The Company suspended store rent payments beginning in April, and is in active discussions with its landlords to negotiate with respect to these rent payments and go-forward occupancy costs. The Financial Accounting Standards Board (“FASB”) issued guidance in April, which allows COVID-19-related rent concessions to be treated as variable rent. The Company did not recognize any material COVID-19-related rent concessions as of May 2, 2020, as it has not yet finalized negotiations with its landlords.
Fiscal Year
The Company’s fiscal year ends on the Saturday nearest to January 31. As used herein, “first quarter of 2020” and “first quarter of 2019” refer to the thirteen-week periods ended May 2, 2020 and May 4, 2019, 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 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.
Interim Financial Statements
The Consolidated Financial Statements as of and for the periods ended May 2, 2020 and May 4, 2019 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 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.
Due to the impacts of COVID-19 and seasonal variations in the retail industry, the results of operations for the interim period is not necessarily indicative of the results expected for the full fiscal year.
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.

8


The earnings of the Company's wholly owned foreign businesses 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 and U.K. businesses. 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 May 2, 2020.
Concentration of Credit Risk
The Company maintains cash and cash equivalents and derivative contracts with various major financial institutions. The Company monitors the relative credit standing of financial institutions with whom the Company transacts and limits the amount of credit exposure with any one entity. Typically, the Company’s investment portfolio is primarily comprised of U.S. government obligations, U.S. Treasury and AAA-rated money market funds, commercial paper and bank deposits.
The Company also periodically reviews the relative credit standing of franchise, license and wholesale partners and other entities to which the Company grants credit terms in the normal course of business. The Company records an allowance for uncollectable accounts when it becomes probable that the counterparty will be unable to pay.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ from those estimates, and the Company revises its estimates and assumptions as new information becomes available.
2. New Accounting Pronouncements
Credit Losses
In June 2016, the FASB issued 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. The Company adopted the standard in the first quarter of fiscal 2020. The adoption of this 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 fiscal 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 $142 million as of May 2, 2020, $152 million as of February 1, 2020 and $182 million as of May 4, 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.
The Company records deferred revenue when cash payments are received in advance of transfer of control of goods or services. Deferred revenue primarily relates to gift cards, loyalty and private label credit card programs and direct channel shipments, which are all impacted by seasonal and holiday-related sales patterns. Deferred revenue was $348 million as of May 2, 2020, $342 million as of February 1, 2020 and $280 million as of May 4, 2019. The Company recognized $93 million as revenue during the first quarter of 2020 from amounts recorded as deferred revenue at the beginning of the period. As of May 2, 2020, the Company recorded deferred revenue of $336 million within Accrued Expenses and Other, and $12 million within Other Long-term Liabilities on the Consolidated Balance Sheet.

9


The following table provides a disaggregation of Net Sales for the first quarter of 2020 and 2019:
 
First Quarter
 
2020
 
2019
 
(in millions)
Bath & Body Works Stores (a)
$
424

 
$
715

Bath & Body Works Direct
289

 
156

Total Bath & Body Works
713

 
871

Victoria’s Secret Stores (a)
514

 
1,149

Victoria’s Secret Direct
308

 
362

Total Victoria’s Secret
822

 
1,511

Victoria's Secret and Bath & Body Works International (b)
65

 
135

Other (c)
54

 
112

Total Net Sales
$
1,654

 
$
2,629

 _______________
(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.
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 first quarter of 2020 and 2019:
 
First Quarter
 
2020
 
2019
 
(in millions)
Weighted-average Common Shares:
 
 
 
Issued Shares
285

 
284

Treasury Shares
(8
)
 
(8
)
Basic Shares
277

 
276

Effect of Dilutive Options and Restricted Stock (a)

 
2

Diluted Shares
277

 
278

Anti-dilutive Options and Awards (a)
12

 
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 the first quarter of 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 period.
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 May 2, 2020.
The Company did not repurchase any shares during the first quarter of 2020 or 2019.

10


Dividends
Under the authority and declaration of the Board of Directors, the Company paid the following dividends during the first quarter of 2020 and 2019:
 
 
Ordinary Dividends
 
Total Paid
 
 
(per share)
 
(in millions)
2020
 
 
 
 
First Quarter
 
$
0.30

 
$
83

2019
 
 
 
 
First Quarter
 
$
0.30

 
$
83


The Board of Directors suspended the quarterly cash dividend beginning in the second quarter of fiscal 2020 as a proactive measure to strengthen the Company's financial flexibility and manage through the COVID-19 pandemic.
5. Inventories
The following table provides details of inventories as of May 2, 2020February 1, 2020 and May 4, 2019:
 
May 2,
2020
 
February 1,
2020
 
May 4,
2019
 
(in millions)
Finished Goods Merchandise
$
1,347

 
$
1,152

 
$
1,225

Raw Materials and Merchandise Components
144

 
135

 
132

Total Inventories
$
1,491

 
$
1,287

 
$
1,357


Inventories are principally valued at the lower of cost, on a weighted-average cost basis, or net realizable value.
6. Property and Equipment, Net
The following table provides details of property and equipment, net as of May 2, 2020February 1, 2020 and May 4, 2019:
 
May 2,
2020
 
February 1,
2020
 
May 4,
2019
 
(in millions)
Property and Equipment, at Cost
$
6,177

 
$
6,613

 
$
6,744

Accumulated Depreciation and Amortization
(3,878
)
 
(4,127
)
 
(3,950
)
Property and Equipment, Net
$
2,299

 
$
2,486

 
$
2,794



Depreciation expense was $139 million and $145 million for the first quarter of 2020 and 2019, respectively.
The Company remains committed to taking the 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 to evaluate the next steps for the separation of the Victoria's Secret business. A component of the profit improvement plan includes a significant rationalization of the Victoria’s Secret company-owned store footprint. The Company estimates that it will close approximately 250 stores in North America in 2020. Given the closures as well as the negative operating results of certain Victoria's Secret stores, the Company recorded long-lived store asset impairment charges of $97 million within the Victoria's Secret segment in the first quarter of 2020. Long-lived store asset impairment charges are included in Costs of Goods Sold, Buying & Occupancy in the 2020 Consolidated Statement of Loss.
7. 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 $120 million as of May 2, 2020, $118 million as of February 1, 2020 and $94 million as of May 4, 2019, are recorded in Other Assets on the Consolidated Balance Sheets.
Included in the Company’s Easton investments are equity interests in Easton Town Center, LLC (“ETC”) and Easton Gateway, LLC (“EG”), entities that own and develop commercial entertainment and shopping centers. The Company’s investments in ETC and EG are accounted for using the equity method of accounting. The Company has a majority financial interest in ETC and EG, but another unaffiliated member manages them, and certain significant decisions regarding ETC and EG require the consent of unaffiliated members in addition to the Company.

11


8. Income Taxes
We have historically calculated the provision for income taxes on the current estimate of the annual effective tax rate and adjusted as necessary for quarterly events. Due to the impacts of the COVID-19 pandemic, the income tax expense for the thirteen weeks ended May 2, 2020 was computed on a year-to-date effective tax rate.
For the first quarter of 2020, the Company’s effective tax rate was 28.0% compared to 33.6% in the first quarter of 2019. The first quarter of 2020 rate was higher than the Company's combined estimated federal and state statutory rate primarily due to the resolution of certain tax matters, which resulted in a $50 million tax benefit, offset by losses related to certain foreign subsidiaries, which generate no tax benefit. The first quarter of 2019 rate was higher than the Company's combined estimated federal and state statutory rate primarily due to the recognition of tax expense on share-based awards that vested in the quarter.
Income taxes paid were $9 million and $12 million for the first quarter of 2020 and 2019, respectively.
Uncertain Tax Positions
The Company had unrecognized tax benefits of $88 million as of February 1, 2020, of which $81 million, if recognized, would reduce the effective income tax rate. Through May 2, 2020, the Company had a net decrease to gross unrecognized tax benefits of $41 million, primarily due to the resolution of certain tax matters. The changes to the unrecognized tax benefits resulted in a $40 million benefit to the Company’s Provision for Income Taxes in the first quarter of 2020.
Of the total unrecognized tax benefits as of May 2, 2020, it is reasonably possible that $25 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.

12


9. Long-term Debt and Borrowing Facilities
The following table provides the Company’s outstanding debt balance, net of unamortized debt issuance costs and discounts, as of May 2, 2020February 1, 2020 and May 4, 2019:
 
May 2,
2020
 
February 1,
2020
 
May 4,
2019
 
(in millions)
Senior Debt with Subsidiary Guarantee
 
 
 
 
 
$1 billion, 6.875% Fixed Interest Rate Notes due November 2035 (“2035 Notes”)
$
991


$
991


$
990

$860 million, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”)
858


858


952

$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

 
496

$500 million, 7.50% Fixed Interest Rate Notes due June 2029 ("2029 Notes")
487

 
487

 

$450 million, 6.625% Fixed Interest Rate Notes due April 2021 (“2021 Notes”)
450

 
450

 
777

$297 million, 6.694% Fixed Interest Rate Notes due January 2027 (“2027 Notes”)
276

 
276

 
274

$338 million, 7.00% Fixed Interest Rate Notes due May 2020 (“2020 Notes”)

 

 
338

Secured Foreign Facilities
107

 
103

 
91

Total Senior Debt with Subsidiary Guarantee
$
4,856


$
4,852


$
5,109

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


298


297

Unsecured Foreign Facilities


50


67

Total Senior Debt
$
646


$
696


$
712

Total
$
5,502


$
5,548


$
5,821

Current Debt
(468
)

(61
)

(72
)
Total Long-term Debt, Net of Current Portion
$
5,034


$
5,487


$
5,749


Issuance of Notes
In June 2019, the Company issued $500 million of 7.50% notes due in June 2029. The obligation to pay principal and interest on these notes is jointly and severally guaranteed on a full and unconditional basis by certain of the Company's 100% owned subsidiaries (the “Guarantors”). The proceeds from the issuance were $486 million, which were net of discounts and issuance costs of $14 million. The discounts and issuance costs are being amortized through the maturity date and are included within Long-term Debt on the May 2, 2020 and February 1, 2020 Consolidated Balance Sheets.
Repurchases of Notes
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 Company recognized a pre-tax loss on extinguishment of debt of $40 million (after-tax loss of $30 million), which includes redemption fees and the write-offs of unamortized issuance costs.
Revolving Credit Facility
The Company, the Guarantors and certain of the Company's 100% owned Canadian subsidiaries guarantee and pledge collateral to secure a revolving credit facility ("Credit Agreement"). In April 2020, the Company entered into an amendment and restatement (“Amendment”) of the Credit Agreement to convert the Company’s credit facility into an asset-backed revolving credit facility (“ABL Facility”). The Amendment maintains the aggregate commitments at $1 billion, and maintains the expiration date in August of 2024. The ABL Facility allows borrowings and letters of credit in U.S. dollars or Canadian dollars.
Availability under the 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 aggregate

13


commitment and (ii) the borrowing base, 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 our consolidated cash balance exceeds $350 million, the Company will be required to prepay outstanding amounts under the ABL Facility to the extent of such excess. As of May 2, 2020, the Company was unable to draw upon the ABL Facility as its consolidated cash balance exceeded $350 million.
As of May 2, 2020, the ABL Facility fees related to committed and unutilized amounts were 0.30% per annum, and the fees related to outstanding letters of credit were 1.75% per annum. In addition, the interest rate on outstanding U.S. dollar borrowings was the London Interbank Offered Rate plus 1.75% per annum. The interest rate on outstanding Canadian dollar-denominated borrowings was the Canadian Dollar Offered Rate plus 1.75% per annum. 
The ABL Facility requires the Company to maintain a fixed charge coverage ratio of not less than 1.00 to 1.00 during an event of default or any period commencing on any day when specified excess availability is less than the greater of (1) $100 million or (2) 15% of the maximum borrowing amount. As of May 2, 2020, the Company was not required to maintain this ratio.
In March 2020, in 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 revolving facility, which was prepaid upon the completion of the Amendment. As of May 2, 2020, there were no borrowings outstanding under the ABL Facility.
The ABL Facility supports the Company’s letter of credit program. The Company had $28 million of outstanding letters of credit as of May 2, 2020 that reduced its availability under the ABL Facility.
Foreign Facilities
Certain of the Company's Greater China subsidiaries utilize revolving and term loan bank facilities to support their operations ("Foreign Facilities"). The Foreign Facilities allow borrowings in U.S. dollars and Chinese Yuan, 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, the Guarantors and certain of the Company's 100% owned Canadian subsidiaries ("Secured Foreign Facilities"), and certain of these facilities are guaranteed by the Company only ("Unsecured Foreign Facilities").
The Secured Foreign Facilities have availability totaling $150 million. During the first quarter of 2020, the Company borrowed $10 million and made payments of $6 million under the Secured Foreign Facilities. As of May 2, 2020, there were borrowings of $107 million outstanding under the Secured Foreign Facilities, of which $18 million is included within Current Debt on the Consolidated Balance Sheet. Borrowings on the Secured Foreign Facility mature between June 2020 and August 2024. During the first quarter of 2020, the Company agreed to cash collateralize the Secured Foreign Facilities but had not yet put the collateral in place as of May 2, 2020. The Secured Foreign Facilities will be required to be collateralized for the total lender commitments, net of certain paydowns, and, as such, reduces over time.
The Unsecured Foreign Facilities have availability totaling $75 million. During the first quarter of 2020, the Company borrowed $13 million and made payments of $63 million under the Unsecured Foreign Facilities. As of May 2, 2020, there were no borrowings outstanding under the Unsecured Foreign Facilities. Subsequent to May 2, 2020, the Company terminated the Unsecured Foreign Facilities.
10. Fair Value Measurements
Cash and Cash Equivalents include cash on hand, demand deposits with financial institutions and highly liquid investments with original maturities of less than 90 days. The Company's Cash and Cash Equivalents are considered Level 1 fair value measurements as they are valued using unadjusted quoted prices in active markets for identical assets.
The following table provides a summary of the principal value and estimated fair value of outstanding publicly traded debt as of May 2, 2020February 1, 2020 and May 4, 2019:
 
May 2,
2020
 
February 1,
2020
 
May 4,
2019
 
(in millions)
Principal Value
$
5,458

 
$
5,458

 
$
5,722

Fair Value, Estimated (a)
4,151

 
5,555

 
5,486


  _______________
(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 approximate fair value because of their short maturity.

14


11. Comprehensive Income
The following table provides the rollforward of accumulated other comprehensive income for the first quarter of 2020:
 
Foreign Currency Translation
 
Cash Flow Hedges
 
Accumulated Other Comprehensive Income
 
(in millions)
Balance as of February 1, 2020
$
52

 
$

 
$
52

Other Comprehensive Income (Loss) Before Reclassifications
(6
)
 
6

 

Amounts Reclassified from Accumulated Other Comprehensive Income

 

 

Tax Effect

 
(1
)
 
(1
)
Current-period Other Comprehensive Income (Loss)
(6
)
 
5

 
(1
)
Balance as of May 2, 2020
$
46

 
$
5

 
$
51


The following table provides the rollforward of accumulated other comprehensive income for the first quarter of 2019:
 
Foreign Currency Translation
 
Cash Flow Hedges
 
Accumulated Other Comprehensive Income
 
(in millions)
Balance as of February 2, 2019
$
57

 
$
2

 
$
59

Other Comprehensive Income (Loss) Before Reclassifications
(4
)
 
2

 
(2
)
Amounts Reclassified from Accumulated Other Comprehensive Income

 
(2
)
 
(2
)
Tax Effect

 

 

Current-period Other Comprehensive Income (Loss)
(4
)
 

 
(4
)
Balance as of May 4, 2019
$
53

 
$
2

 
$
55



12. 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 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 Company's motion to dismiss the consolidated amended complaint is now fully briefed and pending before the court.  The Company views this lawsuit as meritless and intends to defend against this lawsuit vigorously. 
On February 19, 2020, a plaintiff shareholder filed a complaint 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 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 our quarterly dividend prior to the announced reduction of the dividend in November 2018. The Company intends to seek dismissal of the lawsuit.
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 defendants certain current and 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

15


policies relating to workplace conduct.  The Company was named as nominal defendant only, and there are no claims asserted against it.  The Company is currently evaluating potential options for responding to the lawsuit.
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 $36 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 of $5 million was recorded for these obligations. During 2019, additional reserves of $35 million were recorded related to these obligations. As of May 2, 2020, the Company has recorded reserves of $37 million related to these and certain other obligations related to the La Senza business. As of May 2, 2020, reserves of $6 million are included within Accrued Expenses and Other on the Consolidated Balance Sheet and the remaining reserves are included within Other Long-term Liabilities.
Other
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 $17 million as of May 2, 2020 and February 1, 2020, and $10 million as of May 4, 2019 related to these guarantee obligations. This liability is included in Current Operating Lease Liabilities on the May 2, 2020 and February 1, 2020 Consolidated Balance Sheets, and in Long-term Operating Lease Liabilities on the May 4, 2019 Consolidated Balance Sheet.
13. 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 $21 million for the first quarter of 2020 and $19 million for the first quarter of 2019.
The non-qualified plan is an unfunded plan, which provides benefits beyond the Internal Revenue Code limits for qualified defined contribution plans. The plan permits participating associates to elect contributions up to a maximum percentage of eligible compensation. The Company matches associate contributions according to a predetermined formula and contributes additional amounts based on a percentage of the associates’ eligible compensation and years of service. The plan also permits participating associates to defer additional compensation up to a maximum amount, which the Company does not match. Associates’ accounts are credited with interest using a fixed rate determined by the Company and reviewed by the Compensation Committee of the Board of Directors prior to the beginning of each year. Associate contributions and the related interest vest immediately. Company contributions, along with related interest, are subject to vesting based on years of service. Associates may elect in-service distributions for the unmatched additional deferred compensation component only. The remaining vested portion of associates’ accounts in the plan will be distributed upon termination of employment in either a lump sum or in annual installments over a specified period of up to 10 years. Total expense recognized related to the non-qualified plan was $6 million for both the first quarter of 2020 and 2019.
14. Segment Information
The Company has three reportable segments: Bath & Body Works, Victoria's Secret and Victoria's Secret and Bath & Body Works International.
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.

16


The Victoria’s Secret segment sells women’s intimate and other apparel, personal care and beauty products under the Victoria’s Secret and PINK brand names. Victoria’s Secret merchandise is sold online and through retail stores located in the U.S. and Canada.
The Victoria's Secret and Bath & Body Works International segment includes the Victoria's Secret and Bath & Body Works company-owned and partner-operated stores located outside of the U.S. and Canada, as well as the online business in Greater China. This segment includes the following:
Victoria's Secret International, comprised of company-owned stores in the U.K., Ireland and Greater China, as well as stores operated by partners under franchise and license arrangements;
Victoria's Secret Beauty and Accessories, comprised of company-owned stores in Greater China, as well as stores operated by partners under franchise, license and wholesale arrangements, which feature Victoria's Secret branded beauty and accessories products in travel retail and other locations; and
Bath & Body Works International, comprised of 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, and Corporate functions, including non-core real estate, equity investments and other governance functions such as treasury and tax.
The following table provides the Company’s segment information for the first quarter of 2020 and 2019:
 
Bath & Body
Works
 
Victoria’s
Secret
 
Victoria’s Secret
and
Bath &
Body Works
International
 
Other
 
Total
 
(in millions)
2020
 
 
 
 
 
 
 
 
 
First Quarter:
 
 
 
 
 
 
 
 
 
Net Sales
$
713

 
$
822

 
$
65

 
$
54

 
$
1,654

Operating Income (Loss) (a)
69

 
(300
)
 
(35
)
 
(52
)
 
(318
)
2019
 
 
 
 
 
 
 
 
 
First Quarter:
 
 
 
 
 
 
 
 
 
Net Sales
$
871

 
$
1,511

 
$
135

 
$
112

 
$
2,629

Operating Income (Loss)
155

 
33

 
(4
)
 
(31
)
 
153


 _______________
(a)
Victoria's Secret includes long-lived store asset impairment charges of $97 million. For additional information, see Note 6, “Property and Equipment, Net."
The Company’s international net sales include sales from company-owned stores, royalty revenue from franchise and license arrangements, wholesale revenues and direct sales shipped internationally. Certain of these sales are subject to the impact of fluctuations in foreign currency. The Company’s international net sales totaled $179 million and $349 million for the first quarter of 2020 and 2019, respectively.
15. Subsequent Events
Victoria's Secret Transaction Agreement
On May 4, 2020, the Company and Sycamore mutually agreed to terminate the Transaction Agreement. In connection with the termination of the Transaction Agreement, the Company and Sycamore a