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Discontinued Operations | 9 Months Ended
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Oct. 30, 2021
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operations | Discontinued Operations On July 9, 2021, the Company announced that its Board of Directors approved the previously announced separation of the Victoria’s Secret business (the "Separation") into an independent, publicly traded company, Victoria's Secret & Co. On August 2, 2021 (the “Distribution Date”), after the New York Stock Exchange ("NYSE") market closing, the Separation was completed. The Separation was achieved through the Company's distribution (the "Distribution") of 100% of the shares of Victoria's Secret & Co. common stock to holders of L Brands, Inc. common stock as of the close of business on the record date of July 22, 2021. The Company's stockholders of record received one share of Victoria’s Secret & Co. common stock for every three shares of the Company's common stock. On August 3, 2021, Victoria’s Secret & Co. became an independent, publicly-traded company trading on the NYSE under the stock symbol "VSCO." The Company retained no ownership interest in Victoria’s Secret & Co. following the Separation. In July 2021, Victoria’s Secret & Co., prior to the Separation and while a subsidiary of the Company, issued $600 million of 4.625% notes due in July 2029 (the "VSCO Notes"). As of July 31, 2021, the initial proceeds were held in escrow for release to Victoria's Secret & Co. upon satisfaction of certain conditions, including completion of the Separation. Additionally, on August 2, 2021, in connection with the Separation, Victoria's Secret & Co. entered into a term loan facility with a credit limit of $400 million and a senior secured asset-based revolving credit facility with a credit limit of $750 million. In connection with the Separation, Victoria's Secret & Co. received net cash proceeds of $384 million from its $400 million borrowing under its credit facilities. The proceeds from the credit facilities and the $592 million net proceeds from the VSCO Notes were used to fund cash payments of $976 million to the Company in connection with the Separation. The Company does not guarantee the VSCO Notes, the Victoria's Secret & Co. term loan facility or the Victoria's Secret & Co. senior secured asset-based revolving credit facility following the Separation. Cash and Cash Equivalents of $282 million held by Victoria's Secret subsidiaries were transferred to Victoria's Secret & Co. on the Distribution Date. Additionally, the Company made payments of $80 million to Victoria's Secret & Co. during the third quarter for costs incurred prior to the Distribution Date pursuant to the terms of the Separation agreements. During the third quarter of 2021, the Company recognized a net reduction to retained earnings of $175 million as a result of the Separation, primarily related to the transfer of certain assets and liabilities associated with its Victoria's Secret business to Victoria's Secret & Co. net of the $976 million of cash payments received from Victoria's Secret & Co. Additionally, the Company reclassified out of accumulated other comprehensive income $8 million of accumulated foreign currency translation adjustments related to the Victoria's Secret business. In connection with the Separation, the Company entered into several agreements with Victoria's Secret & Co. that govern the relationship of the parties following the spin-off, including the Separation and Distribution Agreement, the Transition Services Agreements, the Tax Matters Agreement, the Employee Matters Agreement and the Domestic Transportation Services Agreement. Under the terms of the Transition Services Agreements, the Company will provide to Victoria's Secret & Co. various services or functions, including human resources, payroll and certain logistics functions. Additionally, Victoria's Secret & Co. will provide to the Company various services or functions, including information technology, certain logistics functions, customer marketing and customer call center services. Generally, these services will be performed for a period of up to two years following the Distribution, except for information technology services, which will be provided for a period of up to three years following the Distribution and may be extended for a maximum of two additional one-year periods subject to increased administrative charges. Consideration and costs for the transition services are determined using several billing methodologies as described in the agreements, including customary billing, pass-through billing, percent of sales billing or fixed fee billing. Consideration for transition services provided to Victoria's Secret & Co. are recorded within the 2021 Consolidated Statements of Income based on the nature of the service and as an offset to expenses incurred to provide the services. Costs for transition services provided by Victoria's Secret & Co. are recorded within the 2021 Consolidated Statements of Income based on the nature of the service. During the third quarter of 2021, the Company recognized consideration of $20 million and recognized costs of $24 million pursuant to the Transition Service Agreements. Under the terms of the Domestic Transportation Services Agreement, the Company will continue to provide transportation services for Victoria's Secret & Co. merchandise in the United States and Canada for an initial term of three years following the Distribution, which term will thereafter continuously renew unless and until Victoria’s Secret & Co. or the Company elects to terminate the arrangement upon 18 or 36 months’ prior written notice, respectively. Consideration for the transportation services is determined using customary billing and fixed billing methodologies, which are described in the agreement, and are subject to an administrative charge. During the third quarter of 2021, the Company recognized consideration of $18 million pursuant to the Domestic Transportation Services Agreement. In conjunction with the Separation, the Company has contingent obligations relating to certain lease payments under the current terms of noncancelable leases. For additional information, see Note 13, "Commitments and Contingencies." Financial Information of Discontinued Operations Income (Loss) from Discontinued Operations, Net of Tax in the Consolidated Statements of Income (Loss) reflects the after-tax results of the Victoria's Secret business and Separation-related fees, and does not include any allocation of general corporate overhead expense or interest expense of the Company. The following table summarizes the significant line items included in Income (Loss) from Discontinued Operations, Net of Tax in the Consolidated Statements of Income (Loss) for the third quarter and year-to-date 2021 and 2020:
| Third Quarter |  | Year-to-Date
| 2021 |  | 2020 |  | 2021 |  | 2020
| (in millions)
Net Sales | $ | 25 |  |  | $ | 1,353 |  |  | $ | 3,194 |  |  | $ | 3,313 |
Costs of Goods Sold, Buying and Occupancy | (14) |  |  | (856) |  |  | (1,841) |  |  | (2,643) |
General, Administrative and Store Operating Expenses (a) | (83) |  |  | (352) |  |  | (975) |  |  | (1,098) |
Interest Expense | — |  |  | (1) |  |  | (2) |  |  | (5) |
Other Income (Loss) | — |  |  | 1 |  |  | (1) |  |  | (1) |
Income (Loss) from Discontinued Operations Before Income Taxes | (72) |  |  | 145 |  |  | 375 |  |  | (434) |
Provision (Benefit) for Income Taxes | 17 |  |  | 10 |  |  | 119 |  |  | (110) |
Income (Loss) from Discontinued Operations, Net of Tax | $ | (89) |  |  | $ | 135 |  |  | $ | 256 |  |  | $ | (324) |
_______________ (a)Includes Separation-related expenses of $76 million and $104 million for the third quarter and year-to-date 2021, respectively. Prior to the third quarter of 2021, these costs were reported in the Other category under the Company's previous segment reporting. The information presented as discontinued operations on the Consolidated Balance Sheets includes certain assets and liabilities that were transferred to Victoria’s Secret & Co. pursuant to the Separation agreements, and excludes certain liabilities that were retained by the Company in connection with the Separation. There were no assets or liabilities classified as discontinued operations as of October 30, 2021. The following table summarizes the carrying value of the significant classes of assets and liabilities classified as discontinued operations as of January 30, 2021 and October 31, 2020:
|  |  | January 30, 2021 |  | October 31, 2020
|  |  | (in millions)
Cash and Cash Equivalents |  |  | $ | 335 |  |  | $ | 189 |
Accounts Receivable, Net |  |  | 121 |  |  | 135 |
Inventories |  |  | 701 |  |  | 981 |
Other |  |  | 82 |  |  | 73 |
Current Assets of Discontinued Operations |  |  | 1,239 |  |  | 1,378 |
Property and Equipment, Net |  |  | 1,078 |  |  | 1,167 |
Operating Lease Assets |  |  | 1,590 |  |  | 1,683 |
Trade Names |  |  | 246 |  |  | 246 |
Deferred Income Taxes |  |  | 11 |  |  | 11 |
Other Assets |  |  | 56 |  |  | 57 |
Other Assets of Discontinued Operations |  |  | $ | 2,981 |  |  | $ | 3,164 |
Accounts Payable |  |  | $ | 338 |  |  | $ | 548 |
Accrued Expenses and Other |  |  | 730 |  |  | 608 |
Current Debt |  |  | — |  |  | 11 |
Current Operating Lease Liabilities |  |  | 421 |  |  | 443 |
Income Taxes |  |  | 9 |  |  | 2 |
Current Liabilities of Discontinued Operations |  |  | 1,498 |  |  | 1,612 |
Deferred Income Taxes |  |  | 93 |  |  | 73 |
Long-term Debt |  |  | — |  |  | 87 |
Long-term Operating Lease Liabilities |  |  | 1,553 |  |  | 1,709 |
Other Long-term Liabilities |  |  | 21 |  |  | 24 |
Other Long-term Liabilities of Discontinued Operations |  |  | $ | 1,667 |  |  | $ | 1,893 |
The cash flows related to discontinued operations have not been segregated, and are included in the Consolidated Statements of Cash Flows for all periods presented. The following table summarizes depreciation and other significant operating noncash items, capital expenditures and financing activities of discontinued operations for each period presented:
| Year-to-Date
| 2021 |  | 2020
| (in millions)
Depreciation of Long-Lived Assets | $ | 158 |  |  | $ | 250 |
Share-based Compensation Expense | 15 |  |  | 20 |
Victoria's Secret Asset Impairment Charges | — |  |  | 214 |
Gain from Victoria's Secret Hong Kong Store Closure and Lease Termination | — |  |  | (39) |
Gain Related to Formation of Victoria's Secret U.K. Joint Venture | — |  |  | (30) |
Capital Expenditures | (66) |  |  | (111) |
Net Repayments of Victoria's Secret Foreign Facilities | — |  |  | (57) |

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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