Vera Bradley Designs, Inc
Dec 6, 2011

Vera Bradley Announces Fiscal 2012 Third Quarter Financial Results

FORT WAYNE, Ind., Dec. 6, 2011 (GLOBE NEWSWIRE) -- Vera Bradley, Inc. (Nasdaq:VRA) today announced its financial results for the fiscal 2012 third quarter ended October 29, 2011. The Company reported net revenues of $121.1 million for the third quarter, compared to $91.6 million in the same period of the prior year, an increase of $29.5 million, or 32%. Diluted earnings per share for the quarter were $0.32, an increase of 45% over adjusted diluted earnings per share in the prior year period.

"We are pleased with the strength of our operating results in the third quarter. Our brand and product assortment continue to resonate with consumers resulting in meaningful sales growth across all of our distribution channels," said Michael C. Ray, Vera Bradley's Chief Executive Officer. "Our success is a tribute to the strength of our brand, our distinctive portfolio of products, our talented team and retail partners, and our loyal customers. Looking ahead, we will continue to execute our growth strategies and we remain optimistic about the long term prospects for Vera Bradley."

By segment, Indirect net revenues increased 16% to $69.1 million, with solid performance across all regions driven by strong reception to our product offerings. Direct net revenues increased 63% to $52.0 million, driven by the opening of 13 full-price and four outlet stores since the third quarter of last year, increased traffic in e-commerce business, improved conversion rates in all channels and a 7.4% increase in comparable-store sales.  

Gross profit for the third quarter increased 27% to $66 million resulting in a gross profit margin of 54.2% versus 56.4% in the prior year. The 220 basis point decline in gross margin during the quarter was due primarily to ongoing and effective efforts to manage inventory. This included supply chain process improvements as well as the opportunistic sale of certain retired inventory. These efforts have now aligned inventory with sales growth ahead of schedule. 

Operating income increased 38.7% to $21.5 million, or 17.8% of net revenues, in the third quarter, compared to adjusted operating income of $15.5 million, or 16.9% of net revenues, excluding $15.7 million of stock-based compensation expense related to the restricted-stock awards in the comparable prior-year period.  

On a GAAP basis, net income for the quarter was $13.0 million, or $0.32 per diluted share, compared to $6.0 million, or $0.17 per diluted share, in the third quarter of fiscal 2011.  After adjusting the third quarter of fiscal 2011 for the previously discussed stock-based compensation expense, and income taxes as if the Company had been a "C" Corporation at the beginning of the quarter, at an assumed rate of 40%, adjusted net income for the third quarter of fiscal 2011 was $9.0 million or $0.22 per diluted share on 40.5 million weighted-average diluted shares outstanding.

At the end of the third quarter, cash and cash equivalents were $8.3 million and accounts receivable were $38.6 million. The accounts receivable balance at the end of the third quarter, compared to the end of the same quarter in fiscal 2011, was in line with sales growth during the quarter. During the third quarter, long-term debt declined by $6.0 million to $65.6 million. Inventory at the end of the third quarter was $111 million compared to $84 million in the prior year, in line with the increase in net revenues on a percentage basis. 

Year-to-Date Results

For the thirty-nine weeks ended October 29, 2011, net revenues increased 27% to $326.3 million, from $256.7 million in the comparable prior-year period.  By segment, Indirect revenues increased 13% to $182.3 million, and Direct revenues increased 51% to $144.0 million, with comparable-store sales increasing 12.0%.

Operating income increased 30.4% to $63.5 million, or 19.5% of net revenues, for the thirty-nine weeks, compared to adjusted operating income of $48.7 million, or 19.0% of net revenues, excluding $15.8 million of stock-based compensation expense related to the restricted-stock awards and $6.1 million of compensation expense for bonuses paid to recipients of the restricted-stock awards in the comparable prior-year period. 

On a GAAP basis, net income for the thirty-nine weeks was $37.8 million, or $0.93 per diluted share, compared to $32.0 million, or $0.90 per diluted share a year ago.  After adjusting fiscal 2011 for the previously discussed bonuses paid and stock-based compensation expense, and income taxes as if the Company had been a "C" Corporation at the beginning of the year, at an assumed rate of 40%, adjusted net income for the thirty-nine weeks of fiscal 2011 was $28.5 million or $0.70 per diluted share on 40.5 million weighted-average diluted shares outstanding.

Outlook

For the fourth quarter of fiscal 2012, the Company expects net revenues to be in the range of $125 million to $130 million and diluted earnings per share to be in the range of $0.44 to $0.47, based on diluted weighted-average shares outstanding of 40.5 million.

For fiscal 2012, the Company now expects net revenues to be in the range of $451 million to $456 million and diluted earnings per share to be in the range of $1.37 to $1.40, based on diluted weighted-average shares outstanding of 40.5 million.

Call Information

A conference call to discuss fiscal 2012 third quarter results is scheduled for today, December 6, 2011, at 4:30 p.m. Eastern Time.  A broadcast of the call will be available via Vera Bradley's Investor Relations section of its website, www.verabradley.com.  In addition, a replay of the call will be available shortly after the conclusion of the call and remain available until December 20, 2011.  To access the recording, listeners should dial (877) 870-5176, and enter the access code, 9415340.

About Vera Bradley, Inc.

Vera Bradley infuses color into all aspects of women's lives with vibrant handbags, accessories, luggage, eyewear, travel items and gifts. Founded in 1982 by Barbara Bradley Baekgaard and Patricia R. Miller, the brand inspires women to "be colorful" with designs that reflect their personal style.  Today, you'll find Vera Bradley accessories in 48 retail stores in the U.S., 8 outlet stores, 3,400 specialty retailers and online at verabradley.com.  Vera Bradley's fiscal 2011 sales were $366 million. The company's commitment to breast cancer research continues to expand through the Vera Bradley Foundation for Breast Cancer.  For more information about Vera Bradley (Nasdaq:VRA), visit www.verabradley.com/mediaroom.

Website Information

We routinely post important information for investors on our website www.verabradley.com in the "Investor Relations" section. We intend to use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

Vera Bradley Safe Harbor Statement

Certain statements in this release are "forward-looking statements" made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements reflect the Company's current expectations or beliefs concerning future events and are subject to various risks and uncertainties that may cause actual results to differ materially from those that we expected, including: possible adverse changes in general economic conditions and their impact on consumer confidence and spending; possible inability to predict and respond in a timely manner to changes in consumer demand; possible loss of key management or design associates or inability to attract and retain the talent required for our business; possible inability to maintain and enhance our brand; possible inability to successfully implement our growth strategies or manage our growing business; possible inability to successfully open new stores as planned; and possible inability to sustain levels of comparable-store sales.  For a discussion of these and other risks and uncertainties that could cause actual results to differ materially from those contained in our forward-looking statements, please refer to "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 29, 2011.  We undertake no obligation to publicly update or revise any forward-looking statement. Financial schedules are attached to this release.

Vera Bradley, Inc.
Condensed Consolidated Balance Sheets
($ in thousands)
(unaudited)
    
    
 October 29,
2011
January 29,
2011
October 30,
2010
 (unaudited) (unaudited)
Assets   
Current assets:     
 Cash and cash equivalents  $ 8,342  $ 13,953  $ 5,873
 Accounts receivable, net  38,591  34,300  28,842
 Inventories  111,099  96,717  83,688
 Other current assets  8,651  6,754  5,724
 Deferred income taxes  10,317  8,743  9,105
 Total current assets  177,000  160,467  133,232
       
Property, plant, and equipment, net  47,308  42,984  41,140
Other assets  967  2,588  2,525
 Total assets  $ 225,275  $ 206,039  $ 176,897
       
Liabilities and Shareholders' Equity      
Current liabilities:      
 Accounts payable  $ 18,949  $ 30,012  $ 20,785
 Accrued employment costs  12,515  17,892  13,814
 Other accrued liabilities  14,468  10,551  10,744
 Income taxes payable  --  10,010  --
 Current portion of long-term debt  88  83  82
 Total current liabilities  46,020  68,548  45,425
       
Long-term debt  65,568  66,934  76,978
Deferred income taxes  4,820  3,300  2,501
Other long-term liabilities  5,413  2,935  1,996
 Total liabilities  121,821  141,717  126,900
       
Shareholders' equity:      
 Additional paid-in-capital  73,115  71,923  71,833
 Retained earnings (accumulated deficit)  30,218  (7,601)  (21,836)
 Accumulated other comprehensive income  121  --  --
 Total shareholders' equity  103,454  64,322  49,997
 Total liabilities and shareholders' equity  $ 225,275  $ 206,039  $ 176,897
         
 
 
Vera Bradley, Inc.
Consolidated Statements of Income
($ in thousands, except per share amounts)
(unaudited)
     
       
 Thirteen Weeks EndedThirty-Nine Weeks Ended
 October 29,
2011
October 30,
2010
October 29,
2011
October 30,
2010
     
Net revenues  $ 121,149  $ 91,595  $ 326,328  $ 256,672
Cost of sales  55,471  39,921  144,578  109,362
 Gross profit  65,678  51,674  181,750  147,310
Selling, general, and administrative expenses  45,365  53,239  124,474  125,824
Other income  1,206  1,373  6,229  5,286
 Operating income (loss)  21,519  (192)  63,505  26,772
Interest expense, net  288  584  933  1,227
 Income (loss) before income taxes  21,231  (776)  62,572  25,545
Income tax (benefit) expense  8,269  (6,775)  24,753  (6,418)
 Net income  $ 12,962  $ 5,999  $ 37,819  $ 31,963
         
Basic weighted-average shares outstanding  40,506,670  36,082,298  40,506,670  35,654,464
Diluted weighted-average shares outstanding  40,540,429  36,213,361  40,538,022  35,699,156
Basic net income per share  $ 0.32  $ 0.17  $ 0.93  $ 0.90
Diluted net income per share  0.32  0.17  0.93  0.90
     
 
 
Vera Bradley, Inc.
Consolidated Statements of Cash Flows
($ in thousands)
(unaudited)
     
     
 Thirty-Nine Weeks Ended
Cash flows from operating activitiesOctober 29,
2011
October 30,
2010
Net income  $ 37,819  $ 31,963
Adjustments to reconcile net income to net cash provided by operating activities:    
 Depreciation and amortization of property, plant, and equipment  6,992  6,193
 Provision for doubtful accounts  375  119
 Loss on disposal of property, plant, and equipment  --   278
 Write-off of debt-issuance costs  --   227
 Stock-based compensation  1,116  15,799
 Deferred income taxes  (54)  (6,604)
 Changes in assets and liabilities:    
 Accounts receivable  (4,703)  2,052
 Inventories  (14,382)  (17,153)
 Other assets  (239)  700
 Accounts payable  (11,063)  1,564
 Income taxes payable  (10,010)  -- 
 Accrued and other liabilities  1,018  1,143
Net cash provided by operating activities  6,869  36,281
    
Cash flows from investing activities   
 Purchases of property, plant, and equipment  (11,316)  (7,303)
 Restricted cash on deposit  --   1,500
Net cash used in investing activities  (11,316)  (5,803)
    
Cash flows from financing activities   
 Payments on financial-institution debt  (28,000)  (58,900)
 Borrowings on financial-institution debt  26,700  105,673
 Payments on vendor-financed debt  (61)  (34)
 Payments of debt-issuance costs  --  (1,104)
 Issuance of stock, net of costs  --  56,337
 Repurchase of stock  --  (304)
 Payments of distributions  --  (132,782)
 Other  76  --
Net cash used in financing activities  (1,285)  (31,114)
Effect of exchange rate changes on cash and cash equivalents  121  --
     
Decrease in cash and cash equivalents  $ (5,611)  $ (636)
Cash and cash equivalents, beginning of period  13,953  6,509
Cash and cash equivalents, end of period  $ 8,342  $ 5,873
     
 
 
Vera Bradley, Inc.
Supplemental Information - Consolidated Statements of Income
Reconciliation of Selling, General and Administrative Expense, as reported to Selling, General and
Administrative Expense, as adjusted
($ in thousands)
(unaudited)
     
     
 Thirteen Weeks
Ended
Thirty-Nine Weeks
Ended
 October 30,
2010
October 30,
2010
     
Selling, general, and administrative expenses, as reported  $ 53,239  $ 125,824
Adjustments    
Stock-based compensation expense related to restricted-stock awards  15,703  15,790
Bonus compensation expense related to restricted-stock awards  --   6,132
Selling, general, and administrative expenses, as adjusted  $ 37,536  $ 103,902
     
     
Vera Bradley, Inc.
Supplemental Information - Consolidated Statements of Income
Reconciliation of Operating Income, as reported to Operating Income, as adjusted
($ in thousands)
(unaudited)
     
     
 Thirteen Weeks
Ended
Thirty-Nine Weeks
Ended
 October 30,
2010
October 30,
2010
     
Operating income, as reported  $ (192)  $ 26,772
Adjustments    
Stock-based compensation expense related to restricted-stock awards  15,703  15,790
Bonus compensation expense related to restricted-stock awards  --   6,132
Operating income, as adjusted  $ 15,511  $ 48,694
     
     
Vera Bradley, Inc.
Supplemental Information - Consolidated Statements of Income
Reconciliation of Net Income, as reported to Net Income, as adjusted
($ in thousands, except per share amounts)
(unaudited)
     
     
 Thirteen Weeks
Ended
Thirty-Nine Weeks
Ended
 October 30,
2010
October 30,
2010
     
Net income, as reported  $ 5,999  $ 31,963
Adjustments    
Stock-based compensation expense related to restricted-stock awards  15,703  15,790
Bonus compensation expense related to restricted-stock awards  --   6,132
Tax benefit for transition from "S" Corporation to "C" Corporation  (6,775)  (6,418)
Adjustment to income taxes  (5,971)  (18,987)
Net income, as adjusted  $ 8,956  $ 28,480
     
     
Basic weighted-average shares outstanding  36,082,298  35,654,464
Share count adjustment  4,424,372  4,852,206
Adjusted basic weighted-average shares outstanding*  40,506,670  40,506,670
     
Diluted weighted-average shares outstanding  36,213,361  35,699,156
Share count adjustment  4,327,068  4,838,866
Adjusted diluted weighted-average shares outstanding*  40,540,429  40,538,022
     
Adjusted net income per share:    
Basic  $ 0.22  $ 0.70
Diluted  0.22  0.70
     
     
     
* Adjusted weighted-average shares outstanding for the thirteen weeks and thirty-nine weeks ended October 30, 2010, equal GAAP 
 weighted-average shares outstanding for the thirteen weeks and thirty-nine weeks ended October 29, 2011, respectively.
CONTACT: Investors:

         Vera Bradley

         Paul G. Blair

         (260) 207-5183

         

         ICR, Inc.

         Joseph Teklits

         Jean Fontana

         Jean.fontana@icrinc.com

         (203) 682-8200

         

         Media:

         877-708-VERA (8372)

         Mediacontact@verabradley.com