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Table of Contents


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: 001-34918
 
___________________________ 
https://cdn.kscope.io/616a170874eee211958e24c886907976-vra-20200502_g1.jpg
VERA BRADLEY, INC.
(Exact name of registrant as specified in its charter)
 ___________________________ 
 
Indiana 27-2935063
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
12420 Stonebridge Road,
Roanoke, Indiana
 46783
(Address of principal executive offices) (Zip Code)
(877) 708-8372
(Registrant’s telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
 ___________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of each exchange on which registered
Common Stock, without par valueVRANASDAQ Global Select Market
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  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ¨  Accelerated filer x
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  x
The registrant had 33,400,064 shares of its common stock outstanding as of June 3, 2020.



Table of Contents
TABLE OF CONTENTS
 
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.

2

Table of Contents
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical or current fact included in this report are forward-looking statements. Forward-looking statements refer to our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies, future performance, and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “might,” “will,” “should,” “can have,” and “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected earnings, revenues, costs, expenditures, cash flows, growth rates, and financial results, our plans and objectives for future operations, growth, initiatives, or strategies, or the expected outcome or impact of pending or threatened litigation are forward-looking statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:
public health pandemics, including the continued outbreak of the novel coronavirus (COVID-19) and the measures taken by governmental authorities and other actors to address it, which may precipitate or exacerbate other risks and/or uncertainties;
civil unrest and its impact on consumer behavior and potential damage or closures to our locations;
possible inability to successfully implement our long-term strategic plan, including our Vision 20/20 initiatives;
possible declines in our comparable sales;
possible inability to maintain and enhance our brand;
possible failure of our multi-channel distribution model;
possible adverse changes in general economic conditions and their impact on consumer confidence and consumer spending, including as may be related to the continued outbreak of COVID-19;
possible inability to predict and respond in a timely manner to changes in consumer demand;
possible inability to successfully open new stores and/or operate current stores as planned;
possible loss of key management or design associates or inability to attract and retain the talent required for our business;
possible data security or privacy breaches or disruptions in our computer systems or website;
possible new or increased tariffs on our products that could lead to increased product costs and lower profit margins;
possible failure of Pura Vida acquisition benefits to materialize as expected, including the possibility that the business may not perform as anticipated; and
possible inability to successfully implement integration strategies related to the Pura Vida business.
We derive many of our forward-looking statements from our operating plans and forecasts, which are based upon detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.
For a discussion of 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 Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 1, 2020.
We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you. Furthermore, the forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Vera Bradley, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
May 2,
2020
February 1,
2020
Assets
Current assets:
Cash and cash equivalents$82,286  $49,917  
Short-term investments499  8,977  
Accounts receivable, net20,559  24,290  
Inventories132,855  123,606  
Income taxes receivable10,913  1,043  
Prepaid expenses and other current assets14,610  10,956  
Total current assets261,722  218,789  
Operating right-of-use assets106,430  114,790  
Property, plant, and equipment, net69,669  73,027  
Intangible assets, net53,865  56,305  
Goodwill44,254  44,254  
Long-term investments2,271  14,912  
Deferred income taxes6,919  7,656  
Other assets6,267  5,328  
Total assets$551,397  $535,061  
Liabilities, Redeemable Noncontrolling Interest, and Shareholders’ Equity
Current liabilities:
Accounts payable$23,735  $20,235  
Accrued employment costs5,660  11,412  
Short-term operating lease liabilities27,048  21,347  
Earn-out liability  18,448  
Other accrued liabilities12,644  13,850  
Income taxes payable90  2,113  
Total current liabilities69,177  87,405  
Long-term operating lease liabilities107,699  113,775  
Long-term debt60,000    
Other long-term liabilities89  62  
Total liabilities236,965  201,242  
Commitments and contingencies
Redeemable noncontrolling interest38,858  30,049  
Shareholders’ equity:
Preferred stock; 5,000 shares authorized, no shares issued or outstanding
    
Common stock, without par value; 200,000 shares authorized, 41,792 and 41,515 shares issued and 33,399 and 33,503 shares outstanding, respectively
    
Additional paid-in-capital99,879  100,357  
Retained earnings282,772  307,414  
Accumulated other comprehensive (loss) income(17) 158  
Treasury stock(107,060) (104,159) 
Total shareholders’ equity of Vera Bradley, Inc.275,574  303,770  
Total liabilities, redeemable noncontrolling interest, and shareholders’ equity$551,397  $535,061  

The accompanying notes are an integral part of these financial statements.
4

Table of Contents
Vera Bradley, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
 
 Thirteen Weeks Ended
 May 2,
2020
May 4,
2019
Net revenues$69,284  $91,003  
Cost of sales35,096  40,535  
Gross profit34,188  50,468  
Selling, general, and administrative expenses59,782  54,297  
Other income20  184  
Operating loss(25,574) (3,645) 
Interest expense (income), net72  (447) 
Loss before income taxes(25,646) (3,198) 
Income tax benefit(10,109) (793) 
Net loss(15,537) (2,405) 
Less: Net loss attributable to redeemable noncontrolling interest(200)   
Net loss attributable to Vera Bradley, Inc.$(15,337) $(2,405) 
Basic weighted-average shares outstanding33,330  34,228  
Diluted weighted-average shares outstanding33,330  34,228  
Basic net loss per share available to Vera Bradley, Inc. common shareholders$(0.66) $(0.07) 
Diluted net loss per share available to Vera Bradley, Inc. common shareholders$(0.66) $(0.07) 
Reconciliation of net loss available to Vera Bradley, Inc. common shareholders
Net loss attributable to Vera Bradley, Inc.$(15,337) $(2,405) 
Excess portion of redeemable noncontrolling interest redemption value adjustment(6,800)   
Net loss available to Vera Bradley, Inc. common shareholders$(22,137) $(2,405) 
The accompanying notes are an integral part of these financial statements.
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Vera Bradley, Inc.
Condensed Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
 
 Thirteen Weeks Ended
 May 2,
2020
May 4,
2019
Net loss$(15,537) $(2,405) 
Unrealized (loss) gain on available-for-sale debt investments(185) 132  
Cumulative translation adjustment10  1  
Comprehensive loss, net of tax(15,712) (2,272) 
Less: Comprehensive loss attributable to redeemable noncontrolling interest(200)   
Comprehensive loss attributable to Vera Bradley, Inc.$(15,512) $(2,272) 
The accompanying notes are an integral part of these financial statements.
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Vera Bradley, Inc.
Condensed Consolidated Statements of Shareholders’ Equity
(in thousands, except share data)
(unaudited)
 Number of Shares 
 Common
Stock
Treasury
Stock
Additional
Paid-in
Capital
Retained EarningsAccumulated
Other
Comprehensive (Loss) Income
Treasury
Stock
Total Permanent
Equity
Balance at February 1, 202033,503,249  8,011,372  $100,357  $307,414  $158  $(104,159) $303,770  
Net loss attributable to Vera Bradley, Inc.—  —  —  (15,337) —  —  (15,337) 
Translation adjustments—  —  —  —  10  —  10  
Unrealized loss on available-for-sale debt investments—  —  —  —  (185) —  (185) 
Restricted shares vested, net of repurchase for taxes277,687  —  (537) —  —  —  (537) 
Stock-based compensation—  —  59  —  —  —  59  
Treasury stock purchased(381,835) 381,835  —  —  —  (2,901) (2,901) 
Redeemable noncontrolling interest redemption value adjustment—  —  —  (9,305) —  —  (9,305) 
Balance at May 2, 202033,399,101  8,393,207  $99,879  $282,772  $(17) $(107,060) $275,574  

Balance at February 2, 201934,347,420  6,935,623  $95,572  $291,994  $(24) $(92,839) $294,703  
Net loss—  —  —  (2,405) —  —  (2,405) 
Translation adjustments—  —  —  —  1  —  1  
Unrealized gain on available-for-sale debt investments—  —  —  —  132  —  132  
Restricted shares vested, net of repurchase for taxes183,346  —  (791) —  —  —  (791) 
Stock-based compensation—  —  1,238  —  —  —  1,238  
Treasury stock purchased(284,088) 284,088  —  —  —  (2,908) (2,908) 
Cumulative adjustment for ASC 842 adoption—  —  —  (196) —  —  (196) 
Balance at May 4, 201934,246,678  7,219,711  $96,019  $289,393  $109  $(95,747) $289,774  

The accompanying notes are an integral part of these financial statements.
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Vera Bradley, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 Thirteen Weeks Ended
 May 2,
2020
May 4,
2019
Cash flows from operating activities
Net loss$(15,537) $(2,405) 
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property, plant, and equipment4,353  4,170  
Amortization of operating right-of-use assets5,563  5,471  
Impairment charges 3,806    
Amortization of intangible assets2,440    
Provision for doubtful accounts497  38  
Stock-based compensation59  1,238  
Deferred income taxes737  102  
Loss on investments20    
Adjustment of earn-out liability229    
Other non-cash (gain) charges, net(23) 11  
Changes in assets and liabilities:
Accounts receivable2,241  (1,934) 
Inventories(9,249) 1,488  
Prepaid expenses and other assets(4,593) 3,427  
Accounts payable3,780  1,273  
Income taxes (11,893) (3,773) 
Operating lease liabilities, net(384) (8,926) 
Accrued and other liabilities(6,792) (5,395) 
Net cash used in operating activities(24,746) (5,215) 
Cash flows from investing activities
Purchases of property, plant, and equipment(2,238) (3,421) 
Purchases of investments(851) (9,615) 
Proceeds from maturities and sales of investments21,788  8,403  
Cash received for business acquisition993    
Net cash provided by (used in) investing activities19,692  (4,633) 
Cash flows from financing activities
Tax withholdings for equity compensation(537) (791) 
Repurchase of common stock(3,077) (3,055) 
Distributions to redeemable noncontrolling interest(296)   
Borrowings under asset-based revolving credit agreement60,000    
Payment of contingent consideration for business acquisition(18,677)   
Net cash provided by (used in) financing activities37,413  (3,846) 
Effect of exchange rate changes on cash and cash equivalents10  1  
Net increase (decrease) in cash and cash equivalents32,369  (13,693) 
Cash and cash equivalents, beginning of period49,917  113,493  
Cash and cash equivalents, end of period$82,286  $99,800  
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Vera Bradley, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(continued)
(unaudited)
 Thirteen Weeks Ended
 May 2,
2020
May 4,
2019
Supplemental disclosure of cash flow information
Cash paid for income taxes, net$1,045  $2,878  
Supplemental disclosure of non-cash activity
Non-cash operating, investing, and financing activities
Repurchase of common stock
Expenditures incurred but not yet paid as of May 2, 2020 and May 4, 2019$  $50  
Expenditures incurred but not yet paid as of February 1, 2020 and February 2, 2019$176  $197  
Purchases of property, plant, and equipment
Expenditures incurred but not yet paid as of May 2, 2020 and May 4, 2019$316  $470  
Expenditures incurred but not yet paid as of February 1, 2020 and February 2, 2019$559  $1,065  
Refer to Note 3 herein for supplemental cash flow information regarding the Company’s leases.
The accompanying notes are an integral part of these financial statements.
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)

1.Description of the Company and Basis of Presentation
The term “Company” refers to Vera Bradley, Inc. and its wholly and majority owned subsidiaries, except where the context requires otherwise or where otherwise indicated.
Vera Bradley is a leading designer of women’s handbags, luggage and travel items, fashion and home accessories, and unique gifts. Founded in 1982 by friends Barbara Bradley Baekgaard and Patricia R. Miller, the brand’s innovative designs, iconic patterns, and brilliant colors continue to inspire and connect women. Vera Bradley offers a unique, multi-channel sales model, as well as a focus on service and a high level of customer engagement.
In July 2019, Vera Bradley, Inc. acquired a 75% interest in Creative Genius, Inc., which also operates under the name Pura Vida Bracelets (“Pura Vida”). Pura Vida, based in La Jolla, California, is a rapidly growing, digitally native lifestyle brand that we believe deeply resonates with its loyal consumer following. The Pura Vida brand has a differentiated and expanding offering of bracelets, jewelry, and other lifestyle accessories.
Beginning in the second quarter of fiscal 2020, the Company has included an additional segment for Pura Vida due to its acquisition. As a result, the Company now has three reportable segments: Vera Bradley Direct (“VB Direct”), Vera Bradley Indirect (“VB Indirect”), and Pura Vida.
The VB Direct business consists of sales of Vera Bradley products through Vera Bradley full-line and factory outlet stores in the United States; verabradley.com; the Vera Bradley online outlet site; and the Vera Bradley annual outlet sale in Fort Wayne, Indiana. As of May 2, 2020, the Company operated 83 full-line stores and 63 factory outlet stores. In light of the COVID-19 pandemic, the Company cancelled its 2020 annual outlet sale. The 2021 annual outlet sale is planned for April 2021.
The VB Indirect business consists of sales of Vera Bradley products to approximately 2,100 specialty retail locations, substantially all of which are located in the United States, as well as department stores, national accounts, third-party e-commerce sites, third-party inventory liquidators, and royalties recognized through licensing agreements related to the Vera Bradley brand.
The Pura Vida segment represents revenues generated through the Pura Vida websites, www.puravidabracelets.com, www.puravidabracelets.eu, and www.puravidabracelets.ca, and through the distribution of Pura Vida-branded products to wholesale retailers, substantially all of which are located in the United States.
The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as permitted by such rules and regulations. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2020, filed with the SEC.
The interim financial statements reflect all adjustments that are, in the opinion of management, necessary to present fairly the results for the interim periods presented. All such adjustments are of a normal, recurring nature. The results of operations for the thirteen weeks ended May 2, 2020, are not necessarily indicative of the results to be expected for the full fiscal year. Further, the COVID-19 pandemic had a material impact on the Company's current-year period results.
The COVID-19 pandemic resulted in travel restrictions both domestically and internationally, community and self quarantines, certain factory closures or reduced operations, as well as mall closures or reduced mall operating hours during the first quarter of fiscal 2021. Although the Vera Bradley and Pura Vida e-commerce operations remained open, the aforementioned items had a material adverse impact on overall consumer demand, traffic, and sales. Furthermore, the pandemic materially impacted the Company's first quarter operating results. The Company cannot currently predict the extent that COVID-19 will impact its future liquidity, operating results, and financial condition, but it could have a significant adverse effect on these metrics. Beginning in mid-March 2020, the Company began taking several actions to navigate the COVID-19 pandemic, protect its financial position, maximize its liquidity, and to position the Company for a strong reopening and future. These actions included:
Temporarily closing all Vera Bradley store locations on March 19;
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Temporarily furloughing approximately 80% of its workforce mid-quarter;
Temporarily reducing base compensation for remaining salaried associates, with reductions on a graduated scale ranging from 15% to 30%, and 75% for the Company's Chief Executive Officer;
Temporarily suspending cash compensation to the Company's Board of Directors;
Temporarily suspending the share repurchase program;
Drawing $60.0 million of its $75.0 million Credit Agreement;
Temporarily eliminating the Company 401(k) and associate charitable contribution matches;
Tightly managing inventory levels through the cancellation of purchase orders, delay of receipts, or seeking price concessions where possible;
Actively working with landlords on addressing rent abatement, payment terms, accelerating store closures, and delaying or cancelling certain planned new store openings;
Reducing non-payroll operating expenses, including but not limited to, marketing and travel; and
Extending vendor payment terms.
In addition, the Company is leveraging elements of the Coronavirus Aid Relief and Economic Security (CARES) Act to enhance the financial well-being of associates and to maximize the financial health of the Company.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and its majority owned subsidiary, Pura Vida beginning on July 17, 2019. The Company has eliminated intercompany balances and transactions in consolidation.
Fiscal Periods
The Company’s fiscal year ends on the Saturday closest to January 31. References to the fiscal quarters ended May 2, 2020 and May 4, 2019 refer to the thirteen-week periods ended on those dates.
Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements. The amendments in this update remove, modify, and add certain disclosure requirements to ASC 820, Fair Value Measurement. This guidance is effective for interim and annual periods beginning on or after December 15, 2019 (fiscal 2021). Early adoption is permitted, and certain amendments are to be adopted prospectively for only the most recent annual or interim period presented in the initial year of adoption or retrospectively. The adoption of this standard in the first quarter of fiscal 2021 did not have a material impact on the Company's consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This standard replaces the incurred loss impairment methodology in current GAAP with a methodology that uses a forward-looking approach to recording credit losses for certain financial instruments including debt securities, trade receivables, and other financial assets. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, for Securities and Exchange Commission (SEC) filers, which is the Company's fiscal 2021. Early adoption is permitted. The adoption of this standard in the first quarter of fiscal 2021 did not have a material impact on the Company's consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update remove certain exceptions to the general principals in Topic 740, as well as simplify GAAP for certain areas and improve consistency within the topic. This guidance is effective for interim and annual periods beginning on or after December 15, 2020 (fiscal 2022). Early adoption is permitted, with all
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
amendments required to be adopted in the same period. The Company is currently evaluating the impact of the guidance on its consolidated financial statements.

2.Revenue from Contracts with Customers

Disaggregation of Revenue
The following presents the Company's net revenues disaggregated by product category for the thirteen weeks ended May 2, 2020 and May 4, 2019 (in thousands):
Thirteen Weeks Ended
May 2, 2020
VB Direct SegmentVB Indirect SegmentPura Vida SegmentTotal
Product categories
Bags$16,491  $4,600  $  $21,091  
Travel9,441  2,397    11,838  
Accessories7,247  1,322  20,539  29,108  
Home2,349  231    2,580  
Other1,309  (1) 2,679  (2) 679  (3) 4,667  
Total net revenues$36,837  (4) $11,229  (5) $21,218  (4) $69,284  
(1) Primarily includes net revenues from apparel/footwear, stationery, freight, and gift card breakage.
(2) Primarily includes net revenues from apparel/footwear, licensing agreements, freight, and merchandising.
(3) Related to freight.
(4) Net revenues were related to product sales recognized at a point in time.
(5) $10.6 million of net revenues related to product sales recognized at a point in time and $0.6 million of net revenues related to sales-based royalties recognized over time.

Thirteen Weeks Ended
May 4, 2019
VB Direct SegmentVB Indirect SegmentPura Vida SegmentTotal
Product categories
Bags$27,667  $9,991  $—  $37,658  
Travel19,926  3,722  —  23,648  
Accessories16,060  4,202  —  20,262  
Home5,685  584  —  6,269  
Other1,798  (1) 1,368  (2) —  3,166  
Total net revenues$71,136  (3) $19,867  (4) $—  $91,003  
(1) Primarily includes net revenues from apparel/footwear, stationery, and freight.
(2) Primarily includes net revenues from licensing agreements, freight, apparel/footwear, and merchandising.
(3) Net revenues were related to product sales recognized at a point in time.
(4) $18.9 million of net revenues related to product sales recognized at a point in time and $1.0 million of net revenues related to sales-based royalties recognized over time.




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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Contract Balances
Contract liabilities as of May 2, 2020 and February 1, 2020, were $4.4 million and $3.9 million, respectively. The balance as of May 2, 2020 consisted of unearned revenue related to the monthly bracelet and jewelry clubs of the Pura Vida segment, unredeemed gift cards, Pura Vida customer deposits and payments collected before shipment, and Pura Vida loyalty club points. The balance as of February 1, 2020 consisted of unearned revenue related to the monthly bracelet and jewelry clubs of the Pura Vida segment, unredeemed gift cards, Pura Vida payments collected before shipment, and an immaterial amount of unearned revenue for pre-payments of royalties in certain of the Company’s licensing arrangements. These contract liabilities are recognized within other accrued liabilities on the Company’s Condensed Consolidated Balance Sheets. The Company did not have contract assets as of May 2, 2020 and February 1, 2020.
The balance for accounts receivable from contracts with customers, net of allowances, as of May 2, 2020 and February 1, 2020, was $14.3 million and $16.3 million, respectively, which is recognized within accounts receivable, net, on the Company’s Condensed Consolidated Balance Sheets. The provision for doubtful accounts was $1.0 million and $0.5 million as of May 2, 2020 and February 1, 2020, respectively. The provision for doubtful accounts is based upon the likelihood of default expected during the life of the receivable.
        
Performance Obligations
The performance obligations for the VB Direct, VB Indirect, and Pura Vida segments include the promise to transfer distinct goods (or a bundle of distinct goods). The VB Indirect segment also includes the right to access intellectual property (“IP”) related to the Vera Bradley brand.
Remaining Performance Obligations
The Company does not have remaining performance obligations in excess of one year or contracts that it does not have the right to invoice as of May 2, 2020.

3.Leases
The Company temporarily closed its full-line and factory outlet stores on March 19, 2020, due to the COVID-19 pandemic, further discussed in Note 1 herein. As a result, it deferred certain rent payments for the time of closure. The Company has not received significant rent abatements as of May 2, 2020.
Discount Rate
The weighted-average discount rate as of May 2, 2020, was 4.9%. The discount rate is not readily determinable in the lease; therefore, the Company estimated the incremental borrowing rate, at the commencement date of each lease, which is the rate of interest it would have to borrow on a collateralized basis over a similar term with similar payments.

Leases Not Yet Commenced
As of May 2, 2020, the Company had retail store leases and a showroom lease which were executed, but did not have control of the underlying assets; therefore, the lease liabilities and right-of-use assets are not recorded on the Condensed Consolidated Balance Sheet. These leases contain undiscounted lease payments, which will be included in the determination of the lease liability, totaling approximately $5.9 million and have approximate terms of 5 to 10 years commencing in fiscal 2021 and fiscal 2022.

Amounts Recognized in the Condensed Consolidated Financial Statements
The following lease expense is recorded within cost of sales for the Asia sourcing office and certain equipment leases and within selling, general, and administrative expenses for all other leases, including retail store leases, in the
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Company's Condensed Consolidated Statement of Operations for the thirteen weeks ended May 2, 2020 and May 4, 2019 (in thousands):
Thirteen Weeks Ended
May 2, 2020May 4, 2019
Operating lease cost$7,234  $7,357  
Variable lease cost818  2,237  
Short-term lease cost69  190  
Total lease cost$8,121  $9,784  

The weighted-average remaining lease term as of May 2, 2020 was 5.8 years.

Supplemental operating cash flow information was as follows (in thousands):
Thirteen Weeks Ended
May 2, 2020May 4, 2019
Cash paid for amounts included in the measurement of operating lease liabilities$2,794  $8,099  
Right-of-use assets increase (decrease) as a result of modified operating lease liabilities, net$87  $(2,194) 

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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
4.Earnings Per Share
Basic earnings per share is computed based on the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed based on the weighted-average number of common shares outstanding, plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares represent outstanding restricted stock units.
On July 16, 2019, as contemplated by the Interest Purchase Agreement, the Company and certain of its subsidiaries and the owners of the remaining twenty-five percent (25%) ownership interest in Pura Vida (the “Sellers”) which was not acquired by the Company (the “Remaining Pura Vida Interest”) entered into a Put/Call Agreement (the “Put/Call Agreement”). Pursuant to the Put/Call Agreement, and subject to the terms and conditions thereof, the Sellers have the right to sell all of the Remaining Pura Vida Interest to the Company, and the Company has the right to purchase all of the Remaining Pura Vida Interests from Sellers, in each case generally at any time following the fifth anniversary of the closing date of the transaction until the tenth anniversary thereof. The purchase price for any Remaining Pura Vida Interest put to, or called by, the Company will be determined based on the arithmetic average of a multiple of adjusted EBITDA of Pura Vida and a multiple of adjusted EBITDA of the Company, as defined in the Put/Call Agreement, over the twelve-month period ending on the last day of the month immediately preceding the month in which an exercise notice is delivered by a relevant party.
As a result of this redemption feature, the Company recorded the noncontrolling interest as redeemable and classified it in temporary equity within its Condensed Consolidated Balance Sheets initially at its acquisition-date fair value. The noncontrolling interest is adjusted each reporting period for income (or loss) attributable to the noncontrolling interest. A measurement period adjustment, if any, is then made to adjust the noncontrolling interest to the higher of the redemption value or carrying value each reporting period. These adjustments are recognized through retained earnings and are not reflected in net loss or net loss attributable to Vera Bradley, Inc. When calculating earnings per share attributable to Vera Bradley, Inc., the Company adjusts the net loss attributable to Vera Bradley, Inc. for the measurement period adjustment to the extent the redemption value exceeds the fair value of the noncontrolling interest on a cumulative basis.
The components of basic and diluted earnings per share were as follows (in thousands, except per share data):
 
 Thirteen Weeks Ended
 May 2,
2020
May 4,
2019
Numerator:
Net loss$(15,537) $(2,405) 
Less: Net loss attributable to redeemable noncontrolling interest(200)   
Net loss attributable to Vera Bradley, Inc.(15,337) (2,405) 
Plus: Excess portion of redeemable noncontrolling interest redemption value adjustment(6,800)   
Net loss available to Vera Bradley, Inc. common shareholders$(22,137) $(2,405) 
Denominator:
Weighted-average number of common shares (basic)33,330  34,228  
Dilutive effect of stock-based awards    
Weighted-average number of common shares (diluted)33,330  34,228  
Net loss per share available to Vera Bradley, Inc. common shareholders:
Basic$(0.66) $(0.07) 
Diluted$(0.66) $(0.07) 
For the thirteen weeks ended May 2, 2020 and May 4, 2019, all potential common shares were excluded from the diluted share calculation because they were anti-dilutive due to the net loss in the period.

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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
5.Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date:
Level 1 – Quoted prices in active markets for identical assets or liabilities;
Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly;
Level 3 – Unobservable inputs based on the Company’s own assumptions.
The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement.
The carrying amounts reflected on the Condensed Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, other current assets, and accounts payable as of May 2, 2020 and February 1, 2020, approximated their fair values.
The following table details the fair value measurements of the Company's investments as of May 2, 2020 and February 1, 2020 (in thousands):
Level 1Level 2Level 3
May 2, 2020February 1, 2020May 2, 2020February 1, 2020May 2, 2020February 1, 2020
Cash equivalents(1)
$62  $27  $  $2,198  $  $  
Short-term investments:
U.S. corporate debt securities    249  3,435      
Commercial paper      2,489      
Municipal securities      1,594      
Non-U.S. corporate debt securities    250  1,136      
U.S. asset-backed securities      323      
Long-term investments: