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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 July 29, 2023
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/285e85c7d805a0f327fa7bef051017e4-Vera Bradley, Inc. Logo.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 30,822,993 shares of its common stock outstanding as of August 30, 2023.



Table of Contents
TABLE OF CONTENTS
 
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.

2

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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 include references 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. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:
possible inability to successfully implement our long-term strategic plans, including Project Restoration;
possible declines in our comparable sales;
possible inability to maintain and enhance our brands;
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 political unrest, social unrest, acts of war and terrorism, and other related matters;
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 websites;
possible disruptions in our supply chain;
possible new or increased tariffs on our products and increases in inbound and outbound freight expense that could lead to increased product costs and lower profit margins; and
public health pandemics and actions by governmental or other actors regarding containment.
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 the above described risks and uncertainties 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 Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 28, 2023, as well as in Item 1A herein.
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)
 
July 29,
2023
January 28,
2023
Assets
Current assets:
Cash and cash equivalents$48,522 $46,595 
Accounts receivable, net23,944 22,105 
Inventories139,301 142,275 
Income taxes receivable2,180 1,311 
Prepaid expenses and other current assets14,625 14,276 
Total current assets228,572 226,562 
Operating right-of-use assets69,932 77,954 
Property, plant, and equipment, net56,127 58,674 
Intangible assets, net14,460 15,918 
Deferred income taxes20,014 21,542 
Other assets2,395 3,851 
Total assets$391,500 $404,501 
Liabilities, Redeemable Noncontrolling Interest, and Shareholders’ Equity
Current liabilities:
Accounts payable$21,605 $20,350 
Accrued employment costs12,965 14,312 
Short-term operating lease liabilities19,587 19,714 
Other accrued liabilities13,496 12,723 
Income taxes payable528 558 
Total current liabilities68,181 67,657 
Long-term operating lease liabilities66,718 74,664 
Other long-term liabilities82 90 
Total liabilities134,981 142,411 
Commitments and contingencies
Redeemable noncontrolling interest 10,712 
Shareholders’ equity:
Preferred stock; 5,000 shares authorized, no shares issued or outstanding
  
Common stock, without par value; 200,000 shares authorized, 43,176 and 42,846 shares issued and 30,848 and 30,766 shares outstanding, respectively
  
Additional paid-in-capital111,663 109,718 
Retained earnings279,204 274,629 
Accumulated other comprehensive loss(69)(105)
Treasury stock(134,279)(132,864)
Total shareholders’ equity of Vera Bradley, Inc.256,519 251,378 
Total liabilities, redeemable noncontrolling interest, and shareholders’ equity$391,500 $404,501 

The accompanying notes are an integral part of these financial statements.
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Vera Bradley, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
 
 Thirteen Weeks EndedTwenty-Six Weeks Ended
 July 29,
2023
July 30,
2022
July 29,
2023
July 30,
2022
Net revenues$128,172 $130,371 $222,534 $228,830 
Cost of sales56,156 69,854 98,769 115,799 
Gross profit72,016 60,517 123,765 113,031 
Selling, general, and administrative expenses59,405 74,042 117,911 134,956 
Impairment of goodwill and intangible assets 29,338  29,338 
Other income, net260 42 631 209 
Operating income (loss)12,871 (42,821)6,485 (51,054)
Interest expense, net12 36 44 76 
Income (loss) before income taxes12,859 (42,857)6,441 (51,130)
Income tax expense (benefit)3,605 (5,956)1,866 (7,519)
Net income (loss)9,254 (36,901)4,575 (43,611)
Less: Net loss attributable to redeemable noncontrolling interest (7,134) (6,870)
Net income (loss) attributable to Vera Bradley, Inc.$9,254 $(29,767)$4,575 $(36,741)
Basic weighted-average shares outstanding30,901 31,429 30,847 32,051 
Diluted weighted-average shares outstanding31,139 31,429 31,208 32,051 
Basic net income (loss) per share available to Vera Bradley, Inc. common shareholders$0.30 $(0.95)$0.15 $(1.15)
Diluted net income (loss) per share available to Vera Bradley, Inc. common shareholders$0.30 $(0.95)$0.15 $(1.15)
The accompanying notes are an integral part of these financial statements.
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Vera Bradley, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)
 
 Thirteen Weeks EndedTwenty-Six Weeks Ended
 July 29,
2023
July 30,
2022
July 29,
2023
July 30,
2022
Net income (loss)$9,254 $(36,901)$4,575 $(43,611)
Cumulative translation adjustment46 (75)36 (106)
Comprehensive income (loss), net of tax9,300 (36,976)4,611 (43,717)
Less: Comprehensive loss attributable to redeemable noncontrolling interest (7,134) (6,870)
Comprehensive income (loss) attributable to Vera Bradley, Inc.$9,300 $(29,842)$4,611 $(36,847)
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
Treasury
Stock
Total Shareholders’
Equity of Vera Bradley, Inc.
Balance at January 28, 202330,766,024 12,079,690 $109,718 $274,629 $(105)$(132,864)$251,378 
Net loss attributable to Vera Bradley, Inc.— — — (4,679)— — (4,679)
Translation adjustments— — — — (10)— (10)
Restricted shares vested, net of repurchase for taxes330,500 — (942)— — — (942)
Stock-based compensation— — 691 — — — 691 
Treasury stock purchased(128,100)128,100    (732)(732)
Purchase of noncontrolling interest equity adjustment— — 1,286 — — — 1,286 
Balance at April 29, 202330,968,424 12,207,790 $110,753 $269,950 $(115)$(133,596)$246,992 
Net income attributable to Vera Bradley, Inc.— — — 9,254 — — 9,254 
Translation adjustments— — — — 46 — 46 
Restricted shares vested, net of repurchase for taxes89 — — — — — — 
Stock-based compensation— — 910 — — — 910 
Treasury stock purchased(120,220)120,220 — — — (683)(683)
Balance at July 29, 202330,848,293 12,328,010 $111,663 $279,204 $(69)$(134,279)$256,519 









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Vera Bradley, Inc.
Condensed Consolidated Statements of Shareholders’ Equity
(in thousands, except share data)
(continued)
(unaudited)
Number of Shares
Common
Stock
Treasury
Stock
Additional
Paid-in
Capital
Retained EarningsAccumulated
Other
Comprehensive Loss
Treasury
Stock
Total Shareholders’
Equity of Vera Bradley, Inc.
Balance at January 29, 202233,170,430 9,258,741 $107,907 $334,364 $(29)$(114,802)$327,440 
Net loss attributable to Vera Bradley, Inc.— — — (6,974)— — (6,974)
Translation adjustments— — — — (31)— (31)
Restricted shares vested, net of repurchase for taxes404,469 — (1,410)— — — (1,410)
Stock-based compensation— — 543 — — — 543 
Treasury stock purchased(1,423,096)1,423,096    (10,454)(10,454)
Balance at April 30, 202232,151,803 10,681,837 $107,040 $327,390 $(60)$(125,256)$309,114 
Net loss attributable to Vera Bradley, Inc.  — (29,767)— — (29,767)
Translation adjustments  — — (75)— (75)
Restricted shares vested, net of repurchase for taxes89   — — —  
Stock-based compensation— — 901 — — — 901 
Treasury stock purchased(986,023)986,023 — — — (6,023)(6,023)
Balance at July 30, 202231,165,869 11,667,860 $107,941 $297,623 $(135)$(131,279)$274,150 
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)
 
 Twenty-Six Weeks Ended
 July 29,
2023
July 30,
2022
Cash flows from operating activities
Net income (loss)$4,575 $(43,611)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation of property, plant, and equipment4,070 4,371 
Amortization of operating right-of-use assets10,501 10,621 
Goodwill and intangible asset impairment 29,338 
Other impairment charges 1,351 
Amortization of intangible assets1,458 1,537 
Provision for doubtful accounts17 (119)
Stock-based compensation1,601 1,444 
Deferred income taxes2,102 (5,419)
Other non-cash loss, net40  
Changes in assets and liabilities:
Accounts receivable(1,856)(4,793)
Inventories2,974 (34,676)
Prepaid expenses and other assets1,107 348 
Accounts payable1,403 12,759 
Income taxes (899)4,652 
Operating lease liabilities, net(10,552)(12,910)
Accrued and other liabilities(566)7,989 
Net cash provided by (used in) operating activities15,975 (27,118)
Cash flows from investing activities
Purchases of property, plant, and equipment(1,727)(4,391)
Cash paid for business acquisition(10,000) 
Net cash used in investing activities(11,727)(4,391)
Cash flows from financing activities
Tax withholdings for equity compensation(942)(1,410)
Repurchase of common stock(1,415)(16,477)
Distributions to redeemable noncontrolling interest (613)
Net cash used in financing activities(2,357)(18,500)
Effect of exchange rate changes on cash and cash equivalents36 (106)
Net increase (decrease) in cash and cash equivalents1,927 (50,115)
Cash and cash equivalents, beginning of period46,595 88,436 
Cash and cash equivalents, end of period$48,522 $38,321 













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Vera Bradley, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(continued)
(unaudited)
 Twenty-Six Weeks Ended
 July 29,
2023
July 30,
2022
Supplemental disclosure of cash flow information
Cash paid (received) for income taxes, net$662 $(6,755)
Supplemental disclosure of non-cash activity
Non-cash operating, investing, and financing activities
Purchases of property, plant, and equipment
Expenditures incurred but not yet paid as of July 29, 2023 and July 30, 2022$199 $1,353 
Expenditures incurred but not yet paid as of January 28, 2023 and January 29, 2022$363 $250 
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 owned subsidiaries, except where the context requires otherwise or where otherwise indicated.
Vera Bradley, Inc. operates two unique lifestyle brands – Vera Bradley and Pura Vida. We believe Vera Bradley and Pura Vida are complementary businesses, both with devoted, emotionally-connected, and multi-generational female customer bases; alignment as causal, comfortable, affordable, and fun brands; positioning as “gifting” and socially-connected brands; strong, entrepreneurial cultures; a keen focus on community, charity, and social consciousness; multi-channel distribution strategies; and talented leadership teams aligned and committed to the long-term success of their brands.
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.
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”). On January 30, 2023, the Company purchased the remaining 25% interest in Pura Vida. Pura Vida, based in La Jolla, California, is a 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.
The Company 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 July 29, 2023, the Company operated 45 full-line stores and 80 factory outlet stores. In light of the COVID-19 pandemic, the Company cancelled its calendar year 2022 annual outlet sale. The sale resumed in June 2023.
The VB Indirect business consists of sales of Vera Bradley products to approximately 1,700 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, puravidabracelets.ca, and www.puravidabracelets.eu; through the distribution of Pura Vida-branded products to wholesale retailers, substantially all of which are located in the United States; and through its five retail stores.
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 January 28, 2023, 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 and twenty-six weeks ended July 29, 2023, are not necessarily indicative of the results to be expected for the full fiscal year due to, in part, seasonal fluctuations in the business and the uncertainty of macroeconomic factors on future periods, including inflation and other related matters.



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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)

Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, including Pura Vida. The Company has eliminated intercompany balances and transactions in consolidation. In the prior year, Pura Vida was a majority owned subsidiary and was included in the consolidated financial statements of the Company. Refer to Notes 4 and 12 herein for additional information.
Fiscal Periods
The Company’s fiscal year ends on the Saturday closest to January 31. References to the fiscal quarters ended July 29, 2023 and July 30, 2022 refer to the thirteen week periods ended on those dates.
Recently Issued Accounting Pronouncements
There were no new accounting pronouncements issued or which became effective during the thirteen and twenty-six weeks ended July 29, 2023, which had, or are expected to have, a significant impact on the Company's 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 and twenty-six weeks ended July 29, 2023 and July 30, 2022 (in thousands):
Thirteen Weeks Ended
July 29, 2023
VB Direct SegmentVB Indirect SegmentPura Vida SegmentTotal
Product categories
Bags$35,396 $9,628 $176 $45,200 
Travel19,960 3,479  23,439 
Accessories15,140 1,987 23,672 40,799 
Home9,138 953  10,091 
Apparel/Footwear4,043 323 470 4,836 
Other2,025 (1)993 (2)789 (3)3,807 
Total net revenues$85,702 (4)$17,363 (5)$25,107 (4)$128,172 
(1) Primarily includes net revenues from stationery, freight, and gift card breakage.
(2) Primarily includes net revenues from licensing agreements and freight.
(3) Related to freight.
(4) Net revenues were related to product sales recognized at a point in time.
(5) $16.7 million of net revenues related to product sales recognized at a point in time and $0.7 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)
Thirteen Weeks Ended
July 30, 2022
VB Direct SegmentVB Indirect SegmentPura Vida SegmentTotal
Product categories
Bags$38,373 $9,603 $779 $48,755 
Travel20,071 3,033  23,104 
Accessories15,757 2,636 23,269 41,662 
Home8,726 732  9,458 
Apparel/Footwear(6)
2,161 360 1,359 3,880 
Other1,925 (1)961 (2)626 (3)3,512 
Total net revenues$87,013 (4)$17,325 (5)$26,033 (4)$130,371 
(1) Primarily includes net revenues from stationery, freight, and gift card breakage.
(2) Primarily includes net revenues from licensing agreements and freight.
(3) Related to freight.
(4) Net revenues were related to product sales recognized at a point in time.
(5) $16.6 million of net revenues related to product sales recognized at a point in time and $0.7 million of net revenues related to sales-based royalties recognized over time.
(6) Includes mask sales.
Twenty-Six Weeks Ended
July 29, 2023
VB Direct SegmentVB Indirect SegmentPura Vida SegmentTotal
Product categories
Bags$58,297 $17,956 $237 $76,490 
Travel35,366 6,658  42,024 
Accessories25,634 3,945 42,683 72,262 
Home15,066 1,541  16,607 
Apparel/Footwear6,990 784 760 8,534 
Other3,254 (1)1,852 (2)1,511 (3)6,617 
Total net revenues$144,607 (4)$32,736 (5)$45,191 (4)$222,534 
(1) Primarily includes net revenues from stationery, freight, and gift card breakage.
(2) Primarily includes net revenues from licensing agreements and freight.
(3) Related to freight.
(4) Net revenues were related to product sales recognized at a point in time.
(5) $31.3 million of net revenues related to product sales recognized at a point in time and $1.4 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)
Twenty-Six Weeks Ended
July 30, 2022
VB Direct SegmentVB Indirect SegmentPura Vida SegmentTotal
Product categories
Bags$64,505 $19,054 $842 $84,401 
Travel35,159 6,106  41,265 
Accessories27,256 4,404 42,129 73,789 
Home14,448 1,858  16,306 
Apparel/Footwear(6)
4,064 860 1,795 6,719 
Other3,217 (1)2,020 (2)1,113 (3)6,350 
Total net revenues$148,649 (4)$34,302 (5)$45,879 (4)$228,830 
(1) Primarily includes net revenues from stationery, freight, and gift card breakage.
(2) Primarily includes net revenues from licensing agreements and freight.
(3) Related to freight.
(4) Net revenues were related to product sales recognized at a point in time.
(5) $32.8 million of net revenues related to product sales recognized at a point in time and $1.5 million of net revenues related to sales-based royalties recognized over time.
(6) Includes mask sales.

Contract Balances
Contract liabilities as of July 29, 2023 and January 28, 2023, were $2.5 million and $3.2 million, respectively. The balance as of July 29, 2023 and January 28, 2023 consisted of unredeemed gift cards, unearned revenue related to the monthly bracelet and jewelry clubs of the Pura Vida segment, Pura Vida loyalty club points, and Pura Vida customer deposits and payments collected before shipment. These contract liabilities are recognized within other accrued liabilities on the Company’s Condensed Consolidated Balance Sheets. Substantially all contract liabilities are recognized within one year. The Company did not have contract assets as of July 29, 2023 and January 28, 2023.
The balance for accounts receivable from contracts with customers, net of allowances, as of July 29, 2023 and January 28, 2023, was $23.4 million and $20.7 million, respectively, which is recognized within accounts receivable, net, on the Company’s Condensed Consolidated Balance Sheets. The provision for doubtful accounts was $0.8 million as of July 29, 2023 and January 28, 2023. 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 July 29, 2023.

3.Leases
Discount Rate
The weighted-average discount rate as of July 29, 2023, and July 30, 2022 was 4.7% and 4.6%, respectively. The discount rate is not readily determinable in the lease; therefore, the Company estimated the incremental borrowing
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
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 July 29, 2023, the Company had one Vera Bradley retail store lease which was executed, but it did not have control of the underlying asset; therefore, the lease liability and right-of-use asset are not recorded on the Condensed Consolidated Balance Sheet. This lease contains undiscounted lease payments, which will be included in the determination of the lease liability, totaling approximately $2.4 million and has a term of approximately 10 years commencing in fiscal year 2024.

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 Company's Condensed Consolidated Statement of Operations for the thirteen and twenty-six weeks ended July 29, 2023 and July 30, 2022 (in thousands):
Thirteen Weeks EndedTwenty-Six Weeks Ended
July 29, 2023July 30, 2022July 29, 2023July 30, 2022
Operating lease cost$6,502 $6,114 $13,067 $12,364 
Variable lease cost1,401 1,564 2,757 2,982 
Short-term lease cost233 102 355 316 
Less: Sublease income (1)
(105)(24)(210)(24)
Total net lease cost$8,031 $7,756 $15,969 $15,638 
(1) Related to the sublease of a former Company location.

The weighted-average remaining lease term as of July 29, 2023 and July 30, 2022 was 5.4 years.

Supplemental operating cash flow information was as follows (in thousands):
Twenty-Six Weeks Ended
July 29, 2023July 30, 2022
Cash paid for amounts included in the measurement of operating lease liabilities$14,803 $14,910 
Right-of-use assets increase as a result of new and modified operating lease liabilities, net$2,499 $17,225 

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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.
As a result of the redemption feature related to the Put/Call Agreement in the prior year, the Company recorded the prior year 25% 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 was adjusted each reporting period for income (or loss) attributable to the noncontrolling interest. A measurement period adjustment, if any, was then made to adjust the noncontrolling interest to the higher of the redemption value or carrying value each reporting period. These adjustments were recognized through retained earnings and were not reflected in net income or net income attributable to Vera Bradley, Inc. When calculating earnings per share attributable to Vera Bradley, Inc., the Company adjusted the net income 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. Refer to Note 12 for additional information regarding the purchase of the remaining 25% interest on January 30, 2023.
The components of basic and diluted earnings per share were as follows (in thousands, except per share data):
 
 Thirteen Weeks EndedTwenty-Six Weeks Ended
 July 29,
2023
July 30,
2022
July 29,
2023
July 30,
2022
Numerator:
Net income (loss)$9,254 $(36,901)$4,575 $(43,611)
Less: Net loss attributable to redeemable noncontrolling interest (7,134) (6,870)
Net income (loss) attributable to Vera Bradley, Inc.$9,254 $(29,767)$4,575 $(36,741)
Denominator:
Weighted-average number of common shares (basic)30,901 31,429 30,847 32,051 
Dilutive effect of stock-based awards238  361  
Weighted-average number of common shares (diluted)31,139 31,429 31,208 32,051 
Net income (loss) per share available to Vera Bradley, Inc. common shareholders:
Basic$0.30 $(0.95)$0.15 $(1.15)
Diluted$0.30 $(0.95)$0.15 $(1.15)
For the thirteen and twenty-six weeks ended July 29, 2023, there were an immaterial number of additional shares issuable upon the vesting of restricted stock units that were excluded from the diluted share calculations because they were anti-dilutive.

For the thirteen and twenty-six weeks ended July 30, 2022, 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 July 29, 2023 and January 28, 2023, approximated their fair values.
The following table details the fair value measurements of the Company's investments as of July 29, 2023 and January 28, 2023 (in thousands):
Level 1Level 2Level 3
July 29, 2023January 28, 2023July 29, 2023January 28, 2023July 29, 2023January 28, 2023
Cash equivalents(1)
$366 $360 $ $ $ $ 
(1) Cash equivalents primarily represent a money market fund that has a maturity of three months or less at the date of purchase. Due to the short maturity, the Company believes the carrying value approximates fair value.
The Company assesses potential impairments to its long-lived assets, which includes property, plant, and equipment and lease right-of-use assets, on a quarterly basis or whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Store-level assets and right-of-use assets are grouped at the individual store-level for the purpose of the impairment assessment. Recoverability of an asset group is measured by a comparison of the carrying amount of an asset group to its estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of the asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. The fair value of the store assets is determined using the discounted future cash flow method of anticipated cash flows through the store’s lease-end date using fair value measurement inputs classified as Level 3. The fair value of right-of-use assets is estimated using market comparative information for similar properties. Level 3 inputs are derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. There were no long-lived asset impairment charges for the thirteen and twenty-six weeks ended July 29, 2023. The Company recorded $0.8 million and $1.4 million for store property, plant, and equipment impairment charges and a corporate lease right-of-use asset impairment charge for the thirteen and twenty-six weeks ended July 30, 2022, respectively.
The discounted cash flow models used to estimate the applicable fair values involve numerous estimates and assumptions that are highly subjective. Changes to these estimates and assumptions could materially impact the fair value estimates. The estimates and assumptions critical to the overall fair value estimates include: (1) estimated future cash flow generated at the store level; (2) discount rates used to derive the present value factors used in determining the fair values; and (3) market rentals at the retail store. These and other estimates and assumptions are impacted by economic conditions and our expectations and may change in the future based on period-specific facts and circumstances. If economic conditions were to deteriorate, future impairment charges may be required which may be material.
On a nonrecurring basis, assets recognized or disclosed at fair value on the consolidated financial statements include items such as property, plant, and equipment, including leasehold improvements, and operating lease assets, as well as assets related to the Pura Vida acquisition including goodwill (in the prior year) and intangible assets. These assets are measured at fair value if determined to be impaired. There were no goodwill or intangible asset impairment charges recorded during the thirteen and twenty-six weeks ended July 29, 2023. During the thirteen and twenty-six weeks
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
ended July 30, 2022, the Company recorded a $29.3 million impairment charge related to goodwill and the indefinite-lived Pura Vida brand asset in conjunction with its second quarter annual quantitative test. Refer to Note 13 herein for additional information.

6.Debt
On September 7, 2018, Vera Bradley Designs, Inc. (“VBD”), a wholly-owned subsidiary of the Company, entered into an asset-based revolving Credit Agreement (the “Credit Agreement”) among VBD, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto. The Credit Agreement provides for certain credit facilities to VBD in an aggregate principal amount not to initially exceed the lesser of $75.0 million or the amount of borrowing availability determined in accordance with a borrowing base of certain assets. Any proceeds of the credit facilities will be used to finance general corporate purposes of VBD and its subsidiaries, including but not limited to Vera Bradley International, LLC and Vera Bradley Sales, LLC (collectively, the “Named Subsidiaries”). The Credit Agreement also contains an option for VBD to arrange with lenders to increase the aggregate principal amount by up to $25.0 million.
Amounts outstanding under the Credit Agreement bear interest at a per annum rate equal to either (i) for CBFR borrowings (including swingline loans), the CB Floating Rate, where the CB Floating Rate is the prime rate which shall never be less than the adjusted one month LIBOR rate on such day, plus the Applicable Rate, where the Applicable Rate is a percentage spread ranging from -1.00% to -1.50% or (ii) for each eurodollar borrowing, the Adjusted LIBO Rate, where the Adjusted LIBO Rate is the LIBO rate for such interest period multiplied by the statutory reserve rate, for the interest period in effect for such borrowing, plus the Applicable Rate, where the Applicable Rate is a percentage ranging from 1.00% to 1.30%. The applicable CB Floating Rate, Adjusted LIBO Rate, or LIBO Rate shall be determined by the administrative agent. The Credit Agreement also requires VBD to pay a commitment fee for the unused portion of the revolving facility of up to 0.20% per annum.
VBD’s obligations under the Credit Agreement are guaranteed by the Company and the Named Subsidiaries. The obligations of VBD under the Credit Agreement are secured by substantially all of the respective assets of VBD, the Company, and the Named Subsidiaries and are further secured by the equity interests in VBD and the Named Subsidiaries.
The Credit Agreement contains various affirmative and negative covenants, including restrictions on the Company's ability to incur debt or liens; engage in mergers or consolidations; make certain investments, acquisitions, loans, and advances; sell assets; enter into certain swap agreements; pay dividends or make distributions or make other restricted payments; engage in certain transactions with affiliates; and amend, modify, or waive any of its rights related to subordinated indebtedness and certain charter and other organizational, governing, and material agreements. The Company may avoid certain of such restrictions by meeting payment conditions defined in the Credit Agreement.
The Credit Agreement also requires the Loan Parties to maintain a minimum fixed charge coverage ratio of 1.00 during periods when borrowing availability is less than the greater of (A) approximately $7.5 million, and (B) 10% of the lesser of (i) the aggregate revolving commitment, and (ii) the borrowing base. The fixed charge coverage ratio, availability, aggregate revolving commitment, and the borrowing base are further defined in the Credit Agreement.
The Credit Agreement contains customary events of default, including, among other things: (i) the failure to pay any principal, interest, or other fees under the Credit Agreement; (ii) the making of any materially incorrect representation or warranty; (iii) the failure to observe or perform any covenant, condition, or agreement in the Credit Agreement or related agreements; (iv) a cross default with respect to other material indebtedness; (v) bankruptcy and insolvency events; (vi) unsatisfied material final judgments; (vii) Employee Retirement Income Security Act of 1974 (“ERISA”) events that could reasonably be expected to have a material adverse effect; and (viii) a change in control (as defined in the Credit Agreement).
As of July 29, 2023 and January 28, 2023, the Company had no borrowings outstanding and availability of $75.0 million under the Credit Agreement.
Subsequent Event
Subsequent to the end of the second quarter, on August 3, 2023, certain subsidiaries of the Company, JP Morgan Chase Bank, N.A., as the administrative agent, and lenders from time to time party thereto, entered into a Third Amendment (the “Third Amendment”) to the Credit Agreement dated September 7, 2018.
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
The Third Amendment amended the Credit Agreement to, among other things: extend the maturity date to May 2028; add Creative Genius, LLC as a borrower; increase an option for the borrowers to arrange with lenders to increase the aggregate principal amount by up to $50.0 million; update the commitment fee rate to 0.20% or 0.30% depending on the average quarterly utilization; update the interest rate per annum for the CB Floating Rate to the greater of the prime rate or 2.5% and remove references to the London Interbank Offered Rate (“LIBOR”) (in the case of a CBFR borrowings including swingline loans); remove references to eurodollar borrowings and replace with term benchmark borrowings where the interest rate per annum is the adjusted term Secured Overnight Financing Rate (“SOFR”), as defined in the Third Amendment to the Credit Agreement; and add RFR borrowings where the interest rate per annum is the adjusted daily simple SOFR, as defined in the Third Amendment to the Credit Agreement.
The Third Amendment also modified the periods that the fixed charge coverage ratio is not permitted to be less than 1.00. The borrowers are required to maintain the fixed charge coverage ratio for periods when borrowing availability is less than the greater of (A) approximately $9.4 million, and (B) 12.5% of the lesser of (i) the aggregate revolving commitment, and (ii) the borrowing base. The fixed charge coverage ratio, availability, aggregate revolving commitment, and the borrowing base are further defined in the Credit Agreement.

7.Income Taxes
The provision for income taxes for interim periods is based on an estimate of the annual effective tax rate adjusted to reflect the impact of discrete items. Management judgment is required in projecting ordinary income to estimate the Company’s annual effective tax rate.
The effective tax rate for the thirteen weeks ended July 29, 2023, was 28.0%, compared to 13.9% for the thirteen weeks ended July 30, 2022. The year-over-year effective tax rate increase was primarily due to the relative impact of permanent items in the current-year period compared to the prior-year period, primarily as a result of noncontrolling interest in the prior-year period and non-deductible executive compensation.
The effective tax rate for the twenty-six weeks ended July 29, 2023, was 29.0%, compared to 14.7% for the twenty-six weeks ended July 30, 2022. The year-over-year effective tax rate increase was primarily due to the relative impact of permanent and discrete items in the current-year period compared to the prior-year period, primarily as a result of stock-based compensation, noncontrolling interest in the prior-year period, and non-deductible executive compensation.
Refer to Note 12 herein for information regarding the deferred income tax adjustment associated with the purchase of the remaining 25% interest in Pura Vida on January 30, 2023.

8.Stock-Based Compensation
The Company recognizes stock-based compensation expense, for its awards of restricted stock units, in an amount equal to the fair market value of the underlying stock on the grant date of the respective award.
The Company reserved 6,000,000 shares of common stock for issuance or transfer under the 2020 Equity and Incentive Plan, as amended, which allows for grants of restricted stock units, as well as other equity awards. The Company maintains the 2010 Equity and Incentive Plan for awards granted prior to the effectiveness of the 2020 Equity and Incentive Plan.
Awards of Restricted Stock Units

During the thirteen weeks ended July 29, 2023, the Company granted 195,617 time-based and performance-based restricted stock units with an aggregate fair value of $1.1 million to certain employees under the 2020 Equity and Incentive Plan. The company did not grant restricted stock units during the thirteen weeks ended July 30, 2022.
During the twenty-six weeks ended July 29, 2023, the Company granted 738,187 time-based and performance-based restricted stock units with an aggregate fair value of $4.3 million to certain employees and non-employee directors under the 2020 Equity and Incentive Plan compared to 841,369 time-based and performance-based restricted stock units with an aggregate fair value of $6.3 million in the same period of the prior year.
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
The majority of the time-based restricted stock units vest and settle in shares of the Company’s common stock, on a one-for-one basis, in equal installments on each of the first three anniversaries of the grant date. Restricted stock units issued to non-employee directors vest after a one-year period from the grant date. The Company recognizes the expense relating to these units, net of estimated forfeitures, on a straight-line basis over the vesting period.
Performance-based restricted stock units vest upon the completion of a three-year period of time (cliff vesting), subject to the employee’s continuing employment throughout and the Company’s achievement of annual earnings per share targets, or other Company performance targets, during the three-year performance period. The Company recognizes the expense relating to these units, net of estimated forfeitures, based on the probable outcome of achievement of the financial targets, on a straight-line basis over three years.
The following table sets forth a summary of restricted stock unit activity for the twenty-six weeks ended July 29, 2023 (units in thousands):
 
 Time-based
Restricted Stock Units
Performance-based
Restricted Stock Units
 Number of
Units
Weighted-
Average
Grant
Date Fair
Value
(per unit)
Number of
Units
Weighted-
Average
Grant
Date Fair
Value
(per unit)
Nonvested units outstanding at January 28, 2023
965 $5.74 523 $4.71 
Granted423 5.87 315 5.82 
Vested(396)6.93 (94)4.08 
Forfeited(142)6.07 (87)6.91 
Nonvested units outstanding at July 29, 2023
850 $5.20 657 $5.04 
As of July 29, 2023, there was $5.9 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested restricted stock units. That cost is expected to be recognized over a weighted-average period of 2.2 years, subject to meeting performance conditions.

9.Commitments and Contingencies
The Company is subject to various claims and contingencies arising in the normal course of business, including those relating to product liability, legal claims, employee benefits, environmental issues, and other matters. Management believes that at this time it is not probable that any of these claims will have a material adverse effect on the Company’s financial condition, results of operations, or cash flows. However, the outcomes of legal proceedings and claims brought against the Company are subject to uncertainty, and future developments could cause these actions or claims, individually or in aggregate, to have a material adverse effect on the Company’s financial condition, results of operations, or cash flows of a particular reporting period.
In August 2019, Vesi Incorporated (“Vesi”) filed suit against the Company in the U.S. District Court for the Southern District of Ohio related to the Company’s licensing business and alleging breach of fiduciary duty, unfair competition, defamation, and tortious interference with prospective business relationships. The complaint sought damages in an amount not less than $10.0 million for punitive damages, attorney fees, prejudgment interest, and any other additional relief. In November 2019, the Company filed a counterclaim against the principals of Vesi as personal guarantors for monies owed to the Company by Vesi. The Company filed a motion for summary judgement asking the Court to dismiss all claims with prejudice and grant judgement on its counterclaim. On January 4, 2023, the Court granted the Company’s motion for summary judgment dismissing Vesi’s claims and also granted judgment on the Company’s counterclaims against the principals of Vesi for an immaterial amount. Vesi has appealed this decision. At this time, we are not able to estimate a possible loss or range of loss that may result from this matter or to determine whether such loss, if any, would have a material adverse effect on our financial condition or results of operations. The Company is vigorously defending itself and management believes that the Company has a number of meritorious legal defenses.
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
    
10.Common Stock
In December 2021, the Company's board of directors approved a share repurchase plan (the “2021 Share Repurchase Program”) which authorized Company management to utilize up to $50.0 million of available cash for repurchases of shares of the Company's common stock. The 2021 Share Repurchase Program went into effect beginning December 13, 2021 and expires in December 2024.
The Company purchased 248,320 shares at an average price of $5.70 per share, excluding commissions, for an aggregate amount of $1.4 million during the twenty-six weeks ended July 29, 2023 under the 2021 Share Repurchase Program. There was $26.3 million remaining available to repurchase shares of the Company's common stock under the 2021 Share Repurchase Program as of July 29, 2023.
As of July 29, 2023, the Company held as treasury shares 12,328,010 shares of its common stock at an average price of $10.89 per share, excluding commissions, for an aggregate carrying amount of $134.3 million. The Company’s treasury shares may be issued under the 2010 Equity and Incentive Plan (with respect to outstanding awards under that plan), under the 2020 Equity and Incentive Plan, or for other corporate purposes.

11.Cloud Computing Arrangements
The Company capitalizes implementation costs associated with its Cloud Computing Arrangements (“CCA”) consistent with costs capitalized for internal-use software. The CCA costs are amortized over the term of the related hosting agreement, taking into consideration renewal options, if any. The renewal period is included in the amortization period if determined that the option is reasonably certain to be exercised. The amortization expense is recorded within selling, general, and administrative expenses in the Company's Condensed Consolidated Statements of Operations, which is within the same line item as the related hosting fees. The balance of the unamortized CCA implementation costs totaled $4.9 million and $6.4 million as of July 29, 2023 and January 28, 2023, respectively. Of this total, $2.8 million and $3.0 million was recorded within prepaid expenses and other current assets and $2.1 million and $3.4 million was recorded within other assets on the Company's Condensed Consolidated Balance Sheets as of July 29, 2023 and January 28, 2023, respectively. The CCA implementation costs are recorded within operating activities in the Company's Condensed Consolidated Statements of Cash Flows.
12.Redeemable Noncontrolling Interest
Redeemable noncontrolling interest represented the remaining twenty-five percent (25%) interest in Pura Vida not acquired by the Company until January 30, 2023.
On July 16, 2019, the Company purchased 75% of Pura Vida's outstanding equity interest and entered into a Put/Call Agreement with the Sellers (the “Put/Call Agreement”) providing for certain rights with respect to the purchase by the Company and sale by the Sellers of the Remaining Pura Vida Interests. On January 23, 2023, the Company and certain of its subsidiaries entered into an Interest Purchase Agreement (the “Interest Purchase Agreement”) with Creative Genius Holdings, Inc. a California corporation, Creative Genius Investments, Inc., a California corporation, Griffin Thall, and Paul Goodman (collectively “Sellers”) to purchase the remaining 25% of the outstanding membership interests (the “Remaining Pura Vida Interests”) of Creative Genius, LLC, a California limited liability company (“Pura Vida”).
Pursuant to the Interest Purchase Agreement, and subject to the terms and conditions thereof, on the closing date (January 30, 2023), the Company acquired the Remaining Pura Vida Interests (the “Transaction”) in exchange for cash consideration consisting of $10.0 million paid at closing, subject to certain adjustments. The Transaction was not subject to financing conditions. The Company’s existing available cash and cash equivalents funded the purchase price. Following completion of the Transaction, the Company owns 100% of the ownership interests in Pura Vida.
The Interest Purchase Agreement provides that, as of the closing of the Transaction, all rights and obligations of the Company and the Sellers under any agreements among the parties, including the Put/Call Agreement, were terminated.
As a result of the Transaction, the Company recorded a decrease to redeemable noncontrolling interest of $10.7 million. The difference between the fair value of the consideration paid and the balance of the redeemable noncontrolling interest resulted in $0.7 million recognized in additional paid-in capital (“APIC”) during the thirteen weeks ended April 29, 2023. In addition, there was an APIC adjustment of $0.6 million related to deferred income
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
taxes for the purchase of the redeemable noncontrolling interest. The total APIC adjustment for this matter during the thirteen weeks ended April 29, 2023, was $1.3 million. Changes in redeemable noncontrolling interest for the twenty-six weeks ended July 29, 2023, were as follows (in thousands):    
Balance at January 28, 2023
$10,712 
Adjustment for purchase of noncontrolling interest(10,712)
Balance at April 29, 2023 and July 29, 2023$ 
Changes in redeemable noncontrolling interest for the thirteen and twenty-six weeks ended July 30, 2022, were as follows (in thousands):
Balance at January 29, 2022$30,974 
Net income attributable to redeemable noncontrolling interest264 
Distributions to redeemable noncontrolling interest(146)
Balance at April 30, 2022$31,092 
Net loss attributable to redeemable noncontrolling interest(7,134)
Distributions to redeemable noncontrolling interest(467)
Balance at July 30, 2022$23,491 
    
13.Intangible Assets and Goodwill
The following tables detail the carrying value of the Company's intangible assets other than goodwill related to the acquisition of a majority interest in Pura Vida. On January 30, 2023, the Company purchased the remaining 25% interest in Pura Vida.
July 29, 2023
in thousandsGross Basis
Accumulated Amortization(1)
Carrying Amount
Definite-lived intangible assets
Customer Relationships$24,208 $(21,414)$2,794 
Non-competition Agreements788 (788) 
Total definite-lived intangible assets24,996 (22,202)2,794 
Indefinite-lived intangible asset
Pura Vida Brand (2)
11,666 — 11,666 
Total intangible assets, excluding goodwill$36,662 $(22,202)$14,460 
(1) Amortization expense is recorded within the Pura Vida segment.
(2) Impairment charges of $9.9 million and $15.1 million were recorded within the Pura Vida segment during the second and fourth quarters of fiscal 2023.
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
January 28, 2023
in thousandsGross Basis
Accumulated Amortization(1)
Carrying Amount
Definite-lived intangible assets
Customer Relationships$24,208 $(19,956)$4,252 
Non-competition Agreements788 (788) 
Total definite-lived intangible assets24,996 (20,744)4,252 
Indefinite-lived intangible asset
Pura Vida Brand (2)
11,666 — 11,666 
Total intangible assets, excluding goodwill$36,662 $(20,744)$15,918 
(1) Amortization expense is recorded within the Pura Vida segment.
(2) Impairment charges of $9.9 million and $15.1 million were recorded within the Pura Vida segment during the second and fourth quarters of fiscal 2023.
Amortization expense is recorded within selling, general, and administrative expenses in the Company's Condensed Consolidated Statement of Operations. The future amortization expense for intangible assets is as follows (in thousands):
Amortization Expense
Fiscal 2024 (remaining six months)1,458 
Fiscal 20251,336 
Total$2,794 
There was no goodwill balance as of July 29, 2023 and January 28, 2023 due to impairment charges recorded during fiscal 2023.
The Company performs its annual impairment test of the indefinite-lived Pura Vida brand during the second quarter of each fiscal year. The annual test included goodwill in prior years.
The fair value of the Pura Vida brand was estimated using a relief-from-royalty method. The estimates and assumptions used in the determination of the fair value of the Pura Vida brand included the projected revenue growth, long-term growth rate, the royalty rate, and discount rate.
For the prior year test, the fair value of the Pura Vida reporting unit was determined using a combination of an income-based approach (discounted cash flows) and a market-based approach (guideline transaction method). The discounted cash flow method involved subjective estimates and assumptions such as projected revenue growth, operating profit, and the discount rate. The guideline transaction method involved transaction multiples derived from the acquisition of controlling interests in stocks of companies that are engaged in the same or similar lines of business as the reporting unit.
During the assessment for the fiscal 2024 test, it was determined that the fair value of the Pura Vida brand exceeded its carrying value and no impairment charge was recorded. During the prior year test, the Company recorded an impairment charge of $9.9 million and $19.4 million for the Pura Vida brand and goodwill, respectively, for the thirteen and twenty-six weeks ended July 30, 2022 within the Pura Vida segment.
While we consider our assumptions in the determination of the fair value of these assets to be reasonable, they are complex and highly subjective. Adverse changes in key assumptions in future periods may result in further declines in the fair value estimates of the Pura Vida brand below its carrying value resulting in additional impairment charges, which could be material. Our key assumptions (as described above in the valuation methodologies used in the determination of fair value) may be impacted by macroeconomic conditions, including inflationary pressures and the impact on consumer discretionary spending, as well as a sustained decline in stock price and potential changes in business strategy. Refer to Note 5 herein for additional information regarding the fair value measurement.
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
14.Cost Savings Initiatives and Other Charges
Cost Savings Initiatives and Severance Charges
During fiscal 2023, the Company began implementation of its targeted cost reductions, which are expected to be fully realized in fiscal 2025. Expense savings are being derived across various areas of the Company, including retail store efficiencies, marketing expenses, information technology contracts, professional services, logistics and operational costs, and corporate payroll.
The Company incurred the following charges during the thirteen weeks ended July 29, 2023 (in thousands):
Reportable Segment
VB DirectVB IndirectPura VidaUnallocated Corporate ExpensesTotal Expense
Severance charges$ $ $79 $ $79 
Consulting fees and other costs (1)
     
Total (2)
$ $ $79 $ $79 
(1) Related to professional fees
(2) Recorded within selling, general, and administrative ("SG&A") expenses

The Company incurred the following charges during the thirteen weeks ended July 30, 2022 (in thousands):
Reportable Segment
VB DirectVB IndirectPura VidaUnallocated Corporate ExpensesTotal Expense
Severance charges (1)
$15 $ $16 $5,683 $5,714 
Consulting fees and other costs (2)
302   2,755 3,057 
Total (3)
$317 $ $16 $8,438 $8,771 
(1) Includes CEO retirement severance
(2) Includes $2.8 million for fees related to cost savings initiatives and CEO search and $0.3 million for concept brand exit costs
(3) $8.6 million of the charges are recorded within SG&A expenses and $0.2 million are recorded within cost of sales


The Company incurred the following charges during the twenty-six weeks ended July 29, 2023 (in thousands):

Reportable Segment
VB DirectVB IndirectPura VidaUnallocated Corporate ExpensesTotal Expense
Severance charges (1)
$342 $ $79 $1,647 $2,068 
Consulting fees and other costs (2)
   105 105 
Total (3)
$342 $ $79 $1,752 $2,173 
(1) Includes former CFO severance
(2) Related to professional fees
(3) Recorded within SG&A expenses

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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
The Company incurred the following charges during the twenty-six weeks ended July 30, 2022 (in thousands):

Reportable Segment
VB DirectVB IndirectPura VidaUnallocated Corporate ExpensesTotal Expense
Severance charges (1)
$15 $ $16 $5,683 $5,714 
Consulting fees and other costs (2)
302   2,905 3,207 
Total (3)
$317 $ $16 $8,588 $8,921 
(1) Includes CEO retirement severance
(2) Includes $2.9 million for fees related to cost savings initiatives and CEO search and $0.3 million for concept brand exit costs
(3) $8.7 million of the charges are recorded within SG&A expenses and $0.2 million are recorded within cost of sales

A summary of charges and related liabilities associated with the cost savings initiatives and severance charges are as follows (in thousands):

Severance Charges and Cash Retention Payment Acceleration Charges (1)
Consulting Fees and Other Costs
Liability as of January 28, 2023$3,083 $60 
Fiscal 2024 charges2,068 105 
Cash payments(4,946)(165)
Non-cash charges and adjustments  
Liability as of July 29, 2023
$205 $ 
(1) Remaining liability is recorded within accrued employment costs

Other Charges
During the thirteen and twenty-six weeks ended July 30, 2022, the Company recorded $5.9 million of non-cash inventory adjustments related to the exit of certain technology products and excess mask products and $1.1 million for purchase order cancellation fees related to spring 2023 product within cost of sales in its Condensed Consolidated Statement of Operations. Collectively, $5.1 million was recorded within the Direct segment, $1.0 million was recorded within the Indirect segment, and $0.9 million was recorded within the Pura Vida segment. There were no similar charges during the thirteen and twenty-six weeks ended July 29, 2023.

15.Segment Reporting
The Company has three operating segments, which are also its reportable segments: VB Direct, VB Indirect, and Pura Vida. These operating segments are components of the Company for which separate financial information is available and for which operating results are evaluated on a regular basis by the chief operating decision maker in deciding how to allocate resources and in assessing the performance of the segments.
The VB Direct segment includes Vera Bradley full-line and factory outlet stores; the Vera Bradley website, verabradley.com; the Vera Bradley online outlet site; and the Vera Bradley annual outlet sale. Revenues generated from this segment are driven through the sale of Vera Bradley-branded products from Vera Bradley to end consumers.
The VB Indirect segment represents revenues generated through the distribution of Vera Bradley-branded products to specialty retailers representing approximately 1,700 locations, substantially all of which are located in the United States; key accounts, which include department stores, national accounts, third-party e-commerce sites, and third-party inventory liquidators; and royalties recognized through licensing agreements related to the Vera Bradley brand.
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
The Pura Vida segment represents revenues generated through the Pura Vida websites, www.puravidabracelets.com, puravidabracelets.ca, and www.puravidabracelets.eu; through the distribution of Pura Vida-branded products to wholesale retailers, substantially all of which are located in the United States; and through the Pura Vida retail stores.
Corporate costs represent the Company’s administrative expenses, which include, but are not limited to: human resources, legal, finance, information technology, design, product development, merchandising, corporate-level marketing and advertising, and various other corporate-level-activity-related expenses not directly attributable to a reportable segment. All intercompany-related activities are eliminated in consolidation and are excluded from the segment reporting.
Company management evaluates segment operating results based on several indicators. The primary or key performance indicators for each segment are net revenues and operating income. Net revenues and operating income information for the Company’s reportable segments during the thirteen and twenty-six weeks ended July 29, 2023 and July 30, 2022, respectively, consisted of the following (in thousands):