What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-30 compared with 2020-03-31 · 519 added, 391 removed, 779 unchanged (54% of the section changed)

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Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of February 1, 2020, and February 2, 2019

Consolidated Statements of Operations for the fiscal years ended February 1, 2020, February 2, 2019, and February 3, 2018

Consolidated Statements of Comprehensive Income for the fiscal years ended February 1, 2020, February 2, 2019, and February 3, 2018

Consolidated Statements of Shareholders’ Equity for the fiscal years ended February 1, 2020, February 2, 2019, and February 3, 2018

Consolidated Statements of Cash Flows for the fiscal years ended February 1, 2020, February 2, 2019, and February 3, 2018

Consolidated Balance Sheets as of January 30, 2021, and February 1, 2020

Consolidated Statements of Operations for the fiscal years ended January 30, 2021, February 1, 2020, and February 2, 2019

Consolidated Statements of Comprehensive Income for the fiscal years ended January 30, 2021, February 1, 2020, and February 2, 2019

Consolidated Statements of Shareholders’ Equity for the fiscal years ended January 30, 2021, February 1, 2020, and February 2, 2019

Consolidated Statements of Cash Flows for the fiscal years ended January 30, 2021, February 1, 2020, and February 2, 2019

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of

Vera Bradley, Inc.

To the shareholders and the Board of Directors of Vera Bradley, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Vera Bradley, Inc.

and subsidiaries (the “Company”) as of February 1, 2020 and February 2, 2019, the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows, for each of the three years in the period ended February 1, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 1, 2020 and February 2, 2019, and the results of its operations and its cash flows for each of the three years in the period ended February 1, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of February 1, 2020, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 31, 2020, expressed an unqualified opinion on the Company's internal control over financial reporting.

and subsidiaries (the "Company") as of January 30, 2021 and February 1, 2020, the related consolidated statements of operations, comprehensive income, shareholders' equity, and cash flows, for each of the three years in the period ended January 30, 2021, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 30, 2021 and February 1, 2020, and the results of its operations and its cash flows for each of the three years in the period ended January 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 30, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

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Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill and Intangible Assets – Refer to Notes 2 and 17 to the financial statements

Critical Audit Matter Description

The Company’s quantitative analysis of goodwill and the indefinite-lived Pura Vida brand for impairment involves the comparison of the fair value of the reporting unit or asset to its carrying value.

The fair value of the reporting unit was determined using an income-based approach and a market-based approach, which required management to make significant estimates and assumptions including the projected revenue growth, operating profit and discount rate.

The Company used the relief-from-royalty method to estimate the fair value of the Pura Vida brand, which required management to make significant estimates and assumptions related to the projected revenue growth, long-term growth rate, royalty rate and discount rate.

The goodwill balance was $44.3 million as of January 30, 2021, all of which related to the Pura Vida reporting unit.

The carrying value of the Pura Vida brand was $36.7 million as of January 30, 2021.

The fair values of the Pura Vida reporting unit and the Pura Vida brand exceeded their carrying values as of the measurement date and, therefore, no impairment was recognized during fiscal 2021.

We identified the impairment analysis of goodwill and the Pura Vida brand as a critical audit matter because of the significant judgments made by management to estimate the fair value of these indefinite-lived assets.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions particularly related to the projected revenue growth and discount rate for the goodwill impairment analysis and the projected revenue growth, royalty rate, and discount rate for the Pura Vida brand impairment analysis.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the projected revenue growth and discount rates for goodwill and Pura Vida brand as well as the royalty rate for the Pura Vida brand included the following, among others:

• We tested the effectiveness of controls over management’s goodwill and Pura Vida brand impairment analyses, including those over the determination of the fair value, such as controls related to management’s forecasts of projected revenue growth, selection of royalty rate and discount rates.

• We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts.

• We evaluated the reasonableness of management’s projected revenue growth by comparing the forecasts to (1) historical revenue, (2) internal communications to management and the Board of Directors, and (3) forecasted information included in industry reports.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rates and royalty rate assumptions, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rates and royalty rate selected by management.

/s/ Deloitte & Touche LLP

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of

Vera Bradley, Inc.

To the shareholders and the Board of Directors of Vera Bradley, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Vera Bradley, Inc and subsidiaries (the “Company”) as of February 1, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 1, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended February 1, 2020, of the Company and our report dated March 31, 2020, expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of a new accounting standard.

As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Pura Vida, which was acquired on July 16, 2019, and whose financial statements constitute approximately 25% of total assets and 6% of total liabilities (excluding contingent consideration) as of February 1, 2020 and approximately 13% of net revenues of the consolidated financial statement amounts as of and for the year ended February 1, 2020.

Accordingly, our audit did not include the internal control over financial reporting at Pura Vida.

We have audited the internal control over financial reporting of Vera Bradley, Inc.

and subsidiaries (the “Company”) as of January 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended January 30, 2021, of the Company and our report dated March 30, 2021, expressed an unqualified opinion on those financial statements.

Basis for Opinion

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(in thousands)

2021 February 1,

Current assets:

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Accounts receivable, net 27,543 24,290

Inventories 141,416 123,606

Income taxes receivable 7,372 1,043

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Intangible assets, net 47,296 56,305

Goodwill 44,254 44,254

Long-term investments — 14,912

Deferred income taxes 3,530 7,656

Other assets 6,342 5,328

Total assets $ 513,787 $ 535,061

Liabilities, Redeemable Noncontrolling Interest, and Shareholders’ Equity

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Retained earnings 316,526 307,414

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income 8 158

Treasury stock ( 107,060 ) ( 104,159 )

Total shareholders’ equity of Vera Bradley, Inc.

314,907 303,770

Total liabilities, redeemable noncontrolling interest, and shareholders’ equity $ 513,787 $ 535,061

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Fiscal Year Ended

2021 February 1,

2020 February 2,

Net revenues $ 468,272 $ 495,212 $ 416,097

Cost of sales 202,754 223,411 177,510

Gross profit 265,518 271,801 238,587

Selling, general, and administrative expenses 252,588 253,425 211,984

Other income 135 1,098 498

Operating income 13,065 19,474 27,101

Interest income, net

Interest expense (income), net 1,203 ( 1,085 ) ( 1,125 )

Income before income taxes 11,862 20,559 28,226

Income tax expense 1,173 5,315 7,469

Net loss attributable to redeemable noncontrolling interest

Net income 10,689 15,244 20,757

Net income (loss) attributable to redeemable noncontrolling interest 2,008 ( 803 ) —

Net income attributable to Vera Bradley, Inc.

$ 8,681 $ 16,047 $ 20,757

Basic weighted-average shares outstanding 33,390 33,983 35,222

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Basic net income per share attributable to Vera Bradley, Inc.

common shareholders $ 0.26 $ 0.47 $ 0.59

Diluted net income per share attributable to Vera Bradley, Inc.

common shareholders $ 0.26 $ 0.47 $ 0.59

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

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Fiscal Year Ended

Unrealized gain (loss) on available for sale debt investments

2021 February 1,

2020 February 2,

Net income $ 10,689 $ 15,244 $ 20,757

Unrealized (loss) gain on available for sale debt investments ( 172 ) 131 96

Cumulative translation adjustment 22 51 ( 6 )

Comprehensive income, net of tax 10,539 15,426 20,847

Comprehensive loss attributable to redeemable noncontrolling interest

Comprehensive income (loss) attributable to redeemable noncontrolling interest 2,008 ( 803 ) —

Comprehensive income attributable to Vera Bradley, Inc.

$ 8,531 $ 16,229 $ 20,847

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

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($ in thousands, except share data)

Number of Shares

Number of Shares Accumulated

Comprehensive (Loss) Income

Retained Earnings

Total Permanent

Balance at January 28, 2017

Stock Treasury

Stock Additional

Capital Retained Earnings Treasury

Stock Total Shareholders’

Equity of Vera Bradley, Inc.

Balance at February 3, 2018 35,459,025 5,642,485 $ 91,192 $ 270,783 $ ( 114 ) $ ( 76,578 ) $ 285,283

Net income — — 20,757 — — 20,757

Translation adjustments — — — — ( 6 ) — ( 6 )

Unrealized loss on available for sale investments

Unrealized gain on available for sale investments — — — — 96 — 96

Restricted shares vested, net of repurchase for taxes 181,533 — ( 547 ) — — — ( 547 )

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Treasury stock purchased ( 1,293,138 ) 1,293,138 — — — ( 16,261 ) ( 16,261 )

Cumulative adjustment for ASC 606 adoption — — — 454 — — 454

Balance at February 2, 2019 34,347,420 6,935,623 $ 95,572 $ 291,994 $ ( 24 ) $ ( 92,839 ) $ 294,703

Net income attributable to Vera Bradley, Inc.

— — — 16,047 — — 16,047

Translation adjustments — — — — 51 — 51

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Cumulative adjustment for ASC 842 adoption — — — ( 196 ) — — ( 196 )

Redeemable noncontrolling interest redemption value adjustment — — — ( 431 ) — — ( 431 )

Balance at February 1, 2020 33,503,249 8,011,372 $ 100,357 $ 307,414 $ 158 $ ( 104,159 ) $ 303,770

Net income attributable to Vera Bradley, Inc.

— — — 8,681 — — 8,681

Translation adjustments — — — — 22 — 22

Unrealized gain on available for sale investments

Unrealized loss on available for sale investments — — — — ( 172 ) — ( 172 )

Restricted shares vested, net of repurchase for taxes 293,076 — ( 575 ) — — — ( 575 )

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Treasury stock purchased ( 381,835 ) 381,835 — — — ( 2,901 ) ( 2,901 )

Cumulative adjustment for ASC 842 adoption

Redeemable noncontrolling interest redemption value adjustment — — — 431 — — 431

Balance at February 1, 2020

Balance at January 30, 2021 33,414,490 8,393,207 $ 105,433 $ 316,526 $ 8 $ ( 107,060 ) $ 314,907

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

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Fiscal Year Ended

2021 February 1,

2020 February 2,

Cash flows from operating activities

Net income $ 10,689 $ 15,244 $ 20,757

Adjustments to reconcile net income to net cash provided by operating activities:

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Deferred income taxes 4,126 ( 864 ) ( 1,497 )

Cash gain on investments

Loss (gain) on investments 13 ( 188 ) 32

Adjustment of earn-out liability 229 ( 1,650 ) —

Amortization of step-up in inventory basis — 8,274 —

Other non-cash charges, net

Other non-cash (gain) charges, net ( 1 ) 202 512

Changes in assets and liabilities:

Accounts receivable ( 5,579 ) ( 1,013 ) 438

Inventories ( 17,810 ) ( 12,645 ) ( 3,994 )

Prepaid expenses and other assets ( 7,940 ) ( 4,477 ) ( 100 )

Accounts payable 7,353 ( 615 ) 738

Income taxes ( 8,121 ) ( 284 ) 4,933

Operating lease liabilities, net ( 22,680 ) ( 25,302 ) —

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Proceeds from maturities and sales of investments 23,281 38,333 85,559

Cash paid for business acquisition, net of cash acquired

Cash received (paid) for business acquisition, net of cash acquired 993 ( 76,032 ) —

Proceeds from disposal of property, plant, and equipment — — 5

Net cash (used in) provided by investing activities

Net cash provided by (used in) investing activities 17,680 ( 69,966 ) 17,955

Cash flows from financing activities

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Payments of debt-issuance costs — — ( 160 )

Borrowings under asset-based revolving credit agreement 60,000 — —

Repayment of borrowings under asset-based revolving credit agreement ( 60,000 ) — —

Payment of contingent consideration for business acquisition ( 18,677 ) — —

Net cash used in financing activities ( 24,146 ) ( 14,285 ) ( 16,771 )

Effect of exchange rate changes on cash and cash equivalents 22 51 ( 6 )

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents 14,258 ( 63,576 ) 44,742

Cash and cash equivalents, beginning of period 49,917 113,493 68,751

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Fiscal Year Ended

2021 February 1,

2020 February 2,

Supplemental disclosure of cash-flow information

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Repurchase of common stock incurred but not yet paid

As of January 30, 2021, February 1, 2020 and February 2, 2019 $ — $ 176 $ 197

As of February 1, 2020, February 2, 2019 and February 3, 2018 $ 176 $ 197 $ —

As of February 2, 2019, February 3, 2018 and January 28, 2017

Purchases of property, plant, and equipment incurred but not yet paid

As of January 30, 2021, February 1, 2020 and February 2, 2019 $ 343 $ 559 $ 1,065

As of February 1, 2020, February 2, 2019 and February 3, 2018 $ 559 $ 1,065 $ 1,183

As of February 2, 2019, February 3, 2018 and January 28, 2017

Contingent consideration related to business acquisition $ — $ 20,098 $ —

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and its wholly and majority 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.

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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.

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and the Vera Bradley annual outlet sale in Fort Wayne, Indiana.

As of February 1, 2020 , the Company operated 88 full-line stores and 63 factory outlet stores.

As of January 30, 2021, the Company operated 75 full-line stores and 69 factory outlet stores.

In light of the COVID-19 pandemic, the Company cancelled its 2020 annual outlet sale.

• The VB Indirect business consists of sales of Vera Bradley products to approximately 2,000 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 and www.puravidabracelets.eu, and through the distribution of Pura Vida-branded products to wholesale retailers, substantially all of which are located in the United States.

• The Pura Vida segment represents revenues generated through the Pura Vida websites, www.puravidabracelets.com, www.puravidabracelets.eu, 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 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 and reduced mall operating hours during fiscal 2021.

Although e-commerce operations remained open for both of our brands, the aforementioned items had a material adverse impact on overall consumer demand, traffic, and sales.

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;

• Temporarily furloughing approximately 80 % of its workforce mid first quarter;

• Temporarily reducing base compensation for remaining salaried associates, with reductions on a graduated scale ranging from 15 % to 30 %, and 75 % for our 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 our $ 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;

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

• 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;

• Extending vendor payment terms.

On May 5, 2020, the Company began to open its Vera Bradley retail stores in a phased approach.

All factory and full line stores were opened as of the end of the fiscal year, although with reduced hours, lower staffing levels, reduced foot traffic, and greatly enhanced safety protocols.

The Company has brought back substantially all associates from furlough;

reinstated the base compensation reductions;

reinstated the cash compensation to the Board of Directors;

paid back $ 60.0 million of borrowings under its Credit Agreement;

and reinstated the 401(k) match in January 2021.

The Company continued to manage operating expenses and inventory levels, and work with landlords on rent abatement and payment terms.

In addition, the Company is leveraging elements of the Coronavirus Aid Relief and Economic Security (CARES) Act.

The CARES Act tax provisions include retention credits, the deferral of the employer portion of certain payroll taxes, and tax benefits related to a net operating loss carryback.

Principles of Consolidation

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The Company utilizes a 52-53 week fiscal year ended on the Saturday closest to January 31.

As such, fiscal years 2020 and 2019, ending on February 1, 2020 and February 2, 2019 , respectively, each reflected a 52-week period.

Fiscal year 2018 ending on February 3, 2018 reflected a 53 -week period.

As such, fiscal years 2021, 2020, and 2019, ending on January 30, 2021, February 1, 2020, and February 2, 2019 respectively, each reflected a 52-week period.

Summary of Significant Accounting Policies

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Cash and cash equivalents represent cash on hand, deposits with financial institutions, and investments with an original maturity of three months or less.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Short-term investments consist of investments with a maturity within one year of the balance sheet date.

As of January 30, 2021, these investments consisted of U.S.

corporate debt securities.

As of February 1, 2020, these investments consisted of U.S.

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asset-backed securities.

As of February 2, 2019 , these investments consisted of U.S.

corporate debt securities, municipal securities, U.S.

Treasury securities, and commercial paper.

Long-term investments consist of investments with a maturity of greater than one year from the balance sheet date.

There were no long-term investments as of January 30, 2021.

As of February 1, 2020, these investments consisted of U.S.

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asset-backed securities, and other foreign securities.

As of February 2, 2019 , these investments consisted of U.S.

corporate debt securities, U.S.

asset-backed securities, and municipal securities.

The Company’s objective with respect to these investments is to earn a higher rate of return, relative to deposit accounts, on funds that are otherwise not anticipated to be required to meet liquidity needs in the near-term while maintaining a low level of investment risk.

These debt securities are classified as available-for-sale;

therefore, unrealized gains and losses are recorded within other comprehensive income.

Interest income earned is recorded within interest income, net, in the Company's Consolidated Statements of Operations.

Refer to Note 15 herein for additional information regarding the Company's investments.

therefore, unrealized

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

gains and losses are recorded within other comprehensive income.

Interest income earned is recorded within interest expense (income), net, in the Company's Consolidated Statements of Operations.

Refe r to Note 14 herein for ad ditional information regarding the Company's investments.

Inventories are stated at the lower of cost or net realizable value.

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The components of inventories were as follows:

2021 February 1,

Raw materials (1)

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The Company recognizes depreciation and amortization expense within cost of sales for expenditures related to distribution center, sourcing, and other related functions and selling, general, and administrative expenses for all other expenditures.

Leasehold improvements are amortized over the shorter of the life of the asset or the lease term.

Leas ehold improvements are amortized over the shorter of the life of the asset or the lease term.

Lease terms typically range from three to ten years .

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At the time of disposal, the cost of assets sold or retired and the related accumulated depreciation or amortization are removed from the accounts and any resulting loss is included in the Consolidated Statements of Operations.

Property, plant, and equipment and operating right-of-use assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset groups may not be recoverable.

Property, plant, and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset groups may not be recoverable.

The reviews are conducted at the lowest identifiable level of cash flows, which is at the retail store level for store-related assets.

If the estimated

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

undiscounted future cash flows related to the property, plant, and equipment and operating right-of-use assets are less than the carrying value, the Company recognizes a loss equal to the difference between the carrying value and the fair value, as further defined below in “Fair Value of Financial Instruments.”

If the estimated undiscounted future cash flows related to the property, plant, and equipment and operating right-of-use assets are less than the carrying value, the Company recognizes a loss equal to the difference between the carrying value and the fair value, as further defined below in “Fair Value of Financial Instruments.”

Routine maintenance and repair costs are expensed as incurred.

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Software costs that do not meet capitalization criteria are expensed as incurred.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Revenue Recognition and Accounts Receivable

Accounting Standard Codification (“ASC”) Topic 606, Revenue from Contracts with Customers , was adopted on a modified retrospective basis on February 4, 2018.

Accordingly, prior year financial information contained herein was not recast and is reported under the prior accounting standard.

Refer to Note 3 herein for additional information.

Vera Bradley and Pura Vida product sales to customers, including amounts billed to customers for shipping fees, as well as royalties from licensing arrangements related to the Vera Bradley brand, are included in net revenues.

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Revenue from the sale of the Company’s products is recognized when control of the promised goods or services is transferred to customers, in the amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

Revenue is recognized using the five-step model identified in ASC Topic 606.

Revenue is recognized using the five-step model.

These steps are:

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The returns and credits reserve and the related activity for each fiscal year presented were as follows (in thousands):

Beginning of Year

Taken / Written Off

Balance at End

Fiscal year ended February 1, 2020

Beginning of Year Provision

Net Revenues Allowances

Taken / Written Off Balance at End

Fiscal year ended January 30, 2021 $ 1,362 $ 14,284 $ ( 13,932 ) $ 1,714

Fiscal year ended February 1, 2020 1,911 15,467 ( 16,016 ) 1,362

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The Company establishes an allowance for doubtful accounts based on historical experience and customer-specific identification and believes that collections of receivables, net of the allowance for doubtful accounts, are reasonably assured.

The allowance for doubtful accounts was approximately $0.5 million and $0.3 million as of February 1, 2020 and February 2, 2019 , respectively.

The allowance for doubtful accounts was approximately $ 1.1 million and $ 0.5 million as of January 30, 2021 and February 1, 2020, respectively.

The provision for doubtful accounts is based upon the likelihood of default expected during the life of the receivable.

Cost of Sales

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Costs and related expenses to purchase and distribute the products are recorded as cost of sales when the related revenues are recognized.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Operating Leases

ASC Topic 842, Leases , was adopted on a modified retrospective basis on February 3, 2019.

Accordingly, prior year financial information contained herein was not recast and is reported under the prior accounting standard.

This comparability primarily impacts the Company's Consolidated Balance Sheets.

Refer to Note 4 herein for additional information regarding the Company's leases.

The Company recognizes lease liabilities at the lease commencement date based upon the present value of the remaining lease payments.

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Operating right-of-use assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

The reviews are conducted at the lowest identifiable level of cash flows, which is at the retail store level for store-related assets.

The reviews are conducted at the lowest identifiable level of cash

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

flows, which is at the retail store level for store-related assets.

If the estimated undiscounted future cash flows related to the operating right-of-use assets are less than the carrying value, the Company recognizes a loss equal to the difference between the carrying value and the fair value, as further defined below in “Fair Value of Financial Instruments.”

Refer to Note 4 herein for additional information regarding the Company's leases.

Store Pre-Opening, Occupancy, and Operating Costs

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Goodwill and Other Intangible Assets

Upon an acquisition, the Company records the fair value of the identifiable intangible assets.

As of February 1, 2020 , these items consisted of the Pura Vida brand, customer relationships, and non-competition agreements.

Assets that are determined to have an indefinite life, including goodwill and the Pura Vida Brand, are not amortized but are assessed for impairment at least annually or whenever events or circumstances indicate that the carrying amount of the asset may not be recoverable.

Upon an acquisition, the Company records the fair value of goodwill and the identifiable intangible assets.

As of January 30, 2021 and February 1, 2020, the identifiable intangible assets consisted of the Pura Vida brand, customer relationships, and non-competition agreements.

Assets that are determined to have an indefinite life, including goodwill and the Pura Vida brand, are not amortized but are assessed for impairment at least annually or whenever events or circumstances indicate that the goodwill may be impaired .

Definite-lived intangible assets, including customer relationships and non-competition agreements, are amortized over their estimated useful lives and are also subject to impairment testing, similar to the Company’s long-lived assets.

The Company performs its annual goodwill and Pura Vida brand impairment test generally during the second quarter.

The Company may first use a qualitative analysis to determine whether it is more-likely-than-not that the fair value of the reporting unit (including goodwill) is less than its carrying value.

If it is determined that it is more-likely-than-not that the fair value is less than the carrying value after this analysis, a quantitative impairment test is performed.

If the Company elects to bypass the qualitative analysis, or if it is determined through the qualitative analysis that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying value, a quantitative analysis is performed.

Under the quantitative test, the fair value of the reporting unit is compared with its carrying value (including goodwill).

If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the amount of total goodwill allocated to the reporting unit.

The fair value of the reporting unit is determined using an income-based approach and a market-based approach.

The Company's critical estimates for the goodwill test include the revenue growth rate, operating profit, and discount rate.

The fair value of the Pura Vida brand is estimated using the relief-from-royalty method.

The critical estimates for the Pura Vida brand impairment test include the projected revenue growth, long-term growth rate, the royalty rate, and the discount rate.

As of January 30, 2021, the carrying value of goodwill and the Pura Vida brand was $ 44.3 million and $ 36.7 million, respectively.

For the annual impairment analysis performed during fiscal 2021, we performed a quantitative analysis.

There was no impairment recorded for goodwill or the Pura Vida brand during fiscal 2021.

The estimated fair values of our Pura Vida reporting unit and the Pura Vida brand are subject to change as a result of many factors including changing economic conditions.

Should actual cash flows and our future estimates deteriorate from the estimates we used, impairment charges may be necessary in future years.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Redeemable Noncontrolling Interest

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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.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

In the event of a change in control of the Company, the parties may exercise a portion of their put and call rights prior to the fifth anniversary of the closing date (as defined in the Put/Call Agreement).

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Discount rates reflect market-based estimates of the risks associated with the projected cash flows directly resulting from the use of those assets in operations.

Refer to Note 17 herein for additional information regarding the redeemable noncontrolling interest.

Refer to Note 16 her ein for additional information regarding the redeemable noncontrolling interest.

Stock-Based Compensation

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The Company recognizes this expense, net of estimated forfeitures, on a straight-line basis over the requisite service period.

Other Income and Advertising Costs

The Company expenses advertising costs at the time the promotion first appears in media, in stores, or on the website, and includes those costs in selling, general, and administrative expenses in the Consolidated Statements of Operations.

The Company classifies the related recovery of a portion of such costs from VB Indirect retailers as other income in the Consolidated Statements of Operations.

Advertising Costs

The Company expenses advertising costs at the time the promotion first appears in media, in stores, or on its websites, and includes those costs in selling, general, and administrative expenses in the Consolidated Statements of Operations.

Total advertising expense was as follows (in thousands):

Fiscal year ended February 1, 2020 (1)

Fiscal year ended January 30, 2021 (1)

Fiscal year ended February 1, 2020 (1)

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(1) Increase primarily as a result of the inclusion of Pura Vida beginning July 17, 2019.

Total recovery from VB Indirect retailers was as follows (in thousands):

Fiscal year ended February 1, 2020

Fiscal year ended February 2, 2019

Fiscal year ended February 3, 2018

Debt-Issuance Costs

Unamortized debt-issuance costs totaled $0.3 million as of February 1, 2020 , and $0.4 million as of February 2, 2019 , and are included in other assets on the Consolidated Balance Sheets.

The Company entered into an asset-based credit agreement on September 7, 2018 and recorded an immaterial amount of expense and debt-issuance costs related to the agreement.

Refer to Note 6 herein for additional information.

Amortization expense of $0.1 million , $0.3 million , and $0.2 million is included in interest income, net in the Consolidated Statements of Operations for the fiscal years ended February 1, 2020 , February 2, 2019 , and February 3, 2018 , respectively.

Fiscal 2019 included a $0.2 million write-off of certain fees from the Company’s prior credit agreement.

Fiscal 2020 includes approximately six months of Pura Vida advertising expense whereas fiscal 2021 includes 12 months of expense.

Vera Bradley, Inc.

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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 Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, other current assets, and accounts payable as of February 1, 2020 and February 2, 2019 , approximated their fair values.

The following table details the fair value measurements of the Company’s investments as of February 1, 2020 and February 2, 2019 (in thousands):

February 1, 2020

February 2, 2019

February 1, 2020

February 2, 2019

February 1, 2020

February 2, 2019

The carrying amounts reflected on the Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, and accounts payable as of January 30, 2021 and February 1, 2020, approximated their fair values.

The following table details the fair value measurements of the Company’s investments as of January 30, 2021 and February 1, 2020 (in thousands):

Level 1 Level 2 Level 3

January 30, 2021 February 1, 2020 January 30, 2021 February 1, 2020 January 30, 2021 February 1, 2020

Cash equivalents (1)

$ 1,565 $ 27 $ — $ 2,198 $ — $ —

Short-term investments:

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asset-backed securities — — — 323 — —

treasury securities

Long-term investments:

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asset-backed securities — — — 582 — —

Municipal securities

(1) Cash equivalents include commercial paper and a money market fund that have a maturity of three months or less at the date of purchase.

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Level 3 inputs are derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The Company recorded $6.3 million in impairment charges during the fiscal year ended February 3, 2018 .

The Company recorded $ 7.4 million in impairment charges related to store assets including property, plant, and equipment and lease right-of-use assets during the fiscal year ended January 30, 2021.

There were no impairment charges for the fiscal years ended February 1, 2020 and February 2, 2019.

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These assets are measured at fair value if determined to be impaired.

Refer to Note 16 herein for additional information on the methods used in the preliminary valuation of acquired intangible assets.

Refer to Note 15 herein for additional information on the methods used in the valuation of acquired intangible assets.

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.

The Company accrues income taxes payable or refundable and recognizes deferred tax assets and liabilities based on differences between the book and tax bases of assets and liabilities.

The Company measures deferred tax assets and liabilities using enacted rates in effect for the years in which the differences are expected to reverse, and recognizes the effect of a change in enacted rates in the period of enactment.

As such, the Company recognized additional income tax expense of $2.1 million during fiscal 2018 upon the enactment of the Tax Cuts and Jobs Act.

Refer to Note 7 herein for additional information.

The Company establishes liabilities for uncertain positions taken or expected to be taken in income tax returns, using a more-likely-than-not recognition threshold.

The Company includes in income tax expense any interest and penalties related to uncertain tax positions.

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 in the same line item within the Company's Consolidated Statements of Operations as the related hosting fees.

The balance of the unamortized CCA implementation costs totaled $ 8.1 million and $ 3.8 million as of January 30, 2021 and February 1, 2020, respectively.

Of this total, $ 2.4 million and $ 0.3 million was recorded within prepaid expenses and other current assets and $ 5.7 million and $ 3.5 million was recorded within other assets on the Company's Consolidated Balance Sheets as of January 30, 2021 and February 1, 2020, respectively.

The CCA implementation costs are recorded within operating activities in the Company's Consolidated Statements of Cash Flows.

Recently Issued Accounting Pronouncements

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In addition, the Company evaluated the usage of applicable transition relief practical expedients at the adoption date as follows:

Practical Expedient Package

The Company elected the practical expedient package and did not re-assess whether a contract was or contained a lease;

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Practical Expedient Package The Company elected the practical expedient package and did not re-assess whether a contract was or contained a lease;

did not re-assess lease classification as an operating or financing lease for expired or existing leases;

and did not re-assess whether a lease contained initial direct costs for expired or existing leases.

The Company did not elect the hindsight practical expedient, which allows for hindsight when assessing the lease term and impairment of right-of-use assets.

Hindsight The Company did not elect the hindsight practical expedient, which allows for hindsight when assessing the lease term and impairment of right-of-use assets.

The Company has operating leases at all of its retail stores;

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Refer to Note 4 herein for additional information regarding ASC Topic 842, including details of practical expedients related to policy elections.

In August 2018, the FASB issued ASU 2018-15, Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract , which aligns the requirements for capitalizing or expensing implementation costs in hosting arrangements (regardless of whether they convey a license to the hosted software) with capitalizing or expensing implementation costs incurred to develop or obtain internal-use software.

This guidance is effective for interim and annual periods beginning on or after December 15, 2019 (fiscal 2021).

Early adoption is permitted, and the amendments can be adopted either retrospectively or prospectively.

The Company adopted this standard at the beginning of its fiscal 2020 (February 3, 2019) on a prospective basis.

The adoption of this standard had an immaterial impact on the Company's Consolidated Financial Statements.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

In January 2017 the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment .

This standard eliminates Step 2 from the goodwill impairment test.

Instead, an entity should compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years (fiscal 2021).

Early adoption is permitted.

The Company early adopted this standard during the third quarter of fiscal 2020, with no impact on its consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements .

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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 Company is currently evaluating the impact of the guidance on its consolidated financial statements.

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 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):

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The Company is currently evaluating the impact of the guidance on its consolidated financial statements.

Revenue from Contracts with Customers

The Company adopted ASC Topic 606 beginning in the first quarter of fiscal 2019 using the modified retrospective adoption method.

Accordingly, disclosures herein required by the standard were excluded for the prior-year period.

The following tables illustrate the financial statement line items that were impacted as a result of the adoption of ASC Topic 606 as of and for the fifty-two weeks ended February 2, 2019.

These adjustments are a result of adjusting for shipments not yet received by customers, gift card breakage revenue, and the re-classification of certain liabilities for estimated product returns, which are further described in Note 2 herein (in thousands).

February 2, 2019

Balances Under Prior U.S.

Consolidated Balance Sheet

Accounts receivable, net

Income taxes receivable

Total current assets

Deferred income taxes

Other accrued liabilities

Total current liabilities

Total liabilities

Retained earnings

Total shareholders’ equity

Total liabilities and shareholders’ equity

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Fifty-Two Weeks Ended

February 2, 2019

Amounts Under Prior U.S.

Consolidated Statement of Operations

Cost of sales

Gross profit (loss)

Operating income (loss)

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Fifty-Two Weeks Ended

February 2, 2019

Amounts Under Prior U.S.

Consolidated Statement of Cash Flows

Cash flows from operating activities

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Deferred income taxes

Changes in assets and liabilities:

Accounts receivable

Accrued and other liabilities

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Revenue from Contracts with Customers

Disaggregation of Revenue

The following presents the Company's net revenues disaggregated by product category for the fifty-two weeks ended February 1, 2020 and February 2, 2019 (in thousands):

The following presents the Company's net revenues disaggregated by product category for the fifty-two weeks ended January 30, 2021, February 1, 2020, and February 2, 2019 (in thousands):

Fifty-Two Weeks Ended

January 30, 2021

VB Direct Segment VB Indirect Segment Pura Vida Segment Total

Product categories

Bags $ 105,197 $ 26,732 $ — $ 131,929

Travel 59,606 12,191 — 71,797

Accessories 49,578 8,207 106,547 164,332

Apparel/Footwear (6)

36,762 13,416 1,857 52,035

Home 31,819 2,253 — 34,072

Other 6,312 (1) 3,718 (2) 4,077 (3) 14,107

Total net revenues $ 289,274 (4) $ 66,517 (5) $ 112,481 (4) $ 468,272

(1) Primarily includes net revenues from stationery, freight, and gift card breakage.

(2) Primarily includes net revenues from licensing agreements, freight, and merchandising.

(3) Related to freight.

(4) Net revenues were related to product sales recognized at a point in time.

(5) $ 63.5 million of net revenues related to product sales recognized at a point in time and $ 3.0 million of net revenues related to sales-based royalties recognized over time.

(6) Includes mask sales.

Fifty Two Weeks Ended

February 1, 2020

VB Direct Segment

VB Indirect Segment

Pura Vida Segment

VB Direct Segment VB Indirect Segment Pura Vida Segment Total

Product categories (1)

Bags $ 136,509 $ 41,206 $ — $ 177,715

Travel 91,732 16,712 — 108,444

Accessories 75,162 15,470 64,568 155,200

Home 32,987 2,703 — 35,690

Apparel/Footwear 5,092 640 — 5,732

Other 6,002 (2) 5,080 (3) 1,349 (4) 12,431

Total net revenues $ 347,484 (5) $ 81,811 (6) $ 65,917 (5) $ 495,212

(1) Primarily includes net revenues from apparel/footwear, stationery, freight, and gift card breakage.

(2) Primarily includes net revenues from licensing agreements, freight, apparel/footwear, and merchandising.

(1) Other net revenues have been recast to exclude Apparel/Footwear to conform with the current-year presentation.

(2) Primarily includes net revenues from stationery, freight, and gift card breakage.

(3) Primarily includes net revenues from licensing agreements, freight, and merchandising.

(4) Related to freight.

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(6) $ 78.0 million of net revenues related to product sales recognized at a point in time and $ 3.8 million of net revenues related to sales-based royalties recognized over time.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Fifty Two Weeks Ended

February 2, 2019

VB Direct Segment

VB Indirect Segment

Pura Vida Segment

VB Direct Segment VB Indirect Segment Pura Vida Segment Total

Product categories (1)

Bags $ 128,255 $ 42,626 $ — $ 170,881

Travel 87,746 19,767 — 107,513

Accessories 75,751 17,043 — 92,794

Home 26,846 2,757 — 29,603

Apparel/Footwear 4,050 948 — 4,998

Other 5,386 (2) 4,922 (3) — 10,308

Total net revenues $ 328,034 (4) $ 88,063 (5) $ — $ 416,097

(1) Primarily includes net revenues from stationery, apparel/footwear, freight, and gift card breakage.

(2) Primarily includes net revenues from licensing agreements, freight, apparel/footwear, and merchandising.

(1) Other net revenues have been recast to exclude Apparel/Footwear to conform with the current-year presentation.

(2) Primarily includes net revenues from stationery, freight, and gift card breakage.

(3) Primarily includes net revenues from licensing agreements, freight, and merchandising.

(4) Net revenues were related to product sales recognized at a point in time.

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Contract Balances

Contract liabilities as of February 1, 2020 and February 2, 2019 , consisted of $3.9 million and $1.6 million , respectively.

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 and other customer pre-payments.

The balance as of February 2, 2019 consisted of unearned revenue related to unredeemed gift cards and an immaterial amount of unearned revenue for pre-payments of royalties in certain of the Company’s licensing arrangements.

Contract liabilities as of January 30, 2021 and February 1, 2020, consisted of $ 4.1 million and $ 3.9 million, respectively.

The balance as of January 30, 2021 consisted of unearned revenue related to the monthly bracelet and jewelry clubs of the Pura Vida segment, unredeemed gift cards, Pura Vida loyalty club points, Pura Vida customer deposits and payments collected before shipment, and an immaterial amount of unearned revenue for pre-payments of royalties in certain of the Company’s licensing arrangements.

The balance as of February 1, 2020 consisted of 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 unearn ed 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 Consolidated Balance Sheets.

The Company did not have contract assets as of February 1, 2020 and February 2, 2019 .

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

The balance for accounts receivable from contracts with customers, net of allowances, as of February 1, 2020 and February 2, 2019 was $16.3 million and $14.1 million , respectively, which is recognized within accounts receivable, net, on the Company’s Consolidated Balance Sheets.

The provision for doubtful accounts was $0.5 million and $0.3 million as of February 1, 2020 and February 2, 2019 , respectively.

Substantially all contract liabilities are recognized within one year.

The Company did no t have contract assets as of January 30, 2021 and February 1, 2020.

The balance for accounts receivable from contracts with customers, net of allowances, as of January 30, 2021 and February 1, 2020 was $ 26.0 million and $ 16.3 million, respectively, which is recognized within accounts receivable, net, on the Company’s Consolidated Balance Sheets.

The provision for doubtful accounts was $ 1.1 million and $ 0.5 million as of January 30, 2021 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

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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 February 1, 2020 .

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 January 30, 2021.

Significant Judgments

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In the Vera Bradley retail stores (recognized within the VB Direct segment), control is transferred and net revenue is recognized at the point of sale.

Product shipments for the Company’s e-commerce channels (recognized within the VB Direct and Pura Vida segments) and shipments to its wholesale retailers (recognized within the VB Indirect segment and Pura Vida segment) are generally shipped Free on Board (“FOB”) shipping point typically from its distribution center in Roanoke, Indiana, for Vera Bradley products and primarily from its third-party fulfillment center in Tijuana, Mexico for Pura Vida products.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Pura Vida segment) are generally shipped Free on Board (“FOB”) shipping point typically from its distribution center in Roanoke, Indiana, for Vera Bradley products and primarily from its third-party fulfillment center in Tijuana, Mexico for Pura Vida products.

Net revenue is recognized upon shipment consistent with when control is transferred to the customer.

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The net revenues associated with these contracts are immaterial, and the Company does not adjust for the time value of money.

Concentration of Credit Risk

Five customers represented approximately 45.0 % of the balance of accounts receivable, net as of January 30, 2021.

The Company temporarily closed its full-line and factory outlet stores on March 19, 2020, due to the COVID-19 pandemic.

As of the end of fiscal 2021, all stores have been reopened.

As a result of the temporary closures, certain rent payments have been deferred.

An immaterial am ount of rent abatements and deferrals were received as of January 30, 2021.

In April 2020, the FASB issued guidance that allows a company to elect to account for COVID-19-related rent concessions as (1) if they were part of the enforceable rights and obligations under the existing lease contract or (2) lease modifications.

Leases that are eligible under this guidance include those that do not have a substantial increase of obligations to the lessee.

The Company has elected to treat COVID-19-related rent abatements as a reduction to its operating lease cost in the period the abatements are received for leases that do not have a substantial change in obligations.

Lease abatements received which were coupled with lease extensions of greater than a month, or a substantial change of future lease payments, were recorded as a lease modification under ASC 842.

The Company also received lease payment deferrals in some cases, extending the due date of the lease payments.

The Company did not remeasure the lease liability and continued to account for the lease following the rights and obligations of the existing lease.

Vera Bradley, Inc.

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Determination of Lease Terms

Retail store leases have remaining terms of up to 10 years as of February 1, 2020 .

Retail store leases have remaining terms of up to 10 years as of January 30, 2021.

These leases generally have early termination rights when certain sales thresholds are not met for a specified measurement period.

The Company's other leases have remaining terms of up to approximately seven years as of February 1, 2020 .

The Company's other leases have remaining terms of up to approximately six years as of January 30, 2021.

If the lease contains a renewal period at the Company's option, the renewal period is included in the lease term if determined the option is reasonably certain to be exercised at lease commencement.

The Company's lease options generally do not include termination rights other than those mentioned.

The Company did not have financing leases as of February 1, 2020 .

The Company did not have financing leases as of January 30, 2021.

Variable Rental Payments

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Discount Rate

The weighted-average discount rate as of February 1, 2020 , was 5.0% .

The rate implicit in the lease is not readily determinable in the lease agreements;

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.

The weighted-average discount rate as of January 30, 2021 and February 1, 2020, was 4.8 % and 5.0 %, respectively.

The discount rate is not readily determinable in the lease;

therefore, the Company estimated the incremental borrowing rate, at the commencement or remeasurement 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 February 1, 2020 , the Company had retail store leases 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 its Consolidated Balance Sheet.

These leases contain undiscounted lease payments, which will be included in the determination of the lease liability, totaling approximately $3.1 million and have approximate terms of 10 years commencing in fiscal 2021.

As of January 30, 2021, the Company did no t have leases which were executed but did it not have control of the underlying assets.

Practical Expedients (Policy Elections)

The Company has elected the following practical expedients as policy elections upon the adoption of ASC Topic 842.

Short-Term Leases

The Company elected to exclude leases with a term of 12 months or less from recognition on the balance sheet for all leases.

Not Separating Lease and Nonlease Components

The Company elected to combine lease and nonlease components and recognize as a single lease component for all leases.

Short-Term Leases The Company elected to exclude leases with a term of 12 months or less from recognition on the balance sheet for all leases.

Not Separating Lease and Nonlease Components The Company elected to combine lease and nonlease components and recognize as a single lease component for all leases.

Refer to Note 2 herein for information regarding transition practical expedients elected.

Amounts Recognized in the Consolidated Financial Statements

The following l ease 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 Consolidated Statements of Operations for the fiscal years ended January 30, 2021 and February 1, 2020 (in thousands):

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Amounts Recognized in the Consolidated Financial Statements

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 Consolidated Statement of Operations for the fiscal year ended February 1, 2020 (in thousands):

Fifty-Two Weeks Ended

February 1, 2020

January 30, 2021 February 1, 2020

Operating lease cost $ 26,112 $ 28,808

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Total lease cost $ 32,378 $ 38,650

The weighted-average remaining lease term as of February 1, 2020 was 6.0 years .

During the fiscal year ended February 2, 2019, the Company recognized rental expense for all leases of $ 34.3 million which included percentage rent expense of $ 3.4 million.

The weighted-average remaining lease term as of January 30, 2021 and February 1, 2020 was 5.4 years and 6.0 years, respectively.

Supplemental operating cash flow information was as follows (in thousands):

Fifty-Two Weeks Ended

February 1, 2020

January 30, 2021 February 1, 2020

Cash paid for amounts included in the measurement of operating lease liabilities $ 27,180 $ 32,702

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Maturity Analysis of Operating Lease Liabilities

Maturities of the Company's operating lease liabilities (undiscounted) reconciled to its lease liability as of February 1, 2020 were as follows (in thousands):

Maturities of the Company's operating lease liabilities (undiscounted) reconciled to its lease liability as of January 30, 2021 were as follows (in thousands):

Operating Leases

Fiscal 2022 (1)

Fiscal 2023 25,315

Fiscal 2024 21,889

Fiscal 2025 19,311

Fiscal 2026 13,676

Thereafter 23,532

Total remaining obligations 131,001

Interest ( 17,144 )

Present value of lease liabilities $ 113,857

Under the prior accounting standard (ASC Topic 840), the maturities of minimum lease payments as disclosed in the Company's Annual Report on Form 10-K as of the fiscal year ended February 2, 2019 were as follows:

Operating Leases

Total remaining minimum lease payments

(1) $ 2.5 million of lease liabilities are recorded within accounts payable on the Company's Consolidated Balance Sheets as of January 30, 2021, and will be paid in fiscal 2022.

These lease liabilities are not included in the table above.

Vera Bradley, Inc.

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Property, plant, and equipment consisted of the following (in thousands):

2021 February 1,

Land and land improvements $ 5,981 $ 5,981

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Construction in progress 454 6,002

164,218 195,659

Accumulated depreciation and amortization ( 100,266 ) ( 122,632 )

Property, plant, and equipment, net $ 63,952 $ 73,027

The reviews are conducted at the lowest identifiable level of cash flows, which is generally the retail store level.

The assets are grouped at the individual store level for store-related assets.

Impairment charges of $6.3 million were recognized, using level 3 inputs, in the fiscal year ended February 3, 2018 for asset groups related to underperforming stores and are included in selling, general, and administrative expenses in the Consolidated Statements of Operations and in impairment charges in the Consolidated Statements of Cash Flows.

The impairment charges are included in the VB Direct segment.

There were no impairment charges recorded during the fiscal years ended February 1, 2020 and February 2, 2019 .

Depreciation and amortization expense associated with property, plant, and equipment, excluding impairment charges (in thousands):

Fiscal year ended February 1, 2020

Fiscal year ended January 30, 2021 $ 13,483

Fiscal year ended February 1, 2020 18,447

Fiscal year ended February 2, 2019 16,540

As of February 1, 2020 and February 2, 2019 , the Company had no borrowings outstanding and availability of $75.0 million under its Credit Agreement.

Subsequent to the end of the fiscal year, the Company has drawn $60.0 million of its $75.0 million Credit Agreement to provide additional flexibility as a result of the COVID-19 pandemic.

As of January 30, 2021 and February 1, 2020, the Company had no borrowings outstanding and availability of $ 75.0 million under its Credit Agreement.

Credit Agreement

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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 %.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

applicable CB Floating Rate, Adjusted LIBO Rate, or LIBO Rate shall be determined by the administrative agent.

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.

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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.

and amend, modify, or waive any of its rights related to subordinated

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

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.

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The components of income tax expense were as follows (in thousands):

2021 February 1,

2020 February 2,

Federal $ ( 4,644 ) $ 4,509 $ 7,020

Foreign 268 681 610

State 1,423 989 1,336

( 2,953 ) 6,179 8,966

Federal 4,794 ( 805 ) ( 1,663 )

State ( 668 ) ( 59 ) 166

4,126 ( 864 ) ( 1,497 )

Total income tax expense $ 1,173 $ 5,315 $ 7,469

A breakdown of the Company’s income before income taxes is as follows (in thousands):

2021 February 1,

2020 February 2,

Domestic $ 10,151 $ 16,267 $ 24,426

Foreign 1,711 4,292 3,800

Total income before income taxes $ 11,862 $ 20,559 $ 28,226

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A reconciliation of income tax expense to the amount computed at the federal statutory rate is as follows (in thousands):

2021 February 1,

2020 February 2,

Federal taxes at statutory rate $ 2,491 21.0 % $ 4,317 21.0 % $ 5,927 21.0 %

4 unchanged sentences

Change in uncertain tax positions ( 2 ) — ( 17 ) ( 0.1 ) ( 17 ) ( 0.1 )

Change in U.S.

Deemed mandatory repatriation

Benefits provided by the CARES Act ( 2,793 ) ( 23.5 ) — — — —

Other 490 4.1 242 1.2 443 1.6

Total income tax expense $ 1,173 9.9 % $ 5,315 25.9 % $ 7,469 26.5 %

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law.

The Tax Act includes, among other things, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, bonus depreciation that allows for full expensing for qualified property, the transition of U.S.

international taxation from a worldwide system to a territorial system with a new provision designed to tax global intangible low-taxed income ("GILTI"), and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings.

Section 15 of the Internal Revenue Code stipulates that the Company's fiscal year ended February 3, 2018, had a blended federal statutory tax rate of approximately 32.9% , which is based on the applicable tax rates before and after the effectiveness of the Tax Act and the number of days in the year.

The Company recorded $2.1 million in provisional income tax expense during the fourth quarter of fiscal 2018 based upon its understanding of the Tax Act and guidance as of the date of the fiscal 2018 filing.

Of the $2.1 million , $2.0 million was related to the remeasurement of net deferred tax assets at rates which they are expected to reverse in the future and $0.3 million was related to the one-time transition tax on mandatory deemed repatriation of foreign earnings, which were partially offset by a $0.2 million income tax benefit related to the blended federal statutory rate.

The Tax Act created a new requirement that certain income earned by foreign subsidiaries, known as GILTI, must be included in the gross income of their U.S.

The Company elected to treat the tax effect of GILTI as a current-period expense when incurred.

During the fourth quarter of fiscal 2019, the Company completed its accounting for the Tax Act and recorded no material adjustments to its fiscal 2018 provisional estimate.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

For the tax year ending January 30, 2021, the effective tax rate reflects the favorable impact of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, enacted on March 27, 2020.

The Company realized a $ 2.8 million tax benefit related to the net operating loss carryback provisions of the CARES Act.

Deferred income taxes reflect the net tax effects of temporary differences between the book and tax bases of assets and liabilities.

Significant components of deferred tax assets and liabilities were as follows (in thousands):

2021 February 1,

Deferred tax assets:

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Compensation and benefits 2,229 3,021

Deferred credits from landlords

Inventories 1,305 1,317

Other 4,778 1,890

Subtotal deferred tax assets 39,373 42,437

valuation allowances ( 51 ) —

Total deferred tax assets 39,322 42,437

2 unchanged sentences

Property, plant, and equipment ( 8,228 ) ( 2,656 )

Other ( 4,045 ) ( 1,505 )

Total deferred tax liabilities ( 35,792 ) ( 34,781 )

Net deferred tax assets $ 3,530 $ 7,656

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Uncertain Tax Positions

A reconciliation of the beginning and ending gross amount of unrecognized tax benefits (excluding interest and penalties) is as follows (in thousands):

2021 February 1,

2020 February 2,

Beginning balance $ 59 $ 83 $ 104

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Lapse of statute of limitations ( 4 ) ( 35 ) ( 65 )

Net increases in unrecognized tax benefits as a result of prior year activity

Reductions for tax positions of prior years

Ending balance $ 55 $ 59 $ 83

As of February 1, 2020 , $0.1 million of total unrecognized tax benefits, net of federal benefit, would, if recognized, favorably affect the effective tax rate in future periods.

As of January 30, 2021, $ 0.1 million of total unrecognized tax benefits, net of federal benefit, would, if recognized, favorably affect the effective tax rate in future periods.

Total unrecognized tax benefits are currently not expected to decrease by a significant amount in the next twelve months.

The Company recognized an immaterial amount of interest only, no penalties, related to unrecognized tax benefits in the fiscal years ended February 1, 2020 , February 2, 2019 , and February 3, 2018 .

Unrecognized tax benefits are included within long-term liabilities in the Company's Consolidated Balance Sheets.

The Company recognized an immaterial amount of interest only, no penalties, related to unrecognized tax benefits in the fiscal years ended February 1, 2020 and February 2, 2019.

Unrecognized tax benefits are included within other long-term liabilities in the Company's Consolidated Balance Sheets.

The Company files income tax returns in the U.S.

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The Company’s stock-based compensation consists of awards of restricted stock and restricted stock units.

The Company recognized stock-based compensation expense of $5.9 million , $4.9 million , and $3.1 million in the fiscal years ended February 1, 2020 , February 2, 2019 , and February 3, 2018 , respectively.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

The Company recognized stock-based compensation expense of $ 5.7 million, $ 5.9 million, and $ 4.9 million in the fiscal years ended January 30, 2021, February 1, 2020, and February 2, 2019, respectively.

Awards of Restricted-Stock Units

The Company reserved 3,000,000 shares of common stock for issuance or transfer under the 2020 Equity and Incentive Plan, which allows for grants of restricted stock units, as well as other equity awards.

As of February 1, 2020 , there were 3,964,026 shares remaining in that program.

During the fiscal year ended February 1, 2020 , the Company granted a total of 416,944 time-based and performance-based restricted stock units to certain employees and non-employee directors under the 2010 Equity and Incentive Plan with an aggregate fair value of $5.4 million .

There were no restricted stock units granted under the 2020 Equity and Incentive Plan during fiscal 2021.

The Company maintains the 2010 Equity and Incentive Plan for awards granted prior to the effectiveness of the 2020 Equity and Incentive Plan.

During the fiscal year ended January 30, 2021, the Company granted a total of 1,460,130 time-based and performance-based restricted stock units to certain employees and non-employee directors under the 2010 Equity and Incentive Plan with an aggregate fair value of $ 6.1 million.

The Company determined the fair value of the units based on the closing price of the Company’s common stock on the grant date.

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Restricted stock unit awards issued to non-employee directors vest after a one-year period from the grant date.

The Company is recognizing the expense relating to these awards, net of estimated forfeitures, on a straight-line basis over the vesting period.

The Company recognizes the expense relating to these awards, net of estimated forfeitures, on a straight-line basis over the vesting period.

The majority of 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 the three-year performance period and the Company’s achievement of annual earnings per share targets, or other Company performance targets, during the three-year performance period.

The Company is recognizing the expense relating to these units, net of estimated forfeitures and based on the probable outcome of achievement of the financial targets, on a straight-line basis over the vesting period.

The following table summarizes information about restricted-stock units as of and for the year ended February 1, 2020 (units in thousands):

Restricted Stock Units

Performance-based

The Company recognizes the expense relating to these units, net of estimated forfeitures and based on the probable outcome of achievement of the financial targets, on a straight-line basis over the vesting period.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

The following table summarizes information about restricted-stock units as of and for the year ended January 30, 2021 (units in thousands):

Restricted Stock Units Performance-based

Restricted Stock Units

Units Weighted-

(per unit) Number of

Units Weighted-

Nonvested units outstanding at February 1, 2020 433 $ 12.03 671 $ 11.08

Granted 858 4.24 602 4.09

Change due to performance condition achievement — — ( 188 ) 7.91

Nonvested units outstanding at February 1, 2020

As of February 1, 2020 , there was $6.4 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested restricted stock units.

Vested ( 239 ) 11.79 ( 187 ) 9.31

Forfeited ( 3 ) 7.32 ( 2 ) 8.11

Nonvested units outstanding at January 30, 2021 1,049 $ 5.73 896 $ 8.34

As of January 30, 2021, there was $ 5.8 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 1.6 years, subject to meeting performance conditions.

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The complaint seeks damages in an amount not less than $ 10.0 million for punitive damages, attorney fees, prejudgment interest, and any other additional relief.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Company has denied any liability and intends to vigorously defend itself in the case.

The Company has denied any liability and intends to vigorously defend itself in the case.

In November 2019, the Company filed a counterclaim against the principals of Vesi as personal guarantors for monies owed to the Company by Vesi.

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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 due to the fact that the Company is vigorously defending itself and management believes that the Company has a number of meritorious legal defenses.

In April of 2020, Chidimma Igboakaeze filed suit seeking class certification for all current and former hourly-paid employees who worked for the Company within the state of California during the four years preceding the filing until final judgement.

The complaint alleges various violations of the California Labor Code related to wages, overtime, meal and rest breaks, non-compliant wage statements and records and other similar allegations related to employment.

The Plaintiff has also filed a Private Attorney General Act claim with the state of California regarding the same allegations.

The Company denies all liability and intends to vigorously defend itself in the case.

The case is currently in discovery.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

401(k) Profit Sharing Plan and Trust

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Additionally, the Company has the option of making discretionary profit sharing payments to the plan as approved by the board of directors.

As of February 1, 2020 , February 2, 2019 , and February 3, 2018 , no discretionary profit sharing payments had been approved.

As of January 30, 2021, February 1, 2020, and February 2, 2019, no discretionary profit sharing payments had been approved.

The 401(k) contribution match was temporarily suspended beginning in March 2020 as a result of the COVID-19 pandemic and resumed in January 2021.

The Company recognizes 401(k) Company contributions within cost of sales for employees related to distribution center, sourcing, and other related functions and selling, general, and administrative expenses for all other employees.

Total Company contributions to the plan were as follows (in thousands):

Fiscal year ended February 1, 2020

Fiscal year ended January 30, 2021 $ 723

Fiscal year ended February 1, 2020 1,732

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Charitable Contributions .

During each of the fiscal years ended February 1, 2020 , February 2, 2019 , and February 3, 2018 the Company made charitable contributions of approximately $0.1 million to the Vera Bradley Foundation for Breast Cancer (the “Foundation”).

During each of the fiscal years ended January 30, 2021, February 1, 2020, and February 2, 2019 the Company made charitable contributions of approximately $ 0.1 million to the Vera Bradley Foundation for Breast Cancer (the “Foundation”).

The Foundation was founded by one of the Company’s directors, who is also on the board of directors of the Foundation.

The liability associated with commitments to the Foundation was approximately $0.3 million as of February 1, 2020 and February 2, 2019 .

The liability associated with commitments to the Foundation was approximately $ 0.2 million and $ 0.3 million as of January 30, 2021 and February 1, 2020, respectively.

The liability consisted of pass-through donations from customers and is included in other accrued liabilities in the Consolidated Balance Sheets.

The associated expense for contributions to the Foundation, which is included in selling, general, and administrative expenses, was as follows (in thousands):

Fiscal year ended February 1, 2020

Fiscal year ended January 30, 2021 $ 53

Fiscal year ended February 1, 2020 101

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Each transaction was approved by the Company's Audit Committee and effected as part of the 2015 Share Repurchase Program.

Refer to Note 13 herein for details regarding the Company's current and prior share repurchase programs.

R efer to Note 13 h erein for details regarding the Company's current and prior share repurchase programs.

On June 26, 2018, the Company agreed to repurchase 200,000 shares of common stock from the Barbara B Baekgaard 2009 Grantor Retained Annuity Trust (the “Baekgaard Trust”) at a price of $ 14.43 per share, representing an approximate four percent ( 4 %) discount from the closing price of $ 15.03 on June 25, 2018.

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Fiscal Year Ended

Net loss attributable to redeemable noncontrolling interest

2021 February 1,

2020 February 2,

Net income $ 10,689 $ 15,244 $ 20,757

Net income (loss) attributable to redeemable noncontrolling interest 2,008 ( 803 ) —

Net income attributable to Vera Bradley, Inc.

$ 8,681 $ 16,047 $ 20,757

Weighted-average number of common shares (basic) 33,390 33,983 35,222

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Net income per share attributable to Vera Bradley, Inc.:

As of February 1, 2020 , February 2, 2019 , and February 3, 2018 , 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.

Basic $ 0.26 $ 0.47 $ 0.59

Diluted $ 0.26 $ 0.47 $ 0.59

As of January 30, 2021, February 1, 2020, and February 2, 2019, 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.

The diluted share calculations include performance-based restricted stock units for completed performance periods.

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On November 29, 2018, the Company's board of directors approved a new share repurchase plan (the “2018 Share Repurchase Program”) authorizing up to $ 50.0 million of repurchases of shares of the Company's common stock.

The 2018 Share Repurchase Program expires December 14, 2020.

Subsequent to year end, in light of the 2019 novel coronavirus (COVID-19) pandemic, the Company suspended the 2018 Share Repurchase Program.

On December 3, 2020, the 2018 Share Repurchase Program was extended through December 11, 2021.

On March 20, 2020, the Company temporarily suspended the share repurchase program to conserve cash as a result of the COVID-19 pandemic.

The board of directors authorized the resumption of the share repurchase program beginning on March 11, 2021.

During the fiscal year ended January 30, 2021, the Company purchased and held 381,835 shares at an average price of $ 7.60 per share, excluding commissions, for an aggregate amount of $ 2.9 million, under the 2018 Share Repurchase Program.

During the fiscal year ended February 1, 2020, the Company purchased and held 1,075,749 shares at an average price of $ 10.52 per share, excluding commissions, for an aggregate amount of $ 11.3 million, under the 2018 Share Repurchase Program.

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Of these purchases, 320,296 shares at an average price of $ 8.86 per share, for an aggregate amount of $ 2.8 million, were purchased under the 2018 Share Repurchase Plan.

During the fiscal year ended February 3, 2018 , the Company purchased and held 934,031 shares at an average price of $8.47 per share, excluding commissions, for an aggregate amount of $7.9 million , under the 2015 Share Repurchase Program.

As of February 1, 2020 , there was $35.8 million remaining available to repurchase shares of the Company’s common stock under the 2018 Share Repurchase Program.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

As of February 1, 2020 , the Company held as treasury shares 8,011,372 shares of its common stock at an average price of $13.00 per share, excluding commissions, for an aggregate carrying amount of $104.2 million .

The Company’s treasury shares may be issued under the 2010 Equity and Incentive Plan or for other corporate purposes.

Vision 20/20 Restructuring and Other Charges

Fifty-Three Weeks Ended February 3, 2018

Vision 20/20 Initiatives and Charges .

During fiscal 2018, the Company launched its Vision 20/20 strategic plan, which involves an aggressive approach to turn around its business over the period ending in fiscal 2021.

The plan is primarily focused on product and pricing initiatives, as well as selling, general, and administrative (“SG&A”) expense reduction initiatives.

The product and pricing initiatives include restoring the Company's full-price business by significantly reducing the amount of clearance merchandise offered on verabradley.com and in its full-line stores, streamlining current product offerings by eliminating unproductive or incongruent categories and SKUs from its assortment, and introducing tighter guardrails around new product categories, patterns, and pricing.

The SG&A expense reductions include right-sizing the Company’s corporate infrastructure to better align with the size of the business, optimizing marketing spending by focusing on efficiencies, and taking a more aggressive stance on closing underperforming full-line stores.

These SG&A expense reductions began in the third quarter of fiscal 2018, largely aimed at right-sizing the corporate infrastructure.

The majority of the product and pricing initiatives were completed during fiscal 2019.

There have been $16.7 million of pre-tax Vision 20/20-related charges ( $10.6 million after the associated tax benefit) since inception, all of which were recognized during fiscal 2018.

There were no Vision 20/20-related charges during the fiscal years ended February 1, 2020 and February 2, 2019.

The Company incurred the following Vision 20/20-related charges during the fiscal year ended February 3, 2018 (in thousands):

Statements of Income Line Item

Total Expense

Reportable Segment

Unallocated Corporate Expenses

Cost of Sales

Asset impairment charges (1)

Strategic consulting charges (2)

Severance charges

Inventory-related charges (3)

Other charges (4)

(1) Refer to Note 5 herein for additional details

(2) Consulting charges for the identification and implementation of Vision 20/20 initiatives

(3) Inventory adjustments for the discontinuation of certain inventory categories

(4) Includes a net lease termination charge ($399 recognized within the Direct segment) and accelerated depreciation charges and other charges ($67 recognized within the Direct segment, $230 recognized within the Indirect segment, and $55 recognized within corporate unallocated expenses)

(5) After the associated tax benefit, the charges totaled $10.6 million

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

A summary of charges and related liabilities associated with the Vision 20/20 initiatives are as follows (in thousands):

Asset Impairment Charges

Strategic Consulting Charges

Severance Charges

Inventory-Related Charges

Other Charges

Fiscal 2018 charges

Cash payments

Non-cash charges

Liability as of February 3, 2018 (1)

(1) The remaining liability as of fiscal 2018 was associated with severance charges and is included within accrued employment costs in the Consolidated Balance Sheets.

The remaining liability as of fiscal 2018 was paid during fiscal 2019 and there were no additional charges during fiscal 2019.

Other Charges .

Other charges recognized in selling, general, and administrative expenses during fiscal 2018, before the implementation of Vision 20/20, totaled $2.8 million ( $1.7 million after the associated tax benefit).

These pre-tax charges consisted of $2.5 million in severance charges (recognized within corporate unallocated expenses) and $0.3 million for a net lease termination charge (recognized within the Direct segment).

Other charges recognized in tax expense during fiscal 2018 totaled $2.1 million related to the Tax Cuts and Jobs Act further described in Note 7 herein.

The Company held $9.0 million and $19.4 million in short-term investments as of February 1, 2020 and February 2, 2019 , respectively.

As of January 30, 2021, there was $ 32.9 million remaining available to repurchase shares of the Company’s common stock under the 2018 Share Repurchase Program.

As of January 30, 2021, the Company held as treasury shares 8,393,207 shares of its common stock at an average price of $ 12.76 per share, excluding commissions, for an aggregate carrying amount of $ 107.1 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.

The Company held $ 1.3 million and $ 9.0 million in short-term investments as of January 30, 2021 and February 1, 2020, respectively.

The following table summarizes the Company’s short-term investments (in thousands):

February 1, 2020

February 2, 2019

January 30, 2021 February 1, 2020

corporate debt securities $ 627 $ 3,435

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asset-backed securities — 323

treasury securities

Total short-term investments $ 1,295 $ 8,977

The Company held $14.9 million and $23.7 million in long-term investments as of February 1, 2020 and February 2, 2019 , respectively.

The Company held $ 14.9 million in long-term investments as of February 1, 2020.

There were no long-term investments as of January 30, 2021.

The following table summarizes the Company’s long-term investments (in thousands):

February 1, 2020

February 2, 2019

January 30, 2021 February 1, 2020

corporate debt securities $ — $ 5,613

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asset-backed securities — 582

Municipal securities

Total long-term investments $ — $ 14,912

There were no material gross unrealized gains or losses on available-for-sale debt securities as of February 1, 2020 and February 2, 2019 .

There were no material gross unrealized gains or losses on available-for-sale debt securities as of January 30, 2021 and February 1, 2020.

Acquisition of Pura Vida

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or “Pura Vida” (the “Transaction”) in exchange for cash consideration of approximately $ 75.0 million.

During the third quarter of fiscal 2020, the Company provided additional cash consideration of approximately $3.0 million for a

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

working capital adjustment.

During the third quarter of fiscal 2020, the Company provided additional cash consideration of approximately $ 3.0 million for a working capital adjustment.

The Company also received a working capital reimbursement of $ 1.0 million during the first quarter of fiscal 2021.

Additional measurement period adjustments were recorded for conditions that existed as of the acquisition date.

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In accordance with the Interest Purchase Agreement, the Company also agreed to a contingent payment of up to $ 22.5 million based on calendar year 2019 adjusted EBITDA of Pura Vida, as defined in the Interest Purchase Agreement.

This contingent payment is recorded as an earn-out liability on the Company’s Consolidated Balance Sheets at its estimated amount payable of $18.4 million .

Subsequent to the end of the fiscal year, the Company paid the earn-out liability.

This contingent payment was paid in the first quarter of fiscal 2021 and totaled $ 18.7 million.

The Company’s existing available cash, cash equivalents, and investments funded the purchase price due at the closing of the Transaction and subsequent to the closing.

Pre-tax Transaction costs totaled $2.7 million for the fiscal year ended ended February 1, 2020 .

These costs are recorded within selling, general, and administrative expenses in the Consolidated Statements of Operations and within corporate unallocated expenses.

Pre-tax Transaction costs totaled $ 2.7 million for the fiscal year ended February 1, 2020.

These costs are recorded within selling, general, and administrative expenses in the Consolidated Statements of Operations and within

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

corporate unallocated expenses.

There were no Transaction costs for the fiscal years ended January 30, 2021 and February 2, 2019.

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 which was not acquired by the Company entered into a Put/Call Agreement.

Refer to Note 2 herein for additional information regarding the Put/Call Agreement.

The following preliminary schedule summarizes the consideration paid for Pura Vida, the fair value of the assets acquired and liabilities assumed, the fair value of the noncontrolling interest, and the fair value of the contingent consideration related to the earn-out provision.

The accounting for the acquisition is preliminary as the Company has not yet finalized the valuation of the aforementioned items.

The following schedule summarizes the consideration paid for Pura Vida, the fair value of the assets acquired and liabilities assumed, the fair value of the noncontrolling interest, and the fair value of the contingent consideration related to the earn-out provision.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Fair Value at Acquisition Date

Measurement Period Adjustments

Adjusted Fair Value at Acquisition Date

in thousands Fair Value at Acquisition Date

Cash and cash equivalents $ 1,495

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Property, plant, and equipment, net 751

Intangible asset, brand (3)

Pura Vida brand (3)

Other intangible assets (4)

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(2) Refer to Notes 2 and 17 herein for additional information regarding goodwill.

(3) The brand intangible asset was valued using the relief-from-royalty method.

(3) The Pura Vida brand intangible asset was valued using the relief-from-royalty method.

The significant assumptions used for the valuation include the royalty rate, estimated projected revenues, the long-term growth rate, and the discount rate.

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Significant assumptions used for the valuation include the discount rate, projected cash flows, and calculated volatility.

(7) Of the total $75.0 million closing consideration, $1.0 million is due to be paid to the Company through a working capital adjustment.

This $1.0 million is recorded within Accounts Receivable, net on the Consolidated Balance Sheet.

(7) Of the total $ 75.0 million closing consideration, $ 1.0 million was refunded to the Company through a working capital adjustment during the first quarter of fiscal 2021.

Cash consideration paid during fiscal 2020 totaled $ 76.0 million.

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As such, the Company’s financial statements are not comparable with the prior-year period pre sented.

Refer to Note 19 herein for

Refer to Note 18 herein for segment-level financial information associated with Pura Vida.

The following unaudited pro forma financial information is

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

segment-level financial information associated with Pura Vida.

The following unaudited pro forma financial information is intended to provide a sense for what the Company's operating results may have been if the Pura Vida acquisition had occurred at the beginning of fiscal 2019.

intended to provide a sense for what the Company's operating results may have been if the Pura Vida acquisition had occurred at the beginning of fiscal 2019.

The pro forma financial information is not indicative of the results that would have been reflected had the transaction actually occurred as of that date, nor is it necessarily indicative of the Company’s future results.

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• Short-term purchase accounting items, such as the inventory step-up adjustment and earn-out liability adjustment, have been excluded due to their non-recurring nature;

Definite-lived intangible amortization that exceeds one year has been reflected as if it occurred at the beginning of fiscal 2019;

• Definite-lived intangible amortization that exceed s one year has been reflected as if it occurred at the beginning of fiscal 2019;

• Transaction costs have been excluded;

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Fifty-Two Weeks Ended

in thousands, except per share data

in thousands, except per share data February 1,

2020 February 2,

Pro forma net revenues $ 538,576 $ 484,376

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Pro forma net income attributable to Vera Bradley, Inc.

22,193 18,081

Pro forma basic net income per share attributable to Vera Bradley, Inc.

$ 0.65 $ 0.51

Pro forma diluted net income per share attributable to Vera Bradley, Inc.

$ 0.65 $ 0.51

Redeemable Noncontrolling Interest

1 unchanged sentence

Refer to Note 2 herein for additional information.

Changes in redeemable noncontrolling interest for the fifty-two weeks ended February 1, 2020 , were as follows (in thousands):

Changes in redeemable noncontrolling interest for the fifty-two weeks ended January 30, 2021 and February 1, 2020, were as follows (in thousands):

Balance at February 2, 2019 $ —

5 unchanged sentences

Balance at February 1, 2020 $ 30,049

Net income attributable to redeemable noncontrolling interest 2,008

Distributions to redeemable noncontrolling interest ( 1,817 )

Adjustment to redemption value ( 431 )

Balance at January 30, 2021 $ 29,809

Vera Bradley, Inc.

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Intangible Assets and Goodwill

The following table details the carrying value of the Company’s intangible assets other than goodwill related to the acquisition of a majority interest in Pura Vida.

The prior-year period did not include intangible assets or goodwill.

The valuation of the intangible assets and goodwill is preliminary and additional adjustments may be reflected during the measurement period.

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.

January 30, 2021

in thousands Gross Basis Accumulated Amortization (1)

Carrying Amount

Definite-lived intangible assets

Customer Relationships $ 24,208 $ ( 14,125 ) $ 10,083

Non-competition Agreements 788 ( 243 ) 545

Total definite-lived intangible assets 24,996 ( 14,368 ) 10,628

Indefinite-lived intangible asset

Pura Vida Brand 36,668 — 36,668

Total intangible assets, excluding goodwill $ 61,664 $ ( 14,368 ) $ 47,296

(1) Amortization expense is recorded within the Pura Vida segment.

February 1, 2020

Accumulated Amortization (1)

in thousands Gross Basis Accumulated Amortization (1)

Carrying Amount

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(1) Amortization expense is recorded within the Pura Vida segment.

The provisional weighted-average amortization period for the definite-lived intangible assets in total is 3.6 years .

The provisional weighted-average amortization period is 3.6 years and 5.0 years for customer relationships and non-competition agreements, respectively.

The provisional amortization expense for intangible assets is as follows (in thousands):

The amortization expense for intangible assets is as fo llows (in thousands):

Amortization Expense

The total amount of the provisional goodwill as of February 1, 2020 , was $44.3 million recorded within the Pura Vida segment upon acquisition.

Fiscal 2022 3,073

Fiscal 2023 3,073

Fiscal 2024 3,073

Fiscal 2025 1,409

Total $ 10,628

The total amount of the goodwill as of January 30, 2021, was $ 44.3 million recorded within the Pura Vida segment upon acquisition.

Goodwill is expected to be deductible for tax purposes, limited to the Company's 75 % majority ownership interest.

Refer to Note 2 and 16 herein for addition information regarding goodwill.

Refer to Note 2 herein for addition information regarding goodwill.

There were no changes in goodwill for the

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

fiscal year ended January 30, 2021.

Changes in goodwill for the fiscal year ended February 1, 2020, were as follows (in thousands):

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Balance at February 1, 2020 $ 44,254

Future impacts of COVID-19, including but not limited to the duration and magnitude of the pandemic, may have an impact on the triggering event assessment or future fair value estimate of goodwill, brand intangible asset, and definite-lived intangible assets, which could lead to material impairment charges.

Refer to Note 2 herein for additional information regarding the fair value measurement.

Segment Reporting

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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.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

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.

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No customer accounted for 10% or more of the Company’s net revenues during fiscal years 2021, 2020, and 2019.

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.

Corporate costs represent the Company’s administrative expenses, which include, but are not limited to:

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The Company does not report depreciation or amortization expense, total assets, or capital expenditures by segment as such information is neither used by management nor accounted for at the segment level.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Net revenues and operating income information for the Company’s reportable segments consisted of the following (in thousands):

Fiscal Year Ended

2021 February 1,

2020 February 2,

Segment net revenues:

VB Direct $ 289,274 $ 347,484 $ 328,034

VB Indirect 66,517 81,811 88,063

Pura Vida 112,481 65,917 —

Total $ 468,272 $ 495,212 $ 416,097

Segment operating income (loss):

VB Direct $ 48,524 $ 68,505 $ 67,862

VB Indirect 24,502 31,077 34,500

Pura Vida 8,031 ( 3,179 ) —

Total $ 81,057 $ 96,403 $ 102,362

Reconciliation:

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Sales outside of the United States were immaterial for all periods presented.

Revenues from external customers for Vera Bradley brand products are attributable to sales of bags, accessories, travel, apparel/footwear, and home items.

Other revenues from Vera Bradley external customers primarily include revenues associated with our stationery, freight, licensing, merchandising, and gift card breakage.

Revenues from external customers for Pura Vida brand products are attributable to sales of accessories and apparel.

Other revenues from Pura Vida external customers include revenues associated with freight.

Refer to Note 3 herein for disaggregation of net revenues by reportable segment.

As of January 30, 2021 and February 1, 2020, substantially all of the Company’s long-lived assets were located in the United States.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Revenues from external customers for Vera Bradley brand products are attributable to sales of bags, travel, accessories, and home items.

Other revenues from Vera Bradley external customers primarily include revenues associated with our apparel/footwear, stationery, freight, licensing, merchandising, and gift card breakage.

Revenues from external customers for Pura Vida brand products are attributable to sales of accessories.

Other revenues from Pura Vida external customers include revenues associated with freight.

Refer to Note 3 herein for disaggregation of net revenues by reportable segment for fiscal 2020 and fiscal 2019.

Net revenues by product categories are as follows (in thousands):

Fiscal Year Ended

Net revenues:

As of February 1, 2020 and February 2, 2019 , substantially all of the Company’s long-lived assets were located in the United States.

Quarterly Financial Information (Unaudited)

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Each of the quarters presented was thirteen weeks in duration.

Fiscal Year Ended January 30, 2021

(unaudited) (unaudited) (unaudited) (unaudited)

Net revenues $ 69,284 $ 131,770 $ 124,849 $ 142,369

Gross profit 34,188 79,621 73,831 77,878

Operating (loss) income ( 25,574 ) 17,499 12,164 8,976

Net (loss) income ( 15,537 ) 8,327 8,974 8,925

Net (loss) income attributable to Vera Bradley, Inc.

( 15,337 ) 7,216 8,874 7,928

Basic net (loss) income per share available to Vera Bradley, Inc.

common shareholders ( 0.66 ) 0.42 0.27 0.24

Diluted net (loss) income per share available to Vera Bradley, Inc.

common shareholders ( 0.66 ) 0.42 0.26 0.23

Reconciliation of net (loss) income available to Vera Bradley, Inc.

common shareholders

Net (loss) income attributable to Vera Bradley, Inc.

$ ( 15,337 ) $ 7,216 $ 8,874 $ 7,928

Excess portion of redeemable noncontrolling interest redemption value adjustment ( 6,800 ) 6,800 — —

Net (loss) income available to Vera Bradley, Inc.

common shareholders $ ( 22,137 ) $ 14,016 $ 8,874 $ 7,928

(1) Includes $ 3.8 million of store impairment charges, $ 2.7 million of intangible asset amortization and an adjustment of the Pura Vida purchase-related earn-out liability, $ 1.5 million of technology re-platforming charges, $ 1.3 million for charges related to the cancellation of certain purchase orders as a result of COVID-19, and $ 0.2 million of department store exit costs as a result of COVID-19.

These adjustments totaled $ 5.1 million collectively attributable to Vera Bradley, Inc.

after the associated tax benefit.

(2) Includes $ 2.3 million of intangible asset amortization and $ 1.3 million of technology-related re-platforming charges ($ 3.7 million collectively attributable to Vera Bradley, Inc.

after the associated tax benefit).

(3) Includes $ 2.3 million of intangible asset amortization ($ 1.4 million attributable to Vera Bradley, Inc, after the associated tax benefit).

(4) Includes $ 3.6 million of store impairment charges and $ 2.0 million of intangible asset amortization ($ 2.6 million collectively attributable to Vera Bradley, Inc.

after the associated tax benefit).

Fiscal Year Ended February 1, 2020

(unaudited) (unaudited) (unaudited) (unaudited)

Net revenues $ 91,003 $ 119,785 $ 127,501 $ 156,923

Gross profit 50,468 67,333 67,870 86,130

Operating (loss) income ( 3,645 ) 7,348 ( 1,476 ) 17,247

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Net (loss) income attributable to Vera Bradley, Inc.

Basic net (loss) income per share attributable to Vera Bradley, Inc.

Diluted net (loss) income per share attributed to Vera Bradley, Inc.

( 2,405 ) 5,854 139 12,459

Basic net (loss) income per share available to Vera Bradley, Inc.

common shareholders ( 0.07 ) 0.17 0.00 0.37

Diluted net (loss) income per share available to Vera Bradley, Inc.

common shareholders ( 0.07 ) 0.17 0.00 0.37

(1) Includes $ 0.8 million ($ 0.6 million after the associated tax benefit) for Pura Vida transaction costs.

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(2) Pura Vida operating results included beginning July 17, 2019, the first full business day following the acquisition of a majority interest.

Includes $1.9 million of Pura Vida transaction costs, Pura Vida purchase accounting adjustments of $1.4 million (consisting of inventory step-up amortization and intangible asset amortization), and $0.7 million of technology re-platforming charges ( $2.9 million collectively attributable to Vera Bradley, Inc.

Includes $ 1.9 million of Pura Vida transaction costs, Pura Vida purchase accounting adjustments of

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

$ 1.4 million (consisting of inventory step-up amortization and intangible asset amortization), and $ 0.7 million of technology re-platforming charges ($ 2.9 million collectively attributable to Vera Bradley, Inc.

after the associated tax benefit).

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Refer to Note 15 herein for additional information regarding the Pura Vida acquisition.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

(4) Includes $ 1.6 million related to incremental stock-based compensation associated with Pura Vida performance and Pura Vida transaction bonuses, $ 1.2 million of technology re-platforming charges, and Pura Vida purchase accounting net adjustments of $ 0.1 million (consisting of intangible asset amortization and inventory step-up amortization, partially offset by an adjustment to reduce the earn-out liability).

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Refer to Note 15 herein for additional information regarding the Pura Vida acquisition.

Fiscal Year Ended February 2, 2019

Operating (loss) income

Net (loss) income

Net (loss) income attributable to Vera Bradley, Inc.

Basic net (loss) income per share attributable to Vera Bradley, Inc.

Diluted net (loss) income per share attributed to Vera Bradley, Inc.

Information in any one quarterly period should not be considered indicative of annual results due to the effect of seasonality of the business.

Subsequent Event

The recent COVID-19 pandemic has resulted in global travel restrictions and community and self quarantines.

The Company has temporarily closed its Vera Bradley full-line and factory outlet stores.

The stores are currently closed through April 4, 2020;

however, some or all of the closures will likely continue beyond this date.

The Company has also temporarily suspended its share repurchase program and has drawn $60.0 million of its $75.0 million Credit Agreement to provide additional flexibility as a result of the pandemic.

We cannot reasonably estimate the length or severity of the pandemic or its results on the Company’s liquidity, results of operations, and financial condition, which could have a material adverse effect.

Fiscal 2021 quarterly data was impacted by the COVID-19 pandemic.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data