What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-28 compared with 2022-03-29 · 254 added, 274 removed, 829 unchanged (39% of the section changed)

4 unchanged sentences

Consolidated Balance Sheets as of January 2 8 , 202 3 , and January 29, 2022

Consolidated Statements of Operations for the fiscal years ended January 29, 2022, January 30, 2021, and February 1, 2020

Consolidated Statements of Comprehensive Income for the fiscal years ended January 29, 2022, January 30, 2021, and February 1, 2020

Consolidated Statements of Shareholders’ Equity for the fiscal years ended January 29, 2022, January 30, 2021, and February 1, 2020

Consolidated Statements of Cash Flows for the fiscal years ended January 29, 2022, January 30, 2021, and February 1, 2020

Consolidated Statements of Operations for the fiscal years ended January 2 8 , 202 3 , January 29, 2022, and January 30, 2021

Consolidated Statements of Comprehensive Income for the fiscal years ended January 28, 2023, January 29, 2022, and January 30, 2021

Consolidated Statements of Shareholders’ Equity for the fiscal years ended January 28, 2023, January 29, 2022, and January 30, 2021

Consolidated Statements of Cash Flows for the fiscal years ended January 28, 2023, January 29, 2022, and January 30, 2021

Notes to Consolidated Financial Statements

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

The fair value of goodwill 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 29, 2022, all of which related to the Pura Vida reporting unit.

The fair value of goodwill 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 growth, 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, royalty rate and discount rate.

The goodwill balance was $0 as of January 28, 2023.

The carrying value of the Pura Vida brand was $11.7 million as of January 28, 2023.

The fair values of goodwill and the Pura Vida brand exceeded their carrying values as of the measurement date and, therefore, no impairment was recognized during the year ended January 29, 2022.

The carrying values of goodwill and the Pura Vida brand exceeded their fair values during fiscal 2023 and, therefore, impairment of $44.3 million and $25.0 million, respectively, was recognized during the year ended January 28, 2023.

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.

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Our audit procedures related to the projected revenue growth, operating profit growth and discount rate 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, operating profit growth, selection of royalty rate and discount rates.

We tested the effectiveness of controls over management’s goodwill and brand impairment analyses, including those over the determination of the fair value, such as controls related to management’s forecasts of projected revenue growth, operating profit growth, and 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 performed sensitivity analyses to evaluate the risk of impairment if key assumptions are changed.

We evaluated the reasonableness of management’s projected revenue growth and operating profit growth by comparing the forecasts to (1) historical results, (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 by:

With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology, and (2) discount rates and royalty rate by:

Assessing the appropriateness of the valuation methodology used to determine the discount rates and royalty rate.

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Cash and cash equivalents $ 46,595 $ 88,436

Short-term investments — 1,295

Accounts receivable, net 22,105 20,681

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Retained earnings 274,629 334,364

Accumulated other comprehensive (loss) income ( 29 ) 8

Accumulated other comprehensive loss ( 105 ) ( 29 )

Treasury stock ( 132,864 ) ( 114,802 )

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2023 January 29,

2021 February 1,

2022 January 30,

Net revenues $ 499,961 $ 540,453 $ 468,272

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Selling, general, and administrative expenses 265,016 261,993 252,588

Impairment of goodwill and intangible assets 69,256 — —

Other income, net 457 961 135

Operating income 26,911 13,065 19,474

Interest expense (income), net 263 1,203 ( 1,085 )

Income before income taxes 26,648 11,862 20,559

Income tax expense 6,430 1,173 5,315

Net income 20,218 10,689 15,244

Net income (loss) attributable to redeemable noncontrolling interest 2,380 2,008 ( 803 )

Net income attributable to Vera Bradley, Inc.

Operating (loss) income ( 94,871 ) 26,911 13,065

Interest expense, net 153 263 1,203

(Loss) income before income taxes ( 95,024 ) 26,648 11,862

Income tax (benefit) expense ( 15,640 ) 6,430 1,173

Net (loss) income ( 79,384 ) 20,218 10,689

Net (loss) income attributable to redeemable noncontrolling interest ( 19,649 ) 2,380 2,008

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

$ ( 59,735 ) $ 17,838 $ 8,681

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Diluted weighted-average shares outstanding 31,503 34,437 33,914

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

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

common shareholders $ ( 1.90 ) $ 0.53 $ 0.26

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

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

common shareholders $ ( 1.90 ) $ 0.52 $ 0.26

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2023 January 29,

2021 February 1,

Net income $ 20,218 $ 10,689 $ 15,244

Unrealized (loss) gain on available for sale debt investments ( 4 ) ( 172 ) 131

2022 January 30,

Net (loss) income $ ( 79,384 ) $ 20,218 $ 10,689

Unrealized loss on available for sale debt investments — ( 4 ) ( 172 )

Cumulative translation adjustment ( 76 ) ( 33 ) 22

Comprehensive income, net of tax 20,181 10,539 15,426

Comprehensive income (loss) attributable to redeemable noncontrolling interest 2,380 2,008 ( 803 )

Comprehensive income attributable to Vera Bradley, Inc.

Comprehensive (loss) income, net of tax ( 79,460 ) 20,181 10,539

Comprehensive (loss) income attributable to redeemable noncontrolling interest ( 19,649 ) 2,380 2,008

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

$ ( 59,811 ) $ 17,801 $ 8,531

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Number of Shares Accumulated

Comprehensive (Loss) Income

Comprehensive Income (Loss)

Stock Treasury

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Translation adjustments — — — — 22 — 22

Unrealized gain on available for sale investments — — — — 131 — 131

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 — — — ( 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

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

Net income attributable to Vera Bradley, Inc.

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Treasury stock purchased ( 865,534 ) 865,534 — — — ( 7,742 ) ( 7,742 )

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

Balance at January 29, 2022 33,170,430 9,258,741 $ 107,907 $ 334,364 $ ( 29 ) $ ( 114,802 ) $ 327,440

Net income attributable to Vera Bradley, Inc.

Net loss attributable to Vera Bradley, Inc.

— — — ( 59,735 ) — — ( 59,735 )

Translation adjustments — — — — ( 76 ) — ( 76 )

Unrealized loss on available for sale investments — — — — ( 4 ) — ( 4 )

Restricted shares vested, net of repurchase for taxes 416,543 — ( 1,430 ) — — — ( 1,430 )

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2023 January 29,

2021 February 1,

2022 January 30,

Cash flows from operating activities

Net income $ 20,218 $ 10,689 $ 15,244

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

Net (loss) income $ ( 79,384 ) $ 20,218 $ 10,689

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

Depreciation of property, plant, and equipment 8,854 9,315 13,483

Impairment charges 85 7,446 —

Amortization of operating right-of-use assets 21,543 20,521 21,128

Goodwill and intangible asset impairment 69,256 — —

Other impairment charges 1,351 85 7,446

Amortization of intangible assets 3,303 3,073 9,009

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Deferred income taxes ( 17,685 ) ( 327 ) 4,126

Loss (gain) on investments — 13 ( 188 )

Gain on investments — — 13

Adjustment of earn-out liability — — 229

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

Other non-cash (gain) charges, net ( 37 ) ( 1 ) 202

Other non-cash charges (gain), net 6 ( 37 ) ( 1 )

Changes in assets and liabilities:

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Accrued and other liabilities ( 1,987 ) 1,562 2,373

Net cash provided by operating activities 39,861 20,702 20,624

Net cash (used in) provided by operating activities ( 13,421 ) 39,861 20,702

Cash flows from investing activities

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Proceeds from maturities and sales of investments — 1,290 23,281

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

Cash received for business acquisition, net of cash acquired — — 993

Proceeds from disposal of property, plant, and equipment — 45 —

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Effect of exchange rate changes on cash and cash equivalents ( 76 ) ( 33 ) 22

Net increase (decrease) in cash and cash equivalents 24,261 14,258 ( 63,576 )

Net (decrease) increase in cash and cash equivalents ( 41,841 ) 24,261 14,258

Cash and cash equivalents, beginning of period 88,436 64,175 49,917

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2023 January 29,

2021 February 1,

2022 January 30,

Supplemental disclosure of cash-flow information

Cash paid for income taxes, net $ 9,083 $ 5,079 $ 6,490

Cash (received) paid for income taxes, net $ ( 6,573 ) $ 9,083 $ 5,079

Cash paid for interest $ 88 $ 293 $ 1,133

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Repurchase of common stock incurred but not yet paid

As of January 28 2023, January 29, 2022, and January 30, 2021 $ — $ — $ —

As of January 29, 2022, January 30, 2021, and February 1, 2020 $ — $ — $ 176

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

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

As of January 28 2023, January 29, 2022, and January 30, 2021 $ 363 $ 250 $ 343

As of January 29, 2022, January 30, 2021, and February 1, 2020 $ 250 $ 343 $ 559

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

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

Refer to Note 4 herein for supplemental cash flow information regarding the Company’s leases.

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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;

alignment as casual, comfortable, affordable, and fun brands;

positioning as “gifting” and socially-connected brands;

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acquired a 75 % interest in Creative Genius, Inc., which also operates under the name Pura Vida Bracelets (“Pura Vida”).

On January 30, 2023, subsequent to the end of fiscal 2023, the Company purchased the remaining 25% interest in Pura Vida.

Pura Vida, based in La Jolla, California, is a digitally native lifestyle brand that we believe deeply resonates with its loyal consumer following.

The Pura Vida brand has a differentiated and expanding offering of bracelets, jewelry, and other lifestyle accessories.

Beginning in the second quarter of fiscal 2020, the Company has included an additional segment for Pura Vida due to its acquisition.

As a result, the Company now has three reportable segments:

The Company has three reportable segments:

Vera Bradley Direct (“VB Direct”), Vera Bradley Indirect (“VB Indirect”), and Pura Vida.

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In light of the COVID-19 pandemic, the Company cancelled its calendar year 2022, 2021, and 2020 annual outlet sales.

The sale will resume in calendar year 2023.

• The VB Indirect business consists of sales of Vera Bradley products to approximately 1,700 specialty retail locations, substantially all of which are located in the United States, as well as department stores, national accounts, third-party e-commerce sites, third-party inventory liquidators, and royalties recognized through licensing agreements related to the Vera Bradley brand.

• The Pura Vida segment represents revenues generated through the Pura Vida websites, www.puravidabracelets.com, www.puravidabracelets.eu, and www.puravidabracelets.ca, the distribution of Pura Vida-branded products to wholesale retailers, substantially all of which are located in the United States, as well as through its first retail store which opened in August 2021.

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 2022, 2021, and 2020, ending on January 29, 2022, January 30, 2021, and February 1, 2020 respectively, each reflected a 52-week period.

As such, fiscal years 2023, 2022, and 2021, ending on January 28, 2023, January 29, 2022, and January 30, 2021 respectively, each reflected a 52-week period.

Summary of Significant Accounting Policies

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Notes to Consolidated Financial Statements

valuation of inventories, valuation of long-lived assets, including operating right-of-use assets, valuation of goodwill and indefinite-lived intangible assets, accounts receivable valuation allowances, sales return allowances, and the useful lives of assets for depreciation or amortization.

Actual results could differ from these estimates.

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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.

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.

There were no short-term investments as of January 29, 2022.

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 expense (income), net, in the Company's Consolidated Statements of Operations.

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

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Routine maintenance and repair costs are expensed as incurred.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

The Company capitalizes certain costs incurred in connection with acquiring, modifying, and installing internal-use software.

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Costs related to shipping of product are classified in cost of sales in the Consolidated Statements of Operations.

The Company has elected to treat shipping and handling activities that occur after the customer has obtained control of a good as an activity to fulfill the promise to transfer the product rather than as an additional promised service.

The Company has elected to treat shipping and handling activities that occur after the customer has obtained control of a good as an activity to fulfill

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

the promise to transfer the product rather than as an additional promised service.

Net revenues exclude sales taxes collected from customers and remitted to governmental authorities from the transaction price.

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and (v) recognize revenue as the performance obligations are satisfied.

The Company collects payment at the point of sale for Vera Bradley full-line and factory outlet store transactions, upon shipment for Vera Bradley e-commerce transactions, and upon purchase for Pura Vida e-commerce transactions.

The Company collects payment at the point of sale for Vera Bradley and Pura Vida full-line and factory outlet store transactions, upon shipment for Vera Bradley e-commerce transactions, and upon purchase for Pura Vida e-commerce transactions.

The Company generally collects payment in arrears in accordance with established payment terms for each customer within the VB Indirect segment and for Pura Vida wholesale retailers.

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Fiscal year ended January 29, 2022 1,714 17,043 ( 17,175 ) 1,582

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

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

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.

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Operating right-of-use assets are based on the lease liability adjusted for prepaid rent, deferred rent, and tenant allowances received from certain of the Company’s landlords, primarily for its retail store locations.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Operating lease liabilities are amortized based upon the effective interest method.

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

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Store Pre-Opening, Occupancy, and Operating Costs

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Business Combination

The Company acquired a majority interest in Pura Vida on July 16, 2019.

In connection with a business combination, the Company records the identifiable assets acquired, liabilities assumed, contingent consideration liabilities, if any, and any noncontrolling interest in the acquiree at their acquisition-date fair values.

Goodwill is measured indirectly as the excess of the sum of (1) the consideration transferred (including contingent consideration, if any) and (2) the fair value of any noncontrolling interest in the acquiree over the net assets acquired and liabilities assumed.

Refer to Note 14 herein for additional information.

Refer to Note 14 herein for additional information regarding the noncontrolling interest in Pura Vida as of January 28, 2023.

These fair value assessments require management judgment and include the use of significant estimates and assumptions including future cash flows, discount and other market rates, and asset lives, among other items.

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

As of January 29, 2022 and January 30, 2021, the identifiable intangible assets consisted of the Pura Vida brand, customer relationships, and non-competition agreements.

As of January 28, 2023 the identifiable intangible assets consisted of the Pura Vida brand and customer relationships.

As of January 29, 2022 the balance also included 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 performs its annual goodwill and Pura Vida brand impairment test 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.

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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 29, 2022, 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 2022, we performed a quantitative analysis.

There was no impairment recorded for goodwill or the Pura Vida brand during fiscal 2022.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

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.

As of January 28, 2023, the carrying value of the Pura Vida brand was $ 11.7 million.

Goodwill was fully impaired during fiscal 2023 leaving no balance.

For the annual impairment analysis performed during fiscal 2023, the Company performed a quantitative analysis, as well as subsequent analyses due to triggering events, further described in Note 15 herein.

There were impairment charges recorded of $ 44.3 million and $ 25.0 million during fiscal 2023 for goodwill and the Pura Vida brand, respectively.

The estimated fair value of the Pura Vida brand is 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.

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On July 16, 2019, as contemplated by the Interest Purchase Agreement, the Company and certain of its subsidiaries and the owners of the remaining twenty-five percent ( 25 %) ownership interest in Pura Vida (the “Sellers”) which was not acquired by the Company (the “Remaining Pura Vida Interest”) entered into a Put/Call Agreement (the “Put/Call Agreement”).

Pursuant to the Put/Call Agreement, and subject to the terms and conditions thereof, the Sellers have the right to sell all of the Remaining Pura Vida Interest to the Company, and the Company has the right to purchase all of the Remaining Pura Vida Interests from Sellers, in each case generally at any time following the fifth anniversary of the closing date of the transaction until the tenth anniversary thereof.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Vida Interests from Sellers, in each case generally at any time following the fifth anniversary of the closing date of the transaction until the tenth anniversary thereof.

The purchase price for any Remaining Pura Vida Interest put to, or called by, the Company will be determined based on the arithmetic average of a multiple of adjusted EBITDA of Pura Vida and a multiple of adjusted EBITDA of the Company, as defined in the Put/Call Agreement, over the twelve-month period ending on the last day of the month immediately preceding the month in which an exercise notice is delivered by a relevant party.

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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 15 her ein for additional information regarding the redeemable noncontrolling interest.

Subsequent Event

On January 23, 2023, the Company and certain of its subsidiaries entered into an Interest Purchase Agreement (the “Interest Purchase Agreement”) with Creative Genius Holdings, Inc.

a California corporation, Creative Genius Investments, Inc., a California corporation, Griffin Thall and Paul Goodman (collectively “Sellers”) to purchase the remaining 25 % of the outstanding membership interests (the "Remaining Pura Vida Interests") of Pura Vida.

The closing date of the Transaction was January 30, 2023 (fiscal 2024).

Pursuant to the Interest Purchase Agreement, and subject to the terms and conditions thereof, on the closing date, the Company indirectly acquired the Remaining Pura Vida Interests (the “Transaction”) in exchange for cash consideration consisting of approximately $ 10 million payable at closing, subject to certain adjustments.

The Transaction was not subject to financing conditions.

The Company’s existing available cash and cash equivalents funded the purchase price.

Following completion of the Transaction, the Company owns one hundred percent ( 100 %) of the ownership interests in Pura Vida.

The Interest Purchase Agreement also includes certain non-competition and customer, supplier and employee non-solicitation and non-interference covenants from the Sellers in favor of the Company during the four-year period beginning on the closing date of the Transaction.

The Interest Purchase Agreement provides that, as of the closing of the Transaction, all rights and obligations of the Company and the Sellers under any agreements among the parties, including the Put/Call Agreement, were terminated.

Stock-Based Compensation

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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.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Total advertising expense was as follows (in thousands):

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Fiscal year ended January 29, 2022

Fiscal year ended February 1, 2020 (1)

(1) As a result of the July 2019 acquisition of Pura Vida, fiscal 2020 includes approximately six months of Pura Vida advertising expense.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Fiscal year ended January 30, 2021

Fair Value of Financial Instruments

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$ 360 $ 2,856 $ — $ — $ — $ —

Short-term investments:

corporate debt securities — — — 627 — —

corporate debt securities — — — 668 — —

(1) Cash equivalents relate to a money market fund that has 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 $ 0.1 million and $ 7.4 million in impairment charges related to store assets including property, plant, and equipment and lease right-of-use assets during the fiscal years ended January 29, 2022 and January 30, 2021.

There were no impairment charges for the fiscal year ended February 1, 2020.

The Company recorded $ 1.4 million , $ 0.1 million , and $ 7.4 million in impairment charges primarily related to store assets including property, plant, and equipment and lease right-of-use assets during the fiscal years ended January 28, 2023, January 29, 2022, and January 30, 2021, respectively.

Assets recognized or disclosed at fair value on the consolidated financial statements on a nonrecurring basis include items such as property, plant, and equipment, including leasehold improvements, and operating lease assets, as well as assets related to the Pura Vida acquisition including goodwill and intangible assets.

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

Refer to Note 14 herein for additional information on the methods used in the valuation of acquired intangible assets.

Refer to Note 15 herein regarding the Pura Vida brand and goodwill impairment test and fiscal 2023 impairment charges.

The discounted cash flow models used to estimate the applicable fair values involve numerous estimates and assumptions that are highly subjective.

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The estimates and assumptions critical to the overall fair value estimates include:

(1) estimated future cash flow generated at the store level;

(1) estimated future cash flow generated at the

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

(2) discount rates used to derive the present value factors used in determining the fair values;

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If economic conditions were to deteriorate, future impairment charges may be required which may be material.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

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.

When measuring deferred tax assets, the Company considers both positive and negative evidence to determine whether it is more likely than not that the deferred tax assets will be realized.

This evidence includes recent operating results, projected future taxable income, the reversal of existing taxable differences, tax planning strategies, among other factors.

When necessary, a valuation allowance is recorded to reduce the deferred tax assets to their anticipated realizable value.

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.

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Recently Issued Accounting Pronouncements

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

The amendments in this update remove, modify, and add certain disclosure requirements to ASC 820, Fair Value Measurement .

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

Early adoption is permitted, and certain amendments are to be adopted prospectively for only the most recent annual or interim period presented in the initial year of adoption or retrospectively.

The adoption of this standard in the first quarter of fiscal 2021 did not have a material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments .

This standard replaces the incurred loss impairment methodology in current GAAP with a methodology that uses a forward-looking approach to recording credit losses for certain financial instruments including debt securities, trade receivables, and other financial assets.

This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, for 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.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

The amendments in this update remove certain exceptions to the general principals in Topic 740, as well as simplify GAAP for certain areas and improve consistency within the topic.

This guidance is effective for interim and annual periods beginning on or after December 15, 2020 (fiscal 2022).

Early adoption is permitted, with all amendments required to be adopted in the same period.

The adoption of this standard in the first quarter of fiscal 2022 did not have a material impact on the Company's consolidated financial statements.

There were no new accounting pronouncements issued or which became effective during fiscal 2023 which had, or are expected to have, a significant impact on the Company's Consolidated Financial Statements.

Vera Bradley, Inc.

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Disaggregation of Revenue

The following presents the Company's net revenues disaggregated by product category for the fifty-two weeks ended January 29, 2022, January 30, 2021, and February 1, 2020 (in thousands):

The following presents the Company's net revenues disaggregated by product category for the fifty-two weeks ended January 28, 2023, January 29, 2022, and January 30, 2021 (in thousands):

Fifty-Two Weeks Ended

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Fifty-Two Weeks Ended

February 1, 2020

January 30, 2021

VB Direct Segment VB Indirect Segment Pura Vida Segment Total

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Apparel/Footwear (6)

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

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

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

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(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.

Contract Balances

Contract liabilities as of January 28, 2023 and January 29, 2022, were $ 3.2 million and $ 3.9 million, respectively.

The balance as of January 29, 2022 consisted of unearned revenue related to unredeemed gift cards, the monthly bracelet and jewelry clubs of the Pura Vida segment, 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 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 consisted of unredeemed gift cards, unearned revenue related to the monthly bracelet and jewelry clubs of the Pura Vida segment, Pura Vida loyalty club points, and Pura Vida customer deposits and payments collected before shipment.

These contract liabilities are recognized within other accrued liabilities on the Company’s Consolidated Balance Sheets.

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Product Sales

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

Product shipments for the Company’s e-

In the Vera Bradley and Pura Vida retail stores (recognized within the VB Direct segment and the Pura Vida segments), 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.

Net revenue is recognized upon shipment consistent with

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

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.

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

when control is transferred to the customer.

Upon shipment, the customer has the right to direct the use of, and obtain substantially all of the benefits from, the product.

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Concentration of Credit Risk

Five customers represented approximately 40.0 % of the balance of accounts receivable, net as of January 29, 2022.

In the prior-year, the Company temporarily closed its full-line and factory outlet stores beginning on March 19, 2020, due to the COVID-19 pandemic, for various lengths of time (from several weeks to several months).

The stores began to re-open on May 5, 2020, with substantially all stores open by the end of July 2020.

All of the Company's stores were open during fiscal 2022.

As a result of the temporary closures in the prior-year, certain rent payments were deferred.

An immaterial amount of rent abatements were received as of January 29, 2022 and January 30, 2021.

An immaterial amount of rent deferrals were received as of January 30, 2021.

No additional rent deferrals were received during fiscal 2022.

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 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.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

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.

Five customers represented nearly 50.0 % of the balance of accounts receivable, net as of January 28, 2023.

Nature of Leases

The Company has operating leases at all of its retail stores, including Pura Vida's retail store, as well as for its New York office, the California Pura Vida office, Asia sourcing office, and showrooms.

The Company also has operating leases for certain equipment and storage spaces.

The Company has operating leases at all of its Vera Bradley and Pura Vida retail stores, as well as for its New York office, the California Pura Vida office, Asia sourcing office, and showrooms.

The Company also has operating leases for storage spaces.

The Company does not have residual value guarantees, restrictions, or covenants imposed by leases.

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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 five years as of January 29, 2022.

The Company's other leases have remaining terms of up to approximately four years as of January 28, 2023.

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.

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These rental payments are not included in the measurement of the lease liability, but are recognized as variable lease cost in the period incurred.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Certain of the Company's leases also contain lease components with increases based upon an index or rate.

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Leases Not Yet Commenced

As of January 29, 2022, the Company had three leases which were executed but did it not have control of the underlying assets;

As of January 28, 2023, the Company had two leases which were executed but did it not have control of the underlying assets;

therefore, the lease liability and right-of-use asset are not recorded on the Condensed Consolidated Balance Sheet.

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

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

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.

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Amounts Recognized in the Consolidated Financial Statements

The following lease expense is recorded within cost of sales for the Asia sourcing office and certain equipment leases and within selling, general, and administrative expenses for all other leases, including retail store leases, in the Company's Consolidated Statements of Operations for the fiscal years ended January 29, 2022, January 30, 2021, and February 1, 2020 (in thousands):

The following lease expense is recorded within cost of sales for the Asia sourcing office and certain equipment leases and within selling, general, and administrative expenses for all other leases, including retail store leases, in the Company's Consolidated Statements of Operations for the fiscal years ended January 28, 2023, January 29, 2022, and January 30, 2021 (in thousands):

Fifty-Two Weeks Ended

January 29, 2022 January 30, 2021 February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Operating lease cost $ 25,118 $ 25,200 $ 26,112

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Short-term lease cost 476 515 445

Sublease income (1)

Total lease cost $ 31,335 $ 33,275 $ 32,378

(1) Related to the sublease of a former Company location.

The weighted-average remaining lease term as of January 28, 2023 and January 29, 2022 was 5.4 years and 5.3 years, respectively.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

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

Fifty-Two Weeks Ended

January 29, 2022 January 30, 2021 February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Cash paid for amounts included in the measurement of operating lease liabilities (1)

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Present value of lease liabilities $ 94,378

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Property, Plant, and Equipment

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Fiscal year ended January 29, 2022 9,315

Fiscal year ended February 1, 2020 18,447

Fiscal year ended January 30, 2021 13,483

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

As of January 28, 2023 and January 29, 2022, the Company had no borrowings outstanding and availability of $ 75.0 million under its Credit Agreement.

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engage in certain transactions with affiliates;

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.

and amend, modify, or waive any of its rights related to subordinated indebtedness and certain charter and other organizational, governing, and material agreements.

The Company may avoid certain of such restrictions by meeting payment conditions defined in the Credit Agreement.

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There were no material fees or expenses associated with the Credit Agreement.

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

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

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

2023 January 29,

2021 February 1,

2022 January 30,

Federal $ 680 $ 5,923 $ ( 4,644 )

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( 17,685 ) ( 327 ) 4,126

Total income tax expense $ 6,430 $ 1,173 $ 5,315

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

Total income tax (benefit) expense $ ( 15,640 ) $ 6,430 $ 1,173

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

2023 January 29,

2021 February 1,

2022 January 30,

Domestic $ ( 98,539 ) $ 24,881 $ 10,151

Foreign 3,515 1,767 1,711

Total income before income taxes $ 26,648 $ 11,862 $ 20,559

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

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

Total (loss) income before income taxes $ ( 95,024 ) $ 26,648 $ 11,862

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

2023 January 29,

2021 February 1,

2022 January 30,

Federal taxes at statutory rate $ ( 19,955 ) 21.0 % $ 5,596 21.0 % $ 2,491 21.0 %

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

Non-deductible executive compensation 1,150 ( 1.2 ) 471 1.8 246 2.1

Other 13 — 218 0.8 244 2.0

Total income tax expense $ 6,430 24.1 % $ 1,173 9.9 % $ 5,315 25.9 %

Total income tax (benefit) expense $ ( 15,640 ) 16.5 % $ 6,430 24.1 % $ 1,173 9.9 %

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.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

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

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Inventories 2,298 1,637

Investment in subsidiary 14,595 826

Other 1,519 2,041

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Net deferred tax assets $ 21,542 $ 3,857

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

The Company considered both positive and negative evidence to determine whether it was more likely than not that some, or all, of the deferred tax assets would not be realized in its valuation allowance assessment.

Based on this assessment, t he Company recorded immaterial valuation allowances as of January 28, 2023 and January 29, 2022

Uncertain Tax Positions

1 unchanged sentence

2023 January 29,

2021 February 1,

2022 January 30,

Beginning balance $ 92 $ 55 $ 59

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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 January 30, 2021 and February 1, 2020.

The Company recognized an immaterial amount of interest only, no penalties, related to unrecognized tax benefits in the fiscal years ended January 29, 2022, February 1, 2020, and February 2, 2019.

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

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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 $ 4.9 million, $ 5.7 million, and $ 5.9 million in the fiscal years ended January 29, 2022, January 30, 2021, and February 1, 2020, respectively.

The Company recognized stock-based compensation expense of $ 3.2 million, $ 4.9 million, and $ 5.7 million in the fiscal years ended January 28, 2023, January 29, 2022, and January 30, 2021, respectively.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Awards of Restricted-Stock Units

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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 28, 2023 (units in thousands):

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Nonvested units outstanding at January 29, 2022

855 $ 7.43 708 $ 7.95

Granted 992 5.60 661 5.62

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Nonvested units outstanding at January 28, 2023

965 $ 5.74 523 $ 4.71

As of January 28, 2023, there was $ 4.4 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested restricted stock units.

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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.

The Company has filed a motion for summary judgement asking the Court to dismiss all claims with prejudice and grant judgement on its counterclaim.

The motion is fully briefed and the Company is awaiting a decision from the Court.

In November 2019, the Company filed

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

a counterclaim against the principals of Vesi as personal guarantors for monies owed to the Company by Vesi.

The Company filed a motion for summary judgement asking the Court to dismiss all claims with prejudice and grant judgement on its counterclaim.

On January 4, 2023, the Court granted the Company’s motion for summary judgment dismissing Vesi’s claims and also granted judgment on the Company’s counterclaims against the principals of Vesi for an immaterial amount.

Vesi has appealed this decision.

At this time, we are not able to estimate a possible loss or range of loss that may result from this matter or to determine whether such loss, if any, would have a material adverse effect on our financial condition or results of operations 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 alleged 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 also filed a Private Attorney General Act claim with the state of California regarding the same allegations.

This case was settled in the first quarter of fiscal 2022 for an immaterial amount.

Vera Bradley, Inc.

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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 January 29, 2022, January 30, 2021, and February 1, 2020, no discretionary profit sharing payments had been approved.

As of January 28, 2023, January 29, 2022, and January 30, 2021, 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.

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Fiscal year ended January 29, 2022 1,929

Fiscal year ended February 1, 2020 1,732

Fiscal year ended January 30, 2021 723

Related-Party Transactions

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The Vera Bradley Foundation for Breast Cancer (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 $ 0.1 million and $ 0.2 million as of January 29, 2022 and January 30, 2021, respectively.

The liability associated with commitments to the Foundation was approximately $ 0.1 million as of January 28, 2023 and January 29, 2022.

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

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Fiscal year ended January 29, 2022 160

Fiscal year ended February 1, 2020 101

Fiscal year ended January 30, 2021 53

Vera Bradley, Inc.

1 unchanged sentence

Earnings Per Share

Basic net income per share is computed based on the weighted-average number of shares of common stock outstanding during the period.

Basic net (loss) income per share is computed based on the weighted-average number of shares of common stock outstanding during the period.

Diluted net income per share is computed based on the weighted-average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method.

Dilutive potential common shares include outstanding restricted stock and restricted-stock units.

The components of basic and diluted net income per share are as follows (in thousands, except per share data):

The components of basic and diluted net (loss) income per share are as follows (in thousands, except per share data):

Fiscal Year Ended

2023 January 29,

2021 February 1,

Net income $ 20,218 $ 10,689 $ 15,244

Net income (loss) attributable to redeemable noncontrolling interest 2,380 2,008 ( 803 )

Net income attributable to Vera Bradley, Inc.

2022 January 30,

Net (loss) income $ ( 79,384 ) $ 20,218 $ 10,689

Net (loss) income attributable to redeemable noncontrolling interest ( 19,649 ) 2,380 2,008

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

$ ( 59,735 ) $ 17,838 $ 8,681

2 unchanged sentences

Weighted-average number of common shares (diluted) 31,503 34,437 33,914

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

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

Basic $ ( 1.90 ) $ 0.53 $ 0.26

Diluted $ ( 1.90 ) $ 0.52 $ 0.26

As of January 29, 2022, January 30, 2021, and February 1, 2020, 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.

As of January 28, 2023, all potential common shares were excluded from the diluted share calculation because they were anti-dilutive due to the net loss in the period.

As of January 29, 2022 and January 30, 2021, 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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The 2021 Share Repurchase Program went into effect beginning December 13, 2021 and expires in December 2024.

During the fiscal year ended January 28, 2023, the Company purchased and held 2,820,949 shares at an average price of $ 6.40 per share, excluding commissions, for an aggregate amount of $ 18.1 million, under the 2021 Share Repurchase Programs.

During the fiscal year ended January 29, 2022, the Company purchased and held 865,534 shares at an average price of $ 8.94 per share, excluding commissions, for an aggregate amount of $ 7.7 million, under the 2018 and 2021 Share Repurchase Programs.

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.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

As of January 28, 2023, there was $ 27.7 million remaining available to repurchase shares of the Company’s common stock under the 2021 Share Repurchase Program.

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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.

Acquisition of Pura Vida

On July 16, 2019, the Company completed its acquisition of a seventy-five percent ( 75 %) ownership interest in Creative Genius, Inc.

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 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.

Pura Vida, based in La Jolla, California, is a digitally native lifestyle brand that we believe deeply resonates with its loyal consumer following.

The Pura Vida brand has a differentiated and expanding offering of bracelets, jewelry, and other lifestyle accessories.

The Company believes that the acquisition will strengthen the Company by providing increased product diversification and future growth opportunities partially as a result of resource and knowledge-sharing.

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 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 February 1, 2020.

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

There were no Transaction costs for the fiscal years ended January 29, 2022 and January 30, 2021.

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 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

in thousands Fair Value at Acquisition Date

Cash and cash equivalents $ 1,495

Accounts receivable, net (5)

Inventories (1)

Prepaid expenses and other current assets 1,537

Operating right of use asset 1,250

Property, plant, and equipment, net 751

Pura Vida brand (3)

Other intangible assets (4)

Total assets acquired 146,285

Accounts payable 6,818

Accrued employment costs 2,351

Other accrued liabilities (5)

Operating lease liability 1,637

Total liabilities assumed 17,443

Contingent consideration related to earn-out provision (6)

Redeemable Noncontrolling Interest

Cash acquired ( 1,495 )

Total closing consideration amount, net of cash acquired (7)

(1) Includes an $ 8.3 million step-up adjustment which was recognized in cost of sales during the four months following the acquisition.

Inventories were valued using the cost approach.

The significant assumptions used for the valuation include inventory balances, projected gross and operating margins, and cost and time to dispose (sell) inventory on hand.

(2) Refer to Notes 2 and 16 herein for additional information regarding goodwill.

(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.

Refer to Note 16 herein for additional information regarding intangible assets.

(4) Other intangible assets include customer relationships and non-competition agreements.

Customer relationships were valued using the multi-period excess earnings method.

Significant assumptions used for the valuation include projected cash flows, the discount rate, and the customer attrition rate.

The non-competition agreements were valued using the with-or-without method.

Significant assumptions used for the valuation include projected cash flows, probability of competition, impact of competition on business, and the discount rate.

Refer to Note 16 herein for additional information regarding intangible assets.

(5) Includes $ 4.1 million related to an indemnified liability.

(6) Contingent consideration related to the earn-out provision was valued using a Monte Carlo simulation in order to forecast the value of the potential future payment.

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 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.

The operations of Pura Vida are recorded in the Company’s Consolidated Statements of Operations for the fiscal year ended February 1, 2020, beginning on July 17, 2019, which represents the first full day following the acquisition.

Refer to Note 17 herein for segment-level financial information associated with Pura Vida.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Redeemable Noncontrolling Interest

Redeemable noncontrolling interest represents the remaining twenty-five percent ( 25 %) interest in Pura Vida not acquired by the Company.

On January 30, 2023, subsequent to the end of fiscal 2023, the Company purchased the remaining 25 % interest in Pura Vida.

Refer to Note 2 herein for additional information.

Changes in redeemable noncontrolling interest for the fifty-two weeks ended January 29, 2022, January 30, 2021, and February 1, 2020 were as follows (in thousands):

Balance at February 2, 2019 $ —

Fair value of noncontrolling interest at acquisition 31,786

Fair value measurement period adjustment 424

Net loss attributable to redeemable noncontrolling interest ( 803 )

Distributions to redeemable noncontrolling interest ( 1,789 )

Adjustment to redemption value 431

Changes in redeemable noncontrolling interest for the fifty-two weeks ended January 28, 2023, January 29, 2022, and January 30, 2021 were as follows (in thousands):

Balance at February 1, 2020 $ 30,049

6 unchanged sentences

Balance at January 29, 2022 $ 30,974

Net loss attributable to redeemable noncontrolling interest ( 19,649 )

Distributions to redeemable noncontrolling interest ( 613 )

Balance at January 28, 2023 $ 10,712

Vera Bradley, Inc.

11 unchanged sentences

Pura Vida Brand (2)

11,666 — 11,666

Total intangible assets, excluding goodwill $ 36,662 $ ( 20,744 ) $ 15,918

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

(2) Impairment charges of $ 9.9 million and $ 15.1 million were recorded within the Pura Vida segment during the second and fourth quarters of fiscal 2023.

January 29, 2022

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Fiscal 2025 1,336

Fiscal 2025 1,409

Total $ 4,252

The total amount of the goodwill as of January 29, 2022 and January 30, 2021, was $ 44.3 million recorded within the Pura Vida segment upon acquisition.

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

The total amount of the goodwill as of January 29, 2022, was $ 44.3 million which was recorded within the Pura Vida segment upon acquisition.

There was no goodwill balance as of January 28, 2023 due to impairment charges recorded during the year.

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

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Refer to Note 2 herein for addition information regarding goodwill.

There were no changes in goodwill for the fiscal years ended January 29, 2022 and January 30, 2021.

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.

to Note 2 herein for addition information regarding goodwill.

Changes to goodwill for the fiscal year ended January 28, 2023 are as follows (in thousands):

Balance at January 29, 2022 $ 44,254

Goodwill impairment (1)

Balance at January 28, 2023 $ —

(1) Goodwill impairment charges of $ 19.4 million and $ 24.9 million were recorded within the Pura Vida segment during the second and fourth quarters of fiscal 2023.

There were no changes in goodwill for the fiscal year ended January 29, 2022.

The Company performs its annual impairment test over goodwill and the indefinite-lived Pura Vida brand during the second quarter of each fiscal year.

The Company has experienced significantly lower sales from its Pura Vida e-commerce channel due to a decline in social and digital media effectiveness, as well as lower sales from the wholesale channel.

These lower sales volumes had a negative impact on the fair value determination of the aforementioned assets.

The fair value of the Pura Vida reporting unit was determined using a combination of an income-based approach (discounted cash flows) and a market-based approach (guideline transaction method).

The discounted cash flow method involved subjective estimates and assumptions such as projected revenue growth, operating profit, and the discount rate.

The guideline transaction method involved transaction multiples derived from the acquisition of controlling interests in stocks of companies that are engaged in the same or similar lines of business as the reporting unit.

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

The estimates and assumptions used in the determination of the fair value of the Pura Vida brand included the projected revenue growth, long-term growth rate, the royalty rate, and discount rate.

During the assessment for the fiscal 2023 annual test, it was determined that the fair values of the Pura Vida reporting unit and the Pura Vida brand were less than their carrying values.

As a result, the Company recorded an impairment charge of $ 9.9 million and $ 19.4 million for the Pura Vida brand and goodwill, respectively, during the second quarter of fiscal 2023 within the Pura Vida segment.

We identified triggering events during the subsequent quarters of fiscal 2023, due to lower operating profit compared to previous forecasts, as well as changes in the long-range plan such as a pause on the opening of new Pura Vida retail stores.

We performed further testing on the Pura Vida reporting unit and Pura Vida brand as a result.

These analyses caused additional impairment charges to be recorded in the fourth quarter of fiscal 2023 of $ 15.1 million and $ 24.9 million for the Pura Vida brand and goodwill, respectively, which reflects a full goodwill impairment.

Collectively, impairment charges for the Pura Vida brand and goodwill during fiscal 2023 totaled $ 69.3 million.

While we consider our assumptions in the determination of the fair value of these assets to be reasonable, they are complex and highly subjective.

Adverse changes in key assumptions in future periods may result in further declines in the fair value estimates of the Pura Vida brand below its carrying value resulting in additional impairment charges, which could be material.

Our key assumptions (as described above in the valuation methodologies used in the determination of fair value) may be impacted by macroeconomic conditions, including inflationary pressures and the impact on consumer discretionary spending, supply chain challenges, as well as a sustained decline in stock price and potential changes in business strategy.

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

Cost Savings Initiatives and Other Charges

Cost Savings Initiatives and Severance Charges

During fiscal 2023, the Company began implementation of its targeted cost reductions, which are expected to be fully realized in fiscal 2024.

Expense savings are being derived across various areas of the Company, including retail store efficiencies, marketing expenses, information technology contracts, professional services, logistics and operational costs, and corporate payroll.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

The Company has incurred the following charges during the fifty-two weeks ended January 28, 2023 (in thousands):

Reportable Segment

VB Direct VB Indirect Pura Vida Unallocated Corporate Expenses Total Expense

Severance charges and cash retention payment acceleration charges (1)

$ 15 $ — $ 422 $ 8,745 $ 9,182

Consulting fees and other costs (2)

302 — 179 3,976 4,457

$ 317 $ — $ 601 $ 12,721 $ 13,639

(1) Includes CEO retirement severance and Vera Bradley brand executive officer severance

(2) Includes $ 3.9 million for fees related to cost savings initiatives and CEO search;

$ 0.3 million for concept brand exit costs;

and $ 0.3 million for certain professional fees

(3) $ 13.4 million of the charges are recorded within selling, general, and administrative expenses and $ 0.2 million are recorded within cost of sales

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

Severance Charges and Cash Retention Payment Acceleration Charges (1)

Consulting Fees and Other Costs (2)

Fiscal 2023 charges $ 9,182 $ 4,457

Cash payments ( 6,083 ) ( 4,095 )

Non-cash charges and adjustments ( 16 ) ( 302 )

Liability as of January 28, 2023 $ 3,083 $ 60

(1) Remaining liability is recorded within accrued employment costs

(2) Remaining liability is recorded within accounts payable

There were no similar charges during fiscal years 2022 and 2021.

Other Charges

Fiscal 2023 .

During the fifty-two weeks ended January 28, 2023, the Company recorded within cost of sales $ 18.1 million of inventory adjustments which consisted of:

$ 8.9 million of excess Pura Vida inventory recognized in the fourth quarter as a result of a change in the Company’s liquidation strategy during the quarter;

$ 6.4 million related to the exit of certain technology products and excess mask products recognized in the second and fourth quarters;

$ 1.2 million of valuation adjustments to write discounted inventory down to its net realizable value recognized in the fourth quarter;

and $ 1.6 million for purchase order cancellation fees related to spring 2023 product and certain raw materials.

During the fifty-two weeks ended January 28, 2023, the Company recorded within selling, general, and administrative expenses:

$ 1.0 million for CEO sign-on bonus and relocation expenses;

$ 0.4 million for former CEO salary retention payments and stock-based compensation associated with retirement;

and $ 0.2 million of professional fees associated with strategic initiatives and other costs.

Collectively, $ 6.2 million was recorded within the Direct segment, $ 1.7 million was recorded within the Indirect segment,$ 10.2 million was recorded within the Pura Vida segment, and $ 1.6 million was recorded within corporate unallocated expenses.

There were no similar charges during fiscal years 2022 and 2021.

Vera Bradley, Inc.

Notes to Consolidated Financial Statements

Segment Reporting

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No customer accounted for 10% or more of the Company’s net revenues during fiscal years 2023, 2022, and 2021.

The Pura Vida segment represents revenues generated through the Pura Vida websites, www.puravidabracelets.com, www.puravidabracelets.eu, and www.puravidabracelets.ca, the Pura Vida retail store, 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, and www.puravidabracelets.ca, Pura Vida retail stores, 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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Notes to Consolidated Financial Statements

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

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

Fiscal Year Ended

2023 January 29,

2021 February 1,

2022 January 30,

Segment net revenues:

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Total $ 499,961 $ 540,453 $ 468,272

Segment operating income (loss):

Segment operating (loss) income:

VB Direct $ 51,097 $ 73,506 $ 48,524

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Reconciliation:

Segment operating income $ 103,348 $ 81,057 $ 96,403

Segment operating (loss) income $ ( 4,529 ) $ 103,348 $ 81,057

Unallocated corporate expenses ( 90,342 ) ( 76,437 ) ( 67,992 )

Operating income $ 26,911 $ 13,065 $ 19,474

Operating (loss) income $ ( 94,871 ) $ 26,911 $ 13,065

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.

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

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

4 unchanged sentences

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