x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Indiana | 27-2935063 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
12420 Stonebridge Road, Roanoke, Indiana | 46783 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ¨ | Accelerated filer | x | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ | |||
Emerging growth company | ¨ | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ |
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1A. | ||
Item 2. | ||
Item 6. |
• | possible inability to successfully implement our long-term strategic plan; |
• | possible continued declines in our comparable sales; |
• | possible inability to maintain and enhance our brand; |
• | possible failure of our multi-channel distribution model; |
• | possible adverse changes in general economic conditions and their impact on consumer confidence and consumer spending; |
• | possible inability to predict and respond in a timely manner to changes in consumer demand; |
• | possible inability to successfully open new stores and/or operate current stores as planned; |
• | possible loss of key management or design associates or inability to attract and retain the talent required for our business; |
• | possible ramifications from the payment card incident disclosed in October 2016; and |
• | possible data security or privacy breaches or disruptions in our computer systems or website. |
ITEM 1. | FINANCIAL STATEMENTS |
April 29, 2017 | January 28, 2017 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 74,400 | $ | 86,375 | ||||
Short-term investments | 9,489 | 30,152 | ||||||
Accounts receivable, net | 22,693 | 23,313 | ||||||
Inventories | 105,421 | 102,283 | ||||||
Income taxes receivable | 5,722 | 3,217 | ||||||
Prepaid expenses and other current assets | 11,579 | 10,237 | ||||||
Total current assets | 229,304 | 255,577 | ||||||
Property, plant, and equipment, net | 100,566 | 101,577 | ||||||
Long-term investments | 17,519 | — | ||||||
Deferred income taxes | 12,672 | 13,539 | ||||||
Other assets | 2,222 | 2,816 | ||||||
Total assets | $ | 362,283 | $ | 373,509 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 25,705 | $ | 32,619 | ||||
Accrued employment costs | 10,743 | 12,474 | ||||||
Other accrued liabilities | 18,667 | 16,906 | ||||||
Income taxes payable | 681 | 508 | ||||||
Total current liabilities | 55,796 | 62,507 | ||||||
Long-term liabilities | 27,243 | 27,216 | ||||||
Total liabilities | 83,039 | 89,723 | ||||||
Commitments and contingencies | ||||||||
Shareholders’ equity: | ||||||||
Preferred stock; 5,000 shares authorized, no shares issued or outstanding | — | — | ||||||
Common stock, without par value; 200,000 shares authorized, 41,093 and 40,927 shares issued and 36,253 and 36,218 shares outstanding, respectively | — | — | ||||||
Additional paid-in-capital | 89,438 | 88,739 | ||||||
Retained earnings | 259,718 | 263,767 | ||||||
Accumulated other comprehensive loss | (43 | ) | (50 | ) | ||||
Treasury stock | (69,869 | ) | (68,670 | ) | ||||
Total shareholders’ equity | 279,244 | 283,786 | ||||||
Total liabilities and shareholders’ equity | $ | 362,283 | $ | 373,509 |
Thirteen Weeks Ended | ||||||||
April 29, 2017 | April 30, 2016 | |||||||
Net revenues | $ | 96,135 | $ | 105,181 | ||||
Cost of sales | 43,435 | 45,525 | ||||||
Gross profit | 52,700 | 59,656 | ||||||
Selling, general, and administrative expenses | 57,771 | 56,376 | ||||||
Other income | 267 | 577 | ||||||
Operating (loss) income | (4,804 | ) | 3,857 | |||||
Interest (income) expense, net | (39 | ) | 48 | |||||
(Loss) income before income taxes | (4,765 | ) | 3,809 | |||||
Income tax (benefit) expense | (716 | ) | 1,391 | |||||
Net (loss) income | $ | (4,049 | ) | $ | 2,418 | |||
Basic weighted-average shares outstanding | 36,235 | 37,547 | ||||||
Diluted weighted-average shares outstanding | 36,235 | 37,724 | ||||||
Basic net (loss) income per share | $ | (0.11 | ) | $ | 0.06 | |||
Diluted net (loss) income per share | $ | (0.11 | ) | $ | 0.06 |
Thirteen Weeks Ended | ||||||||
April 29, 2017 | April 30, 2016 | |||||||
Net (loss) income | $ | (4,049 | ) | $ | 2,418 | |||
Unrealized gain on available-for-sale investments | 13 | — | ||||||
Cumulative translation adjustment | (6 | ) | 5 | |||||
Comprehensive (loss) income, net of tax | $ | (4,042 | ) | $ | 2,423 |
Thirteen Weeks Ended | ||||||||
April 29, 2017 | April 30, 2016 | |||||||
Cash flows from operating activities | ||||||||
Net (loss) income | $ | (4,049 | ) | $ | 2,418 | |||
Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||
Depreciation of property, plant, and equipment | 4,948 | 4,702 | ||||||
Provision for doubtful accounts | 162 | 23 | ||||||
Stock-based compensation | 1,278 | 842 | ||||||
Deferred income taxes | 867 | 221 | ||||||
Cash gain on investments | 152 | — | ||||||
Other non-cash gain, net | (19 | ) | (13 | ) | ||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | 458 | 3,580 | ||||||
Inventories | (3,138 | ) | 178 | |||||
Prepaid expenses and other assets | (748 | ) | (1,749 | ) | ||||
Accounts payable | (6,040 | ) | 1,262 | |||||
Income taxes | (2,332 | ) | (12,066 | ) | ||||
Accrued and other liabilities | (1,476 | ) | (3,395 | ) | ||||
Net cash used in operating activities | (9,937 | ) | (3,997 | ) | ||||
Cash flows from investing activities | ||||||||
Purchases of property, plant, and equipment | (3,362 | ) | (5,594 | ) | ||||
Purchases of investments | (26,975 | ) | (30,000 | ) | ||||
Proceeds from maturity of investment | 30,000 | — | ||||||
Net cash used in investing activities | (337 | ) | (35,594 | ) | ||||
Cash flows from financing activities | ||||||||
Tax withholdings for equity compensation | (579 | ) | (572 | ) | ||||
Repurchase of common stock | (1,116 | ) | (5,694 | ) | ||||
Other financing activities, net | — | (16 | ) | |||||
Net cash used in financing activities | (1,695 | ) | (6,282 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (6 | ) | 5 | |||||
Net decrease in cash and cash equivalents | (11,975 | ) | (45,868 | ) | ||||
Cash and cash equivalents, beginning of period | 86,375 | 97,681 | ||||||
Cash and cash equivalents, end of period | $ | 74,400 | $ | 51,813 | ||||
Supplemental disclosure of cash flow information | ||||||||
Cash paid for income taxes, net | $ | 522 | $ | 13,223 | ||||
Supplemental disclosure of non-cash activity | ||||||||
Non-cash operating, investing, and financing activities | ||||||||
Repurchase of common stock | ||||||||
Expenditures incurred but not yet paid as of April 29, 2017 and April 30, 2016 | $ | 83 | $ | 426 | ||||
Expenditures incurred but not yet paid as of January 28, 2017 and January 30, 2016 | $ | — | $ | 436 | ||||
Purchases of property, plant, and equipment | ||||||||
Expenditures incurred but not yet paid as of April 29, 2017 and April 30, 2016 | $ | 2,780 | $ | 3,173 | ||||
Expenditures incurred but not yet paid as of January 28, 2017 and January 30, 2016 | $ | 2,204 | $ | 2,872 |
Thirteen Weeks Ended | ||||||||
April 29, 2017 | April 30, 2016 | |||||||
Numerator: | ||||||||
Net (loss) income | $ | (4,049 | ) | $ | 2,418 | |||
Denominator: | ||||||||
Weighted-average number of common shares (basic) | 36,235 | 37,547 | ||||||
Dilutive effect of stock-based awards | — | 177 | ||||||
Weighted-average number of common shares (diluted) | 36,235 | 37,724 | ||||||
(Loss) earnings per share: | ||||||||
Basic | $ | (0.11 | ) | $ | 0.06 | |||
Diluted | $ | (0.11 | ) | $ | 0.06 |
• | Level 1 – Quoted prices in active markets for identical assets or liabilities; |
• | Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; |
• | Level 3 – Unobservable inputs based on the Company’s own assumptions. |
Level 1 | Level 2 | Level 3 | |||||||||||||||||||||
April 29, 2017 | January 28, 2017 | April 29, 2017 | January 28, 2017 | April 29, 2017 | January 28, 2017 | ||||||||||||||||||
Cash equivalents(1) | $ | 904 | $ | — | $ | 22,198 | $ | — | $ | — | $ | — | |||||||||||
Short-term investments: | |||||||||||||||||||||||
Municipal securities | — | — | 4,533 | — | — | — | |||||||||||||||||
Commercial paper | — | — | 3,491 | — | — | — | |||||||||||||||||
U.S. corporate debt securities | — | — | 1,465 | — | — | — | |||||||||||||||||
Certificate of deposit | — | — | — | 30,152 | — | — | |||||||||||||||||
Long-term investments: | |||||||||||||||||||||||
U.S. corporate debt securities | — | — | 7,282 | — | — | — | |||||||||||||||||
Non-U.S. corporate debt securities | — | — | 6,144 | — | — | — | |||||||||||||||||
Municipal securities | — | — | 2,079 | — | — | — | |||||||||||||||||
U.S. treasury securities | 2,014 | — | — | — | — | — | |||||||||||||||||
(1) Cash equivalents include a money market fund, commercial paper and municipal securities that have a maturity of three months or less at the date of purchase. Due to their short maturity, the Company believes the carrying value approximates fair value. |
April 29, 2017 | January 28, 2017 | |||||||
Finished goods | 105,421 | 102,283 | ||||||
Total inventories | $ | 105,421 | $ | 102,283 |
Time-based Restricted Stock Units | Performance-based Restricted Stock Units | |||||||||||||
Number of Units | Weighted- Average Grant Date Fair Value (per unit) | Number of Units | Weighted- Average Grant Date Fair Value (per unit) | |||||||||||
Nonvested units outstanding at January 28, 2017 | 487 | $ | 18.04 | 375 | $ | 19.10 | ||||||||
Granted | 294 | 9.31 | 212 | 9.31 | ||||||||||
Vested | (233 | ) | 18.18 | — | — | |||||||||
Forfeited | (24 | ) | 17.15 | (93 | ) | 24.84 | ||||||||
Nonvested units outstanding at April 29, 2017 | 524 | $ | 13.11 | 494 | $ | 14.05 |
April 29, 2017 | January 28, 2017 | ||||||
Municipal securities | $ | 4,533 | $ | — | |||
Commercial paper | 3,491 | — | |||||
U.S. corporate debt securities | 1,465 | — | |||||
Certificate of deposit | — | 30,152 | |||||
Total short-term investments | $ | 9,489 | $ | 30,152 |
April 29, 2017 | January 28, 2017 | ||||||
U.S. corporate debt securities | $ | 7,282 | $ | — | |||
Non-U.S. corporate debt securities | 6,144 | — | |||||
Municipal securities | 2,079 | — | |||||
U.S. treasury securities | 2,014 | — | |||||
Total long-term investments | $ | 17,519 | $ | — |
Thirteen Weeks Ended | ||||||||
April 29, 2017 | April 30, 2016 | |||||||
Segment net revenues: | ||||||||
Direct | $ | 68,837 | $ | 72,946 | ||||
Indirect | 27,298 | 32,235 | ||||||
Total | $ | 96,135 | $ | 105,181 | ||||
Segment operating income: | ||||||||
Direct | $ | 6,812 | $ | 12,137 | ||||
Indirect | 9,446 | 12,598 | ||||||
Total | $ | 16,258 | $ | 24,735 | ||||
Reconciliation: | ||||||||
Segment operating income | $ | 16,258 | $ | 24,735 | ||||
Less: | ||||||||
Unallocated corporate expenses | (21,062 | ) | (20,878 | ) | ||||
Operating (loss) income | $ | (4,804 | ) | $ | 3,857 |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | We launched our new platform for verabradley.com in February 2017, creating a dynamic digital flagship. The new site offers a number of enhancements including, among others, the ability to strategically segment and personalize messaging, express check-out, and “order on-line, pickup in-store.” |
• | We are continuing work on our store renovation strategy by adding our new branding, including storefront facade, logo, and interior changes to our higher-volume and traffic full-line stores. One full-line store renovation was completed in the first quarter, and approximately 19 additional renovations will be completed throughout the remainder of fiscal 2018. |
• | During the first quarter, we opened three factory outlet stores in Laredo, Texas; Myrtle Beach, South Carolina; and Houston, Texas. |
• | We partnered with TLC on Girl Starter, a new reality-competition TV show which debuted in April. We will continue to work with other partners to enhance our image and expand our reach. |
• | We announced a licensing agreement for apparel and accessories designed for health care professionals which is expected to launch in the Spring of fiscal 2019. In addition, our license for technology products including smartphone and tablet cases, power solutions, and portable audio launched in March. |
• | Net revenues decreased 8.6% to $96.1 million. |
• | Direct segment sales decreased 5.6% to $68.8 million. Comparable sales decreased 12.5%. |
• | Indirect segment sales decreased 15.3% to $27.3 million. |
• | Gross profit was $52.7 million, or 54.8% of net revenue. |
• | Operating loss was $4.8 million and net loss was $4.0 million, or $0.11 per diluted share. These results included severance charges of $1.3 million ($0.8 million after the associated tax benefit), or $0.02 per diluted share. |
• | Cash and cash equivalents and investments were $101.4 million at April 29, 2017. |
• | Capital expenditures for the thirteen weeks totaled $3.4 million. |
• | Repurchases of common stock for the thirteen weeks totaled $1.2 million. |
• | Overall economic trends; |
• | Consumer preferences and fashion trends; |
• | Competition; |
• | The timing of our releases of new patterns and collections; |
• | Changes in our product mix; |
• | Pricing and level of promotions; |
• | Amount of store, mall and e-commerce traffic; |
• | The level of customer service that we provide in stores and to our on-line customers; |
• | Our ability to source and distribute products efficiently; |
• | The number of stores we open and close in any period; and |
• | The timing and success of promotional and marketing efforts. |
Thirteen Weeks Ended | ||||||||
April 29, 2017 | April 30, 2016 | |||||||
Statement of Income Data: | ||||||||
Net revenues | $ | 96,135 | $ | 105,181 | ||||
Cost of sales | 43,435 | 45,525 | ||||||
Gross profit | 52,700 | 59,656 | ||||||
Selling, general, and administrative expenses | 57,771 | 56,376 | ||||||
Other income | 267 | 577 | ||||||
Operating (loss) income | (4,804 | ) | 3,857 | |||||
Interest (income) expense, net | (39 | ) | 48 | |||||
(Loss) income before income taxes | (4,765 | ) | 3,809 | |||||
Income tax (benefit) expense | (716 | ) | 1,391 | |||||
Net (loss) income | $ | (4,049 | ) | $ | 2,418 | |||
Percentage of Net Revenues: | ||||||||
Net revenues | 100.0 | % | 100.0 | % | ||||
Cost of sales | 45.2 | % | 43.3 | % | ||||
Gross profit | 54.8 | % | 56.7 | % | ||||
Selling, general, and administrative expenses | 60.1 | % | 53.6 | % | ||||
Other income | 0.3 | % | 0.5 | % | ||||
Operating (loss) income | (5.0 | )% | 3.7 | % | ||||
Interest (income) expense, net | — | % | — | % | ||||
(Loss) income before income taxes | (5.0 | )% | 3.6 | % | ||||
Income tax (benefit) expense | (0.7 | )% | 1.3 | % | ||||
Net (loss) income | (4.2 | )% | 2.3 | % |
Thirteen Weeks Ended | ||||||||
April 29, 2017 | April 30, 2016 | |||||||
Net Revenues by Segment: | ||||||||
Direct | $ | 68,837 | $ | 72,946 | ||||
Indirect | 27,298 | 32,235 | ||||||
Total | $ | 96,135 | $ | 105,181 | ||||
Percentage of Net Revenues by Segment: | ||||||||
Direct | 71.6 | % | 69.4 | % | ||||
Indirect | 28.4 | % | 30.6 | % | ||||
Total | 100.0 | % | 100.0 | % |
Thirteen Weeks Ended | ||||||||
April 29, 2017 | April 30, 2016 | |||||||
Operating (Loss) Income by Segment: | ||||||||
Direct | $ | 6,812 | $ | 12,137 | ||||
Indirect | 9,446 | 12,598 | ||||||
Less: Corporate unallocated | (21,062 | ) | (20,878 | ) | ||||
Total | $ | (4,804 | ) | $ | 3,857 | |||
Operating Income as a Percentage of Net Revenues by Segment: | ||||||||
Direct | 9.9 | % | 16.6 | % | ||||
Indirect | 34.6 | % | 39.1 | % | ||||
Store Data (1): | ||||||||
Total stores open at end of period | 162 | 152 | ||||||
Comparable sales (including e-commerce) decrease (2) | (12.5 | )% | (6.7 | )% | ||||
Total gross square footage at end of period (all stores) | 377,740 | 346,708 | ||||||
Average net revenues per gross square foot (3) | $ | 118 | $ | 128 |
(1) | Includes our full-line and factory outlet stores. |
(2) | Comparable sales are calculated based upon our stores that have been open for at least 12 full fiscal months and net revenues from our e-commerce operations. Increase or decrease is reported as a percentage of the comparable sales for the same period in the prior fiscal year. Remodeled stores are included in comparable sales unless the store was closed for a portion of the current or comparable prior period or the remodel resulted in a significant change in square footage. |
(3) | Dollars not in thousands. Average net revenues per gross square foot are calculated by dividing total net revenues for our stores that have been open at least 12 full fiscal months as of the end of the period by total gross square footage for those stores. Remodeled stores are included in average net revenues per gross square foot unless the store was closed for a portion of the period. |
Thirteen Weeks Ended | ||||||||
April 29, 2017 | April 30, 2016 | |||||||
Net cash used in operating activities | $ | (9,937 | ) | $ | (3,997 | ) | ||
Net cash used in investing activities | (337 | ) | (35,594 | ) | ||||
Net cash used in financing activities | (1,695 | ) | (6,282 | ) |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Program | |||||||||
January 29, 2017 - February 25, 2017 | 8,560 | $ | 10.65 | 8,560 | $ | 21,238,544 | |||||||
February 26, 2017 - April 1, 2017 | 56,941 | 9.10 | 56,941 | 20,720,216 | |||||||||
April 2, 2017 - April 29, 2017 | 66,118 | 8.91 | 66,118 | 20,130,955 | |||||||||
131,619 | $ | 9.11 | 131,619 |
Exhibit No. | Description | ||
10.1 | Fiscal 2018 Restricted Stock Unit/Performance Unit Terms and Conditions | ||
10.2 | Fiscal 2018 Annual Incentive Compensation Plan (Executives) | ||
10.3 | Form of Performance-Based Award Agreement under the 2010 Equity and Incentive Plan | ||
31.1 | CEO Section 302 Certification | ||
31.2 | CFO Section 302 Certification | ||
32.1 | Section 906 Certifications* | ||
101 | The following materials from Vera Bradley, Inc.’s Quarterly Report on Form 10-Q for the quarter ended April 29, 2017 formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Statements of Income for the Thirteen Weeks ended April 29, 2017 and April 30, 2016; (ii) Condensed Consolidated Statements of Comprehensive Income for the Thirteen Weeks ended April 29, 2017 and April 30, 2016; (iii) Condensed Consolidated Balance Sheets as of April 29, 2017 and January 28, 2017; (iv) Condensed Consolidated Statements of Cash Flows for the Thirteen Weeks ended April 29, 2017 and April 30, 2016, and (v) Notes to Condensed Consolidated Financial Statements. ** | ||
* | Furnished, not filed. | ||
** | Pursuant to Rule 406T of SEC Regulation S-T, the Interactive Data Files included as Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these Sections. |
Vera Bradley, Inc. (Registrant) | ||
Date: June 7, 2017 | /s/ John Enwright | |
John Enwright | ||
Vice President – Interim Chief Financial Officer |
Exhibit No. | Description | ||
10.1 | Fiscal 2018 Restricted Stock Unit/Performance Unit Terms and Conditions | ||
10.2 | Fiscal 2018 Annual Incentive Compensation Plan (Executives) | ||
10.3 | Form of Performance-Based Award Agreement under the 2010 Equity and Incentive Plan | ||
31.1 | CEO Section 302 Certification | ||
31.2 | CFO Section 302 Certification | ||
32.1 | Section 906 Certifications* | ||
101 | The following materials from Vera Bradley, Inc.’s Quarterly Report on Form 10-Q for the quarter ended April 29, 2017 formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Statements of Income for the Thirteen Weeks ended April 29, 2017 and April 30, 2016; (ii) Condensed Consolidated Statements of Comprehensive Income for the Thirteen Weeks ended April 29, 2017 and April 30, 2016; (iii) Condensed Consolidated Balance Sheets as of April 29, 2017 and January 28, 2017; (iv) Condensed Consolidated Statements of Cash Flows for the Thirteen Weeks ended April 29, 2017 and April 30, 2016, and (v) Notes to Condensed Consolidated Financial Statements. ** | ||
* | Furnished, not filed. | ||
** | Pursuant to Rule 406T of SEC Regulation S-T, the Interactive Data Files included as Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these Sections. |
Incentive Opportunity (Percent of Base Salary) | |||
Participant Level | Threshold | Target | Excellence |
EVP | 25% | 50% | 87.5% |
VP2 | 20% | 40% | 70% |
Participant Level | Corporate Performance | Corporate Strategic Objective Performance | Individual Personal Financial Objectives | |
Net Revenue | Operating Income | |||
EVP/VP2 | 25% | 25% | 25% | 25% |
Net Revenue Performance Level | Payout as a Percentage of the Portion of Incentive Tied to Corporate Performance* |
Threshold | 25% |
Target | 100% |
Excellence | 200% |
Operating Income Performance Level | Payout as a Percentage of the Portion of Incentive Tied to Corporate Performance* |
Threshold | 25% |
Target | 100% |
Excellence | 200% |
– | Complete Update to Strategic Plan |
– | Increase Brand Desirability: Implement a robust marketing program, recognize and reward her, leverage known brands, hyper-focused brand clarity and alignment in key functional areas, and drive retail traffic |
– | Increase Product Desirability: Increase customer wallet by 2.7% for FY18 |
– | Optimize Platform Distribution: Increase total direct conversion 900 basis points. |
– | Leverage Core Expense: Improve SG&A and COGS and optimize the store network to improve the Company’s cost structure. |
– | Power Performance Through People: Build a world-class team of empowered and high-performance individuals and teams, who rally around our brand and core values and are passionate about both winning together and bringing women together through the secret language of beauty |
1. | The CEO direct reports at a level of Executive Vice President and certain designated CEO direct reports at the Vice President Level 2 are eligible to participate in this Annual Plan. Any question regarding eligibility for participation in this Annual Plan shall be resolved by the Compensation Committee, in the Committee’s sole discretion. |
2. | Participation in this Annual Plan neither gives any employee the right to be retained as an employee nor limits the Company's right to discharge or discipline any employee. |
3. | Final payout of any bonus under this Plan is subject to the final approval of the Chief Financial Officer, Vice President, Human Resources and Compensation Committee. |
4. | Participants placed on a Performance Improvement Plan within six months of when payment is made under this Plan will not be eligible for such payment. |
5. | Certification of Results. Before any Awards under the Annual Plan are deemed earned with respect to a Performance Period, the Compensation Committee shall certify, in accordance with Section 9.5 of the 2010 Plan, in writing (i) that the performance goals have been met for the Performance Period, and (ii) the calculation of "Operating Income" and "Net Revenue" for the Performance Period. |
a. | Definition of "Operating Income". For purposes of this Annual Plan, the term "Operating Income" means, with respect to the Performance Period related to any Awards, the Company's consolidated operating income, as determined in accordance with U.S. GAAP, adjusted to exclude the effects, as shown on the financial statements furnished as part of Form 8-K (announcing the Company's fiscal year-end financial results) for any fiscal year of the Company ending with or within the Performance Period, of (i) any acquisition during the Performance Period, including the amortization expense of intangible assets acquired during the Performance Period, (ii) material charges or income arising from litigation, (iii) corporate restructuring, asset impairment, or other special charges, and (iv) cumulative effect of changes to U.S. GAAP accounting. |
b. | Definition of "Net Revenue". For purposes of this Annual Plan, the term "Net Revenue" means, with respect to the Performance Period related to any Awards, the Company's consolidated net revenue, as determined in accordance with U.S. GAAP. |
6. | Except as provided herein, (a) no Participant will be entitled to an incentive payment under the Plan unless the Participant is employed by the Company or an Affiliate in an eligible position on the day the incentive payment is made, and (b) a Participant who separates from Service for any reason prior to the date of payment of such incentive will not be entitled to a prorated award, unless otherwise required by applicable state law. By way of clarification, should a Participant separate from Service and be rehired within the same Performance Period, the Participant shall not be given credit for prior periods Service. Notwithstanding the preceding provisions, the following provisions will apply if, during the Performance Period (or after the Performance Period and prior to the date of payment), you cease providing Services due to death, Disability or Retirement (and provided that you have not otherwise engaged in an act that would constitute Cause): |
i. | Death or Disability: In the event a Participant's Service terminates as a result of death or Disability prior to the date on which the incentive payment is made, the outstanding Award shall be treated as earned at the target level (if such Service terminated prior to the end of the Performance Period), or at the actual level (if such Service terminated |
ii. | Retirement: In the event a Participant's Service with the Company terminates as a result of Retirement during the Performance Period, the outstanding Award shall be earned based on the actual Company performance level obtained (determined at the end of the Performance Period) and target individual performance level, with any such earned Awards becoming fully vested and paid out as provided in section 8, below. |
7. | Notwithstanding anything to the contrary in this Annual Plan, in the event of a Change in Control of the Company during the Performance Period, then the outstanding Award shall be treated as earned at the target level, but prorated based on the number of full fiscal months (in which the Participant provided Service throughout such month) during the Performance Period, with any such earned Awards becoming fully vested and paid out as soon as practicable (but not later than 30 calendar days) following the Change in Control. For purposes of this Annual Plan, the term "Change in Control" shall mean the occurrence of any one or more of the following: (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Exchange Act and the rules of the Securities and Exchange Commission as in effect on the date of this Award), other than (i) Barbara Baekgaard, Patricia Miller, Michael Ray and Kim Colby and their respective heirs and descendants and any trust established for the benefit of such Persons, (ii) the Company or a corporation owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company, or (iii) any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate, of securities of the Company representing more than twenty-five percent (25%) of the combined voting power of the Company's then outstanding securities; (b) the occupation of a majority of the seats (other than vacant seats) on the Board by Persons who were neither (i) nominated by the Board nor (ii) appointed by directors so nominated; or (c) the consummation of (i) an agreement for the sale or disposition of all or substantially all of the Company's assets, or (ii) a merger, consolidation or reorganization of the Company with or involving any other corporation, other than a merger, consolidation or reorganization that results in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation or reorganization. |
8. | All Participants will receive an award that is prorated based on Base Salary earned during the Performance Period. |
9. | In the event that a Participant joins the Company at any time during the final three fiscal months of the Performance Period, such participant will not be eligible to participate in this Plan. |
10. | All goal attainment calculations will follow normal rounding guidelines (i.e., 93.1% to 93.49% = 93%; 93.5% to 93.9% = 94%). |
11. | Payments under the Annual Plan will be paid in cash after the end of the Company's fiscal tax year but no later than the 15th day of the third month following the Company's fiscal tax year on which the annual incentives under this Annual Plan are based. |
12. | The Company shall have the power and the right to deduct or withhold an amount sufficient to satisfy federal, state, and local taxes (including FICA obligations), domestic or foreign, and other deductions required to be withheld by law with respect to this Award. |
13. | Record keeping and computation required by this Annual Plan will be subject to review by third-party auditors, and by the Compensation Committee. |
14. | Interpretations, determinations, and actions regarding plan administration shall be made by the Compensation Committee. |
15. | While it is the intent of the Company to continue this Annual Plan as stated herein, the Company reserves the right to amend or discontinue the plan at any time in its sole discretion. |
16. | No Participant can assign, encumber or transfer any of his or her rights and interests under the Award described in this document, except, in the event of his or her death, by will or the laws of descent and distribution. |
17. | The rights granted under this document are in all respects subject to the provisions of the 2010 Plan to the same extent and with the same effect as if they were set forth fully therein. If the terms of this document or the Award conflict with the terms of the 2010 Plan, the 2010 Plan will control. |
Type of Grant | Discretionary grant of Performance Units (“Performance RSUs”). This is a one-time, discretionary grant to reward you for your continued contribution to the success of Vera Bradley. |
Number of Performance RSUs | [Insert XX] |
Date of Grant of Award | [Insert XX] |
Performance Period | [Insert XX] |
Earning of Performance RSUs | The Performance RSUs will be divided into three equal tranches of 1/3 each (each a separate "Tranche") of the total Award and allocated to each of the three fiscal years of the Company ending during the Performance Period, with each such fiscal year being considered a performance year ("Performance Year"). Importantly, each Tranche of Performance RSUs must be "earned" and "vested" before it will be settled in the form of Shares of the Company. Except as otherwise provided herein, (i) each Tranche of Performance RSUs will be deemed earned only if the Earnings Per Share (as defined in the [Insert XX] Restricted Stock Unit/Performance Unit Terms and Conditions) of the Company for the applicable Performance Year meets or exceeds the threshold level established by the Compensation Committee for such Performance Year, and (ii) each Tranche of Performance RSUs will be deemed vested only if you are continuously employed with the Company throughout the Performance Period. |
Performance Level* for each Tranche | |||
Threshold | Target | Excellence | |
Performance Level Attainment as % of Target [Insert FYXX] | [Insert XX] | [Insert XX] | [Insert XX] |
Performance Level Attainment as % of Target [Insert FYXX] | [Insert XX] | [Insert XX] | [Insert XX] |
Performance Level Attainment as % of Target [Insert FYXX] | [Insert XX] | [Insert XX] | [Insert XX] |
Payout level** for Tranche of Performance RSUs | [Insert XX] | [Insert XX] | [Insert XX] |
* The actual number of Performance RSUs allocated to each Tranche that can be earned under this Award Agreement is based on the level of performance achieved (as summarized in the table above) during the applicable Performance Year and can range from 0% of the "Target" (for performance levels below the "Threshold" level) to a maximum of [Insert XX]% of the "Target" (for performance levels at or above the "Excellence" level). | |||
** Payout levels for each Tranche of Performance RSUs are based on the attained percentage of the target Earnings Per Share for each respective Performance Year (using linear interpolation for results falling between the three performance levels). |
Termination of Service | In general, should your Service with Vera Bradley be terminated prior to the last day of the Performance Period, all then outstanding Performance RSUs (whether or not one or more Tranches have been earned as a result of the Earnings per Share for such Performance Year) will be forfeited to the Company. However, the following provisions will apply if, during the Performance Period, you cease providing Services due to death, Disability or Retirement (and provided that you have not otherwise engaged in an act that would constitute Cause): | |
Death or Disability: In the event that your Service with the Company terminates as a result of your death or Disability during the Performance Period, (i) with respect to Performance Years that have been completed at the time of such death or Disability, each such Tranche shall be earned only to the extent of actual performance for such Performance Year, and (ii) with respect to Performance Years that have not been completed at the time of such death or Disability, each such Tranche shall be deemed to be earned based on the "Target" level of performance for such Performance Year, but prorated based on the number of full fiscal months (in which you provided Service throughout such month) during the Performance Period. Any such earned Awards shall become fully vested and paid out in Shares of Company stock pursuant to the settlement provisions below. For purposes of this Award Agreement, "Disability" shall have the meaning assigned to such term in the 2010 Plan. | ||
Retirement: In the event your Service terminates as a result of your Retirement during the Performance Period, each Tranche of outstanding Awards shall be treated as earned (i) with respect to Performance Years that have been completed at the time of such Retirement, each such Tranche shall be earned and vested only to the extent of actual performance for such Performance Year, and (ii) with respect to Performance Years that have not been completed at the time of such Retirement, each such Tranche shall be deemed to be earned based on the actual performance level attained for such Performance Year, but prorated based on the number of full fiscal months (in which you provided Service throughout such month) during the Performance Period. Any such earned Awards shall become fully vested and paid out in Shares of Company stock pursuant to the settlement provisions below. For purposes of this Award Agreement, "Retirement" shall have the meaning assigned to such term in the 2010 Plan. | ||
If your Service with the Company shall terminate during the Performance Period for any reason other than death, Disability, or Retirement, all Performance RSUs granted hereunder (whether or not a Tranche was previously earned) shall be forfeited to the Company. | ||
Change in Control | Notwithstanding anything to the contrary in this Award Agreement, in the event of the consummation of a Change in Control of the Company (and provided that you remain continuously employed with the Company until such Change in Control) during the Performance Period, then each Tranche of outstanding Awards shall be treated as earned (i) with respect to Performance Years that have been completed at the time of such Change in Control, such Tranche shall be earned and vested only to the extent of actual performance for such Performance Year, and (ii) with respect to Performance Years that have not been completed at the time of such Change in Control, each such Tranche shall be deemed to be earned at the Target level, with any such earned Performance RSUs becoming fully vested. Performance RSUs payable upon a Change in Control shall be paid immediately prior to the Change in Control in the form of one Share of Company stock for each vested Performance RSU. Partial Shares (along with any accumulated dividends) will be paid in cash at the same time the Shares are delivered. | |
Settlement | Except as it applies to Tranches that are deemed to be earned at "Target" and become payable due to a Change in Control or due to termination of Service as a result of death or Disability, no Awards will become payable unless the Committee certifies that the performance goals in the Award Agreement have been attained with respect to the applicable Performance Year during the Performance Period in a manner that complies with Code Section 162(m) and the 2010 Plan. Any earned Performance RSUs will be paid in the form of one Share of Company stock for each earned whole Performance RSU. Delivery of the Share(s) will be made, including delivery with respect to a Disabled Participant, or to the estate of a deceased Participant, after the end of the Performance Period and not later than the 15th day of the third month following the end of the Performance Period. Shares will be credited to an account established for the benefit of the Participant with the Company's administrative agent. The Participant will have full legal and beneficial ownership with respect to the Shares at that time. Partial Shares (along with any accumulated dividends) will be paid in cash at the same time the Shares are delivered. | |
Withholding Taxes | You acknowledge and agree that the Company shall have the power and the right to deduct or withhold, an amount sufficient to satisfy federal, state, and local taxes (including your FICA obligation), domestic or foreign, required by law to be withheld with respect to this Award. |
1. | I have reviewed this quarterly report on Form 10-Q of Vera Bradley, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: June 7, 2017 | /s/ Robert Wallstrom | |
Robert Wallstrom | ||
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Vera Bradley, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: June 7, 2017 | /s/ John Enwright | |
John Enwright | ||
Vice President - Interim Chief Financial Officer |
/s/ Robert Wallstrom | ||
Robert Wallstrom | ||
Chief Executive Officer | ||
June 7, 2017 | ||
Date |
/s/ John Enwright | ||
John Enwright | ||
Vice President - Interim Chief Financial Officer | ||
June 7, 2017 | ||
Date |
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