Acquisition of Pura Vida (Tables)

6 Months Ended

Aug. 01, 2020

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed


in thousands	Fair Value at Acquisition Date
Cash and cash equivalents	$	1,495
Accounts receivable, net⁽⁵⁾	7,680
Inventories⁽¹⁾	27,654
Prepaid expenses and other current assets	1,537
Operating right of use asset	1,250
Property, plant, and equipment, net	751
Goodwill⁽²⁾	44,254
Intangible asset, brand⁽³⁾	36,668
Other intangible assets⁽⁴⁾	24,996
Total assets acquired	146,285

Accounts payable	6,818
Accrued employment costs	2,351
Other accrued liabilities⁽⁵⁾	6,637
Operating lease liability	1,637
Total liabilities assumed	17,443

Less:
Contingent consideration related to earn-out provision⁽⁶⁾	(20,098)
Redeemable noncontrolling interest	(32,210)
Cash acquired	(1,495)

Total closing consideration amount, net of cash acquired ⁽⁷⁾	$	75,039

(1) Includes an $8.3 million step-up adjustment which was recognized in cost of sales within four months of 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 Note 14 herein for additional information regarding goodwill.
(3) The 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, long-term growth rate, and the discount rate. Refer to Note 14 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 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 14 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.

Schedule of Business Acquisition, Pro Forma Information

The following adjustments have been made:

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

•Transaction costs have been excluded; and

•Tax expense has been estimated at an effective tax rate of 25.0%.


	Thirteen Weeks Ended						Twenty-Six Weeks Ended
in thousands, except per share data	August 1, 2020		August 3, 2019		August 1, 2020		August 3, 2019
Pro forma net revenues	$	131,770	$	141,099	$	201,054	$	249,091
Pro forma net income (loss)	13,890		7,557		(4,091)		4,677
Pro forma net income (loss) attributable to Vera Bradley, Inc.	12,403		7,574		(5,796)		5,035

Pro forma basic net income (loss) per share available to Vera Bradley, Inc. shareholders	$	0.57	$	0.22	$	(0.17)	$	0.15
Pro forma diluted net income (loss) per share available to Vera Bradley, Inc. shareholders	$	0.57	$	0.22	$	(0.17)	$	0.15