VINCE HOLDING CORP., 10-Q filed on 9/15/2020
Quarterly Report
v3.20.2
Document and Entity Information - shares
6 Months Ended
Aug. 01, 2020
Aug. 31, 2020
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Aug. 01, 2020  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q2  
Trading Symbol VNCE  
Entity Registrant Name VINCE HOLDING CORP.  
Entity Central Index Key 0001579157  
Current Fiscal Year End Date --02-01  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Common Stock, Shares Outstanding   11,795,941
Entity Shell Company false  
Entity Current Reporting Status Yes  
Entity File Number 001-36212  
Entity Tax Identification Number 75-3264870  
Entity Address, Address Line One 500 5th Avenue  
Entity Address, Address Line Two 20th Floor  
Entity Address, City or Town New York  
Entity Address, State or Province NY  
Entity Address, Postal Zip Code 10110  
City Area Code 212  
Local Phone Number 944-2600  
Title of 12(b) Security Common Stock, $0.01 par value per share  
Security Exchange Name NYSE  
Document Quarterly Report true  
Document Transition Report false  
Entity Interactive Data Current Yes  
Entity Incorporation, State or Country Code DE  
v3.20.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Aug. 01, 2020
Feb. 01, 2020
Current assets:    
Cash and cash equivalents $ 782 $ 466
Trade receivables, net 18,589 40,660
Inventories, net 92,122 66,393
Prepaid expenses and other current assets 3,483 6,725
Total current assets 114,976 114,244
Property and equipment, net 18,823 25,274
Operating lease right-of-use assets, net 89,004 94,632
Intangible assets, net 76,819 81,533
Goodwill 31,973 41,435
Deferred income taxes   102
Other assets 5,112 5,082
Total assets 336,707 362,302
Current liabilities:    
Accounts payable 58,450 43,075
Accrued salaries and employee benefits 9,021 9,620
Other accrued expenses 11,265 14,194
Short-term lease liabilities 19,186 20,638
Current portion of long-term debt 2,063 2,750
Total current liabilities 99,985 90,277
Long-term debt 72,898 48,680
Long-term lease liabilities 95,042 90,211
Other liabilities 416 2,354
Commitments and contingencies (Note 8)
Stockholders' equity:    
Common stock at $0.01 par value (100,000,000 shares authorized, 11,795,824 and 11,680,593 shares issued and outstanding at August 1, 2020 and February 1, 2020, respectively) 118 117
Additional paid-in capital 1,138,014 1,137,147
Accumulated deficit (1,069,621) (1,006,381)
Accumulated other comprehensive loss (145) (103)
Total stockholders' equity 68,366 130,780
Total liabilities and stockholders' equity $ 336,707 $ 362,302
v3.20.2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Aug. 01, 2020
Feb. 01, 2020
Statement Of Financial Position [Abstract]    
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 11,795,824 11,680,593
Common stock, shares outstanding 11,795,824 11,680,593
v3.20.2
Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Aug. 01, 2020
Aug. 03, 2019
Aug. 01, 2020
Aug. 03, 2019
Income Statement [Abstract]        
Net sales $ 37,022 $ 92,223 $ 76,040 $ 166,240
Cost of products sold 23,682 48,869 46,700 84,994
Gross profit 13,340 43,354 29,340 81,246
Impairment of goodwill and intangible assets   19,491 13,848 19,491
Impairment of long-lived assets   641 13,026 641
Selling, general and administrative expenses 27,348 41,630 65,892 85,753
Loss from operations (14,008) (18,408) (63,426) (24,639)
Interest expense, net 1,022 1,221 2,047 2,580
Other (Income) expense, net 4 9 (2,303) 119
Loss before income taxes (15,034) (19,638) (63,170) (27,338)
Provision (benefit) for income taxes 28 (96) 70 (49)
Net loss (15,062) (19,542) (63,240) (27,289)
Other comprehensive loss:        
Foreign currency translation adjustments (1) (31) (42) (38)
Comprehensive loss $ (15,063) $ (19,573) $ (63,282) $ (27,327)
Loss per share:        
Basic loss per share $ (1.28) $ (1.67) $ (5.39) $ (2.34)
Diluted loss per share $ (1.28) $ (1.67) $ (5.39) $ (2.34)
Weighted average shares outstanding:        
Basic 11,784,007 11,672,914 11,739,061 11,651,375
Diluted 11,784,007 11,672,914 11,739,061 11,651,375
v3.20.2
Condensed Consolidated Statements of Stockholders' Equity (Deficit) - USD ($)
$ in Thousands
Total
Cumulative Effect, Period of Adoption, Adjustment [Member]
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Deficit [Member]
Accumulated Deficit [Member]
Cumulative Effect, Period of Adoption, Adjustment [Member]
Accumulated Other Comprehensive Loss [Member]
Beginning Balance at Feb. 02, 2019 [1] $ 99,246   $ 116 $ 1,135,401 $ (1,036,188)   $ (83)
Beginning Balance, shares at Feb. 02, 2019 [1]     11,622,994        
Comprehensive loss:              
Net loss (7,747)       (7,747)    
Foreign currency translation adjustments (7)           (7)
Share-based compensation expense 427     427      
Cumulative effect of accounting change from adoption of ASU 2016-02 | ASU 2016-02 [Member]   $ (589)       $ (589)  
Restricted stock unit vestings 1   $ 1        
Restricted stock unit vestings, shares     64,572        
Tax withholdings related to restricted stock vesting (301)     (301)      
Tax withholdings related to restricted stock vesting, shares     (23,066)        
Ending Balance at May. 04, 2019 [1] 91,030   $ 117 1,135,527 (1,044,524)   (90)
Ending Balance, shares at May. 04, 2019 [1]     11,664,500        
Beginning Balance at Feb. 02, 2019 [1] 99,246   $ 116 1,135,401 (1,036,188)   (83)
Beginning Balance, shares at Feb. 02, 2019 [1]     11,622,994        
Comprehensive loss:              
Net loss (27,289)            
Foreign currency translation adjustments (38)            
Ending Balance at Aug. 03, 2019 [1] 71,964   $ 117 1,136,034 (1,064,066)   (121)
Ending Balance, shares at Aug. 03, 2019 [1]     11,678,403        
Beginning Balance at May. 04, 2019 [1] 91,030   $ 117 1,135,527 (1,044,524)   (90)
Beginning Balance, shares at May. 04, 2019 [1]     11,664,500        
Comprehensive loss:              
Net loss (19,542)       (19,542)    
Foreign currency translation adjustments (31)           (31)
Share-based compensation expense 527     527      
Restricted stock unit vestings, shares     15,346        
Tax withholdings related to restricted stock vesting (20)     (20)      
Tax withholdings related to restricted stock vesting, shares     (1,443)        
Ending Balance at Aug. 03, 2019 [1] 71,964   $ 117 1,136,034 (1,064,066)   (121)
Ending Balance, shares at Aug. 03, 2019 [1]     11,678,403        
Beginning Balance at Feb. 01, 2020 $ 130,780   $ 117 1,137,147 (1,006,381)   (103)
Beginning Balance, shares at Feb. 01, 2020 11,680,593   11,680,593        
Comprehensive loss:              
Net loss $ (48,178)       (48,178)    
Foreign currency translation adjustments (41)           (41)
Share-based compensation expense 541     541      
Restricted stock unit vestings 1   $ 1        
Restricted stock unit vestings, shares     127,613        
Tax withholdings related to restricted stock vesting (205)     (205)      
Tax withholdings related to restricted stock vesting, shares     (38,524)        
Ending Balance at May. 02, 2020 82,898   $ 118 1,137,483 (1,054,559)   (144)
Ending Balance, shares at May. 02, 2020     11,769,682        
Beginning Balance at Feb. 01, 2020 $ 130,780   $ 117 1,137,147 (1,006,381)   (103)
Beginning Balance, shares at Feb. 01, 2020 11,680,593   11,680,593        
Comprehensive loss:              
Net loss $ (63,240)            
Foreign currency translation adjustments (42)            
Ending Balance at Aug. 01, 2020 $ 68,366   $ 118 1,138,014 (1,069,621)   (145)
Ending Balance, shares at Aug. 01, 2020 11,795,824   11,795,824        
Beginning Balance at May. 02, 2020 $ 82,898   $ 118 1,137,483 (1,054,559)   (144)
Beginning Balance, shares at May. 02, 2020     11,769,682        
Comprehensive loss:              
Net loss (15,062)       (15,062)    
Foreign currency translation adjustments (1)           (1)
Share-based compensation expense 525     525      
Restricted stock unit vestings (1)     (1)      
Restricted stock unit vestings, shares     25,020        
Tax withholdings related to restricted stock vesting (17)     (17)      
Tax withholdings related to restricted stock vesting, shares     (3,135)        
Issuance of common stock related to ESPP 24     24      
Issuance of common stock related to ESPP, shares     4,257        
Ending Balance at Aug. 01, 2020 $ 68,366   $ 118 $ 1,138,014 $ (1,069,621)   $ (145)
Ending Balance, shares at Aug. 01, 2020 11,795,824   11,795,824        
[1] Amounts reflect the retrospective combination of the entities. See Note 11 “Related Party Transactions” for additional details.
v3.20.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended 12 Months Ended
Aug. 01, 2020
May 02, 2020
Aug. 03, 2019
May 04, 2019
Aug. 01, 2020
Aug. 03, 2019
Feb. 01, 2020
Feb. 02, 2019
Operating activities                
Net loss         $ (63,240) $ (27,289)    
Add (deduct) items not affecting operating cash flows:                
Adjustment to Tax Receivable Agreement Liability         (2,320)      
Impairment of goodwill and intangible assets     $ 19,491   13,848 19,491    
Impairment of long-lived assets     641   13,026 641    
Depreciation and amortization         3,654 5,403    
Provision for bad debt         2,001 5    
Amortization of deferred financing costs         277 282    
Deferred income taxes         102      
Share-based compensation expense $ 525   527   1,066 954    
Other, net           (304)    
Changes in assets and liabilities:                
Receivables, net         20,067 1,188    
Inventories         (25,740) (3,711)    
Prepaid expenses and other current assets         3,135 (16)    
Accounts payable and accrued expenses         11,775 (512)    
Other assets and liabilities         1,097 (1,452)    
Net cash used in operating activities         (21,252) (5,320)    
Investing activities                
Payments for capital expenditures         (1,597) (1,860)    
Net cash used in investing activities         (1,597) (1,860)    
Financing activities                
Proceeds from borrowings under the Revolving Credit Facilities         106,048 144,215    
Repayment of borrowings under the Revolving Credit Facilities         (82,548) (137,269)    
Proceeds from borrowings under the Revolving Credit Facilities - Acquired Businesses       $ 4,025   10,760 $ 11,761 $ 23,284
Repayment of borrowings under the Revolving Credit Facilities - Acquired Businesses       (4,750)   (8,310) (29,410) (22,200)
Repayment of borrowings under the Term Loan Facilities           (1,375)    
Tax withholdings related to restricted stock vesting         (222) (321)    
Proceeds from stock option exercises, restricted stock vesting, and issuance of common stock under employee stock purchase plan         24 1    
Financing fees         (225) (1)    
Net cash provided by financing activities   $ 35,673   (1,936) 23,077 7,700 (11,991) (4,737)
Increase in cash, cash equivalents, and restricted cash         228 520    
Effect of exchange rate changes on cash, cash equivalents, and restricted cash         (14) (14)    
Cash, cash equivalents, and restricted cash, beginning of period   $ 647   $ 361 647 361 361  
Cash, cash equivalents, and restricted cash, end of period 861   867   861 867 647 $ 361
Less: restricted cash at end of period 79   152   79 152    
Cash and cash equivalents $ 782   $ 715   782 715 $ 466  
Supplemental Disclosures of Cash Flow Information                
Cash payments for interest         1,622 1,970    
Cash payments for income taxes, net of refunds         (153) $ 171    
Supplemental Disclosures of Non-Cash Investing and Financing Activities                
Capital expenditures in accounts payable and accrued liabilities         270      
Deferred financing fees in accrued liabilities         $ 300      
v3.20.2
Description of Business and Basis of Presentation
6 Months Ended
Aug. 01, 2020
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Description of Business and Basis of Presentation

Note 1. Description of Business and Basis of Presentation

On November 27, 2013, Vince Holding Corp. (“VHC” or the “Company”), previously known as Apparel Holding Corp., closed an initial public offering (“IPO”) of its common stock and completed a series of restructuring transactions (the “Restructuring Transactions”) through which Kellwood Holding, LLC acquired the non-Vince businesses, which included Kellwood Company, LLC (“Kellwood Company” or “Kellwood”), from the Company. The Company continues to own and operate the Vince business, which includes Vince, LLC.

Prior to the IPO and the Restructuring Transactions, VHC was a diversified apparel company operating a broad portfolio of fashion brands, which included the Vince business. As a result of the IPO and Restructuring Transactions, the non-Vince businesses were separated from the Vince business, and the stockholders immediately prior to the consummation of the Restructuring Transactions (the “Pre-IPO Stockholders”) (through their ownership of Kellwood Holding, LLC) retained the full ownership and control of the non-Vince businesses. The Vince business is now the sole operating business of VHC.

On November 18, 2016, Kellwood Intermediate Holding, LLC and Kellwood Company, LLC entered into a Unit Purchase Agreement with Sino Acquisition, LLC (the “Kellwood Purchaser”) whereby the Kellwood Purchaser agreed to purchase all of the outstanding equity interests of Kellwood Company, LLC. Prior to the closing, Kellwood Intermediate Holding, LLC and Kellwood Company, LLC conducted a pre-closing reorganization pursuant to which certain assets of Kellwood Company, LLC were distributed to a newly formed subsidiary of Kellwood Intermediate Holding, LLC, St. Louis Transition, LLC (“St. Louis, LLC”). The transaction closed on December 21, 2016 (the “Kellwood Sale”).

On November 3, 2019, Vince, LLC, an indirectly wholly owned subsidiary of VHC, completed its acquisition (the “Acquisition”) of 100% of the equity interests of Rebecca Taylor, Inc. and Parker Holding, LLC (collectively, the “Acquired Businesses”) from Contemporary Lifestyle Group, LLC (“CLG”). The Acquired Businesses represented all of the operations of CLG. Because the Acquisition was a transaction between commonly controlled entities, accounting principles generally accepted in the United States of America (“GAAP”) requires the retrospective combination of the entities for all periods presented as if the combination had been in effect since the inception of common control. Accordingly, the Company’s unaudited financial statements included in this Quarterly Report on Form 10-Q (this “Quarterly Report”), including for the three and six months ended August 3, 2019, reflect the retrospective combination of the entities as if the combination had been in effect since inception of common control. See Note 11 “Related Party Transactions” for further information.

(A) Description of Business: The Company is a global contemporary group, consisting of three brands: Vince, Rebecca Taylor, and Parker. Vince, established in 2002, is a leading global luxury apparel and accessories brand best known for creating elevated yet understated pieces for every day effortless style. Rebecca Taylor, founded in 1996 in New York City, is a high-end women’s contemporary lifestyle brand inspired by beauty in the everyday. Parker, founded in 2008 in New York City, is a contemporary women’s fashion brand that is trend focused. The Company reaches its customers through a variety of channels, specifically through major wholesale department stores and specialty stores in the United States (“U.S.”) and select international markets, as well as through the Company’s branded retail locations and the Company’s websites. The Company designs products in the U.S. and sources the vast majority of products from contract manufacturers outside the U.S., primarily in Asia. Products are manufactured to meet the Company’s product specifications and labor standards.  

(B) Basis of Presentation: The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. Therefore, these financial statements should be read in conjunction with VHC’s audited financial statements for the fiscal year ended February 1, 2020, as set forth in the 2019 Annual Report on Form 10-K.

The condensed consolidated financial statements include the Company’s accounts and the accounts of the Company’s wholly-owned subsidiaries as of August 1, 2020. All intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) and disclosures necessary for a fair statement. The results of operations for these periods are not necessarily comparable to, or indicative of, results of any other interim period or the fiscal year as a whole.

As noted above, the Company’s unaudited financial statements included in this Quarterly Report, including for the three and six months ended August 3, 2019, reflect the retrospective combination of the entities as if the combination had been in effect since inception of common control. See Note 11 “Related Party Transactions” for further information.

(C) Use of Estimates The preparation of financial statements in conformity with GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements which affect revenues and expenses during the period reported. Estimates are adjusted when necessary to reflect actual experience. Significant estimates and assumptions may affect many items in the financial statements. Actual results could differ from estimates and assumptions in amounts that may be material to the consolidated financial statements.  

The Company considered the novel coronavirus (“COVID-19”) related impacts to its estimates including the impairment of property and equipment and operating lease right-of-use (“ROU”) assets, the impairment of goodwill and intangible assets, accounts receivable and inventory valuation, the liability associated with our tax receivable agreement, and the assessment of our liquidity. These estimates may change as the current situation evolves or new events occur.  

(D) COVID 19: The spread of COVID-19, which was declared a pandemic by the World Health Organization in March 2020, has caused state and municipal public officials to mandate jurisdiction-wide curfews, including “shelter-in-place” and closures of most non-essential businesses as well as other measures to mitigate the spread of the virus.

In light of the COVID-19 pandemic, we have taken various measures to improve our liquidity as described below.  Based on these measures and our current expectations, we believe that our sources of liquidity will generate sufficient cash flows to meet our obligations during the next twelve months from the date these financial statements are issued.

 

The following summarizes the various measures we have implemented and continue to implement as well as the impacts from the COVID-19 pandemic during the three and six months ended August 1, 2020.  

 

 

While we continued to serve our customers through our online e-commerce websites during the period in which we were forced to shut down all of our domestic and international retail locations alongside other retailers, including our wholesale partners, the store closures resulted in a sharp decline in our revenue and ability to generate cash flows from operations.  We began reopening stores during May 2020 and nearly all of the Company’s stores have since reopened in a limited capacity in accordance with state and local regulations related to the COVID-19 pandemic.  Other than Hawaii which re-closed based on the most recent stay-at-home order, we have not been impacted by any re-closure orders or regulations.

 

As a result of store closures and the decline in projected cash flows, the Company recognized a non-cash impairment charge related to property and equipment and operating lease ROU assets to adjust the carrying amounts of certain store locations to their estimated fair value.  During the six months ended August 1, 2020, the Company recorded an impairment of property and equipment and operating lease ROU assets of $4,470 and $8,556, respectively. The impairment charges are recorded within impairment of long-lived assets on the condensed consolidated statement of operations and comprehensive loss.  There were no such impairment charges recorded for the three months ended August 1, 2020.  

 

The Company incurred a non-cash impairment charge on goodwill and intangible assets as a result of the decline in long-term projections due to COVID-19.  See Note 2, “Goodwill and Intangible Assets” for additional information;

 

We entered into amendments to our 2018 Term Loan Facility as well as our 2018 Revolving Credit Facility to provide additional liquidity and amend certain financial covenants to allow increased operational flexibility.  See Note 4, “Long-Term Debt and Financing Arrangements”;

 

Furloughed all of our retail store associates as well as a significant portion of our corporate associates during the period of store closures and reinstated a limited number of associates commensurate to the store re-openings as well as other business needs;

 

Temporarily reduced retained employee salaries and board retainer fees;

 

Engaged in active discussions with landlords to address the current operating environment, including amending existing lease terms.  

 

Executed other operational initiatives to carefully manage our investments across all key areas, including aligning inventory levels with anticipated demand and reevaluating non-critical capital build-out and other investments and activities; and

 

Streamlined our expense structure in all areas such as marketing, distribution, and product development to align with the business environment and sales opportunities.

In addition, affiliates of Sun Capital, who own approximately 72% of the outstanding shares of the Company’s common stock (see Note 11 “Related Party Transactions” for further discussion regarding our relationship with Sun Capital) have committed through July 31, 2021 to provide financial support to the Company of up to $8,000 upon the occurrence of certain events and conditions.

COVID-19 pandemic remains highly volatile and continues to evolve on a daily basis, which could negatively affect the outcome of the measures intended to address its impact and/or our current expectations of the Company’s future business performance.  Factors such as continued temporary closures and/or reclosures of our stores, distribution centers and corporate facilities as well as those of our wholesale partners; declines and changes in consumer behavior including traffic, spending and demand and resulting build-up of excess inventory; supply chain disruptions; our and our business partners’ ability to access capital sources and maintain compliance with credit facilities; as well as our ability to collect receivables and diversion of corporate resources from key business activities and compliance efforts could continue to adversely affect the Company’s business, financial condition, cash flow, liquidity and results of operations.

 (E) Sources and Uses of Liquidity: The Company’s sources of liquidity are cash and cash equivalents, cash flows from operations, if any, borrowings available under the 2018 Revolving Credit Facility (as defined below) and the Company’s ability to access capital markets. The Company’s primary cash needs are funding working capital requirements, meeting debt service requirements, and capital expenditures for new stores and related leasehold improvements.

(F) Revenue Recognition: The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied, which generally occurs upon the transfer of control in accordance with the contractual terms and conditions of the sale. Sales are recognized when the control of the goods are transferred to the customer for the Company’s wholesale business, upon receipt by the customer for the Company’s e-commerce business, and at the time of sale to the consumer for the Company’s retail business. See Note 10 “Segment Financial Information” for disaggregated revenue amounts by segment.

 

Revenue associated with gift cards is recognized upon redemption and unredeemed balances are considered contract liability and recorded within other accrued expenses, which are subject to escheatment within the jurisdictions in which it operates. As of August 1, 2020 and February 1, 2020, contract liability was $1,549 and $1,585, respectively.  For the three and six months ended August 1, 2020, the Company recognized $39 and $107, respectively, of revenue that was previously included in contract liability as of February 1, 2020.

(G) Recent Accounting Pronouncements: Except as noted below, the Company has considered all recent accounting pronouncements and has concluded that there are no recent accounting pronouncements that may have a material impact on its Consolidated Financial Statements, based on current information.

Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board's ("FASB") issued ASU 2018-15: “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract”. The ASU is intended to align the requirements for capitalization of implementation costs incurred in a cloud computing arrangement that is a service contract with the existing guidance for internal-use software. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2019. The guidance provides flexibility in adoption, allowing for either retrospective adjustment or prospective adjustment for all implementation costs incurred after the date of adoption. The Company adopted the guidance on February 2, 2020, the first day of fiscal 2020,which did not have a material effect on the Company’s condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13: "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments". The ASU requires an impairment model (known as the current expected credit loss ("CECL") model) that is based on expected losses rather than incurred losses. Under the new guidance, each reporting entity should estimate an allowance for expected credit losses, which is intended to result in more timely recognition of losses. The new standard applies to trade receivables arising from revenue transactions. Under ASC 606, revenue is recognized when, among other criteria, it is probable that an entity will collect the consideration it is entitled to when goods or services are transferred to a customer. When trade receivables are recorded, they become subject to the CECL model and estimates of expected credit losses on trade receivables over their contractual life will be required to be recorded at inception based on historical information, current conditions, and reasonable and supportable forecasts. This guidance is effective for smaller reporting companies for annual periods beginning after December 15, 2022, including the interim periods in the year. Early adoption is permitted.  Management is currently evaluating the impact of this ASU on the consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12: “Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes.” The guidance simplifies the approach for intraperiod tax allocations, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. The guidance also clarifies and simplifies other areas of ASC 740. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. Management is currently evaluating the impact of this ASU on the consolidated financial statements.

(H) Revision: The Company identified an error in the consolidated statement of cash flows for the six months ended August 3, 2019 and for the three months ended May 2, 2020 and May 4, 2019 as well as for the years ended February 1, 2020 and February 2, 2019 related to the presentation of proceeds and repayments of borrowings under revolving credit facilities within financing activities.  The Company has historically presented proceeds and repayments from borrowings under revolving credit facilities as net in the financing section of the statement of cash flows because of the continuous activity of proceeds and repayments of borrowings.  Given the contractual maturity of the revolver is greater than three months, the Company concluded that gross presentation was appropriate and has revised the historical financial statements.  These adjustments were not considered to be material individually or in the aggregate to the previously issued financial statements.  However, because of the significance of these adjustments, the Company has revised its consolidated statement of cash flows for each period noted above.  These revisions had no impact on the consolidated balance sheets, consolidated statements of operations or consolidated statements of comprehensive income (loss) for the periods nor did it have an impact on total cash flows from operating, investing or financing activities.

 

 

 

Six Months Ended August 3, 2019

 

(in thousands)

 

As Previously Reported

 

 

Adjustment

 

 

As Revised

 

Financing activities

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from borrowings under the Revolving Credit Facilities

 

$

 

 

$

144,215

 

 

$

144,215

 

Repayment of borrowings under the Revolving Credit Facilities

 

 

 

 

 

(137,269

)

 

 

(137,269

)

Net proceeds from borrowings under the Revolving Credit Facilities

 

 

6,946

 

 

 

(6,946

)

 

 

 

Net cash provided by financing activities

 

$

5,250

 

 

$

 

 

$

5,250

 

 

 

 

 

Three Months Ended

 

 

 

May 2, 2020

 

 

May 4, 2019

 

(in thousands)

 

As Previously Reported

 

 

Adjustment

 

 

As Revised

 

 

As Previously Reported

 

 

Adjustment

 

 

As Revised

 

Financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from borrowings under the Revolving Credit Facilities

 

$

 

 

$

81,878

 

 

$

81,878

 

 

$

 

 

$

74,031

 

 

$

74,031

 

Repayment of borrowings under the Revolving Credit Facilities

 

 

 

 

 

(46,001

)

 

 

(46,001

)

 

 

 

 

 

(74,253

)

 

 

(74,253

)

Net proceeds from borrowings under the Revolving Credit Facilities

 

 

35,877

 

 

 

(35,877

)

 

 

 

 

 

(222

)

 

 

222

 

 

 

 

Proceeds from borrowings under the Revolving Credit Facilities - Acquired Businesses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,025

 

 

 

4,025

 

Repayment of borrowings under the Revolving Credit Facilities- Acquired Businesses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,750

)

 

 

(4,750

)

Net proceeds (repayment) from borrowings under the Revolving Credit Facilities - Acquired Businesses

 

 

 

 

 

 

 

 

 

 

 

(725

)

 

 

725

 

 

 

 

Net cash (used in)/provided by financing activities

 

$

35,673

 

 

$

 

 

$

35,673

 

 

$

(1,936

)

 

$

 

 

$

(1,936

)

 

 

 

 

Year Ended

 

 

 

February 1, 2020

 

 

February 2, 2019

 

(in thousands)

 

As Previously Reported

 

 

Adjustment

 

 

As Revised

 

 

As Previously Reported

 

 

Adjustment

 

 

As Revised

 

Financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from borrowings under the Revolving Credit Facilities

 

$

 

 

$

310,434

 

 

$

310,434

 

 

$

 

 

$

311,015

 

 

$

311,015

 

Repayment of borrowings under the Revolving Credit Facilities

 

 

 

 

 

(301,727

)

 

 

(301,727

)

 

 

 

 

 

(308,899

)

 

 

(308,899

)

Net proceeds from borrowings under the Revolving Credit Facilities

 

 

8,707

 

 

 

(8,707

)

 

 

 

 

 

2,116

 

 

 

(2,116

)

 

 

 

Proceeds from borrowings under the Revolving Credit Facilities - Acquired Businesses

 

 

 

 

 

11,761

 

 

 

11,761

 

 

 

 

 

 

23,284

 

 

 

23,284

 

Repayment of borrowings under the Revolving Credit Facilities- Acquired Businesses

 

 

 

 

 

(29,410

)

 

 

(29,410

)

 

 

 

 

 

(22,200

)

 

 

(22,200

)

Net proceeds (repayment) from borrowings under the Revolving Credit Facilities - Acquired Businesses

 

 

(17,649

)

 

 

17,649

 

 

 

 

 

 

1,084

 

 

 

(1,084

)

 

 

 

Net cash (used in)/provided by financing activities

 

$

(11,991

)

 

$

 

 

$

(11,991

)

 

$

(4,737

)

 

$

 

 

$

(4,737

)

 

v3.20.2
Goodwill and Intangible Assets
6 Months Ended
Aug. 01, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets

Note 2. Goodwill and Intangible Assets

Net goodwill balances and changes therein by segment were as follows:

 

(in thousands)

 

Vince Wholesale

 

 

Vince

Direct-to-consumer

 

 

Rebecca Taylor and Parker

 

 

Total Net Goodwill

 

Balance as of February 1, 2020

 

$

41,435

 

 

$

 

 

$

 

 

$

41,435

 

Impairment charges

 

 

(9,462

)

 

 

 

 

 

 

 

 

(9,462

)

Balance as of August 1, 2020

 

$

31,973

 

 

$

 

 

$

 

 

$

31,973

 

 

The total carrying amount of goodwill is net of accumulated impairments of $101,845.

During the first quarter of fiscal 2020, the Company determined that a triggering event had occurred as a result of changes to the Company’s long-term projections driven by the impacts of COVID-19.  The Company performed an interim quantitative impairment assessment of goodwill and intangible assets.

The Company determined the fair value of the Vince wholesale reportable segment using a combination of the market and income approach. Step one of the assessment determined that the fair value was below the carrying amount by $9,462, and as a result the Company recorded a goodwill impairment charge of $9,462 within Impairment of goodwill and intangible assets on the condensed consolidated statement of operations and comprehensive loss for the six months ended August 1, 2020.  There were no impairment charges for the three months ended August 1, 2020.  The Company recorded a goodwill impairment charge of $2,129 related to the Rebecca Taylor and Parker reportable segment for the three and six months ended August 3, 2019.

The following tables present a summary of identifiable intangible assets:

 

(in thousands)

 

Gross Amount

 

 

Accumulated Amortization

 

 

Accumulated Impairments

 

 

Net Book Value

 

Balance as of August 1, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

$

31,355

 

 

$

(20,737

)

 

$

(6,115

)

 

$

4,503

 

Tradenames

 

 

13,100

 

 

 

(57

)

 

 

(12,527

)

 

 

516

 

Indefinite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tradenames

 

 

110,986

 

 

 

 

 

 

(39,186

)

 

 

71,800

 

Total intangible assets

 

$

155,441

 

 

$

(20,794

)

 

$

(57,828

)

 

$

76,819

 

 

(in thousands)

 

Gross Amount

 

 

Accumulated Amortization

 

 

Accumulated Impairments

 

 

Net Book Value

 

Balance as of February 1, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

$

31,355

 

 

$

(20,437

)

 

$

(6,115

)

 

$

4,803

 

Tradenames

 

 

13,100

 

 

 

(29

)

 

 

(12,527

)

 

 

544

 

Indefinite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tradenames

 

 

110,986

 

 

 

 

 

 

(34,800

)

 

 

76,186

 

Total intangible assets

 

$

155,441

 

 

$

(20,466

)

 

$

(53,442

)

 

$

81,533

 

 

The Company estimated the fair value of the Vince and Rebecca Taylor tradename indefinite-lived intangible assets using the relief from royalty method and determined that the fair value of the Vince and Rebecca Taylor tradenames were below their carrying amounts. Significant assumptions utilized in these analyses included projected revenue growth rates, royalty rates and discount rates.  Accordingly, the Company recorded an impairment charge for the Vince and Rebecca Taylor tradename indefinite-lived intangible assets of $4,386, which was recorded within Impairment of goodwill and intangible assets on the condensed consolidated statement of operations and comprehensive loss for the six months ended August 1, 2020. There were no such impairment charges for the three months ended August 1, 2020.  

 

The Company recorded an impairment charge associated with the Rebecca Taylor and Parker tradename indefinite-lived intangible assets of $11,247 and $6,115 of impairment charges for the Rebecca Taylor and Parker customer relationships which are recorded within Impairment of goodwill and intangible assets on the condensed consolidated statement of operations and comprehensive loss for the three and six months ended August 3, 2019.  In accordance with ASC 350, indefinite-lived intangibles should be reassessed each reporting period to determine whether events or circumstances continue to support an indefinite life. Based on the impairment charge calculated, the Company determined that the indefinite life classification was no longer appropriate for the Parker tradename. Accordingly, the Company determined a 10-year useful life was more appropriate and began amortizing the Parker tradename beginning in the third quarter of fiscal 2019.

 

Amortization of identifiable intangible assets was $163 and $328 for the three and six months ended August 1, 2020, respectively and $634 and $1,268 for the three and six months ended August 3, 2019, respectively. The estimated amortization expense for identifiable intangible assets is $655 for each fiscal year for the next five fiscal years.

v3.20.2
Fair Value Measurements
6 Months Ended
Aug. 01, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 3. Fair Value Measurements

Accounting Standards Codification (“ASC”) Subtopic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This guidance outlines a valuation framework, creates a fair value hierarchy to increase the consistency and comparability of fair value measurements, and details the disclosures that are required for items measured at fair value. Financial assets and liabilities are to be measured using inputs from three levels of the fair value hierarchy as follows:

 

Level 1—

 

quoted market prices in active markets for identical assets or liabilities

 

 

 

Level 2—

 

observable market-based inputs (quoted prices for similar assets and liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active) or inputs that are corroborated by observable market data

 

 

 

Level 3—

 

significant unobservable inputs that reflect the Company’s assumptions and are not substantially supported by market data

The Company did not have any non-financial assets or non-financial liabilities recognized at fair value on a recurring basis at August 1, 2020 or February 1, 2020. At August 1, 2020 and February 1, 2020, the Company believes that the carrying value of cash and cash equivalents, receivables, and accounts payable approximates fair value, due to the short-term maturity of these instruments. The Company’s debt obligations with a carrying value of $75,973 as of August 1, 2020 are at variable interest rates. The carrying value of the Company’s 2018 Revolving Credit Facility (as defined below) approximates fair value as the stated interest rate approximates market rates currently available to the Company, which are considered Level 2 inputs. The fair value of the Company’s 2018 Term Loan Facility (as defined below) was approximately $26,000 as of August 1, 2020 based upon an estimated market value calculation that factors principal, time to maturity, interest rate, and current cost of debt, which is considered a Level 3 input.

The Company’s non-financial assets, which primarily consist of goodwill, intangible assets, operating lease ROU assets, and property and equipment, are not required to be measured at fair value on a recurring basis and are reported at their carrying values. However, on a periodic basis whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable (and at least annually for goodwill and indefinite-lived intangible assets), non-financial assets are assessed for impairment and, if applicable, written down to (and recorded at) fair value.

The fair value of property and equipment and ROU assets was determined using a discounted cash-flow model that utilized Level 3 inputs. The measurement of fair value of these assets is considered a Level 3 valuation based on certain unobservable inputs including projected cash flows and estimates that would be used by market participants in valuing these or similar assets.  The Company makes estimates regarding future operating results based on its experience and knowledge of market factors in which the retail location is located. The Company’s retail locations are reviewed for impairment at the retail location level, which is the lowest level at which individual cash flows can be identified.

The following tables present the non-financial assets the Company measured at fair value on a non-recurring basis for the six months ended August 1, 2020, based on such fair value hierarchy:

 

 

 

Net Carrying

Value as of

 

 

Fair Value Measured and Recorded at Reporting Date Using:

 

 

Total Losses - Six Months Ended

 

 

(in thousands)

 

August 1, 2020

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

August 1, 2020

 

 

Property and equipment

 

$

7,922

 

 

$

 

 

$

 

 

$

7,922

 

 

$

4,470

 

(1)

Goodwill

 

 

31,973

 

 

 

 

 

 

 

 

 

31,973

 

 

 

9,462

 

(2)

Tradenames - Indefinite-lived

 

 

71,800

 

 

 

 

 

 

 

 

 

71,800

 

 

 

4,386

 

(2)

ROU Assets

 

 

72,200

 

 

 

 

 

 

 

 

 

72,200

 

 

 

8,556

 

(1)

(1) Recorded within Impairment of long-lived assets on the Condensed Consolidated Statements of Operations and Comprehensive Loss. See Note 1 “Description of Business and Summary of Significant Accounting Policies – (D) COVID-19” for additional information.

(2) Recorded within Impairment of goodwill and intangible assets on the Condensed Consolidated Statements of Operations and Comprehensive Loss. See Note 1 “Description of Business and Summary of Significant Accounting Policies – (D) COVID-19” for additional information.

 

 

v3.20.2
Long-Term Debt and Financing Arrangements
6 Months Ended
Aug. 01, 2020
Debt Disclosure [Abstract]  
Long-Term Debt and Financing Arrangements

Note 4. Long-Term Debt and Financing Arrangements

Long-term debt consisted of the following:

 

 

 

August 1,

 

 

February 1,

 

(in thousands)

 

2020

 

 

2020

 

Long-term debt:

 

 

 

 

 

 

 

 

Term Loan Facilities

 

$

24,750

 

 

$

24,750

 

Revolving Credit Facilities

 

 

51,223

 

 

 

27,723

 

Total debt principal

 

 

75,973

 

 

 

52,473

 

Less: current portion of long-term debt

 

 

2,063

 

 

 

2,750

 

Less: deferred financing costs

 

 

1,012

 

 

 

1,043

 

Total long-term debt

 

$

72,898

 

 

$

48,680

 

 

2018 Term Loan Facility

 

On August 21, 2018, Vince, LLC entered into a $27,500 senior secured term loan facility (the “2018 Term Loan Facility”) pursuant to a credit agreement by and among Vince, LLC, as the borrower, VHC and Vince Intermediate Holdings, LLC, a direct subsidiary of VHC and the direct parent company of Vince, LLC (“Vince Intermediate”), as guarantors, Crystal Financial, LLC, as administrative agent and collateral agent, and the other lenders from time to time party thereto. The 2018 Term Loan Facility is subject to quarterly amortization of principal equal to 2.5% of the original aggregate principal amount of the 2018 Term Loan Facility, with the balance payable at final maturity. Interest is payable on loans under the 2018 Term Loan Facility at a rate equal to the 90-day LIBOR rate (subject to a 0% floor) plus applicable margins subject to a pricing grid based on a minimum Consolidated EBITDA (as defined in the credit agreement for the 2018 Term Loan Facility) calculation. During the continuance of certain specified events of default, interest will accrue on the outstanding amount of any loan at a rate of 2.0% in excess of the rate otherwise applicable to such amount. The 2018 Term Loan Facility matures on the earlier of August 21, 2023 and the maturity date of the 2018 Revolving Credit Facility (as defined below).

 

The 2018 Term Loan Facility contains a requirement that Vince, LLC maintain a Consolidated Fixed Charge Coverage Ratio (as defined in the credit agreement for the 2018 Term Loan Facility) as of the last day of any period of four fiscal quarters not to exceed 0.85:1.00 for the fiscal quarter ended November 3, 2018, 1.00:1.00 for the fiscal quarter ended February 2, 2019, 1.20:1.00 for the fiscal quarter ended May 4, 2019, 1.35:1.00 for the fiscal quarter ending August 3, 2019, 1.50:1.00 for the fiscal quarters ending November 2, 2019 and February 1, 2020 and 1.75:1.00 for the fiscal quarter ending May 2, 2020 and each fiscal quarter thereafter. In addition, the 2018 Term Loan Facility contains customary representations and warranties, other covenants, and events of default, including but not limited to, covenants with respect to limitations on the incurrence of additional indebtedness, liens, burdensome agreements, guarantees, investments, loans, asset sales, mergers, acquisitions, prepayment of other debt, the repurchase of capital stock, transactions with affiliates, and the ability to change the nature of the Company’s business or its fiscal year, and distributions and dividends. The 2018 Term Loan Facility generally permits dividends to the extent that no default or event of default is continuing or would result from a contemplated dividend, so long as (i) after giving pro forma effect to the contemplated dividend and for the following six months Excess Availability will be at least the greater of 20.0% of the Loan Cap (as defined in the credit agreement for the 2018 Term Loan Facility) and $10,000, (ii) after giving pro forma effect to the contemplated dividend, the Consolidated Fixed Charge Coverage Ratio for the 12 months preceding such dividend will be greater than or equal to 1.0 to 1.0 (provided that the Consolidated Fixed Charge Coverage Ratio may be less than 1.0 to 1.0 if, after giving pro forma effect to the contemplated dividend, Excess Availability for the six fiscal months following the dividend is at least the greater of 25.0% of the Loan Cap and $12,500), and (iii) the pro forma Fixed Charge Coverage Ratio after giving effect to such contemplated dividend is no less than the minimum Consolidated Fixed Charge Coverage Ratio for such quarter. In addition, the 2018 Term Loan Facility is subject to a Borrowing Base (as defined in the credit agreement of the 2018 Term Loan Facility) which can, under certain conditions, result in the imposition of a reserve under the 2018 Revolving Credit Facility. As of August 1, 2020, the Company was in compliance with applicable covenants.  

The 2018 Term Loan Facility also contains an Excess Cash Flow (as defined in the credit agreement for the 2018 Term Loan Facility) sweep requirement in which Vince, LLC remits 50% of Excess Cash Flow reduced on a dollar-for-dollar basis by any voluntary prepayments of the 2018 Term Loan Facility or the 2018 Revolving Credit Facility (to the extent accompanied by a permanent reduction in commitments) during such fiscal year or after the fiscal year but prior to the date of the excess cash flow payment, to be applied to the outstanding principal balance commencing 10 business days after the filing of the Company’s Annual Report on Form 10-K starting from fiscal year ending February 1, 2020. There was no such payment due for fiscal year ended February 1, 2020.  

On March 30, 2020, Vince, LLC entered into the Limited Waiver and Amendment (the “Second Term Loan Amendment”) to the 2018 Term Loan Facility. The Second Term Loan Amendment postponed the amortization payment due on April 1, 2020, with 50% of such payment to be paid on July 1, 2020 and the remainder to be paid on October 1, 2020 and modifies certain reporting obligations.

 

On June 8, 2020, Vince, LLC entered into the Third Amendment (the “Third Term Loan Amendment”) to the 2018 Term Loan Facility. The Third Term Loan Amendment, among others, (i) temporarily suspends the Consolidated Fixed Charge Coverage Ratio covenant through the delivery of a compliance certificate relating to the fiscal quarter ended July 31, 2021 (such period, the “Extended Accommodation Period”); (ii) requires Vince, LLC to maintain Fixed Charge Coverage Ratio of 1.0 to 1.0 in the event the excess availability under the 2018 Revolving Credit Facility is less than (x) $10,000 between September 6, 2020 and January 9, 2021 and (y) $12,500 between January 10, 2021 and January 31, 2021 and (z) $15,000 during all other times during the Extended Accommodation Period; (ii) revises the Fixed Charge Coverage Ratio required to be maintained following the Extended Accommodation Period (commencing with the fiscal month ending July 31, 2021) to be 1.50 to 1.0 for the fiscal quarter ending July 31, 2021 and 1.75 to 1.0 for each fiscal quarter thereafter; (iii) waives the amortization payments due on July 1, 2020 and October 1, 2020 (including the amortization payment due on April 1, 2020 that was previously deferred under the Second Term Loan Amendment); (iv) for any fiscal four quarter period ending prior to or on October 30, 2020, increasing the cap on certain items eligible to be added back to Consolidated EBITDA to 27.5% from 22.5%; and (iv) during the Extended Accommodation Period, allows Vince, LLC to cure any default under the applicable Fixed Charge Coverage Ratio covenant by including any amount provided by equity or subordinated debt (which amount shall be at least $1,000) in the calculation of excess availability under the 2018 Revolving Credit Facility so that the excess availability is above the applicable threshold described above.

 

The Third Term Loan Amendment also (a) waives certain events of default; (b) temporarily revises the applicable margin to be 9.0% for one year after the Third Term Loan Amendment effective date (2.0% of which is to be accrued but not payable in cash until the first anniversary of the Third Term Loan Amendment effective date) and after such time and through the Extended Accommodation Period, 9.0% or 7.0% depending on the amount of Consolidated EBITDA; (c) increases the LIBOR floor from 0% to 1.0%; (d) eliminates the Borrower’s and any loan party’s ability to designate subsidiaries as unrestricted and to make certain payments, restricted payments and investments during the Extended Accommodation Period; (e) resets the prepayment premium to 3.0% of the prepaid amount if prepaid prior to the first anniversary of the Third Term Loan Amendment Effective Date, 1.5% of the prepaid amount if prepaid prior to the second anniversary of the Third Term Loan Amendment Effective Date and 0% thereafter; (f) imposes a requirement to pay down the 2018 Revolving Credit Facility to the extent cash on hand exceeds $5,000 on the last day of each week; (g) permits Vince, LLC to incur up to $8,000 of additional secured debt (in addition to any interest accrued or paid in kind), to the extent subordinated to the 2018 Term Loan Facility on terms reasonably acceptable to Crystal;  (h) extends the delivery periods for (x) annual financial statements for the fiscal year ended February 1, 2020 to June 15, 2020 and (y) quarterly financial statements for the fiscal quarters ended May 2, 2020 and ending August 1, 2020 to July 31, 2020 and October 29, 2020, respectively, and (i) grants ongoing relief through September 30, 2020 with respect to certain covenants regarding the payment of lease obligations.

 

As a result of the Third Term Loan Amendment, the Company incurred $383 of additional financing costs.  In accordance with ASC Topic 470, “Debt”, the Company accounted for this amendment as a debt modification and has recorded $233 of the financing costs paid to third parties within selling, general and administrative expenses on the condensed consolidated statement of operations and comprehensive loss for the six months ended August 1, 2020. The remaining $150 of financing costs are recorded as deferred debt issuance costs which will be amortized over the remaining term of the 2018 Term Loan Facility and are included in accrued liabilities on the condensed consolidated balance sheet as of August 1, 2020.

 

Through August 1, 2020, on an inception to date basis, the Company had made repayments totaling $2,750 in the aggregate on the 2018 Term Loan Facility. As of August 1, 2020, the Company had $24,750 of debt outstanding under the 2018 Term Loan Facility.

 

 

2018 Revolving Credit Facility

 

On August 21, 2018, Vince, LLC entered into an $80,000 senior secured revolving credit facility (the “2018 Revolving Credit Facility”) pursuant to a credit agreement by and among Vince, LLC, as the borrower, VHC and Vince Intermediate, as guarantors, Citizens Bank, N.A. (“Citizens”), as administrative agent and collateral agent, and the other lenders from time to time party thereto. The 2018 Revolving Credit Facility provides for a revolving line of credit of up to $80,000, subject to a Loan Cap, which is the lesser of (i) the Borrowing Base as defined in the credit agreement for the 2018 Revolving Credit Facility and (ii) the aggregate commitments, as well as a letter of credit sublimit of $25,000. It also provides for an increase in aggregate commitments of up to $20,000. The 2018 Revolving Credit Facility matures on the earlier of August 21, 2023 and the maturity date of the 2018 Term Loan Facility. On August 21, 2018, Vince, LLC incurred $39,555 of borrowings, prior to which $66,271 was available, given the Loan Cap as of such date.  

 

Interest is payable on the loans under the 2018 Revolving Credit Facility at either the LIBOR or the Base Rate, in each case, with applicable margins subject to a pricing grid based on an average daily excess availability calculation. The “Base Rate” means, for any day, a fluctuating rate per annum equal to the highest of (i) the rate of interest in effect for such day as publicly announced from time to time by Citizens as its prime rate; (ii) the Federal Funds Rate for such day, plus 0.5%; and (iii) the LIBOR Rate for a one month interest period as determined on such day, plus 1.00%. During the continuance of certain specified events of default, at the election of Citizens, interest will accrue at a rate of 2.0% in excess of the applicable non-default rate.

 

The 2018 Revolving Credit Facility contains a requirement that, at any point when Excess Availability (as defined in the credit agreement for the 2018 Revolving Credit Facility) is less than 10.0% of the loan cap and continuing until Excess Availability exceeds the greater of such amounts for 30 consecutive days, Vince must maintain during that time a Consolidated Fixed Charge Coverage Ratio (as defined in the credit agreement for the 2018 Revolving Credit Facility) equal to or greater than 1.0 to 1.0 measured as of the last day of each fiscal month during such period.

 

The 2018 Revolving Credit Facility contains representations and warranties, other covenants and events of default that are customary for this type of financing, including covenants with respect to limitations on the incurrence of additional indebtedness, liens, burdensome agreements, guarantees, investments, loans, asset sales, mergers, acquisitions, prepayment of other debt, the repurchase of capital stock, transactions with affiliates, and the ability to change the nature of the Company’s business or its fiscal year. The 2018 Revolving Credit Facility generally permits dividends in the absence of any event of default (including any event of default arising from a contemplated dividend), so long as (i) after giving pro forma effect to the contemplated dividend and for the following six months Excess Availability will be at least the greater of 20.0% of the Loan Cap and $10 million and (ii) after giving pro forma effect to the contemplated dividend, the Consolidated Fixed Charge Coverage Ratio for the 12 months preceding such dividend will be greater than or equal to 1.0 to 1.0 (provided that the Consolidated Fixed Charge Coverage Ratio may be less than 1.0 to 1.0 if, after giving pro forma effect to the contemplated dividend, Excess Availability for the six fiscal months following the dividend is at least the greater of 25.0% of the Loan Cap and $12,500). As of August 1, 2020, the Company was in compliance with applicable covenants.  

 

On November 1, 2019, Vince, LLC entered into First Amendment (the “First Revolver Amendment”) to the 2018 Revolving Credit Facility, which provides the borrower the ability to elect the Daily LIBOR Rate in lieu of the Base Rate to be applied to the borrowings upon applicable notice.  The “Daily LIBOR Rate” means a rate equal to the Adjusted LIBOR Rate in effect on such day for deposits for a one day period, provided that, upon notice and not more than once every 90 days, such rate may be substituted for a one week or one month period for the Adjusted LIBOR Rate for a one day period.

 

On November 4, 2019, Vince, LLC entered into the Second Amendment (the “Second Revolver Amendment”) to the credit agreement of the 2018 Revolving Credit Facility. The Second Revolver Amendment increased the aggregate commitments under the 2018 Revolving Credit Facility by $20,000 to $100,000. Pursuant to the terms of the Second Revolver Amendment, the Acquired Businesses became guarantors under the 2018 Revolving Credit Facility and jointly and severally liable for the obligations thereunder. Simultaneously, Vince, LLC entered into a Joinder Amendment to the credit agreement of the 2018 Term Loan Facility whereby the Acquired Businesses became guarantors under the 2018 Term Loan Facility and jointly and severally liable for the obligations thereunder.

 

On June 8, 2020, Vince, LLC entered into the Third Amendment (the “Third Revolver Amendment”) to the 2018 Revolving Credit Facility. The Third Revolver Amendment, among others, increases availability under the facility’s borrowing base by (i) temporarily increasing the aggregate commitments under the 2018 Revolving Credit Facility to $110,000 through November 30, 2020 (such period, the “Accommodation Period”) (ii) temporarily revising the eligibility of certain account debtors during the Accommodation Period by extending by 30 days the period during which those accounts may remain outstanding past due as well as increasing the concentration limits of certain account debtors and (iii) for any fiscal four quarter period ending prior to or on October 30, 2021, increasing the cap on certain items eligible to be added back to Consolidated EBITDA to 27.5% from 22.5%.

 

The Third Revolver Amendment also (a) waives events of default; (b) temporarily increases the applicable margin on all borrowings of revolving loans by 0.75% per annum during the Accommodation Period and increases the LIBOR floor from 0% to 1.0%; (c) eliminates Vince LLC’s and any loan party’s ability to designate subsidiaries as unrestricted and to make certain payments, restricted payments and investments during the Extended Accommodation Period; (d) temporarily suspends the Fixed Charge Coverage Ratio covenant through the Extended Accommodation Period; (e) requires Vince, LLC to maintain a Fixed Charge Coverage Ratio of 1.0 to 1.0 in the event the excess availability under the 2018 Revolving Credit Facility is less than (x) $10,000 between September 6, 2020 and January 9, 2021, (y) $12,500 between January 10, 2021 and January 31, 2021 and (z) $15,000 at all other times during the Extended Accommodation Period; (f)  imposes a requirement (y) to pay down the 2018 Revolving Loan Facility to the extent cash on hand exceeds $5,000 on the last day of each week and (z) that, after giving effect to any borrowing thereunder, Vince, LLC may have no more than $5,000 of cash on hand; (g) permits Vince, LLC to incur up to $8,000 of additional secured debt (in addition to any interest accrued or paid in kind), to the extent subordinated to the 2018 Revolving Credit Facility on terms reasonably acceptable to Citizens; (h) establishes a method for imposing a successor reference rate if LIBOR should become unavailable, (i) extends the delivery periods for (x) annual financial statements for the fiscal year ended February 1, 2020 to June 15, 2020 and (y) quarterly financial statements for the fiscal quarters ended May 2, 2020 and ending August 1, 2020 to July 31, 2020 and October 29, 2020, respectively, and (j) grants ongoing relief through September 30, 2020 with respect to certain covenants regarding the payment of lease obligations.

 

As a result of the Third Revolver Amendment, the Company incurred $375 of additional deferred financing costs.  In accordance with ASC Topic 470, “Debt”, the Company accounted for this amendment as a debt modification and has recorded the additional deferred financing costs as deferred debt issuance costs which will be amortized over the remaining term of the 2018 Revolving Credit Facility.  Financing costs of $150 are included in accrued liabilities on the condensed consolidated balance sheet as of August 1, 2020.

As of August 1, 2020, $34,696 was available under the 2018 Revolving Credit Facility, net of the loan cap, and there were $51,223 of borrowings outstanding and $5,308 of letters of credit outstanding under the 2018 Revolving Credit Facility. The weighted average interest rate for borrowings outstanding under the 2018 Revolving Credit Facility as of August 1, 2020 was 2.8%.

 

Acquired Businesses Short-Term Borrowings

 

On July 23, 2014, Parker Lifestyle, LLC, as borrower, and Sun Capital Partners V, L.P., as guarantor, entered into a Loan Authorization Agreement with BMO Harris Bank N.A., as lender, for a revolving credit facility.  On December 21, 2016, that facility was amended to include Rebecca Taylor, Inc. The maximum credit line was $25,000 (the "BMO Obligations") subject to a maximum credit limit, which required that the sum of (i) the aggregate principal amounts of loans outstanding, (ii) the aggregate undrawn stated

amount of letters of credit issued under the credit facility, and (iii) the aggregate amount of any unreimbursed draws under any letters of credit issued, shall not exceed the credit limit.  Any letters of credit issued under the BMO Obligations credit facility were subject to the same maximum credit line. On November 3, 2019, in conjunction with the acquisition of the Acquired Businesses, $19,099, plus accrued interest, of the cash consideration was used to pay-off the outstanding debt obligation under this facility. On November 3, 2019, at the request of the Company and upon the satisfaction of certain release conditions, the BMO Obligations were released.

 

v3.20.2
Inventory
6 Months Ended
Aug. 01, 2020
Inventory Disclosure [Abstract]  
Inventory

Note 5. Inventory

Inventories consisted of finished goods. As of August 1, 2020 and February 1, 2020, finished goods, net of reserves were $92,122 and $66,393, respectively.

v3.20.2
Share-Based Compensation
6 Months Ended
Aug. 01, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Share-Based Compensation

Note 6. Share-Based Compensation

Employee Stock Plans

Vince 2013 Incentive Plan

In connection with the IPO, the Company adopted the Vince 2013 Incentive Plan, which provides for grants of stock options, stock appreciation rights, restricted stock and other stock-based awards. In May 2018, the Company filed a Registration Statement on Form S-8 to register an additional 660,000 shares of common stock available for issuance under the Vince 2013 Incentive Plan. The aggregate number of shares of common stock which may be issued or used for reference purposes under the Vince 2013 Incentive Plan or with respect to which awards may be granted may not exceed 1,000,000 shares. The shares available for issuance under the Vince 2013 Incentive Plan may be, in whole or in part, either authorized and unissued shares of the Company’s common stock or shares of common stock held in or acquired for the Company’s treasury. In general, if awards under the Vince 2013 Incentive Plan are cancelled for any reason, or expire or terminate unexercised, the shares covered by such award may again be available for the grant of awards under the Vince 2013 Incentive Plan. As of August 1, 2020, there were 332,368 shares under the Vince 2013 Incentive Plan available for future grants. Options granted pursuant to the Vince 2013 Incentive Plan typically vest in equal installments over four years, subject to the employees’ continued employment and expire on the earlier of the tenth anniversary of the grant date or upon termination as outlined in the Vince 2013 Incentive Plan. Restricted stock units (“RSUs”) granted vest in equal installments over a three-year period or vest in equal installments over four years, subject to the employees’ continued employment, except for RSUs issued under the exchange offer described below.

Employee Stock Purchase Plan

The Company maintains an employee stock purchase plan (“ESPP”) for its employees. Under the ESPP, all eligible employees may contribute up to 10% of their base compensation, up to a maximum contribution of $10 per year. The purchase price of the stock is 90% of the fair market value, with purchases executed on a quarterly basis. The plan is defined as compensatory, and accordingly, a charge for compensation expense is recorded to selling, general and administrative expense for the difference between the fair market value and the discounted purchase price of the Company’s Stock. During the six months ended August 1, 2020, 4,257 shares of common stock were issued under the ESPP. During the six months ended August 3, 2019, no shares of common stock were issued under the ESPP. As of August 1, 2020, there were 86,878 shares available for future issuance under the ESPP.

Stock Options

A summary of stock option activity for both employees and non-employees for the six months ended August 1, 2020 is as follows:

 

 

 

Stock Options

 

 

Weighted Average Exercise Price

 

 

Weighted Average Remaining Contractual Term (years)

 

 

Aggregate Intrinsic Value

(in thousands)

 

Outstanding at February 1, 2020

 

 

175

 

 

$

38.87

 

 

 

6.7

 

 

$

 

Granted

 

 

 

 

$

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

$

 

 

 

 

 

 

 

 

 

Forfeited or expired

 

 

(117

)

 

$

38.92

 

 

 

 

 

 

 

 

 

Outstanding at August 1, 2020

 

 

58

 

 

$

38.77

 

 

 

5.2

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vested and exercisable at August 1, 2020

 

 

58

 

 

$

38.77

 

 

 

5.2

 

 

$

 

 

All outstanding shares were vested at May 2, 2020.

Restricted Stock Units

A summary of restricted stock unit activity for the six months ended August 1, 2020 is as follows:

 

 

 

Restricted Stock Units

 

 

Weighted Average Grant Date Fair Value

 

Non-vested restricted stock units at February 1, 2020

 

 

679,926

 

 

$

11.12

 

Granted

 

 

20,786

 

 

$

9.06

 

Vested

 

 

(152,820

)

 

$

10.40

 

Forfeited

 

 

(57,116

)

 

$

9.20

 

Non-vested restricted stock units at August 1, 2020

 

 

490,776

 

 

$

11.48

 

 

Share-Based Compensation Expense

The Company recognized share-based compensation expense of $525 and $527, including expense of $48 and $42, respectively, related to non-employees, during the three months ended August 1, 2020 and August 3, 2019, respectively. The Company recognized share-based compensation expense of $1,066 and $954, including expense of $99 and $82, respectively, related to non-employees, during the six months ended August 1, 2020 and August 3, 2019, respectively.  

v3.20.2
Earnings Per Share
6 Months Ended
Aug. 01, 2020
Earnings Per Share [Abstract]  
Earnings Per Share

Note 7. Earnings Per Share

Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Except when the effect would be anti-dilutive, diluted earnings (loss) per share is calculated based on the weighted average number of shares of common stock outstanding plus the dilutive effect of share-based awards calculated under the treasury stock method. In periods when we have a net loss, share-based awards are excluded from our calculation of earnings per share as their inclusion would have an anti-dilutive effect.

The following is a reconciliation of weighted average basic shares to weighted average diluted shares outstanding:  

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

August 1,

 

 

August 3,

 

 

August 1,

 

 

August 3,

 

 

 

2020

 

 

2019

 

 

2020