VINCE HOLDING CORP., 10-K filed on 6/11/2020
Annual Report
v3.20.1
Document and Entity Information - USD ($)
$ in Millions
12 Months Ended
Feb. 01, 2020
May 31, 2020
Aug. 03, 2019
Cover [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Feb. 01, 2020    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Trading Symbol VNCE    
Entity Registrant Name VINCE HOLDING CORP.    
Entity Central Index Key 0001579157    
Current Fiscal Year End Date --02-01    
Entity Well-known Seasoned Issuer No    
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Filer Category Non-accelerated Filer    
Entity Small Business true    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Common Stock, Shares Outstanding   11,772,324  
Entity Public Float     $ 40.1
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, $0.01 par value per share    
Security Exchange Name NYSE    
Document Annual Report true    
Document Transition Report false    
Entity Interactive Data Current Yes    
Entity Incorporation, State or Country Code DE    
v3.20.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Feb. 01, 2020
Feb. 02, 2019
Current assets:    
Cash and cash equivalents $ 466 $ 209 [1]
Trade receivables, net 40,660 38,038 [1]
Inventories, net 66,393 71,634 [1]
Prepaid expenses and other current assets 6,725 9,634 [1]
Total current assets 114,244 119,515 [1]
Property and equipment, net 25,274 29,317 [1]
Operating lease right-of-use assets, net 94,632  
Intangible assets, net 81,533 100,491 [1]
Goodwill 41,435 43,564 [1]
Deferred income taxes 102 203 [1]
Other assets 5,082 3,942 [1]
Total assets 362,302 297,032 [1]
Current liabilities:    
Accounts payable 43,075 40,256 [1]
Accrued salaries and employee benefits 9,620 6,933 [1]
Other accrued expenses 14,194 11,633 [1]
Short-term lease liabilities 20,638  
Short-term borrowings [1]   17,649
Current portion of long-term debt 2,750 2,750 [1]
Total current liabilities 90,277 79,221 [1]
Long-term debt 48,680 42,340 [1]
Deferred rent [1]   17,177
Long-term lease liabilities 90,211  
Other liabilities 2,354 59,048 [1]
Commitments and contingencies (Note 6) [1]
Stockholders' equity:    
Common stock at $0.01 par value (100,000,000 shares authorized, 11,680,593 and 11,622,994 shares issued and outstanding at February 1, 2020 and February 2, 2019, respectively) 117 116 [1]
Additional paid-in capital 1,137,147 1,135,401 [1]
Accumulated deficit (1,006,381) (1,036,188) [1]
Accumulated other comprehensive loss (103) (83) [1]
Total stockholders' equity 130,780 99,246 [1],[2]
Total liabilities and stockholders' equity $ 362,302 $ 297,032 [1]
[1] Fiscal 2018 amounts reflect the retrospective combination of the entities. See Note 2 “Business Combinations” for additional details.
[2] Fiscal 2017 and 2018 amounts reflect the retrospective combination of the entities. See Note 2 “Business Combinations” for additional details.
v3.20.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Feb. 01, 2020
Feb. 02, 2019
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 11,680,593 11,622,994
Common stock, shares outstanding 11,680,593 11,622,994
v3.20.1
Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($)
$ in Thousands
12 Months Ended
Feb. 01, 2020
Feb. 02, 2019
Income Statement [Abstract]    
Net sales $ 375,187 $ 361,679
Cost of products sold 196,757 192,273
Gross profit 178,430 169,406
Impairment of goodwill and intangible assets 19,491  
Selling, general and administrative expenses 179,329 164,049
(Loss) income from operations (20,390) 5,357
Interest expense, net 4,958 6,922
Other (income) expense, net (55,842) 237
Income (loss) before income taxes 30,494 (1,802)
Provision for income taxes 98 156
Net income (loss) 30,396 (1,958)
Other comprehensive income (loss):    
Foreign currency translation adjustments (20) (18)
Comprehensive income (loss) $ 30,376 $ (1,976)
Earnings (loss) per share:    
Basic earnings (loss) per share $ 2.60 $ (0.17)
Diluted earnings (loss) earnings per share $ 2.55 $ (0.17)
Weighted average shares outstanding:    
Basic 11,665,541 11,619,828
Diluted 11,929,299 11,619,828
v3.20.1
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Total
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive Loss [Member]
Beginning Balance at Feb. 03, 2018 [1] $ 99,869 $ 116 $ 1,134,048 $ (1,034,230) $ (65)
Beginning Balance, shares at Feb. 03, 2018 [1]   11,616,500      
Comprehensive income:          
Net income (loss) (1,958)     (1,958)  
Foreign currency translation adjustments (18)       (18)
Comprehensive income (loss) (1,976)        
Share-based compensation expense 1,335   1,335    
Exercise of stock options and issuance of common stock under employee stock purchase plan ("ESPP") 18   18    
Exercise of stock options and issuance of common stock under employee stock purchase plan, shares   1,654      
Restricted stock unit vestings, shares   4,840      
Ending Balance at Feb. 02, 2019 [1] $ 99,246 [2] $ 116 1,135,401 (1,036,188) (83)
Ending Balance, shares at Feb. 02, 2019 11,622,994 11,622,994 [1]      
Comprehensive income:          
Net income (loss) $ 30,396     30,396  
Foreign currency translation adjustments (20)       (20)
Comprehensive income (loss) 30,376        
Share-based compensation expense 2,033   2,033    
Cumulative effect of accounting change from adoption | ASU 2016-02 [Member] (589)     (589)  
Restricted stock unit vestings 1 $ 1      
Restricted stock unit vestings, shares   79,918      
Tax withholdings related to restricted stock vesting (321)   (321)    
Tax withholdings related to restricted stock vesting, shares   (24,509)      
Issuance of common stock related to ESPP 34   34    
Issuance of common stock related to ESPP, shares   2,190      
Ending Balance at Feb. 01, 2020 $ 130,780 $ 117 $ 1,137,147 $ (1,006,381) $ (103)
Ending Balance, shares at Feb. 01, 2020 11,680,593 11,680,593      
[1] Fiscal 2017 and 2018 amounts reflect the retrospective combination of the entities. See Note 2 “Business Combinations” for additional details.
[2] Fiscal 2018 amounts reflect the retrospective combination of the entities. See Note 2 “Business Combinations” for additional details.
v3.20.1
Consolidated Statements of Cash Flows
$ in Thousands
12 Months Ended
Feb. 01, 2020
USD ($)
Feb. 02, 2019
USD ($)
[1]
Operating activities    
Net income (loss) $ 30,396 $ (1,958)
Add (deduct) items not affecting operating cash flows:    
Adjustment to Tax Receivable Agreement Liability (55,953)  
Impairment of goodwill and intangible assets 19,491  
Depreciation and amortization 9,602 11,298
Impairment of property and equipment and Lease ROU assets 818 1,684
Loss on disposal of property and equipment 128 293
Deferred rent   (1,476)
Deferred income taxes 101 176
Share-based compensation expense 2,033 1,335
Loss on debt extinguishment   816
Amortization of deferred financing cost 554 660
Other, net (304) 106
Changes in assets and liabilities:    
Receivables, net (2,628) (9,922)
Inventories 5,252 (10,875)
Prepaid expenses and other current assets 2,942 224
Accounts payable and accrued expenses 7,606 9,928
Other assets and liabilities (3,219) 327
Net cash provided by operating activities 16,819 2,616
Investing activities    
Payments for capital expenditures (4,523) (3,699)
Net cash used in investing activities (4,523) (3,699)
Financing activities    
Net proceeds from borrowings under the Revolving Credit Facilities 8,707 2,116
Net (repayment of) proceeds from borrowings under the Acquired Businesses Revolving Credit Facilities (17,649) 1,084
Proceeds from borrowings under the Term Loan Facilities   27,500
Repayment of borrowings under the Term Loan Facilities (2,750) (33,000)
Tax payments related to restricted stock vesting (321)  
Proceeds from stock option exercises, restricted stock vesting, and issuance of common stock under employee stock purchase plan 35 18
Financing fees (13) (2,455)
Net cash used in financing activities (11,991) (4,737)
Increase (decrease) in cash, cash equivalents, and restricted cash 305 (5,820)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (20) 2
Cash, cash equivalents, and restricted cash, beginning of period 361 [1] 6,179
Cash, cash equivalents, and restricted cash, end of period 646 361
Less: restricted cash at end of period 180 152
Cash and cash equivalents per balance sheet at end of period 466 209
Supplemental Disclosures of Cash Flow Information    
Cash payments on Tax Receivable Agreement obligation   351
Cash payments for interest 4,195 5,481
Cash payments for income taxes, net of refunds (13) 27
Supplemental Disclosures of Non-Cash Investing and Financing Activities    
Capital expenditures in accounts payable and accrued liabilities $ 494 $ 103
[1] Fiscal 2018 amounts reflect the retrospective combination of the entities. See Note 2 “Business Combinations” for additional details.
v3.20.1
Description of Business and Summary of Significant Accounting Policies
12 Months Ended
Feb. 01, 2020
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Description of Business and Summary of Significant Accounting Policies

Note 1. Description of Business and Summary of Significant Accounting Policies

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. References to “Vince”, “Rebecca Taylor” or “Parker” refer only to the referenced brand.

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, 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 audited financial statements included in this Annual Report, including for the fiscal year ended February 2, 2019, reflect the retrospective combination of the entities as if the combination had been in effect since inception of common control. See Note 2 “Business Combinations” 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 consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

The consolidated financial statements include the Company’s accounts and the accounts of the Company’s wholly-owned subsidiaries as of February 1, 2020. All intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the financial statements contain all adjustments (consisting solely of normal recurring adjustments) and disclosures necessary for a fair statement.

As noted above, the Company’s audited financial statements for the fiscal year ended February 2, 2019, as set forth in the 2018 Annual Report on Form 10-K now reflect the retrospective combination of the entities as if the combination had been in effect since inception of common control. See Note 2 “Business Combinations” for further information.

(C) Fiscal Year: The Company operates on a fiscal calendar widely used by the retail industry that results in a given fiscal year consisting of a 52 or 53-week period ending on the Saturday closest to January 31.

 

References to “fiscal year 2019” or “fiscal 2019” refer to the fiscal year ended February 1, 2020; and

 

References to “fiscal year 2018” or “fiscal 2018” refer to the fiscal year ended February 2, 2019.

Fiscal years 2019 and 2018 consisted of a 52-week period.

(D) 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 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. See Note 15, “Subsequent Events’ for further discussion regarding the impact of the novel coronavirus (“COVID-19”) on the Company’s sources and uses of liquidity.

(E) Use of Estimates: The preparation of consolidated 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.

Significant estimates inherent in the preparation of the consolidated financial statements include accounts receivable allowances, customer returns, the net realizable value of inventory, reserves for contingencies, useful lives and impairments of long-lived tangible and intangible assets, the impact of COVID-19 in evaluating the Company’s sources and uses of liquidity, Tax Receivable Agreement obligation, and accounting for income taxes, among others.

(F) Cash and cash equivalents:  All demand deposits and highly liquid short-term deposits with original maturities of three months or less are considered cash equivalents.

(G) Accounts Receivable and Concentration of Credit Risk: The Company maintains an allowance for accounts receivable estimated to be uncollectible. The provision for bad debts is included in Selling, general and administrative (“SG&A”) expense. Substantially all of the Company’s trade receivables are derived from sales to retailers and are recorded at the invoiced amount and do not bear interest. The Company performs ongoing credit evaluations of its wholesale partners’ financial condition and requires collateral as deemed necessary. The past due status of a receivable is based on its contractual terms. Account balances are charged off against the allowance when it is probable the receivable will not be collected.

Accounts receivable are recorded net of allowances including expected future chargebacks from wholesale partners and estimated margin support. It is the nature of the apparel and fashion industry that suppliers similar to the Company face significant pressure from customers in the retail industry to provide allowances to compensate for wholesale partner margin shortfalls. This pressure often takes the form of customers requiring the Company to provide price concessions on prior shipments as a prerequisite for obtaining future orders. Pressure for these concessions is largely determined by overall retail sales performance and, more specifically, the performance of the Company’s products at retail. To the extent the Company’s wholesale partners have more of the Company’s goods on hand at the end of the season, there will be greater pressure for the Company to grant markdown concessions on prior shipments. Accounts receivable balances are reported net of expected allowances for these matters based on the historical level of concessions required and estimates of the level of markdowns and allowances that will be required in the coming season. The Company evaluates the allowance balances on a continual basis and adjusts them as necessary to reflect changes in anticipated allowance activity. The Company also provides an allowance for sales returns based on known trends and historical return rates.

In fiscal 2019, sales to one wholesale partner accounted for more than ten percent of the Company’s net sales. These sales represented 22% of fiscal 2019 net sales. In fiscal 2018, sales to one wholesale partner accounted for more than ten percent of the Company’s net sales. These sales represented 22% of fiscal 2018 net sales.

Three wholesale partners each represented greater than ten percent of the Company’s gross accounts receivable balance as of February 1, 2020, with a corresponding aggregate total of 60% of such balance. Four wholesale partners each represented greater than ten percent of the Company’s gross accounts receivable balance as of February 2, 2019, with a corresponding aggregate total of 72% of such balance.

(H) Inventories: Inventories are stated at the lower of cost or net realizable value. Cost is determined on the first-in, first-out basis. The cost of inventory includes purchase cost as well as sourcing, transportation, duty, and other processing costs associated with acquiring, importing, and preparing inventory for sale. Inventory costs are included in cost of products sold at the time of their sale. Product development costs are expensed in SG&A expense when incurred. Inventory values are reduced to net realizable value when there are factors indicating that certain inventories will not be sold on terms sufficient to recover their cost. Inventories consisted of finished goods. As of February 1, 2020 and February 2, 2019, finished goods, net of reserves were $66,393 and $71,634, respectively.

The Company has two major suppliers that accounted for approximately 34% of inventory purchases for fiscal 2019. Amounts due to these suppliers was $3,173 included in accounts payable in the consolidated balance sheet as of February 1, 2020. The Company had two major suppliers that accounted for approximately 26% of inventory purchases for fiscal 2018. Amounts due to these suppliers was $3,968 included in accounts payable in the consolidated balance sheet as of February 2, 2019.

(I) Property and Equipment: Property and equipment are stated at cost. Depreciation is computed on the straight-line method over estimated useful lives of three to ten years for furniture, fixtures, and equipment. Leasehold improvements are depreciated on the straight-line basis over the shorter of their estimated useful lives or the lease term, excluding renewal terms. Capitalized software is depreciated on the straight-line basis over the estimated economic useful life of the software, generally three to seven years. Maintenance and repair costs are charged to earnings while expenditures for major renewals and improvements are capitalized. Upon the disposition of property and equipment, the accumulated depreciation is deducted from the original cost and any gain or loss is reflected in current earnings. Property and equipment consisted of the following:

 

 

 

February 1,

 

 

February 2,

 

(in thousands)

 

2020

 

 

2019

 

Leasehold improvements

 

$

43,075

 

 

$

41,705

 

Furniture, fixtures and equipment

 

 

14,565

 

 

 

13,777

 

Capitalized software

 

 

12,516

 

 

 

12,048

 

Construction in process

 

 

905

 

 

 

362

 

Total property and equipment

 

 

71,061

 

 

 

67,892

 

Less: accumulated depreciation

 

 

(45,787

)

 

 

(38,575

)

Property and equipment, net

 

$

25,274

 

 

$

29,317

 

 

Depreciation expense was $7,886 and $8,601 for fiscal 2019 and fiscal 2018, respectively.

(J) Impairment of Long-lived Assets:  The Company reviews long-lived assets which consist of property and equipment, operating lease assets and intangible assets with a finite life for impairment when the existence of facts and circumstances indicate that the useful life is shorter than previously estimated or that the carrying amount of an asset group may not be recoverable from future operations based on undiscounted expected future cash flows. The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets, which for our retail stores is at the store level.  The estimated fair value of the asset or asset group is based on discounted future cash flows of the asset or asset group using a discount rate commensurate with the related risk. For operating lease assets, the Company determines the fair value of the assets by discounting the estimated market rental rates over the remaining term of the lease. These estimates can be affected by factors such as future store results, real estate demand, store closure plans, property specific discount rate and economic conditions that can be difficult to predict.

During fiscal 2019, the Company recorded non-cash asset impairment charges of $818, within SG&A expenses on the Consolidated Statements of Operations and Comprehensive Income (Loss), related to the impairment of certain retail stores as the carrying values were determined not to be recoverable. The impairment charge consisted of $641 related to property and equipment and $177 related to operating lease right-of-use assets. The carrying amounts of these assets were adjusted to their estimated fair values. Additionally, during the second quarter of fiscal 2019, the Company identified facts and circumstances that indicated that the net book value of finite-lived intangible assets associated with Rebecca Taylor and Parker may not be recoverable, resulting in the determination that a triggering event had occurred. The Company recorded a non-cash asset impairment charge of $6,115 related to the Rebecca Taylor and Parker customer relationships within Impairment of goodwill and intangible assets on the Consolidated Statements of Operations and Comprehensive Income (Loss), as the Company had determined that the fair value of these customer relationships was $0. Significant assumptions utilized in these analyses included projected revenue growth rates and discount rates.

During fiscal 2018, the Company recorded non-cash asset impairment charges of $1,684 within SG&A expenses on the Consolidated Statements of Operations and Comprehensive Income (Loss), related to the impairment of property and equipment for certain retail stores as the carrying values were determined not to be recoverable. The carrying amounts of these assets were adjusted to their estimated fair values.

 

(K) Goodwill and Other Intangible Assets: Goodwill and other indefinite-lived intangible assets are tested for impairment at least annually and in an interim period if a triggering event occurs. As discussed in further detail below, we determined that a triggering event occurred during the second quarter of fiscal 2019.

 

Goodwill is not allocated to the Company’s operating segments in the measure of segment assets regularly reported to and used by management, however goodwill is allocated to operating segments (goodwill reporting units) for the purpose of the annual impairment test for goodwill.

Goodwill represents the excess of the cost of acquired businesses over the fair market value of the identifiable net assets. The indefinite-lived intangible assets are the Vince tradename and the Rebecca Taylor tradename.

An entity may elect to perform a qualitative impairment assessment for goodwill and indefinite-lived intangible assets. If adverse qualitative trends are identified during the qualitative assessment that indicate that it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying amount, a quantitative impairment test is required. “Step one” of the quantitative impairment test for goodwill requires an entity to determine the fair value of each reporting unit and compare such fair value to the respective carrying amount. If the estimated fair value of the reporting unit exceeds the carrying value of the net assets assigned to that reporting unit, goodwill is not impaired, and the Company is not required to perform further testing. If the carrying amount of the reporting unit exceeds its estimated fair value, an impairment loss is recorded for the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The goodwill impairment test is dependent on a number of factors, including estimates of future growth, profitability and cash flows, discount rates and other variables. The Company bases its estimates on assumptions it believes to be reasonable, but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates.  

The Company estimates the fair value of the tradename intangible assets using a discounted cash flow valuation analysis, which is based on the “relief from royalty” methodology.  This methodology assumes that in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these types of assets. The relief from royalty approach is dependent on a number of factors, including estimates of future growth, royalty rates in the category of intellectual property, discount rates and other variables.  The Company bases its fair value estimates on assumptions it believes to be reasonable, but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates. The Company recognizes an impairment loss when the estimated fair value of the tradename intangible asset is less than the carrying value.

An entity may pass on performing the qualitative assessment for a reporting unit or indefinite-lived intangible asset and directly perform the quantitative assessment. This determination can be made on an asset by asset basis, and an entity may resume performing a qualitative assessment in subsequent periods.    

During the second quarter of fiscal 2019, the Company identified facts and circumstances that indicated that the fair value of goodwill associated with Rebecca Taylor and Parker, the Rebecca Taylor tradename and the Parker tradename may not be recoverable, resulting in the determination that a triggering event had occurred. Because of decreases in projected revenues and declines in margins due to increases of aged inventory related to the Rebecca Taylor and Parker brands that were considered other than temporary, the Company performed a quantitative assessment on goodwill and these indefinite-lived intangible assets.

The Company estimated the fair value of the Rebecca Taylor and Parker tradename intangible assets using the relief from royalty methodology and determined that the fair value of the Rebecca Taylor and Parker tradenames were below their carrying amounts. Accordingly, the Company recorded an impairment charge for the Rebecca Taylor and Parker tradename intangible assets of $11,247, which was recorded within Impairment of goodwill and intangible assets on the Consolidated Statements of Operations and Comprehensive Income (Loss) in fiscal 2019. Significant assumptions utilized in these analyses included projected revenue growth rates, royalty rates and discount rates. A quantitative impairment test on the goodwill allocated to the Rebecca Taylor and Parker reporting unit determined that the fair value was below the carrying value. The Company estimated the fair value using the income valuation approach. “Step one” of the assessment determined that the fair value was below the carrying amount by $2,129, and as a result the Company recorded a goodwill impairment charge of $2,129 within Impairment of goodwill and intangible assets on the Consolidated Statements of Operations and Comprehensive Income (Loss) in fiscal 2019.  There were no impairment charges for fiscal 2018.

Determining the fair value of goodwill and other intangible assets is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates and operating margins, discount rates and future market conditions, among others. It is possible that estimates of future operating results could change adversely and impact the evaluation of the recoverability of the carrying value of goodwill and intangible assets and that the effect of such changes could be material.

In accordance with Accounting Standards Codification (“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 as of the beginning of the third quarter of fiscal 2019. The remaining definite-lived intangible assets are comprised of customer relationships and are being amortized on a straight-line basis over their useful lives of 20 years.

In both fiscal 2019 and fiscal 2018, the Company performed its annual impairment test during the fourth quarter. The Company elected to perform a qualitative impairment test on goodwill allocated to the Company’s Vince Wholesale reporting unit and concluded that it was more likely than not that the fair value of the Company’s Vince Wholesale reporting unit exceeded its carrying value and was not impaired. Goodwill was $41,435 as of February 1, 2020 and February 2, 2019.

The Company also elected to perform a qualitative impairment test on its Vince tradename intangible asset and concluded that it is more likely than not that the fair value of the Company’s Vince tradename intangible asset exceeds its carrying value and the Vince tradename intangible asset is not impaired. There was no additional impairment as part of the annual impairment test for Rebecca Taylor tradename. Tradename intangible assets were $76,730 and $88,006 as of February 1, 2020 and February 2, 2019 respectively, which is included within Intangible assets, net in our consolidated balance sheets.

See Note 3 “Goodwill and Intangible Assets” for more information on the details surrounding goodwill and intangible assets.

(L) Deferred Financing Costs: Deferred financing costs, such as underwriting, financial advisory, professional fees, and other similar fees are capitalized and recognized in interest expense over the contractual life of the related debt instrument using the straight-line method, as this method results in recognition of interest expense that is materially consistent with that of the effective interest method.

(M) Leases: The Company determines if a contract contains a lease at inception. The Company leases various office spaces, showrooms and retail stores which generally have initial terms of 10 years and cannot be extended or can be extended for one additional 5-year term, with the exception of a few recent leases which are on shorter terms. The Company will not include renewal options in the underlying lease term unless the Company is reasonably certain to exercise the renewal option. Substantially all of the Company’s leases require a fixed annual rent, and most require the payment of additional rent if store sales exceed a negotiated amount. These percentage rent expenses are considered as variable lease costs and are recognized in the consolidated financial statements when incurred. In addition, the Company’s real estate leases may also require additional payments for real estate taxes and other occupancy-related costs which it considers as non-lease components.

Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized based upon the present value of the future lease payments over the lease term. As the Company’s leases do not provide an implicit borrowing rate, the Company uses an estimated incremental borrowing rate based upon combination of market-based factors, such as market quoted forward yield curves and company specific factors, such as the Company’s credit rating, lease size and duration to calculate the present value.

 

(N) 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 13 “Segment Information” for disaggregated revenue amounts by segment.

 

Revenue associated with gift cards is recognized upon redemption and unredeemed balances are considered a contract liability and recorded within other accrued expenses, which are subject to escheatment within the jurisdictions in which it operates. As of February 1, 2020 and February 2, 2019, the contract liability was $1,585 and $1,428, respectively. In fiscal 2019, the Company recognized $303 of revenue that was previously included in the contract liability as of February 2, 2019.

 

Amounts billed to customers for shipping and handling costs are not material.  Such shipping and handling costs are accounted for as a fulfillment cost and are included in cost of products sold. Sales taxes that are collected by the Company from a customer are excluded from revenue.    

 

Sales are measured as the amount of consideration the Company expects to receive in exchange for transferring goods, which includes estimates for variable consideration. Variable consideration mainly includes discounts, chargebacks, markdown allowances, cooperative advertising programs, and sales returns. Estimated amounts of discounts, chargebacks, markdown allowances, cooperative advertising programs, and sales returns are accounted for as reductions of sales when the associated sale occurs. These estimated amounts are adjusted periodically based on changes in facts and circumstances when the changes become known. On the Company’s consolidated balance sheet, reserves for sales returns are included within other accrued liabilities, and the value of inventory associated with reserves for sales returns are included in prepaid expenses and other current assets. The Company continues to estimate the amount of sales returns based on known trends and historical return rates.  

(O) Cost of Products Sold: The Company’s cost of products sold and gross margins may not necessarily be comparable to that of other entities as a result of different practices in categorizing costs. The primary components of the Company’s cost of products sold are as follows:

 

the cost of purchased merchandise, including raw materials;

 

the cost of inbound transportation, including freight;

 

the cost of the Company’s production and sourcing departments;

 

other processing costs associated with acquiring and preparing the inventory for sale; and

 

shrink and valuation reserves.

(P) Marketing and Advertising: The Company provides cooperative advertising allowances to certain of its customers. These allowances are accounted for as reductions in sales as discussed in “Revenue Recognition” above. Production expense related to company-directed advertising is deferred until the first time at which the advertisement runs. All other expenses related to company-directed advertising are expensed as incurred. Marketing and advertising expense recorded in SG&A expenses was $17,581 and $15,081in fiscal 2019 and fiscal 2018, respectively. At February 1, 2020 and February 2, 2019, deferred production expenses associated with company-directed advertising were $749 and $941, respectively.

(Q) Share-Based Compensation: New, modified and unvested share-based payment transactions with employees, such as stock options and restricted stock units, are measured at fair value and recognized as compensation expense over the requisite service period and is included as a component of SG&A expenses in the Consolidated Statements of Operations and Comprehensive Income (Loss). Additionally, share-based awards granted to non-employees are expensed over the period in which the related services are rendered at their fair value, using the Black Scholes Pricing Model to determine fair value. Forfeitures are accounted for as they occur.  

(R) Income Taxes: The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities at enacted rates. The Company assesses the likelihood of the realization of deferred tax assets and adjusts the carrying amount of these deferred tax assets by a valuation allowance to the extent the Company believes it more likely than not that all or a portion of the deferred tax assets will not be realized. Many factors are considered when assessing the likelihood of future realization of deferred tax assets, including recent earnings results within taxing jurisdictions, expectations of future taxable income, the carryforward periods available and other relevant factors. Changes in the required valuation allowance are recorded in income in the period such determination is made. The Company recognizes tax positions in the Consolidated Balance Sheets as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with tax authorities assuming full knowledge of the position and all relevant facts. Accrued interest and penalties related to unrecognized tax benefits are included in income taxes in the Consolidated Statements of Operations and Comprehensive Income (Loss).

(S) 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 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.

(T) 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 February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02: “Leases (Topic 842)”, a new lease accounting standard. The guidance requires lessees to recognize right-of-use lease assets and lease liabilities on the balance sheet for those leases currently classified as operating leases. In July 2018, the FASB issued ASU 2018-11: “Leases (Topic 842): Targeted improvements” which provides companies with an additional transition method to apply the new guidance at the adoption date instead of the earliest period presented in the financial statements. The Company adopted the standard on February 3, 2019, the first day of fiscal 2019 instead of the earliest period presented in the financial statements per ASU 2018-11. See Note 12. “Leases” for additional details.

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 August 2018, the 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. We do not expect that the adoption of this ASU will have a material impact on our 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.

v3.20.1
Business Combinations
12 Months Ended
Feb. 01, 2020
Business Combinations [Abstract]  
Business Combinations

Note 2. Business Combinations

On November 4, 2019, Vince, LLC entered into an Equity Purchase Agreement (the “Purchase Agreement”) with CLG, providing for the Acquisition by Vince, LLC of 100% of the equity interests of the Acquired Businesses from CLG. The Acquisition was consummated effective on November 3, 2019.

The aggregate purchase price for the Acquisition was $19,730, which amount was used to satisfy all outstanding obligations under the credit facility of the Acquired Businesses and for the payment of certain compensation expenses. The purchase price was paid in cash and funded under the 2018 Revolving Credit Facility which was upsized simultaneously with the Acquisition, as described in Note 5 “Long-Term Debt and Financing Arrangements”.

CLG is owned by affiliates of Sun Capital Partners, Inc. (collectively, “Sun Capital”).  Sun Capital beneficially owns approximately 73% of the Company’s common stock.  The Acquisition was reviewed and approved by the Special Committee of the Company’s Board of Directors, consisting solely of directors not affiliated with Sun Capital, who was represented by independent financial and legal advisors.

The Acquisition is treated for accounting purposes as a transaction by entities under common control within the scope of ASC Topic 805 “Business Combinations”. This guidance requires the retrospective combination of the entities for all periods presented as if the combination had been in effect since inception of common control. Therefore, the Company’s audited financial statements for the fiscal year ended February 2, 2019, now reflect the retrospective combination of the entities. Additionally, the combination of the entities reflects the historical balance sheet data for the Acquired Businesses. This presentation constitutes a change in reporting entity. The following table provides the impact of the change in reporting entity on our results of operations for fiscal 2018:

 

 

 

Fiscal Year

 

(in thousands)

 

2018

 

Income (loss) from operations

 

$

1,218

 

Net (loss) income

 

 

64

 

Other comprehensive income

 

 

(18

)

Earnings (loss) per share:

 

 

 

 

Basic (loss) earnings per share

 

$

 

Diluted (loss) earnings per share

 

$

 

During fiscal 2019, the Company incurred $3,571 of transaction and other related costs related to the Acquisition, which have been expensed and are included in SG&A expense in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss).

v3.20.1
Goodwill and Intangible Assets
12 Months Ended
Feb. 01, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets

Note 3. 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 2, 2019

 

$

41,435

 

 

$

 

 

$

2,129

 

 

$

43,564

 

Impairment charges

 

 

 

 

 

 

 

 

(2,129

)

 

 

(2,129

)

Balance as of February 1, 2020

 

$

41,435

 

 

$

 

 

$

 

 

$

41,435

 

The total carrying amount of goodwill was net of accumulated impairments of $92,383 and $90,254 as of February 1, 2020 and February 2, 2019, respectively. During the second quarter of fiscal 2019, the Company identified facts and circumstances that indicated that the fair value of goodwill associated with Rebecca Taylor and Parker may not be recoverable, resulting in the determination that a triggering event had occurred. As a result, the Company recorded a $2,129 goodwill impairment charge in the Rebecca Taylor and Parker reporting unit. See Note 1 “Description of Business and Summary of Significant Accounting Policies – (K) Goodwill and Other Intangible Assets” for additional details. There were no impairments recorded as a result of the Company’s annual goodwill impairment test performed during fiscal 2019 and 2018.

The following tables present a summary of identifiable intangible assets:

 

(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

 

Tradename

 

 

13,100

 

 

 

(29

)

 

 

(12,527

)

 

 

544

 

Indefinite-lived intangible asset:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tradename

 

 

110,986

 

 

 

 

 

 

(34,800

)

 

 

76,186

 

Total intangible assets

 

$

155,441

 

 

$

(20,466

)

 

$

(53,442

)

 

$

81,533

 

 

(in thousands)

 

Gross Amount

 

 

Accumulated Amortization

 

 

Accumulated Impairments

 

 

Net Book Value

 

Balance as of February 2, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

$

31,355

 

 

$

(18,870

)

 

$

 

 

$

12,485

 

Indefinite-lived intangible asset:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tradename

 

 

124,086

 

 

 

 

 

 

(36,080

)

 

 

88,006

 

Total intangible assets

 

$

155,441

 

 

$

(18,870

)

 

$

(36,080

)

 

$

100,491

 

 

During the second quarter of fiscal 2019, the Company identified facts and circumstances that indicated that the fair value of the Rebecca Taylor tradename, the Parker tradename and Rebecca Taylor and Parker customer relationships may not be recoverable, resulting in the determination that a triggering event had occurred. As a result of comparing the fair value of these assets to their respective carrying values, the Company recorded an $11,247 impairment charge associated with the Rebecca Taylor and Parker tradename intangible assets and $6,115 of impairment charges for the Rebecca Taylor and Parker customer relationships. See Note 1 “Description of Business and Summary of Significant Accounting Policies – (J) Impairment of Long-Lived Assets and (K) Goodwill and Other Intangible Assets” for additional details. No impairments of the Company’s indefinite lived tradenames were recorded as a result of the Company’s annual asset impairment tests performed during fiscal 2019 and fiscal 2018.

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 $1,596 and $2,536 for fiscal 2019 and fiscal 2018, respectively, which is included in SG&A expenses on the Consolidated Statements of Operations and Comprehensive Income (Loss). Amortization expense for each of the fiscal years 2020 to 2024 is expected to be as follows:

 

 

 

Future

 

(in thousands)

 

Amortization

 

2020

 

$

655

 

2021

 

 

655

 

2022

 

 

655

 

2023

 

 

655

 

2024

 

 

655

 

Total next 5 fiscal years

 

$

3,275

 

 

v3.20.1
Fair Value Measurements
12 Months Ended
Feb. 01, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 4. 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 February 1, 2020 or February 2, 2019. At February 1, 2020 and February 2, 2019, the Company believes that the carrying values of cash and cash equivalents, receivables, and accounts payable approximate fair value, due to the short-term maturity of these instruments. The Company’s debt obligations with a carrying value of $52,473 as of February 1, 2020 are at variable interest rates. The carrying value of the Company’s 2018 Revolving Credit Facility approximates fair value as the stated interest rate approximates market rate currently available to the Company, which is considered a Level 2 input. The fair value of the Company’s 2018 Term Loan Facility was approximately $25,000 as of February 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, ROU lease 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 following tables present the non-financial assets the Company measured at fair value on a non-recurring basis in fiscal 2019 and fiscal 2018, based on such fair value hierarchy:

 

 

 

Net Carrying

Value as of

 

 

Fair Value Measured and Recorded at Reporting Date Using:

 

 

Total Losses - Year Ended

 

 

(in thousands)

 

February 1, 2020

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

February 1, 2020

 

 

Property and equipment

 

$

 

 

$

 

 

$

 

 

$

 

 

$

641

 

(1)

Goodwill

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,129

 

(2)

Tradenames - Indefinite-lived

 

 

5,086

 

 

 

 

 

 

 

 

 

5,086

 

 

 

3,550

 

(2)

Tradenames - Definite-lived

 

 

544

 

 

 

 

 

 

 

 

 

544

 

 

 

7,697

 

(2)

Customer Lists

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,115

 

(2)

ROU Assets

 

 

788

 

 

 

 

 

 

 

 

 

788

 

 

 

177

 

(1)

 

 

 

Net Carrying

Value as of

 

 

Fair Value Measured and Recorded at Reporting Date Using:

 

 

Total Losses - Year Ended

 

 

(in thousands)

 

February 2, 2019

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

February 2, 2019

 

 

Property and equipment

 

$

56

 

 

$

 

 

$

 

 

$

56

 

 

$

1,684

 

(1)

 

(1) Recorded within SG&A expenses on the Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 1 “Description of Business and Summary of Significant Accounting Policies – (J) Impairment of Long-lived Assets” for additional information.

(2) Recorded within Impairment of goodwill and intangible assets on the Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 1 “Description of Business and Summary of Significant Accounting Policies – (J) Impairment of Long-lived Assets and (K) Goodwill and Other Intangible Assets” for additional information.

 

v3.20.1
Long-Term Debt and Financing Arrangements
12 Months Ended
Feb. 01, 2020
Debt Disclosure [Abstract]  
Long-Term Debt and Financing Arrangements

Note 5. Long-Term Debt and Financing Arrangements

Debt obligations consisted of the following:

 

 

 

February 1,

 

 

February 2,

 

(in thousands)

 

2020

 

 

2019

 

Short-term borrowings:

 

 

 

 

 

 

 

 

Acquired Businesses Short Term Borrowings

 

$

 

 

$

17,649

 

Total short-term borrowings

 

$

 

 

$

17,649

 

 

 

 

 

 

 

 

 

 

Long-term debt:

 

 

 

 

 

 

 

 

Term Loan Facilities

 

$

24,750

 

 

$

27,500

 

Revolving Credit Facilities

 

 

27,723

 

 

 

19,016

 

Total debt principal

 

 

52,473

 

 

 

46,516

 

Less: current portion of long-term debt

 

 

2,750

 

 

 

2,750

 

Less: deferred financing costs

 

 

1,043

 

 

 

1,426

 

Total long-term debt

 

$

48,680

 

 

$

42,340

 

 

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 ending 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 February 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 ended February 1, 2020. There were no such payment due for fiscal year ended February 1, 2020.  

Through February 1, 2020, on an inception to date basis, the Company had made repayments of $2,750 on the 2018 Term Loan Facility.

Scheduled maturities of the 2018 Term Loan Facility are as follows:

 

 

2018 Term Loan

 

(in thousands)

 

Maturities

 

Fiscal 2020

 

$

2,750

 

Fiscal 2021

 

 

2,750

 

Fiscal 2022

 

 

2,750

 

Fiscal 2023

 

 

16,500

 

      Total

 

$

24,750

 

 

Subsequent to February 1, 2020, the Company entered into certain amendments for the 2018 Term Loan Facility. See Note 15 “Subsequent Events” for additional information.

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 $10,000 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 February 1, 2020, the Company was in compliance with applicable covenants.

On November 1, 2019, Vince, LLC entered into the 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.

Subsequent to February 1, 2020, the Company entered into an amendment for the 2018 Revolving Credit Facility. See Note 15 “Subsequent Events” for additional information.

As of February 1, 2020, $59,916 was available under the 2018 Revolving Credit Facility, net of the loan cap, and there were $27,723 of borrowings outstanding and $6,505 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 February 1, 2020 was 3.3%.

As of February 2, 2019, $36,850 was available under the 2018 Revolving Credit Facility, net of the loan cap, and there were $19,016 of borrowings outstanding and $6,013 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 February 2, 2019 was 4.4%.

2013 Term Loan Facility

On November 27, 2013, Vince, LLC and Vince Intermediate entered into a $175,000 senior secured term loan facility (as amended from time to time, the “2013 Term Loan Facility”) with the lenders party thereto, Bank of America, N.A. (“BofA”), as administrative agent, JP Morgan Chase Bank and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers, and Cantor Fitzgerald as documentation agent. The 2013 Term Loan Facility would have matured on November 27, 2019. Vince, LLC and Vince Intermediate were borrowers and VHC was a guarantor under the 2013 Term Loan Facility.

On August 21, 2018, the Company refinanced the 2013 Term Loan Facility by entering into the 2018 Term Loan Facility and the 2018 Revolving Credit Facility. All outstanding amounts under the 2013 Term Loan Facility of $29,146, including interest, were repaid in full and the 2013 Term Loan Facility was terminated.

2013 Revolving Credit Facility

On November 27, 2013, Vince, LLC entered into a $50,000 senior secured revolving credit facility (as amended from time to time, the “2013 Revolving Credit Facility”) with BofA as administrative agent. Vince, LLC was the borrower and VHC and Vince Intermediate were the guarantors under the 2013 Revolving Credit Facility. On June 3, 2015, Vince, LLC entered into a first amendment to the 2013 Revolving Credit Facility, that among other things, increased the aggregate commitments under the facility from $50,000 to $80,000, subject to a loan cap which was the lesser of (i) the Borrowing Base, as defined in the loan agreement, (ii) the aggregate commitments, or (iii) $70,000 until debt obligations under the Company’s 2013 Term Loan Facility have been paid in full, and extended the maturity date from November 27, 2018 to June 3, 2020.

           On August 21, 2018, the Company refinanced the 2013 Revolving Credit Facility by entering into the 2018 Term Loan Facility and the 2018 Revolving Credit Facility. All outstanding amounts under the 2013 Revolving Credit Facility of $40,689, including interest, were repaid in full and the 2013 Revolving Credit Facility was terminated.

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.

v3.20.1
Commitments and Contingencies
12 Months Ended
Feb. 01, 2020
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 6. Commitments and Contingencies

Leases

The Company leases its office spaces, showrooms and retail stores under operating leases which have remaining terms up to ten years, excluding renewal terms. Most of the Company’s real estate leases contain covenants that require the Company to pay real estate taxes, insurance, and other executory costs. Certain of these leases require contingent rent payments or contain kick-out clauses and/or opt-out clauses, based on the operating results of the retail operations utilizing the leased premises. Rent under leases with scheduled rent changes or lease concessions are recorded on a straight-line basis over the lease term. Rent expense under all operating leases was $29,230 and $27,746 for fiscal 2019 and fiscal 2018, respectively, which is recorded within SG&A expenses.

The future minimum lease payments under operating leases at February 1, 2020 were as follows:

 

 

 

Minimum Lease

 

(in thousands)

 

Payments

 

Fiscal 2020

 

$

27,472

 

Fiscal 2021

 

 

25,723

 

Fiscal 2022

 

 

23,812

 

Fiscal 2023

 

 

20,173

 

Fiscal 2024

 

 

17,038

 

Thereafter

 

 

19,692

 

Total minimum lease payments

 

$

133,910

 

 

Other Contractual Cash Obligations

At February 1, 2020, the Company’s other contractual cash obligations of $39,709 consisted primarily of inventory purchase obligations and service contracts. Subsequent to February 1, 2020, the Company reducec certain inventory purchase obligations totaling approximately $1,900 as part of its operational adjustments in response to the COVID-19 pandemic.

Litigation

On September 7, 2018, a complaint was filed in the United States District Court for the Eastern District of New York by certain stockholders (collectively, the “Plaintiff”), naming the Company as well as Brendan Hoffman, the Company’s Chief Executive Officer, David Stefko, the Company’s Executive Vice President, Chief Financial Officer, one of the Company’s directors, certain of the Company’s former officers and directors, and Sun Capital Partners, Inc. and certain of its affiliates, as defendants. The complaint generally alleges that the Company and the named parties made false and/or misleading statements and/or failed to disclose matters relating to the transition of the Company’s ERP systems from Kellwood. The complaint brings causes of action for violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated under the Exchange Act against the Company and the named parties and for violations of Section 20(a) of the Exchange Act against the individual parties, Sun Capital Partners, Inc. and its affiliates.  The complaint seeks unspecified monetary damages and unspecified costs and fees. On January 28, 2019, in response to our motion to dismiss the original complaint, the Plaintiff filed an amended complaint, naming the same defendants as parties and asserting the same causes of action as those stated in the original complaint. On October 4, 2019, an individual stockholder filed a complaint marked as a related suit to the amended complaint, containing substantially identical allegations and claims against the same defendant parties.

The Company currently believes that the likelihood of an unfavorable judgment arising from this matter is remote based on the information currently available and that the ultimate resolution of this matter will not have a material adverse effect on the Company’s business in a future period. However, given the inherent unpredictability of litigation and the fact that this litigation is still in its very early stages, the Company is unable to predict with certainty the outcome of this litigation or reasonably estimate a possible loss or range of loss, if any, associated with this litigation at this time. In addition, the Company will be required to expend resources to defend this matter.

On September 6, 2019, Vince, LLC received a favorable judgment from the second instance court in the People’s Republic of China in connection with a trademark infringement case. The judgment awarded Vince, LLC approximately $700 in damages and fees, net of applicable taxes, which was included in SG&A expense in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss). This amount was paid in full to Vince, LLC by the defendants in the case in the fourth quarter of fiscal 2019.

  Additionally, the Company is a party to legal proceedings, compliance matters, environmental as well as wage and hour and other labor claims that arise in the ordinary course of its business. Although the outcome of such items cannot be determined with certainty, management believes that the ultimate outcome of these items, individually and in the aggregate, will not have a material adverse impact on the Company’s financial position, results of operations or cash flows.

v3.20.1
Share-Based Compensation
12 Months Ended
Feb. 01, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Share-Based Compensation

Note 7. 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 February 1, 2020, there were 254,206 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.

On April 26, 2018, the Company commenced a tender offer to exchange certain options to purchase shares of its common stock, whether vested or unvested, from eligible employees and executive officers for replacement restricted stock units (“Replacement RSUs”) granted under the Vince 2013 Incentive Plan (the “Option Exchange”). Employees and executive officers of the Company on the date of offer commencement and those who remained an employee or executive officer of the Company through the expiration date of the offer and held at least one option as of the commencement of the offer that was granted under the Vince 2013 Incentive Plan were eligible to participate.  The exchange ratio of this offer was a 1-to-1.7857 basis (one stock option exchanged for every 1.7857 Replacement RSUs). This tender offer expired on 11:59 p.m. Eastern Time on May 24, 2018 (the “Offer Expiration Date”). The Replacement RSUs were granted on the business day immediately following the Offer Expiration Date.  As a result of the Option Exchange, 149,819 stock options were cancelled and 267,538 Replacement RSUs were granted with a grant date fair value of $9.15 per unit. All Replacement RSUs vest pursuant to the following schedule: 10% on April 19, 2019; 20% on April 17, 2020; 25% on April 16, 2021; and 45% on April 15, 2022, subject to the holder’s remaining continuously employed with the Company through each such applicable vesting date. Replacement RSUs have the new vesting schedule regardless of whether the surrendered eligible options were partially vested at the time it was exchanged. The purpose of this exchange was to foster retention, motivate our key contributors, and better align the interests of our employees and stockholders to maximize stockholder value.

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 SG&A expense for the difference between the fair market value and the discounted purchase price of the Company’s Stock. During fiscal 2019 and fiscal 2018, 2,190 and 1,654 shares of common stock, respectively, were issued under the ESPP. As of February 1, 2020, there were 91,135 shares available for future issuance under the ESPP.

Stock Options

A summary of stock option activity for both employees and non-employees for fiscal 2019 is as follows:

 

 

 

Stock Options

 

 

Weighted Average Exercise Price

 

 

Weighted Average Remaining Contractual Term (years)

 

 

Aggregate Intrinsic Value

(in thousands)

 

Outstanding at February 2, 2019

 

 

204

 

 

$

31.71

 

 

 

6.7

 

 

$

 

Granted

 

 

 

 

$

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

$

 

 

 

 

 

 

 

 

 

Forfeited or expired

 

 

(29

)

 

$

38.77

 

 

 

 

 

 

 

 

 

Outstanding at February 1, 2020

 

 

175

 

 

$

38.87

 

 

 

5.7

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vested and exercisable at February 1, 2020

 

 

175

 

 

$

38.87

 

 

 

5.7

 

 

$

 

 

All outstanding shares were vested at February 1, 2020.

Restricted Stock Units

A summary of restricted stock unit activity for fiscal 2019 is as follows:

 

 

 

Restricted Stock Units

 

 

Weighted Average Grant Date Fair Value

 

Non-vested restricted stock units at February 2, 2019

 

 

504,230

 

 

$

9.19

 

Granted

 

 

273,483

 

 

$

14.38

 

Vested

 

 

(79,918

)

 

$

10.19

 

Forfeited

 

 

(17,869

)

 

$

10.81

 

Non-vested restricted stock units at February 1, 2020

 

 

679,926

 

 

$

11.12

 

 

The total fair value of restricted stock units vested during fiscal 2019 and fiscal 2018 was $814 and $179, respectively.

At February 1, 2020, there was $5,968 of unrecognized compensation costs related to restricted stock units that will be recognized over a remaining weighted average period of 1.8 years.

Share-Based Compensation Expense

During fiscal 2019, the Company recognized share-based compensation expense of $2,033 and a related tax benefit of $0. During fiscal 2018, the Company recognized share-based compensation expense of $1,335 and a related tax benefit of $0.

v3.20.1
Defined Contribution Plan
12 Months Ended
Feb. 01, 2020
Compensation And Retirement Disclosure [Abstract]  
Defined Contribution Plan

Note 8. Defined Contribution Plan

The Company maintains defined contribution plans for employees who meet certain eligibility requirements. Features of these plans allow participants to contribute to a plan a percentage of their annual compensation, subject to IRS limitations. Certain plans also provide for discretionary matching contributions by the Company. The annual expense incurred by the Company for defined contribution plans was $464 and $460 in fiscal 2019 and fiscal 2018, respectively.

v3.20.1
Stockholders' Equity
12 Months Ended
Feb. 01, 2020
Equity [Abstract]  
Stockholders' Equity

Note 9. Stockholders’ Equity

Common Stock

The Company currently has authorized for issuance 100,000,000 shares of its voting common stock, par value of $0.01 per share.

As of February 1, 2020 and February 2, 2019, the Company had 11,680,593 and 11,622,994 shares issued and outstanding, respectively.

Dividends

The Company has not paid dividends, and the Company’s current ability to pay such dividends is restricted by the terms of its debt agreements. The Company’s future dividend policy will be determined on a yearly basis and will depend on earnings, financial condition, capital requirements, and certain other factors. The Company does not expect to declare dividends with respect to its common stock in the foreseeable future.

v3.20.1
Earnings Per Share
12 Months Ended
Feb. 01, 2020
Earnings Per Share [Abstract]  
Earnings Per Share

Note 10. 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.

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

 

 

 

Fiscal Year

 

 

 

2019

 

 

2018

 

Weighted-average shares—basic

 

 

11,665,541

 

 

 

11,619,828

 

Effect of dilutive equity securities

 

 

263,758

 

 

 

 

Weighted-average shares—diluted

 

 

11,929,299

 

 

 

11,619,828

 

 

Because the Company incurred a net loss for the fiscal year ended February 2, 2019, weighted-average basic shares and weighted-average diluted shares outstanding are equal for the period.

For the fiscal years ended February 1, 2020 and February 2, 2019, 16,408 and 115,280 weighted average shares of share-based compensation, respectively, were excluded from the computation of weighted average shares for diluted earnings per share, as their effect would have been anti-dilutive.

v3.20.1
Income Taxes
12 Months Ended
Feb. 01, 2020
Income Tax Disclosure [Abstract]  
Income Taxes

Note 11. Income Taxes

 

The provision for income taxes consisted of the following:

 

 

Fiscal Year

 

(in thousands)

2019

 

 

2018

 

Current:

 

 

 

 

 

 

 

Domestic:

 

 

 

 

 

 

 

Federal

$

(130

)

 

$

85

 

State

 

188

 

 

 

93

 

Foreign

 

40

 

 

 

72

 

Total current

 

98

 

 

 

250

 

Deferred:

 

 

 

 

 

 

 

Domestic:

 

 

 

 

 

 

 

Federal

 

 

 

 

(443

)

State

 

 

 

 

346

 

Foreign

 

 

 

 

3

 

Total deferred

 

 

 

 

(94

)

Total provision for income taxes

$

98

 

 

$

156

 

 

The sources of income (loss) before provision for income taxes are from the United States, the Company’s subsidiaries in the United Kingdom and the Company’s French branch. The Company files U.S. federal income tax returns and income tax returns in various state and local jurisdictions.

Current income taxes are the amounts payable under the respective tax laws and regulations on each year’s earnings. Deferred income tax assets and liabilities represent the tax effects of revenues, costs and expenses, which are recognized for tax purposes in different periods from those used for financial statement purposes.

A reconciliation of the federal statutory income tax rate to the effective tax rate is as follows:

 

 

Fiscal Year

 

 

2019

 

 

2018

 

Statutory federal rate

 

21.0

%

 

 

21.0

%

State taxes, net of federal benefit

 

5.8

%

 

 

(74.1

)%

Non-deductible Tax Receivable Agreement adjustment (1)

 

(38.3

)%

 

 

 

Valuation allowance

 

4.6

%

 

 

(32.4

)%

Return to provision adjustment

 

0.2

%

 

 

96.0

%

Non-deductible Officers Compensation

 

2.1

%

 

 

(10.6

)%

Rate Differential on Foreign Income

 

0.1

%

 

 

(3.0

)%