Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
VNCE > SEC Filings for VNCE > Form 10-Q on 3-Jan-2014All Recent SEC Filings

Show all filings for VINCE HOLDING CORP.

Form 10-Q for VINCE HOLDING CORP.


3-Jan-2014

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

a) Management's Discussion and Analysis of Financial Condition and Results of Operations of Vince Holding Corp. (previously known as Apparel Holding Corp. and subsidiaries and includes both the non-Vince and Vince businesses, unless otherwise indicated)

The following discussion of Vince Holding Corp.'s financial condition and results of operations should be read together with the condensed consolidated financial statements and related notes of Vince Holding Corp. included elsewhere in this document. As used in this section, unless the context requires otherwise, "Vince Holding Corp." refers to Vince Holding Corp. and its consolidated subsidiaries prior to giving effect to the IPO and Restructuring Transactions, and "Kellwood" refers to Kellwood Holding, LLC and its consolidated subsidiaries (including Kellwood Company, LLC) after giving effect to the IPO and Restructuring Transactions.

The businesses of Vince Holding Corp. described in this section represent its various operations, including the Vince and non-Vince businesses prior to giving effect to the IPO and the Restructuring Transactions. The operations of VHC consist solely of the Vince business after giving effect to the Restructuring Transactions and the IPO, which occurred on November 27, 2013. The non-Vince businesses are owned solely by the Pre-IPO Stockholders effective as of November 27, 2013. For a discussion and analysis of the financial information relating solely to the Vince business, please see "Supplemental Management's Discussion and Analysis of Financial Condition and Results of Operations of Vince, LLC" of Item 2(b) of this Form 10-Q.


Table of Contents

Results of Continuing Operations

The following tables summarize key components of Vince Holding Corp.'s results
of continuing operations, prior to the IPO and Restructuring Transactions, for
the periods indicated, both in dollars and as a percentage of its net sales
(unaudited):



                                                        Three Months Ended                                       Nine Months Ended
                                           November 2, 2013            October 27, 2012             November 2, 2013            October 27, 2012
(In thousands, except percentages)
Statement of Operations Data:
Net sales                               $ 213,948        100.0 %    $ 203,355        100.0 %     $ 577,915        100.0 %    $ 522,800        100.0 %
Cost of products sold                     145,426         68.0        140,440         69.1         401,457         69.5        375,733         71.9

Gross Profit                               68,522         32.0         62,915         30.9         176,458         30.5        147,067         28.1
Operating expenses:
Selling, general and
administrative expenses                    53,109         24.8         45,786         22.5         146,612         25.4        129,312         24.7
Amortization of intangible assets             474          0.2            475          0.2           1,424          0.2          1,425          0.3
Restructuring, environmental
remediation and other charges                  68           -             557          0.3             895          0.1          2,821          0.5
Impairment of long-lived assets
(excluding goodwill)                          933          0.5              8           -              933          0.2            725          0.1
Change in fair value of contingent
consideration                                  -            -              -            -              (54 )         -          (4,507 )       (0.8 )

Total operating expenses                   54,584         25.5         46,826         23.0         149,810         25.9        129,776         24.8

Income from operations                     13,938          6.5         16,089          7.9          26,648          4.6         17,291          3.3
Interest expense, net                      14,762          6.9         23,773         11.7          58,433         10.1         97,924         18.8
Other expense, net                            614          0.3            609          0.3           1,847          0.3          1,824          0.3

Loss before income taxes                   (1,438 )       (0.7 )       (8,293 )       (4.1 )       (33,632 )       (5.8 )      (82,457 )      (15.8 )
Provision (benefit) for income taxes        1,015          0.4            (58 )         -            3,694          0.6          2,187          0.4

Net loss from continuing operations        (2,453 )       (1.1 )       (8,235 )       (4.1 )       (37,326 )       (6.4 )      (84,644 )       16.2
Net (loss) income from discontinued
operations                                     94           -          (6,660 )       (3.2 )         9,324          1.6        (11,458 )        2.2

Net loss                                $  (2,359 )        1.1 %    $ (14,895 )       (7.3 )%    $ (28,002 )        4.8 %    $ (96,102 )       18.4 %


Basic and diluted earnings per share
(1):
Net loss from continuing operations     $   (0.09 )                 $   (0.32 )                  $   (1.42 )                 $   (3.23 )
Net (loss) income from discontinued
operations                                     -                        (0.25 )                       0.35                       (0.44 )

Net loss                                $   (0.09 )                 $   (0.57 )                  $   (1.07 )                 $   (3.67 )

(1) In connection with the IPO, VHC's board of directors approved the conversion of all non-voting common stock into voting common stock on a one for one basis, and a 28.5177 for one split of its common stock. Accordingly, all references to share and per share information in all periods presented have been adjusted to reflect the stock split.


Table of Contents

Non-GAAP Reconciliations

The table below presents a reconciliation of Adjusted EBITDA to net income based on our statements of operations for each of the periods indicated. The presentation of Adjusted EBITDA is intended to supplement the understanding of VHC's operating performance. This non-GAAP financial measure is not intended to be a performance measure that should be regarded as an alternative to, or more meaningful than, GAAP measures and may not be comparable to similarly titled measures presented by other companies. Management believes Adjusted EBITDA assists in comparing performance over various reporting periods and against peers on a consistent basis because it removes from operating results the impact of items that do not reflect our core operating performance.

                                            Three Months Ended                        Nine Months Ended
                                     November 2,          October 27,          November 2,          October 27,
                                        2013                 2012                 2013                 2012
(in thousands)
Adjusted EBITDA
Vince                               $      21,333        $      19,853        $      42,835        $      35,113
ARP                                        (1,464 )             (2,205 )             (1,992 )             (2,413 )
Juniors                                     2,852                4,553               12,236                7,666
Moderate                                    1,339                2,749                2,171                1,746
Other                                       1,847                4,216                5,639                6,963

Segment Adjusted EBITDA                    25,907               29,166               60,889               49,075
Unallocated corporate Adjusted
EBITDA                                     (6,454 )             (7,420 )            (21,603 )            (23,334 )
Interest expense, net                     (14,762 )            (23,773 )            (58,433 )            (97,924 )
Depreciation                               (1,478 )             (1,278 )             (4,100 )             (4,183 )
Amortization of intangible
assets                                       (474 )               (475 )             (1,424 )             (1,425 )
Restructuring, environmental
and other charges                             (68 )               (557 )               (895 )             (2,821 )
Impairment of long-lived assets
(excluding goodwill)                         (933 )                 (8 )               (933 )               (725 )
Change in fair value of
contingent consideration                       -                    -                    54                4,507
Public company transition costs
(a)                                        (3,176 )             (3,948 )             (7,187 )             (5,627 )

Loss from continuing operations
before income taxes                 $      (1,438 )      $      (8,293 )      $     (33,632 )      $     (82,457 )

(a) Adjusted EBITDA does not include the impact of public company transition costs and certain one-time costs of $3.2 million and $7.2 million for the three and nine months ended November 2, 2013, respectively, and $3.9 million and $5.6 million for the three and nine months ended October 27, 2012. These costs include charges that are directly attributable to the IPO, incremental costs for external legal counsel and consulting fees incurred to effect the Restructuring Transactions and other one-time costs. These charges are excluded due to their non-recurring nature and ability to impact comparability to other periods.

Three Months Ended November 2, 2013 Compared to Three Months ended October 27, 2012

Net sales for continuing operations for Vince Holding Corp. for the three months ended November 2, 2013 were $213.9 million, increasing $10.5 million, or 5.2%, versus $203.4 million for the three months ended October 27, 2012. The increase in net sales is primarily due to higher net sales within our Vince and Juniors segments, partially offset by lower net sales in our other segments.

Segment Adjusted EBITDA for the three months ended November 2, 2013 was $25.9 million, decreasing $3.3 million, or 11.3%, versus $29.2 million for the three months ended October 27, 2012. The decrease in Segment Adjusted EBITDA was due to lower Segment Adjusted EBITDA in our Juniors, Moderate and Other segments, offset by higher Segment Adjusted EBITDA in our Vince segment.


Table of Contents

                         Segment Results of Operations



                                         Net Sales by Segment                    Segment Adjusted EBITDA
                                          Three Months Ended                       Three Months Ended
                                   November 2,          October 27,         November 2,           October 27,
                                       2013                2012                2013                  2012
(In thousands)
Net Sales by Segment
Vince                             $       85,755       $      76,990       $      21,333         $      19,853
ARP                                       21,919              21,236              (1,464 )              (2,205 )
Juniors                                   52,959              47,112               2,852                 4,553
Moderate                                  23,354              23,915               1,339                 2,749
Other                                     29,961              34,102               1,847                 4,216

Total                             $      213,948       $     203,355       $      25,907         $      29,166

Vince. Net sales from the Vince segment (which has been operated through Vince, LLC since September 2012) increased $8.8 million, or 11.4%, to $85.8 million in the three months ended November 2, 2013 from $77.0 million in the three months ended October 27, 2012 due to additional volume at existing as well as new wholesale partners, as well as an increase in the number of retail stores and increased productivity at existing retail stores. The overall increase in net sales was driven primarily by the strength of existing product lines, successful introduction of new products and the increasing recognition of the Vince brand name.

Segment Adjusted EBITDA from the Vince segment increased $1.4 million, or 7.0%, to $21.3 million in the three months ended November 2, 2013 from $19.9 million in the three months ended October 27, 2012 due to the increase in net sales noted above, partially offset by higher corporate and marketing expenses to support the growth of the brand.

ARP. Net sales from the ARP segment increased $0.7 million, or 3.3% to $21.9 million in the three months ended November 2, 2013 from $21.2 million in the three months ended October 27, 2012, driven by a shift in the timing of product shipments into the third quarter of fiscal 2013.

Segment Adjusted EBITDA from the ARP segment increased $0.7 million, or 31.8%, to $(1.5) million in the three months ended November 2, 2013 from $(2.2) million in the three months ended October 27, 2012, driven by a shift in the timing of product shipments into the third quarter of fiscal 2013 noted above.

Juniors. Net sales from the Juniors segment increased $5.9 million, or 12.5% to $53.0 million in the three months ended November 2, 2013 from $47.1 million in the three months ended October 27, 2012 primarily due to increased private label program orders from wholesale partners, as well an increase in the number of wholesale doors distributing our products and sales related to its licensed XOXO product.

Segment Adjusted EBITDA from the Juniors segment decreased $1.7 million, or 37.0%, to $2.9 million in the three months ended November 2, 2013 from $4.6 million in the three months ended October 27, 2012 primarily due to increased, higher margin net sales offset by an increase in compensation expenses.

Moderate. Net sales from the Moderate segment decreased $0.5 million, or 2.1%, to $23.4 million in the three months ended November 2, 2013 from $23.9 million in the three months ended October 27, 2012 due to reduced orders from wholesale partners. The moderate segment has been and continues to be a declining source of sales as retailers expand their private label offerings.

Segment Adjusted EBITDA from the Moderate segment decreased $1.4 million, or 51.9%, to $1.3 million in the three months ended November 2, 2013 from $2.7 million in the three months ended October 27, 2012 due to lower net sales coupled with a decline in gross margin rates.


Table of Contents

Other. Net revenue from the Other segment decreased $4.1 million, or 12.0%, to $30.0 million for the three months ended November 2, 2013 from $34.1 million in the three months ended October 27, 2012 due primarily to a reduction in orders from a certain wholesale partner as it continued to refine its out-sourced strategy for its private label brands, coupled with a decrease in revenue related to the David Meister dress business.

Segment Adjusted EBITDA from the Other segment decreased $2.4 million, or 57.1%, to $1.8 million for the three months ended November 2, 2013 from $4.2 million in the three months ended October 27, 2012 due to lower sales and a decline in margin rate related to the David Meister dress business as well as increased design, compensation, and advertising expenses at Rebecca Taylor to continue to grow the business.

Gross profit/gross margin for continuing operations for the three months ended November 2, 2013, increased 110 basis points to 32.0% from 30.9% in the three months ended October 27, 2012. The increase in gross margin is driven primarily by a higher percentage of our sales coming from the Vince segment, which generally recognizes higher margins.

Selling, general and administrative expense ("SG&A") for continuing operations in the three months ended November 2, 2013 was $53.1 million, or 24.8% of net sales, increasing $7.3 million, or 15.9%, compared to $45.8 million, or 22.5%, of net sales in the three months ended October 27, 2012. The increase in SG&A expense is primarily in the Vince segment and is due to i) increased compensation expense of $1.5 million related to hiring and retaining certain key employees, ii) increased occupancy and depreciation expense of $2.3 million due primarily to new retail store openings, and iii) increased design, development and marketing expenses of $0.6 million to support Vince's brand awareness growth efforts and the opening of new retail stores. Other increases in SG&A include higher compensation expenses within the Juniors and other segments during the three months ended November 2, 2013 as compared to the three months ended October 27, 2012.

Amortization of intangible assets for continuing operations for the three months ended November 2, 2013 and for the three months ended October 27, 2012 remained unchanged at $0.5 million.

Restructuring, environmental remediation and other charges for continuing operations for the three months ended November 2, 2013 were $0.1 million, decreasing $0.5 million, or 83.3%, from $0.6 million in the three months ended October 27, 2012 for the reasons set forth below in "-Impairment, Restructuring, Environmental Remediation and Other Charges."

Impairment of long-lived assets (excluding goodwill) was $1.0 million during the three months ended November 2, 2013 due to the impairment of a trademark in our ARP segment, part of the non-Vince businesses, as compared to no impairments on long-lived assets of its continuing operations during the three months ended October 27, 2012.

Interest expense, net for the three months ended November 2, 2013 was $14.8 million, a decrease of $9.0 million, or 37.8%, compared to $23.8 million in the three months ended October 27, 2012. The decrease is due primarily to lower average outstanding debt balances during the three months ended November 2, 2013 as compared to the three months ended October 27, 2012, primarily due to the Sun Capital Contribution of $407.5 million on June 18, 2013, as further described below.

Other expense, net for continuing operations remained consistent at $0.6 million for the three months ended November 2, 2013 and October 27, 2012.

Provision for income taxes. Vince Holding Corp.'s effective tax rate on pretax earnings for continuing operations for the three months ended November 2, 2013 and the three months ended October 27, 2012 were (70.6%) and 0.7%, respectively. The rate for the period ending November 2, 2013 differs from the U.S. statutory rate of 35% primarily due to the incurrence of additional valuation allowances and nondeductible transaction costs associated with the IPO. The rate for the period ending October 27, 2012 differs from the U.S. statutory rate of 35% primarily due to nondeductible interest.


Table of Contents

Net (loss) income from discontinued operations. There was $0.1 million of income for the three months ended November 2, 2013 compared to a loss of $6.7 million for the three months ended October 27, 2012. During the three months ended October 27, 2012 the Zobha, Phat Licensing, Royal Robbins and Baby Phat Wholesale businesses, part of the non-Vince businesses, were all still in operation.

Nine Months Ended November 2, 2013 Compared to Nine Months ended October 27, 2012

Net sales for continuing operations for Vince Holding Corp. for the nine months ended November 2, 2013 were $577.9 million, increasing $55.1 million, or 10.5%, versus $522.8 million for the nine months ended October 27, 2012. The increase in sales compared to the prior year is primarily due to increased sales within our Vince and Juniors segments.

Segment Adjusted EBITDA for the nine months ended November 2, 2013 was $60.9 million, increasing $11.8 million, or 24.0%, versus $49.1 million for the nine months ended October 27, 2012. The increase in Segment Adjusted EBITDA was due to increased EBITDA in our Vince and Juniors segments.

                         Segment Results of Operations



                                         Net Sales by Segment                    Segment Adjusted EBITDA
                                          Nine Months Ended                         Nine Months Ended
                                   November 2,          October 27,         November 2,           October 27,
                                       2013                2012                2013                  2012
(In thousands)
Net Sales by Segment
Vince                             $      200,412       $     167,521       $      42,835         $      35,113
ARP                                       73,191              73,531              (1,992 )              (2,413 )
Juniors                                  163,534             136,962              12,236                 7,666
Moderate                                  55,536              62,424               2,171                 1,746
Other                                     85,242              82,362               5,639                 6,963

Total                             $      577,915       $     522,800       $      60,889         $      49,075

Vince. Net sales from the Vince segment (which has been operated through Vince, LLC since September 2012) increased $32.9 million, or 19.6%, to $200.4 million in the nine months ended November 2, 2013 from $167.5 million in the nine months ended October 27, 2012 due to additional volume at existing as well as new wholesale partners, as well as an increase in the number of retail stores and increased productivity at existing retail stores. The overall increase in net sales was driven primarily by the strength of existing product lines, successful introduction of new products and the increasing recognition of the Vince brand name.

Segment Adjusted EBITDA from the Vince segment increased $7.7 million, or 21.9%, to $42.8 million in the nine months ended November 2, 2013 from $35.1 million in the nine months ended October 27, 2012 due primarily to the increase in net sales noted above, partially offset by higher corporate and marketing expenses to support the growth of the brand.

ARP. Net sales from the ARP segment decreased $0.3 million, or 0.4%, to $73.2 million in the nine months ended November 2, 2013 from $73.5 million in the nine months ended October 27, 2012.

Segment Adjusted EBITDA from the ARP segment increased $0.4 million, or 16.7%, to $(2.0) million in the nine months ended November 2, 2013 from $(2.4) million in the nine months ended October 27, 2012 due to decreased spending for samples, marketing and advertising.

Juniors. Net sales from the Juniors segment increased $26.5 million, or 19.3%, to $163.5 million in the nine months ended November 2, 2013 from $137.0 million in the nine months ended October 27, 2012 primarily due to increased private label program orders from wholesale partners, as well an increase in the number of wholesale doors distributing our products and sales related to its licensed XOXO product.


Table of Contents

Segment Adjusted EBITDA from the Juniors segment increased $4.5 million, or 58.4%, to $12.2 million in the nine months ended November 2, 2013 from $7.7 million in the nine months ended October 27, 2012 primarily due to increased, higher margin net sales coupled with a reduction in advertising expenses.

Moderate. Net sales from the Moderate segment decreased $6.9 million, or 11.1%, to $55.5 million in the nine months ended November 2, 2013 from $62.4 million in the nine months ended October 27, 2012 due to reduced orders from wholesale partners. The moderate segment has been and continues to be a declining source of sales as retailers expand their private label offerings.

Segment Adjusted EBITDA from the Moderate segment increased $0.5 million, or 29.4%, to $2.2 million in the nine months ended November 2, 2013 from $1.7 million in the nine months ended October 27, 2012 due to improved gross margin rates and expense reductions in design expenses.

Other. Net revenue from the Other segment increased $2.8 million, or 3.4%, to $85.2 million for the nine months ended November 2, 2013 from $82.4 million in the nine months ended October 27, 2012 due primarily to additional orders from a certain wholesale partner as it continued to implement an out-sourced strategy for its private label brands, as well as growth at Rebecca Taylor and the addition of a new value program with a certain wholesale partner. This was partially offset by a decrease in revenue related to the David Meister dress business.

Segment Adjusted EBITDA from the Other segment decreased $1.4 million, or 20.0%, to $5.6 million for the nine months ended November 2, 2013 from $7.0 million in the nine months ended October 27, 2012 due to declining margins in the David Meister dress business.

Gross profit/gross margin for continuing operations for the nine months ended November 2, 2013 increased 240 basis points to 30.5% from 28.1% in the nine months ended October 27, 2012. The increase is due primarily to increased volume of the higher margin Vince and Juniors segments.

SG&A for continuing operations in the nine months ended November 2, 2013 was $146.6 million, or 25.4% of net sales, increasing $17.3 million, or 13.4%, compared to $129.3 million, or 24.7%, of net sales in the nine months ended October 27, 2012. The increase in SG&A expense is primarily within the Vince segment and is due to i) increased compensation expense of $2.6 million related to hiring and retaining certain key employees, ii) increased occupancy and depreciation expense of $3.7 million due primarily to new retail store openings,
iii) increased design, development and marketing expenses of $3.0 million to support Vince's brand awareness growth efforts and the opening of new retail stores, and iv) increased corporate costs such as legal and other professional fees of $2.0 million associated with preparing to become a public company. Other increases in SG&A include higher compensation within the Juniors and other segments during the nine months ended November 2, 2013 as compared to the nine months ended October 27, 2012.

Amortization of intangible assets for continuing operations for the nine months ended November 2, 2013 and for the nine months ended October 27, 2012 remained unchanged at $1.4 million.

Restructuring, environmental remediation and other charges for continuing operations for the nine months ended November 2, 2013 were $0.9 million, decreasing $1.9 million, or 67.9%, from $2.8 million in the nine months ended October 27, 2012 for the reasons set forth below in "-Impairment, Restructuring, Environmental Remediation and Other Charges."

Impairment of long-lived assets (excluding goodwill) for continuing operations was $0.9 million for the nine months ended November 2, 2013 which represented an increase of $0.2 million, or 28.6%, from $0.7 million for the nine months ended October 27, 2012. The increase was due to the realization of an impairment loss for the decline in market value of an exited facility in Trenton, Tennessee.

Interest expense, net for the nine months ended November 2, 2013 was $58.4 million, a decrease of $39.5, or 40.3%, million compared to $97.9 million in the nine months ended October 27, 2012. The decrease is due primarily to lower average outstanding debt balances during the nine months ended November 2, 2013 as compared to the nine months ended October 27, 2012. During the fourth quarter of fiscal 2012 all capitalized interest accrued prior to July 19, 2012 . . .

  Add VNCE to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for VNCE - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.