VINCE HOLDING CORP. - Quarter Report: 2013 November (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended November 2, 2013

Or

Commission File Number: 001-36212

VINCE HOLDING CORP.*

(Exact name of registrant as specified in its charter)

1441 Broadway—6th Floor

New York, New York 10018

(Address of principal executive offices) (Zip code)

(212) 515-2600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨    No  x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

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VINCE HOLDING CORP. AND SUBSIDIARIES

(previously known as Apparel Holding Corp. and Subsidiaries

and includes both the non-Vince and Vince businesses, unless otherwise indicated)

TABLE OF CONTENTS 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this Form 10-Q constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts or present facts or conditions, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, the introduction of new merchandise, and the implementation of our marketing and branding strategies. In many cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or the negative of these terms or other comparable terminology.

The forward-looking statements contained in this document reflect our views as of November 2, 2013 about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, those factors described in “Item 1A—Risk Factors” of this Form 10-Q.

Readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on these forward-looking statements. All of the forward-looking statements we have included in this document are based on information available to us as of November 2, 2013. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as otherwise required by law.

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PART I—FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

VINCE HOLDING CORP. AND SUBSIDIARIES

(previously known as Apparel Holding Corp. and Subsidiaries

and includes both the non-Vince and Vince businesses, unless otherwise indicated)

Condensed Consolidated Balance Sheets

(in thousands, except share data, unaudited)

See notes to unaudited condensed consolidated financial statements.

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VINCE HOLDING CORP. AND SUBSIDIARIES

(previously known as Apparel Holding Corp. and Subsidiaries

and includes both the non-Vince and Vince businesses, unless otherwise indicated)

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data, unaudited)

See notes to unaudited condensed consolidated financial statements.

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VINCE HOLDING CORP. AND SUBSIDIARIES

(previously known as Apparel Holding Corp. and Subsidiaries

and includes both the non-Vince and Vince businesses, unless otherwise indicated)

Condensed Consolidated Statements of Comprehensive Loss

(in thousands, except share and per share data, unaudited)

See notes to unaudited condensed consolidated financial statements.

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VINCE HOLDING CORP. AND SUBSIDIARIES

(previously known as Apparel Holding Corp. and Subsidiaries

and includes both the non-Vince and Vince businesses, unless otherwise indicated)

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

See notes to unaudited condensed consolidated financial statements.

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VINCE HOLDING CORP. AND SUBSIDIARIES

(previously known as Apparel Holding Corp. and Subsidiaries

and includes both the non-Vince and Vince businesses, unless otherwise indicated)

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

See notes to unaudited condensed consolidated financial statements.

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VINCE HOLDING CORP. AND SUBSIDIARIES

(previously known as Apparel Holding Corp. and Subsidiaries

and includes both the non-Vince and Vince businesses, unless otherwise indicated)

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands except share and per share data)

Note 1. Description of Business and Basis of Presentation

The historical financial information presented herein as of November 2, 2013 and all periods presented include both the non-Vince and Vince businesses, unless otherwise indicated, for Vince Holding Corp. (“VHC” or the “Company”) previously known as Apparel Holding Corp.

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

(A) Description of Business: VHC, together with its wholly-owned subsidiaries as of November 2, 2013, design, merchandise and sell a growing collection of premier fashion brands across a broad range of consumer lifestyles, and recreational apparel and products aimed to improve the consumer outdoor experience. We market branded as well as private label products and market to all channels of distribution with product specific to the particular channel. Some of our fashion brands include Vince, Rebecca Taylor, David Meister, My Michelle and XOXO, along with numerous private label businesses for major retailers. We market products under many brands, some of which we own, and others that are under licensing agreements. The majority of our products are sourced from contract manufacturers, primarily in the Eastern Hemisphere. Products are manufactured to meet our product specifications and labor standards.

(B) Basis of Presentation: The accompanying condensed 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”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. Therefore, these financial statements should be read in conjunction with VHC’s audited financial statements for the fiscal year ended February 2, 2013.

The condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries as of November 2, 2013. All intercompany accounts and transactions have been eliminated. The amounts and disclosures included in the notes to the condensed consolidated financial statements, unless otherwise indicated, are presented on a continuing operations basis. In the opinion of management, the financial statements contain all adjustments (consisting solely of normal recurring adjustments) and disclosures necessary to make the information presented therein not misleading. The results of operations for these periods are not necessarily comparable to, or indicative of, results of any other interim period or the fiscal year as a whole.

Note 2. The IPO and Restructuring Transactions

As discussed in Note 1, there were a series of transactions completed on November 27, 2013. The following is a brief summary:

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Note the above Restructuring Transactions separated the Vince and non-Vince businesses on November 27, 2013. Any and all debt obligations outstanding at the time of the transactions either remain with Kellwood Holding, LLC and its subsidiaries (i.e. the non-Vince businesses) and/or were discharged, repurchased or refinanced. See information below for a summary of the Company’s new revolving credit facility and new term loan facility.

Note 3. Impairment, Restructuring, Environmental Remediation and Other Charges

For the three and nine months ended November 2, 2013 and October 27, 2012, the costs related to impairment of long-lived assets and restructuring, environmental remediation and other charges recorded in continuing and discontinued operations were as follows:

For the three and nine months ended November 2, 2013 and October 27, 2012, the costs related to impairment of long-lived assets and restructuring, environmental remediation and other charges were recorded as follows:

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During the first nine months of fiscal 2013, we recognized an impairment charge of $933 related to trademark and customer relationships as a result of our decision to cease procurement of product for one of our brands within our ARP segment (part of the non-Vince businesses). During the first nine months of fiscal 2012, we recognized an impairment charge of $725 related to the decline in market value of our exited facility in Trenton, Tennessee. We also recognized $755 in charges during the nine months ended October 27, 2012 to adjust our accrual for environmental remediation costs related to a former metal fabrication plant. Other noteworthy restructuring activities in continuing operations for the first nine months of fiscal 2013 and fiscal 2012 included various efforts to create a more efficient operational and organizational structure in our support operations and women’s wear businesses.

The following table represents a rollforward of contractual obligations, employee severance and termination benefits, impairment of long-lived assets and restructuring, environmental remediation and other charges recorded in continuing operations for the first nine months of fiscal 2013:

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The following table represents a rollforward of contractual obligations, employee severance and termination benefits, impairment of long-lived assets and restructuring, environmental remediation and other charges recorded in discontinued operations for the first nine months of fiscal 2013:

Note 4. Discontinued Operations

During the second quarter of fiscal 2013, we divested the Zobha business (a non-Vince business) in order to focus resources on larger contemporary and Juniors brands. As a result of the divestiture, we realized a total loss of $1,269 within net (loss) income from discontinued operations on the Condensed Consolidated Statements of Operations for the nine months ended November 2, 2013. The total loss includes charges to adjust inventory values to the lower of cost or market, impairment charges to write down obsolete assets, employee termination costs, and accrued rent commitments and other costs associated with the exit of our leased office and retail spaces. We anticipate future cash outflows related to employee termination and non-cancellable lease payments for Zobha of approximately $262, which are primarily payable through fiscal 2014.

Due to diminishing prospects in the urban market, we decided to exit the Phat Farm and Baby Phat (collectively, “Phat Fashions”) businesses (both of which are non-Vince businesses) during fiscal 2012. We sold the Phat Farm trademark to a former licensee during the second quarter of fiscal 2012, and subsequently sold the Baby Phat trademark to the same party on March 20, 2013, exiting the Phat Fashions licensing business. The Phat Fashions licensing business was reported as discontinued operations during the first quarter of fiscal 2013. In conjunction with the sale of the Baby Phat trademark, we shut down the Baby Phat wholesale operations which produced apparel under the Baby Phat juniors license during the fourth quarter of fiscal 2012. We anticipate net cash outflows related to the Phat Fashions businesses of less than $500.

On December 31, 2012, we sold the equity interests of Royal Robbins, LLC, and certain assets and liabilities of the Royal Robbins Canadian operations (a non-Vince business) to an unrelated third party. At the closing of the sale, and pursuant to the terms of the purchase agreement, $500 of the proceeds were deposited to a restricted escrow account, and $221 was withheld by the buyer as consideration for a working capital adjustment to the purchase price. Both the receivable from the buyer and escrow fund are reported in current assets of discontinued operations on the Condensed Consolidated Balance Sheet as of February 2, 2013. These amounts were received in the first quarter of fiscal 2013.

During the second quarter of fiscal 2012, we decided to exit our Lamb & Flag and BLK DNM businesses (both of which are non-Vince businesses). This decision resulted from the determination that our greenfield startup brands are not aligned with our current strategic initiatives, as they require significant cash outlays and only offer long-term payback. On May 31, 2012, we sold substantially all the assets and liabilities of our BLK DNM operations resulting in a loss of $1,874 included within net (loss) income from discontinued operations on the Condensed Consolidated Statement of Operations for the nine months ended October 27, 2012. The loss recorded includes disposal costs for legal fees and non-cancellable contract obligations. We completed the shutdown of the Lamb & Flag business during the third quarter of fiscal 2012.

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Operating results for the discontinued operations, including all charges incurred during the periods presented for impairment of long-lived assets and restructuring and other charges as described in Note 3 to the Condensed Consolidated Financial Statements, are as follows:

The effective tax rate for the first nine months of fiscal 2013 differs from the U.S. statutory rate of 35% primarily due to a release of valuation allowance. The release in valuation allowance is primarily due to the allocation of the disallowed tax loss on the sale of the Baby Phat trademark to intangible assets with indefinite lives resulting in fewer deferred tax liabilities that cannot be offset against deferred tax assets for valuation allowance purposes. The effective tax rate for discontinued operations for the first nine months of fiscal 2012 differs from the U.S. statutory rate of 35% primarily due to an increase in the valuation allowance offset in part by state taxes.

Summarized assets and liabilities of discontinued operations are as follows:

Current liabilities of discontinued operations as of November 2, 2013 are primarily related to amounts owed for non-cancellable contract payments for the Phat Fashions and Zobha businesses, which are part of the non-Vince businesses. Current assets as of February 2, 2013 primarily consist of the outstanding sale proceeds for Royal Robbins, net receivables from the Baby Phat wholesale operations prior to completion of its shutdown in

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the fourth quarter of fiscal 2012, net receivables from the Phat Fashions business prior to the sale of the Baby Phat trademark in the first quarter of fiscal 2013 and net receivables and inventory of the Zobha operations. Current liabilities of discontinued operations as of February 2, 2013 are primarily related to unpaid disposal costs related to the sale of Royal Robbins, a non-Vince business, non-cancellable contract termination costs to exit the Lamb & Flag business and Baby Phat wholesale operations, accrued liabilities associated with the Phat Fashions business, and the final make-whole payment of the non-Vince businesses of $485 to PVH Corp. related to the early termination of our Calvin Klein license agreements.

Cash flows from discontinued operations are combined with cash flows from continuing operations under Operating Activities, Investing Activities and Financing Activities in the Condensed Consolidated Statements of Cash Flows. As of November 2, 2013, we expect to have future net cash outflows related to our discontinued operations of approximately $1,100, which is primarily payable through fiscal 2014.

Note 5. Goodwill and Intangible Assets

Goodwill balances by segment and changes therein subsequent to the February 2, 2013 Condensed Consolidated Balance Sheet are as follows:

Identifiable intangible assets of continuing operations are as follows:

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Amortization of identifiable intangible assets for continuing operations was $474 and $1,424 for three and nine months ended November 2, 2013, respectively, and was $475 and $1,425 for the three and nine months ended October 27, 2012, respectively. The estimated amortization expense for identifiable intangible assets is expected to be $1,871 for each fiscal year for the next five fiscal years.

Note 6. Fair Value

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:

The following table presents our liabilities measured at fair value on a recurring basis and are categorized using the fair value hierarchy. We do not measure any assets at fair value on a recurring basis.

Changes in Level 3 liabilities for the nine months ended November 2, 2013 were as follows:

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Changes in Level 3 liabilities for the nine months ended October 27, 2012 were as follows:

The recorded amounts of cash, receivables, accounts payable and short-term debt approximate their fair values at November 2, 2013 and February 2, 2013 due to the short maturity of these instruments. The estimated fair value of our long-term debt, including the current portion of long-term debt, at November 2, 2013 is $410,817, compared to the recorded amount of $391,067 as of the same date. The estimated fair value of our long-term debt, including both variable-rate and fixed-rate debt, at February 2, 2013 is $737,365, compared to the recorded amount of $761,752 as of the same date. These estimated fair values utilize quoted prices obtained through independent pricing sources for the same or similar types of borrowing arrangements.

Note 7. Financing Arrangements

Wells Fargo Facility

On October 19, 2011, Kellwood Company and certain of its domestic subsidiaries, as borrowers (the “Borrowers”), entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as agent, and lenders from time to time. The Credit Agreement provides the Borrowers with a non-amortizing senior revolving credit facility with aggregate lending commitments of $160,000 (the “Wells Fargo Facility”), reduced to $155,000 by the December 31, 2012 Amendment described below. The Wells Fargo Facility terminates at the earliest to occur of (a) October 19, 2016, (b) 90 days prior to the scheduled December 31, 2014, maturity date of the 12.875% Notes (as defined in Note 8, Long-term debt, to the Condensed Consolidated Financial Statements) (including any extension effective on or prior to such 90th day prior to such scheduled maturity date) or (c) 90 days prior to the scheduled maturity date of the Cerberus Term Loan (as defined below) (including any extension effective on or prior to such 90th day prior to such scheduled maturity date). The amount which the Borrowers may borrow from time to time under the Wells Fargo Facility is determined on the basis of a borrowing base formula that is a percentage of Kellwood Company and subsidiaries accounts receivable and inventory that meet eligibility criteria specified in the Credit Agreement, but in no case more than the aggregate lending commitments of the participating lenders. All borrowings under the Wells Fargo Facility bear interest at a rate per annum equal to an applicable margin (ranging from 2.5%-3.0% per annum for LIBOR Revolver Loans (as defined in the Credit Agreement) and 1.25%-1.75% for Base Rate Loans (as defined in the Credit Agreement) based on average availability under the Credit Agreement) plus, at the Borrowers’ election, LIBOR or a Base Rate as defined in the Credit Agreement. In addition to paying interest, the Borrowers will pay a periodic commitment fee to the lenders under the Credit Agreement based on the amount of unused availability under the borrowing base formula. The Wells Fargo Facility is secured by a first-priority security interest in substantially all of the assets of the Borrowers, principally consisting of accounts receivable, inventory, and intellectual property. The Credit Agreement contains certain customary representations, warranties, provisions and restrictions. The Credit Agreement requires that the Borrowers maintain a fixed

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charge coverage ratio of at least 1:1 during any Covenant Testing Period (as defined in the Credit Agreement) which is triggered when excess availability is below 12.5% of the aggregate commitments under the Wells Fargo Facility (the “Covenant Testing Trigger Date”). The fixed charge ratio is defined as the ratio of Consolidated EBITDA (as defined in the Credit Agreement) (with certain addbacks as defined in the Credit Agreement for certain restructuring charges, startup losses in newly developed brands, costs incurred in certain acquisitions, management fees, as well as certain other costs and charges) minus capital expenditures and certain distributions; to fixed charges, defined as consolidated net interest expense paid or payable in cash, scheduled principal payments on debt in cash and certain earnout payments paid in cash up to a certain amount, calculated over the trailing four fiscal quarters. If the covenants are not met, a cash dominion period will go into effect whereby the agent has the ability to direct the disposition of the balances in controlled deposit accounts. The cash dominion period will expire when availability is over 12.5% of the aggregate commitments under the Wells Fargo Facility for a period of 90 consecutive days.

On March 23, 2012, the Credit Agreement was amended to modify the Covenant Testing Period such that it is now triggered when excess availability is below $5,000 and triggered the cash dominion period, as defined in the Credit Agreement. This amendment was entered into in consideration for a guaranty of payment of obligations under the Credit Agreement and a $20,000 letter of credit to the benefit of Wells Fargo Bank, National Association, as agent, issued by an affiliate of Sun Capital Partners, Inc.

On April 20, 2012, the Credit Agreement was amended to extend the modification to the Covenant Testing Period to be in effect until March 21, 2014 unless the guaranty described above is no longer in effect or the full face amount of the letter of credit described above is no longer available to be drawn. The guaranty will be released, the letter of credit returned and the trigger for the Covenant Testing Period will return to the pre-amendment level when availability is above $35,000 for 90 consecutive days and is projected to remain above $25,000 through the remaining term of the Credit Agreement. This amendment also provided for the consent of the Wells Fargo Facility lenders to the additional loans under the Sun Term Loan Agreements (as defined in Note 8).

On December 31, 2012, the Credit Agreement was amended to obtain consent to the sale of the Royal Robbins business, to release Royal Robbins as a Borrower and/or Obligor under the Credit Agreement, and to release the agent’s lien on the assets of Royal Robbins. Additionally, the first $10,000 of the net cash proceeds arising from the cash purchase price paid at closing (excluding any escrow amount) were to be applied to the Cerberus Term Loan (as defined in Note 8, Long-term debt, to the Condensed Consolidated Financial Statements) and the remaining portion to be remitted to the Wells Fargo Facility. This amendment also resulted in a permanent reduction to availability of $5,000.

At November 2, 2013, the maximum capacity on the Wells Fargo Facility was $150,860 and there were borrowings outstanding and letters of credit outstanding of $122,291 and $12,770, respectively. At February 2, 2013, the maximum capacity on the Wells Fargo Facility was $110,838 and there were borrowings outstanding and letters of credit outstanding of $79,783 and $13,304, respectively. At November 2, 2013 and February 2, 2013 availability under the Wells Fargo Facility was $15,799 and $17,751, respectively. Kellwood Company was in compliance with all provisions as of all periods presented.

On November 27, 2013, in connection with the consummation of the IPO and Restructuring Transactions, the Credit Agreement was amended and restated in accordance with its terms. After giving effect to such amendment and restatement, neither VHC nor any of its subsidiaries have any obligations thereunder.

Revolving Credit Facility

On November 27, 2013, Vince, LLC entered into a new senior secured revolving credit facility in connection with the closing of the IPO and Restructuring Transactions. Bank of America, N.A. (“BofA”) serves

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as administrative agent for this new facility. This revolving credit facility provides for a revolving line of credit of up to $50 million and matures on November 27, 2018. The revolving credit facility also provides for a letter of credit sublimit of $25 million (plus any increase in aggregate commitments) and for an increase in aggregate commitments of up to $20 million. Vince, LLC is the borrower and the VHC and Vince Intermediate Holding, LLC (“Vince Intermediate”) are the guarantors under the new revolving credit facility. Interest is payable on the loans under the 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 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 BofA as its prime rate; (ii) the Federal Funds Rate for such day, plus 0.50%; and (iii) the LIBOR Rate for a one month interest period as determined on such day, plus 1.0%. During the continuance of an event of default and at the election of the required lender, interest will accrue at a rate of 2% in excess of the applicable non-default rate.

The revolving credit facility contains a requirement that, at any point when “Excess Availability” is less than the greater of (i) 15% percent of the loan cap or (ii) $7.5 million, and continuing until Excess Availability exceeds the greater of such amounts for 30 consecutive days, during which time, Vince must maintain a consolidated EBITDA (as defined in the related credit agreement) equal to or greater than $20 million.

The revolving credit facility contains representations and warranties, other covenants and events of default that are customary for this type of financing, including limitations on the incurrence of additional indebtedness, liens, negative pledges, 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 its business or its fiscal year. The revolving credit facility generally permits dividends in the absence of any event of default (including any event of default arising from the contemplated dividend), so long as (i) after giving pro forma effect to the contemplated dividend, for the following six months Excess Availability will be at least the greater of 20% of the aggregate lending commitments and $7.5 million and (ii) after giving pro forma effect to the contemplated dividend, the “Consolidated Fixed Charge Coverage Ratio” for the 12 months preceding such dividend shall be greater than or equal to 1.1 to 1.0 (provided that the Consolidated Fixed Charge Coverage Ratio may be less than 1.1 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 35% of the aggregate lending commitments and $10 million).

Term Loan Facility

On November 27, 2013, in connection with the closing of the IPO and Restructuring Transactions, Vince, LLC and Vince Intermediate entered into a new $175 million senior secured term loan credit facility with the lenders party thereto, BofA, as administrative agent, JPMorgan Chase Bank and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers, and Cantor Fitzgerald as documentation agent. The new term loan facility will mature on November 27, 2019. On November 27, 2013, net proceeds from the new term loan facility were used, at closing, to repay the promissory note issued by Vince Intermediate to Kellwood Company immediately prior to the consummation of the IPO as part of the Restructuring Transactions.

The term loan facility also provides for an incremental facility of up to the greater of $50 million and an amount that would result in the consolidated net total secured leverage ratio not exceeding 3.00 to 1.00, in addition to certain other rights to refinance or repurchase portions of the term loan. The term loan facility is subject to quarterly amortization of principal equal to 0.25% of the original aggregate principal amount of the term loan facility, with the balance payable at final maturity. Interest is payable on loans under the term loan facility at a rate of either (i) the Eurodollar rate (subject to a 1.00% floor) plus 5.00% or (ii) the base rate (subject to a 2.00% floor) plus 3.00%. During the continuance of a payment or bankruptcy event of default, interest will accrue (i) on the overdue principal amount of any loan at a rate of 2% in excess of the rate otherwise applicable to such loan and (ii) on any overdue interest or any other outstanding overdue amount at a rate of 2% in excess of the nondefault interest rate then applicable to base rate loans.

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The term loan facility contains a requirement that Vince, LLC and Vince Intermediate maintain a “Consolidated Net Total Leverage Ratio” as of the last day of any period of four fiscal quarters not to exceed 3.75:1.00 for the fiscal quarters ending February 1, 2014 through November 1, 2014, 3.50:1.0 for the fiscal quarters ending January 31, 2015 through October 31, 2015, and 3.25:1.00 for the fiscal quarter ending January 30, 2016 and each fiscal quarter thereafter. In addition, the term loan facility contains customary representations and warranties, other covenants, and events of default, including but not limited to, limitations on the incurrence of additional indebtedness, liens, negative pledges, 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 its business or its fiscal year, and distributions and dividends. The term loan facility generally permits dividends to the extent that no default or event of default is continuing or would result from the contemplated dividend and the pro forma Consolidated Net Total Leverage Ratio after giving effect to such contemplated dividend is at least 0.25 lower than the maximum Consolidated Net Total Leverage Ratio for such quarter. All obligations under the term loan facility are guaranteed by VHC and any future material domestic restricted subsidiaries of Vince, LLC and secured by a lien on substantially all of the assets of the VHC, Vince, LLC and Vince Intermediate and any future material domestic restricted subsidiaries.

Note 8. Long-Term Debt

Long-term debt, net of applicable discounts or premiums, consisted of the following at November 2, 2013 and February 2, 2013 (both prior to the IPO and Restructuring Transactions):

Sun Promissory Notes

On May 2, 2008, VHC entered into a $225,000 Senior Subordinated Promissory Note and a $75,000 Senior Subordinated Promissory Note with Sun Kellwood Finance, LLC (“Sun Kellwood Finance”), an affiliate of Sun Capital Partners, Inc.. We collectively refer to these notes as our “Sun Promissory Notes”. The unpaid principal balance of the notes accrue interest at 15% per annum until the maturity date of October 15, 2011, at which point any unpaid principal balance of the notes shall accrue interest at a rate of 17% per annum until the notes are paid in full. All interest which is not paid in cash on or before the last day of each calendar month are deemed paid in kind and added to the principal balance of the notes unless an election is made otherwise.

On July 19, 2012, Vince Holding Corp. amended the Sun Promissory Notes to extend the maturity date to October 15, 2016 and reduce the interest rate to 12% per annum until maturity, at which point any unpaid principal balance of the notes shall accrue interest at a rate of 14% per annum until the notes are paid in full.

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On December 28, 2012, Sun Kellwood Finance, LLC (“Sun Capital Finance”) waived all interest capitalized and accrued under the notes prior to July 19, 2012. As both parties were under the common control of affiliates of Sun Capital Partners, Inc. (“Sun Capital”), this transaction resulted in a capital contribution of $270,852 which was recorded as an adjustment to additional paid in capital on our Condensed Consolidated Balance Sheet as of February 2, 2013.

On June 18, 2013, Sun Kellwood Finance assigned all title and interest in the Sun Promissory Notes to Sun Cardinal, LLC (“Sun Cardinal”). Immediately following the assignment, Sun Cardinal contributed all outstanding principal and interest due under these notes as of June 18, 2013 to the capital of VHC. As both parties were under common control of affiliates of Sun Capital at such time, this transaction resulted in a capital contribution of $334,595, which was recorded as an adjustment to VHC’s additional paid in capital on the Condensed Consolidated Balance Sheet at November 2, 2013.

Sun Capital Loan Agreement

VHC was party to a Loan Authorization Agreement, originally dated February 13, 2008, by and between VHC (as the successor entity to Cardinal Integrated, LLC), SCSF Kellwood Finance, LLC (“SCSF Finance”) and Sun Kellwood Finance (as successors to Bank of Montreal) for a $72,000 line of credit, and $69,485 principal balance, which we refer to as the “Sun Capital Loan Agreement”. Under the terms of this agreement, as amended from time to time, interest accrued at a rate equal to the rate per annum announced by the Bank of Montreal, Chicago, Illinois, from time to time as its prime commercial rate, or equivalent, for U.S. dollar loans to borrowers located in the U.S. plus 2%. Interest on the loan was due by the last day of each fiscal quarter and is payable either in immediately available funds on each interest payment date or by adding such interest to the unpaid principal balance of the loan on each interest payment date. The original maturity date of the loan was August 6, 2009. On July 19, 2012, the maturity date of the loan was extended to August 6, 2014.

On December 28, 2012, Sun Kellwood Finance and SCSF Finance waived all interest capitalized and accrued under the loan authorization agreement prior to July 19, 2012. As all parties were under the common control of affiliates of Sun Capital, this transaction resulted in a capital contribution of $18,249, which was recorded as an adjustment to additional paid in capital on our Condensed Consolidated Balance Sheet as of February 2, 2013.

On June 18, 2013, Sun Kellwood Finance and SCSF Finance assigned all title and interest in the note under the Sun Capital Loan Agreement to Sun Cardinal. Immediately following the assignment, Sun Cardinal contributed all outstanding principal and interest due under this note as of June 18, 2013 to the capital of VHC. As all parties were under common control of affiliates of Sun Capital at such time, this transaction resulted in a capital contribution of $72,932, which was recorded as an adjustment to VHC’s additional paid in capital on the Condensed Consolidated Balance Sheet at November 2, 2013.

Cerberus Term Loan Agreement

On October 19, 2011, Kellwood Company and certain of its domestic subsidiaries, as borrowers (the “Cerberus Borrowers”), entered into a Term Loan Agreement (the “Term Loan Agreement”) with Cerberus Business Finance, LLC (the “Agent”), as agent and the lenders from time to time party thereto. The Term Loan Agreement provided the Borrowers with a non-amortizing secured Cerberus Term Loan in an aggregate amount of $55,000 (the “Cerberus Term Loan”). The Cerberus Term Loan terminated at the earliest to occur of (a) October 19, 2015, (b) the date on which the Wells Fargo Facility (as defined above in Note 7, Financing Arrangements, to the Consolidated Financial Statements) has been paid in full and all commitments thereunder have been terminated or (c) 60 days prior to the scheduled December 31, 2014, maturity date of our 12.875% Notes (including any extensions thereof agreed to after October 19, 2011). All borrowings under the Cerberus Term Loan bore interest, from the date of the agreement until the effective date of the amendment described below at a rate per annum equal to an applicable margin (10.25% per annum for LIBOR Rate Loans (as defined in the Term Loan Agreement) and 7.75% for Reference Rate Loans (as defined in the Term Loan Agreement))

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plus, at the Cerberus Borrowers’ election, LIBOR or a Reference Rate as defined in the Term Loan Agreement. The Cerberus Term Loan was secured by a security interest in substantially all of the assets of the Borrowers, principally consisting of accounts receivable, inventory and intellectual property, which security interest was contractually subordinated to security interests of the lenders under the Credit Agreement. The Term Loan Agreement contained certain customary representations, warranties, provisions and restrictions. The Term Loan Agreement required that the Borrowers maintain a fixed charge coverage ratio as of each fiscal quarter end prior to the effective date of the amendment described below of at least 1:1. The fixed charge ratio was defined as the ratio of Consolidated EBITDA (as defined in the December 31 amendment to the Term Loan Agreement as described below ) (with certain addbacks as defined in the amended Term Loan Agreement for certain restructuring charges, startup losses in newly developed brands, costs incurred in certain acquisitions, as well as certain other costs and charges) minus capital expenditures and certain distributions and management fees; to fixed charges, defined as consolidated net interest expense paid or payable in cash, scheduled principal payments on debt in cash and certain earnout payments paid in cash, excluding earnout payments related to the Vince brand for the 2011 fiscal year, up to a certain amount, calculated over the trailing four fiscal quarters. The Term Loan Agreement also required that the Cerberus Borrowers maintained a leverage ratio as defined in the Term Loan Agreement and ranging from 2.85:1-4.25:1 during the life of the Cerberus Term Loan prior to the effective date of the amendment described below. The leverage ratio was defined as the ratio of indebtedness secured by a lien on any collateral (including the debt under the Credit Agreement and Cerberus Term Loan, but excluding the debt under the Sun Term Loan Agreements (as defined below) and the 12.875% Notes), divided by Consolidated EBITDA (as defined in the December 31 amendment to the Cerberus Term Loan described below) for the trailing four fiscal quarters.

On January 26, 2012, Kellwood Company obtained a waiver to the Cerberus Term Loan until the end of the first quarter of fiscal 2012 (the “Waiver Period”), as it anticipated not being in compliance with the fixed charge coverage ratio and the leverage ratio covenants as of January 28, 2012. In conjunction with this waiver, Kellwood Company paid the Agent a $75 waiver fee and an affiliate of Sun Capital provided the Agent with a $10,000 letter of credit. The waiver required the parties to the Cerberus Term Loan to work in good faith during the Waiver Period to amend the financial covenants set forth in the Cerberus Term Loan at levels mutually acceptable to all parties.

On April 20, 2012 Kellwood Company entered into Consent and Amendment No. 1 to the Cerberus Term Loan. This amendment provided for the consent of the Cerberus Term Loan lenders to the additional term loans under the Sun Term Loan Agreement (as defined below), the release of the $10,000 letter of credit noted above and the delivery of audited fiscal 2011 financial statements within 97 days of fiscal year-end. This amendment increased the applicable margins for borrowings under the Cerberus Term Loan which bore interest from and after the effective date of the amendment at a rate per annum equal to an applicable margin (ranging from 10.75%-11.25% per annum for LIBOR Rate Loans (as defined in the Cerberus Term Loan) and 8.25%-8.75% for Reference Rate Loans (as defined in the Cerberus Term Loan) based on leverage and income tests under the Cerberus Term Loan) plus, at the Cerberus Borrowers’ election, LIBOR or a Reference Rate as defined in the Cerberus Term Loan. The amendment also provided for a portion of such interest equal to 1% per annum to be paid-in-kind and added to the principal amount of such term loans. The amendment also modified the financial covenant levels required to be maintained by the Cerberus Borrowers beginning with the second quarter of fiscal 2012 for each financial covenant. The Cerberus Term Loan, as amended, required that the Borrowers maintain a fixed charge coverage ratio as of each fiscal quarter end (beginning with the second quarter of fiscal 2012) ranging from 0.14:1-1.28:1 during the life of the Cerberus Term Loan. The Cerberus Term Loan, as amended, also required that the Cerberus Borrowers maintain a leverage ratio as defined in the Cerberus Term Loan and ranging from 2.44:1-7.77:1 during the life of the Cerberus Term Loan (beginning with the second quarter of fiscal 2012). The minimum fixed charge coverage ratios for the second, third and fourth quarters of fiscal 2012 were 0.14:1, 0.41:1 and 0.67:1, respectively. The minimum fixed charge coverage ratios for fiscal 2013 were 0.89:1, 1.24:1, 1.28:1, and 1.22:1 for the first through fourth quarters, respectively. The maximum leverage ratios for fiscal 2013 were 3.47:1, 358:1, 3.08:1, and 2.44:1 for the first through fourth quarters, respectively. At November 2, 2013 Kellwood Company was in compliance with all provisions of the amended Cerberus Term Loan.

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On December 31, 2012, Kellwood Company amended the Cerberus Term Loan to obtain consent to the sale of the Royal Robbins business, to release Royal Robbins, LLC as a Borrower and/or Obligor under the Cerberus Term Loan, and to release the agent’s lien on the assets of Royal Robbins. This amendment required the prepayment of the obligations under the Cerberus Term Loan in an amount not less than $10,000 from a portion of the proceeds from the sale of Royal Robbins with the remaining funds to be remitted to the Wells Fargo Facility. This amendment also redefined the definition Consolidated EBITDA to allow for certain additional addbacks.

On May 3, 2013, Kellwood Company amended the Cerberus Term Loan in anticipation of not being in compliance with the fixed charge coverage ratio covenant during the 2013 fiscal year. This amendment modified the definition of the fixed charge coverage ratio to allow us to exclude certain types of capital expenditures in the calculation of the minimum fixed charge coverage ratio for the second, third, and fourth quarters of fiscal 2013, not to exceed $7,500 in total. Additionally, this amendment modified the minimum fixed charge coverage ratios for the second, third, and fourth quarters of fiscal 2013 to be 1.10:1, 1.175:1, and 1.25:1, respectively. On June 28, 2013, Cerberus and Kellwood Company entered into a consent to the Cerberus Term Loan with respect to Vince Holding Corp.’s incurrence of the Term G Loan under the Sun Term Loan B/C/D/E/F/G Agreement.

On November 27, 2013, in connection with the closing of the IPO and Restructuring Transactions, the Cerberus Term Loan was repaid with a portion of the proceeds from the repayment of the Kellwood Note Receivable.

Term A/B/C/D/E/F/G Obligations

On October 19, 2011, Kellwood Company and certain of its domestic subsidiaries, as borrowers (the “Sun Term Loan Borrowers”), affiliates of Sun Capital, as lenders, and Sun Kellwood Finance, as collateral agent, entered into (a) the Amended and Restated Term A Loan Agreement (the “Term A Loan Agreement”) and (b) the Third Amended and Restated Term Loan (the “Term B/C/D Loan Agreement”, and together with the Term A Loan Agreement, the “Sun Term Loan Agreements”).

The Term A Loan Agreement served to amend and restate in its entirety the Term Loan dated July 23, 2009, as previously amended (the “Prior Term A Agreement”) pursuant to which the lenders made certain Term A loans with an original principal amount of $12,168, the proceeds of which were used by the Sun Term Loan Borrowers to fund payment of the principal amounts outstanding, plus accrued and unpaid interest on the 7.875% 1999 Debentures due July 15, 2009 that were not tendered as part of the exchange offer for the 12.875% Notes.

The Term B/C/D Loan Agreement served to amend and restate in its entirety the Second Amended and Restated Term Loan dated as of August 5, 2011 (as amended, amended and restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Prior Term B/C/D Agreement”) pursuant to which the lenders made certain (i) Term B loans with an original principal amount of $22,393 issued on January 4, 2011, the proceeds of which were used by the Sun Term Loan Borrowers solely to finance the acquisition of Rebecca Taylor, (ii) Term C loans with an original principal amount of $14,900 issued on March 18, 2011, the proceeds of which were used to fund working capital, capital expenditures and other general corporate purposes of the Sun Term Loan Borrowers and (iii) Term D loans with an original principal amount of $10,000 issued on August 5, 2011, the proceeds of which were used to fund all or any part of the purchase price or cost of design, construction, installation or improvement or lease of property (real or personal), plant or equipment (whether through the direct acquisition of such assets or the acquisition of capital stock of any person owning such assets) used in the business of the Sun Term Loan Borrowers.

The primary reason for entering into the Sun Term Loan Agreements was to conform the major non-economic terms of such agreements, including the representations, warranties and covenants, to those of the Credit Agreement and the Cerberus Term Loan. The Sun Term Loan Agreements were also amended to provide a

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termination date of the earlier of (i) January 19, 2017 or (ii) the date on which the Cerberus Term Loan has been terminated; provided that, if the Cerberus Term Loan was extended, the stated maturity date set forth in (i) above shall be extended by a period of the same duration. The Sun Term Loan Agreements were amended such that the Sun Term Loan Agreements bear interest at 10% per annum (or 12% per annum in the case of the Term E loans, the Term F loans and the Term G loans described below) that will be added to the principal amounts of the Sun Term Loans. If the availability under the Credit Agreement is not less than $45,000, Kellwood Company was permitted to pay interest at a rate of 5% per annum in cash with respect to the Term A, B, C and D Loans and at a rate of 6% per annum in cash with respect to the Term E, F, and G Loans. The Sun Term Loan Agreements were secured by a security interest in substantially all of the assets of the Sun Term Loan Borrowers, which security interest was contractually subordinated to the security interests of the lenders under the Credit Agreement and the Cerberus Term Loan. The Sun Term Loan Agreements contained certain customary representations, warranties, provisions and restrictions substantially similar to the Credit Agreement and Cerberus Term Loan.

On April 20, 2012, Kellwood Company entered into an amendment and restatement of each of the Sun Term Loan Agreements. The Term B/C/D Loan Agreement was amended and restated in order to (i) provide for new Term E loans with an original principal amount of $5,100, the proceeds of which were used to finance costs and expenses and earnout payments in respect of certain acquisitions consummated by the Borrowers prior to the date of the Term E loans, (ii) provide for new Term F loans with an original principal amount of $24,900, the proceeds of which were used to fund working capital, capital expenditures and other general corporate purposes of the Sun Term Loan Borrowers, and (iii) to conform to the changes made to the Credit Agreement and the Cerberus Term Loan. The primary reason for entering into the amendment and restatement of the Term A Loan Agreement was to conform to the changes made to the Credit Agreement, the Cerberus Term Loan and the Term B/C/D Loan Agreement. On June 28, 2013, Kellwood Company entered into an amendment and restatement of the Sun Term Loan B/C/D/E/F Agreement in order to (i) provide for new Term G loans with an original principal amount of $5,000, the proceeds of which were used to fund working capital, capital expenditures and other general corporate purposes of the Sun Term Loan Borrowers and (ii) to conform to the changes made to the Credit Agreement and the Cerberus Term Loan. The Term E loans, the Term F loans and the Term G loans bore interest at 12% per annum that was added to the principal amounts of such loans. If the availability under the Credit Agreement was not less than $45,000, Kellwood Company was permitted to pay interest at a rate of 6% per annum in cash. No cash interest has been paid on the Sun Term Loan Agreements.

On November 27, 2013, in connection with the closing of the IPO and Restructuring Transactions, the Sun Term Loan Agreements were discharged through (i) the application of a portion of the Kellwood Note Receivable proceeds and (ii) capital contributions by Sun Capital affiliates.

12.875% Notes

Interest on the 12.875% 2009 Debentures due December 31, 2014 of Kellwood Company (the “12.875% Notes”) was paid (a) in cash at a rate of 7.875% per annum payable in January and July; and (b) in the form of PIK interest at a rate of 5% per annum (“PIK Interest”) payable either by increasing the principal amount of the outstanding 12.875% Notes, or by issuing additional 12.875% Notes with a principal amount equal to the PIK Interest accrued for the interest period. The 12.875% Notes were guaranteed by various of Kellwood Company’s subsidiaries on a secured basis, which security interest was contractually subordinated to security interests of lenders under the Credit Agreement, the Cerberus Term Loan and the Sun Term Loan Agreements. The 12.875% Notes contained certain customary provisions that, among other things, limited the ability to incur additional indebtedness, make certain restricted payments, dispose of assets or redeem or repurchase capital stock or prepay subordinated indebtedness.

On November 27, 2013, in connection with the closing of the IPO and Restructuring Transactions, the 12.875% Notes were redeemed with a portion of the proceeds from the repayment of the Kellwood Note Receivable, at which time Vince, LLC was released as a guarantor of such indebtedness and the obligations under the related indenture were satisfied and discharged.

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7.625% Notes

Interest on the 7.625% 1997 Debentures due October 15, 2017 of Kellwood Company (the “7.625% Notes”) is payable in April and October.

On November 27, 2013, in connection with the closing of the IPO and Restructuring Transactions, Kellwood Company commenced a tender offer for the 7.625% Notes. A portion of the proceeds from the repayment of the Kellwood Note Receivable were used to fund the tender offer, as discussed below.

Principal amounts of the notes payable and long-term debt outstanding at November 2, 2013 include the following:

Principal amounts of the notes payable and long-term debt outstanding at February 2, 2013 include the following:

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As discussed above and in connection with the IPO and the Restructuring Transactions, Kellwood Company, LLC refinanced, repaid or discharged or repurchased all indebtedness outstanding under the Cerberus Term Loan, the Sun Term Loan Agreements and the 12.875% Notes. Kellwood Company, LLC also amended and restated the Wells Fargo Facility on November 27, 2013 in order to, among other things, remove Vince, LLC as a guarantor of the related obligations. Additionally, Kellwood Company, LLC has completed a tender offer for all of the issued and outstanding 7.625% Notes. After giving effect to the final settlement of the tender offer on December 12, 2013, approximately $48.8 million in aggregate principal amount of the 7.625% Notes remain outstanding. Neither VHC, nor Vince Intermediate nor Vince, LLC are a guarantor or obligor of the 7.625% Notes.

Note 9. Inventory

Inventories of continuing operations consist of the following: