UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_________________________________________________________________________________________
FORM 10-Q
_________________________________________________________________________________________
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 26, 2016
or
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
for the transition period from to .
Commission file number: 001-34507
_________________________________________________________________________________________
VITAMIN SHOPPE, INC.
(Exact name of registrant as specified in its charter)
________________________________________________________________________________________
Delaware | 11-3664322 | |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
300 Harmon Meadow Blvd.
Secaucus, New Jersey 07094
(Addresses of Principal Executive Offices, including Zip Code)
(201) 868-5959
(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 x No ¨
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 (§232.405 of this chapter) 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. (Check one):
Large accelerated filer | x | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨ No x
As of April 15, 2016 Vitamin Shoppe, Inc. had 24,268,995 shares of common stock outstanding.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements regarding future financial results and performance, future business prospects, revenue, stores, our ability to implement strategic initiatives and meet market expectations, share repurchases, product offerings, contract manufacturing, supply chain network utilization, intellectual property, integration of acquisitions, working capital, liquidity, capital expenditures, capital needs and interest costs, industry based factors, including the level of competition in the vitamin, mineral and supplement industry, continued demand from the primary markets Vitamin Shoppe, Inc. (the “Company” or “we”) serves, consumer perception of our products, the availability of raw materials, as well as economic conditions generally and factors more specific to the Company such as compliance with manufacturing, healthcare, environmental and other regulations, changes in accounting standards, certifications and practices and restrictions imposed by the Company’s Revolving Credit Facility (as defined below), including financial covenants and limitations on the Company’s ability to incur additional indebtedness and the Company’s future capital requirements, and other risks, uncertainties and factors set forth under Item 1A., entitled “Risk Factors”, in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2015 and in our other reports and documents filed with the Securities and Exchange Commission (the “SEC”). You can identify these forward-looking statements by the use of words such as “outlook”, “believes”, “expects”, “potential”, “continues”, “may”, “will”, “should”, “seeks”, “predicts”, “intends”, “plans”, “estimates”, “anticipates”, “target”, “could” or the negative version of these words or other comparable words. These statements are subject to various risks and uncertainties, many of which are outside our control, including, among others, product liability claims and recalls, the availability of insurance, the strength of the economy, changes in the overall level of consumer spending, the performance of the Company's products within the prevailing retail environment, trade restrictions, international operations, availability of suitable store locations at appropriate terms, new credit card technology, e-commerce relationships, disruptions of manufacturing, warehouse or distribution facilities or information systems, and other specific factors discussed herein and in other SEC filings by us (including our reports on Forms 10-K and 10-Q filed with the SEC).
We believe that all forward-looking statements are based on reasonable assumptions when made; however, we caution that it is impossible to predict actual results or outcomes or the effects of risks, uncertainties or other factors on anticipated results or outcomes with certainty and that, accordingly, one should not place undue reliance on these statements. Forward-looking statements speak only as of the date when made and we undertake no obligation to update these statements in light of subsequent events or developments. Actual results may differ materially from anticipated results or outcomes discussed in any forward-looking statement.
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TABLE OF CONTENTS
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Item 1. | ||
Item 2. | ||
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Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
EX 10.01 | ||
EX 10.03 | ||
EX 10.06 | ||
EX 10.07 | ||
EX 10.08 | ||
EX 31.1 | ||
EX 31.2 | ||
EX 32.1 | ||
EX 32.2 | ||
EX-101 | INSTANCE DOCUMENT | |
EX-101 | SCHEMA DOCUMENT | |
EX-101 | CALCULATION LINKBASE DOCUMENT | |
EX-101 | DEFINITION LINKBASE DOCUMENT | |
EX-101 | LABELS LINKBASE DOCUMENT | |
EX-101 | PRESENTATION LINKBASE DOCUMENT |
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
VITAMIN SHOPPE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
March 26, 2016 | December 26, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 2,096 | $ | 15,104 | |||
Accounts receivable, net of allowance of $897 and $897 in 2016 and 2015, respectively | 5,609 | 7,437 | |||||
Inventories | 227,796 | 226,830 | |||||
Prepaid expenses and other current assets | 29,438 | 25,194 | |||||
Total current assets | 264,939 | 274,565 | |||||
Property and equipment, net of accumulated depreciation and amortization of $281,913 and $274,222 in 2016 and 2015, respectively | 138,718 | 140,158 | |||||
Goodwill | 243,269 | 243,269 | |||||
Other intangibles, net | 86,903 | 87,270 | |||||
Other assets | 2,750 | 3,429 | |||||
Total assets | $ | 736,579 | $ | 748,691 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Revolving credit facility | $ | 6,000 | $ | 8,000 | |||
Accounts payable | 54,253 | 41,217 | |||||
Accrued expenses and other current liabilities | 70,064 | 68,259 | |||||
Total current liabilities | 130,317 | 117,476 | |||||
Convertible notes, net | 116,743 | 115,410 | |||||
Deferred rent | 39,461 | 39,889 | |||||
Other long-term liabilities | 611 | 615 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock, $0.01 par value; 250,000,000 shares authorized and no shares issued and outstanding at March 26, 2016 and December 26, 2015 | — | — | |||||
Common stock, $0.01 par value; 400,000,000 shares authorized, 24,415,944 shares issued and 24,288,845 shares outstanding at March 26, 2016, and 25,993,715 shares issued and 25,873,581 shares outstanding at December 26, 2015 | 244 | 260 | |||||
Additional paid-in capital | 99,511 | 139,827 | |||||
Treasury stock, at cost; 127,099 shares at March 26, 2016 and 120,134 shares at December 26, 2015 | (5,440 | ) | (5,225 | ) | |||
Accumulated other comprehensive loss | (149 | ) | (60 | ) | |||
Retained earnings | 355,281 | 340,499 | |||||
Total stockholders’ equity | 449,447 | 475,301 | |||||
Total liabilities and stockholders’ equity | $ | 736,579 | $ | 748,691 |
See accompanying notes to condensed consolidated financial statements.
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VITAMIN SHOPPE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended | |||||||
March 26, 2016 | March 28, 2015 | ||||||
Net sales | $ | 336,774 | $ | 336,835 | |||
Cost of goods sold | 220,527 | 222,186 | |||||
Gross profit | 116,247 | 114,649 | |||||
Selling, general and administrative expenses | 88,985 | 83,694 | |||||
Income from operations | 27,262 | 30,955 | |||||
Interest expense, net | 2,262 | 164 | |||||
Income before provision for income taxes | 25,000 | 30,791 | |||||
Provision for income taxes | 10,218 | 12,091 | |||||
Net income | $ | 14,782 | $ | 18,700 | |||
Weighted average common shares outstanding | |||||||
Basic | 24,802,335 | 29,497,599 | |||||
Diluted | 25,009,058 | 29,867,344 | |||||
Net income per common share | |||||||
Basic | $ | 0.60 | $ | 0.63 | |||
Diluted | $ | 0.59 | $ | 0.63 |
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Three Months Ended | |||||||
March 26, 2016 | March 28, 2015 | ||||||
Net income | $ | 14,782 | $ | 18,700 | |||
Other comprehensive income (loss): | |||||||
Foreign currency translation adjustments | (89 | ) | 93 | ||||
Other comprehensive income (loss) | (89 | ) | 93 | ||||
Comprehensive income | $ | 14,693 | $ | 18,793 |
See accompanying notes to condensed consolidated financial statements.
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VITAMIN SHOPPE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended | |||||||
March 26, 2016 | March 28, 2015 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 14,782 | $ | 18,700 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization of fixed and intangible assets | 10,063 | 9,227 | |||||
Impairment charges on fixed assets | 218 | — | |||||
Amortization of deferred financing fees | 237 | 39 | |||||
Amortization of debt discount on convertible notes | 1,134 | — | |||||
Deferred income taxes | 612 | 234 | |||||
Deferred rent | (709 | ) | (506 | ) | |||
Equity compensation expense | 1,710 | 2,143 | |||||
Issuance of shares for services rendered | 167 | — | |||||
Tax benefits on exercises of equity awards | 117 | (113 | ) | ||||
Contingent consideration for acquisition of FDC Vitamins, LLC | — | (959 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 1,828 | 3,110 | |||||
Inventories | (554 | ) | (26,303 | ) | |||
Prepaid expenses and other current assets | (4,245 | ) | (197 | ) | |||
Other long-term assets | 7 | (219 | ) | ||||
Accounts payable | 12,442 | 9,648 | |||||
Accrued expenses and other current liabilities | 5,123 | (9,783 | ) | ||||
Other long-term liabilities | 263 | 513 | |||||
Net cash provided by operating activities | 43,195 | 5,534 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (11,681 | ) | (11,274 | ) | |||
Acquisition of FDC Vitamins, LLC | — | 487 | |||||
Trademarks and other intangible assets | (91 | ) | (149 | ) | |||
Net cash used in investing activities | (11,772 | ) | (10,936 | ) | |||
Cash flows from financing activities: | |||||||
Borrowings under revolving credit facility | 15,000 | 18,000 | |||||
Repayments of borrowings under revolving credit facility | (17,000 | ) | (8,000 | ) | |||
Bank overdraft | 141 | 4,538 | |||||
Contingent consideration payment for acquisition of FDC Vitamins, LLC | — | (4,041 | ) | ||||
Proceeds from exercises of common stock options | — | 783 | |||||
Issuance of shares under employee stock purchase plan | 164 | 207 | |||||
Tax benefits on exercises of equity awards | (117 | ) | 113 | ||||
Purchases of treasury stock | (215 | ) | (101 | ) | |||
Purchases of shares under Share Repurchase Programs | (42,307 | ) | (16,541 | ) | |||
Other financing activities | (20 | ) | (24 | ) | |||
Net cash used in financing activities | (44,354 | ) | (5,066 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (77 | ) | 156 | ||||
Net decrease in cash and cash equivalents | (13,008 | ) | (10,312 | ) |
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Cash and cash equivalents beginning of period | 15,104 | 12,166 | |||||
Cash and cash equivalents end of period | $ | 2,096 | $ | 1,854 | |||
Supplemental disclosures of cash flow information: | |||||||
Interest paid | $ | 65 | $ | 65 | |||
Income taxes paid | $ | 59 | $ | 1,630 | |||
Supplemental disclosures of non-cash investing activities: | |||||||
Liability for purchases of property and equipment | $ | 4,582 | $ | 4,649 |
See accompanying notes to condensed consolidated financial statements.
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VITAMIN SHOPPE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
Vitamin Shoppe, Inc. (“VSI”), is incorporated in the State of Delaware, and through its wholly-owned subsidiary, Vitamin Shoppe Industries Inc. (“Subsidiary” or “Industries” together with VSI, the “Company”), is a multi-channel specialty retailer and contract manufacturer of nutritional products. Sales of both national brands and our own brands of vitamins, minerals, herbs, specialty supplements, sports nutrition and other health and wellness products (“VMS products”) are made through VSI-operated retail stores and the internet to customers located primarily in the United States. The Company manufactures products for both sales to third parties as well as for the VSI product assortment.
The condensed consolidated financial statements as of March 26, 2016 and March 28, 2015 are unaudited. The condensed consolidated balance sheet as of December 26, 2015 was derived from our audited financial statements. All intercompany transactions and balances have been eliminated in consolidation. In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. The interim financial statements reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation in conformity with GAAP. The interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Form 10-K for the fiscal year ended December 26, 2015, as filed with the Securities and Exchange Commission on February 23, 2016 (the “Fiscal 2015 Form 10-K”). The results of operations for the interim periods should not be considered indicative of results to be expected for the full year.
The Company's fiscal year ends on the last Saturday in December. As used herein, the term "Fiscal Year" or "Fiscal" refers to a 52-week or 53-week period, ending on the last Saturday in December. Fiscal 2016 is a 53-week fiscal year. The results for the three months ended March 26, 2016 and March 28, 2015 are each based on 13-week periods.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the reporting period. Actual results could differ from those estimates.
Except as noted below, the Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on its results of operations, financial condition, or cash flows, based on current information.
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers (Topic 606). Under ASU 2014-09, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB deferred the effective date of ASU 2014-09 by one year. ASU 2014-09 will be effective for annual reporting periods beginning after December 15, 2017 for public companies and early adoption of ASU 2014-09 is permitted for public companies for annual reporting periods beginning after December 15, 2016. The Company is evaluating ASU 2014-09 to determine if this guidance will have a material impact on the Company’s condensed consolidated financial statements.
In July 2015, the FASB issued Accounting Standards Update No. 2015-11 (“ASU 2015-11”), Simplifying the Measurement of Inventory (Topic 330). ASU 2015-11 simplifies the subsequent measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. ASU 2015-11 is effective for public companies for annual reporting periods beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption of ASU 2015-11 is permitted. The Company is evaluating ASU 2015-11 to determine if this guidance will have a material impact on the Company’s condensed consolidated financial statements.
In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (“ASU 2016-02”), Leases (Topic 842). ASU 2016-02 was issued by the FASB to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. ASU 2016-02 will require modified retrospective application at the beginning of our first quarter of Fiscal 2019, but permits adoption in an earlier period. The Company is evaluating ASU 2016-02 in order to determine the impact of this guidance on the Company’s condensed consolidated financial statements and
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anticipates this guidance will significantly impact our condensed consolidated financial statements given we have a significant number of leases.
In March 2016, the FASB issued Accounting Standards Update No. 2016-09 (“ASU 2016-09”), Compensation-Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 addresses simplification of several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for public companies for annual reporting periods beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption of ASU 2016-09 is permitted. The Company is evaluating ASU 2016-09 to determine if this guidance will have a material impact on the Company’s condensed consolidated financial statements.
2. Inventories
The components of inventories are as follows (in thousands):
March 26, 2016 | December 26, 2015 | ||||||
Finished goods | $ | 210,522 | $ | 211,879 | |||
Work-in-process | 6,539 | 6,180 | |||||
Raw materials | 10,735 | 8,771 | |||||
$ | 227,796 | $ | 226,830 |
3. Goodwill and Intangible Assets
Goodwill is allocated between the Company’s segments (reporting units), retail, direct and manufacturing. The following table discloses the carrying value of all intangible assets (in thousands):
March 26, 2016 | December 26, 2015 | ||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||
Intangible assets | |||||||||||||||||||||||
Goodwill | $ | 243,269 | $ | — | $ | 243,269 | $ | 243,269 | $ | — | $ | 243,269 | |||||||||||
Tradenames – Indefinite-lived | 68,405 | — | 68,405 | 68,405 | — | 68,405 | |||||||||||||||||
Brands | 10,000 | 1,019 | 8,981 | 10,000 | 880 | 9,120 | |||||||||||||||||
Customer relationships | 7,500 | 688 | 6,812 | 7,500 | 594 | 6,906 | |||||||||||||||||
Tradenames – Definite-lived | 4,764 | 2,882 | 1,882 | 4,673 | 2,722 | 1,951 | |||||||||||||||||
Software | 1,300 | 477 | 823 | 1,300 | 412 | 888 | |||||||||||||||||
$ | 335,238 | $ | 5,066 | $ | 330,172 | $ | 335,147 | $ | 4,608 | $ | 330,539 |
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The useful lives of the Company’s definite-lived intangible assets are between 3 to 20 years. The expected amortization expense on definite-lived intangible assets on the Company’s condensed consolidated balance sheet at March 26, 2016, is as follows (in thousands):
Remainder of Fiscal 2016 | $ | 1,065 | |
Fiscal 2017 | 1,422 | ||
Fiscal 2018 | 1,422 | ||
Fiscal 2019 | 1,270 | ||
Fiscal 2020 | 1,163 | ||
Thereafter | 12,156 | ||
$ | 18,498 |
4. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in thousands):
March 26, 2016 | December 26, 2015 | ||||||
Accrued salaries and related expenses | $ | 14,688 | $ | 10,115 | |||
Accrued income taxes | 10,183 | 4 | |||||
Sales tax payable and related expenses | 7,922 | 6,975 | |||||
Deferred sales | 7,086 | 20,483 | |||||
Accrued fixed asset additions | 2,471 | 5,842 | |||||
Other accrued expenses | 27,714 | 24,840 | |||||
$ | 70,064 | $ | 68,259 |
5. Credit Arrangements
Convertible Senior Notes due 2020
On December 9, 2015, the Company completed an offering of $143.8 million of its 2.25% Convertible Senior Notes due 2020 (the “Convertible Notes”). The Convertible Notes are senior unsecured obligations of the Company. Interest on the Convertible Notes is payable on June 1 and December 1 of each year, commencing on June 1, 2016 until their maturity date of December 1, 2020. The Company may not redeem the Convertible Notes prior to the maturity date.
Prior to July 1, 2020, the Convertible Notes will be convertible only under certain circumstances. The Convertible Notes will be convertible at an initial conversion rate of 25.1625 shares of the Company’s common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to an initial conversion price of approximately $39.74. The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, the Company is required to increase, in certain circumstances, the conversion rate for a holder who elects to convert its Convertible Notes in connection with such a corporate event including customary conversion rate adjustments in connection with a “make-whole fundamental change” as defined. Upon conversion, the Company may satisfy its conversion obligation by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at its election.
The Company allocated the principal amount of the Convertible Notes between its liability and equity components (see table below). The carrying amount of the liability component was determined by measuring the fair value of a similar debt instrument of similar credit quality and maturity that did not have the conversion feature. The carrying amount of the equity component, representing the embedded conversion option, was determined by deducting the fair value of the liability component from the principal amount of the Convertible Notes as a whole. The equity component was recorded to additional
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paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification. The excess of the principal amount of the Convertible Notes over the carrying amount of the liability component was recorded as a debt discount, and is being amortized to interest expense using an effective interest rate of 3.8% over the term of the Convertible Notes. The Company allocated the total amount of transaction costs incurred to the liability and equity components using the same proportions as the proceeds from the Convertible Notes. Transaction costs attributable to the liability component were recorded as a direct deduction from the liability component of the Convertible Notes, and are being amortized to interest expense using the effective interest method through the maturity date. Transaction costs attributable to the equity component were netted with the equity component of the Convertible Notes in additional paid-in capital.
The Convertible Notes consist of the following components (in thousands):
March 26, 2016 | December 26, 2015 | ||||||
Liability component: | |||||||
Principal | $ | 143,750 | $ | 143,750 | |||
Conversion feature | (24,800 | ) | (24,800 | ) | |||
Liability portion of debt issuance costs | (3,792 | ) | (3,800 | ) | |||
Amortization | 1,585 | 260 | |||||
Net carrying amount | $ | 116,743 | $ | 115,410 | |||
Equity component: | |||||||
Conversion feature | $ | 24,800 | $ | 24,800 | |||
Equity portion of debt issuance costs | (793 | ) | (793 | ) | |||
Deferred taxes | 941 | 941 | |||||
Net carrying amount | $ | 24,948 | $ | 24,948 | |||
In connection with the issuance of the Convertible Notes, the Company entered into convertible note hedge transactions for which it paid an aggregate $26.4 million. In addition, the Company sold warrants for which it received aggregate proceeds of $13.0 million. The convertible note hedge transactions are expected generally to reduce potential dilution of the Company’s common stock upon any conversion of notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted notes. However, the warrant transaction could separately have a dilutive effect to the extent that the market value per share of the Company’s common stock exceeds the applicable strike price of the warrant transactions, which is approximately $52.99 at inception. As these transactions meet certain accounting criteria, the convertible note hedge and warrant transactions are recorded in stockholders’ equity, are not accounted for as derivatives and are not remeasured each reporting period.
The net proceeds from the Convertible Notes and related transactions of $125.7 million, net of commissions and offering costs of $4.6 million, were used to repurchase shares of the Company’s common stock under the Company’s share repurchase programs. Refer to Note 9. Share Repurchase Programs for additional information.
Revolving Credit Facility
As of March 26, 2016 and as of December 26, 2015, the Company had $6.0 million and $8.0 million of borrowings outstanding on its Revolving Credit Facility (the "Revolving Credit Facility"), respectively.
Subject to the terms of the Revolving Credit Facility, which has a maturity date of October 11, 2018, the Company may borrow up to $90.0 million, with a Company option to increase the facility up to a total of $150.0 million. The availability under the Revolving Credit Facility is subject to a borrowing base calculated on the value of certain accounts receivable as well as certain inventory of the Company. The obligations thereunder are secured by a security interest in substantially all of the assets of the Company. Under the Revolving Credit Facility, VSI has guaranteed the Company’s obligations, and Industries and its wholly-owned subsidiaries have each guaranteed the obligations of the other respective entities. The Revolving Credit Facility provides for affirmative and negative covenants affecting the Company. The Revolving Credit Facility restricts, among other things, the Company’s ability to incur indebtedness, create or permit liens on the Company’s assets, declare or pay dividends and make certain other restricted payments, consolidate, merge or recapitalize, sell assets, make certain investments,
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loans or other advances, enter into transactions with affiliates, change our line of business, and restricts the types of hedging activities the Company can enter into. The largest amount borrowed during the three months ended March 26, 2016 and March 28, 2015 was $15.0 million and $18.0 million, respectively. The unused available line of credit under the Revolving Credit Facility at March 26, 2016 was $81.1 million.
Borrowings under the Revolving Credit Facility accrue interest, at the Company’s option, at the rate per annum based on an “alternative base rate” plus 0.25% or 0.50% or the adjusted Eurodollar rate plus 1.25% or 1.50%, in each case with the higher spread applicable in the event that the aggregate amount of the borrowings under the Revolving Credit Facility exceeds 50% of the borrowing base availability under the Revolving Credit Facility. The weighted average interest rate for the Revolving Credit Facility during the three months ended March 26, 2016 and March 28, 2015 was 1.70% and 1.44%, respectively. The commitment fee on the undrawn portion of the $90.0 million Revolving Credit Facility was 0.25% as of March 26, 2016 and December 26, 2015.
Interest expense, net for the three months ended March 26, 2016 and March 28, 2015 consists of the following (in thousands):
Three Months Ended | |||||||
March 26, 2016 | March 28, 2015 | ||||||
Amortization of debt discount on convertible notes | $ | 1,134 | $ | — | |||
Interest on convertible notes | 804 | — | |||||
Amortization of deferred financing fees | 237 | 39 | |||||
Interest / fees on the revolving credit facility and other interest | 87 | 125 | |||||
Interest expense, net | $ | 2,262 | $ | 164 |
6. Stock Based Compensation
Equity Incentive Plans – The Company has two equity incentive plans that provide stock based compensation to certain directors, officers, consultants and employees of the Company; the 2006 Stock Option Plan (the “2006 Plan”) and the Vitamin Shoppe 2009 Equity Incentive Plan (the “2009 Plan”). As of March 26, 2016, there were 2,079,960 shares available to grant under both plans which includes 127,099 shares currently held by the Company as treasury stock.
The following table summarizes restricted shares for the 2009 Plan as of March 26, 2016 and changes during the three month period then ended:
Number of Unvested Restricted Shares | Weighted Average Grant Date Fair Value | |||||
Unvested at December 26, 2015 | 398,562 | $ | 42.65 | |||
Granted | 133,227 | $ | 30.14 | |||
Vested | (17,410 | ) | $ | 46.71 | ||
Canceled/forfeited | (57,439 | ) | $ | 45.12 | ||
Unvested at March 26, 2016 | 456,940 | $ | 38.54 |
The total intrinsic value of restricted shares vested during the three months ended March 26, 2016 and March 28, 2015, was $0.5 million and $0.2 million, respectively.
The following table summarizes stock options for the 2006 and 2009 Plans as of March 26, 2016 and changes during the three month period then ended:
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Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (years) | Aggregate Intrinsic Value (in thousands) | |||||||||
Outstanding at December 26, 2015 | 284,838 | $ | 22.65 | |||||||||
Granted | 212,617 | $ | 30.26 | |||||||||
Exercised | — | $ | — | |||||||||
Canceled/forfeited | (292 | ) | $ | 34.19 | ||||||||
Outstanding at March 26, 2016 | 497,163 | $ | 25.89 | 5.67 | $ | 2,675 | ||||||
Vested or expected to vest at March 26, 2016 | 482,375 | $ | 25.89 | 5.67 | ||||||||
Vested and exercisable at March 26, 2016 | 282,046 | $ | 22.35 | 2.44 | $ | 2,675 |
There were no options exercised during the three months ended March 26, 2016. The total intrinsic value of options exercised during the three months ended March 28, 2015 was $0.7 million. The cash received from options exercised during the three months ended March 28, 2015 was $0.8 million.
Stock options granted during the three months ended March 26, 2016 shall become vested in equal installments on the first, second and third anniversaries of the date on which such equity grants were awarded.
The following table summarizes performance share units for the 2009 Plan as of March 26, 2016 and changes during the three month period then ended:
Number of Unvested Performance Share Units | Weighted Average Grant Date Fair Value | |||||
Unvested at December 26, 2015 | — | $ | — | |||
Granted | 116,628 | $ | 30.26 | |||
Vested | — | $ | — | |||
Canceled/forfeited | — | $ | — | |||
Unvested at March 26, 2016 | 116,628 | $ | 30.26 |
Performance share units granted during the three months ended March 26, 2016 shall become vested on December 29, 2018 if the performance criteria are achieved. Performance share units can vest at a range of 25% to 150% based on the achievement of pre-established performance targets.
The following table summarizes restricted share units for the 2009 Plan as of March 26, 2016 and changes during the three month period then ended:
Number of Unvested Restricted Share Units | Weighted Average Grant Date Fair Value | |||||
Unvested at December 26, 2015 | 11,280 | $ | 37.25 | |||
Granted | — | $ | — | |||
Vested | (3,760 | ) | $ | 37.25 | ||
Canceled/forfeited | — | $ | — | |||
Unvested at March 26, 2016 | 7,520 | $ | 37.25 |
The total intrinsic value of restricted share units vested during the three months ended March 26, 2016 and March 28, 2015, was $0.1 million and $0.4 million, respectively.
Compensation expense attributable to stock based compensation for the three months ended March 26, 2016 and March 28, 2015, was approximately $1.7 million and $2.1 million, respectively. As of March 26, 2016, the remaining unrecognized stock based compensation expense for non-vested stock options, restricted shares, performance share units and restricted share units to be expensed in future periods is $13.0 million, and the related weighted-average period over which it is
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expected to be recognized is 2.1 years. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company estimates forfeitures based on its historical forfeiture rate since the inception of granting stock based awards. The estimated value of future forfeitures for stock options, restricted shares, performance share units and restricted share units as of March 26, 2016 is approximately $1.1 million.
The weighted-average grant date fair value of stock options was $8.30 during the three months ended March 26, 2016. Stock options were not granted during the three months ended March 28, 2015. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
Three Months Ended | ||
March 26, 2016 | ||
Expected dividend yield | 0.0 | % |
Weighted average expected volatility | 32.6 | % |
Weighted average risk-free interest rate | 1.2 | % |
Expected holding period | 4.00 years |
Treasury Stock – As part of the Company’s equity incentive plans, the Company makes required tax payments on behalf of employees as their restricted shares vest. The Company withholds the number of vested shares having a value on the date of vesting equal to the minimum statutory tax obligation. The shares withheld are recorded as treasury shares. During the three months ended March 26, 2016, the Company purchased 6,965 shares in settlement of employees’ tax obligations for a total of $0.2 million. The Company accounts for treasury stock using the cost method. These shares are available to grant under the Company’s equity incentive plans.
7. Advertising Costs
The costs of advertising for online marketing arrangements, magazines, direct mail and radio are expensed the first time the advertising takes place. Advertising expense was $5.9 million and $6.5 million for the three months ended March 26, 2016 and March 28, 2015, respectively.
8. Net Income Per Share
The Company’s basic net income per share excludes the dilutive effect of stock options, unvested restricted shares, unvested performance share units and unvested restricted share units. It is based upon the weighted average number of common shares outstanding during the period divided into net income.
Diluted net income per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. Stock options, unvested restricted shares, unvested performance share units and unvested restricted share units are included as potential dilutive securities for the periods applicable, using the treasury stock method to the extent dilutive.
The components of the calculation of basic net income per common share and diluted net income per common share are as follows (in thousands except share and per share data):
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Three Months Ended | |||||||
March 26, 2016 | March 28, 2015 | ||||||
Numerator: | |||||||
Net income | $ | 14,782 | $ | 18,700 | |||
Denominator: | |||||||
Basic weighted average common shares outstanding | 24,802,335 | 29,497,599 | |||||
Effect of dilutive securities: | |||||||
Stock options | 73,372 | 123,583 | |||||
Restricted shares | 132,617 | 244,585 | |||||
Performance share units | 169 | — | |||||
Restricted share units | 565 | 1,577 | |||||
Diluted weighted average common shares outstanding | 25,009,058 | 29,867,344 | |||||
Basic net income per common share | $ | 0.60 | $ | 0.63 | |||
Diluted net income per common share | $ | 0.59 | $ | 0.63 |
Stock options and restricted shares for the three months ended March 26, 2016 and March 28, 2015 in the amount of 10,159 shares and 10,015 shares, respectively, have been excluded from the above calculation as they were anti-dilutive.
The Company has the intent and ability to settle the principal portion of its Convertible Notes in cash, and as such, has applied the treasury stock method, which has resulted in the underlying convertible shares being anti-dilutive for the three months ended March 26, 2016 as the Company’s average stock price was less than the conversion price. Refer to Note 5. Credit Arrangements for additional information on the Convertible Notes.
9. Share Repurchase Programs
On August 5, 2014, May 6, 2015 and November 23, 2015, the Company’s board of directors approved share repurchase programs that enable the Company to purchase up to an aggregate of $300 million of its shares of common stock from time to time over three year periods ending on August 4, 2017, May 5, 2018 and November 22, 2018, respectively. As of March 26, 2016, 7,181,363 shares have been repurchased for a total of $246.2 million. The repurchase program does not obligate the Company to acquire any specific number of shares of its common stock and may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing such shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate. These factors may also affect the timing and amount of share repurchases.
During the three months ended March 26, 2016 and March 28, 2015, the Company repurchased 787,875 and 400,000 shares, respectively, of its common stock in the open market. The shares were retired upon repurchase. Open market share repurchases were $23.3 million in the three months ended March 26, 2016 and $16.5 million in the three months ended March 28, 2015 with average repurchase prices per share of $29.56 and $41.35, respectively. In the first fiscal quarter of 2016, the Company also repurchased 646,666 shares of its common stock for $19.0 million, or $29.40 per share, under a 10b5-1 program which the Company entered into to purchase shares under predetermined criteria.
Additionally, the Company has entered into accelerated share repurchase (“ASR”) arrangements with financial institutions. In exchange for an up-front payment, the financial institutions initially delivered shares of the Company’s common stock. The total number of shares ultimately delivered, and therefore the average repurchase price paid per share, is determined at the end of the purchase period of each ASR based on the volume weighted-average price of the Company’s common stock during that period. The shares were retired in the periods they are delivered, and each up-front payment was accounted for as a reduction to stockholders’ equity in the Company’s Condensed Consolidated Balance Sheet in the period the payment was made. The Company reflects each ASR as a repurchase of common stock in the period delivered for purposes of calculating earnings per share and as a forward contract indexed to its own common stock. The ASRs met all of the applicable criteria for equity classification, and therefore, were not accounted for as derivative instruments.
The following table summarizes the Company’s ASR arrangements:
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Beginning of ASR Period | Up-front Payment (in millions) | Initial Share Deliveries | End of ASR Period | Final Shares Delivered | Average Repurchase Price | |||||||||||
November, 2014 | $ | 50.0 | 982,714 | January, 2015 | 88,325 | $ | 46.68 | |||||||||
December, 2015 | $ | 50.0 | 1,391,940 | February, 2016 | 235,053 | $ | 30.73 | |||||||||
10. Legal Proceedings
The Company is party to various lawsuits arising from time to time in the normal course of business, some of which are covered by insurance. Although the impact of the final resolution of these matters on the Company's financial condition, results of operations or cash flows is not known, management does not believe that the resolution of these lawsuits will have a material adverse effect on the financial condition, results of operations or liquidity of the Company.
11. Segment Data
The Company currently operates three business segments, retail, direct and manufacturing. The operating segments are segments of the Company for which separate financial information is available and for which operating results are evaluated regularly by executive management in deciding how to allocate resources and in assessing performance. The Company's management evaluates segment operating results based on several indicators. The primary key performance indicators are sales and operating income for each segment. The table below represents key financial information for each of the Company's business segments as well as corporate costs. The retail segment primarily includes the Company's retail stores. The retail segment generates revenue primarily through the sale of VMS products through Vitamin Shoppe and Super Supplements retail stores in the United States and Puerto Rico. The direct segment generates revenue through the sale of VMS products primarily through the Company's websites. The Company's websites offer customers online access to a full assortment of approximately 18,000 SKUs. The manufacturing segment supplies the retail and direct segments, along with various thirds parties, with finished products for sale. Corporate costs represent all other expenses not allocated to the retail, direct or manufacturing segments which include, but are not limited to: human resources, legal, retail management, direct management, finance, information technology, depreciation (primarily related to assets utilized by the retail and direct business segments as well as corporate assets) and amortization, and various other corporate level activity related expenses. Intercompany sales transactions are eliminated in consolidation.
The Company’s segments are designed to allocate resources internally and provide a framework to determine management responsibility. The accounting policies of the segments are consistent with those described in Note 2. Summary of Significant Accounting Policies in the Fiscal 2015 Form 10-K. The Company has allocated $165.3 million, $45.3 million and $32.6 million of its recorded goodwill to the retail, direct and manufacturing segments, respectively. The Company does not have identifiable assets separated by segment, with the exception of the identifiable assets of the manufacturing segment which were $91.6 million and $88.4 million as of March 26, 2016 and December 26, 2015, respectively. Capital expenditures for the manufacturing segment for the three months ended March 26, 2016 and March 28, 2015 were approximately $0.4 million and $1.1 million, respectively. At March 26, 2016 and December 26, 2015, long lived assets of the manufacturing segment were $60.0 million and $60.4 million, respectively. Depreciation and amortization expense, included in selling, general and administrative expenses, for the manufacturing segment during the three months ended March 26, 2016 and March 28, 2015 was approximately $0.4 million and $0.3 million, respectively.
The following table contains key financial information of the Company’s business segments (in thousands):
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Three Months Ended | |||||||
March 26, 2016 | March 28, 2015 | ||||||
Net sales: | |||||||
Retail | $ | 288,012 | $ | 287,983 | |||
Direct | 35,852 | 34,844 | |||||
Manufacturing | 20,560 | 21,828 | |||||
Segment net sales | 344,424 | 344,655 | |||||
Elimination of intersegment revenues | (7,650 | ) | (7,820 | ) | |||
Net sales | $ | 336,774 | $ | 336,835 | |||
Income (Loss) from operations: | |||||||
Retail | $ | 56,663 | $ | 56,059 | |||
Direct | 5,186 | 5,065 | |||||
Manufacturing | (262 | ) | 299 | ||||
Corporate costs (1) | (34,325 | ) | (30,468 | ) | |||
Income from operations | $ | 27,262 | $ | 30,955 |
(1) Corporate costs include (in thousands):
Three Months Ended | |||||||
March 26, 2016 | March 28, 2015 | ||||||
Depreciation and amortization expenses | $ | 9,669 | $ | 8,880 | |||
Super Supplements conversion costs (a) | 1,275 | — | |||||
Canada stores closing costs (b) | 1,099 | — | |||||
Reinvention strategy costs (c) | 541 | — | |||||
Integration costs (d) | — | 360 |
(a) | Costs related to the closure of the Seattle distribution center. |
(b) | Costs primarily include lease termination charges. |
(c) | The costs represent outside consultants fees in connection with the Company’s “reinvention strategy”. |
(d) | Represents integration costs related to the acquisition of Nutri-Force, consisting primarily of professional fees. |
12. Fair Value of Financial Instruments
The fair value hierarchy requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. The three levels are defined as follows:
• | Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities. |
• | Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets. |
• | Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability. |
The Company’s financial instruments include cash, accounts receivable, accounts payable and its Revolving Credit Facility. The Company believes that the recorded values of these financial instruments approximate their fair values due to their nature and respective durations.
The following table contains information of the Company’s Convertible Notes (in thousands):
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March 26, 2016 | December 26, 2015 | ||||||
Fair Value | $ | 113,011 | $ | 119,784 | |||
Carrying Value | 116,743 | 115,410 | |||||
The fair value of the Convertible Notes was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including the trading price of the Company’s Convertible Notes, when available, the Company’s stock price and interest rates based on similar debt issued by parties with credit ratings similar to the Company (Level 1 or 2).
Certain assets are measured at fair value on a non-recurring basis, that is, the assets are subject to fair value adjustments in certain circumstances such as when there is evidence of impairment. These measures of fair value, and related inputs, are considered Level 2 or 3 measures under the fair value hierarchy.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the condensed consolidated financial statements and notes thereto included as part of this quarterly report on Form 10-Q.
Company Overview
We are a multi-channel specialty retailer and contract manufacturer of vitamins, minerals, herbs, specialty supplements, sports nutrition and other health and wellness products. As of March 26, 2016, we operated 766 stores in 45 states, the District of Columbia and Puerto Rico and also sold our products directly to consumers through the internet, primarily at www.vitaminshoppe.com. We market approximately 850 nationally recognized brands as well as our own brands, which include Vitamin Shoppe®, BodyTech®, True Athlete®, Mytrition®, plnt®, ProBioCare™, Next Step® and Betancourt Nutrition™. We believe we offer one of the largest varieties of products among vitamin, mineral and supplement (“VMS”) retailers and continue to refine our assortment with approximately 7,500 stock keeping units ("SKUs") offered in our typical store and approximately 10,500 additional SKUs available through e-commerce. Our broad product offering enables us to provide our customers with a depth of selection of products that may not be readily available at other specialty retailers or mass merchants, such as discount stores, supermarkets, drugstores and wholesale clubs. We believe our product offering and emphasis on product knowledge and customer service helps us meet the needs of our target customer and serves as a foundation for enhancing customer loyalty.
During the second quarter of Fiscal 2015, the Company began development of a strategic plan focused on upgrading our customers’ experience across our retail and e-commerce channels, the “reinvention strategy”. We worked with outside consultants to analyze qualitative and quantitative information relevant to our customers’ experience. The reinvention strategy is focused on upgrading the customer experience to inspire our target customers with changes to curate our product assortment, opportunities to increase private brands penetration, enhancements to the in-store and digital experience, store layout, as well as changes to improve the effectiveness of our loyalty program. Such changes may result in a reduction of SKUs offered by the Company which could result in the recognition of related inventory charges in future periods. We expect to incur approximately $10.0 million to $15.0 million of selling, general and administrative costs during Fiscal 2016 in connection with the reinvention strategy, of which approximately $6.0 million to $8.0 million of such costs are expected to be on-going. These costs include additional internal resources, improvements to store network connectivity, and outside consultants. During the first quarter of Fiscal 2016, we incurred $2.0 million of costs in connection with the reinvention strategy. The Company expects to realize improved financial results from the reinvention strategy beginning in Fiscal 2017. In addition, we have engaged a consulting firm in Fiscal 2016 to identify other efficiencies and cost reduction opportunities focusing on product sourcing, store operations and corporate expenses.
In an on-going effort to identify efficiencies and stream-line processes, we performed a review of certain business operations in Fiscal 2015. As part of this review, we implemented changes to the product assortment and supply chain operations of Super Supplements to more closely align Super Supplements with current processes and assortments in the Vitamin Shoppe retail stores. As a result, net costs of $1.0 million were incurred during the first quarter of Fiscal 2016. Annual cost savings resulting from these actions are estimated to be $1 million to $2 million. In addition, the Company evaluated its Canadian operations in order to determine whether to continue investments in the Canadian market and decided to cease operations, closing one store in the first quarter and closing the remaining two stores in the second quarter of Fiscal 2016. As a result, net costs of $0.9 million were incurred during the first quarter and costs of approximately $2.0 million are expected to be
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incurred during the second quarter of Fiscal 2016. The annual cost savings related to ceasing operations in Canada are estimated to be approximately $1.0 million. Costs for these two initiatives include lease liabilities, markdown charges on inventory and employee severance.
Highlights for the First Quarter of Fiscal 2016
• | Net sales were flat compared to the same period of the prior year |
• | Total comparable net sales decreased 1.9% |
• | Comparable store net sales decreased 2.6% |
• | Comparable e-commerce net sales increased 3.9% |
• | The Company opened 9 stores |
• | The Company re-purchased 1.7 million shares of its common stock |
• | Fully diluted earnings per share of $0.59 |
Segment Information
We operate through three business segments: retail, which includes Vitamin Shoppe and Super Supplements retail store formats, direct, which consists of our e-commerce and catalog formats, and manufacturing, which consists of the Nutri-Force manufacturing operations.
Retail. Through our retail store formats, we believe we differentiate ourselves in the VMS industry, which has been successful across geographic and demographic markets. What makes us unique is our broad selection of VMS products and our stores are staffed with trained and knowledgeable employees, who we refer to as Health Enthusiasts®, and who are able to inform our customers about product features and assist in product selection.
Direct. We also sell our products directly to consumers through the internet, primarily at www.vitaminshoppe.com. Our e-commerce sites complement our in-store experience by extending our retail product offerings with approximately 10,500 additional SKUs that are not available in our stores and enable us to access customers outside our retail markets and those who prefer to shop online.
Manufacturing. Through Nutri-Force, we provide custom manufacturing and private labeling of VMS products and develop and market our own branded products for both sales to third parties and for the VSI product assortment.
Trends and Other Factors Affecting Our Business
Our performance is affected by industry trends including, among others, demographic, health and lifestyle preferences, as well as other factors, such as industry media coverage and governmental actions. For example, our industry is subject to potential regulatory activity and other legal matters that could affect the credibility of a given product or category of products. Consumer trends, such as those described in the following paragraph, the overall impact on consumer spending, which may be affected heavily by current economic conditions, and limited product innovation and introductions in the VMS industry can dramatically affect purchasing patterns. Even though our business model allows us to respond to changing industry trends by introducing new products and adjusting our product mix and sales incentives, such actions may not offset adverse trends. Additionally, our performance is affected by competitive trends such as the entry of new competitors, changes in promotional strategies or expansion of product assortment by various competitors.
Sales of weight management products are generally more sensitive to consumer trends, such as increased demand for products recommended by the media, resulting in higher volatility than our other products. In addition to the weight management product lines, we intend to continue our focus in meeting the demands of a rapidly growing health conscious public.
Our historical results have also been significantly influenced by our new store openings. Since the beginning of Fiscal 2014, we have opened 120 stores and as of March 26, 2016 operate 766 stores located in 45 states, the District of Columbia and Puerto Rico. In Fiscal 2016, we have reduced the number of new store openings as we continue to evaluate and implement our reinvention strategy. We plan to open approximately 30 new stores in Fiscal 2016.
New stores have typically required approximately four to five years to mature, generating lower store level sales in the
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initial years than our mature stores. As a result, new stores generally have a negative impact on our overall operating margin. In addition, our new stores since the beginning of Fiscal 2013 are approximately 2,900 square feet compared to the average of our total store portfolio of approximately 3,500 square feet. Additionally, stores opened in new markets have lower brand awareness compared to stores in existing markets, and as a result initially experience a lower sales volume than stores opened in existing markets. As these stores mature, we expect them to contribute meaningfully to our operating results.
In Fiscal 2015, the Company began implementation of a new warehouse management system application (“WMS”) at its Ashland, Virginia distribution center in order to realize further productivity improvements and functionality. Implementation of the new WMS is expected to be completed in Fiscal 2016.
Critical Accounting Policies
Our significant accounting policies are described in Note 2 of the Notes to Consolidated Financial Statements included in our financial statements in the Fiscal 2015 Form 10-K. A discussion of our critical accounting policies and estimates is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Fiscal 2015 Form 10-K. Management has discussed the development and selection of these policies with the Audit Committee of our Board of Directors, and the Audit Committee of our Board of Directors has reviewed the disclosures relating to them. Management believes there have been no material changes to the critical accounting policies or estimates reported in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the Fiscal 2015 Form 10-K.
General Definitions for Operating Results
Net Sales consist of sales, net of sales returns, deferred sales, customer incentives and a provision for estimated future returns, from comparable and non comparable sales. Total comparable net sales include sales generated by retail stores after 410 days of operation and e-commerce sales. Sales to third parties of manufactured products generated by Nutri-Force are considered non-comparable sales.
Cost of goods sold includes the cost of inventory sold, costs of warehousing, distribution, manufacturing and store occupancy costs and excludes depreciation and amortization related to the retail and direct segments that is included within selling, general and administrative expenses. Warehousing, distribution and manufacturing costs, which are capitalized into inventory and then expensed as merchandise is sold, include freight to transfer merchandise, costs associated with our buying department, distribution facilities and manufacturing overhead. Store occupancy costs include rent, common area maintenance, real estate taxes and utilities.
Gross profit is net sales minus cost of goods sold.
Selling, general and administrative expenses consist of depreciation and amortization of fixed and intangible assets, operating payroll and related benefits, advertising and promotion expense, and other selling, general and administrative expenses.
Income from operations consists of gross profit minus selling, general and administrative expenses.
Interest expense, net includes interest on our Revolving Credit Facility and Convertible Notes, letters of credit fees, interest on our capital leases, as well as amortization of financing costs, reduced by interest income earned from highly liquid investments (investments purchased with an original maturity of three months or less).
Key Performance Indicators and Statistics
We use a number of key indicators of financial condition and operating results to evaluate the performance of our business, including the following (in thousands):
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Three Months Ended | |||||||
March 26, 2016 | March 28, 2015 | ||||||
Net sales | $ | 336,774 | $ | 336,835 | |||
(Decrease) Increase in total comparable net sales (1) | (1.9 | )% | 1.2 | % | |||
(Decrease) Increase in comparable store net sales | (2.6 | )% | 1.5 | % | |||
Increase (Decrease) in e-commerce comparable net sales | 3.9 | % | (0.9 | )% | |||
Gross profit as a percent of net sales | 34.5 | % | 34.0 | % | |||
Income from operations | $ | 27,262 | $ | 30,955 |
(1) | Total comparable net sales are comprised of comparable retail store sales and e-commerce sales. |
The following table shows the growth in our network of stores during the three months ended March 26, 2016 and March 28, 2015:
Three Months Ended | |||||
March 26, 2016 | March 28, 2015 | ||||
Store Data: | |||||
Stores open at beginning of period | 758 | 717 | |||
Stores opened | 9 | 11 | |||
Stores closed | (1 | ) | (3 | ) | |
Stores open at end of period | 766 | 725 | |||
Total retail square footage at end of period (in thousands) | 2,685 | 2,579 | |||
Average store square footage at end of period | 3,505 | 3,558 |
Three Months Ended March 26, 2016 Compared to Three Months Ended March 28, 2015
The information presented below is for the three months ended March 26, 2016 and March 28, 2015 and was derived from our condensed consolidated financial statements, which, in the opinion of management, include all adjustments necessary for a fair presentation of our financial position and operating results for such periods and as of such dates.
The following tables summarize our results of operations for the three months ended March 26, 2016 and March 28, 2015 (in thousands):
Three Months Ended | ||||||||||||||
March 26, 2016 | March 28, 2015 | $ Change | % Change | |||||||||||
Net sales | $ | 336,774 | $ | 336,835 | $ | (61 | ) | — | % | |||||
Cost of goods sold | 220,527 | 222,186 | (1,659 | ) | (0.7 | )% | ||||||||
Cost of goods sold as % of net sales | 65.5 | % | 66.0 | % | ||||||||||
Gross profit | 116,247 | 114,649 | 1,598 | 1.4 | % | |||||||||
Gross profit as % of net sales | 34.5 | % | 34.0 | % | ||||||||||
Selling, general and administrative expenses | 88,985 | 83,694 | 5,291 | 6.3 | % | |||||||||
SG&A expenses as % of net sales | 26.4 | % | 24.8 | % | ||||||||||
Income from operations | 27,262 | 30,955 | (3,693 | ) | (11.9 | )% | ||||||||
Income from operations as % of net sales | 8.1 | % | 9.2 | % | ||||||||||
Interest expense, net | 2,262 | 164 | 2,098 | 1,279.3 | % | |||||||||
Income before provision for income taxes | 25,000 | 30,791 | (5,791 | ) | (18.8 | )% | ||||||||
Provision for income taxes | 10,218 | 12,091 | (1,873 | ) | (15.5 | )% | ||||||||
Net income | $ | 14,782 | $ | 18,700 | $ | (3,918 | ) | (21.0 | )% |
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Net Sales
Net sales were relatively flat as a result of an increase in our total non-comparable net sales of $7.0 million offset by a decrease in our total comparable net sales of $6.0 million, or 1.9% and a decrease in Nutri-Force net sales of $1.1 million to third parties. Sales increased $4.8 million in the Vitamins, Minerals and Herbs category and decreased $4.9 million in the Sports Nutrition category.
Net sales for our three business segments, as well as a discussion of the changes in each segment's net sales from the comparable prior year period, are provided below (in thousands):
Three Months Ended | ||||||||||||||
March 26, 2016 | March 28, 2015 | $ Change | % Change | |||||||||||
Net Sales: | ||||||||||||||
Retail (a) | $ | 288,012 | $ | 287,983 | $ | 29 | — | % | ||||||
Direct (b) | 35,852 | 34,844 | 1,008 | 2.9 | % | |||||||||
Manufacturing (c) | 20,560 | 21,828 | (1,268 | ) | (5.8 | )% | ||||||||
Segment net sales | 344,424 | 344,655 | (231 | ) | (0.1 | )% | ||||||||
Elimination of intersegment revenues | (7,650 | ) | (7,820 | ) | 170 | (2.2 | )% | |||||||
Total net sales | $ | 336,774 | $ | 336,835 | $ | (61 | ) | — | % |
(a) | The change in retail sales resulted from an increase in non-comparable store sales of $7.3 million offset by a decrease in comparable store sales of $7.3 million, or 2.6%. The decrease in comparable store sales was primarily driven by lower customer traffic. |
(b) | Direct sales increased primarily due to an increase in e-commerce sales of 3.9% partially offset by a decrease in catalog sales. The increase in e-commerce sales was primarily due to effective customer acquisition strategies. |
(c) | Manufacturing sales reflect a decrease of $1.1 million in product manufactured for third parties and a decrease of $0.2 million in product manufactured for the Vitamin Shoppe assortment. |
Cost of Goods Sold
Cost of goods sold includes product, warehouse, distribution, manufacturing and occupancy costs. As a percentage of net sales, cost of goods sold decreased primarily due to 1.3% resulting from category mix, higher private brands penetration and a reduction in promotional pricing partially offset by an increase of 0.5% related to occupancy costs and 0.3% due to supply chain costs.
Selling, General and Administrative Expenses
Three Months Ended | ||||||||||||||
March 26, 2016 | March 28, 2015 | $ Change | % Change | |||||||||||
SG&A Expenses (in thousands): | ||||||||||||||
Payroll and Benefits (a) | $ | 33,845 | $ | 31,994 | $ | 1,851 | 5.8 | % | ||||||
Payroll & benefits as % of net sales | 10.0 | % | 9.5 | % | ||||||||||
Advertising and Promotion (b) | 5,892 | 6,532 | (640 | ) | (9.8 | )% | ||||||||
Advertising & promotion as % of net sales | 1.7 | % | 1.9 | % | ||||||||||
Other SG&A (c) | 49,248 | 45,168 | 4,080 | 9.0 | % | |||||||||
Other SG&A as % of net sales | 14.6 | % | 13.4 | % | ||||||||||
Total SG&A Expenses | $ | 88,985 | $ | 83,694 | $ | 5,291 | 6.3 | % |
(a) | Payroll and benefits increased primarily due to the increase in head count to operate new stores and an increase in the average wage rates. |
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(b) | Advertising and promotion decreased due to lower retail expenditures of $0.8 million partially offset by an increase in digital advertising of $0.2 million. |
(c) | The increase in other SG&A expenses was primarily due to Super Supplements conversion costs of $1.3 million, costs related to the closing of the Canada stores of $1.1 million, increased depreciation and amortization expenses of $0.8 million and reinvention strategy costs of $0.5 million. |
Income from Operations
Operating income (loss) for our three business segments are provided below (in thousands):
Three Months Ended | ||||||||||||||
March 26, 2016 | March 28, 2015 | $ Change | % Change | |||||||||||
Income (Loss) from operations: | ||||||||||||||
Retail (a) | $ | 56,663 | $ | 56,059 | $ | 604 | 1.1 | % | ||||||
% of net sales | 19.7 | % | 19.5 | % | ||||||||||
Direct (b) | 5,186 | 5,065 | 121 | 2.4 | % | |||||||||
% of net sales | 14.5 | % | 14.5 | % | ||||||||||
Manufacturing (c) | (262 | ) | 299 | (561 | ) | (187.6 | )% | |||||||
% of net sales | (1.3 | )% | 1.4 | % | ||||||||||
Corporate costs (d) | (34,325 | ) | (30,468 | ) | (3,857 | ) | 12.7 | % | ||||||
% of net sales | (10.2 | )% | (9.0 | )% | ||||||||||
Income from operations | $ | 27,262 | $ | 30,955 | $ | (3,693 | ) | (11.9 | )% |
(a) | The increase in retail income from operations is due to a 1.7% increase in gross margin resulting from category mix, higher private brands penetration and a reduction in promotional pricing partially offset by 0.7% related to an increase in occupancy costs and 0.7% from payroll and benefits costs. |
(b) | Direct income from operations was flat as a percentage of sales due to a 1.3% reduction in margin offset by a 1.3% reduction of selling, general and administrative expenses. |
(c) | The decrease in manufacturing income from operations was primarily due to lower sales volume. |
(d) | The increase in corporate costs was primarily due to Super Supplements conversion costs of $1.3 million, costs related to the closing of the Canada stores of $1.1 million, increased depreciation and amortization expenses of $0.8 million and reinvention strategy costs of $0.5 million. |
Interest Expense, Net
The increase in interest expense, net of $2.1 million is primarily due to interest expense on our Convertible Notes, which includes the coupon interest, amortization of the debt discount and the amortization of deferred financing fees.
Provision for Income Taxes
The effective tax rate for the three months ended March 26, 2016 was 40.9%, compared to 39.3% for the three months ended March 28, 2015. The change in the effective tax rate is primarily due to charges incurred in Canada related to the closing of retail stores which do not result in tax benefits to the Company’s consolidated results.
Key Indicators of Liquidity and Capital Resources
The following table provides key indicators of our liquidity and capital resources (in thousands):
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As of | |||||||
March 26, 2016 | December 26, 2015 | ||||||
Balance Sheet Data: | |||||||
Cash and cash equivalents | $ | 2,096 | $ | 15,104 | |||
Working capital | 134,622 | 157,089 | |||||
Total assets | 736,579 | 748,691 | |||||
Total debt, including capital lease obligations | 122,836 | 123,525 |
Three Months Ended | |||||||
March 26, 2016 | March 28, 2015 | ||||||
Other Information: | |||||||
Depreciation and amortization of fixed and intangible assets | $ | 10,063 | $ | 9,227 | |||
Cash Flows Provided By (Used In): | |||||||
Operating activities | $ | 43,195 | $ | 5,534 | |||
Investing activities | (11,772 | ) | (10,936 | ) | |||
Financing activities | (44,354 | ) | (5,066 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (77 | ) | 156 | ||||
Net decrease in cash and cash equivalents | $ | (13,008 | ) | $ | (10,312 | ) |
Liquidity and Capital Resources
Our primary uses of cash have been to fund working capital, operating expenses and capital expenditures related primarily to the build-out of new stores, the remodeling of existing stores and information technology investments as well as to repurchase shares of our common stock. Historically, we have financed our requirements predominately through internally generated cash flow, supplemented with short-term financing. In Fiscal 2015, we issued $143.8 million of Convertible Notes to fund the repurchase of shares of our common stock. Refer to Note 5., “Credit Arrangements”, to our condensed consolidated financial statements for additional information. We believe that the cash generated by operations and cash and cash equivalents, together with the borrowing availability under our revolving credit facility, will be sufficient to meet our working capital needs for the next twelve months, our store growth plans, costs and investments related to our reinvention strategy, systems development, store improvements and interest payments on the Convertible Notes, as well as the repurchase of shares of our common stock from time to time.
We purchased $42.3 million of common stock under our $300.0 million share repurchase programs during the three months ended March 26, 2016. Refer to Note 9., “Share Repurchase Programs”, to our condensed consolidated financial statements for additional information. During Fiscal 2016 we plan to spend approximately $40 million in capital expenditures, including costs for building new stores, remodeling existing stores and information technology and investments resulting from our reinvention strategy. Of the total capital expenditures projected for Fiscal 2016, we have invested $11.7 million during the three months ended March 26, 2016. We plan to open approximately 30 new stores in Fiscal 2016, of which we have opened 9 stores and closed 1 store as of March 26, 2016. Our working capital requirements for merchandise inventory will continue to increase as we continue to open additional stores. Currently, our practice is to establish an inventory level of approximately $150,000 at cost for each of our stores, the cost of which is partially offset by vendor incentive and allowance programs. Additionally, 30 day payment terms have been extended to us by some of our suppliers allowing us to effectively manage our inventory and working capital.
The Company is subject to concentrations of credit risk associated with cash and cash equivalents, and at times holds cash balances in excess of Federal Deposit Insurance Corporation limits. Currently, the Company’s cash management practice is to hold cash balances in quality institutions and invest in highly liquid and secure investments.
We were in compliance with all debt covenants relating to our Revolving Credit Facility and Convertible Notes as of March 26, 2016. We expect to be in compliance with these same debt covenants during the remainder of Fiscal 2016 as well.
Cash Provided by Operating Activities
Net cash provided by operating activities was $43.2 million for the three months ended March 26, 2016 as compared to $5.5 million for the three months ended March 28, 2015. The $37.7 million increase in cash flows from operating activities is
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primarily due to an increase in accrued income taxes and accrued compensation for the three months ended March 26, 2016 and an increase in inventory purchases for the three months ended March 28, 2015 related primarily to the transition of Vitamin Shoppe production of private brands to Nutri-Force.
Cash Used in Investing Activities
Net cash used in investing activities was $11.8 million during the three months ended March 26, 2016 as compared to $10.9 million during the three months ended March 28, 2015. Capital expenditures during the three months ended March 26, 2016 and March 28, 2015 were used primarily for the build-out of new stores, the remodeling of existing stores and information technology investments. The Company opened 9 new stores during the three months ended March 26, 2016 as compared to 11 new stores during the three months ended March 28, 2015.
Cash Used in Financing Activities
Net cash used in financing activities was $44.4 million for the three months ended March 26, 2016, as compared to $5.1 million for the three months ended March 28, 2015. The $39.3 million increase in cash used in financing activities is primarily due to purchases of common stock under the Company’s share repurchase programs of $25.8 million and a reduction in net borrowings under the Company’s Revolving Credit Facility of $12.0 million.
Revolving Credit Facility
The terms of our Revolving Credit Facility extend through October 11, 2018, and allow the Company to borrow up to $90.0 million, subject to the terms of the facility, with a Company option to increase the facility up to a total of $150.0 million. For information regarding the terms of our Revolving Credit Facility, refer to Note 5., “Credit Arrangements” in the Notes to Condensed Consolidated Financial Statements (unaudited). As of March 26, 2016, the Company had $6.0 million of borrowings outstanding on its Revolving Credit Facility. The largest amount borrowed during the three months ended March 26, 2016 and March 28, 2015 was $15.0 million and $18.0 million, respectively. The unused available line of credit under the Revolving Credit Facility at March 26, 2016 was $81.1 million.
Convertible Notes
On December 9, 2015, the Company closed its offering of $143.8 million of its 2.25% Convertible Notes. The Convertible Notes are senior unsecured obligations of the Company. Interest is payable on the Convertible Notes on June 1 and December 1 of each year, commencing on June 1, 2016 until their maturity date of December 1, 2020. For additional information regarding the terms of our Convertible Notes, refer to Note 5., "Credit Arrangements", to our condensed consolidated financial statements.
Contractual Obligations and Commercial Commitments
As of March 26, 2016, there have been no material changes with respect to our contractual obligations since December 26, 2015. For additional information, see Contractual Obligations and Commercial Commitments under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, in the Fiscal 2015 Form 10-K.
Off-Balance Sheet Arrangements
We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business. We do not have any off-balance sheet arrangements or relationships with entities that are not consolidated into our financial statements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources. The Company has commitments for its operating leases, primarily related to its stores, distribution centers, as well as its manufacturing and corporate facilities, which are not reflected on our balance sheet. For additional information, see Contractual Obligations and Commercial Commitments under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, in the Fiscal 2015 10-K.
Effects of Inflation
We do not believe that our sales or operating results have been materially affected by inflation during the periods presented in our financial statements. During the three months ended March 26, 2016, retail price inflation was approximately 1%. We anticipate retail inflation to be approximately 1% for the remainder of Fiscal 2016. Additionally, we may experience increased cost pressure from our suppliers which could have an adverse effect on our gross profit results in the future.
Recent Accounting Pronouncements
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Except as discussed in Note 1., “Basis of Presentation” in the Notes to the Condensed Consolidated Financial Statements (unaudited), the Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on its results of operations, financial condition, or cash flows, based on current information.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
The Company’s market risks relate primarily to changes in interest rates. Market risk represents the risk of changes in the value of market risk sensitive instruments caused by fluctuations in interest rates and commodity prices. Changes in these factors could cause fluctuations in the results of our operations and cash flows.
Our Revolving Credit Facility carries a floating interest rate and, therefore, our statements of income and our cash flows are exposed to changes in interest rates. As of March 26, 2016, there was $6.0 million of borrowings outstanding on our Revolving Credit Facility. At March 26, 2016, a hypothetical 10% change in the floating interest rate would have a de minimis impact on our consolidated financial statements.
Our Convertible Notes carry a fixed interest rate and, therefore, have no market risk.
Item 4. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, who are our principal executive officer and principal financial officer, respectively, of the design and operation of our disclosure controls and procedures as such term is defined in Rules l3a-15(e) and l5d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of March 26, 2016, pursuant to Exchange Act Rules 13a-l5 and 15d-15. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of March 26, 2016.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended March 26, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including the Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
For a more detailed explanation of the factors affecting our business, please refer to the Risk Factors section in the Fiscal 2015 Form 10-K. There has not been a material change to the risk factors set forth in the Fiscal 2015 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table summarizes the Company’s purchases of shares of common stock during the quarter ended March 26, 2016:
Period | Total Number of Shares (or Units) Purchased (1) | Average Price Paid per Share (or Unit) (2) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (3) | Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (in thousands) | |||||||||
December 27, 2015 through January 23, 2016 | 101,795 | $ | 27.99 | 100,023 | $ | 93,287 | |||||||
January 24, 2016 through February 20, 2016 | 584,327 | $ | 24.26 | 579,134 | $ | 79,268 | |||||||
February 21, 2016 through March 26, 2016 | 990,437 | $ | 25.74 | 990,437 | $ | 53,772 | |||||||
Totals | 1,676,559 | 1,669,594 |
(1) | Includes 6,965 shares withheld to cover required tax payments on behalf of employees as their restricted shares vest. |
(2) | Average price paid per share includes 110,781 shares received on February 10, 2016 and 124,272 shares received on February 25, 2016, in settlement of an accelerated share repurchase arrangement, for no additional consideration. |
(3) | On August 5, 2014, May 6, 2015 and November 23, 2015, the Company’s board of directors approved share repurchase programs that enable the Company to purchase up to an aggregate of $300 million of its shares of common stock from time to time over three year periods ending on August 4, 2017, May 5, 2018 and November 22, 2018, respectively. |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
Exhibit
No. Description
3.1 | Fourth Amended and Restated By-laws of Vitamin Shoppe Inc. (Incorporated by reference to Exhibit 3.2 in our Annual Report on Form 10-K filed on February 23, 2016. (File No. 001-34507)) |
10.01 | Vitamin Shoppe, Inc. Executive Severance Pay Policy, amended and restated effective as of March 4, 2016. (Filed herewith) |
10.02 | Director Compensation Plan and Stock Ownership Guidelines.* (Incorporated by reference to Exhibit 10.2 in our Current Report on Form 8-K filed on January 4, 2016 (File No. 001-34507)) |
10.03 | Offer Letter, dated as of March 24, 2016, among Vitamin Shoppe, Inc., Vitamin Shoppe Industries Inc. and Brenda Galgano. (Filed herewith) |
10.04 | Letter Agreement, dated as of December 31, 2015, among Vitamin Shoppe, Inc., Vitamin Shoppe Industries Inc. and Richard Markee. * (Incorporated by reference to Exhibit 10.1 in our Current Report on Form 8-K filed on January 4, 2016 (File No. 001-34507)) |
10.05 | Letter Agreement, dated as of January 29, 2016, among Vitamin Shoppe, Inc., Vitamin Shoppe Industries Inc. and Louis H. Weiss. (Incorporated by reference to Exhibit 10.53 in our Annual Report on Form 10-K filed on February 23, 2016. (File No. 001-34507)) |
10.06 | Form of Performance Stock Unit Award Agreement. (Filed herewith) |
10.07 | Form of Non-Qualified Stock Option Agreement. (Filed herewith) |
10.08 | Form of Restricted Stock Award Agreement. (Filed herewith) |
10.09 | Agreement, dated as of January 12, 2016, by and between the Company and Carlson Capital. (Incorporated by reference to Exhibit 10.1 in our Current Report on Form 8-K filed on January 12, 2016 (File No. 001-34507)) |
10.10 | Fourth Amendment to Amended and Restated Loan and Security Agreement, dated as of January 29, 2016, by and among Vitamin Shoppe Industries Inc., VS Direct Inc., Vitamin Shoppe Mariner, Inc., and Vitamin Shoppe Global, Inc., VS Hercules LLC, FDC Vitamins LLC, Betancourt Sports Nutrition, LLC, Vitamin Shoppe Procurement Services, Inc., as Borrowers, the guarantors parties thereto, the lenders parties thereto, and JPMorgan Chase Bank, N.A., as Agent. (Incorporated by reference to Exhibit 10.13 in our Annual Report on Form 10-K filed on February 23, 2016 (File No. 001-34507)) |
10.11 | Joinder Agreement, dated as of March 20, 2015 by and between Vitamin Shoppe Procurement Services and JPMorgan Chase Bank, N.A. (Incorporated by reference to Exhibit 10.29 in our Annual Report on Form 10-K filed on February 23, 2016. (File No. 001-34507)) |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Executive Officer. |
32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer. |
101.1 | The following financial information from the Company’s Quarterly Report on Form 10-Q, for the period ended March 26, 2016, formatted in eXtensible Business Reporting Language: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements |
* Management contract or compensation plan or arrangement.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on May 4, 2016.
VITAMIN SHOPPE, INC. | ||
By: | /s/ Brenda Galgano | |
Brenda Galgano | ||
EVP and Chief Financial Officer |
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INDEX TO EXHIBITS
Exhibit
No. Description
3.1 | Fourth Amended and Restated By-laws of Vitamin Shoppe Inc. (Incorporated by reference to Exhibit 3.2 in our Annual Report on Form 10-K filed on February 23, 2016. (File No. 001-34507)) |
10.01 | Vitamin Shoppe, Inc. Executive Severance Pay Policy, amended and restated effective as of March 4, 2016. (Filed herewith) |
10.02 | Director Compensation Plan and Stock Ownership Guidelines.* (Incorporated by reference to Exhibit 10.2 in our Current Report on Form 8-K filed on January 4, 2016 (File No. 001-34507)) |
10.03 | Offer Letter, dated as of March 24, 2016, among Vitamin Shoppe, Inc., Vitamin Shoppe Industries Inc. and Brenda Galgano. (Filed herewith) |
10.04 | Letter Agreement, dated as of December 31, 2015, among Vitamin Shoppe, Inc., Vitamin Shoppe Industries Inc. and Richard Markee. * (Incorporated by reference to Exhibit 10.1 in our Current Report on Form 8-K filed on January 4, 2016 (File No. 001-34507)) |
10.05 | Letter Agreement, dated as of January 29, 2016, among Vitamin Shoppe, Inc., Vitamin Shoppe Industries Inc. and Louis H. Weiss. (Incorporated by reference to Exhibit 10.53 in our Annual Report on Form 10-K filed on February 23, 2016. (File No. 001-34507)) |
10.06 | Form of Performance Stock Unit Award Agreement. (Filed herewith) |
10.07 | Form of Non-Qualified Stock Option Agreement. (Filed herewith) |
10.08 | Form of Restricted Stock Award Agreement. (Filed herewith) |
10.09 | Agreement, dated as of January 12, 2016, by and between the Company and Carlson Capital. (Incorporated by reference to Exhibit 10.1 in our Current Report on Form 8-K filed on January 12, 2016 (File No. 001-34507)) |
10.10 | Fourth Amendment to Amended and Restated Loan and Security Agreement, dated as of January 29, 2016, by and among Vitamin Shoppe Industries Inc., VS Direct Inc., Vitamin Shoppe Mariner, Inc., and Vitamin Shoppe Global, Inc., VS Hercules LLC, FDC Vitamins LLC, Betancourt Sports Nutrition, LLC, Vitamin Shoppe Procurement Services, Inc., as Borrowers, the guarantors parties thereto, the lenders parties thereto, and JPMorgan Chase Bank, N.A., as Agent. (Incorporated by reference to Exhibit 10.13 in our Annual Report on Form 10-K filed on February 23, 2016 (File No. 001-34507)) |
10.11 | Joinder Agreement, dated as of March 20, 2015 by and between Vitamin Shoppe Procurement Services and JPMorgan Chase Bank, N.A. (Incorporated by reference to Exhibit 10.29 in our Annual Report on Form 10-K filed on February 23, 2016. (File No. 001-34507)) |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Executive Officer. |
32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer. |
101.1 | The following financial information from the Company’s Quarterly Report on Form 10-Q, for the period ended March 26, 2016, formatted in eXtensible Business Reporting Language: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements |
* Management contract or compensation plan or arrangement.
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