Accounting Policies, by Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Accounting Policies [Abstract] | ' |
Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block] | ' |
Nature of Business |
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Vitacost.com, Inc. (“Vitacost” or the “Company”) is a leading online retailer of healthy living products, including dietary supplements such as vitamins, minerals, herbs and other botanicals, as well as cosmetics, natural personal care products, pet products, sports nutrition and health foods. Vitacost was incorporated in 1994 and began its online retail activity in 1999. Vitacost sells a proprietary line of healthy living products as well as a wide selection of other manufacturers’ brand-name goods. The Company ships products from two distribution centers located in Lexington, North Carolina and Las Vegas, Nevada. |
Consolidation, Policy [Policy Text Block] | ' |
Principles of Consolidation: |
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The consolidated financial statements include the accounts of Vitacost and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. |
Reclassification, Policy [Policy Text Block] | ' |
Reclassifications: |
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Reclassifications on the 2012 consolidated balance sheet have been made to conform to the 2013 presentation. Reclassifications on the 2012 and 2011 consolidated statements of cash flows have been made to conform to the 2013 presentation. |
Use of Estimates, Policy [Policy Text Block] | ' |
Accounting Estimates: |
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The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates inherent in the preparation of the accompanying consolidated financial statements include deferred revenue, the reserve for inventory obsolescence, assumptions used in the valuation of stock-based compensation, the reserve for sales returns and management’s forecast of future cash flows used as a basis to assess recoverability of long-lived assets, including intangible assets and goodwill. |
Cash and Cash Equivalents, Policy [Policy Text Block] | ' |
Cash and Cash Equivalents: |
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The Company considers all highly-liquid investments purchased with original maturities of three months or less at the date of purchase to be cash equivalents. The Company maintains its cash and cash equivalents in various bank deposit accounts which, at times, may exceed the federally-insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on such accounts. |
Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block] | ' |
Restricted Cash: |
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Restricted cash consists of cash pledged as collateral to a vendor. |
Trade and Other Accounts Receivable, Policy [Policy Text Block] | ' |
Accounts Receivable: |
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Accounts receivable consists primarily of amounts in-transit from banks for customer credit card, debit card and electronic benefit transfer transactions that are generally processed by the banks within seven days of authorization. Based on the Company’s historical collection experience and a review of the status of accounts receivable, an allowance for doubtful accounts of $0.1 million and $0.2 million was recorded as of December 31, 2013 and 2012, respectively. |
Inventory, Policy [Policy Text Block] | ' |
Inventory: |
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Inventory, consisting principally of healthy living products, is primarily stated at the lower of cost or market using the first in, first out (“FIFO”) method. |
Property, Plant and Equipment, Policy [Policy Text Block] | ' |
Property and Equipment: |
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Property and equipment is stated at cost less accumulated depreciation. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the assets or the lease term. Depreciation is computed using the straight-line method over the following estimated useful lives: |
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| Years | | | | | | | | | |
Furniture, fixtures and equipment | 3 | – | 10 | | | | | | | | | |
Computers | 3 | – | 5 | | | | | | | | | |
Software | 3 | – | 5 | | | | | | | | | |
Leasehold and building improvements | 3 | – | 39 | | | | | | | | | |
Buildings | | 39 | | | | | | | | | | |
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Upon retirement or sale, the cost and accumulated depreciation are from the accounts and the gain or loss, if any, is included in the consolidated statements of operations. |
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Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company would evaluate potential impairment by comparing the carrying amount of the asset with the estimated undiscounted future cash flows associated with the use of the asset and its eventual disposition. Should the review indicate the asset is not recoverable; the Company’s carrying value of the asset would be reduced to its estimated fair value, which is measured by future discounted cash flows. |
Goodwill and Intangible Assets, Policy [Policy Text Block] | ' |
Goodwill and Other Intangible Assets: |
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Goodwill is tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. |
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Intangible assets subject to amortization are amortized using the straight-line method over their estimated period of benefit. The Company evaluates the recoverability of intangible assets periodically by taking into account events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired. |
Revenue Recognition, Policy [Policy Text Block] | ' |
Revenue Recognition and Freight: |
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Revenue from the sale of healthy living products is recognized when all the following criteria are met: a customer executes an order, the sales price and the shipping and handling fee have been determined, credit card authorization has occurred, collection is reasonably assured and the product has been received by the customer. The Company establishes a deferred revenue liability that represents orders shipped but not yet received by the customer at the end of a given period. The Company’s sales terms grant customers certain limited rights of return. It has been the Company’s experience that such returns have been insignificant. The Company recorded a reserve for returns of $0.2 million at December 31, 2013 and 2012. |
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Revenue from customers, classified by products and freight were as follows: |
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| | Year Ended December 31, | |
| | 2013 | | | 2012 | | | 2011 | |
(In thousands) | | | |
Third-party products | | $ | 290,231 | | | $ | 245,800 | | | $ | 190,541 | |
Proprietary products | | | 78,002 | | | | 72,335 | | | | 60,973 | |
Freight | | | 14,511 | | | | 12,545 | | | | 9,009 | |
Net sales | | $ | 382,744 | | | $ | 330,680 | | | $ | 260,523 | |
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Freight costs are expensed as incurred and recorded as a component of cost of goods sold. Freight expense totaled approximately $36.4 million, $31.7 million, and $26.0 million for the years ended December 31, 2013, 2012, and 2011, respectively. |
Operating Expenses Policy [Policy Text Block] | ' |
Operating Expenses: |
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The Company’s operating expenses are grouped into three categories: fulfillment, sales and marketing, and general and administrative. The following is a brief synopsis of each category: |
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Fulfillment Expenses: |
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Fulfillment expenses include the costs of warehousing and shipping supplies, machinery and equipment, maintenance, employees, professional services and rent. |
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Sales and Marketing Expenses: |
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Sales and marketing expenses include online advertising and promotional expenditures, affiliates and partners’ commissions, traditional media advertising, print expenses and payroll related expenses for personnel engaged in marketing, sales, customer service, merchandising. Advertising costs are expensed as incurred. Advertising expense totaled $20.9 million, $21.1 million and $13.2 million for the years ended December 31, 2013, 2012, and 2011, respectively. |
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General and Administrative Expenses: |
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General and administrative expenses consist of executive compensation, information technology expenses, credit card processing fees, legal fees, professional services, employee expenses and general corporate expenses. |
Earnings Per Share, Policy [Policy Text Block] | ' |
Earnings per Share: |
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The Company computed earnings per share by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by giving effect to all potentially dilutive common shares, including stock options and warrants. The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding for the years ended December 31, 2013, 2012, and 2011: |
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| | Year Ended December 31, | |
| | 2013 | | | 2012 | | | 2011 | |
| | (In thousands) | |
Weighted-average shares outstanding - basic | | | 33,631 | | | | 32,675 | | | | 27,829 | |
Effect of dilutive securities | | | - | | | | - | | | | - | |
Weighted-average shares outstanding - diluted | | | 33,631 | | | | 32,675 | | | | 27,829 | |
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For the periods where the Company reported losses, all common stock equivalents are excluded from the computation of diluted earnings per share, since the result would be antidilutive. Securities that were not included in the calculation of diluted earnings per share because to do so would have been antidilutive for the periods presented, are as follows: |
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| | Year Ended December 31, | |
| | 2013 | | | 2012 | | | 2011 | |
| | (In thousands) | |
Stock options | | | 2,679 | | | | 2,391 | | | | 2,582 | |
Warrants | | | 1,681 | | | | 1,681 | | | | - | |
Total antidilutive common stock equivalents excluded from diluted earnings per share | | | 4,360 | | | | 4,072 | | | | 2,582 | |
Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] | ' |
Stock-Based Compensation: |
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In September 2011, the Company obtained shareholder approval of the 2011 Incentive Compensation Plan (the “Plan”) which replaced the 2007 Stock Award Plan (the “2007 Plan”). The 2007 Plan will continue to govern awards previously granted under it. The Plan’s share reserve includes the sum of 6.0 million shares of the Company’s common stock, plus (i) any shares of its common stock which have been reserved but not issued pursuant to any awards granted under the 2007 Plan, and (ii) the number of shares subject to outstanding awards under the 2007 Plan that expire or otherwise terminate without having been exercised in full, or are forfeited to or repurchased by the Company. Under the terms of the Plan, options to purchase stock are granted at an exercise price that approximates the fair market value of the underlying shares at the time of the grant. Compensation expense related to stock options recognized in earnings in 2013, 2012, and 2011, was approximately $2.4 million, $2.0 million, and $1.0 million on a pretax basis, respectively. |
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Nonqualified options generally become exercisable on the date of the grant or over a five-year period and expire in ten years. Incentive stock options generally become exercisable over a five-year period and expire in ten years. The Company recognizes compensation expense for stock awards based on their fair value and related tax effects over the requisite service period. The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation method which uses the assumptions noted in the below table. The valuation technique incorporates assumptions for the expected volatility of the stock price, the expected term of the option, expected dividends, forfeitures and risk-free interest rate for the expected term of the option. As a result of its limited trading history, the Company uses expected volatilities based on the historical volatility of a custom peer group. The expected term of the option is calculated using simplified method, which analyzes the vesting terms of an option along with the contractual term, setting the expected term at a midpoint in between. The risk-free interest rate takes into account the time-value of money. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at time of grant. The Company estimates forfeitures based on historical pre-vesting forfeitures and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. |
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The fair value of each option granted was estimated using the following assumptions: |
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| 2013 | 2012 | 2011 | | | |
Expected life - employees (years) | 6 | - | 7 | 6 | - | 7 | | N/A | | | | |
Expected life - executives (years) | 6 | - | 7 | 6 | - | 7 | 5.5 | - | 6.5 | | | |
Volatility percentage | 52.90% | - | 53.30% | 54.00% | - | 55.20% | 62.60% | - | 63.90% | | | |
Risk free interest rate | 1.18 | - | 2.08% | 0.83% | - | 1.22% | 1.13% | - | 1.94% | | | |
Dividends | | None | | | None | | | None | | | | |
Fair Value of Financial Instruments, Policy [Policy Text Block] | ' |
Fair Value of Financial Instruments: |
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Existing accounting guidance defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and requires disclosures about fair value measurements. The guidance applies to all assets and liabilities that are being measured and reported on a fair value basis. It requires disclosure that establishes a framework for measuring fair value in GAAP and about fair value measurements. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. Assets and liabilities carried at fair value are classified and disclosed in one of the following three categories: |
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Level 1: Quoted market prices in active markets for identical assets or liabilities. |
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Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data. |
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Level 3: Unobservable inputs that are not corroborated by market data. |
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The carrying amounts of other financial instruments, including cash and cash equivalents, accounts receivable, other receivables and accounts payable approximate fair value due to the short maturity of these instruments. Cash and cash equivalents are a Level 1 instrument within the fair value hierarchy. |
Concentration Risk, Credit Risk, Policy [Policy Text Block] | ' |
Concentration of Credit Risk: |
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The Company’s cash and cash equivalents were held by one major financial institution and for certain accounts exceeded federally insured limits. These cash and cash equivalent balances could be impacted if this financial institution fails or is subjected to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to its cash and cash equivalents. |
Income Tax, Policy [Policy Text Block] | ' |
Income Taxes: |
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Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax base. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that includes the enactment date. |
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When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The Company has determined that there were no material uncertain tax positions and accordingly no associated interest and penalties were required to be accrued at December 31, 2013 or 2012. |
Commitments and Contingencies, Policy [Policy Text Block] | ' |
Contingencies: |
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On an ongoing basis, the Company assesses potential liabilities related to lawsuits or claims brought against it. While it is typically very difficult to determine the timing and ultimate outcome of such actions, the Company’s management uses their best judgment to determine if it is probable that it will incur an expense related to the settlement or final adjudication of such matters and whether a reasonable estimation of such probable loss, if any, can be made. In assessing probable losses, the Company takes into consideration estimates of the amount of insurance recoveries, if any. The Company discloses a contingency when it is at least a reasonable possibility that a loss or an additional loss may have been incurred and accrues a liability when it believes a loss is probable and the amount of loss can be reasonably estimated. Due to the inherent uncertainties related to the eventual outcome of litigation and potential insurance recoveries, it is possible that certain matters may be resolved for amounts materially different from any provisions or disclosures that the Company has previously made. |
Sales or Other Taxes, Policy [Policy Text Block] | ' |
Sales or Other Taxes: |
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A number of states have sought to impose sales or other tax collection obligations on online retailers. Certain states have imposed such a sales tax obligation requirement on remote online retailers that use residents of that state to directly or indirectly refer potential customers, via a link on an internet website or other means, to the online retailer for a commission-based fee. There is still significant uncertainty as to whether or how existing laws governing these matters apply to Vitacost and how these laws will be interpreted for the Company and other online retailers. As a result, it is currently not possible to determine the ultimate outcome as to whether such potential obligations apply to the Company under its specific facts and circumstances. Because the Company does not believe that it is probable such potential obligations are applicable to its specific facts and circumstances, it has not accrued for such potential obligations as of December 31, 2013. The Company is also currently unable to estimate the amount of the loss, if any, should such potential obligations apply. The eventual outcome of a successful assertion by one or more states that the Company should collect sales or other taxes may be materially different from any provisions or disclosures the Company has previously made and could have a material adverse effect on the Company’s financial position, results of operations and cash flows. |
New Accounting Pronouncements, Policy [Policy Text Block] | ' |
Recently Adopted and Recently Issued Accounting Guidance |
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The Company did not adopt any accounting guidance nor was there any new accounting guidance issued during the year that had or would have had a material impact on the Company’s consolidated financial statements. |