Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Dec. 31, 2013 | Jan. 28, 2014 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'Natural Grocers by Vitamin Cottage, Inc. | ' |
Entity Central Index Key | '0001547459 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Dec-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--09-30 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 22,472,130 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q1 | ' |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Dec. 31, 2013 | Sep. 30, 2013 |
In Thousands, unless otherwise specified | ||
Current assets: | ' | ' |
Cash and cash equivalents | $6,222 | $8,132 |
Restricted cash | 0 | 500 |
Short term investments - available-for-sale securities | 1,150 | 1,149 |
Accounts receivable, net | 1,698 | 2,401 |
Merchandise inventory | 48,572 | 45,472 |
Prepaid expenses and other current assets | 870 | 1,097 |
Deferred income tax assets | 1,196 | 1,114 |
Total current assets | 59,708 | 59,865 |
Property and equipment, net | 102,772 | 98,910 |
Other assets: | ' | ' |
Deposits and other assets | 189 | 203 |
Goodwill and other intangible assets, net of accumulated amortization of $654 and $654, respectively | 900 | 900 |
Deferred financing costs, net | 39 | 25 |
Total other assets | 1,128 | 1,128 |
Total assets | 163,608 | 159,903 |
Current liabilities: | ' | ' |
Accounts payable | 28,080 | 28,918 |
Accrued expenses | 10,024 | 9,306 |
Capital and financing lease obligations, current portion | 189 | 174 |
Total current liabilities | 38,293 | 38,398 |
Long-term liabilities: | ' | ' |
Capital and financing lease obligations, net of current portion | 19,611 | 19,648 |
Deferred income tax liabilities | 7,174 | 6,877 |
Deferred rent | 5,033 | 4,731 |
Leasehold incentives | 5,904 | 5,716 |
Total long-term liabilities | 37,722 | 36,972 |
Total liabilities | 76,015 | 75,370 |
Commitments (Note 11) | ' | ' |
Stockholders' equity: | ' | ' |
Common stock, $0.001 par value. Authorized 50,000,000 shares, 22,442,389 and 22,441,253 issued and outstanding, respectively | 22 | 22 |
Additional paid in capital | 53,842 | 53,704 |
Retained earnings | 33,729 | 30,807 |
Total stockholders' equity | 87,593 | 84,533 |
Total liabilities and stockholders' equity | $163,608 | $159,903 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2013 | Sep. 30, 2013 |
In Thousands, except Share data, unless otherwise specified | ||
Goodwill and other intangible assets, accumulated amortization (in dollars) | $654 | $654 |
Common stock, par value (in dollars per share) | $0.00 | $0.00 |
Common stock, Authorized shares | 50,000,000 | 50,000,000 |
Common stock, issued shares | 22,442,389 | 22,441,253 |
Common stock, outstanding shares | 22,442,389 | 22,441,253 |
Consolidated_Statements_of_Inc
Consolidated Statements of Income (USD $) | 3 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 |
Consolidated Statements of Income | ' | ' |
Net sales | $120,580 | $95,831 |
Cost of goods sold and occupancy costs | 85,199 | 67,994 |
Gross profit | 35,381 | 27,837 |
Store expenses | 25,173 | 20,203 |
Administrative expenses | 3,889 | 3,326 |
Pre-opening and relocation expenses | 889 | 519 |
Operating income | 5,430 | 3,789 |
Other (expense) income: | ' | ' |
Interest expense | -707 | -255 |
Other income, net | 1 | 2 |
Total other expense | -706 | -253 |
Income before income taxes | 4,724 | 3,536 |
Provision for income taxes | -1,802 | -1,315 |
Net income | $2,922 | $2,221 |
Net income per common share: | ' | ' |
Basic (in dollars per share) | $0.13 | $0.10 |
Diluted (in dollars per share) | $0.13 | $0.10 |
Weighted average common shares outstanding: | ' | ' |
Basic (in shares) | 22,442,191 | 22,372,184 |
Diluted (in shares) | 22,470,979 | 22,464,229 |
Consolidated_Statements_of_Com
Consolidated Statements of Comprehensive Income (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 |
Consolidated Statements of Comprehensive Income | ' | ' |
Net income | $2,922 | $2,221 |
Other comprehensive income, net of tax: | ' | ' |
Unrealized gain on available-for-sale securities, net of tax | ' | 1 |
Other comprehensive income | ' | 1 |
Comprehensive income | $2,922 | $2,222 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 |
Operating activities: | ' | ' |
Net income | $2,922 | $2,221 |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
Depreciation and amortization | 3,938 | 2,992 |
Gain on disposal of property and equipment | ' | -1 |
Share-based compensation | 130 | 17 |
Excess tax benefit from share-based compensation | -7 | ' |
Deferred income tax expense (benefit) | 215 | -636 |
Non-cash interest expense | 7 | 22 |
Interest accrued on investments and amortization of premium | -1 | 1 |
Other amortization | ' | 17 |
Decrease (increase) in: | ' | ' |
Accounts receivable, net | 703 | -245 |
Income tax receivable | 575 | ' |
Merchandise inventory | -3,100 | -856 |
Prepaid expenses and other assets | -334 | -34 |
(Decrease) increase in: | ' | ' |
Accounts payable | -961 | -3,008 |
Accrued expenses | 734 | 1,676 |
Deferred rent and leasehold incentives | 489 | 174 |
Net cash provided by operating activities | 5,310 | 2,340 |
Investing activities: | ' | ' |
Acquisition of property and equipment | -7,684 | -8,825 |
Proceeds from sale of property and equipment | ' | 1 |
Purchase of available-for-sale securities | 0 | -181 |
Decrease in restricted cash | 500 | ' |
Net cash used in investing activities | -7,184 | -9,005 |
Financing activities: | ' | ' |
Repayments under notes payable, related party | ' | -64 |
Capital and financing lease obligations payments | -43 | -6 |
Excess tax benefit from share-based compensation | 7 | ' |
Equity issuance costs | ' | -268 |
Loan fees paid | ' | -18 |
Net cash used in financing activities | -36 | -356 |
Net decrease in cash and cash equivalents | -1,910 | -7,021 |
Cash and cash equivalents, beginning of period | 8,132 | 17,291 |
Cash and cash equivalents, end of period | 6,222 | 10,270 |
Supplemental disclosures of cash flow information: | ' | ' |
Cash paid for interest | ' | 3 |
Cash paid for interest on capital and financing lease obligations | 693 | 229 |
Income taxes paid | 22 | 101 |
Supplemental disclosures of non-cash investing and financing activities: | ' | ' |
Acquisition of property and equipment not yet paid | 3,646 | 2,176 |
Property acquired through capital and financing lease obligations | $14 | $10,319 |
Organization
Organization | 3 Months Ended |
Dec. 31, 2013 | |
Organization | ' |
Organization | ' |
1. Organization | |
Nature of Business | |
Natural Grocers by Vitamin Cottage, Inc. (Natural Grocers or the holding company) and its consolidated subsidiaries (collectively, the Company) operate retail stores that specialize in natural and organic groceries and dietary supplements. The Company operates its retail stores under its trademark Natural Grocers by Vitamin Cottage® with 76 stores as of December 31, 2013, including 31 stores in Colorado, 13 in Texas, five in Oregon, four each in Kansas, Montana and New Mexico, three each in Arizona, Nebraska and Oklahoma, two each in Idaho and Wyoming, and one each in Missouri and Utah, as well as a bulk food repackaging facility and distribution center in Colorado. The Company had 72 stores as of September 30, 2013. | |
Basis_of_Presentation_and_Summ
Basis of Presentation and Summary of Significant Accounting Policies | 3 Months Ended | |||||
Dec. 31, 2013 | ||||||
Basis of Presentation and Summary of Significant Accounting Policies | ' | |||||
Basis of Presentation and Summary of Significant Accounting Policies | ' | |||||
2. Basis of Presentation and Summary of Significant Accounting Policies | ||||||
Consolidated Financial Statements | ||||||
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission in Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information included in this report on Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended September 30, 2013. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation. Interim results are not necessarily indicative of results for any other interim period or for a full fiscal year. The Company reports its results of operations on a fiscal year ending September 30. | ||||||
The holding company was incorporated in Delaware on April 9, 2012. The accompanying consolidated financial statements include all the accounts of the Company’s wholly owned subsidiaries, Vitamin Cottage Natural Food Markets, Inc. (the operating company), Vitamin Cottage Two Ltd. Liability Company (VC2) and Natural Systems, LLC. The operating company formed the holding company in order to facilitate the purchase of the remaining noncontrolling interest in Boulder Vitamin Cottage Group, LLC (BVC) and consummation of the Company’s initial public offering (IPO) during fiscal year 2012. All significant intercompany balances and transactions have been eliminated in consolidation. | ||||||
The Company has one reporting segment, natural and organic retail stores. Sales from the Company’s natural and organic retail stores are derived from sales of the following products, which are presented as a percentage of sales for the three months ended December 31, 2013 and 2012 as follows: | ||||||
Three months | ||||||
ended December 31, | ||||||
2013 | 2012 | |||||
Grocery | 66.6 | % | 64.1 | |||
Dietary supplements | 23.3 | 25.4 | ||||
Other | 10.1 | 10.5 | ||||
100 | % | 100 | ||||
Use of Estimates | ||||||
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, the disclosure of contingent assets and liabilities at the balance sheet date and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. | ||||||
Recent Accounting Pronouncements | ||||||
In February 2013, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2013-02 “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” ASU No. 2013-02 supersedes the presentation requirements for reclassifications out of accumulated other comprehensive income in both ASU No. 2011-12 and 2011-05. ASU No. 2013-02 requires an entity to disaggregate the total change of each component of other comprehensive income either on the face of the income statement or as a separate disclosure in the notes. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This update is effective for the Company beginning in the quarter ended December 31, 2013. The adoption of this update did not have a material effect on the Company’s consolidated financial statements. |
Earnings_Per_Share
Earnings Per Share | 3 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Earnings Per Share | ' | ||||||
Earnings Per Share | ' | ||||||
3. Earnings Per Share | |||||||
Basic earnings per share (EPS) excludes dilution and is computed by dividing net income by the weighted average shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if the Company’s granted but unvested restricted stock units were to vest, resulting in the issuance of common stock that would then share in the earnings of the Company. Presented below is basic and diluted EPS for the three months ended December 31, 2013 and 2012, dollars in thousands, except share and per share data: | |||||||
Three months ended December 31, | |||||||
2013 | 2012 | ||||||
Net income | $ | 2,922 | 2,221 | ||||
Weighted average common shares outstanding | 22,442,191 | 22,372,184 | |||||
Effect of dilutive securities | 28,788 | 92,045 | |||||
Weighted average common shares outstanding including effect of dilutive securities | 22,470,979 | 22,464,229 | |||||
Basic earnings per share | $ | 0.13 | 0.1 | ||||
Diluted earnings per share | $ | 0.13 | 0.1 | ||||
The Company did not declare any dividends in the three months ended December 31, 2013 or 2012. |
LongTerm_Debt
Long-Term Debt | 3 Months Ended |
Dec. 31, 2013 | |
Long-Term Debt | ' |
Long-Term Debt | ' |
4. Long-Term Debt | |
Credit Facility | |
The Company has a revolving credit facility. The operating company is the borrower under the credit facility and its obligations under the credit facility are guaranteed by the holding company. | |
On December 12, 2013, the Company entered into an amended and restated $15.0 million credit agreement that, among other things, (i) extended the maturity date of the Company’s revolving credit facility by three years to January 31, 2017, (ii) provides the Company with the right to request the issuance of letters of credit under the credit facility up to $3.0 million, (iii) allows the Company to increase the amount available under the revolving credit facility, up to an additional amount that may not exceed $10.0 million by obtaining an additional commitment or commitments, (iv) eliminated a requirement for a consolidated earnings before interest, taxes, depreciation and amortization to revenue ratio and (v) amended the unused commitment fee from 0.20% to amounts ranging from 0.15% to 0.35% based on certain conditions. | |
The Company had no amounts outstanding on the revolving credit facility as of December 31, 2013 and September 30, 2013. As of December 31, 2013, the Company has an undrawn, issued and outstanding letter of credit of $0.5 million which was reserved against the available borrowing under the terms of the revolving credit facility. There is an available balance of $14.5 million and $15.0 million as of December 31, 2013 and December 31, 2012, respectively, under the revolving credit facility. | |
As of December 31, 2013 and September 30, 2013, the Company was in compliance with the debt covenants under the credit facility. | |
Capital and Financing Lease Obligations | |
From time to time, the Company enters into various leases that are included in capital and financing lease obligations. The Company does not record rent expense for these capitalized real estate leases, but rather rental payments under the capital leases are recognized as a reduction of the capital and financing lease obligation and as interest expense (see Note 5). | |
Interest | |
The Company incurred gross interest expense of approximately $0.7 million and approximately $0.3 million in the three months ended December 31, 2013 and 2012, respectively, related primarily to interest on capital and financing lease obligations. The Company did not capitalize any interest for the three months ended December 31, 2013 and 2012, respectively, and had insignificant amounts of amortization of deferred financing costs for the three months ended December 31, 2013 and 2012, respectively. | |
Lease_Commitments
Lease Commitments | 3 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Lease Commitments | ' | ||||||
Lease Commitments | ' | ||||||
5. Lease Commitments | |||||||
Capital and financing lease obligations as of December 31, 2013 and September 30, 2013, are as follows, dollars in thousands: | |||||||
As of | |||||||
December 31, 2013 | September 30, 2013 | ||||||
Capital lease finance obligations, due in monthly installments through fiscal year 2028 | $ | 15,037 | 13,746 | ||||
Capital lease obligations, due in monthly installments through fiscal year 2028 | 4,763 | 4,792 | |||||
Capital lease finance obligations for assets under construction, due in monthly installments through fiscal year 2028 | — | 1,284 | |||||
Total capital and financing lease obligations | 19,800 | 19,822 | |||||
Less current portion | (189 | ) | (174 | ) | |||
Total capital and financing lease obligations, net of current portion | $ | 19,611 | 19,648 |
Property_and_Equipment
Property and Equipment | 3 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Property and Equipment | ' | ||||||||
Property and Equipment | ' | ||||||||
6. Property and Equipment | |||||||||
The Company had the following property and equipment balances as of December 31, 2013 and September 30, 2013, dollars in thousands: | |||||||||
As of | |||||||||
Useful lives | December 31, | September 30, | |||||||
(in years) | 2013 | 2013 | |||||||
Construction in process | n/a | $ | 4,028 | 5,421 | |||||
Capitalized real estate leases for build-to-suit stores, including unamortized land of $617 and $617, respectively | 40 | 17,107 | 15,774 | ||||||
Capitalized real estate leases | 15 | 4,866 | 4,866 | ||||||
Land improvements | 15-May | 1,000 | 1,000 | ||||||
Leasehold and building improvements | 20-Feb | 63,270 | 59,058 | ||||||
Fixtures and equipment | 7-May | 59,704 | 56,459 | ||||||
Computer hardware and software | 5-Mar | 8,655 | 8,252 | ||||||
158,630 | 150,830 | ||||||||
Less accumulated depreciation and amortization | (55,858 | ) | (51,920 | ) | |||||
Property and equipment, net | $ | 102,772 | 98,910 | ||||||
As of December 31, 2013 and September 30, 2013, respectively, capitalized real estate leases for build-to-suit stores includes the assets for the Company’s build-to-suit stores and capitalized real estate leases includes assets for the Company’s buildings under capital leases (see Note 5). | |||||||||
Construction in process includes zero and approximately $1.3 million as of December 31, 2013 and September 30, 2013, respectively, related to construction costs for build-to-suit leases in process for which the Company was deemed the owner during the construction period. | |||||||||
Depreciation and amortization expense for the three months ended December 31, 2013 and 2012 is summarized as follows, dollars in thousands: | |||||||||
Three months ended December 31, | |||||||||
2013 | 2012 | ||||||||
Depreciation and amortization expense included in cost of goods sold and occupancy costs | $ | 186 | 173 | ||||||
Depreciation and amortization expense included in store expenses | 3,643 | 2,701 | |||||||
Depreciation and amortization expense included in administrative expenses | 109 | 118 | |||||||
Total depreciation and amortization expense | $ | 3,938 | 2,992 |
Supplementary_Balance_Sheet_In
Supplementary Balance Sheet Information | 3 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Supplementary Balance Sheet Information | ' | ||||||
Supplementary Balance Sheet Information | ' | ||||||
7. Supplementary Balance Sheet Information | |||||||
Restricted Cash | |||||||
As of September 30, 2013, the Company held $0.5 million in restricted cash which represented cash that was pledged as collateral for a standby letter of credit related to the Company’s workers’ compensation insurance. The Company elected to pledge this cash as collateral for the letter of credit to support its workers’ compensation insurance. As of December 31, 2013, the Company has released the restricted cash balance which existed as of September 30, 2013, and has no restricted cash balance outstanding. As of December 31, 2013, a $0.5 million letter of credit to support the Company’s workers compensation insurance has been issued under the terms of the amended and restated revolving credit facility. | |||||||
Accrued Expenses | |||||||
The composition of accrued expenses is summarized as follows as of December 31, 2013 and September 30, 2013, dollars in thousands: | |||||||
As of | |||||||
December 31, | September 30, | ||||||
2013 | 2013 | ||||||
Payroll and employee-related expenses | $ | 4,835 | 5,247 | ||||
Accrued income, property, sales and use tax payable | 3,753 | 2,686 | |||||
Deferred revenue related to gift card sales | 803 | 625 | |||||
Other | 633 | 748 | |||||
Total accrued expenses | $ | 10,024 | 9,306 |
Investments
Investments | 3 Months Ended |
Dec. 31, 2013 | |
Investments | ' |
Investments | ' |
8. Investments | |
The Company had available-for-sale securities, generally consisting of certificates of deposit, corporate bonds and municipal bonds totaling approximately $1.2 million and approximately $1.1 million, which were classified as short-term as of December 31, 2013 and September 30, 2013, respectively. At December 31, 2013, the average maturities of the Company’s short-term investments was approximately two months. At September 30, 2013, the average maturities of the Company’s short-term investments was approximately five months. There was no other-than-temporary impairment on available-for-sale securities as of December 31, 2013 or September 30, 2013. | |
During the three months ended December 31, 2013 and 2012, the Company recorded insignificant amounts of interest income and expense relating to amortized premiums paid. | |
Fair_Value_Measurements
Fair Value Measurements | 3 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Fair Value Measurements | ' | ||||||||||||
Fair Value Measurements | ' | ||||||||||||
9. Fair Value Measurements | |||||||||||||
The Company records its financial assets and liabilities at fair value in accordance with the framework for measuring fair value in authoritative guidance. The framework establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). The three levels are defined as follows: | |||||||||||||
Level 1— | Inputs are unadjusted quoted prices for identical assets or liabilities in active markets; | ||||||||||||
Level 2— | Inputs include quoted prices for similar assets or liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and | ||||||||||||
Level 3— | Inputs are unobservable and are considered significant to the fair value measurement. | ||||||||||||
Non-financial assets, such as goodwill and long-lived assets, are accounted for at fair value, if determined to be impaired, on a non-recurring basis. These items are tested for impairment on the occurrence of a triggering event or in the case of goodwill, at least on an annual basis. | |||||||||||||
The carrying amounts of financial instruments not included in the table below, including those cash and cash equivalents that are not invested in money market funds, restricted cash, accounts receivable, accounts payable and other accrued expenses, approximate fair value because of the short maturity of those instruments. | |||||||||||||
As of December 31, 2013 and September 30, 2013, the Company had the following financial assets and liabilities that were subject to fair value measurements according to the fair value hierarchy, dollars in thousands: | |||||||||||||
As of | |||||||||||||
December 31, 2013 | September 30, 2013 | ||||||||||||
Input | Carrying | Fair Value | Carrying | Fair Value | |||||||||
Level | Amount | Amount | |||||||||||
Cash and cash equivalents: | |||||||||||||
Money market fund | 1 | $ | 1 | 1 | 501 | 501 | |||||||
Investments — available-for-sale securities: | |||||||||||||
Certificates of deposit | 2 | 586 | 586 | 585 | 585 | ||||||||
Corporate bonds | 2 | 376 | 376 | 376 | 376 | ||||||||
Municipal bonds | 2 | 188 | 188 | 188 | 188 | ||||||||
The money market fund and available-for-sale securities are carried at fair value. For debt securities for which quoted market prices are not available, the fair value is determined using an income approach valuation technique that considers, among other things, rates currently observed in publicly traded debt markets for debt of similar terms to companies with comparable credit risk. During the three months ended December 31, 2013, the Company made no purchases of, and had no maturities or sales of, available-for-sale securities. During the three months ended December 31, 2013 and for the fiscal year ended September 30, 2013, there were no transfers between levels and the Company had no level 3 assets. See Note 8 for additional disclosures. |
Related_Party_Transactions
Related Party Transactions | 3 Months Ended |
Dec. 31, 2013 | |
Related Party Transactions | ' |
Related Party Transactions | ' |
10. Related Party Transactions | |
The Company has ongoing relationships with related entities as noted below: | |
Isely Family Land Trust LLC: The Company has one operating lease for a store location with the Isely Family Land Trust LLC (Land Trust). The Land Trust is owned by the Isely Children’s Trust and by the Margaret A. Isely Family Trust. Rent paid to the Land Trust was less than $0.1 million for each of the three months ended December 31, 2013 and 2012. | |
Chalet Properties, LLC: The Company has seven operating leases with Chalet Properties, LLC (Chalet). Chalet is owned by the Company’s four non-independent board members: Kemper Isely, Zephyr Isely, Heather Isely and Elizabeth Isely, and other related family members. Rent paid to Chalet was approximately $0.3 million for each of the three months ended December 31, 2013 and 2012. | |
Commitments_and_Contingencies
Commitments and Contingencies | 3 Months Ended |
Dec. 31, 2013 | |
Commitments and Contingencies | ' |
Commitments and Contingencies | ' |
11. Commitments and Contingencies | |
Legal | |
The Company is periodically involved in various legal proceedings that are incidental to the conduct of its business, including but not limited to employment discrimination claims, customer injury claims and investigations. When the potential liability from a matter can be estimated and the loss is considered probable, the Company records the estimated loss. Due to uncertainties related to the resolution of lawsuits, investigations and claims, the ultimate outcome may differ from the estimates. Although the Company cannot predict with certainty the ultimate resolution of any lawsuits, investigations and claims asserted against it, management does not believe any currently pending legal proceeding to which the Company is a party will have a material adverse effect on its business, prospects, financial condition, cash flows or results of operations. | |
Basis_of_Presentation_and_Summ1
Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 3 Months Ended | |||||
Dec. 31, 2013 | ||||||
Basis of Presentation and Summary of Significant Accounting Policies | ' | |||||
Consolidated Financial Statements | ' | |||||
Consolidated Financial Statements | ||||||
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission in Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information included in this report on Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended September 30, 2013. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation. Interim results are not necessarily indicative of results for any other interim period or for a full fiscal year. The Company reports its results of operations on a fiscal year ending September 30. | ||||||
The holding company was incorporated in Delaware on April 9, 2012. The accompanying consolidated financial statements include all the accounts of the Company’s wholly owned subsidiaries, Vitamin Cottage Natural Food Markets, Inc. (the operating company), Vitamin Cottage Two Ltd. Liability Company (VC2) and Natural Systems, LLC. The operating company formed the holding company in order to facilitate the purchase of the remaining noncontrolling interest in Boulder Vitamin Cottage Group, LLC (BVC) and consummation of the Company’s initial public offering (IPO) during fiscal year 2012. All significant intercompany balances and transactions have been eliminated in consolidation. | ||||||
The Company has one reporting segment, natural and organic retail stores. Sales from the Company’s natural and organic retail stores are derived from sales of the following products, which are presented as a percentage of sales for the three months ended December 31, 2013 and 2012 as follows: | ||||||
Three months | ||||||
ended December 31, | ||||||
2013 | 2012 | |||||
Grocery | 66.6 | % | 64.1 | |||
Dietary supplements | 23.3 | 25.4 | ||||
Other | 10.1 | 10.5 | ||||
100 | % | 100 | ||||
Use of Estimates | ' | |||||
Use of Estimates | ||||||
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, the disclosure of contingent assets and liabilities at the balance sheet date and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. | ||||||
Recent Accounting Pronouncements | ' | |||||
Recent Accounting Pronouncements | ||||||
In February 2013, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2013-02 “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” ASU No. 2013-02 supersedes the presentation requirements for reclassifications out of accumulated other comprehensive income in both ASU No. 2011-12 and 2011-05. ASU No. 2013-02 requires an entity to disaggregate the total change of each component of other comprehensive income either on the face of the income statement or as a separate disclosure in the notes. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This update is effective for the Company beginning in the quarter ended December 31, 2013. The adoption of this update did not have a material effect on the Company’s consolidated financial statements. | ||||||
Basis_of_Presentation_and_Summ2
Basis of Presentation and Summary of Significant Accounting Policies (Tables) | 3 Months Ended | |||||
Dec. 31, 2013 | ||||||
Basis of Presentation and Summary of Significant Accounting Policies | ' | |||||
Schedule of sales from natural and organic retail stores | ' | |||||
Three months | ||||||
ended December 31, | ||||||
2013 | 2012 | |||||
Grocery | 66.6 | % | 64.1 | |||
Dietary supplements | 23.3 | 25.4 | ||||
Other | 10.1 | 10.5 | ||||
100 | % | 100 |
Earnings_Per_Share_Tables
Earnings Per Share (Tables) | 3 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Earnings Per Share | ' | ||||||
Schedule of basic and diluted EPS | ' | ||||||
Presented below is basic and diluted EPS for the three months ended December 31, 2013 and 2012, dollars in thousands, except share and per share data: | |||||||
Three months ended December 31, | |||||||
2013 | 2012 | ||||||
Net income | $ | 2,922 | 2,221 | ||||
Weighted average common shares outstanding | 22,442,191 | 22,372,184 | |||||
Effect of dilutive securities | 28,788 | 92,045 | |||||
Weighted average common shares outstanding including effect of dilutive securities | 22,470,979 | 22,464,229 | |||||
Basic earnings per share | $ | 0.13 | 0.1 | ||||
Diluted earnings per share | $ | 0.13 | 0.1 |
Lease_Commitments_Tables
Lease Commitments (Tables) | 3 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Lease Commitments | ' | ||||||
Schedule of capital and financing lease obligations | ' | ||||||
Capital and financing lease obligations as of December 31, 2013 and September 30, 2013, are as follows, dollars in thousands: | |||||||
As of | |||||||
December 31, 2013 | September 30, 2013 | ||||||
Capital lease finance obligations, due in monthly installments through fiscal year 2028 | $ | 15,037 | 13,746 | ||||
Capital lease obligations, due in monthly installments through fiscal year 2028 | 4,763 | 4,792 | |||||
Capital lease finance obligations for assets under construction, due in monthly installments through fiscal year 2028 | — | 1,284 | |||||
Total capital and financing lease obligations | 19,800 | 19,822 | |||||
Less current portion | (189 | ) | (174 | ) | |||
Total capital and financing lease obligations, net of current portion | $ | 19,611 | 19,648 |
Property_and_Equipment_Tables
Property and Equipment (Tables) | 3 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Property and Equipment | ' | ||||||||
Schedule of property and equipment, net | ' | ||||||||
The Company had the following property and equipment balances as of December 31, 2013 and September 30, 2013, dollars in thousands: | |||||||||
As of | |||||||||
Useful lives | December 31, | September 30, | |||||||
(in years) | 2013 | 2013 | |||||||
Construction in process | n/a | $ | 4,028 | 5,421 | |||||
Capitalized real estate leases for build-to-suit stores, including unamortized land of $617 and $617, respectively | 40 | 17,107 | 15,774 | ||||||
Capitalized real estate leases | 15 | 4,866 | 4,866 | ||||||
Land improvements | 15-May | 1,000 | 1,000 | ||||||
Leasehold and building improvements | 20-Feb | 63,270 | 59,058 | ||||||
Fixtures and equipment | 7-May | 59,704 | 56,459 | ||||||
Computer hardware and software | 5-Mar | 8,655 | 8,252 | ||||||
158,630 | 150,830 | ||||||||
Less accumulated depreciation and amortization | (55,858 | ) | (51,920 | ) | |||||
Property and equipment, net | $ | 102,772 | 98,910 | ||||||
Schedule of depreciation and amortization expense | ' | ||||||||
Depreciation and amortization expense for the three months ended December 31, 2013 and 2012 is summarized as follows, dollars in thousands: | |||||||||
Three months ended December 31, | |||||||||
2013 | 2012 | ||||||||
Depreciation and amortization expense included in cost of goods sold and occupancy costs | $ | 186 | 173 | ||||||
Depreciation and amortization expense included in store expenses | 3,643 | 2,701 | |||||||
Depreciation and amortization expense included in administrative expenses | 109 | 118 | |||||||
Total depreciation and amortization expense | $ | 3,938 | 2,992 |
Supplementary_Balance_Sheet_In1
Supplementary Balance Sheet Information (Tables) | 3 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Supplementary Balance Sheet Information | ' | ||||||
Schedule of composition of accrued expenses | ' | ||||||
The composition of accrued expenses is summarized as follows as of December 31, 2013 and September 30, 2013, dollars in thousands: | |||||||
As of | |||||||
December 31, | September 30, | ||||||
2013 | 2013 | ||||||
Payroll and employee-related expenses | $ | 4,835 | 5,247 | ||||
Accrued income, property, sales and use tax payable | 3,753 | 2,686 | |||||
Deferred revenue related to gift card sales | 803 | 625 | |||||
Other | 633 | 748 | |||||
Total accrued expenses | $ | 10,024 | 9,306 |
Fair_Value_Measurements_Tables
Fair Value Measurements (Tables) | 3 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Fair Value Measurements | ' | ||||||||||||
Schedule of financial assets and liabilities subject to fair value measurements | ' | ||||||||||||
As of December 31, 2013 and September 30, 2013, the Company had the following financial assets and liabilities that were subject to fair value measurements according to the fair value hierarchy, dollars in thousands: | |||||||||||||
As of | |||||||||||||
December 31, 2013 | September 30, 2013 | ||||||||||||
Input | Carrying | Fair Value | Carrying | Fair Value | |||||||||
Level | Amount | Amount | |||||||||||
Cash and cash equivalents: | |||||||||||||
Money market fund | 1 | $ | 1 | 1 | 501 | 501 | |||||||
Investments — available-for-sale securities: | |||||||||||||
Certificates of deposit | 2 | 586 | 586 | 585 | 585 | ||||||||
Corporate bonds | 2 | 376 | 376 | 376 | 376 | ||||||||
Municipal bonds | 2 | 188 | 188 | 188 | 188 | ||||||||
Organization_Details
Organization (Details) | Dec. 31, 2013 | Sep. 30, 2013 |
item | item | |
Organization | ' | ' |
Number of retail stores | 76 | 72 |
Colorado | ' | ' |
Organization | ' | ' |
Number of retail stores | 31 | ' |
Texas | ' | ' |
Organization | ' | ' |
Number of retail stores | 13 | ' |
Oregon | ' | ' |
Organization | ' | ' |
Number of retail stores | 5 | ' |
Kansas | ' | ' |
Organization | ' | ' |
Number of retail stores | 4 | ' |
Montana | ' | ' |
Organization | ' | ' |
Number of retail stores | 4 | ' |
New Mexico | ' | ' |
Organization | ' | ' |
Number of retail stores | 4 | ' |
Arizona | ' | ' |
Organization | ' | ' |
Number of retail stores | 3 | ' |
Nebraska | ' | ' |
Organization | ' | ' |
Number of retail stores | 3 | ' |
Oklahoma | ' | ' |
Organization | ' | ' |
Number of retail stores | 3 | ' |
Wyoming | ' | ' |
Organization | ' | ' |
Number of retail stores | 2 | ' |
Idaho | ' | ' |
Organization | ' | ' |
Number of retail stores | 2 | ' |
Missouri | ' | ' |
Organization | ' | ' |
Number of retail stores | 1 | ' |
Utah | ' | ' |
Organization | ' | ' |
Number of retail stores | 1 | ' |
Basis_of_Presentation_and_Summ3
Basis of Presentation and Summary of Significant Accounting Policies (Details) | 3 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
item | ||
Basis of Presentation and Summary of Significant Accounting Policies | ' | ' |
Number of reporting segments | 1 | ' |
Consolidated Financial Statements | ' | ' |
Sales percentage | 100.00% | 100.00% |
Grocery | ' | ' |
Consolidated Financial Statements | ' | ' |
Sales percentage | 66.60% | 64.10% |
Dietary supplements | ' | ' |
Consolidated Financial Statements | ' | ' |
Sales percentage | 23.30% | 25.40% |
Other | ' | ' |
Consolidated Financial Statements | ' | ' |
Sales percentage | 10.10% | 10.50% |
Earnings_Per_Share_Details
Earnings Per Share (Details) (USD $) | 3 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 |
Basic and Diluted EPS | ' | ' |
Net income (in dollars) | $2,922 | $2,221 |
Weighted average common shares outstanding | 22,442,191 | 22,372,184 |
Effect of dilutive securities (in shares) | 28,788 | 92,045 |
Weighted average common shares outstanding including effect of dilutive securities | 22,470,979 | 22,464,229 |
Basic earnings per share (in dollars per share) | $0.13 | $0.10 |
Diluted earnings per share (in dollars per share) | $0.13 | $0.10 |
LongTerm_Debt_Details
Long-Term Debt (Details) (USD $) | 3 Months Ended | 0 Months Ended | 0 Months Ended | |||||||
In Millions, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 12, 2013 | Dec. 31, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 12, 2013 | Dec. 12, 2013 | Dec. 31, 2013 | Dec. 12, 2013 |
Revolving Credit Facility | Revolving Credit Facility | Revolving Credit Facility | Revolving Credit Facility | Revolving Credit Facility | Revolving Credit Facility | Letters of credit | Letters of credit | |||
Minimum | Maximum | Maximum | ||||||||
Long-Term Debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Period by which maturity date is extended | ' | ' | '3 years | ' | ' | ' | ' | ' | ' | ' |
Amount available for borrowing | ' | ' | $15 | ' | ' | ' | ' | ' | ' | $3 |
Additional maximum borrowing capacity | ' | ' | ' | ' | ' | ' | ' | 10 | ' | ' |
Unused commitment fee before amendment (as a percent) | ' | ' | 0.20% | ' | ' | ' | ' | ' | ' | ' |
Unused commitment fee (as a percent) | ' | ' | ' | ' | ' | ' | 0.15% | 0.35% | ' | ' |
Amount outstanding | ' | ' | ' | 0 | 0 | ' | ' | ' | ' | ' |
Amount of letter of credit undrawn, issued and outstanding | 0.5 | ' | ' | ' | ' | ' | ' | ' | 0.5 | ' |
Available balance under credit facility | ' | ' | ' | 14.5 | ' | 15 | ' | ' | ' | ' |
Gross interest expense | $0.70 | $0.30 | ' | ' | ' | ' | ' | ' | ' | ' |
Lease_Commitments_Details
Lease Commitments (Details) (USD $) | Dec. 31, 2013 | Sep. 30, 2013 |
In Thousands, unless otherwise specified | ||
Capital and financing lease obligations | ' | ' |
Capital and Financing Lease Obligations | ' | ' |
Total capital and financing lease obligations | $19,800 | $19,822 |
Less current portion | -189 | -174 |
Total capital and financing lease obligations, net of current portion | 19,611 | 19,648 |
Capital lease finance obligations, due in monthly installments through fiscal year 2028 | ' | ' |
Capital and Financing Lease Obligations | ' | ' |
Total capital and financing lease obligations | 15,037 | 13,746 |
Capital lease finance obligations, due in monthly installments through fiscal year 2028 | Construction in process | ' | ' |
Capital and Financing Lease Obligations | ' | ' |
Total capital and financing lease obligations | ' | 1,284 |
Capital lease obligations, due in monthly installments through fiscal year 2028 | ' | ' |
Capital and Financing Lease Obligations | ' | ' |
Total capital and financing lease obligations | $4,763 | $4,792 |
Property_and_Equipment_Details
Property and Equipment (Details) (USD $) | 3 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2013 |
Property and Equipment | ' | ' | ' |
Property and Equipment, gross | $158,630 | ' | $150,830 |
Less accumulated depreciation and amortization | -55,858 | ' | -51,920 |
Property and Equipment, net | 102,772 | ' | 98,910 |
Depreciation and amortization | 3,938 | 2,992 | ' |
Cost of goods sold and occupancy costs | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Depreciation and amortization | 186 | 173 | ' |
Store expenses | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Depreciation and amortization | 3,643 | 2,701 | ' |
Administrative expenses | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Depreciation and amortization | 109 | 118 | ' |
Construction in process | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Property and Equipment, gross | 4,028 | ' | 5,421 |
Capitalized real estate leases for build to suit stores | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Useful lives | '40 years | ' | ' |
Property and Equipment, gross | 17,107 | ' | 15,774 |
Capitalized real estate leases | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Useful lives | '15 years | ' | ' |
Property and Equipment, gross | 4,866 | ' | 4,866 |
Land improvements | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Property and Equipment, gross | 1,000 | ' | 1,000 |
Land improvements | Minimum | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Useful lives | '5 years | ' | ' |
Land improvements | Maximum | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Useful lives | '15 years | ' | ' |
Leasehold and building improvements | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Property and Equipment, gross | 63,270 | ' | 59,058 |
Leasehold and building improvements | Minimum | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Useful lives | '2 years | ' | ' |
Leasehold and building improvements | Maximum | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Useful lives | '20 years | ' | ' |
Fixtures and equipment | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Property and Equipment, gross | 59,704 | ' | 56,459 |
Fixtures and equipment | Minimum | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Useful lives | '5 years | ' | ' |
Fixtures and equipment | Maximum | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Useful lives | '7 years | ' | ' |
Computer hardware and software | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Property and Equipment, gross | 8,655 | ' | 8,252 |
Computer hardware and software | Minimum | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Useful lives | '3 years | ' | ' |
Computer hardware and software | Maximum | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Useful lives | '5 years | ' | ' |
Unamortized land | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Property and Equipment, gross | 617 | ' | 617 |
Construction in progress / Build to suit lease in process | ' | ' | ' |
Property and Equipment | ' | ' | ' |
Property and Equipment, gross | $0 | ' | $1,300 |
Supplementary_Balance_Sheet_In2
Supplementary Balance Sheet Information (Details) (USD $) | Dec. 31, 2013 | Sep. 30, 2013 |
Supplementary Balance Sheet Information | ' | ' |
Restricted Cash | $0 | $500,000 |
Amount of letter of credit associated with the entity's workers' compensation insurance | 500,000 | ' |
Payroll and employee-related expenses | 4,835,000 | 5,247,000 |
Accrued income, property, sales and use tax payable | 3,753,000 | 2,686,000 |
Deferred revenue related to gift card sales | 803,000 | 625,000 |
Other | 633,000 | 748,000 |
Total accrued expenses | $10,024,000 | $9,306,000 |
Investments_Details
Investments (Details) (USD $) | 3 Months Ended | 12 Months Ended |
In Millions, unless otherwise specified | Dec. 31, 2013 | Sep. 30, 2013 |
Investment Holdings | ' | ' |
Other than temporary impairment | $0 | $0 |
Short-term | ' | ' |
Investment Holdings | ' | ' |
Available-for-sale securities, consisting of certificates of deposit, corporate bonds and municipal bonds | $1.20 | $1.10 |
Maturity period of investments | '2 months | '5 months |
Fair_Value_Measurements_Detail
Fair Value Measurements (Details) (USD $) | 3 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2013 |
Fair Value Measurements | ' | ' | ' |
Available-for-sale securities purchased | $0 | $181 | ' |
Proceeds from maturity of available-for-sale securities | 0 | ' | ' |
Proceeds from sale of available-for-sale securities | 0 | ' | ' |
Transfer from Level 1 to 2 | 0 | ' | 0 |
Transfer from Level 2 to 1 | 0 | ' | 0 |
Level 1 | Carrying Amount | Money market fund | ' | ' | ' |
Fair Value Measurements | ' | ' | ' |
Cash and cash equivalents: | 1 | ' | 501 |
Level 1 | Fair Value | Money market fund | ' | ' | ' |
Fair Value Measurements | ' | ' | ' |
Cash and cash equivalents: | 1 | ' | 501 |
Level 2 | Carrying Amount | Certificates of deposit | ' | ' | ' |
Fair Value Measurements | ' | ' | ' |
Investments - available-for-sale securities: | 586 | ' | 585 |
Level 2 | Carrying Amount | Corporate bonds | ' | ' | ' |
Fair Value Measurements | ' | ' | ' |
Investments - available-for-sale securities: | 376 | ' | 376 |
Level 2 | Carrying Amount | Municipal bonds | ' | ' | ' |
Fair Value Measurements | ' | ' | ' |
Investments - available-for-sale securities: | 188 | ' | 188 |
Level 2 | Fair Value | Certificates of deposit | ' | ' | ' |
Fair Value Measurements | ' | ' | ' |
Investments - available-for-sale securities: | 586 | ' | 585 |
Level 2 | Fair Value | Corporate bonds | ' | ' | ' |
Fair Value Measurements | ' | ' | ' |
Investments - available-for-sale securities: | 376 | ' | 376 |
Level 2 | Fair Value | Municipal bonds | ' | ' | ' |
Fair Value Measurements | ' | ' | ' |
Investments - available-for-sale securities: | 188 | ' | 188 |
Level 3 | ' | ' | ' |
Fair Value Measurements | ' | ' | ' |
Assets | $0 | ' | $0 |
Related_Party_Transactions_Det
Related Party Transactions (Details) (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 |
Isely Family Land Trust LLC | ' | ' |
Related party transactions | ' | ' |
Number of operating leases | 1 | ' |
Isely Family Land Trust LLC | Maximum | ' | ' |
Related party transactions | ' | ' |
Rent expense | $0.10 | $0.10 |
Chalet Properties, LLC | ' | ' |
Related party transactions | ' | ' |
Number of operating leases | 7 | ' |
Rent expense | $0.30 | $0.30 |
Number of owners that are non-independent board members | 4 | ' |