Natural Grocers by Vitamin tage(NGVC) - 2023 Q4 - Annual Report

PART I Business Overview Natural Grocers is a specialty retailer of natural and organic groceries and dietary supplements, emphasizing quality, affordability, and nutrition education General Natural Grocers is a specialty retailer emphasizing high-quality natural and organic products, customer service, and nutrition education - Natural Grocers is a specialty retailer of natural and organic groceries and dietary supplements, emphasizing high-quality products, affordable prices, customer service, nutrition education, and community outreach[20] - The company adheres to strict quality guidelines, prohibiting artificial colors, flavors, preservatives, sweeteners, or hydrogenated oils in grocery products[20] Our History and Founding Principles Founded in 1958 by Margaret and Philip Isely, the company expanded to 165 stores across 21 states by September 30, 2023 - Founded in 1958 by Margaret and Philip Isely, driven by a commitment to nutrition education and natural products[21] - The company expanded from 11 stores to 165 stores across 21 states as of September 30, 2023, under the second generation of Isely family leadership[22] Our Markets The company operates in growing natural products and dietary supplement industries, driven by consumer focus on wellness and quality - Operates within the growing natural products retail and dietary supplement industries, driven by increased consumer focus on high-quality nutrition, wellness, and environmental concerns[23][25][29] Our Competitive Strengths Competitive strengths include strict product standards, free science-based nutrition education, and a scalable, cost-effective store format - Strict product standards include only USDA certified organic produce, pasture-raised dairy, free-range eggs, and naturally raised meats, with no artificial ingredients[27] - Differentiated customer service model provides free science-based nutrition education through Nutritional Health Coaches (NHCs), classes, and the Health Hotline magazine[28] - The company utilizes a scalable, cost-effective smaller-store format and a disciplined approach to new store development, supported by experienced management[30][32] Our Growth Strategies Growth strategies involve new store openings, leveraging loyalty programs, enhancing brand awareness, and improving operating margins - Plans to open 4-6 new stores in fiscal year 2024 and leverage the {N}power customer rewards program and mobile app to increase sales from existing customers[33][36][37] - Strategies include enhancing brand awareness through diverse marketing channels and improving operating margins by optimizing performance, managing costs, and achieving economies of scale[37][38] Our Stores Stores average 11,000 selling square feet, offering a convenient environment with community rooms, and data-driven site selection - Stores average 11,000 selling square feet, offering a convenient, clean, and shopper-friendly environment, often including community rooms and demonstration kitchens[41] - Site selection is data-driven, focusing on high-visibility locations, often complementing conventional retailers with specialized natural and organic offerings[42] Our Focus on Nutrition Education Nutrition education is a core principle, with in-store Nutritional Health Coaches and the Health Hotline magazine - Nutrition education is a core principle, with every store employing a degreed Nutritional Health Coach (NHC) to provide free science-based education and one-on-one coaching[43][44] - Educational efforts are supplemented by the Health Hotline magazine, published 11 times in FY2023, featuring health articles and sale items[45] Our Products Product selection adheres to strict quality guidelines, including organic produce, pasture-raised dairy, and naturally raised meats - Product selection adheres to strict quality guidelines, including USDA certified organic produce, pasture-raised dairy, naturally raised meats, and sustainable seafood, while excluding artificial ingredients, alcohol, and tobacco[46][47] Sales Mix by Product Category (FY2023) | Category | Percentage of Net Sales | | :------------------ | :---------------------- | | Grocery | 70% | | Dietary Supplements | 21% | | Body Care, Pet Care & Other | 9% | Quality Assurance Product quality is ensured through reputable suppliers, FDA compliance, and USDA organic handler certification - Ensures product quality through reputable suppliers, FDA current good manufacturing practices for supplements, and USDA organic handler certification for all stores[51][52] Our Pricing Strategy Pricing strategy combines "Always Affordable Price" with promotions and loyalty discounts for competitive offerings - Pricing strategy combines "Always Affordable Price" with various promotions, including {N}power member discounts and seasonal specials, to offer competitive pricing[53][54][60] Our Store Operations Stores operate with consistent hours, structured management, cross-trained staff, and a dedicated distribution center - Stores operate with consistent hours and a structured management team, including cross-trained staff and on-site Nutritional Health Coaches for training and customer education[55][56][57][58] - Operates a 150,000 sq ft bulk food repackaging and distribution center in Golden, Colorado, and manages inventory using a weeks-on-hand system[59] Sourcing and Vendors The company sources from approximately 1,000 suppliers, with UNFI as a significant partner, and utilizes in-house repackaging - Sources from approximately 1,000 suppliers and 2,900 brands, with United Natural Foods Inc. (UNFI) accounting for 68% of total purchases in FY2023; the contract with UNFI was extended to September 2028[60] - Utilizes third-party manufacturers for private label products and repackages bulk foods in-house, refrigerating items like nuts and flours to maintain freshness[61] Our Crew Members and Our Approach to Human Capital Resources The company employs 3,235 full-time and 938 part-time Crew members, focusing on engagement, development, and comprehensive benefits - As of September 30, 2023, employed 3,235 full-time and 938 part-time Crew members, with a strong focus on engagement, development, and retention through training and benefits[63][64] - Prioritizes internal promotions, filling approximately 64% of vacant store manager positions and 71% of assistant store manager positions from within in FY2023[65] - Offers comprehensive benefits, including health insurance, 401(k) with discretionary match, above-average retail wages, in-store discounts, "Vitamin Bucks," and a "Heroes in Aprons Fund" for financial assistance[67] Our Customers Core customers prioritize health, nutrition, affordable natural/organic products, and environmentally sustainable practices - Core customers prioritize health, nutrition, affordable natural/organic products, and environmentally sustainable practices, expecting knowledgeable staff[68] Our Communities Community stewardship involves free educational services, local sourcing, food donations, and sustainable operational practices - Engages in community stewardship through extensive free educational services, local sourcing, food donations, promoting reusable bags, and implementing sustainable operational practices[69] Marketing and Advertising Marketing focuses on customer education and the {N}power rewards program, utilizing multi-channel advertising and home delivery - Marketing efforts are heavily focused on customer education and the {N}power customer rewards program, which grew to 2.1 million members by September 30, 2023, supported by a new mobile application[70][71] - Utilizes a multi-channel approach including the Health Hotline magazine, seasonal promotions, website, social media, traditional advertising, and home delivery services at 160 stores[72][73][74][75][76] Competition The company operates in a highly competitive industry, differentiating itself through strict product focus and nutrition education - Operates in a highly competitive and fragmented industry, differentiating itself through a strict focus on carefully vetted, affordably priced, high-quality natural and organic products, and extensive nutrition education[79] Seasonality The business does not experience significant seasonal fluctuations in consumer purchasing patterns - The business does not experience significant seasonal fluctuations in consumer purchasing[80] Insurance and Risk Management Risk is managed through a combination of insurance and self-insurance for various operational and employee-related liabilities - Manages risk through a combination of insurance and self-insurance for workers' compensation, general liability, product liability, cyber risk, and employee healthcare benefits[81] Trademarks and Other Intellectual Property The company protects its brand and competitive position through registered trademarks and service marks - Protects its brand and competitive position through registered trademarks and service marks, including Natural Grocers®, Vitamin Cottage®, and {N}power®[83] Information Technology Systems Significant investment in IT infrastructure, including ERP, POS, HRIS, and cloud technology, supports scaling and efficiency - Invested significantly in IT infrastructure, including an ERP system, new POS, HRIS, and cloud technology, with plans for continued scaling and efficiency improvements[84] Regulatory Compliance Subject to extensive federal, state, and local regulations covering product safety, labeling, advertising, and manufacturing - Subject to extensive federal, state, and local regulations from agencies like FDA, FTC, and USDA, covering product safety, labeling, advertising, and manufacturing[85] - Compliance is critical, with risks including increased costs, product restrictions, recalls, and potential damage to reputation from non-compliance or new regulations (e.g., FSMA, DSHEA, CBD products)[87][89][92][94] Segment Information The company operates as a single reporting segment focused on natural and organic retail stores - Operates as a single reporting segment focused on natural and organic retail stores[95] Available Information Public access to SEC filings and corporate governance documents is provided on the company's website - Provides public access to SEC filings and corporate governance documents on its website, www.naturalgrocers.com[96](index=96&type=chunk) Risk Factors The company faces significant risks including growth challenges, economic downturns, competition, supply chain issues, and regulatory compliance - The company's business, financial condition, and results of operations are materially impacted by various factors, including growth challenges, market trends, economic conditions, competition, and regulatory compliance[98][107] Risk Factor Summary This section provides a high-level overview of the key risks that could materially affect the company's operations and financial results Risks related to our business and operations Operational risks include growth challenges, consumer preference shifts, economic conditions, supply chain disruptions, and labor issues - May not be successful in efforts to grow profitably[100] - Inability to identify market trends and react to changing consumer preferences in a timely manner[100] - Fluctuations in store sales growth and quarterly financial performance[100] - Adverse economic conditions and political instability[100] - Inflation or deflation[100] - Widespread health pandemics[100] - Inability to compete effectively in highly competitive markets[100] - Inability to maintain or increase operating margins[100] - Reduction in traffic to anchor stores[100] - Product recalls, withdrawals, or seizures[100] - Reduced availability of certified organic products or products meeting internal standards[100] - Disruptions affecting significant suppliers (e.g., UNFI)[101] - Adverse weather conditions, natural disasters, and climate change[101] - Acts of violence at or threatened against stores[101] - Geographic concentration of stores (Colorado, Texas)[101] - Failure to maintain reputation and brand value[101] - Perishable food product losses[101] - Suppliers distributing specialty products through other channels[101] - Failure to retain or attract key personnel or qualified employees[101] - Significant interruption in bulk food repackaging facility or supply chain[103] - Higher wage and benefit costs[103] - Union activity[103] - Impairment of long-lived assets[103] - Significant lease obligations[103] - Material disruption or failure of information systems, including cyber-attacks[103] - Claims under self-insurance program differing from estimates[103] - Inability to protect intellectual property rights[103] - Increasing energy costs[103] - Legal proceedings[103] - Effective tax rate changes and results of examinations[103] - Failure to maintain effective internal control over financial reporting[103] - Changes in accounting standards[103] Risks related to government regulations and policies Regulatory risks involve compliance with food safety, dietary supplement rules, potential CBD product actions, and political advocacy impacts - Failure to comply with regulatory requirements or product specifications[103] - Subject to numerous federal, state, and local laws and regulations, increasing costs or limiting sales[103] - Sale of products containing cannabidiol (CBD) leading to regulatory action or legal proceedings[103] - Activities of Nutritional Health Coaches and nutrition education services impacted by government regulation or inability to secure adequate liability insurance[103] - Challenges to product claims by consumers or regulatory agencies[103] - Products suffering from real or perceived quality/food safety concerns, causing illness/injury/death[103] - Political advocacy activities reducing customer count and sales[103] Risks related to our indebtedness and liquidity Financial risks are tied to credit facility covenants, cash flow for debt service, and the need for additional capital - Credit facility limiting operational flexibility[105] - Inability to generate sufficient cash flow to satisfy debt service obligations[105] - Liquidity needs requiring additional capital through debt or equity financings[105] - Share repurchase program adversely affecting liquidity and stock price[105] General risks related to our common stock Risks related to common stock include principal stockholder influence, dividend policy, and anti-takeover provisions - Current principal stockholders (Isely family) having significant influence[106] - Inability to continue paying dividends[106] - Securities or industry analysts not publishing research, changing recommendations, or operating results not meeting expectations[106] - Anti-takeover provisions in organizational documents and Delaware law[106] - "Controlled company" status relying on NYSE corporate governance exemptions[106] Unresolved Staff Comments The company reported no unresolved staff comments from the SEC Properties As of September 30, 2023, Natural Grocers operated 165 stores across 21 states, with most properties leased - As of September 30, 2023, the company operated 165 stores across 21 states, with significant concentrations in Colorado (44 stores) and Texas (23 stores)[195] - The company owns 13 store buildings and leases the majority of its properties, including its home office and a 150,000 sq ft bulk food repackaging and distribution center[195][196] Legal Proceedings The company is involved in routine legal proceedings, but management anticipates no material adverse effect - The company is involved in routine legal proceedings, but management does not anticipate any material adverse effect on its financial statements[197] Mine Safety Disclosures This item is not applicable to the company PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Natural Grocers' common stock trades on NYSE, with dividend payments and an active share repurchase program Market Information This section provides details on the trading market for the company's common stock Holders of Record Information on the number of common stock holders of record as of a specified date Dividend Policy Details on the company's historical and recently approved cash dividend payments to stockholders Dividends Paid | Fiscal Year | Quarterly Dividend per Share | Special Dividend per Share | | :---------- | :--------------------------- | :------------------------- | | 2023 | $0.10 | - | | 2022 | $0.10 | - | | 2021 | $0.07 | $2.00 (Dec 2020) | - On November 16, 2023, the Board approved a special cash dividend of $1.00 per share and a quarterly cash dividend of $0.10 per share, payable December 13, 2023[201][411] Use of Proceeds From Registered Securities Information regarding the application of funds raised from registered securities offerings Unregistered Sales of Equity Securities Details on any equity securities issued without registration under the Securities Act of 1933 Issuer Purchases of Equity Securities Information on the company's share repurchase program, including authorization and activity - The Board authorized a share repurchase program in May 2016 for up to $10.0 million, extended until May 31, 2024[204][395] Share Repurchase Activity (FY2023) | Metric | Value | | :------------------------------------ | :---------- | | Number of common shares acquired | 17,998 | | Average price per common share acquired | $10.07 | | Total cost of common shares acquired | $0.2 million | - As of September 30, 2023, $8.1 million remained available under the share repurchase program[184][397] Reserved This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported increased net sales and net income for FY2023, driven by comparable store sales growth and strong liquidity Company Overview Overview of the company's store count, geographic presence, and store development plans for fiscal year 2024 - As of September 30, 2023, the company operated 165 natural and organic grocery and dietary supplement stores across 21 states[207] - In fiscal year 2023, the company opened 3 new stores, relocated/remodeled 3, and closed 2; it plans to open 4-6 new stores and relocate/remodel 4-6 stores in fiscal year 2024[209] Performance Highlights Key financial and operational metrics for fiscal year 2023, including net sales, net income, and EBITDA Fiscal Year 2023 Performance Highlights (vs. FY2022) | Metric | FY2023 (Millions) | FY2022 (Millions) | Change ($ Millions) | Change (%) | | :-------------------------------- | :---------------- | :---------------- | :------------------ | :--------- | | Net Sales | $1,140.6 | $1,089.6 | $50.9 | 4.7% | | Daily Average Comparable Store Sales | 3.6% (increase) | 2.6% (increase) | N/A | 1.0 pp | | Net Income | $23.2 | $21.4 | $1.9 | 8.8% | | EBITDA | $60.6 | $58.1 | $2.5 | 4.3% | | Adjusted EBITDA | $63.4 | $62.2 | $1.2 | 2.0% | | Cash and Cash Equivalents | $18.3 | $12.0 | $6.3 | 52.5% | | Available Revolving Facility | $48.5 | N/A | N/A | N/A | Industry Trends and Economics Discussion of economic factors, cost inflation, and competitive landscape influencing the company's performance - The company's performance is influenced by broader economic trends, including consumer spending, labor shortages, and supply chain disruptions[212] - Experienced annualized cost inflation of approximately 7% in fiscal year 2023 and 5% in Q4 FY2023, mitigated by pricing strategies[212] - Operates in a growing but highly competitive natural and organic grocery and dietary supplement industry, facing challenges from existing and new competitors[213] Outlook Anticipated future growth drivers, including customer loyalty, wellness trends, and potential for cost leverage - Anticipates continued profitable growth driven by a loyal customer base, increasing basket size, growing consumer interest in wellness, and a differentiated shopping experience[214] - Foresees opportunities for increased cost leverage and economies of scale as the store base expands, though growth is subject to economic and competitive conditions[215] Key Financial Metrics in Our Business Explanation of key performance indicators and cost components used to evaluate business performance - Key performance indicators include net sales, daily average comparable store sales (which increased 3.6% in FY2023), transaction count, and average transaction size[217] - Cost of goods sold and occupancy costs include inventory, shipping, distribution, buying, shrink, third-party delivery fees, and store occupancy (rent, CAM, taxes)[217] - Gross profit is net sales minus cost of goods sold and occupancy costs, with gross margin impacted by retail prices, product costs, occupancy, product mix, and new store openings[218] - Store expenses cover store-level costs like salaries, benefits, utilities, depreciation, advertising, and impairment charges, while administrative expenses cover home office costs[219][220] - Pre-opening expenses for new stores and relocations/remodels are expensed as incurred, including rent, salaries, and advertising[221] Results of Operations Detailed analysis of financial performance, including net sales, gross profit, and expenses for recent fiscal years Year ended September 30, 2023 compared to Year ended September 30, 2022 Comparative analysis of financial results for fiscal years 2023 and 2022, highlighting key changes in income statement items Consolidated Statements of Income Data (FY2023 vs FY2022, in thousands) | Metric | FY2023 | FY2022 | Change ($) | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | :--------- | | Net sales | $1,140,568 | $1,089,625 | $50,943 | 4.7% | | Cost of goods sold and occupancy costs | $813,637 | $784,744 | $28,893 | 3.7% | | Gross profit | $326,931 | $304,881 | $22,050 | 7.2% | | Store expenses | $257,282 | $242,057 | $15,225 | 6.3% | | Administrative expenses | $35,973 | $31,562 | $4,411 | 14.0% | | Pre-opening expenses | $2,007 | $1,107 | $900 | 81.3% | | Operating income | $31,669 | $30,155 | $1,514 | 5.0% | | Interest expense, net | $(3,299) | $(2,371) | $(928) | 39.1% | | Income before income taxes | $28,370 | $27,784 | $586 | 2.1% | | Provision for income taxes | $(5,127) | $(6,419) | $1,292 | (20.1)% | | Net income | $23,243 | $21,365 | $1,878 | 8.8% | | Basic EPS | $1.02 | $0.94 | $0.08 | 8.5% | | Diluted EPS | $1.02 | $0.94 | $0.08 | 8.5% | Other Operating Data (FY2023 vs FY2022) | Metric | FY2023 | FY2022 | Change (%) | | :-------------------------------- | :----- | :----- | :--------- | | Number of stores at end of period | 165 | 164 | 0.6% | | Change in daily average comparable store sales | 3.6% | 2.6% | 1.0 pp | | Number of new stores opened | 3 | 3 | 0% | | Number of stores relocated/remodeled | 3 | 2 | 50% | | Number of stores closed | 2 | 1 | 100% | - Net sales increased by 4.7% to $1,140.6 million, driven by a 3.6% increase in daily average comparable store sales (1.8% average transaction size, 1.7% transaction count), new store sales, and marketing initiatives[227] - Gross profit rose 7.2% to $326.9 million, with gross margin increasing to 28.7% from 28.0%, primarily due to higher product margin from effective pricing and promotions, partially offset by higher shrink expense[228] - Store expenses increased 6.3% to $257.3 million, and as a percentage of net sales, rose to 22.6% from 22.2%, mainly due to higher wage rates[229] - Administrative expenses increased 14.0% to $36.0 million, driven by higher compensation, technology amortization, software, and legal expenses[230] - Net income increased 8.8% to $23.2 million, with diluted EPS of $1.02, benefiting from a lower effective income tax rate (18.1% vs 23.1%) due to increased food donation deductions[233][234] Year ended September 30, 2022 compared to Year ended September 30, 2021 Comparative analysis of financial results for fiscal years 2022 and 2021, detailing changes in performance metrics Non-GAAP financial measures Discussion of non-GAAP financial measures like EBITDA and Adjusted EBITDA used for performance evaluation EBITDA and Adjusted EBITDA Reconciliation and analysis of EBITDA and Adjusted EBITDA, highlighting their use in evaluating operational performance Reconciliation of Net Income to EBITDA and Adjusted EBITDA (FY2023 vs FY2022, in thousands) | Metric | FY2023 | FY2022 | | :-------------------------------------- | :------- | :------- | | Net income | $23,243 | $21,365 | | Interest expense, net | $3,299 | $2,371 | | Provision for income taxes | $5,127 | $6,419 | | Depreciation and amortization | $28,906 | $27,906 | | EBITDA | $60,575 | $58,061 | | Impairment of long-lived assets and store closing costs | $1,464 | $2,920 | | Share-based compensation | $1,360 | $1,186 | | Adjusted EBITDA | $63,399 | $62,167 | - EBITDA increased 4.3% to $60.6 million in FY2023, maintaining 5.3% of net sales[238] - Adjusted EBITDA increased 2.0% to $63.4 million, representing 5.6% of net sales[239] - Management uses EBITDA and Adjusted EBITDA as supplemental non-GAAP measures to evaluate operating performance and the effectiveness of operational strategies, as they remove non-cash and non-core operational impacts[240][241] Liquidity and Capital Resources Overview of the company's cash flow, credit facilities, and capital allocation strategies for operations and growth - Primary liquidity sources are cash from operations, current cash balances ($18.3 million as of Sept 30, 2023), and borrowings under the Revolving Facility ($48.5 million available)[244] - Uses of cash include inventory purchases, operating expenses, capital expenditures for new stores and remodels, debt service, dividends, and share repurchases[244] - A special cash dividend of $1.00 per share and a quarterly dividend of $0.10 per share were approved in November 2023, to be funded by available cash and Revolving Facility borrowings[246] Operating Activities Analysis of cash generated from the company's core business operations for the fiscal year Net Cash Provided by Operating Activities (in thousands) | Metric | FY2023 | FY2022 | Change ($) | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | :--------- | | Net cash provided by operating activities | $64,606 | $39,693 | $24,913 | 62.8% | Investing Activities Details on cash used for capital expenditures, including new store openings and remodels Net Cash Used in Investing Activities (in thousands) | Metric | FY2023 | FY2022 | Change ($) | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | :--------- | | Net cash used in investing activities | $(37,950) | $(31,143) | $(6,807) | 21.9% | - Plans capital expenditures of $30.0 million to $39.0 million in fiscal year 2024, primarily for new store openings and relocations/remodels[251] Financing Activities Information on cash flows related to debt, equity, dividends, and share repurchases Net Cash Used in Financing Activities (in thousands) | Metric | FY2023 | FY2022 | Change ($) | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | :--------- | | Net cash used in financing activities | $(20,353) | $(20,189) | $(164) | 0.8% | Credit Facility Details on the company's revolving credit facility, including its terms, availability, and compliance - On November 16, 2023, the Revolving Facility was increased from $50.0 million to $75.0 million and its maturity extended to November 16, 2028[254][412] Credit Facility Status (as of Sept 30, 2023, in millions) | Metric | Amount | | :-------------------------------- | :----- | | Revolving Facility Commitment | $75.0 | | Term Loan Facility Outstanding | $7.7 | | Revolving Facility Outstanding | $0.0 | | Available for Borrowing (Revolving) | $48.5 | - The company was in compliance with all Credit Facility covenants as of September 30, 2023[258][371] Share Repurchases Summary of the company's share repurchase program, including activity and remaining authorization Share Repurchase Activity (FY2023) | Metric | Value | | :------------------------------------ | :---------- | | Number of common shares acquired | 17,998 | | Total cost of common shares acquired | $0.2 million | | Remaining authorization | $8.1 million | Recent Accounting Pronouncements Discussion of recently adopted and upcoming accounting standards and their anticipated impact on financial statements - Adopted ASU 2020-04 (Reference Rate Reform) in FY2023, replacing LIBOR with SOFR, with no material impact[345] - ASU 2016-13 (Credit Losses) will be effective in FY2024, but no material impact on consolidated financial statements is anticipated[347] Critical Accounting Policies Overview of accounting policies requiring significant judgment and estimates, such as income taxes and asset impairment - Critical accounting policies involve significant judgment and estimates for income taxes, goodwill and intangible assets, impairment of long-lived assets, and leases[262] - Long-lived assets are assessed for impairment annually or when circumstances indicate non-recoverability, using projected undiscounted future cash flows and fair value estimates[268] - Lease accounting requires significant judgment in classifying leases (operating vs. finance), determining lease terms, and estimating incremental borrowing rates[271][275] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate exposure on its floating-rate Credit Facility Interest Rate Risk Analysis of the company's exposure to interest rate fluctuations and their potential impact on financial results - The company's primary market risk is interest rate changes on its Credit Facility, which carries floating rates[277] - A hypothetical 100 basis point increase in interest rates would change annual interest expense by $0.2 million[277] Financial Statements and Supplementary Data This section presents the audited consolidated financial statements and accompanying notes for recent fiscal years - KPMG LLP issued unqualified opinions on the consolidated financial statements and the effectiveness of internal control over financial reporting for the fiscal year ended September 30, 2023[280][281][292][293] Reports of Independent Registered Public Accounting Firm Includes the unqualified opinions from KPMG LLP on the consolidated financial statements and internal controls Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and equity, as of fiscal year-ends Consolidated Statements of Income Details the company's revenues, expenses, and net income for the fiscal years presented Consolidated Statements of Cash Flows Reports cash inflows and outflows from operating, investing, and financing activities for the fiscal years Consolidated Statements of Changes in Stockholders' Equity Shows changes in equity accounts, including common stock, additional paid-in capital, and retained earnings Notes to Consolidated Financial Statements Provides detailed explanations and supplementary information for the consolidated financial statements - The company's revenue disaggregation for FY2023 shows Grocery at 70%, Dietary Supplements at 21%, and Body Care, Pet Care and Other at 9% of net sales[354] - Long-lived asset impairment charges totaled $1.3 million in fiscal year 2023, down from $2.9 million in fiscal year 2022[325][359][363] - The Credit Facility was amended on November 16, 2023, increasing the Revolving Facility to $75.0 million and extending its maturity to November 16, 2028, while also permitting a special cash dividend of up to $25.0 million[254][369][412] 1. Organization Describes the company's legal structure, business, and operational context 2. Basis of Presentation and Summary of Significant Accounting Policies Outlines the principles and key accounting policies used in preparing the financial statements 3. Revenue Recognition Details how and when the company recognizes revenue from its various sales channels 4. Earnings Per Share Explains the calculation of basic and diluted earnings per share for the reporting periods 5. Fair Value Measurements Describes the methodologies and assumptions used for fair value measurements of financial instruments 6. Property and Equipment Provides information on the company's property, plant, and equipment, including depreciation policies 7. Impairment of Long-Lived Assets Details the company's policy and assessment for impairment of long-lived assets 8. Goodwill and Other Intangible Assets Information on the company's goodwill and other intangible assets, including amortization policies 9. Accrued Expenses Provides a breakdown of various accrued liabilities and their components 10. Debt Details the company's debt obligations, including terms, interest rates, and covenants 11. Lease Commitments Information on the company's operating and finance lease obligations and related accounting 12. Share-Based Compensation Describes the company's share-based compensation plans and related accounting treatment 13. Stockholders' Equity Details the components of stockholders' equity, including common stock and retained earnings 14. Related Party Transactions Information on transactions between the company and its related parties 15. Income Taxes Details the company's income tax provision, deferred taxes, and effective tax rates 16. Defined Contribution Plan Information on the company's defined contribution retirement plan for employees 17. Segment Reporting Details the company's operating segments and how they are reported 18. Commitments and Contingencies Information on the company's contractual commitments and potential contingent liabilities 19. Subsequent Events Details significant events occurring after the balance sheet date but before financial statement issuance Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reported no changes in or disagreements with accountants on accounting and financial disclosure matters Controls and Procedures Management assessed the effectiveness of internal control over financial reporting and disclosure controls as effective Internal Control Over Financial Reporting Management's conclusion on the effectiveness of internal control over financial reporting as of September 30, 2023 - Management concluded that internal control over financial reporting was effective as of September 30, 2023, providing reasonable assurance regarding financial reporting reliability[417] Changes in Internal Control over Financial Reporting Reports on any material changes in internal control over financial reporting during the last fiscal quarter Evaluation of Disclosure Controls and Procedures Management's assessment of the effectiveness of the company's disclosure controls and procedures Other Information The company reported no other information required by this item Disclosure Regarding Foreign Jurisdictions that Prevent Inspections The company reported no disclosures regarding foreign jurisdictions that prevent inspections PART III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the proxy statement Executive Compensation Information regarding executive compensation is incorporated by reference from the company's proxy statement Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership and equity compensation plans is incorporated by reference from the proxy statement Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the proxy statement Principal Accounting Fees and Services Information on principal accounting fees and services, including KPMG LLP as the auditor, is incorporated by reference PART IV Exhibits, Financial Statement Schedules This section lists all exhibits and financial statement schedules filed as part of the Form 10-K Form 10-K Summary This item is not applicable to the company