# Natural Grocers by Vitamin Cottage, Inc. (NGVC) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Natural Grocers by Vitamin Cottage, Inc.'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1547459/000143774921028226/ngvc20210930_10k.htm
Accession: 0001437749-21-028226
Filing date: 2021-12-09
Report date: 2021-09-30
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/NGVC/
All MD&A years: /company/NGVC/mda/
Next year: /company/NGVC/mda/fy2022/ (FY 2022)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with our consolidated financial statements and notes thereto which are included elsewhere in this Form 10-K. This MD&A contains forward-looking statements. Refer to “Forward-Looking Statements” at the beginning of this Form 10-K for an explanation of these types of statements. Summarized numbers included in this section, and corresponding percentage or basis point changes may not sum due to the effects of rounding.

Company Overview

We operate natural and organic grocery and dietary supplement stores that are focused on providing high-quality products at affordable prices, exceptional customer service, nutrition education and community outreach. We offer a variety of natural and organic groceries and dietary supplements that meet our strict quality standards. We believe we have been at the forefront of the natural and organic foods movement since our founding. We are headquartered in Lakewood, Colorado. As of September 30, 2021, we operated 162 stores in 20 states, including Colorado, Arizona, Arkansas, Idaho, Iowa, Kansas, Louisiana, Minnesota, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, Texas, Utah, Washington and Wyoming. We also operate a bulk food repackaging facility and distribution center in Colorado.

We offer a variety of natural and organic groceries and dietary supplements that meet our strict quality guidelines. The size of our stores varies from approximately 5,000 to 16,000 selling square feet. For the year ended September 30, 2021, our new stores averaged approximately 10,000 selling square feet.

The growth in the organic and natural foods industry and growing consumer interest in health and nutrition have enabled us to continue to open new stores and enter new markets. Over the last five fiscal years, our store base has grown at a compound annual growth rate of 5.2%. We opened three new stores and relocated/remodeled five existing stores in fiscal year 2021. We plan to open four to six new stores and relocate/remodel three to four stores in fiscal year 2022. As of the date of this report, we also have signed leases or acquired property for an additional five new stores and four relocations/remodels that we plan to open in fiscal years 2022 and beyond. Between October 1, 2021 and the date of this Form 10-K, we did not open any new stores or relocate/remodel any stores.

Performance Highlights

Key highlights of our recent performance are discussed briefly below and are discussed in further detail throughout this MD&A. Key financial metrics, including, but not limited to, daily average comparable store sales, are defined under the caption “Key Financial Metrics in Our Business,” presented later in this MD&A.

[[GREPCENT_TABLE]]
[["","\u25cf","Net sales. Net sales were $1,055.5 million for the year ended September 30, 2021, an increase of $18.7 million, or 1.8%, compared to net sales of $1,036.8 million for the year ended September 30, 2020."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Daily average comparable store sales. Daily average comparable store sales for the year ended September 30, 2021 increased 0.7% from the year ended September 30, 2020."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Net income. Net income was $20.6 million for the year ended September 30, 2021, an increase of $0.6 million, or 2.9%, compared to net income of $20.0 million for the year ended September 30, 2020."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","EBITDA. EBITDA was $58.0 million in the year ended September 30, 2021, a decrease of $1.0 million, or 1.7%, compared to EBITDA of $58.9 million for the year ended September 30, 2020. EBITDA is not a measure of financial performance under GAAP. Refer to the \u201cNon-GAAP Financial Measures\u201d section of this MD&A for a definition of EBITDA and a reconciliation of the Company\u2019s net income to EBITDA."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Adjusted EBITDA. Adjusted EBITDA was $60.3 million in the year ended September 30, 2021, a decrease of $0.4 million, or 0.6%, compared to Adjusted EBITDA of $60.7 million for the year ended September 30, 2020. Adjusted EBITDA is not a measure of financial performance under GAAP. Refer to the \u201cNon-GAAP Financial Measures\u201d section of this MD&A for a definition of Adjusted EBITDA and a reconciliation of the Company\u2019s net income to Adjusted EBITDA."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Liquidity. We had cash and cash equivalents of $23.7 million as of September 30, 2021 and $49.0 million was available for borrowing under our $50.0 million Credit Facility. As of September 30, 2021, the Company had outstanding letters of credit of $1.0 million, which amount was reserved against the amount available for borrowing under the terms of our Credit Facility."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u25cf","New store growth. We opened 37 new stores between the beginning of fiscal year 2017 and the end of fiscal year 2021, with 162 stores open as of September 30, 2021. We opened three new stores in fiscal year 2021. We plan to open a total of four to six new stores in fiscal year 2022, which would result in an annual new store growth rate of between 2.5% and 3.7% for fiscal year 2022."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Store Relocations and Remodels. We relocated/remodeled 17 stores between the beginning of fiscal year 2017 and the end of fiscal year 2021. We relocated/remodeled five existing stores in fiscal year 2021."]]
[[/GREPCENT_TABLE]]

Industry Trends and Economics

We have identified the following recent trends and factors that have impacted and may continue to impact our results of operations and financial condition:

[[GREPCENT_TABLE]]
[["","\u25cf","COVID-19 pandemic. On March 11, 2020, the World Health Organization announced that COVID-19 infections had become a pandemic, and on March 13, 2020, the U.S. President announced a National Emergency relating to the disease. During the course of the COVID-19 pandemic, federal, state and local authorities have imposed, from time to time, a number of public health mandates intended to prevent the spread of the virus, including vaccination mandates, social distancing, quarantine, wearing face coverings, and \u201cstay-at-home\u201d measures. While significant efforts to distribute COVID-19 vaccines to the public are ongoing across the United States and states have reopened their economies by easing restrictions, certain of these public health mandates have had an adverse impact on the U.S. economy. Additional negative financial markets and industry-specific impacts could result from future case surges, outbreaks, COVID-19 virus variants, the potential that current vaccines may be less effective or ineffective against future COVID-19 virus variants, and the risk that large groups of the population may not receive vaccinations against COVID-19. The long-term economic impact of the COVID-19 pandemic is unknown at this time."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Impact of the COVID-19 pandemic on our operations. We believe we have acted proactively in response to the COVID-19 pandemic and the resulting government mandates. To date, all of our stores have continued operating since the start of the COVID-19 pandemic. We have experienced increased levels of net sales and average transaction size due to the COVID-19 pandemic as public health measures have been implemented by states across our footprint and customers have adjusted to these new circumstances by consuming more food at home. The COVID-19 pandemic and government mandates have also led to an increase in online orders for home delivery, which we offer at substantially all our stores in partnership with a third party."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Future impact of the COVID-19 pandemic. We believe our proactive response to the COVID-19 pandemic has resulted in increased customer loyalty, but there can be no assurance we will continue to experience elevated levels of net sales, in particular, when the COVID-19 pandemic subsides. We expect the impact of the COVID-19 pandemic and government mandates on our financial condition, results of operations and cash flows will largely depend on the extent and duration of the COVID-19 pandemic, the governmental and public actions taken in response, including economic stabilization efforts, and the long-term effect the COVID-19 pandemic will have on the U.S. economy. Moreover, the COVID-19 pandemic and government mandates make it more challenging for management to estimate future performance of our business, particularly over the near term. See \u201cItem 1A.- Risk Factors\u201d. Additional information regarding the impact of the COVID-19 pandemic and government mandates on our business and results of operations is provided below in this MD&A."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Impact of broader economic trends and political environment. The grocery industry and our sales are affected by general economic conditions, including, but not limited to, consumer spending, the level of disposable consumer income, consumer debt, interest rates, inflation or deflation, periods of recession and growth, the price of commodities, the political environment and consumer confidence. Furthermore, our ability to meet our labor needs, while controlling wage and labor-related costs, is subject to numerous external factors, including the availability of a sufficient number of qualified persons in the work force in the markets in which we are located, unemployment levels within those markets, prevailing wage rates, changing demographics, health and other insurance costs and changes in employment legislation, including unemployment benefits."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Opportunities in the growing natural and organic grocery and dietary supplements industry. Our industry, which includes organic and natural foods and dietary supplements, continues to experience growth driven primarily by increased public interest in health and nutrition. Capitalizing on this opportunity, we continue to open new stores and enter new markets. We expect the rate of new store unit growth in the foreseeable future to be dependent upon economic and business conditions and other factors, including the impact of the COVID-19 pandemic and related government mandates."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u25cf","Competition. The grocery and dietary supplement retail business is a large, fragmented and highly competitive industry with few barriers to entry. Competition in the grocery industry is likely to intensify, and shopping dynamics may shift, as a result of, among other things, industry consolidation, expansion by existing competitors, and the increasing availability of grocery ordering, pick-up and delivery options. These businesses compete with us on the basis of price, selection, quality, customer service, convenience, location, store format, shopping experience, ease of ordering and delivery or any combination of these or other factors. They also compete with us for products and locations. In addition, some of our competitors are expanding to offer a greater range of natural and organic foods. We also face internally generated competition when we open new stores in markets we already serve. We believe our commitment to carrying only carefully vetted, affordably priced and high-quality natural and organic products and dietary supplements, as well as our focus on providing nutrition education, differentiate us in the industry and provide a competitive advantage."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Consumer preferences. Our performance is also impacted by trends regarding natural and organic products, dietary supplements and at-home meal preparation. Consumer preferences towards dietary supplements or natural and organic food products might shift as a result of, among other things, economic conditions, food safety perceptions, changing consumer choices and the cost of these products. A change in consumer preferences away from our offerings, including those resulting from reductions or changes in our offerings, could have a material adverse effect on our business. Additionally, negative publicity regarding the safety of dietary supplements, product recalls or new or upgraded regulatory standards may adversely affect demand for the products we sell and could result in lower consumer traffic, sales and results of operations."]]
[[/GREPCENT_TABLE]]

Outlook

We believe there are several key factors that have contributed to our success and will enable us to increase our comparable store sales and continue to profitably expand. These factors include a loyal customer base, increasing basket size, growing consumer interest in nutrition and wellness, a differentiated shopping experience that focuses on customer service, nutrition education, a convenient, clean, and shopper-friendly retail environment, and our focus on high-quality, affordable natural and organic groceries and dietary supplements.

We expect the rate of new store unit growth in the foreseeable future to be dependent upon economic and business conditions and other factors, including the impact of the COVID-19 pandemic and related government mandates.

Over the long term, we believe there are opportunities for us to continue to expand our store base, expand profitability and increase comparable store sales. However, future sales growth, including comparable store sales, and our profitability could vary due to increasing competitive conditions in the natural and organic grocery and dietary supplement industry and regional and general economic conditions. In the future, we believe there are opportunities for increased leverage of costs and increased economies of scale in sourcing products. However, due to the fixed nature of certain of our costs (in particular, our rent obligations and related occupancy costs), our ability to leverage costs may be limited.

Our operating results may be affected by a variety of internal and external factors and trends, which are described more fully in the section entitled “Risk Factors” appearing elsewhere in this Form 10-K.

Key Financial Metrics in Our Business

In assessing our performance, we consider a variety of performance and financial measures. The key measures are as follows:

Net sales

Our net sales are comprised of gross sales net of discounts, in-house coupons, returns and allowances. In comparing net sales between periods, we monitor the following:

[[GREPCENT_TABLE]]
[["","\u25cf","Change in daily average comparable store sales. We begin to include sales from a store in comparable store sales on the first day of the thirteenth full month following the store\u2019s opening. We monitor the percentage change in comparable store sales by comparing sales from all stores in our comparable store base for a reporting period against sales from the same stores for the same number of operating months in the comparable reporting period of the prior year. When a store that is included in comparable store sales is remodeled or relocated, we continue to consider sales from that store to be comparable store sales. Our comparable store sales data may not be presented on the same basis as our competitors. We use the term \u201cnew stores\u201d to refer to stores that have been open for less than thirteen months. Daily average comparable store sales are comparable store sales divided by the number of selling days in each period. We use this metric to remove the effect of differences in the number of selling days we are open during the comparable periods (for example, as a result of leap years or the Easter holiday shift between quarters)."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u25cf","Transaction count. Transaction count represents the number of transactions reported at our stores during the period and includes transactions that are voided, return transactions and exchange transactions."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Average transaction size. Average transaction size, or basket size, is calculated by dividing net sales by transaction count for a given time period. We use this metric to track the trends in average dollars spent in our stores per customer transaction."]]
[[/GREPCENT_TABLE]]

Cost of goods sold and occupancy costs

Our cost of goods sold and occupancy costs include the cost of inventory sold during the period (net of discounts and allowances), shipping and handling costs, distribution and supply chain costs (including the costs of our bulk food repackaging facility), buying costs, shrink expense, third-party delivery fees and store occupancy costs. Store occupancy costs include rent, common area maintenance and real estate taxes. Depreciation expense included in cost of goods sold relates to depreciation of assets directly used at our bulk food repackaging facility. The components of our cost of goods sold and occupancy costs may not be identical to those of our competitors, and as a result, our cost of goods sold and occupancy costs data included in this Form 10-K may not be identical to those of our competitors, and may not be comparable to similar data made available by our competitors. Occupancy costs as a percentage of net sales typically decrease as new stores mature and sales increase. Rent payments for leases classified as finance lease obligations are not recorded in cost of goods sold and occupancy costs. Rather, these rent payments are recognized as a reduction of the related obligations and as interest expense.

Gross profit and gross margin

Gross profit is equal to our net sales less our cost of goods sold and occupancy costs. Gross margin is gross profit as a percentage of net sales. Gross margin is impacted by changes in retail prices, product costs, occupancy costs and the mix of products sold, as well as the rate at which we open new stores.

Store expenses

Store expenses consist of store-level expenses, such as salary and benefits, share-based compensation, supplies, utilities, depreciation, advertising, bank credit card charges and other related costs associated with operations and purchasing support. Depreciation expense included in store expenses relates to depreciation for assets directly used at the stores, including depreciation on land improvements, leasehold improvements, fixtures and equipment and technology. Depreciation expenses on the right-of-use assets related to the finance leases of the stores are also considered store expenses. Additionally, store expenses include any gain or loss recorded on the disposal of fixed assets, primarily related to store relocations, as well as store closure and lease termination costs. Store expenses also include long-lived asset impairment charges. The majority of store expenses consist of labor-related expenses, which we closely manage and which trend closely with sales. Labor-related expenses as a percentage of net sales tend to be higher at new stores compared to comparable stores, as new stores require a minimum level of staffing in order to maintain adequate levels of customer service combined with lower sales. As new stores increase their sales, labor-related expenses as a percentage of net sales typically decrease.

Administrative expenses

Administrative expenses consist of home office-related expenses, such as salary and benefits, share-based compensation, office supplies, hardware and software expenses, depreciation and amortization expense, occupancy costs (including rent, common area maintenance, real estate taxes and utilities), professional services expenses, expenses associated with our Board, expenses related to compliance with the requirements of regulations applicable to publicly traded companies, and other general and administrative expenses. Depreciation expense included in administrative expenses relates to depreciation for assets directly used at the home office including depreciation on land improvements, leasehold improvements, fixtures and equipment and computer hardware and software.

Pre-opening expenses

Pre-opening expenses for new stores and relocations/remodels may include rent expense, salaries, advertising, supplies and other miscellaneous costs incurred prior to the store opening. Rent expense is generally incurred from one to four months prior to a store’s opening date for store leases classified as operating. For store leases classified as finance leases, we recognize pre-opening interest expense. Other pre-opening and relocation expenses are generally incurred in the 60 days prior to the store opening. Certain advertising and promotional costs associated with opening a new store may be incurred both before and after the store opens. All pre-opening costs are expensed as incurred. Pre-opening expenses for remodels are incurred if the store is required to be closed due to the remodel.

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Interest expense, net

Interest expense consists of the interest associated with finance lease obligations net of capitalized interest and our Credit Facility.

Income tax expense

Income taxes are accounted for in accordance with the provisions of Income Taxes (ASC 740). 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 basis. Deferred tax assets and liabilities are remeasured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) was signed into law. Intended to provide economic relief to those impacted by the COVID-19 pandemic, the CARES Act, among other things, includes provisions addressing the carryback of net operating losses for specific periods, temporary modifications to the limitations placed on the tax deductibility of net interest expenses, and technical amendments for qualified improvement property (QIP).

Results of Operations

The following table presents key components of our results of operations expressed as a percentage of net sales for the periods presented:

[[GREPCENT_TABLE]]
[["","","Year ended September 30,"],["","","2021","","","2020","","","2019"],["Statements of Income Data:*"],["Net sales","","","100.0","%","","","100.0","","","","100.0"],["Cost of goods sold and occupancy costs","","","72.3","","","","72.7","","","","73.6"],["Gross profit","","","27.7","","","","27.3","","","","26.4"],["Store expenses","","","22.2","","","","21.9","","","","21.9"],["Administrative expenses","","","2.7","","","","2.6","","","","2.5"],["Pre-opening expenses","","","0.1","","","","0.1","","","","0.2"],["Operating income","","","2.7","","","","2.7","","","","1.9"],["Interest expense, net","","","(0.2",")","","","(0.2",")","","","(0.5",")"],["Income before income taxes","","","2.5","","","","2.5","","","","1.3"],["Provision for income taxes","","","(0.5",")","","","(0.5",")","","","(0.3",")"],["Net income","","","1.9","%","","","1.9","","","","1.0"],["__________________________"],["*Figures may not sum due to rounding."],["Other Operating Data (Unaudited):"],["Number of stores at end of period","","","162","","","","159","","","","153"],["Store unit count increase period over period","","","1.9","%","","","3.9","","","","3.4"],["Change in daily average comparable store sales","","","0.7","%","","","12.0","","","","3.1"],["Number of stores opened during the period","","","3","","","","6","","","","6"],["Number of stores relocated and remodeled during the period","","","5","","","","2","","","","5"],["Gross square footage at end of period(1)","","","2,649,532","","","","2,599,649","","","","2,522,906"],["Selling square footage at end of period(1)","","","1,719,813","","","","1,687,196","","","","1,637,150"]]
[[/GREPCENT_TABLE]]

(1) Gross square footage and selling square footage at the end of the period include the square footage for all stores that were open as of the end of the period presented.

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Year ended September 30, 2021 compared to Year ended September 30, 2020

The following table summarizes our results of operations and other operating data for the periods presented, dollars in thousands:

[[GREPCENT_TABLE]]
[["","","Year ended September 30,","","","Change in"],["","","2021","","","2020","","","Dollars","","","Percent"],["Statements of Income Data:"],["Net sales","","$","1,055,516","","","","1,036,842","","","","18,674","","","","1.8","%"],["Cost of goods sold and occupancy costs","","","763,328","","","","753,701","","","","9,627","","","","1.3"],["Gross profit","","","292,188","","","","283,141","","","","9,047","","","","3.2"],["Store expenses","","","234,586","","","","227,069","","","","7,517","","","","3.3"],["Administrative expenses","","","28,355","","","","26,780","","","","1,575","","","","5.9"],["Pre-opening expenses","","","920","","","","1,543","","","","(623",")","","","(40.4",")"],["Operating income","","","28,327","","","","27,749","","","","578","","","","2.1"],["Interest expense, net","","","(2,271",")","","","(2,048",")","","","(223",")","","","10.9"],["Income before income taxes","","","26,056","","","","25,701","","","","355","","","","1.4"],["Provision for income taxes","","","(5,475",")","","","(5,692",")","","","217","","","","(3.8",")"],["Net income","","$","20,581","","","","20,009","","","","572","","","","2.9","%"]]
[[/GREPCENT_TABLE]]

Net sales

Net sales increased $18.7 million, or 1.8%, to $1,055.5 million for the year ended September 30, 2021 compared to $1,036.8 million for the year ended September 30, 2020, primarily due to a $4.2 million increase in comparable store sales, and a $14.5 million increase in new store sales. Daily average comparable store sales increased 0.7% for the year ended September 30, 2021 compared to an increase of 12.0% for the year ended September 30, 2020. The daily average comparable store sales increase in fiscal year 2021 resulted from a 4.7% increase in average transaction size, partially offset by a 3.8% decrease in daily average transaction count. In the year ended September 30, 2021, customers reduced their frequency of shopping trips in response to the COVID-19 pandemic and related government mandates, but increased their overall basket size per shopping trip. Comparable store average transaction size was $44.24 for the year ended September 30, 2021. The increase in net sales during the year ended September 30, 2021 is attributable to our customers’ response to the COVID-19 pandemic and related government mandates, inflationary pressure on our retail prices, marketing initiatives, promotional campaigns and increased membership in and usage of the {N}power® customer loyalty program.

Gross profit

Gross profit increased $9.0 million, or 3.2%, to $292.2 million for the year ended September 30, 2021 compared to $283.1 million for the year ended September 30, 2020, primarily driven by the increased sales volumes resulting from the COVID-19 pandemic and related government mandates. Gross profit reflects earnings after product and occupancy costs. Gross margin increased to 27.7% for the year ended September 30, 2021 from 27.3% for the year ended September 30, 2020. The increase in gross margin during the year ended September 30, 2021 was primarily driven by improved product margin, and lower shrink and store occupancy expenses as a percentage of net sales.

Store expenses

Store expenses increased $7.5 million, or 3.3%, to $234.6 million in the year ended September 30, 2021 compared to $227.1 million in the year ended September 30, 2020. Store expenses as a percentage of net sales were 22.2% and 21.9% for the years ended September 30, 2021 and 2020, respectively. Store expenses as a percentage of net sales increased during the year ended September 30, 2021 due to higher labor-related expenses in the first half of the year. Store expenses included long-lived asset impairment charges and lease termination costs of $1.5 million in fiscal year 2021 and long-lived asset impairment charges of $0.6 million in fiscal year 2020.

Administrative expenses

Administrative expenses increased $1.6 million, or 5.9%, to $28.4 million for the year ended September 30, 2021 compared to $26.8 million for the year ended September 30, 2020. Administrative expenses as a percentage of net sales were 2.7% and 2.6% for the years ended September 30, 2021 and 2020, respectively.

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Pre-opening expenses

Pre-opening expenses decreased $0.6 million, or 40.4%, to $0.9 million for the year ended September 30, 2021 compared to $1.5 million for the year ended September 30, 2020. The change in pre-opening expenses was primarily due to the impact of the number and timing of new store openings and relocations/remodels. The numbers of stores opened and relocated/remodeled were as follows for the periods presented:

[[GREPCENT_TABLE]]
[["","","Year ended September 30,"],["","","2021","","","2020"],["New stores","","","3","","","","6"],["Relocated/remodeled stores","","","5","","","","2"],["","","","8","","","","8"]]
[[/GREPCENT_TABLE]]

Interest expense, net

Interest expense, net of capitalized interest, increased $0.2 million, or 10.9%, in the year ended September 30, 2021 compared to the year ended September 30, 2020.

Income taxes

Provision for income taxes decreased $0.2 million to $5.5 million for the year ended September 30, 2021 compared to $5.7 million for the year ended September 30, 2020. The Company’s effective income tax rate was approximately 21.0% and 22.1% for the years ended September 30, 2021 and 2020, respectively.

Net income

Net income for the year ended September 30, 2021 was $20.6 million, or $0.91 in diluted earnings per share compared to $20.0 million, or $0.89 in diluted earnings per share, in the year ended September 30, 2020.

Year ended September 30, 2020 compared to Year ended September 30, 2019

A comparative discussion of our results of operations and other operating data for the years ended September 30, 2020 and September 30, 2019 is set out in our Annual Report on Form 10-K for the year ended September 30, 2020 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations - Year ended September 30, 2020 compared to Year ended September 30, 2019.”

Non-GAAP financial measures

EBITDA and Adjusted EBITDA

Management believes some investors’ understanding of our performance is enhanced by including EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA as adjusted to exclude the effects of certain income and expense items that management believes make it more difficult to assess the Company’s actual operating performance, including certain items such as share-based compensation, impairment charges, store closing costs and non-recurring items. EBITDA and Adjusted EBITDA are not measures of financial performance under GAAP. We believe EBITDA and Adjusted EBITDA provide additional information about: (i) our operating performance, because they assist us in comparing the operating performance of our stores on a consistent basis, as they remove the impact of non-cash depreciation and amortization expense as well as items not directly resulting from our core operations, such as interest expense and income taxes and (ii) our performance and the effectiveness of our operational strategies. Additionally, EBITDA is a component of a measure in our financial covenants under our Credit Facility.

Furthermore, management believes some investors use EBITDA and Adjusted EBITDA as supplemental measures to evaluate the overall operating performance of companies in our industry. Management believes that some investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations. By providing these non-GAAP financial measures, together with a reconciliation from net income, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. Commencing with its financial reporting for fiscal year 2021, the Company has revised its definition of Adjusted EBITDA to exclude share-based compensation expense. The Company’s historical presentation of Adjusted EBITDA, including for fiscal year 2020, did not exclude share-based compensation expense. However, Adjusted EBITDA for fiscal year 2020, as presented in this report, has been recast to exclude share-based compensation expense to enhance the comparability of this measure between fiscal year 2020 and fiscal year 2021. Management believes that excluding share-based compensation expense from Adjusted EBITDA will enhance investors’ ability to assess period-to-period comparisons of the Company’s operating performance and make more meaningful comparisons between our operating performance and the operating performance of our competitors.

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Our competitors may define EBITDA and Adjusted EBITDA differently, and as a result, our measure of EBITDA and Adjusted EBITDA may not be directly comparable to EBITDA and Adjusted EBITDA of other companies. Items excluded from EBITDA and Adjusted EBITDA are significant components in understanding and assessing financial performance. EBITDA and Adjusted EBITDA are supplemental measures of operating performance that do not represent, and should not be considered in isolation or as an alternative to, or substitute for, net income or other financial statement data presented in the consolidated financial statements as indicators of financial performance. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of the limitations are:

[[GREPCENT_TABLE]]
[["","\u25cf","EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","EBITDA and Adjusted EBITDA do not reflect any impact for single lease expense for leases classified as finance leases;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","EBITDA and Adjusted EBITDA do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Adjusted EBITDA does not reflect share-based compensation expense, impairment and store closing costs;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","EBITDA and Adjusted EBITDA do not reflect our tax expense or the cash requirements to pay our taxes; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements."]]
[[/GREPCENT_TABLE]]

Due to these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA as supplemental information.

The following table reconciles net income to EBITDA and Adjusted EBITDA, dollars in thousands:

[[GREPCENT_TABLE]]
[["","","Year ended September 30,"],["","","2021","","","2020"],["Net income","","$","20,581","","","","20,009"],["Interest expense, net","","","2,271","","","","2,048"],["Provision for income taxes","","","5,475","","","","5,692"],["Depreciation and amortization","","","29,633","","","","31,193"],["EBITDA","","","57,960","","","","58,942"],["Impairment of long-lived assets and store closing costs","","","1,455","","","","612"],["Share-based compensation","","","877","","","","1,129"],["Adjusted EBITDA(1)","","$","60,292","","","","60,683"]]
[[/GREPCENT_TABLE]]

(1) Adjusted EBITDA for fiscal year 2020, as presented, has been recast to exclude share-based compensation expense to enhance the comparability of this measure between fiscal year 2020 and fiscal year 2021.

Year ended September 30, 2021 compared to Year ended September 30, 2020

EBITDA decreased 1.7% to $58.0 million in the year ended September 30, 2021 compared to $58.9 million in the year ended September 30, 2020. EBITDA as a percentage of net sales was 5.5% and 5.7% for the years ended September 30, 2021 and 2020, respectively.

Adjusted EBITDA decreased 0.6% to $60.3 million in the year ended September 30, 2021 compared to $60.7 million in the year ended September 30, 2020. Adjusted EBITDA as a percentage of net sales was 5.7% and 5.9% for the years ended September 30, 2021 and 2020, respectively.

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Year ended September 30, 2020 compared to Year ended September 30, 2019

A comparative discussion of EBITDA and Adjusted EBITDA for the years ended September 30, 2020 and September 30, 2019 is set out in our Annual Report on Form 10-K for the year ended September 30, 2020 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP financial measures – EBITDA and Adjusted EBITDA.”

Liquidity and Capital Resources

Our ongoing primary sources of liquidity are cash generated from operations, current balances of cash and cash equivalents and borrowings under our Revolving Facility. Our primary uses of cash are for purchases of inventory, operating expenses, capital expenditures predominantly in connection with opening, relocating and remodeling stores, debt service and corporate taxes. As of September 30, 2021, we had $23.7 million in cash and cash equivalents and $49.0 million available for borrowing under our Revolving Facility. On November 18, 2020, we entered into a $35.0 million Term Loan Facility maturing November 13, 2024, which was used to partially fund the special cash dividend paid in December 2020.

In May 2016, our Board authorized a two-year share repurchase program pursuant to which the Company may repurchase up to $10.0 million in shares of the Company’s common stock. Our Board subsequently extended the share repurchase program, which will terminate on May 31, 2022. We did not repurchase any shares during the year ended September 30, 2021. Between October 1, 2021 and December 6, 2021 (the latest practicable date for making the determination), we did not repurchase any additional shares of our common stock. The dollar value of the shares of the Company’s common stock that may yet be repurchased under the share repurchase program is $8.3 million. Potential future share repurchases under the share repurchase program could be funded by operating cash flow, excess cash balances or borrowings under our Revolving Facility. The timing and the number of shares repurchased, if any, will be dictated by our capital needs and stock market conditions.

We paid a quarterly cash dividend of $0.07 per share of common stock during each quarter of fiscal year 2021 and we paid a special cash dividend of $2.00 per share of common stock in December 2020. On November 18, 2021, our Board approved a quarterly cash dividend of $0.10 per share, which will be paid on December 15, 2021 to stockholders of record as of the close of business on November 29, 2021.

We plan to continue to open new stores in the future, which may require us to borrow additional amounts under our Revolving Facility from time to time. We believe that cash and cash equivalents, together with the cash generated from operations and the borrowing availability under our Revolving Facility will be sufficient to meet our working capital needs and planned capital expenditures, including capital expenditures related to new store needs, repayment of debt, stock repurchases and dividends for the next 12 months and the foreseeable future. Our working capital position benefits from the fact that we generally collect cash from sales to customers the same day or, in the case of credit or debit card transactions, within days from the related sale.

The following is a summary of our operating, investing and financing activities for the periods presented, dollars in thousands:

[[GREPCENT_TABLE]]
[["","","Year ended September 30,"],["","","2021","","","2020"],["Net cash provided by operating activities","","$","53,880","","","","66,503"],["Net cash used in investing activities","","","(27,755",")","","","(29,557",")"],["Net cash used in financing activities","","","(30,981",")","","","(14,626",")"],["Net (decrease) increase in cash and cash equivalents","","","(4,856",")","","","22,320"],["Cash and cash equivalents, beginning of year","","","28,534","","","","6,214"],["Cash and cash equivalents, end of year","","$","23,678","","","","28,534"]]
[[/GREPCENT_TABLE]]

Year ended September 30, 2021 compared to Year ended September 30, 2020

Operating Activities

Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization and changes in deferred taxes, and the effect of working capital changes. Net cash provided by operating activities decreased $12.6 million, or 19.0%, to $53.9 million in the year ended September 30, 2021, from $66.5 million in the year ended September 30, 2020. The decrease in cash provided by operating activities was primarily due to a decrease in cash provided by working capital and a decrease in net income adjusted for non-cash items.

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Investing Activities

Net cash used in investing activities consists primarily of capital expenditures. Net cash used in investing activities decreased $1.8 million, or 6.1%, to $27.8 million in the year ended September 30, 2021 compared to $29.6 million in the year ended September 30, 2020. Cash paid for capital expenditures decreased $0.4 million in the year ended September 30, 2021 compared to the year ended September 30, 2020, driven by the number and the timing of new store openings and store relocations.

During the year ended September 30, 2021, we opened three new stores, relocated three stores and remodeled two stores, compared to opening six new stores, relocating one store and remodeling one store during the year ended September 30, 2020. We plan to spend approximately $28 million to $35 million on capital expenditures during fiscal year 2022 in connection with the opening of four to six planned new stores and three to four store relocations. We anticipate that our new stores will require, on average, an upfront capital investment of approximately $2.2 million per store.

Acquisition of property and equipment not yet paid increased $2.4 million to $4.8 million in fiscal year 2021 compared to $2.4 million in fiscal year 2020 due to the timing of payments related to new store openings and relocations.

Financing Activities

Net cash used in financing activities consists primarily of borrowings and repayments under our Credit Facility, payments of finance lease obligations, and dividends paid to shareholders. Net cash used in financing activities was $31.0 million for the year ended September 30, 2021 compared to $14.6 million for the year ended September 30, 2020. The increase in cash used in financing activities for the year ended September 30, 2021 was primarily due to dividends paid to shareholders of $51.5 million partially offset by net incremental borrowing under our Credit Facility of $23.7 million during the year ended September 30, 2021, compared to net incremental repayments of $5.7 million during the year ended September 30, 2020.

Year ended September 30, 2020 compared to Year ended September 30, 2019

A comparative discussion of operating, investing and financing activities for the years ended September 30, 2020 and September 30, 2019 is set out in our Annual Report on Form 10-K for the year ended September 30, 2020 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

Credit Facility

The revolving commitment amount under the Revolving Facility is $50.0 million, including a $5.0 million sub-limit for standby letters of credit. We borrowed $35.0 million under the Term Loan Facility in December 2020. The operating company is the borrower under the Credit Facility and its obligations under the Credit Facility are guaranteed by the holding company and Vitamin Cottage Two Ltd. Liability Company (VC2). The Credit Facility is secured by a lien on substantially all of the Company’s assets. The Company has the right to borrow, prepay and re-borrow amounts under the Credit Facility at any time prior to the maturity date without premium or penalty. On November 13, 2019, the Company amended the Credit Facility to extend the maturity date to November 13, 2024 and permit the operating company to pay cash dividends to Natural Grocers in an amount sufficient to allow Natural Grocers to repurchase shares of common stock and pay dividends on its common stock in an aggregate amount not to exceed $10.0 million during any fiscal year. On November 18, 2020, we entered into the Fourth Amendment to the Credit Facility (the Fourth Amendment) to provide for the Term Loan Facility and to permit payment of a one-time dividend of up to $50.0 million no later than December 31, 2020.

Base rate borrowings under the Credit Facility bear interest at a fluctuating base rate as determined by the lenders’ administrative agent based on the most recent compliance certificate of the operating company and stated at the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate, and (iii) the Eurodollar rate plus 1.00%, less the lender spread based upon the Company’s consolidated leverage ratio. Eurodollar rate borrowings under the Credit Facility bear interest based on the London Interbank Offered Rate, or its successor rate (LIBOR), for the interest period plus the lender spread based upon the Company’s consolidated leverage ratio. The unused commitment fee is also based upon the Company’s consolidated leverage ratio. At the Company’s election, the Credit Facility currently bears interest at the Eurodollar rate. The Company will repay principal amounts outstanding under the Term Loan Facility in equal quarterly installments of approximately $0.4 million commencing on the last day of each fiscal quarter commencing on March 31, 2021 and ending on September 30, 2024. Amounts repaid on the Term Loan Facility may not be reborrowed.

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The Credit Facility requires compliance with certain customary operational and financial covenants, including a consolidated leverage ratio. The Credit Facility also contains certain other customary limitations on the Company’s ability to incur additional debt, guarantee other obligations, grant liens on assets and make investments or acquisitions, among other limitations. Additionally, the Credit Facility prohibits the payment of cash dividends to the holding company from the operating company without the required lenders’ consent, provided that so long as no default exists or would arise as a result thereof, the operating company may pay cash dividends to the holding company in an amount sufficient to allow the holding company to: (i) pay various audit, accounting, tax, securities, indemnification, reimbursement, insurance and other reasonable expenses incurred in the ordinary course of business and (ii) repurchase shares of common stock and pay dividends on our common stock in an aggregate amount not to exceed $10.0 million during any fiscal year.

We had no amounts outstanding under the Revolving Facility as of September 30, 2021 and 2020. We had $23.7 million of outstanding borrowings under the Term Loan Facility as of September 30, 2021. As of September 30, 2021 and September 30, 2020, we had undrawn, issued and outstanding letters of credit of $1.0 million and $1.3 million, respectively, which were reserved against the amount available for borrowing under the terms of the Revolving Facility. We had $49.0 million and $48.7 million available for borrowing under the Credit Facility as of September 30, 2021 and September 30, 2020, respectively.

As of each of September 30, 2021 and September 30, 2020, the Company was in compliance with the debt covenants under the Credit Facility.

Recent Accounting Pronouncements

For a description of new applicable accounting pronouncements, including those recently adopted, see Note 2, Basis of Presentation and Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures of contingent assets and liabilities. Actual amounts may differ from these estimates. We base our estimates on historical experience and on various other assumptions and factors that we believe to be reasonable under the circumstances. We evaluate our accounting policies and resulting estimates on an ongoing basis to make adjustments we consider appropriate under the facts and circumstances.

We have chosen accounting policies we believe are appropriate to report accurately and fairly our operating results and financial position, and we apply those accounting policies in a consistent manner. Refer to our consolidated financial statements and related notes for a summary of our significant accounting policies. We believe the following accounting policies are the most critical in the preparation of our consolidated financial statements because they involve the most difficult, subjective or complex judgments about the effect of matters that are inherently uncertain.

Income Taxes

We account for income taxes using the asset and liability method. This method requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between the tax basis and financial reporting basis of our assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates in the respective jurisdictions in which we operate. We consider the need to establish valuation allowances to reduce deferred income tax assets to the amounts that we believe are more likely than not to be recovered.

We recognize the effect of income tax positions only if those positions are more likely than not of being sustained by the relevant taxing authority. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

Significant accounting judgment is required in determining the provision for income taxes and related accruals, deferred tax assets and liabilities. In the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain. In addition, we are subject to periodic audits and examinations by the IRS and other state and local taxing authorities. Although we believe that our estimates are reasonable, actual results could differ from these estimates.

To the extent we prevail in matters for which reserves have been established, or are required to pay amounts in excess of our reserves, our effective income tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement would require the use of our cash and would result in an increase in our effective income tax rate in the period of resolution. A favorable tax settlement would be recognized as a reduction in our effective income tax rate in the period of resolution.

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Goodwill and Intangible Assets

We assess our goodwill and intangible assets primarily consisting of trademarks, favorable operating leases and covenants-not-to-compete at least annually. The Company’s annual impairment testing of goodwill is performed as of July 1. In performing the Company’s analysis of goodwill, the Company first evaluates qualitative factors, including relevant events and circumstances, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment,” Topic 350, “Intangibles – Goodwill and Other” (ASU 2017-04). Early adoption is permitted and the Company early adopted for the year ended September 30, 2020. The amendments in ASU 2017-04 simplify the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the current two-step impairment test. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value should be recognized; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. There are significant judgments and estimates within the processes; it is therefore possible that materially different amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. As of September 30, 2021, the Company has recorded no impairment charges related to goodwill.

Impairment of Long-Lived Assets and Store Closing Costs

We assess our long-lived assets, principally property and equipment and lease right of use assets, for possible impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. These events or changes primarily include a significant change in current period performance combined with a history of losses and a projection of continuing losses, or a decision to close or relocate a store. The Company assesses the recoverability of the assets at an individual store level which we consider to be the lowest level in the organization for which independent identifiable cash flows are available. If the carrying value of such assets over their respective remaining lives is not recoverable through projected undiscounted future cash flows, impairment is recognized for any excess of the carrying value over the estimated fair value of the asset group. The fair value of the asset group is estimated based on either: (i) discounted future cash flows using a market participant’s discount rate; or (ii) an appropriate third-party market appraisal or other valuation technique.

Our judgment regarding events or changes in circumstances that indicate the assets carrying value may not be recoverable is based on several factors such as historical and forecasted operating results, significant industry trends and other economic factors. Further, determining whether an impairment exists requires that we use estimates and assumptions in calculating the future undiscounted cash flows expected to be generated by the assets. These estimates and assumptions look several years into the future and include assumptions on future store revenue growth, potential impact of operational changes, competitive factors, inflation and the economy. Application of alternative assumptions could produce materially different results.

If the Company commits to a plan to dispose of a long-lived asset before the end of its previously estimated useful life, estimated cash flows are revised accordingly, and the Company may be required to record an asset impairment write-down. Additionally, related liabilities arise, such as severance, contractual obligations and other accruals associated with store closings from decisions to dispose of assets. The Company estimates these liabilities based on the facts and circumstances in existence for each restructuring decision. The amounts the Company will ultimately realize or disburse could differ from the amounts assumed in arriving at the asset impairment and restructuring charge recorded.

Leases

We lease retail stores, a bulk food repackaging facility and distribution center, land and administrative offices under long-term operating leases or finance leases. Accounting for leased properties requires compliance with technical accounting rules and significant judgment by management. Application of these accounting rules and assumptions made by management will determine whether the lease is accounted for as an operating lease, whether we are considered the owner for accounting purposes or whether the lease is accounted for as a finance lease.

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842)” in February 2016 and subsequently issued related ASUs in 2018 and 2019 (collectively, “ASC 842”). ASC 842 requires lessees to recognize a right-of-use asset and corresponding lease liability for all leases with terms greater than 12 months. Under ASC 842, recognition, measurement and presentation of lease expenses depend on whether the lease is classified as a finance or operating lease.

We adopted ASC 842 on October 1, 2019, the first day of fiscal year 2020, using the modified retrospective transition approach. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, permits companies not to reassess prior conclusions on lease identification, lease classification and initial direct costs. We did not elect the hindsight practical expedient.

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Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent the Company’s right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives and impairment of operating lease assets.

Most leases include one or more options to renew, with renewal terms normally expressed in periods of five-year increments. The exercise of lease renewal options is at the Company’s sole discretion. The lease term includes the initial contractual term as well as any options to extend the lease when it is reasonably certain that the Company will exercise that option.

As most of the Company’s lease agreements do not provide an implicit discount rate, the Company uses an estimated incremental borrowing rate, which is derived from third-party lenders, to determine the present value of lease payments. We use other observable market data to evaluate the appropriateness of the rate derived from the lenders. The estimated incremental borrowing rate is based on the borrowing rate for a secured loan with a term similar to the expected term of the lease.

Significant accounting judgment and assumptions are required in determining the accounting for leases, including:

[[GREPCENT_TABLE]]
[["","\u25cf","fair market value of the leased asset, which is generally estimated based on project costs or comparable market data. Fair market value is used as a factor in determining whether the lease is accounted for as an operating or finance lease, and is used for recording the leased asset when we are determined to be the owner for accounting purposes;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","minimum lease term that includes contractual lease periods, and may also include the exercise of renewal options if the exercise of the option is determined to be reasonably assured or where failure to exercise such options would result in an economic penalty. The minimum lease term is used as a factor in determining whether the lease is accounted for as an operating lease or a finance lease and in determining the period over which to depreciate the finance lease asset; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","incremental borrowing rate which is estimated based on treasury rates for debt with maturities comparable to the minimum lease term and our credit spread and other premiums. The incremental borrowing rate is used as a factor in determining the present value of the minimum lease payments which is then used in determining whether the lease is accounted for as an operating lease or finance lease, as well as for allocating our rental payments on operating and finance leases between interest expense and a reduction of the outstanding obligation."]]
[[/GREPCENT_TABLE]]