Company: NGVC
Filing Date: 2025-12-11
Form Type: 10-K
Source: 0001437749-25-037556
Chunk: 250

Company: Natural Grocers by Vitamin Cottage, Inc.
Filing Date: 2025-12-11
Form: 10-K
Item: Item 1C
Chunk 250
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 as interest expense. The interest rate on finance lease obligations is determined at the commencement of the lease.

Interest

The Company incurred gross interest expense of $3.3 million, $4.5 million and $3.6 million for the years ended September 30, 2025, 2024 and 2023, respectively. Interest expense relates primarily to interest on finance lease obligations and the Credit Facility. The Company capitalized interest of $0.3 million for each of the years ended September 30, 2025, 2024 and 2023.

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12. Leases

The Company leases most of its stores, a bulk food repackaging facility and distribution center and its administrative offices. The Company determines if an arrangement is a lease or contains a lease at inception. Lease terms generally range from 10 to 25 years, with scheduled increases in minimum rent payments.

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

Most leases include one or more options to renew, with renewal terms normally expressed in periods of five-to-ten 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.

Variable payments related to pass-through costs for maintenance, taxes and insurance or adjustments based on an index such as Consumer Price Index are not included in the measurement of the lease liability or asset and are expensed as incurred.

Because the rate implicit in the Company’s lease agreements is typically not readily determinable, the Company uses an estimated incremental borrowing rate, which is derived from third-party lenders, to determine the present value of lease payments. The Company uses 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.

Leases are recorded at the commencement date (the date the underlying asset becomes available for use) for the present value of lease payments, less tenant improvement allowances received or receivable. Leases with a term of 12 months or less (short-term leases) are not presented on the balance sheet. The Company has