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What changed in National Vision Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of National Vision Holdings, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+541 added−549 removedSource: 10-K (2024-02-27) vs 10-K (2023-03-01)

Top changes in National Vision Holdings, Inc.'s 2024 10-K

541 paragraphs added · 549 removed · 449 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

130 edited+15 added−24 removed62 unchanged
Biggest changeThe following table provides an overview of our portfolio of brands: Overview of Our Brands and Omni-channel & E-commerce Platform Owned & Host Brands Legacy Lowest Price Eyewear Value Superstore Shop-Within-A-Shop Commissary Store Shop-Within-A-Shop Employed ODs Mostly Independent ODs Mostly Independent ODs Mostly Independent ODs Mostly Independent ODs 905 Stores 136 Stores 29 Stores 54 Stores 230 Stores ~3,500 sq. ft. ~4,500 sq. ft. ~800 sq. ft. ~1,000 sq. ft. ~1,800 sq. ft. ~1,400 SKUs ~1,400 SKUs ~600 SKUs ~800 SKUs ~800 SKUs Centralized Lab Lab in Store / Centralized Lab Centralized Lab Centralized Lab Centralized Lab OMNI-CHANNEL & E-COMMERCE Sister Sites (4) Proprietary Sites (5) Partner Sites (7) Note: Store count as of December 31, 2022.
Biggest changeOur Business The following table provides an overview of our portfolio of brands, excluding the Legacy segment stores and websites that we operated as of December 30, 2023 but no longer operate or will cease to operate in 2024 (see “Our Partner Brands” below for more information): Overview of Our Brands and Omni-channel & E-commerce Platform Owned & Host Brands Lowest Price Eyewear Value Superstore Shop-Within-A-Shop Commissary Store Employed ODs Mostly Independent ODs Mostly Independent ODs Mostly Independent ODs 957 Stores 148 Stores 29 Stores 54 Stores ~3,500 sq. ft. ~4,500 sq. ft. ~800 sq. ft. ~1,000 sq. ft. ~1,400 SKUs ~1,400 SKUs ~600 SKUs ~800 SKUs Centralized Lab Lab in Store / Centralized Lab Centralized Lab Centralized Lab OMNI-CHANNEL & E-COMMERCE Note: Store count as of December 30, 2023.
We source eyeglass frames for our Eyeglass World stores from leading designer brands, private label manufacturers and low-cost overseas manufacturers. Eyeglass World locations offer eye exams, primarily from independent optometrists and optometrists employed by independent professional corporations or similar entities, and have on-site laboratories that enable stores to quickly fulfill customer orders and make repairs.
We source eyeglass frames for our Eyeglass World stores from leading designer brands, private label manufacturers and low-cost overseas manufacturers. Eyeglass World locations offer eye exams, primarily from independent optometrists and optometrists employed by independent professional corporations or similar entities and have on-site laboratories that enable stores to quickly fulfill customer orders and make repairs on site.
We also offer in our America’s Best and Eyeglass World stores contact lenses from all major contact lens manufacturers, including our own private label brands (Sofmed and Natural Eyes HydraWear, made by CooperVision), and accessories. Collectively, our broad product offerings deliver consistent financial results and reduce our reliance on any individual product, style or trend.
We also offer in our America’s Best and Eyeglass World stores accessories and contact lenses from all major contact lens manufacturers, including our own private label brands (Sofmed and Natural Eyes HydraWear, made by CooperVision). Collectively, our broad product offerings deliver consistent financial results and reduce our reliance on any individual product, style or trend.
Our Optical Laboratories and Distribution Network We use a highly-efficient mix of four domestic, company-operated processing facilities and have two outsourcing relationships with international, third-party facilities. We have state-of-the-art lens processing capabilities in our four geographically-diverse, company-operated production facilities in Lawrenceville, Georgia; St. Cloud, Minnesota; Plano, Texas; and Salt Lake City, Utah.
Our Optical Laboratories and Distribution Network We use a highly efficient mix of four domestic, company-operated processing facilities and have two outsourcing relationships with international, third-party facilities. We have state-of-the-art lens processing capabilities in our geographically diverse, company-operated production facilities in Lawrenceville, Georgia; St. Cloud, Minnesota; Plano, Texas; and Salt Lake City, Utah.
Programs like our 401(k) plan, core and supplemental life insurance, health plan, short-term and long-term disability, wellness and disease management programs, including personalized programs for diabetes and hypertension, vacation pay, parental and adoption leave, accident, critical illness, group legal and identity theft programs, and a financial protection resource, provide the needed resources essential for helping our people care for themselves and their families.
Programs like our 401(k) plan, core and supplemental life insurance, health plan, short and long-term disability, wellness and disease management programs, including personalized programs for diabetes and hypertension, vacation pay, parental and adoption leave, accident, critical illness, group legal and identity theft programs, and a financial protection resource, provide the needed resources essential for helping our people care for themselves and their families.
Under the U.S. Federal Food, Drug and Cosmetic Act (the “FDC Act”), medical devices must meet a number of regulatory requirements. We engage in certain manufacturing, repackaging and relabeling activities at our optical laboratories and at certain Eyeglass World stores, which subject us to the FDA’s registration, listing and quality requirements.
Under the U.S. Federal Food, Drug and Cosmetic Act (the “FDC Act”), medical devices must meet a number of regulatory requirements. We engage in certain manufacturing, repackaging and relabeling activities at our optical laboratories and in certain Eyeglass World stores, which subject us to the FDA’s registration, listing and quality requirements.
The multiyear nature of these memberships, which customers pay in full at the time they join, facilitates repeat traffic to America’s Best stores for exams and contact lens purchases and builds customer loyalty. See Note 7. “Revenue from Contracts With Customers” in our audited consolidated financial statements included in Part II. Item 8. of this Form 10-K for additional information.
The multiyear nature of these memberships, which customers pay in full at the time they join, facilitates repeat traffic to America’s Best stores for exams and contact lens purchases and builds customer loyalty. See Note 8. “Revenue from Contracts with Customers” in our audited consolidated financial statements included in Part II. Item 8. of this Form 10-K for additional information.
Additionally, although the period between December 25th and the end of our fiscal year is typically a high-volume period, the net revenue associated with substantially all orders of prescription eyeglasses and contact lenses during that period is deferred until January due to our policy of recognizing revenue only after the product has been accepted by the customer, further contributing to higher first half of the year results.
Additionally, although the period between December 25th and the end of our fiscal year is typically a high-volume period, the net revenue associated with substantially all orders of prescription eyeglasses and contact lenses during that period is deferred until January due to our policy of recognizing revenue only after the product has been accepted by the customer, further contributing to higher revenue results in the first half of the year.
We continue to benefit from America’s Best national advertising campaigns, which we believe are cost effective and help raise our brand awareness in both existing and new markets. Additional advertising investments include digital media, search, direct mail, email and local store marketing. We are continually tracking consumer media consumption behaviors and adjusting our media plan accordingly.
We continue to benefit from America’s Best national advertising campaigns, which we believe are cost effective and help raise our brand awareness in both new and existing markets. Additional advertising investments include digital media, search engine, direct mail, email and local store marketing. We are continually tracking consumer media consumption behaviors and adjusting our media plan accordingly.
Our ability to launch our remote medicine solution in certain jurisdictions or in the most cost-efficient manner is highly dependent on the evolution of these state-by-state requirements and restrictions. Professional Licensure and Regulation Our operations are subject to state licensing laws. All states license the practice of ophthalmology and optometry and many states license opticians.
Our ability to launch our remote medicine solution in certain jurisdictions at all or in the most cost-efficient manner is highly dependent on the evolution of these state-by-state requirements and restrictions. Professional Licensure and Regulation Our operations are subject to state licensing laws. All states license the practice of ophthalmology and optometry and many states license opticians.
The FCPA and other similar anti-bribery and anti-kickback laws and regulations generally prohibit companies and their intermediaries from making improper payments or offering anything of value to non-U.S. officials for the purpose of obtaining or retaining business. Our policies and our code of conduct mandate compliance with applicable law, including these laws and regulations.
The FCPA and other similar anti-bribery and anti-kickback laws and regulations generally prohibit companies and their intermediaries from making improper payments or offering anything of value to non-U.S. officials for the purpose of obtaining or retaining business. Our policies and our code of conduct mandate compliance with applicable laws and regulations, including these.
Physician Self-Referral Law, or the Stark Law, generally prohibits physicians (which the Stark Law defines to also include optometrists) from referring, for “designated health services” (as defined by the Centers for Medicare & Medicaid Services), Medicare or Medicaid beneficiaries to any entity with which the physician or an immediate family member of the physician has a financial relationship.
Physician Self-Referral Law, or the Stark Law, generally prohibits physicians (which the Stark Law defines to include optometrists) from referring, for “designated health services” (as defined by the Centers for Medicare & Medicaid Services), Medicare or Medicaid beneficiaries to any entity with which the physician or an immediate family member of the physician has a financial relationship.
A person or entity does not need to have actual knowledge of the Anti-Kickback Statute or healthcare fraud statutes, or specific intent to violate them in order to have committed a violation. Many states have adopted similar laws that apply to any third-party payors including commercial plans.
A person or entity does not need to have actual knowledge of the Anti-Kickback Statute or healthcare fraud statutes, or specific intent to violate them in order to have committed a violation. Many states have adopted similar laws that apply to third-party payors including commercial plans.
We focus on sourcing low-cost products, including well-known frame brands, secondary frame brands, direct import and private label frames and private label contact lenses. Our well-developed capability of direct-to-factory sourcing and importing of frames allows us to offer high quality, low priced frames while generating strong gross margins.
We focus on sourcing low-cost products, including well-known frame brands, secondary frame brands, direct import and private label frames and private label contact lenses. Our well-developed capability of direct-to-factory sourcing and importing of frames allows us to offer high-quality, low-priced frames while generating strong margins.
We route eyeglass orders to both our owned and outsourced laboratories through an automated decision tree that incorporates information on (i) the nature of the job; (ii) the technical capabilities of each laboratory; (iii) the capacity of each laboratory; (iv) the inventory at each laboratory; and (v) the cost of that particular type of job at each laboratory.
We route eyeglass orders to both our owned and outsourced laboratories through an automated decision tree that incorporates information on (i) the nature of the job; (ii) the technical capabilities of each laboratory; (iii) the capacity of each laboratory; (iv) the inventory at each laboratory; and (v) the cost of that particular job at each laboratory.
Our college scholarship program was established to assist associates with children (age 24 or under), who are high school seniors or graduates, planning to enroll in a full-time undergraduate course of study at an accredited U.S. college or university.
Our college scholarship program was established to assist associates with children age 24 or under, who are high school seniors or graduates and planning to enroll in a full-time undergraduate course of study at an accredited U.S. college or university.
These programs may be subject to regulation under managed care and related state laws, including those of California, where these programs are offered as managed care products by FirstSight. In addition, our Eyecare Club programs may subject us to state statutes regulating discount medical plans.
These programs may be subject to regulation under managed care and related state laws, including those of California, where these programs are offered as managed care products by FirstSight. In addition, our Eyecare Club programs may subject us to state laws regulating discount medical plans.
As a health care provider and as a business associate to health care providers, we are subject to federal and comparable state laws governing privacy and security, including the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and its implementing regulations, such as the Privacy Rule, the Security Rule and the Breach Notification Rule.
As a health care provider and as a business associate to health care providers, we are subject to federal and state laws governing privacy and security, including the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and its implementing regulations, such as the Privacy Rule, the Security Rule and the Breach Notification Rule.
Competition The optical retail industry is highly competitive. Competition is generally based upon brand name recognition, price, convenience, selection, service and product quality. We operate within the value segment of the U.S. optical retail industry, which emphasizes price and value. This segment is fragmented.
Competition The optical retail industry is highly competitive. Competition is generally based upon brand name recognition, price, convenience, selection, service and product quality. We operate within the value segment of the U.S. optical retail industry, which emphasizes price and affordability. This segment is fragmented.
In addition, through multiple charitable partnerships with organizations such as VisionSpring, RestoringVision, the International Agency for the Prevention of Blindness and VOSH International, we both directly assist and indirectly help improve the vision of millions of individuals globally.
In addition, through multiple charitable partnerships with organizations such as VisionSpring, RestoringVision, the International Agency for the Prevention of Blindness and VOSH International, we both directly assist and indirectly help to improve the vision of millions of individuals globally.
Our compensation programs are also designed to reinforce our growth agenda and talent acquisition strategy. In addition to competitive base pay, we seek to reward associates with annual incentive awards, recognition programs, and equity awards for associates at certain levels.
Our compensation programs are designed to reinforce our growth agenda and talent acquisition strategy. In addition to competitive base pay, we seek to reward associates with annual incentive awards, recognition programs and equity awards for associates at certain levels.
Recently, there has been an increase in legislative and rulemaking activity that creates disparity across jurisdictions on how telehealth is regulated and how we are able to implement our remote medicine solution.
Recently, there has been an increase in legislative and rulemaking activity that creates disparity across jurisdictions in how telehealth is regulated and how we are able to implement our remote medicine solution.
It is possible that state regulators could determine that we are operating as a discount medical plan and as such are subject to the various registration, disclosure and solvency requirements. 17 Table of contents Privacy and Security We directly collect, use, access, disclose, transmit and/or store protected health information (“PHI”) and personally identifiable information (“PII”) in connection with the sales of our products and services, customer service, billing and employment practices.
It is possible that state regulators could determine that we are operating as a discount medical plan and thus subject to various registration, disclosure and solvency requirements. 17 Table of contents Privacy and Security We directly collect, use, access, disclose, transmit and/or store protected health information (“PHI”) and personally identifiable information (“PII”) in connection with the sales of our products and services, customer service, billing and employment practices.
The Stark Law is a strict liability law, meaning that intent is not required; the mere presence of a prohibited relationship may constitute a Stark Law violation if certain mandatory exceptions are not met. 18 Table of contents Federal Food and Drug Administration (“FDA”) Regulation The FDA generally has authority to, among other things, regulate the manufacture, distribution, sale and labeling of medical devices, including contact and spectacle lenses.
The Stark Law is a strict liability law, meaning that intent is not required; the mere presence of a prohibited relationship may constitute a violation if certain mandatory exceptions are not met. 18 Table of contents Federal Food and Drug Administration (“FDA”) Regulation The FDA generally has authority to, among other things, regulate the manufacture, distribution, sale and labeling of medical devices, including contact and eyeglass lenses.
Due to the proliferation of smartphones, laptops, tablets and other electronic devices, the U.S. population has experienced a dramatic increase in the amount of time spent viewing electronic screens. According to The Vision Council, about 90% of American adults report using digital devices for more than three hours per day with approximately 80% reporting experiencing symptoms of digital eye strain.
Due to the proliferation of smartphones, laptops, tablets and other electronic devices, the U.S. population has experienced a dramatic increase in the amount of time spent viewing electronic screens. According to The Vision Council, about 90% of American adults reported using digital devices for more than three hours per day with approximately 80% reporting experiencing symptoms of digital eye strain.
The dispensing of prescription eyewear is also regulated in most states in which we do business. In some states, we are required to register our stores as optical dispensaries.
The dispensing of prescription eyewear is also regulated in most states in which we do business and, in some states, we are required to register our stores as optical dispensaries.
We utilize a combination of co-location data center and cloud-based solutions for our infrastructure and the majority of our applications consist of standard, integrated software solutions. Our systems provide the data analysis and automation necessary to support our marketing, merchandising, inventory, distribution, store operations and point-of-sale, e-commerce, remote medicine, finance, accounting and human resources initiatives.
We utilize a combination of co-location data centers and cloud-based solutions for our infrastructure and the majority of our applications consist of standard, integrated software solutions. Our systems provide the data analysis and automation necessary to support our marketing, merchandising, inventory, distribution, store operations and point-of-sale, e-commerce, remote medicine, finance, accounting and human resources initiatives.
AC Lens handles site management, customer relationship management and order fulfillment and also sells a wide variety of contact lenses, eyeglasses and eye care accessories.
AC Lens handles site management, customer relationship management (“CRM”) and order fulfillment and also sells a wide variety of contact lenses, eyeglasses and eye care accessories.
Each year, ten recipients are granted an award of $2,500 each and awards are renewable up to three years for a total scholarship of $10,000. We also provide current and former associates who are in pursuit of a Doctor of Optometry (O.D.) degree with financial support through a tuition reimbursement program.
Each year, ten recipients are granted an award of $2,500 each and awards are renewable for up to three years for a total scholarship of $10,000. We also provide current and former associates who are in pursuit of a Doctor of Optometry degree with financial support through a tuition reimbursement program.
Our America’s Best operations, which feature a bundled offer of eyeglasses and an eye examination, are particularly implicated by these laws. State legislators and regulators may be reluctant to accept telehealth and remote medicine as an additional way to provide access to quality patient care.
Our America’s Best operations, which feature a bundled offer of eyeglasses and an eye examination, are particularly implicated by these laws. Additionally, state legislators and regulators may be reluctant to accept telehealth and remote medicine as a way to provide access to quality patient care.
General We are one of the largest optical retailers in the United States and a leader in the attractive value segment of the U.S. optical retail industry. We believe that vision is central to quality of life and that people deserve to see their best to live their best, regardless of their budget.
General We are one of the largest optical retailers in the United States (“U.S.”) and a leader in the attractive value segment of the U.S. optical retail industry. We believe that vision is central to quality of life and that people deserve to see their best to live their best, regardless of their budget.
With respect to our fourth quarter results, compared to other retailers, our products and services are less likely to be included in consumer’s holiday spending budgets, therefore reducing spending on personal vision correction during the weeks preceding December 25th of each year.
With respect to our fourth quarter results, compared to other retailers, our products and services are less likely to be included in consumers’ holiday spending budgets, therefore reducing spending on personal vision correction during the weeks preceding December 25th of each year.
Several courts have found a violation of the statute’s intent requirement if a single purpose of an arrangement involving remuneration is to induce referrals of patients or consumers purchasing healthcare goods or services paid for, in whole or in part, by federal government programs.
Several courts have found a violation of the statute’s intent requirement where the single purpose of an arrangement involving remuneration is to induce referrals of patients or consumers purchasing healthcare goods or services paid for, in whole or in part, by federal government programs.
Its signature offer of “two pairs of eyeglasses for $79.95, including a free eye exam”, is typically priced significantly lower than the competition and provides customers with a wide selection of frame choices at this entry point. In America’s Best stores, vision care services are provided by optometrists employed either by us or by independent professional corporations or similar entities.
Its signature offer of “two pairs of eyeglasses for $79.95, including a free eye exam,” is typically priced significantly lower than the competition and provides customers with a wide selection of frame choices at this entry point. In America’s Best stores, vision care services are provided by optometrists employed either by us or by independent professional corporations or similar entities.
Many of these laws and regulations are vague and are subject to the interpretation of regulators and enforcement authorities, which may change over time. States periodically revisit these laws and regulations and we are subject to the ongoing risk that the regulatory scheme in any state can change in ways adverse to us.
Many of these laws and regulations are vague and subject to the interpretation of regulators and enforcement authorities, which may change over time. States periodically revisit these laws and regulations and we are subject to the ongoing risk that the regulatory scheme in any state could change in ways adverse to us.
Our brands are positioned to stand for low prices and great value, which resonate with our target consumers and leave a lasting impression that is distinct from the competition. We believe that video is a key channel for connecting with our customers.
Our brands are positioned to stand for low prices and great value, both of which resonate with our target consumers and leave a lasting impression that is distinct from the competition. We believe that video is a key channel for connecting with our customers.
Designated health services do not include optometric services for physician referrals. This law further prohibits the entity receiving a prohibited referral from presenting a claim for reimbursement by Medicare or Medicaid for services furnished pursuant to the prohibited referral.
Designated health services do not include physician referrals for optometric services. The Stark Law further prohibits the entity receiving a prohibited referral from presenting a claim for reimbursement by Medicare or Medicaid for services furnished pursuant to the prohibited referral.
We also offer free on-demand mental and behavioral health resources, to provide needed guidance when work and personal challenges affect an associate’s overall well-being. Additionally, our associates receive an annual associate eyewear ticket and eyewear gift tickets that provide them or their friends and family discounted eyewear purchases in our stores.
We also offer free on-demand mental and behavioral health resources, to provide needed guidance when work and personal challenges affect an associate’s overall well-being. Additionally, our associates receive an annual associate eyewear ticket and eyewear gift tickets that provide them, along with their friends and family, discounted eyewear purchases in our stores.
We believe that remote working and learning arrangements that have been necessitated by the COVID-19 pandemic have led to increased use of electronic screens. • Growing Focus on Health and Wellness . The optical retail industry is poised to continue to benefit from expansive trends underlying an increasing societal focus on health and wellness.
Additionally, we believe that remote working and learning arrangements that were necessitated by the COVID-19 pandemic have led to increased use of electronic screens. • Growing Focus on Health and Wellness . The optical retail industry is poised to continue to benefit from expansive trends underlying an increasing societal focus on health and wellness.
Information Technology Information technology systems are critical to our day-to-day operations as well as to our long-term growth strategies. Our systems are designed to deliver a consistent, scalable, high-performing and secure experience for our customers and partners.
Information Technology Information technology systems are critical to our day-to-day operations as well as to our long-term growth strategy. Our systems are designed to deliver a consistent, scalable, high-performing and secure experience for our customers and partners.
“Risk Factors” below for a discussion of these and other risks. A summary of certain laws and regulations is described below. 16 Table of Contents Corporate Practice of Medicine/Optometry and Similar Laws Many states prohibit the corporate practice of medicine/optometry where an unlicensed entity practices medicine or employs a physician or optometrist to provide professional medical services.
“Risk Factors” below for a discussion of these and other risks. A summary of certain laws and regulations is described below. Corporate Practice of Medicine/Optometry and Similar Laws Many states prohibit the corporate practice of medicine/optometry where an unlicensed entity practices medicine or employs a physician or optometrist to provide professional medical services.
Based on new or revised regulatory developments, we may be required to take additional actions or increase expenditures in the future to comply with higher industry and regulatory safety standards. 19 Table of contents Insurance and Risk Management We use a combination of insurance and self-insurance for workers’ compensation, general liability, property insurance, director and officers’ liability insurance, vehicle liability and associate health-care benefits, among others.
Based on new or revised regulatory developments, we may be required to take additional actions or increase expenditures in the future to comply with changing employment requirements and higher industry and regulatory safety standards. 19 Table of contents Insurance and Risk Management We use a combination of purchased insurance and self-insurance for workers’ compensation, general liability, property, director and officers’ liability, and vehicle liability, and associate health-care benefits, among others.
Our quarterly results may also be affected by the timing of new store openings and store closings, the amount of sales contributed by new and existing stores, the timing of certain holidays, as well as the timing of weather-related store closures.
Our quarterly results may also be affected by the timing of new store openings and store closings, the amount of sales contributed by new and existing stores, the timing of certain holidays, and the timing of weather-related store closures.
In addition, state regulators or boards of optometry may challenge our promotional practices, including America’s Best’s bundled offers, as, among other things, violating applicable state laws regarding unfair competition, false advertising to consumers, or corporate practice of optometry prohibitions. Foreign Corrupt Practices Act (“FCPA”) We source a significant portion of our products from outside the United States.
In addition, state regulators or boards of optometry may challenge our promotional practices, including America’s Best’s bundled offers, as, among other things, violating applicable state laws regarding unfair competition, false advertising to consumers or corporate practice of optometry prohibitions. Foreign Corrupt Practices Act (“FCPA”) We source a significant portion of our products from outside of the U.S.
The first half seasonality is attributable primarily to the timing of our customers’ income tax refunds and annual health insurance program start/reset periods. We believe that many customers in our target market, which consists of value seeking and lower income consumers, rely on tax refunds to pay for eyewear and eye care.
The first half seasonality is attributable primarily to the timing of our customers’ income tax refunds and annual health insurance program start/reset periods. We believe that many customers in our target market are value seeking and lower income consumers who rely on tax refunds to pay for eyewear and eye care.
We believe these investments, along with maintenance of our existing information technology capabilities, will provide the flexibility and capacity to accommodate our future growth plans. Intellectual Property We own a number of registered and common law trademarks and pending applications for trademark registrations in the United States, primarily through our subsidiaries.
We believe these investments, along with maintenance of our existing information technology capabilities, will provide the flexibility and capacity to accommodate our future growth plans. Intellectual Property We own a number of registered and common law trademarks and pending applications for trademark registrations in the U.S., primarily through our subsidiaries.
Our credit card agreements with our banks require that we comply with this standard and pay for any fines and assessments imposed by the credit card companies in the event of a compromise of card data. Service Contract Regulations We offer product protection plans for our eyeglasses. In certain states, service contract and similar laws regulate these plans.
Our credit card agreements with our banks require that we comply with this standard and pay any fines or assessments imposed by the credit card companies in the event of a compromise of card data. Service Contract Regulations We offer product protection plans for our eyeglasses. In certain states, laws governing service contracts regulate these plans.
The fundamentals of our model are described below: • Differentiated and Defensible Value Proposition . We believe our success is driven by our low prices, convenient locations, broad assortment of branded and private label merchandise and the high levels of in-store service provided by our well-trained and passionate store associates and vision care professionals.
The fundamentals of our model are described below: • Differentiated and Defensible Value Proposition . We believe our success is driven by our value-based offerings, convenient locations, broad assortment of branded and private label merchandise and the high levels of in-store service provided by our well-trained and passionate store associates and vision care professionals.
The FTC has authority under Section 5 of the Federal Trade Commission Act (the “FTC Act”) to investigate and prosecute practices that are “unfair trade practices,” “deceptive trade practices,” or “unfair methods of competition.” State attorneys general typically have comparable authority and many states permit private plaintiffs to bring actions on the basis of these laws.
The FTC has authority under Section 5 of the FTC Act to investigate and prosecute practices that are “unfair trade practices,” “deceptive trade practices,” or “unfair methods of competition.” State attorneys general typically have comparable authority and many states permit private plaintiffs to bring actions on the basis of these laws.
The majority of our owned stores have achieved profitability during the second year of operation and have paid back invested capital in three to five years. 7 Table of Contents • Grow Our Store Base. We believe that we continue to have significant expansion opportunities in the United States.
The majority of our owned stores have achieved profitability during the second year of operation and have paid back invested capital in three to five years. 7 Table of Contents • Grow Our Store Base. We believe that we continue to have significant expansion opportunities in the U.S.
Since 2006, we have opened 930 stores in the aggregate, including 900 stores under our America’s Best and Eyeglass World retail brands. Our store economics are based on low capital investment, steady ramping of sales in new locations, low operating costs and consistent sales volume and earnings growth in mature stores, which result in attractive returns on capital.
Since 2006, we have opened 1,000 stores in the aggregate, including 970 stores under our America’s Best and Eyeglass World retail brands. Our store economics are based on low capital investment, steady ramping of sales in new locations, low operating costs and consistent sales volume and earnings growth in mature stores, which result in attractive returns on capital.
Fairness to Contact Lens Consumers Act (“FCLCA”) and E-commerce Laws In connection with our sales of contact lenses, we must comply with the FCLCA, and its implementing regulations, including the Contact Lens Rule, promulgated by the Federal Trade Commission (“FTC”), which establish a national uniform standard in the United States with regard to releasing and verifying contact lens prescriptions.
Fairness to Contact Lens Consumers Act (“FCLCA”) and E-commerce Laws In connection with our sales of contact lenses, we must comply with the FCLCA, and its implementing regulations, including the Contact Lens Rule, promulgated by the Federal Trade Commission (“FTC”), which establish a national uniform standard in the U.S. with regard to issuing, releasing and verifying contact lens prescriptions.
We prioritized the safety of our associates, optometrists, customers and patients by voluntarily closing our stores to the public for a temporary period of time in 2020 to implement enhanced safety and cleaning protocols in order to serve our customers and patients with everyone’s health and safety in mind.
We prioritized the safety of our associates, optometrists, customers and patients by voluntarily closing our stores to the public for a temporary period of time in 2020 to implement enhanced safety and cleaning protocols in order to serve our customers and patients with everyone’s health and safety in mind. Health and safety remain at the forefront for us.
Environmental and Safety Regulation Our optical laboratories in the United States and our in-store laboratories in our Eyeglass World locations subject us to various federal, state and local laws, regulations and other requirements pertaining to protection of the environment, public health and associate safety, including, for example, regulations governing the management of hazardous substances, and the maintenance of safe working conditions.
Environmental and Safety Regulation Our optical laboratories in the U.S. and our in-store laboratories within Eyeglass World locations subject us to various federal, state and local laws, regulations, and other requirements pertaining to protection of the environment, public health, and associate safety, including, for example, regulations governing the management of hazardous substances and the maintenance of safe working conditions.
As a result, a significant number of America’s Best customers and Eyeglass World customers who purchase eyeglasses choose upgraded lenses and/or frames instead of each brand’s base offer.
As a result, a significant number of America’s Best customers and Eyeglass World customers who purchase eyeglasses choose upgraded lenses and/or frames instead of each brand’s signature or opening offer.
We have long-term contracts with some key suppliers, including Essilor and CooperVision. Under our agreement with Essilor, Essilor has the sole and exclusive right to supply certain lenses for eyeglasses to us. The current term of our agreement with Essilor runs through May 2026.
We have long-term contracts with certain of our key suppliers, including Essilor and CooperVision. Under our agreement with Essilor, Essilor has the sole and exclusive right to supply certain eyeglass lenses to us. The current term of our agreement with Essilor runs through May 2026.
For our Host and Legacy brands, we rely on our Host and Legacy partners’ marketing initiatives to drive traffic into their stores, and then we develop and execute highly targeted local marketing campaigns within stores to create awareness of our service and product offerings. Our customer relationship management (“CRM”) system is used to collect customer demographic data.
For our Host brands, we rely on our Host partners’ marketing initiatives to drive traffic into their stores. We then develop and execute highly targeted local marketing campaigns within stores to create awareness of our service and product offerings. Our CRM system is used to collect customer demographic data.
Lens orders that are not completed in store are completed by our centralized laboratory network. These stores are primarily located in freestanding or in-line locations near high-foot-traffic shopping centers. Our Partner Brands.
Lens orders that are not completed in store are 8 Table of Contents completed by our centralized laboratory network. These stores are primarily located in freestanding or in-line locations near high-foot-traffic shopping centers. Our Partner Brands.
Within our Owned & Host segment, America’s Best offers its Eyecare Club programs primarily to its contact lens customers. As of December 31, 2022, the Eyecare Club had approximately 1.6 million active members.
Within our Owned & Host segment, America’s Best offers its Eyecare Club programs primarily to its contact lens customers. As of December 30, 2023, the Eyecare Club had approximately 1.6 million active members.
A significant portion of America’s Best and Eyeglass World’s advertising investments are on traffic-driving video advertisements, which we leverage broadly across multiple stores in each market to gain a larger share of voice, and, in turn, drive traffic and margins.
A significant portion of America’s Best and Eyeglass World’s advertising investments are on awareness-driving video advertisements, network television and digital platforms, which we leverage broadly across multiple stores in each market to gain a larger share of voice and, in turn, drive traffic and margins.
This network was created through significant investment by us, and is leveraged across our portfolio of brands in both segments to provide efficiency and scale.
This network was created through significant investment by us and is leveraged across our portfolio of brands to provide efficiency and scale.
In addition, as part of our efforts to provide quality, accessible eyecare, we recently deployed a telehealth solution in certain locations that allows optometrists working remotely to provide eye exam services to patients.
In addition, as part of our efforts to provide quality, accessible eye care, we have deployed a telehealth solution in certain locations that allows optometrists working remotely to provide eye exam services to patients.
We anticipate that the Office of Civil Rights, which is the enforcement agency for HIPAA, will implement modest changes to HIPAA sometime in 2023, pursuant to a notice of proposed rulemaking that was issued in December 2020. Moreover, nearly all states have adopted their own data breach laws with comparable (and sometimes conflicting) standards and requirements.
We believe that the Office of Civil Rights, which is the enforcement agency for HIPAA, may implement modest changes to HIPAA in 2024, pursuant to a notice of proposed rulemaking that was issued in December 2020. Moreover, nearly all states have adopted their own data breach laws with comparable (and sometimes conflicting) standards and requirements.
Nonetheless, our diverse product portfolio encompasses many brand names and thousands of SKUs. Offerings include both brand name designers, like Ray-Ban, Guess and Calvin Klein, as well as private label options at attractive prices. Our brand-name frame offerings are manufactured by market leaders and we partner with several overseas factories to direct source our private label products.
Nonetheless, our diverse product portfolio encompasses many brand names and thousands of stock keeping units (“SKUs”). Offerings include both brand name designers, like Ray-Ban, Coach and Calvin Klein, and private label options at attractive prices. Our brand-name frame offerings are manufactured by market leaders and we partner with several overseas factories to direct source our private label products.
Our managed care business primarily consists of participation in private managed care programs. While our managed care business has continued to grow, we are underpenetrated in the managed care market relative to the broader optical retail industry, and we believe that this continues to represent a growth opportunity.
While our managed care business has continued to grow, we are underpenetrated in the managed care market relative to the broader optical retail industry, and we believe that this continues to represent a growth opportunity.
We offer a range of services to customers, including eyeglass purchasing, online scheduling and appointment reminders, contact lens purchasing, “buy-in-store and ship-to-home” capabilities and online frame browsing, among others. Our omni-channel offerings work in concert with these brands to enhance the overall quality of the customer experience. Our dedicated e-commerce websites are managed by our subsidiary, AC Lens.
We offer a range of services to customers, including eyeglass purchasing, online scheduling and appointment reminders, contact lens purchasing, “buy-in-store and ship-to-home” capabilities and online frame browsing, among others. Our omni-channel offerings work in concert with these brands to enhance the overall quality of the customer experience.
As one of the largest purchasers of eyeglass frames, spectacle lenses and contact lenses in the United States, we also benefit from centralized procurement efforts and purchasing economies of scale. 8 Table of Contents Our America’s Best Brand. America’s Best strives to be the value leader in virtually every market in which it operates.
As one of the largest purchasers of eyeglass frames, eyeglass lenses and contact lenses in the U.S., we also benefit from centralized procurement efforts and purchasing economies of scale. Our America’s Best Brand. America’s Best strives to be the value leader in virtually every market in which it operates.
Laws Related to Reimbursement by Government Programs Our participation in federal reimbursement programs, such as Medicare and Medicaid, subjects us to state and federal anti-kickback, false claims, physician self-referral and similar laws.
Laws Related to Reimbursement by Government Programs Our participation in federal reimbursement programs, such as Medicare and Medicaid, subjects us to state and federal laws and regulations with respect to anti-kickback, false claims and physician self-referral, among other similar areas.
In both of our reportable segments, eye exam services are provided by optometrists employed by us or by professional corporations or similar entities owned by eye care practitioners with whom we have contractual arrangements or by independent optometrists with whom we have contracted.
Eye exam services are provided by optometrists employed by us, or by professional corporations or similar entities owned by eye care practitioners with whom we have contractual arrangements or by independent optometrists with whom we have contracted.
This is further demonstrated by the customer mix of our mature stores, with existing customers representing 65% of total customers in 2022 and new customers representing the remaining 35% of total customers in 2022. • Attractive Store Economics .
This is further demonstrated by the customer mix of our mature stores, with existing customers representing 66% of total customers in 2023 and new customers representing the remaining 34% of total customers in 2023. • Attractive Store Economics .
Such changes may require us to update our processes and could impact our ability to submit claims or to timely receive reimbursements from our managed care partners. As such, when asked, we have assisted a number of our larger vision care insurance payors to either implement or improve their existing EDI claim systems.
Such changes may require us to update our processes and could impact our ability to submit claims or to timely receive reimbursements from our managed care partners. As such, when asked, we have assisted a number of our larger vision care insurance payors to either implement or improve claims transmission processes via application programming interfaces.
SKU figures refer to eyeglass frame SKUs. ODs are Doctors of Optometry. All of our brands leverage our highly-efficient centralized laboratory network and distribution system, which helps us minimize production and distribution costs.
SKU figures refer to eyeglass frame SKUs. ODs are Doctors of Optometry. We reach customers through a portfolio of brands described below. All of our brands leverage our highly efficient centralized laboratory network and distribution system, which helps us minimize production and distribution costs.
According to The Vision Council, over 80% of adults in the United States use some form of vision correction, and there is a significant increase in the use of vision correction above age 45, with further increases for above age 55.
According to The Vision Council, approximately 80% of adults in the U.S. use some form of vision correction, and there is a significant increase in the use of vision correction above age 45, with further increases above age 55.
In addition, we have partnered with schools and other organizations to promote the profession of optometry, including continuing our multi-year sponsorship of the Association of Schools and Colleges of Optometry campaign “Optometry Gives Me Life” targeted at high school and college students, and ensuring that graduating optometrists are educated on the variety of career options available to them.
We are continuing our multi-year sponsorship of the Association of Schools and Colleges of Optometry campaign “Optometry Gives Me Life” targeted at high school and college students, and ensuring that graduating optometrists are educated on the variety of career options available to them.
We compete with mass merchants and warehouse club stores, specialty retail chains and independent eye care practitioners and opticians. In the broader optical retail industry, we also compete with large national retailers such as (in alphabetical order) LensCrafters, Pearle Vision and Visionworks. This competition takes place both in physical retail locations and online.
We compete with mass merchants and warehouse club stores, specialty retail chains, and independent eye care practitioners and opticians. In the broader optical retail industry, we also compete with large national retailers such as LensCrafters, Pearle Vision and Visionworks, both in physical retail locations and online. We also compete with online sellers of contact lenses and eyewear.
Many states interpret the corporate practice of medicine/optometry rules broadly to prohibit employment of eye care practitioners by corporations like us and to prohibit various financial arrangements, such as fee-splitting, between eye care practitioners and other entities. Many states also regulate certain business practices as well as landlord-tenant arrangements between optical companies and optometrists.
Further, many states interpret these or similar rules broadly to prohibit employment of eye care practitioners by corporations like us and to prohibit various financial arrangements, such as fee-splitting, between eye care practitioners and other entities. Many states also 16 Table of Contents regulate certain business practices as well as landlord-tenant arrangements between optical companies and optometrists.
Examples of areas in which we have invested and continue to invest in include software systems to enhance the growth of omni-channel, customer engagement efforts, the remote medicine and electronic healthcare records (EHR) platform rollout, cybersecurity programs, our overall security posture, our point-of-sale system and enterprise resource planning (ERP).
Areas in which we have invested and continue to invest in include, among others, software systems to enhance the growth of omni-channel, customer engagement efforts, CRM, remote medicine and EHR platforms rollout, cybersecurity programs, our overall security posture, point-of-sale systems and enterprise resource planning (“ERP”).
As of December 31, 2022 this new technology has been enabled in approximately 300 of our America’s Best locations. We believe remote medicine not only helps provide quality, accessible eyecare to more patients, but also helps address constraints in exam capacity from optometrist availability in store.
As of December 30, 2023, this technology has been enabled in over 500 of our America’s Best locations. We believe remote medicine not only helps provide quality, accessible eye care to more patients, but also helps address constraints in exam capacity from optometrist availability in store.
Benefits of the Eyecare Club include two free eye exams per year for the duration of the multi-year membership, 10% off all contact lenses and eyeglasses and other periodic benefits and discounts. Memberships can be purchased in stores or on our America’s Best website.
Eyecare Club members receive two free eye exams per year and 10% off all contact lenses and eyeglasses for the duration of the three-year membership, as well as other periodic benefits and discounts, for a one-time fixed payment. Memberships can be purchased in stores or on our America’s Best website.
Our Mission and Philanthropic Efforts Our mission is to help people by making quality eye care and eyewear more affordable and accessible. Our philanthropic culture instills a sense of purpose and engagement in our associates, from in-store team members to senior management.
We utilize third-party carriers to transport products from these centers to customers and store locations. Our Mission and Philanthropic Efforts Our mission is to help people by making quality eye care and eyewear more affordable and accessible. Our philanthropic culture instills a sense of purpose and engagement in our associates, from in-store team members to senior management.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur leverage could have important consequences for us, including: • requiring us to utilize a substantial portion of our cash flows from operations to make payments on our indebtedness, reducing the availability of our cash flows to fund working capital, capital expenditures, general corporate and other purposes; • increasing our vulnerability to adverse economic, industry, or competitive developments; • making it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including any financial maintenance and restrictive covenants, could result in an event of default under the agreements governing our indebtedness; • restricting us from capitalizing on business opportunities; • limiting our ability to obtain additional financing for working capital, capital expenditures, execution of our business strategy, debt service requirements, acquisitions and other general corporate purposes; and • limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged and who, therefore, may be able to take advantage of opportunities that our leverage prevents us from exploiting. 37 Table of Contents Our ability to make principal and interest payments on and to refinance our indebtedness will depend on our ability to generate cash in the future and is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
Biggest changeOur leverage could have a number of consequences for us, including: • requiring us to utilize a substantial portion of our cash flows from operations to make payments on our indebtedness, reducing the availability of our cash flows to fund working capital, capital expenditures, general corporate and other purposes; • increasing our vulnerability to adverse economic, industry or competitive developments; • making it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including any financial maintenance and restrictive covenants, could result in an event of default under the agreements governing our indebtedness; • restricting us from capitalizing on business opportunities; • limiting our ability to obtain additional financing for working capital, capital expenditures, execution of our business strategy, debt service requirements, acquisitions or other general corporate purposes; and 37 Table of Contents • limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged and who, therefore, may be able to take advantage of opportunities that our leverage prevents us from exploiting.
If we fail to open and operate new stores in a timely and cost-effective manner or fail to successfully enter new markets, our financial performance could be materially and adversely affected. Achieving our growth strategy depends, in large part, on growing our store base and expanding our operations, both in existing and new markets, and operating our new stores successfully.
If we fail to open and operate new stores in a timely and cost-effective manner or fail to successfully enter new markets, our financial performance could be materially and adversely affected. Achieving our growth strategy depends, in large part, on growing our store base and expanding our operations, both in new and existing markets, and operating our new stores successfully.
Certain technological advances, greater availability of, or increased consumer preferences for, vision correction alternatives to prescription eyeglasses or contact lenses, and future drug development for the correction of vision-related problems may reduce the demand for our products and adversely impact our business and profitability.
Certain technological advances, greater availability of, or increased consumer preferences for, vision correction alternatives to prescription eyeglasses or contact lenses, or future drug development for the correction of vision-related problems may reduce the demand for our products and adversely impact our business and profitability.
We typically realize a higher portion of net sales during the first half of the fiscal year, due, among other things, to the timing of tax refunds and the impact of healthcare plan resets after the close of the prior year.
We typically realize a higher portion of net sales during the first half of the fiscal year, due to, among other things, the timing of tax refunds and the impact of healthcare plan resets after the close of the prior year.
Problems in any of these areas could result in a reduction in sales, increased costs, sanctions or penalties and damage to our reputation and brands. 27 Table of Contents In addition, we must keep up to date with competitive technology trends, including the use of new or improved technology, creative user interfaces and other e-commerce marketing tools such as paid search and mobile applications, among others, which may increase our costs and which may not increase sales or attract customers.
Problems in any of these areas could result in a reduction in sales, increased costs, sanctions or penalties, or damage to our reputation and brands. 27 Table of Contents In addition, we must keep up to date with competitive technology trends, including the use of new or improved technology, creative user interfaces and other e-commerce marketing tools such as paid search and mobile applications, among others, which may increase our costs and which may not increase sales or attract customers.
If we change the transportation companies we use, we could face logistical difficulties that could adversely affect deliveries and we could incur costs and expend resources in connection with such change. We also may not be able to obtain terms as favorable as those received from the third-party transportation providers we currently use, which could increase our costs.
If we change the transportation companies we use, we may face logistical difficulties that could adversely affect deliveries and we could incur costs and expend resources in connection with such change. We also may not be able to obtain terms as favorable as those received from the third-party transportation providers we currently use, which could increase our costs.
Events beyond our control, including, but not limited to, disruptions in operations due to natural or man-made disasters, inclement weather conditions, accidents, system failures, or public health emergencies could also result in delays in our receipt of inventory and the delivery of merchandise between our stores, our optical laboratories and our distribution centers, significantly higher costs and longer lead times or an adverse effect on our ability to fulfill customer orders in a timely manner.
Events beyond our control, including, but not limited to, disruptions in operations due to natural or man-made disasters, inclement weather conditions, accidents, system failures, or public health emergencies could also result in delays in our receipt of inventory or the delivery of merchandise between our stores, our optical laboratories and our distribution centers, significantly higher costs and longer lead times, or an adverse effect on our ability to fulfill customer orders in a timely manner.
Any disruption to the laboratories’ operations may reduce or impair the quality of assembled eyeglasses. The inability to fulfill, or any delays in processing, customer orders through our laboratory network or any quality issues could result in the loss of customers, issuances of refunds or credits and may also adversely affect our reputation.
Any disruption to our laboratories’ operations may reduce or impair the quality of assembled eyeglasses. The inability to fulfill, or any delays in processing, customer orders through our laboratory network or any quality issues could result in the loss of customers, issuances of refunds or credits and may also adversely affect our reputation.
Any such tariffs, restrictions or other changes could lead to additional costs, delays in shipments, embargoes and other uncertainties that could negatively impact our relationships with our international vendors and labs and materially adversely affect our business, including by requiring us to increase our prices and identify alternative sources for merchandise and labs.
Any such tariffs, restrictions or other changes could lead to additional costs, delays in shipments, embargoes or other uncertainties that could negatively impact our relationships with our international vendors and labs and materially adversely affect our business, including by requiring us to increase our prices and identify alternative sources for merchandise and labs.
If we were to lose any significant supplier, we may be unable to establish additional or replacement sources for our products that meet our quality controls and standards in a timely manner or on commercially reasonable terms, if at all. As a few major suppliers dominate the optical retail industry, the risks associated with finding alternative sources may be exacerbated.
If we were to lose any significant supplier, we may be unable to establish additional or replacement sources for our products that meet our quality controls and standards in a timely manner, on commercially reasonable terms or at all. As a few major suppliers dominate the optical retail industry, the risks associated with finding alternative sources may be exacerbated.
Any such breach, attack, virus or other event could result in costly investigations and litigation exceeding applicable insurance coverage or contractual rights available to us, civil or criminal penalties, operational changes or other response measures, loss of consumer confidence in our security measures, and negative publicity that could adversely affect our financial condition, results of operations and reputation.
Any such breach, attack, virus or other event could result in costly investigations and litigation exceeding applicable insurance coverage or contractual rights available to us, civil or criminal penalties, operational changes or other response measures, loss of consumer confidence in our security measures, or negative publicity that could adversely affect our financial condition, results of operations and reputation.
The ever-changing regulatory landscape may cause disruption as we launch our remote medicine solution in various states, causing us to significantly reconfigure the solution or potentially decide to not deploy in that particular state. This may have an abrupt and material effect on our business operations or financial status.
The ever-changing regulatory landscape may cause disruption as we launch our remote medicine solution in various states, causing us to significantly reconfigure the solution or potentially decide to not deploy the solution in that particular state. This may have an abrupt and material effect on our business operations or financial status.
Our failure to comply with the applicable regulations could have severe consequences, including the closure of our stores, possible breaches of the agreements relating to certain of our brands, changes to our way of doing business and the imposition of fines and penalties. We are subject to managed vision care laws and regulations.
Our failure to comply with applicable regulations could have severe consequences, including the closure of our stores, possible breaches of the agreements relating to certain of our brands, changes to our way of doing business and the imposition of fines and penalties. We are subject to managed vision care laws and regulations.
If our merchandise or services do not meet applicable governmental safety standards or our customers’ expectations regarding quality or safety, we could experience lost sales and increased costs, be exposed to legal and reputational risk and face fines or penalties which could materially adversely affect our financial results.
If our merchandise or services do not meet applicable governmental safety standards or our customers’ expectations regarding quality or safety, we could experience lost sales and increased costs, be exposed to legal and reputational risk, or face fines or penalties which could materially adversely affect our financial results.
These laws also apply generally to all our properties. Our failure to comply with these laws can subject us to criminal and civil liabilities. In connection with our Vista Optical military locations, we must comply with regulations governing the occupancy of military bases.
These laws also apply generally to all of our properties. Our failure to comply with these laws can subject us to criminal and civil liabilities. In connection with our Vista Optical military locations, we must comply with regulations governing the occupancy of military bases.
If any of these claims or proceedings were to be determined adversely to us, a judgment, a fine or a settlement involving a payment of a material sum of money were to occur, or injunctive relief were issued against us, our business, financial condition and results of operations could be materially adversely affected.
If any of these claims or proceedings were to be determined adversely to us, if a judgment, a fine or a settlement involving a payment of a material sum of money were to occur, or if injunctive relief were issued against us, our business, financial condition and results of operations could be materially adversely affected.
To support our expanding business and execute our growth strategy, we need significant amounts of capital, including funds to pay our lease obligations, build out new store spaces, laboratories and distribution centers, implement and operate remote medicine technology and EHR platforms, purchase inventory, pay personnel and further invest in our infrastructure and facilities including investments in transitioning and updating our enterprise resource planning and other technological systems and capabilities.
To support our expanding business and execute our growth strategy, we need significant amounts of capital, including funds to pay our lease obligations, build out new store spaces, laboratories and distribution centers, implement and operate remote medicine technology and EHR platforms, purchase inventory, pay personnel and further invest in our infrastructure and facilities, including investments in transitioning and updating our enterprise resource planning (“ERP”) and other technological systems and capabilities.
Risks associated with our e-commerce and omni-channel business include: • uncertainties associated with our websites, mobile applications and in-store systems including changes in required technology interfaces, website downtime and other technical failures, costs and technical issues as we upgrade our website software, inadequate system capacity, computer viruses, human error, security breaches, legal claims related to our website operations and e-commerce fulfillment; • disruptions in telephone service or power outages; • reliance on third parties for computer hardware and software, web-hosting, as well as delivery of merchandise to our customers; • rapid technology changes; • time and costs associated with training and implementing new technologies and systems; • credit or debit card fraud and other payment processing related issues; • changes in applicable federal, state and international regulations; • liability for online content; • cybersecurity and consumer and HIPAA privacy concerns and regulation; and • natural disasters or adverse weather conditions.
Risks associated with our e-commerce and omni-channel business include: • uncertainties associated with our websites, mobile applications and in-store systems, including changes in required technology interfaces, website downtime and other technical failures, costs and technical issues as we upgrade our website software, inadequate system capacity, computer viruses, human error, security breaches, legal claims related to our website operations, and e-commerce fulfillment; • disruptions in telephone service or power outages; • reliance on third parties for computer hardware and software, web-hosting, and delivery of merchandise to our customers; • rapid technology changes; • time and costs associated with training and implementing new technologies and systems; • credit or debit card fraud and other payment processing related issues; • changes in applicable federal, state and international regulations; • liability for online content; • cybersecurity and consumer and HIPAA privacy concerns and regulations; and • natural disasters or adverse weather conditions.
Because the techniques used to circumvent security systems can be highly sophisticated, change frequently, are often not recognized until launched against a target and may originate from less regulated and remote areas around the world, we may be unable to proactively address all possible techniques or implement adequate preventive measures for all situations.
Because the techniques used to circumvent security systems can be highly sophisticated, change frequently, are often not recognized until launched against a target and may originate from less regulated and remote areas around the world, we may be unable to proactively address all possible vulnerabilities or implement adequate preventive measures for all situations.
In addition, in order to prepare for our peak shopping quarters, we must increase the staffing at our stores and order and keep in stock more merchandise than we carry during other parts of the year. This staffing increase and inventory build-up may require us to expend cash faster than is generated by our operations during this period.
In addition, in order to prepare for our peak shopping quarters, we must increase the staffing at our stores and order and keep in stock more merchandise than we carry during other parts of the year. This staffing increase and inventory build-up may require us to expend cash faster than it is generated by our operations during this period.
If our practices in the areas of social impact, employee empowerment, environmental stewardship and corporate governance fail to meet such expectations and standards, our reputation and employee and customer retention may be negatively impacted. Additionally, increased regulatory requirements regarding climate and ESG disclosures, as well as environmental stewardship could also lead to increased operational costs.
If our practices in the areas of social impact, employee empowerment, environmental stewardship and corporate governance fail to meet such expectations and standards, our reputation or employee and customer retention may be negatively impacted. Additionally, increased regulatory requirements regarding climate and ESG disclosures, as well as environmental stewardship, could also lead to increased operational costs.
In addition, some professional corporations or similar entities provide for the vision care services at a number of our retail locations, exposing us to some concentration risk. A material change to any of the foregoing relationships could have a material adverse effect on our business, financial condition and results of operations.
In addition, a limited number of professional corporations or similar entities provide for the vision care services at a number of our retail locations, exposing us to some concentration risk. A material change to any of the foregoing relationships could have a material adverse effect on our business, financial condition and results of operations.
If a legal challenge to our chosen remote medicine solution were successful, and we are unable to modify the model to comply with the requirements but still meet the needs of patients and optometrists, this may have a material effect on our business operations or financial status in that jurisdiction.
If a legal challenge to our chosen remote medicine solution were successful, and we are unable to modify the model to comply with the requirements and still meet the needs of patients and optometrists, this may have a material effect on our business operations or financial status in that jurisdiction.
Increase in transportation costs (including increases in fuel costs), increased shipping costs, issues with overseas shipments, supplier-side delays, reductions in the transportation capacity of carriers, labor strikes or shortages in the transportation industry, disruptions to the national and international transportation infrastructure and unexpected delivery interruptions or delays also have the potential to derail our distribution process.
Increases in transportation costs (including increases in fuel costs), increased shipping costs, issues with overseas shipments, supplier-side delays, reductions in the transportation capacity of carriers, labor strikes or shortages in the transportation industry, disruptions to the national and international transportation infrastructure, and unexpected delivery interruptions or delays also have the potential to derail our distribution process.
In addition to the vision care and healthcare laws and regulations discussed above, we are subject to numerous federal, state, local and foreign laws and governmental regulations including those relating to environmental protection, building, land use and zoning requirements, workplace regulations, wage and hour, privacy and information security, consumer protection laws, immigration and employment law matters.
In addition to the vision care and healthcare laws and regulations discussed above, we are subject to numerous federal, state, local and foreign laws and governmental regulations including those relating to environmental protection, building, land use and zoning requirements, workplace regulations, wage and hour, privacy and information security, consumer protection, immigration, and employment matters.
Environmental, social and governance (ESG) issues, including those related to climate change, could have a material adverse effect on our business, financial condition and results of operations. Investors, customers, employees and other stakeholders have increasingly focused on the ESG practices of companies in recent years.
Environmental, social and governance (“ESG”) issues, including those related to climate change, could have a material adverse effect on our business, financial condition and results of operations. Investors, customers, employees and other stakeholders have increasingly focused on the ESG practices of companies in recent years.
Our systems and those of our third-party service providers and business partners may be vulnerable to security breaches, attacks by hackers, acts of vandalism, computer viruses, misplaced or lost data, human errors or other similar events and are from time to time subject to such attacks.
Our systems and those of our third-party service providers and business partners may be vulnerable to security breaches, attacks by hackers, acts of vandalism, computer viruses, misplaced or lost data, human errors, or other similar events and are from time to time subject to such incidents.
Any difficulties or delays in securing the services of these professionals could also adversely affect our relationships with our Host and Legacy partners. The optical retail industry is highly competitive, and if we do not compete successfully, our business may be adversely impacted.
Any difficulties or delays in securing the services of these professionals could also adversely affect our relationships with our Host partners. The optical retail industry is highly competitive, and if we do not compete successfully, our business may be adversely impacted.
Like most corporations, the Company’s systems are a target of attacks. Although the incidents that we have experienced to date have not had a material effect on our business, there can be no assurance that such incidents will not have a material adverse effect on us in the future.
Like most corporations, our systems are a target of attacks. Although the incidents that we have experienced to date have not had a material effect on our business, there can be no assurance that such incidents will not have a material adverse effect on us in the future.
Cloud, Minnesota; Plano, Texas; and Salt Lake City, Utah. We also have outsourcing relationships with third-party laboratories in Mexico and China. These laboratories process most of the lenses ordered by our customers in our stores, as well as on our websites.
Cloud, Minnesota; Plano, Texas; and Salt Lake City, Utah. We also have outsourcing relationships with third-party laboratories in Mexico. These laboratories process most of the lenses ordered by customers in our stores, as well as on our websites.
Termination or expiration of our Host and Legacy agreements would result in a reduction of our revenues and operating cash flows, which could be material and which could adversely affect our business, financial condition and results of operations including an impairment of the intangible assets.
Termination or expiration of our Host agreements would result in a reduction of our revenues and operating cash flows, which could be material and which could adversely affect our business, financial condition and results of operations including an impairment of the intangible assets.
We cannot anticipate all of the demands that our expanding operations will impose on our business, personnel and systems and our failure to address such demands and to profitably manage our growth could have a material adverse effect on our business, financial condition and results of operations.
We cannot anticipate all of the demands that our expanding operations will impose on our business, personnel and systems and our failure to address such demands or to profitably manage our growth could have a material adverse effect on our business, financial condition and results of operations.
Additionally, business partners may also face a data breach, allowing for our customer or proprietary business information to be released, could result in a loss of consumer confidence in our security measures, harm our business and also lead to costly investigations and litigation.
Additionally, business partners may also face a data breach, allowing for our customer or proprietary business information to be released, which could result in a loss of consumer confidence in our security measures, harm our business and also lead to costly investigations and litigation.
We rely on a limited number of vendors to supply the majority of our eyeglass lenses and contact lenses and are thus exposed to concentration of supplier risk. In particular, we have agreed to exclusively purchase almost all of our spectacle lenses from one supplier.
We rely on a limited number of vendors to supply the majority of our eyeglass lenses and contact lenses and are thus exposed to concentration of supplier risk. In particular, we have agreed to exclusively purchase almost all of our eyeglass lenses from one supplier.
The benefits we currently experience from our vendor relationships could be adversely affected if our vendors: • discontinue selling merchandise to us; 29 Table of Contents • enter into arrangements with competitors that could impair our ability to sell their products, including by giving our competitors exclusivity arrangements or limiting our access to certain products; • sell similar or identical products to our competitors with similar or better pricing, some of whom may already purchase merchandise in significantly greater volume and at lower prices than we do; • raise the prices they charge us; • refuse to allow us to return merchandise purchased from them; • change pricing terms to require us to pay on delivery or upfront, including as a result of changes in the credit relationships some of our vendors have with their various lending institutions; • lengthen their lead times; or • initiate or expand sales of their products to retail customers directly through their own stores, catalogs or on the Internet and compete with us directly.
The benefits we currently experience from our vendor relationships could be adversely affected if our vendors: • discontinue selling merchandise to us; • enter into arrangements with competitors that could impair our ability to sell their products, including by giving our competitors exclusivity arrangements or limiting our access to certain products; • sell similar or identical products to our competitors with similar or better pricing, some of whom may already purchase merchandise in significantly greater volume and at lower prices than we do; • raise the prices they charge us; • refuse to allow us to return merchandise purchased from them; • change pricing terms to require us to pay on delivery or upfront, including as a result of changes in the credit relationships some of our vendors have with their various lending institutions; • lengthen their lead times; or • initiate or expand sales of their products to retail customers directly through their own stores, catalogs or on the Internet and compete with us directly.
Many states require that opticians be licensed to dispense and fit eyeglasses and contact lenses. The failure to have vision care professionals available in or near our stores could adversely affect our ability to win managed vision care contracts.
Many states require that opticians be licensed to dispense and fit eyeglasses and contact lenses. Failure to have vision care professionals available in or near our stores could adversely affect our ability to win managed vision care contracts.
Our business is partly dependent on our ability to strategically source a sufficient volume and variety of brand name merchandise at opportunistic pricing. Some of our products are sourced from suppliers or with significantly reduced prices.
Our business is partly dependent on our ability to strategically source a sufficient volume and variety of brand name merchandise at opportunistic pricing. Some of our products are sourced from suppliers or at significantly reduced prices.
We must continuously monitor legislative and rulemaking activities for changes in the telehealth requirements and work with various stakeholders to educate lawmakers on how remote optometry services may be provided safely and effectively.
We must continuously monitor legislative and rulemaking activities for changes in telehealth requirements and work with various stakeholders to educate lawmakers on how remote optometry services may be provided safely and effectively.
The success of our contemplated expansion depends on many factors, including, among others, our ability to: • recruit and retain qualified vision care professionals (who may be licensed or unlicensed, depending on state regulations) for any new store; • address regulatory, competitive, merchandising, marketing, distribution and other challenges encountered in connection with expansion into new markets where we have limited historical experience; • hire, train and retain an expanded workforce of store managers and other personnel; • maintain adequate laboratory, distribution facility, information technology and other operational system capabilities; • successfully integrate new stores into our existing management structure and operations, including information technology integration; • negotiate acceptable lease terms at suitable retail locations; • source sufficient levels of inventory at acceptable costs; • obtain necessary permits and licenses; • construct and open our stores on a timely basis; • generate sufficient levels of cash or obtain financing on acceptable terms to support our expansion; • participate in managed care arrangements for new stores; • achieve and maintain brand awareness in new and existing markets; and • identify and satisfy the merchandise and other preferences of our customers.
The success of our contemplated expansion depends on many factors, including, among others, our ability to: • recruit and retain qualified vision care professionals (who may be licensed or unlicensed, depending on state regulations) for any new store; • address regulatory, competitive, merchandising, marketing, distribution and other challenges encountered in connection with expansion into new markets where we have limited historical experience; • hire, train and retain an expanded workforce of store managers and other personnel; • maintain adequate laboratory, distribution facility, information technology and other operational system capabilities; • successfully integrate new stores into our existing management structure and operations, including information technology integration; • negotiate acceptable lease terms at suitable retail locations; • source sufficient levels of inventory at acceptable costs; • obtain necessary permits and licenses; • construct and open our stores on a timely basis; • generate sufficient levels of cash or obtain financing on acceptable terms to support our expansion; • participate in managed care arrangements for new stores; 22 Table of Contents • achieve and maintain brand awareness in new and existing markets; and • identify and satisfy the merchandise, lifestyle and other preferences of our customers.
Our growth strategy could strain our existing resources and cause the performance of our existing stores to suffer. Our planned expansion has and continues to place increased demands on our existing operational, managerial, supply-chain and administrative resources.
Our growth strategy could strain our existing resources and cause the performance of our existing stores to suffer. Our planned expansion has placed, and continues to place, increased demands on our existing operational, managerial, supply-chain and administrative resources.
Defending against such claims and proceedings is costly and time consuming and may divert management’s attention and personnel resources from our normal business operations, and the outcome of many of these claims and proceedings cannot be predicted.
Defending against such claims and proceedings is costly and time consuming and may divert management’s attention and resources from our normal business operations, and the outcome of many of these claims and proceedings cannot be predicted.
Risks Related to Our Indebtedness We have a significant amount of indebtedness which could adversely affect our business and financial position, including limiting our business flexibility and preventing us from meeting our debt obligations. We have a significant amount of indebtedness.
Risks Related to Our Indebtedness We have a significant amount of indebtedness which could adversely affect our business and financial position, including by limiting our business flexibility and preventing us from meeting our debt obligations. We have a significant amount of indebtedness.
It may be difficult for us to prevent others from copying elements of our products and any litigation to enforce our rights could be costly, divert attention of management, and may not be successful.
It may be difficult for us to prevent others from copying elements of our products and any litigation to enforce our rights could be costly, divert attention of management and may not ultimately be successful.
If consumers accept the use of these technologies, consumers could become less likely to obtain an in-person eye examination and therefore less likely to shop at our retail locations.
If consumers accept the use of these technologies, they could become less likely to obtain an in-person eye examination and therefore less likely to shop at our retail locations.
If the U.S. were to withdraw from or materially modify any other international trade agreements to which it is a party or if the U.S. imposes significant additional tariffs or other restrictions on imports from China and Mexico, where our outsourced optical laboratories are located and where the majority of our frames are sourced and manufactured, it could have an adverse impact on our business.
If the U.S. were to withdraw from or materially modify any other international trade agreement to which it is a party or if the U.S. imposes significant additional tariffs or other restrictions on imports from Mexico, where our outsourced optical laboratories are located, or China, where the majority of our frames are sourced and manufactured, it could have an adverse impact on our business.
Security breaches, computer malware and computer hacking have become more prevalent across industries and are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated organized groups and individuals. We may face increased cybersecurity risks due to our reliance on internet technology and the increased number of employees working remotely following the pandemic.
Security breaches, computer malware and computer hacking have become more prevalent across industries and are increasing in their frequency, level of persistence, sophistication and intensity, and are being conducted by sophisticated, organized groups and individuals. We may face increased cybersecurity risks due to our reliance on Internet technology and the increased number of employees working remotely following the pandemic.
“Business-Government Regulation.” 21 Table of Contents A material change in our relationship with vision care professionals, whether resulting from constraints in exam capacity, a dispute with an eye care practitioner or a group of eye care practitioners controlling multiple practice locations, a government or regulatory authority challenging our operating structure or our relationship with vision care professionals, or other changes to applicable laws or regulations (or interpretations of the same), or the loss of these relationships, could impair our ability to provide services to our customers, cause our customers to go elsewhere for their optical needs, or result in legal sanctions against us.
“Business-Government Regulation.” A material change in our relationship with vision care professionals, whether resulting from constraints in exam capacity, a dispute with an eye care practitioner or a group of eye care practitioners controlling multiple practice locations, a government or regulatory authority challenging our operating structure or our relationship with vision care professionals, or other changes to applicable laws or regulations (or interpretations of the same), or the loss of these relationships, could impair our ability to provide services to our customers, cause our customers to go elsewhere for their optical needs, or result in legal sanctions against us.
Technological advances in vision care, including the development of remote medicine and other new or improved products, as well as future drug development for the correction of vision-related problems, could significantly change how eye exams may be conducted and make our existing products less attractive or even obsolete.
Technological advances in vision care, including the development of artificial intelligence, remote medicine and other new or improved products, as well as future drug development for the correction of vision-related problems, could significantly change how eye exams may be conducted and make our existing products less attractive or even obsolete.
An increase in interest rates, whether because of an increase in market interest rates or a decrease in our creditworthiness, could also increase the cost of servicing our debt and could materially reduce our profitability and cash flows. On January 1, 2022, the publication of the one-week and two-months U.S. Dollar LIBOR maturities and all non-U.S.
An increase in interest rates, whether because of an increase in market interest rates or a decrease in our creditworthiness, could increase the cost of servicing our debt and could materially reduce our profitability and cash flows. Moreover, on January 1, 2022, the publication of the one-week and two-months U.S. Dollar LIBOR maturities and all non-U.S.
For example, we have in the past been subject to the unilateral pricing policies implemented by certain contact lens manufacturers, which policies mandated the minimum prices at which certain contact lenses could be sold to consumers. Such manufacturers could refuse to supply us with their products if they deemed us in breach of such policies.
For example, we have in the past been subject to the unilateral pricing policies implemented by certain contact lens manufacturers, which mandated the minimum prices at which certain contact lenses could be sold to consumers. Such manufacturers could refuse to supply us with their products if they deem us in breach of such policies.
Further, the FTC has authority to investigate and prosecute practices that constitute “unfair trade practices,” “deceptive trade practices” or “unfair methods of competition.” State attorneys generals typically have comparable authority, and many states also permit private plaintiffs to bring actions on the basis of these laws.
Further, the FTC has authority to investigate and prosecute practices that constitute “unfair trade practices,” “deceptive trade practices” or “unfair methods of competition.” State attorneys general typically have comparable authority and many states also permit private plaintiffs to bring actions on the basis of these laws.
We are subject to risks associated with leasing substantial amounts of space, including future increases in occupancy costs. We lease our America’s Best and Eyeglass World store locations, our corporate office, the AC Lens corporate office, the FirstSight corporate office, our laboratories in Georgia, Texas and Utah and our distribution centers.
We are subject to risks associated with leasing substantial amounts of space, including future increases in occupancy costs. We lease our America’s Best and Eyeglass World store locations, our corporate office, the FirstSight corporate office, our laboratories in Georgia, Texas and Utah, and our distribution centers.
Other than our contracts for the supply of spectacle lenses and our private label contact lenses, we typically do not enter into long-term contracts with our vendors and, as such, we operate without significant contractual assurances of continued supply, pricing or access to new products.
Other than our contracts for the supply of eyeglass lenses and our private label contact lenses, we typically do not enter into long-term contracts with our vendors and, as such, we operate without significant contractual assurances of continued supply, pricing or access to new products.
The insurance we maintain for business interruption may not cover all risk, or be sufficient to cover all of our potential losses, may not continue to be available to us on acceptable terms, if at all, and any insurance proceeds may not be paid to us in a timely manner. 28 Table of Contents We may incur losses arising from our investments in technological innovators in the optical retail industry, which would negatively affect our financial results.
The insurance we maintain for business interruption may not cover all risk or be sufficient to cover all of our potential losses or may not continue to be available to us on acceptable terms, if at all, and any insurance proceeds may not be paid to us in a timely manner. 28 Table of Contents We may incur losses arising from our investments in technological innovators in the optical retail industry, including artificial intelligence, which would negatively affect our financial results.
The terms of our existing or future debt agreements may also restrict us from affecting any of these alternatives. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.
The terms of our existing or future debt agreements may also restrict us from effecting any of these alternatives. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.
In addition, state regulators or boards of optometry may also challenge our promotional practices, including America’s Best’s bundled offers, as, among other things, violating applicable state laws regarding unfair competition, false advertising to consumers, or corporation practice of optometry prohibitions.
In addition, state regulators or boards of optometry may also challenge our promotional practices, including America’s Best’s bundled offers, as, among other things, violating applicable state laws regarding unfair competition, false advertising to consumers or corporate practice of optometry prohibitions.
If claims for payment are disputed by managed care payors or if we fail to timely or accurately submit claims, we may not receive payment for such claims in a timely manner or at all, which could negatively impact our relationship with managed care organizations and could require us to take write-offs or otherwise have a significant negative impact on our business, financial condition and results of operations.
If claims for payment are disputed by managed care payors or if we fail to timely or accurately submit claims, we may not receive payment for such claims in a 32 Table of Contents timely manner or at all, which could negatively impact our relationship with managed care organizations and could require us to take write-offs or otherwise have a significant negative impact on our business, financial condition and results of operations.
Such store closures due to factors that are outside of our control could materially adversely affect our sales and profitability. Furthermore, our target market, which consists of value seeking and lower income consumers, is sensitive to a number of these and other factors outside of our control.
Such store closures due to factors that are outside of our control could materially adversely affect our sales and profitability. Furthermore, our target market of value-seeking and lower income consumers, is sensitive to a number of these and other factors outside of our control.
Our e-commerce and omni-channel business faces distinct risks, and our failure to successfully manage it could have a negative impact on our profitability. As an e-commerce and omni-channel retailer, we encounter risks and difficulties frequently experienced by internet-based businesses.
Our e-commerce and omni-channel business faces distinct risks, and our failure to successfully manage those risks could have a negative impact on our profitability. As an e-commerce and omni-channel retailer, we encounter risks and difficulties frequently experienced by Internet-based businesses.
The powers, preferences and rights of these additional series of preferred stock may be senior to or on parity with our common stock, which may reduce its value. 40 Table of Contents Our amended and restated certificate of incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, associates or stockholders.
The powers, preferences and rights of these additional series of preferred stock may be senior to or in parity with our common stock, which may reduce its value. 40 Table of Contents Our certificate of incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, associates or stockholders.
Our ability to recruit optometrists who are willing and able to provide telehealth services where permitted may be affected by their respective licensing authorities or state optometry boards or associations view on telehealth practice.
Our ability to recruit optometrists who are willing and able to provide telehealth services where permitted may be affected by their respective licensing authorities or state optometry boards or association’s view on telehealth practice.
Moreover, negative press or reports about internationally manufactured products may sway public opinion, and thus customer confidence, away from the products sold in our stores. These and other issues affecting our international vendors or internationally manufactured merchandise could have a material adverse effect on our business, financial condition and results of operations.
Moreover, negative press or reports about internationally manufactured products may sway public opinion, and thus customer confidence, away from the products sold in our stores. These and other issues affecting our international vendors or internationally 30 Table of Contents manufactured merchandise could have a material adverse effect on our business, financial condition and results of operations.
In such event, we could be required to incur enhanced compliance costs, as well as the risk of cease and desist orders and monetary penalties. 33 Table of Contents Our participation in federal healthcare programs, such as Medicare and Medicaid, requires us to comply with laws regarding the way in which we conduct business and submit claims.
In such event, we could be required to incur enhanced compliance costs, or be at risk of cease and desist orders and monetary penalties. 33 Table of Contents Our participation in federal healthcare programs, such as Medicare and Medicaid, requires us to comply with laws regarding the way in which we conduct business and submit claims.
The successful operation of our business as well as our ability to provide a positive shopping experience that will generate orders and drive subsequent visits depends on efficient and uninterrupted operation of our order-taking and fulfillment operations.
The successful operation of our business and our ability to provide a positive shopping experience that will generate orders and drive subsequent visits depends on efficient and uninterrupted operation of our order-taking and fulfillment operations.
The global macroeconomic effects of the pandemic, including weakened economic conditions, consumer spending and supply chain disruptions, and financial market volatility have continued, and may continue for an indefinite period of time.
The global macroeconomic effects of pandemics, including weakened economic conditions, consumer spending and supply chain disruptions, and financial market volatility have continued, and may continue for an indefinite period of time.
In addition, we may have to upgrade our existing information technology systems or choose to incorporate new technology systems from time to time in order for such systems to support the increasing needs of our expanding business.
In addition, we may need to upgrade our existing information technology systems or choose to incorporate new technology systems from time to time in order for such systems to support the increasing needs of our expanding business.
The loss of our Vision Centers or Vista Optical locations could impair our ability to attract and retain management and retail associates, compete for managed vision care contracts, obtain favorable terms, such as discounts and rebates, from optical vendors and generate cash to fund our business and service our debt obligations.
Additionally, the loss of our Vista Optical locations could impair our ability to attract and retain management and retail associates, compete for managed vision care contracts, obtain favorable terms, such as discounts and rebates, from optical vendors and generate cash to fund our business and service our debt obligations.
If one or more of these analysts stop covering us or fail to publish reports on us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline. Item 1B. Unresolved Staff Comments None. 42 Table of Contents
If one or more of these analysts stop covering us or fail to publish reports on us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline. Item 1B. Unresolved Staff Comments None.
Our business depends on consumer demand for our products and, consequently, is sensitive to a number of factors that influence consumer confidence and spending, such as general economic conditions, consumer disposable income, energy and fuel prices, recession and fears of recession, unemployment, minimum wages, availability of consumer credit, consumer debt levels, conditions in the housing market, interest rates, tax rates and policies, inflation, consumer confidence in future economic conditions and political conditions, developments related to the U.S. federal debt ceiling, war and fears of war (including the Russian invasion of Ukraine), impacts of climate change, inclement weather, natural disasters, terrorism, cybersecurity incidents, outbreak of viruses or widespread illness and consumer perceptions of personal well-being and security.
Our business depends on consumer demand for our products and, consequently, is sensitive to a number of factors that influence consumer confidence and spending, such as general economic conditions, consumer disposable income, energy and fuel prices, recession and fears of recession, unemployment, minimum wages, availability of consumer credit, consumer debt levels, conditions in the housing market, interest rates, tax rates and policies, inflation, consumer confidence in future economic conditions and political conditions, developments related to the U.S. federal debt ceiling, global conflict (including the Russia-Ukraine war and the Israel-Hamas conflict), impacts of climate change, inclement weather, natural disasters, terrorism, cybersecurity incidents, outbreak of viruses or widespread illness and consumer perceptions of personal well-being and security.
We cannot guarantee that any project will be completed on time or within established 24 Table of Contents budgets. Any delay or increased costs associated with any project could adversely affect the financial and overall performance of our existing and planned new stores.
We cannot guarantee that any project will be completed on time or within established budgets. Any delay or increased costs associated with any project could adversely affect the financial and overall performance of our existing and planned new stores.
Our four laboratories in the United States and our in-store laboratories at our Eyeglass World locations subject us to various federal, state and local laws, regulations and other requirements pertaining to protection of the environment, public health and associate safety, including regulations governing the management of hazardous substances and the maintenance of safe working conditions, such as the Occupational Safety and Health Act of 1970, as amended.
Our four laboratories in the U.S. and our in-store laboratories at Eyeglass World locations subject us to various federal, state and local laws, regulations and other requirements pertaining to protection of the environment, public health and associate safety, including regulations governing the management of hazardous substances and the maintenance of safe working conditions, such as the Occupational Safety and Health Act of 1970, as amended.
Larger competitors who have greater financial and operational resources, greater brand recognition and broader geographic presence than we do, may be able to offer more competitive prices, and have larger marketing and advertising spends. Vertically integrated competitors may advantageously leverage their structure and make it more difficult for others in the industry, including us, to compete.
Larger competitors who have greater financial and operational resources, greater brand recognition or broader geographic presence than we do, have large marketing and advertising spends and may be able to offer more competitive prices. Vertically integrated competitors may advantageously leverage their structure, making it more difficult for others in the industry, including us, to compete.
Although, we have enabled remote medicine technologies in a number of locations to enable the provision of eye examinations by remote doctors to patients in-store, several companies have developed technologies for, and some companies are incorporating the remote delivery of eye examinations and eye refractions more broadly.
Although we have enabled remote medicine technologies in a number of locations to enable the provision of eye examinations by remote doctors to patients in our stores, several companies have developed technologies for, and some companies are incorporating the remote delivery of, eye examinations and eye refractions more broadly.
We cannot guarantee that our interpretation of existing or future requirements is aligned with how regulators may interpret such requirements, and we cannot assure that, if challenged, our current telehealth solution will be found to be in compliance with the law.
We cannot guarantee that our interpretation of existing or future requirements is aligned with how regulators may interpret such requirements, and we cannot assure that, if challenged, our current remote medicine solution will be found to be in compliance with the law.
In addition, the potential default or bankruptcy of landlords in existing or pending leasehold locations may affect our ability to maintain or renew our existing leases. All of these factors could have a material adverse impact on our operations. Most leases for our stores provide for a minimum rent and typically include escalating rent increases over time.
In addition, the potential default or bankruptcy of landlords in existing or pending leasehold locations may affect our ability to maintain or renew our existing leases. Any of these factors could have a material adverse impact on our operations. Most of our store leases provide for a minimum rent and typically include escalating rent increases over time.
Our ability to hire and/or contract with vision care professionals for our stores and remote offerings is critical to our operations as well as our growth strategy. Our operations, like those of many of our competitors, depend on our ability to offer both eyewear and eye exams, which require the availability of optometrists in or near our stores.
Our ability to hire and/or contract with vision care professionals for in-store roles and remote care offerings is critical to our operations as well as our growth strategy. Our operations, like those of many of our competitors, depend on our ability to offer both eyewear and eye exams, which requires the availability of optometrists in or near our stores.
Substantially all of our inventory is shipped directly from suppliers to our two distribution centers in Lawrenceville, Georgia and Columbus, Ohio. Inventory is then processed, sorted and shipped using third-party carriers to our stores, to our laboratories for further processing, to our online customers or to Walmart stores and Sam’s Club locations. We operate laboratory facilities in Lawrenceville, Georgia; St.
Substantially all of our inventory is shipped directly from suppliers to our two distribution centers in Lawrenceville, Georgia and Columbus, Ohio. Inventory is then processed, sorted and shipped using third-party carriers to our stores, to our laboratories for further processing or to our online customers. We operate laboratory facilities in Lawrenceville, Georgia; St.
If there are amendments to the PCI Standard, the cost of re-compliance could also be substantial and we may suffer loss of critical data and interruptions or delays in our operations as a result. 36 Table of Contents Adverse litigation judgments or settlements resulting from legal proceedings relating to our business operations could materially adversely affect our business, financial condition and results of operations.
If there are amendments to the PCI Standard, the cost of compliance with new requirements could also be substantial and we may suffer loss of critical data and interruptions or delays in our operations as a result. 36 Table of Contents Adverse judgments or settlements resulting from legal proceedings relating to our business operations could materially adversely affect our business, financial condition and results of operations.
Eyeglasses and contact lenses are regulated as medical devices in the United States by the FDA, and under the FDC Act, such medical devices must meet a number of regulatory requirements. We do not hold any marketing authorizations for the eyeglasses and contact lenses that we sell as we serve as the retailer for third-party manufacturers’ devices.
Eyeglasses and contact lenses are regulated as medical devices in the U.S. by the FDA, and under the FDC Act, such medical devices must meet a number of regulatory requirements. We do not hold any marketing authorizations for the eyeglasses and contact lenses that we sell as we serve as the retailer for third-party manufacturers’ devices.
In addition, as our managed care business continues to grow closer to overall industry penetration levels, we expect our associated revenue growth rate to slow over time. We may be unable to establish or maintain satisfactory relationships with managed care and other third-party payors.
In addition, as our managed care business continues to grow closer to overall industry penetration levels, we expect our associated revenue growth rate to slow over time. 29 Table of Contents We may be unable to establish or maintain satisfactory relationships with managed care and other third-party payors.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThese leases generally require us to pay insurance, utilities, real estate taxes and common area maintenance expenses. We occupy our Host and Legacy locations through master agreements with our Host partners, which contain standard terms and conditions, such as fixed and percentage-based payments.
Biggest changeWe occupy our Host locations through master agreements with our Host partners, which contain standard terms and conditions, such as fixed and percentage-based payments. A summary of our stores by location as of December 30, 2023 is shown below. This summary includes the Legacy stores we operated as of December 30, 2023.
In addition, we lease office space for our AC Lens corporate office in Columbus, Ohio and office space for our FirstSight corporate office in Upland, California. 43 Table of Contents
In addition, we lease office space for our FirstSight corporate office in Upland, California and leased office space for our AC Lens corporate office in Columbus, Ohio through February 2024. 43 Table of Contents
Item 2. Properties We lease all of our America’s Best and Eyeglass World retail stores. Our leases generally have noncancelable lease terms of between five and 10 years, with an option to renew for additional terms of one to 10 years or more.
Item 2. Properties We lease all of our America’s Best and Eyeglass World retail stores. Our leases generally have noncancelable lease terms of between five and 10 years, with an option to renew for additional terms of one to 10 years or more. In recent years, we have entered into more leases with 10-year initial terms with renewal options.
A summary of our stores by location as of December 31, 2022 is as follows: State America’s Best Eyeglass World Legacy Other State America’s Best Eyeglass World Legacy Other AK — — 1 7 MT — — 1 — AL 22 1 3 3 NC 21 — 36 2 AR — — — 1 ND — — — — AZ 27 11 9 2 NE 5 1 — 1 CA 74 20 43 4 NH — — 2 — CO 26 2 7 3 NJ 35 — 3 1 CT 10 — 7 — NM — 2 6 3 DE — — — — NV — 4 2 1 FL 89 41 2 2 NY 36 — 13 1 GA 43 3 30 5 OH 38 1 — 1 HI — — 3 — OK — — — — IA 8 1 — — OR 10 — 3 9 ID 7 — — — PA 38 5 13 — IL 54 2 — — RI — — — — IN 17 10 — — SC 17 3 6 1 KS — 1 8 2 SD — — 1 — KY 6 1 — 2 TN 22 3 — — LA 15 — 1 1 TX 117 5 3 5 MA — — 2 — UT 13 5 — 1 MD 24 — 1 1 VA 30 — 16 1 ME — — — — VT — — — — MI 32 12 — — WA 17 1 1 19 MN 15 — — — WI 11 — — — MO 25 1 — 1 WV — — 6 — MS — — — 2 WY 1 — 1 — ___________ Note: ‘Other’ includes Vista Optical in Fred Meyer stores and on military bases.
State America’s Best Eyeglass World Legacy Other State America’s Best Eyeglass World Legacy Other AK — — 1 7 MT — — 1 — AL 24 1 3 3 NC 23 — 36 2 AR — — — 1 ND — — — — AZ 28 11 9 2 NE 5 1 — 1 CA 76 20 43 4 NH — — 2 — CO 26 7 7 3 NJ 39 — 3 1 CT 10 — 7 — NM — 2 5 3 DE — — — — NV — 4 2 1 FL 96 43 2 2 NY 38 — 13 1 GA 44 4 28 5 OH 41 1 — 1 HI — — 3 — OK — — — — IA 8 1 — — OR 10 — 3 9 ID 7 — — — PA 44 5 13 — IL 57 2 — — RI — — — — IN 18 11 — — SC 19 3 6 1 KS — 2 6 2 SD — — 1 — KY 6 1 — 2 TN 23 4 — — LA 15 — 1 1 TX 123 6 3 5 MA — — 2 — UT 14 5 — 1 MD 24 — 1 1 VA 33 — 16 1 ME — — — — VT — — — — MI 35 12 — — WA 18 1 1 19 MN 14 — — — WI 11 — — — MO 27 1 — 1 WV — — 6 — MS — — — 2 WY 1 — 1 — ___________ Note: ‘Other’ includes Vista Optical in Fred Meyer stores and on military bases.
Over the past few years, we have been entering into more leases with 10 year initial terms, with renewal options. Most leases for these retail stores provide for a minimum rent, typically with escalating rent increases. In certain circumstances we pay a percentage rent based upon sales after certain minimum thresholds are achieved.
Most leases for these retail stores provide for a minimum rent, typically with escalating rent increases. In certain circumstances we pay a percentage rent based upon sales after certain minimum thresholds are achieved. These leases generally require us to pay insurance, utilities, real estate taxes and common area maintenance expenses.
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As a result of the MSA Termination, we no longer operate the Legacy stores listed below. Refer to Item 1. “Our Business - Overview of Our Brands and Omni-channel & E-commerce Platform” for more information on the MSA Termination.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings See Note 11. “Commitments and Contingencies” in our consolidated financial statements included in Part II. Item 8. of this Form 10-K for information regarding certain legal proceedings in which we are involved, which discussion is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 44 Table of Contents PART II
Biggest changeItem 3. Legal Proceedings See Note 12. “Commitments and Contingencies” in our consolidated financial statements included in Part II. Item 8. of this Form 10-K for information regarding certain legal proceedings in which we are involved, which discussion is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable.
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Information About Our Executive Officers Information about our executive officers is incorporated by reference from Part III—Item 10 of this annual report. 44 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRepurchases may be made from time to time in the Company’s discretion through one or more open market or privately negotiated transactions, and pursuant to pre-set trading plans meeting the requirements of all applicable securities laws and regulations. Shares may be repurchased under the program through December 30, 2023.
Biggest changeThe authorization permits the Company to make purchases of its common stock from time to time in the open market or privately negotiated transactions, and pursuant to pre-set trading plans meeting the requirements of all applicable securities laws and regulations.
On November 29, 2021, the Company’s Board of Directors authorized an increase from $50 million to $100 million in aggregate amount of shares of the Company’s common stock that may be repurchased under the Company’s current share repurchase program.
On November 29, 2021, the Board authorized an increase from $50 million to $100 million in aggregate amount of shares of the Company’s common stock that may be repurchased under the Company’s current share repurchase program.
Issuer Purchases of Equity Securities During the quarter ended December 31, 2022, we did not purchase any of our equity securities that are registered under Section 12(b) of the Exchange Act. Effective November 8, 2021, the Company's Board of Directors authorized the Company to repurchase up to $50 million aggregate amount of shares of the Company's common stock.
Issuer Purchases of Equity Securities During the quarter ended December 30, 2023, we did not purchase any of our equity securities that are registered under Section 12(b) of the Exchange Act. Effective November 8, 2021, the Company’s Board of Directors (the “Board”) authorized the Company to repurchase up to $50 million aggregate amount of shares of the Company’s common stock.
The graph below presents the Company’s cumulative total stockholder returns relative to the performance of the Nasdaq Global Composite Index and the Nasdaq US Benchmark Retail Index commencing December 29, 2017 through December 31, 2022.
The graph below presents the Company’s cumulative total stockholder returns relative to the performance of the Nasdaq Global Composite Index and the Nasdaq US Benchmark Retail Index commencing December 28, 2018 and through December 29, 2023.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the Nasdaq Global Select Market under the symbol “EYE”. Holders As of February 24, 2023, there were approximately 19 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the Nasdaq Global Select Market under the symbol “EYE.” Holders As of February 16, 2024, there were approximately 12 holders of record of our common stock.
The points on the graph represent fiscal year-end values based on the last trading day of each fiscal year. The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our common stock. 45 Table of Contents Unregistered Sales of Equity Securities None. 46 Table of Contents Item 6. Reserved
The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our common stock. 45 Table of Contents Unregistered Sales of Equity Securities None. 46 Table of Contents Item 6. Reserved
During fiscal years 2022 and 2021, the Company repurchased 2.7 million shares of its common stock for $80.0 million, and 1.4 million shares of its common stock for $69.9 million, respectively, under the share repurchase program. After these repurchases, approximately $50 million remains available under the share repurchase authorization as of December 31, 2022.
During fiscal years 2023, 2022, and 2021, the Company repurchased 1.1 million shares of its common stock for $25.0 million, 2.7 million shares of its common stock for $80.0 million, and 1.4 million shares of its common stock for $69.9 million, respectively, under the share repurchase program.
All values assume a $100 initial investment at the opening price of the Company’s common stock on Nasdaq and data for the Nasdaq Global Composite Index and the Nasdaq US Benchmark Retail Index assumes all dividends were reinvested on the date paid.
All values assume a $100 initial investment in the Company’s common stock on Nasdaq and data for the Nasdaq Global Composite Index and the Nasdaq US Benchmark Retail Index assumes all dividends were reinvested on the date paid. The points on the graph represent fiscal year-end values based on the last trading day of each fiscal year.
Added
The Company’s original share repurchase authorization expired on December 30, 2023, and had remaining capacity of $25 million. Effective February 23, 2024, the Board authorized the Company to repurchase up to $50 million aggregate amount of shares of the Company’s common stock until January 3, 2026.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

137 edited+40 added−49 removed101 unchanged
Biggest changeFiscal Year 2022 Fiscal Year 2021 Fiscal Year 2020 Percentage of net revenue: Total costs applicable to revenue 46.2 % 43.5 % 46.0 % Selling, general and administrative expenses 45.6 % 43.3 % 42.4 % Total operating expenses 50.8 % 48.1 % 49.0 % Income from operations 3.1 % 8.4 % 5.1 % Net income 2.1 % 6.2 % 2.1 % Adjusted Operating Income 4.4 % 9.8 % 7.8 % Adjusted EBITDA 9.0 % 14.2 % 12.8 % 54 Table of Contents Fiscal Year 2022 compared to Fiscal Year 2021 Net revenue The following presents, by segment and by brand, comparable store sales growth, stores open at the end of the period and net revenue for fiscal year 2022 compared to fiscal year 2021.
Biggest changeFiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021 Percentage of net revenue: Total costs applicable to revenue 47.1 % 46.2 % 43.5 % Selling, general and administrative expenses 46.6 % 45.6 % 43.3 % Total operating expenses 55.1 % 50.8 % 48.1 % Income (loss) from operations (2.2) % 3.1 % 8.4 % Net income (loss) (3.1) % 2.1 % 6.2 % Adjusted Operating Income 3.4 % 4.4 % 9.8 % Adjusted EBITDA 7.8 % 9.0 % 14.2 % Fiscal Year 2023 compared to Fiscal Year 2022 Net revenue The following presents, by segment and by brand, comparable store sales growth, stores open at the end of the period and net revenue for fiscal year 2023 compared to fiscal year 2022. 53 Table of Contents Comparable store sales growth (1) Stores open at end of period Net revenue (2) In thousands, except percentage and store data Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2023 Fiscal Year 2022 Owned & Host segment America’s Best 4.0 % (7.7) % 957 905 $ 1,470,411 69.1 % $ 1,366,019 68.1 % Eyeglass World (1.0) % (6.7) % 148 136 225,906 10.6 % 217,727 10.9 % Military 3.0 % (4.3) % 54 54 22,758 1.1 % 22,114 1.1 % Fred Meyer (4.6) % (5.1) % 29 29 10,973 0.5 % 11,508 0.6 % Owned & Host segment total 1,188 1,124 $ 1,730,048 81.3 % $ 1,617,368 80.6 % Legacy segment (0.5) % (8.4) % 225 230 150,894 7.1 % 151,877 7.6 % Corporate/Other — — — — 252,427 11.9 % 242,822 12.1 % Reconciliations — — — — (6,901) (0.3) % (6,663) (0.3) % Total 3.1 % (7.5) % 1,413 1,354 $ 2,126,468 100.0 % $ 2,005,404 100.0 % Adjusted Comparable Store Sales Growth (3) 2.9 % (7.6) % _________ (1) We calculate total comparable store sales based on consolidated net revenue excluding the impact of (i) Corporate/Other segment net revenue, (ii) sales from stores opened less than 13 months, (iii) stores closed in the periods presented, (iv) sales from partial months of operation when stores do not open or close on the first day of the month and (v) if applicable, the impact of a 53rd week in a fiscal year.
Item 8. of this Form 10-K, with the exception of the Legacy segment, which is adjusted as noted in clause (ii) of footnote (3) below. (2) Percentages reflect line item as a percentage of net revenue, adjusted for rounding.
Item 8. of this Form 10-K, with the exception of the Legacy segment, which is adjusted as noted in clause (ii) of footnote (3) below. (2) Percentages reflect line item as a percentage of net revenue, adjusted for rounding.
Legacy segment managed care net product revenue is recorded in net product sales while revenue associated with servicing non-managed care customers is recorded in net sales of services and plans. Eyeglass and contact lens product costs for both managed care and non-managed care net revenue are recorded in costs of products.
Legacy segment managed care net product revenue is recorded in net product sales while revenue associated with servicing non-managed care customers is recorded in net sales of services and plans. Eyeglass and contact lens product costs for both managed care and non-managed care net revenue are recorded in costs of products.
Increases in managed care mix decrease costs of products as a percentage of net product sales and have a corresponding negative impact on costs of services as a percentage of net sales of services and plans in our Legacy segment.
Increases in managed care mix decrease costs of products as a percentage of net product sales and have a corresponding negative impact on costs of services as a percentage of net sales of services and plans in our Legacy segment.
Net Cash Used for Investing Activities Net cash used for investing activities increased by $18.0 million, to $110.9 million, during fiscal year 2022 from $92.9 million during fiscal year 2021. The increase was primarily due to increased capital investments in remote medicine and new store openings. We purchased $113.5 million in capital items during fiscal year 2022.
Net cash used for investing activities increased by $18.0 million, to $110.9 million, during fiscal year 2022 from $92.9 million during fiscal year 2021. The increase was primarily due to increased capital investments in remote medicine and new store openings. We purchased $113.5 million in capital items during fiscal year 2022.
Some of these limitations are: • they do not reflect costs or cash outlays for capital expenditures or contractual commitments; • they do not reflect changes in, or cash requirements for, our working capital needs; • EBITDA, Adjusted EBITDA and Adjusted Operating Income do not reflect the interest expense (income), net or the cash requirements necessary to service interest or principal payments, on our debt; • EBITDA, Adjusted EBITDA and Adjusted Operating Income do not reflect period to period changes in taxes, income tax provision or the cash necessary to pay income taxes; 61 Table of Contents • they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; • 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 cash requirements for such replacements; and • other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.
Some of these limitations are: • they do not reflect costs or cash outlays for capital expenditures or contractual commitments; • they do not reflect changes in, or cash requirements for, our working capital needs; • EBITDA, Adjusted EBITDA and Adjusted Operating Income do not reflect the interest expense (income), net or the cash requirements necessary to service interest or principal payments, on our debt; • EBITDA, Adjusted EBITDA and Adjusted Operating Income do not reflect period to period changes in taxes, income tax provision or the cash necessary to pay income taxes; 60 Table of Contents • they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; • 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 cash requirements for such replacements; and • other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.
Depending on our liquidity levels, conditions in the capital markets and other factors, we may from time to time consider the refinancing or issuance of debt, issuance of equity or other securities, the proceeds of which could provide additional liquidity for our operations, as well as modifications to our term loan where possible.
Depending on our liquidity levels, conditions in the capital markets and other factors, we may from time to time consider the prepayment, refinancing or issuance of debt, issuance of equity or other securities, the proceeds of which could provide additional liquidity for our operations, as well as modifications to our term loan where possible.
Many factors affect comparable store sales, including: • consumer confidence, preferences and buying trends and overall economic trends including inflation and the amount and timing of tax refunds; • the availability of optometrists and other vision care professionals; • advertising strategies; • participation in managed care programs; • the recurring nature of eye care purchases; • our ability to identify and respond effectively to customer preferences and trends; • our ability to provide an assortment of high quality/low-cost product offerings that generate new and repeat visits to our stores; • foot traffic in retail shopping centers where our stores are predominantly located; • the customer experience we provide in our stores; • our ability to source and receive products accurately and timely; • changes in product pricing, including promotional activities; • the number of items purchased per store visit; • the number of stores that have been in operation for more than 12 months; • impact of competition and consolidation in the U.S. optical retail industry; • impact and timing of weather related store closures; and • public health emergencies, like COVID-19, which may exacerbate the effects and relevant risk exposures listed above.
Many factors affect comparable store sales, including: • consumer confidence, preferences and buying trends and overall economic trends including inflation and the amount and timing of tax refunds; 49 Table of Contents • the availability of optometrists and other vision care professionals; • advertising strategies; • participation in managed care programs; • the recurring nature of eye care purchases; • our ability to identify and respond effectively to customer preferences and trends; • our ability to provide an assortment of high quality/low-cost product offerings that generate new and repeat visits to our stores; • foot traffic in retail shopping centers where our stores are predominantly located; • the customer experience we provide in our stores; • our ability to source and receive products accurately and timely; • changes in product pricing, including promotional activities; • the number of items purchased per store visit; • the number of stores that have been in operation for more than 12 months; • impact of competition and consolidation in the U.S. optical retail industry; • impact and timing of weather-related store closures; and • public health emergencies, like COVID-19, which may exacerbate the effects and relevant risk exposures listed above.
For further information, please see “Risk Factors” and “Forward-Looking Statements.” Overview We are one of the largest optical retailers in the United States and a leader in the attractive value segment of the U.S. optical retail industry.
For further information, please see “Risk Factors” and “Forward-Looking Statements.” Overview We are one of the largest optical retailers in the United States (the “U.S.”) and a leader in the attractive value segment of the U.S. optical retail industry.
Net product sales decreased $70.0 million, or 4.1% during fiscal year 2022 compared to fiscal year 2021, primarily due to a $80.7 million, or 6.7%, decrease in eyeglass sales, which was partially offset by a $6.4 million, or 1.7%, increase in contact lens sales and a $4.3 million, or 3.2%, increase in wholesale fulfillment. 55 Table of Contents Net sales of services and plans decreased $4.1 million, or 1.1%, driven primarily by a $7.1 million, or 16.9%, decrease in management fees from our Legacy partner, which was partially offset by a $5.6 million, or 2.9%, increase in exam revenues.
Net product sales decreased $70.0 million, or 4.1% during fiscal year 2022 compared to fiscal year 2021, primarily due to a $80.7 million, or 6.7%, decrease in eyeglass sales, which was partially offset by a $6.4 million, or 1.7%, increase in contact lens sales and a $4.3 million, or 3.2%, increase in wholesale fulfillment. 57 Table of Contents Net sales of services and plans decreased $4.1 million, or 1.1%, driven primarily by a $7.1 million, or 16.9%, decrease in management fees from our Legacy partner, which was partially offset by a $5.6 million, or 2.9%, increase in exam revenues.
See Note 7. “Revenue from Contracts With Customers” in our audited consolidated financial statements included in Part II. Item 8. of this Form 10-K for additional information.
See Note 8. “Revenue from Contracts with Customers” in our audited consolidated financial statements included in Part II. Item 8. of this Form 10-K for additional information.
Significant unobservable inputs used in the fair value measurement of the reporting units include revenue growth rates, payroll and other expense growth rates, capital expenditures and discount rates. These assumptions are sensitive to future changes in the business profitability, changes in our business strategy, customer concentration risk and external market conditions, among other factors. See Note 3.
Significant unobservable inputs used in the fair value measurement of the reporting units include revenue growth rates, payroll and other expense growth rates, capital expenditures and discount rates. These assumptions are sensitive to future changes in the business profitability, changes in our business strategy, customer concentration risk and external market conditions, among other factors. See Note 4.
We believe the impacts of the COVID-19 pandemic on vision care professional availability, including a competitive recruiting market and preferences for adjusted work schedules, and the demand for optometrists exceeding supply in certain areas during fiscal year 2022 have caused constraints in exam capacity which are continuing.
We believe the impacts of the COVID-19 pandemic on vision care professional availability, including a competitive recruiting market and preferences for adjusted work schedules, and the demand for optometrists exceeding supply in certain areas during fiscal year 2023 have caused constraints in exam capacity which are continuing.
We define Adjusted EBITDA as net income, plus interest expense (income), net, income tax provision (benefit) and depreciation and amortization, further adjusted to exclude stock based compensation expense, loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, and certain other expenses.
We define Adjusted EBITDA as net income, plus interest expense (income), net, income tax provision (benefit) and depreciation and amortization, further adjusted to exclude stock-based compensation expense, loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, ERP implementation expenses and certain other expenses.
A 100 basis point change in our estimate of value delivered to customers compared to expected customer usage of benefits would have affected revenues in fiscal year 2022 by approximately $2 million; this amount would have been recognized at different times over the contract period.
A 100 basis point change in our estimate of value delivered to customers compared to expected customer usage of benefits would have affected revenues in fiscal year 2023 by approximately $2 million; this amount would have been recognized at different times over the contract period.
We allocate each lease payment between a reduction of the lease obligation and interest expense using the effective interest method. Finance lease amounts above represent required contractual cash payments in the periods presented. Refer to Note 8. “Leases” for our current and long-term lease payment obligations.
We allocate each lease payment between a reduction of the lease obligation and interest expense using the effective interest method. Finance lease amounts above represent required contractual cash payments in the periods presented. Refer to Note 9. “Leases” for our current and long-term lease payment obligations.
With respect to our fourth quarter results, compared to other retailers, our products and services are less likely to be included in consumer’s holiday spending budgets, therefore reducing spending on personal vision correction during the weeks preceding December 25th of each year.
With respect to our fourth quarter results, compared to other retailers, our products and services are less likely to be included in consumers’ holiday spending budgets, therefore reducing spending on personal vision correction during the weeks preceding December 25th of each year.
There are no revenue transactions between reportable segments, and there are no other items in the reconciliations other than the effects of unearned and deferred revenue. See Note 14. “Segment Reporting” in our consolidated financial statements included in Part II. Item 8. of this Form 10-K.
There are no revenue transactions between reportable segments, and there are no other items in the reconciliations other than the effects of unearned and deferred revenue. See Note 15. “Segment Reporting” in our consolidated financial statements included in Part II. Item 8. of this Form 10-K.
See “Non-GAAP Financial Measures” for definitions of the Company Non-GAAP Measures and for additional information. 53 Table of Contents Results of Operations The following table summarizes key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net revenue.
See “Non-GAAP Financial Measures” for definitions of the Company Non-GAAP Measures and for additional information. 52 Table of Contents Results of Operations The following table summarizes key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net revenue.
Brand-level comparable store sales growth is calculated based on cash basis revenues consistent with what the CODM reviews, and consistent with reportable segment revenues presented in Note 14. “Segment Reporting” in our consolidated financial statements included in Part II.
Brand-level comparable store sales growth is calculated based on cash basis revenues consistent with what the CODM reviews, and consistent with reportable segment revenues presented in Note 15. “Segment Reporting” in our consolidated financial statements included in Part II.
SG&A for fiscal year 2022 and fiscal year 2021 includes $0.6 million and $1.5 million, respectively, of incremental costs directly related to adapting the Company’s operations during the COVID-19 pandemic. 56 Table of Contents Owned & Host segment SG&A.
SG&A for fiscal year 2022 and fiscal year 2021 includes $0.6 million and $1.5 million, respectively, of incremental costs directly related to adapting the Company’s operations during the COVID-19 pandemic. 58 Table of Contents Owned & Host segment SG&A.
Brand-level comparable store sales growth is calculated based on cash basis revenues consistent with what the CODM reviews, and consistent with reportable segment revenues presented in Note 14. “Segment Reporting” in our consolidated financial statements included in Part II.
Brand-level comparable store sales growth is calculated based on cash basis revenues consistent with what the CODM reviews, and consistent with reportable segment revenues presented in Note 15. “Segment Reporting” in our consolidated financial statements included in Part II.
When appropriate, the Company may utilize excess liquidity towards debt service requirements, including voluntary debt prepayments, or required interest and principal payments, if any, as well as repurchases of common stock, based on excess cash flows.
When appropriate, the Company may utilize excess liquidity towards debt service requirements, including voluntary debt prepayments, or required interest and principal payments, if any, as well as repurchases of common stock or other securities, based on excess cash flows.
We operate in the highly competitive and fragmented U.S. optical retail industry. We face competition from mass merchants, specialty retail chains, online retailers and independent eye practitioners and opticians, along with large national retailers.
We operate in the highly competitive and fragmented U.S. optical retail in dustry. We face competition from mass merchants, specialty retail chains, online retailers and independent eye practitioners and opticians, along with large national retailers.
We also believe that, for the same reasons, investors find our calculation of Adjusted Comparable Stores Sales Growth to be meaningful. 52 Table of Contents Adjusted Operating Income, Adjusted Operating Margin, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted Diluted EPS (collectively, the “Company Non-GAAP Measures”) The Company Non-GAAP Measures are key measures used by management to assess our financial performance.
We also believe that, for the same reasons, investors find our calculation of Adjusted Comparable Stores Sales Growth to be meaningful. Adjusted Operating Income, Adjusted Operating Margin, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted Diluted EPS (collectively, the “Company Non-GAAP Measures”) The Company Non-GAAP Measures are key measures used by management to assess our financial performance.
Approximately 80% to 85% of o ur capital spend is related to our expected growth (i.e., new stores, remote medicine infrastructure, EHR, optometric equipment, additional capacity in our optical laboratories and distribution centers, and our IT infrastructure, including omni-channel platform related investments).
Approximately 80% to 85% of our capital spend is related to our expected growth (i.e., new stores, remote medicine infrastructure, EHR, optometric equipment, additional capacity in our optical laboratories and distribution centers, and our IT infrastructure, including ERP and omni-channel platform related investments).
GAAP in making the determination as to whether or not to record an asset or liability related to our arrangements with third parties. Consistent with current accounting guidance, we do not record an asset or liability associated with long-term purchase, marketing and promotional commitments, or commitments to philanthropic endeavors.
We follow U.S. GAAP in making the determination as to whether to record an asset or liability related to our arrangements with third parties. Consistent with current accounting guidance, we do not record an asset or liability associated with long-term purchase, marketing and promotional commitments, or commitments to philanthropic endeavors.
Impairment of P&E and ROU assets In evaluating store-level property and equipment and ROU assets for recoverability and impairment, we may consider multiple factors including financial performance of the stores, regional and local business climates, future plans for the store operations and other qualitative factors.
Impairment of P&E and ROU assets 66 Table of Contents In evaluating store-level property and equipment and ROU assets for recoverability and impairment, we may consider multiple factors including financial performance of the stores, regional and local business climates, future plans for the store operations and other qualitative factors.
(3) There are two differences between total comparable store sales growth based on consolidated net revenue and Adjusted Comparable Store Sales Growth: (i) Adjusted Comparable Store Sales Growth includes the effect of deferred and unearned revenue as if such revenues were earned at the point of sale, resulting in an increase of 0.7% and a decrease of 0.4% from total comparable store sales growth based on consolidated net revenue for fiscal year 2021 and fiscal year 2020, respectively, and (ii) Adjusted Comparable Store Sales Growth includes retail sales to the Legacy partner’s customers (rather than the revenues recognized consistent with the management & services agreement with the Legacy partner), resulting in a decrease of 0.1% and a decrease of 0.1% from total comparable store sales growth based on consolidated net revenue for the fiscal years 2021 and 2020, respectively.
(3) There are two differences between total comparable store sales growth based on consolidated net revenue and Adjusted Comparable Store Sales Growth: (i) Adjusted Comparable Store Sales Growth includes the effect of deferred and unearned revenue as if such revenues were earned at the point of sale, resulting in a decrease of 0.1% and an increase of 0.7% from total comparable store sales growth based on consolidated net revenue for fiscal years 2023 and 2022, respectively, and (ii) Adjusted Comparable Store Sales Growth includes retail sales to the Legacy partner’s customers (rather than the revenues recognized consistent with the management & services agreement with the Legacy partner), resulting in a decrease of 0.1% and a decrease of 0.1% from total comparable store sales growth based on consolidated net revenue for the fiscal years 2023 and 2022, respectively.
“Long-term Debt” to our consolidated financial statements included in Part II. Item 8 of this Form 10-K for more information on our term loan. (b) Refer to Note 4. “Long-term Debt” for more information on the 2025 Notes and Note 13. “Earnings Per Share” for the treatment of earnings per share in relation to the 2025 Notes.
“Long-term Debt” to our consolidated financial statements included in Part II. Item 8 of this Form 10-K for more information on our term loan. (b) Refer to Note 5. “Long-term Debt” for more information on the 2025 Notes and Note 14. “Earnings Per Share” for the treatment of earnings per share in relation to the 2025 Notes.
Consumer behavior driven by the COVID-19 pandemic has resulted in a departure from seasonal norms we have experienced in recent years and may continue to disrupt the historical quarterly cadence of our results of operations for an unknown period of time.
Changes in consumer behavior driven by lingering effects of the COVID-19 pandemic have resulted in a departure from seasonal norms we have experienced in recent years and may continue to disrupt the historical quarterly cadence of our results of operations for an unknown period of time.
While we have relationships with almost all vision care insurers in the United States and with all of the major carriers, currently, a relatively small number of payors comprise the majority of our managed care revenues, subjecting us to concentration risk.
While we have relationships with almost all vision care insurers in the U.S. and with all of the major carriers, currently, a relatively small number of payors comprise the majority of our managed care revenues, subjecting us to concentration risk.
Net Cash Provided by Operating Activities Cash flows provided by operating activities decreased by $139.7 million to $119.2 million, during fiscal year 2022 from $258.9 million during fiscal year 2021 as a result of a $86.1 million decrease in net income, changes in net working capital and other assets and liabilities, which used an additional $38.6 million in cash and a decrease in non-cash expense adjustments of $15.0 million, in each case, as compared to fiscal year 2021.
Cash flows provided by operating activities decreased by $139.7 million to $119.2 million, during fiscal year 2022 from $258.9 million during fiscal year 2021 as a result of a $86.1 million decrease in net income, changes in net working capital and other assets and liabilities, which used an additional $39.9 million in cash and a decrease in non-cash expense adjustments of $13.7 million, in each case, as compared to fiscal year 2021.
The most significant components of our operating assets and liabilities are inventories, accounts receivable, prepaid expenses and other assets, accounts payable, deferred and unearned revenue and other payables and accrued expenses.
The most significant components of our operating assets and liabilities are inventories, accounts receivable, prepaid expenses and other assets, accounts payable, deferred and unearned revenue and other payables and accrued 62 Table of Contents expenses.
Eyeglass World locations primarily feature eye care services provided by independent optometrists and optometrists employed by independent professional corporations or similar entities and on-site optical laboratories that enable stores to quickly fulfill many customer orders and make repairs on site. Eyeglass World stores are primarily located in freestanding or in-line locations near high-foot-traffic shopping centers.
Eyeglass World locations offer eye exams, provided primarily by independent optometrists and optometrists employed by independent professional corporations or similar entities, and have on-site optical laboratories that enable stores to quickly fulfill many customer orders and make repairs on site. Eyeglass World stores are primarily located in freestanding or in-line locations near high-foot-traffic shopping centers.
We adjust for amortization of costs related to the 2025 Notes only when adjustment for these costs is not required in the calculation of diluted earnings per share according to U.S. GAAP.
We adjust for amortization of deferred financing costs related to the 2025 Notes only when adjustment for these costs is not required in the calculation of diluted earnings per share under U.S. GAAP.
Additionally, although the period between December 25th and the end of our fiscal year is typically a high-volume period, the net revenue associated with substantially all orders of prescription eyeglasses and contact lenses during that period is deferred until the following fiscal period due to our policy of recognizing revenue only after the product has been accepted by the customer.
Additionally, although the period between December 25th and the end of our fiscal year is typically a high-volume period, the net revenue associated with substantially all orders of prescription eyeglasses and contact lenses during that period is deferred until the following fiscal period due to our policy of recognizing revenue only after the product has been accepted by the customer, further contributing to higher revenue results in the first half of the year.
We have made significant investments in information technology systems, including our point-of-sale system and enterprise resource planning (ERP), supply chain systems, marketing, and personnel, as well as experienced industry executives, and management and merchandising teams to support our long-term growth objectives.
We have made and continue to make significant investments in information technology systems, including those to support our point-of-sale system, ERP, supply chain systems, marketing, and personnel, as well as experienced industry executives, and management and merchandising teams to support our long-term growth objectives.
As of December 31, 2022, our total inventory balance was $123.2 million. A 10% increase in the obsolescence and shrinkage reserves will not have a material impact on our financial position. See Note 1. “Business and Significant Accounting Policies” to our consolidated financial statements included in Part II. Item 8 of this Form 10-K.
As of December 30, 2023, our total inventory balance was $119.9 million. A 10% increase in the obsolescence and shrinkage reserves will not have a material impact on our financial position. See Note 1. “Business and Significant Accounting Policies” to our consolidated financial statements included in Part II. Item 8 of this Form 10-K.
Amounts and timing may be different from our estimated interest payments due to potential voluntary prepayments, borrowings, interest rate fluctuations and the expected discontinuation of LIBOR. Expected obligations on our hedging instruments are excluded from estimated interest presented in the table above. Refer to Note 1.
Amounts and timing may be different from our estimated interest payments due to potential voluntary prepayments, borrowings and interest rate fluctuations. Expected obligations on our hedging instruments are excluded from estimated interest presented in the table above.
In addition, as our participation in managed care programs continues to approach overall industry penetration levels, we expect our associated managed care revenue growth rate to slow over time. Infrastructure Investment Our historical results of operations reflect the impact of our ongoing investments in infrastructure to support our growth, including additional investments in remote medicine and EHR platforms.
In addition, as our participation in managed care programs continues to approach overall industry penetration levels, we expect our associated managed care revenue growth rate to slow over time. Infrastructure Investment Our historical results of operations reflect the impact of our ongoing investments in infrastructure to support our growth.
Changes in raw materials prices did not materially impact our costs applicable to revenue in fiscal year 2022. We anticipate that pressures from increases to our raw materials prices could have an impact on our costs applicable to revenue in fiscal year 2023. Such an inflationary environment and labor market challenges can also result in wage pressures in certain markets.
We anticipate that pressures from increases to our raw materials prices could have an impact on our costs applicable to revenue in fiscal year 2024. Such an inflationary environment and labor market challenges can also result in wage pressures in certain markets.
Wage investment pressure, increases to costs applicable to revenue from increases in raw materials prices and potential freight price increases in fiscal year 2023 may not be able to be fully offset by leverage from revenue growth, productivity efficiency and, as appropriate, various pricing actions.
Wage investment pressure and increases to costs applicable to revenue from increases in raw materials prices may not be able to be fully offset by leverage from revenue growth, productivity efficiency and, as appropriate, various pricing actions.
As of fiscal year end 2022, we had $229.4 million in cash and cash equivalents and $293.6 million of availability under our revolving credit facility, which includes $6.4 million in outstanding letters of credit.
As of fiscal year end 2023, we had $149.9 million in cash and cash equivalents and $293.6 million of availability under our revolving credit facility, which includes $6.4 million in outstanding letters of credit.
Our net deferred liability balance as of December 31, 2022 was $93.9 million. Changes in assumptions in our estimates could result in material changes to these balances. See Note 6. “Income Taxes” to our consolidated financial statements included in Part II. Item 8 of this Form 10-K.
Our net deferred liability balance as of December 30, 2023 was $87.9 million. Changes in assumptions in our estimates could result in material changes to these balances. See Note 7. “Income Taxes” to our consolidated financial statements included in Part II. Item 8 of this Form 10-K.
Due to these factors the costs to employ or retain optometrists have increased and may increase further, potentially materially. Targeted wage investments, including increases in compensation for our optometrists and associates, and flexibility initiatives have impacted our costs applicable to revenue and selling, general and administrative expenses.
Due to these factors, the costs to employ or retain optometrists have increased and may increase further, potentially materially. Targeted wage investments, including increases in compensation for our optometrists and associates, and flexibility initiatives have impacted our costs applicable to revenue and selling, general and administrative expenses. We anticipate that wage pressures in certain markets will continue in 2024.
We reach our customers through a diverse portfolio of 1,354 retail stores across five brands and 16 consumer websites as of fiscal year end 2022.
We reach our customers through a diverse portfolio of 1,413 retail stores across five brands and 13 consumer websites as of fiscal year end 2023.
We considered multiple factors including, but not limited to: forecasted scenarios related to store performance and the likelihood that these scenarios would be ultimately realized; and the remaining useful lives of the assets.
We considered multiple factors including, but not limited to: forecasted scenarios related to store performance and the likelihood that these scenarios would be ultimately realized; and the remaining useful lives of the assets. Asset impairment expenses were recognized in Corporate/Other.
(c) Refer to Note 4. “Long-term Debt” for more information on our revolving credit facility. (d) We have estimated our interest payments on our term loan based on LIBOR as of the end of fiscal year 2022.
(c) Refer to Note 5. “Long-term Debt” for more information on our revolving credit facility. (d) We have estimated our interest payments on our term loan based on Term Secured Overnight Financing Rate as of the end of fiscal year 2023.
The components of our costs applicable to revenue may not be comparable to other retailers. Selling, General and Administrative SG&A generally fluctuates consistently with revenue due to the variable store, field office and corporate support costs; however, some fixed costs slightly improve as a percentage of net revenue as our net revenues grow over time.
Selling, General and Administrative 51 Table of Contents SG&A generally fluctuates consistently with revenue due to the variable store, field office and corporate support costs; however, some fixed costs slightly improve as a percentage of net revenue as our net revenues grow over time.
(g) Other adjustments include amounts that management believes are not representative of our operating performance (amounts in brackets represent reductions in Adjusted Operating Income, Adjusted Diluted EPS and Adjusted EBITDA), which are primarily related to excess payroll taxes on stock option exercises, executive severance and relocation and other expenses and adjustments, including our share of (gains) losses on equity method investments of $(2.7) million and $(2.4) million for fiscal years 2022 and 2021, respectively, and losses on other investments of $0.3 million for fiscal year 2022.
(i) Other adjustments include amounts that management believes are not representative of our operating performance (amounts in brackets represent reductions in Adjusted Operating Income, Adjusted Diluted EPS and Adjusted EBITDA), which are primarily related to the termination of the Walmart partnership of $7.0 million for fiscal year 2023, costs associated with the digitization of paper-based records of $2.2 million for fiscal year 2023, excess payroll taxes on vesting of restricted stock units and exercises of stock options, executive severance and relocation and other expenses and adjustments, including our share of (gains) losses on equity method investments of $(2.7) million and $(2.4) million for fiscal years 2022 and 2021, respectively, and losses on other investments of $0.3 million for fiscal year 2022.
Long-term Debt The following table sets forth the amounts owed under our term loan and the 2025 Notes and the interest rate on such outstanding amounts, and the amount available for additional borrowing thereunder, as of the end of fiscal year 2022: In thousands Interest Rate (2) Amount Outstanding Amount Available for Additional Borrowing 2025 Notes, due May 15, 2025 Fixed $ 402,497 $ — Term loan, due July 18, 2024 Variable 150,000 — Revolving credit facility, due July 18, 2024 (1) Variable — 293,619 Total $ 552,497 $ 293,619 ____________ (1) At December 31, 2022, the amount available under our revolving credit facility reflected a reduction of $6.4 million of letters of credit outstanding.
Long-term Debt The following table sets forth the amounts owed under our term loan and the 2025 Notes and the interest rate on such outstanding amounts, and the amount available for additional borrowing thereunder, as of the end of fiscal year 2023: In thousands Interest Rate (2) Amount Outstanding Amount Available for Additional Borrowing 2025 Notes, due May 15, 2025 Fixed $ 302,497 $ — Term Loan A, due June 13, 2028 Variable 146,250 — Revolving Loans, due June 13, 2028 (1) Variable — 293,619 Total $ 448,747 $ 293,619 ____________ (1) At December 30, 2023, the amount available under our revolving credit facility reflected a reduction of $6.4 million of letters of credit outstanding.
Developing the estimates and assumptions used in our recovery and impairment evaluations require significant judgment. The cash flows used in estimating fair value were discounted using market rates from 7.5% to 10% in fiscal year 2022. We had $359.8 million of property and equipment, net, and ROU assets of $382.8 million as of December 31, 2022.
Developing the estimates and assumptions used in our recovery and impairment evaluations require significant judgment. The cash flows used in estimating fair value of property and equipment and ROU assets were discounted using market rates from 7.8% to 11.5% in fiscal year 2023.
References herein to “fiscal year 2022” relate to the 52 weeks ended December 31, 2022, references herein to “fiscal year 2021” relate to the 52 weeks ended January 1, 2022 and references herein to “fiscal year 2020” relate to the 53 weeks ended January 2, 2021.
References herein to “fiscal year 2023” relate to the 52 weeks ended December 30, 2023, references herein to “fiscal year 2022” relate to the 52 weeks ended December 31, 2022 and references herein to “fiscal year 2021” relate to the 52 weeks ended January 1, 2022.
During fiscal years 2022 and 2021, the Company repurchased 2.7 million shares of its common stock for $80.0 million, and 1.4 million shares of its common stock for $69.9 million, respectively, under the share repurchase program. After these repurchases, approximately $50 million remains available under the share repurchase authorization as of December 31, 2022.
During fiscal years 2023, 2022, and 2021, the Company repurchased 1.1 million shares of its common stock for $25.0 million, 2.7 million shares of its common stock for $80.0 million, and 1.4 million shares of its common stock for $69.9 million, respectively, under the share repurchase program.
“Goodwill and Intangible Assets” to our consolidated financial statements included in Part II. Item 8. of this Form 10-K for further detail on goodwill impairment. As of December 31, 2022, we had $777.6 million of goodwill, $240.5 million of non-amortizing intangible assets, and $34.7 million of other intangible assets, net of accumulated amortization.
“Goodwill and Intangible Assets” included in Part II. Item 8. of this Form 10-K for further detail on goodwill impairment. As of December 30, 2023, we had $717.5 million of goodwill, $240.5 million of non-amortizing intangible assets, and $20.3 million of other intangible assets, net of accumulated amortization.
Other expense (income), net We recognized a gain of $2.4 million in Other expense (income), net in fiscal year 2021 in connection with the acquisition of our equity method investee by a third party. See Note 1. “Business and Significant Accounting Policies” for further details.
This change was primarily a result of a gain of $2.7 million in Other expense (income), net in fiscal year 2022 that did not occur in fiscal year 2023 in connection with the acquisition of our equity method investee by a third party. See Note 1. “Business and Significant Accounting Policies” for further details.
Our results of operations have been and will continue to be materially affected by the timing and number of new store openings. As stores mature, profitability typically increases significantly.
New Store Openings We expect that new stores will be a key driver of growth in our net revenue and operating profit in the future. Our results of operations have been and will continue to be materially affected by the timing and number of new store openings. As stores mature, profitability typically increases significantly.
The fair values of our other reporting units exceeded their respective carrying values by at least 60%. Future changes in a reporting unit’s business profitability, expected cash flows, changes in business strategy and external market conditions, among other factors, could require us to record an impairment charge for goodwill.
Future changes in a reporting unit’s business profitability, expected cash flows, changes in business strategy and external market conditions, among other factors, could require us to record an impairment charge for goodwill.
Our Host brands consisted of 54 Vista Optical locations on select military bases and 29 Vista Optical locations within select Fred Meyer stores as of fiscal year end 2022. We have strong, long-standing relationships with our Host partners and have maintained each partnership for over 20 years. These brands provide eye exams primarily by independent optometrists.
O ur Host brands consisted of 54 Vista O ptical locations on select military bases a nd 29 Vista O ptical locations within select Fred Meyer stores as of fiscal year end 2023. We have strong, long-standing relationships with our Host partners and have maintained each partners hip for over 20 years.
A one day increase in our estimate of the average days needed to process delivery would have affected revenues in fiscal year 2022 by approximately $ 5 million, which would ultimately have been recorded in the next fiscal year. 67 Table of Contents The Company considers its revenue from managed care customers to include variable consideration and estimates such amounts associated with managed care customer revenues using the history of concessions provided and cash receipts from managed care providers; a 100 basis point change in our rate of concessions granted would have reduced our revenues in fiscal year 2022 by approximately $4 million.
The Company considers its revenue from managed care customers to include variable consideration and estimates such amounts associated with managed care customer revenues using the history of concessions provided and cash receipts from managed care providers; a 100 basis point change in our rate of concessions granted would have reduced our revenues in fiscal year 2023 by approximately $2 million.
Owned & Host segment costs of products. Costs of products as a percentage of net product sales decreased from 28.0% for fiscal year 2020 to 27.4% for fiscal year 2021 driven by increased eyeglass mix and higher eyeglass margin, primarily the effect of the temporary store closures in fiscal year 2020. Legacy segment costs of products.
Owned & Host segment costs of products. Costs of products as a percentage of net product sales decreased from 28.9% for fiscal year 2022 to 28.7% for fiscal year 2023 primarily driven by increased eyeglass mix and higher eyeglass margin. Legacy segment costs of products.
A 100 basis point increase in discount rates used to estimate the fair value of the Company’s reporting units would result in an approximate $3 million impairment of the Company’s goodwill balance in the Legacy segment at the end of fiscal year 2022. The Legacy segment’s operations are sensitive to customer concentration.
A 100 basis point increase in discount rates used to estimate the fair value of the Company’s reporting units would not result in an impairment of goodwill at fiscal year-end.
“Business and Significant Accounting Policies” for more information on the sale. Net Cash Provided by (Used for) Financing Activities Net cash used for financing activities decreased $149.8 million, from $234.3 million use of cash during fiscal year 2021 to $84.6 million use of cash during fiscal year 2022 .
Net cash used for financing activities decreased $149.8 million, from $234.3 million use of cash during fiscal year 2021 to $84.6 million use of cash during fiscal year 2022.
Deferred revenue represents the timing difference of when we collect the cash from the customer and when services related to product protection plans and eye care club memberships are performed.
Deferred revenue represents the timing difference of when we collect the cash from the customer and when services related to product protection plans and eye care club memberships are performed. Increases or decreases in deferred revenue during the reporting period represent cash collections in excess of, or below the recognition of, previous deferrals.
All brands utilize our centralized laboratories. This segment also includes sales from our America’s Best, Eyeglass World, and Military omni-channel websites. 47 Table of Contents • Legacy – We manage the operations of, and supply inventory and laboratory processing services to, 230 Vision Centers in Walmart retail locations as of fiscal year end 2022.
This segment also includes sales from our America’s Best, Eyeglass World, and Military omni-channel websites. • Legacy – As of fiscal year end 2023, we managed the operations of, and supplied inventory and laboratory processing servi ces to, 225 Vision Centers in Walmart retail locations .
In comparison, the income tax provision associated with fiscal year 2020 reflected our statutory federal and state rate of 25.5% combined with a benefit of $8.0 million associated primarily with the stock option exercises. 60 Table of Contents Non-GAAP Financial Measures Adjusted Operating Income, Adjusted Operating Margin, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Diluted EPS We define Adjusted Operating Income as net income, plus interest expense (income), net and income tax provision (benefit), further adjusted to exclude stock based compensation expense, loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, amortization of acquisition intangibles and certain other expenses.
Our effective tax rate for fiscal year 2021 was 14.1%, reflecting a benefit of $16.5 million primarily from the exercise of stock options and stranded tax effect associated with our matured interest rate swaps during the first quarter of 2021 . 59 Table of Contents Non-GAAP Financial Measures Adjusted Operating Income, Adjusted Operating Margin, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Diluted EPS We define Adjusted Operating Income as net income, plus interest expense (income), net and income tax provision (benefit), further adjusted to exclude stock-based compensation expense, loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, amortization of acquisition intangibles, ERP implementation expenses and certain other expenses.
We are continuing to strategically invest in recruitment and retention initiatives, including flexible adjusted work schedules, along with continuing our implementation of remote medicine technologies, which has expanded our offerings while also increasing costs. New Store Openings We expect that new stores will be a key driver of growth in our net revenue and operating profit in the future.
We are continuing to strategically invest in recruitment and retention initiatives, including flexible adjusted work schedules, along with continuing our implementation of remote medicine technologies, which has expanded our offerings while also increasing costs.
AC Lens sales associated with Walmart and Sam’s Club contact lenses distribution arrangements represen ted 7.0% of c onsolidated net revenue during fiscal year 2022 . • Managed care business conducted by FirstSight, our wholly-owned subsidiary that is licensed as a single-service health plan under California law, which arranges for the provision of optometric services at the offices next to certain Walmart stores throughout California, and also issues individual vision plans in connection with our America’s Best operations in California. • Unallocated corporate overhead expenses, which are a component of selling, general and administrative expenses and are comprised of various home office expenses such as payroll, occupancy costs and consulting and professional fees.
In connection with the MSA Termination, AC Lens has delivered notices of non-renewal of the agreements it has with Walmart and Sam’s Club such that those agreements are expected to terminate on June 30, 2024. • Managed care business conducted by FirstSight, our wholly-owned subsidiary that is licensed as a single-service health plan under California law, which issues individual vision plans in connection with our America’s Best operations in California and, until the termination of the agreement between FirstSight and Walmart on February 23, 2024, arranged for the provision of optometric services at the offices next to certain Walmart stores throughout California. • Unallocated corporate overhead expenses, which are a component of selling, general and administrative expenses and are comprised of various home office expenses such as payroll, occupancy costs and consulting and professional fees.
If the projected net undiscounted cash flows are less than the carrying value of the related assets, we then measure impairment based on a discounted cash flow model and record an impairment charge as the excess of carrying value over the estimated fair value.
If the projected net undiscounted cash flows are less than the carrying value of the related assets, we then measure impairment based on a discounted cash flow model and record an impairment charge as the excess of carrying value over the estimated fair value. 67 Table of Contents Income Taxes Calculations and assessments of uncertain tax positions involve estimates and complex judgments because the ultimate tax outcomes are uncertain and future events are unpredictable.
Some of the percentage totals in the table above do not foot due to rounding differences. 62 Table of Contents In thousands, except per share amounts Fiscal Year 2022 Fiscal Year 2021 Fiscal Year 2020 Diluted EPS $ 0.52 $ 1.43 $ 0.44 Stock based compensation expense (a) 0.17 0.15 0.13 Asset impairment (b) 0.07 0.05 0.27 Litigation settlement (c) — 0.02 0.05 Amortization of acquisition intangibles (d) 0.09 0.08 0.09 Amortization of debt discounts and deferred financing costs (e) 0.04 0.02 0.14 Losses (gains) on change in fair value of derivatives (f) (0.20) (0.03) 0.05 Other (j) (0.00) (0.01) 0.03 Tax benefit of stock option exercises (h) (0.00) (0.15) (0.10) Tax effect of total adjustments (i) (0.04) (0.08) (0.19) Adjusted Diluted EPS $ 0.65 $ 1.48 $ 0.91 Weighted average diluted shares outstanding 80,298 96,134 82,793 Note: Fiscal years 2022 and 2021 include 52 weeks.
Some of the percentage totals in the table above do not foot due to rounding differences. 61 Table of Contents In thousands, except per share amounts Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021 Diluted EPS $ (0.84) $ 0.52 $ 1.43 Stock-based compensation expense (a) 0.26 0.17 0.15 Loss on extinguishment of debt (b) 0.01 — — Asset impairment (c) 1.05 0.07 0.05 Litigation settlement (d) — — 0.02 Amortization of acquisition intangibles (e) 0.07 0.09 0.08 Amortization of debt discounts and deferred financing costs (f) 0.04 0.04 0.02 Derivative fair value adjustments (g) 0.12 (0.20) (0.03) ERP implementation expenses (h) 0.01 — — Other (l) 0.14 (0.00) (0.01) Tax expense (benefit) from stock-based compensation (j) 0.02 (0.00) (0.15) Tax effect of total adjustments (k) (0.23) (0.04) (0.08) Adjusted Diluted EPS $ 0.64 $ 0.65 $ 1.48 Weighted average diluted shares outstanding 78,313 80,298 96,134 Note: Some of the totals in the table above do not foot due to rounding differences. ____________ (a) Non-cash charges related to stock-based compensation programs, which vary from period to period depending on the timing of awards and performance vesting conditions.
GAAP to be added back for diluted earnings per share, losses (gains) on change in fair value of derivatives, certain other expenses, and tax benefit of stock option exercises, less the tax effect of these adjustments.
GAAP to be added back for diluted earnings per share, derivative fair value adjustments, ERP implementation expenses, certain other expenses, and tax expense (benefit) from stock-based compensation, less the tax effect of these adjustments.
Brand and Segment Information Our operations consist of two reportable segments: • Owned & Host – As of fiscal ye ar end 2022, our owned brands consisted of 905 America’s Best Contacts and Eyeglasses (“America’s Best”) retail stores and 136 Eyeglass World retail stores.
Brand and Segment Information As of December 30, 2023, our operations consisted of two reportable segments: • Owned & Host – As of fiscal ye ar end 2023, our owned brands consist ed of 957 Am erica’s Best Contacts and Eyeglasses (“America’s Best”) retail stores an d 148 Eyeglas s World retail stores.
For fiscal years 2022 and 2021, approximately 23% of our revenue was recorded in the fourth quarter, but approximately 26% and 25% of annual SG&A costs were recorded in the respective fourth quarters of these fiscal years. 51 Table of Contents How We Assess the Performance of Our Business We consider a variety of financial and operating measures in assessing the performance of our business.
For fiscal years 2023 and 2022, approximately 24% and 23% of our revenue was recorded in the fourth quarter, but approximately 25% and 26% of annual SG&A costs were recorded in the respective fourth quarters of these fiscal years.
In thousands, except earnings per share, percentage and store data Fiscal Year 2022 Fiscal Year 2021 Fiscal Year 2020 Revenue: Net product sales $ 1,648,315 $ 1,718,344 $ 1,418,283 Net sales of services and plans 357,089 361,181 293,477 Total net revenue 2,005,404 2,079,525 1,711,760 Costs applicable to revenue (exclusive of depreciation and amortization): Products 636,324 633,116 551,783 Services and plans 289,263 271,663 234,841 Total costs applicable to revenue 925,587 904,779 786,624 Operating expenses: Selling, general and administrative expenses 915,355 900,798 724,985 Depreciation and amortization 99,956 97,089 91,585 Asset impairment 5,783 4,427 22,004 Other income, net (2,552) (2,505) (445) Total operating expenses 1,018,542 999,809 838,129 Income from operations 61,275 174,937 87,007 Interest expense, net 462 25,612 48,327 Earnings before income taxes 60,813 149,325 38,680 Income tax provision 18,691 21,081 2,403 Net income $ 42,122 $ 128,244 $ 36,277 Supplemental operating data: Number of stores open at end of period 1,354 1,278 1,205 New stores opened during the period 80 75 62 Adjusted Operating Income (1) $ 87,795 $ 204,749 $ 134,148 Diluted EPS $ 0.52 $ 1.43 $ 0.44 Adjusted Diluted EPS (1) $ 0.65 $ 1.48 $ 0.91 Adjusted EBITDA (1) $ 180,263 $ 294,350 $ 218,307 Note: Fiscal years 2022 and 2021 include 52 weeks.
In thousands, except earnings per share, percentage and store data Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021 Revenue: Net product sales $ 1,744,136 $ 1,648,315 $ 1,718,344 Net sales of services and plans 382,332 357,089 361,181 Total net revenue 2,126,468 2,005,404 2,079,525 Costs applicable to revenue (exclusive of depreciation and amortization): Products 664,589 636,324 633,116 Services and plans 336,321 289,263 271,663 Total costs applicable to revenue 1,000,910 925,587 904,779 Operating expenses: Selling, general and administrative expenses 991,883 915,355 900,798 Depreciation and amortization 98,252 99,956 97,089 Asset impairment 82,413 5,783 4,427 Other expense (income), net (164) (2,552) (2,505) Total operating expenses 1,172,384 1,018,542 999,809 Income (loss) from operations (46,826) 61,275 174,937 Interest expense, net 14,339 462 25,612 Loss on extinguishment of debt 599 — — Earnings (loss) before income taxes (61,764) 60,813 149,325 Income tax provision 4,137 18,691 21,081 Net income (loss) $ (65,901) $ 42,122 $ 128,244 Supplemental operating data: Number of stores open at end of period 1,413 1,354 1,278 New stores opened during the period 70 80 75 Adjusted Operating Income (1) $ 72,321 $ 87,795 $ 204,749 Diluted EPS $ (0.84) $ 0.52 $ 1.43 Adjusted Diluted EPS (1) $ 0.64 $ 0.65 $ 1.48 Adjusted EBITDA (1) $ 165,322 $ 180,263 $ 294,350 (1) Refer to Non-GAAP Financial Measures section below for our presentation of Adjusted Operating Income, Adjusted Diluted EPS and Adjusted EBITDA.
The following table reconciles our Adjusted Operating Income, Adjusted Operating Margin, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin to net income; and Adjusted Diluted EPS to diluted EPS for the periods presented: In thousands Fiscal Year 2022 Fiscal Year 2021 Fiscal Year 2020 Net income $ 42,122 2.1 % $ 128,244 6.2 % $ 36,277 2.1 % Interest expense 462 0.0 % 25,612 1.2 % 48,327 2.8 % Income tax provision 18,691 0.9 % 21,081 1.0 % 2,403 0.1 % Stock based compensation expense (a) 13,512 0.7 % 14,886 0.7 % 10,740 0.6 % Asset impairment (b) 5,783 0.3 % 4,427 0.2 % 22,004 1.3 % Litigation settlement (c) — — % 1,500 0.1 % 4,395 0.3 % Amortization of acquisition intangibles (d) 7,488 0.4 % 7,488 0.4 % 7,426 0.4 % Other (g) (263) (0.0) % 1,511 0.1 % 2,576 0.2 % Adjusted Operating Income / Adjusted Operating Margin $ 87,795 4.4 % $ 204,749 9.8 % $ 134,148 7.8 % Note: Fiscal years 2022 and 2021 include 52 weeks.
The following table reconciles our Adjusted Operating Income, Adjusted Operating Margin, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin to net income; and Adjusted Diluted EPS to diluted EPS for the periods presented: In thousands Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021 Net income $ (65,901) (3.1) % $ 42,122 2.1 % $ 128,244 6.2 % Interest expense, net 14,339 0.7 % 462 0.0 % 25,612 1.2 % Income tax provision 4,137 0.2 % 18,691 0.9 % 21,081 1.0 % Stock-based compensation expense (a) 20,174 0.9 % 13,512 0.7 % 14,886 0.7 % Loss on extinguishment of debt (b) 599 0.0 % — — % — — % Asset impairment (c) 82,413 3.9 % 5,783 0.3 % 4,427 0.2 % Litigation settlement (d) — — % — — % 1,500 0.1 % Amortization of acquisition intangibles (e) 5,251 0.2 % 7,488 0.4 % 7,488 0.4 % ERP implementation expenses (h) 484 0.0 % — — % — — % Other (i) 10,825 0.5 % (263) (0.0) % 1,511 0.1 % Adjusted Operating Income / Adjusted Operating Margin $ 72,321 3.4 % $ 87,795 4.4 % $ 204,749 9.8 % Note: Percentages reflect line item as a percentage of net revenue, adjusted for rounding.
Our participation in these programs represent an increasingly significant portion of our overall revenues and represented approximately one third of our 50 Table of Contents overall revenues in fiscal year 2022.
Our participation in these programs represent an increasingly significant portion of our overall revenues and represented approxima tely 35% of our overall revenues in fiscal year 2023 .
The key measures we use to determine how our consolidated business and operating segments are performing are net revenue, costs applicable to revenue, and selling, general, and administrative expenses, which are described further in Note 1. “Business and Significant Accounting Policies,” to our consolidated financial statements included in Part II. Item 8. of this Form 10-K.
How We Assess the Performance of Our Business We consider a variety of financial and operating measures in assessing the performance of our business. The key measures we use to determine how our consolidated business and operating segments are performing are net revenue, costs applicable to revenue, and selling, general, and administrative expenses, which are described further in Note 1.
In addition to lease commitments and contractual obligations, our material cash requirements also include operating expenses such as payroll, store rent, and advertising expenses, which we expect to fund primarily with existing cash balances and cash flows from operations. We follow U.S.
(g) Other commitments include minimum purchase commitments with certain trade vendors and contractual agreements to purchase goods or services in the ordinary course of business. 65 Table of Contents In addition to lease commitments and contractual obligations, our material cash requirements also include operating expenses such as payroll, store rent, and advertising expenses, which we expect to fund primarily with existing cash balances and cash flows from operations.
Costs of products as a percentage of net product sales decreased slightly from 47.8% for fiscal year 2020 to 47.7% for fiscal year 2021. The decrease was primarily driven by the effect of the temporary store closures in fiscal year 2020, which was partially offset by a lower mix of managed care customer transactions versus non-managed care customer transactions.
Costs of products as a percentage of net product sales decreased from 46.8% for fiscal year 2022 to 45.2% for fiscal year 2023. The decrease was primarily driven by a higher mix of managed care customer transactions versus non-managed care customer transactions.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+2 added−0 removed2 unchanged
Biggest change“Business and Significant Accounting Policies” to our consolidated financial statements included in Part II. Item 8 of this Form 10-K for more information on the cessation of LIBOR. As of December 31, 2022, $150.0 million of term loan borrowings were subject to variable interest rates, with a weighted average borrowing rate of 3.1%.
Biggest change“Business and Significant Accounting Policies” to our consolidated financial statements included in Part II. Item 8 of this Form 10-K for more information on the cessation of LIBOR.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We have market risk exposure from changes in interest rates. When appropriate, we use derivative financial instruments to mitigate the risk from such exposure. A discussion of our accounting policies for derivative financial instruments is included in Note 1. “Business and Significant Accounting Policies” and Note 9.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We have market risk exposure from changes in interest rates. When appropriate, we use derivative financial instruments to mitigate the risk from such exposure. A discussion of our accounting policies for derivative financial instruments is included in Note 1. “Business and Significant Accounting Policies” and Note 10.
An increase to market rates of 1.0% as of December 31, 2022 would not result in a material increase to interest expense. Assuming a decrease to market rates of 1.0%, the resulting impact to interest expense related to the interest rate derivative would be approximately $4 million. 69 Table of Contents
An increase to market rates of 1.0% as of December 30, 2023 would not result in a material increase to interest expense. Assuming a decrease to market rates of 1.0%, the resulting impact to interest expense related to the interest rate derivative would be approximately $1 million.
Added
As of December 30, 2023, $146.3 million of term loan borrowings were subject to variable interest rates and we had total borrowings of $448.7 million with a weighted average borrowing rate of 3.4%, inclusive of the effects of our interest rate collar.
Added
Our exposure to risk from changes in the interest rates will change upon the maturity of our interest rate collar on July 18, 2024. See Note 13. “Interest Rate Derivatives” to our consolidated financial statements included in Part II. Item 8 of this Form 10-K for more information on our interest rate collar. 68 Table of Contents

Other EYE 10-K year-over-year comparisons