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What changed in National Vision Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of National Vision Holdings, Inc.'s 2022 and 2023 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 2023 report.

+480 added−486 removedSource: 10-K (2023-03-01) vs 10-K (2022-02-28)

Top changes in National Vision Holdings, Inc.'s 2023 10-K

480 paragraphs added · 486 removed · 347 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

85 edited+36 added−24 removed95 unchanged
Biggest changeIn addition, states may amend or adopt new laws or regulations regarding data privacy that may be applicable to us, such as the California Consumer Privacy Act of 2018 (the “CCPA”), which went into effect January 2020, and the amendments to the CCPA made by the California Privacy Rights Act of 2020, which will go into effect in January 2023. 17 Table of Contents 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.
Biggest changeLaws 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.
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 and order fulfillment and also sells a wide variety of contact lenses, eyeglasses and eye care accessories.
We were named one of Forbes’ Best Employers for Women and one of Forbes’ Best Employers for Veterans in 2021 and received the highest ranking given by 50/50 Women on Boards for balanced gender representation among the independent members of the Company’s Board of Directors.
We were named one of Forbes’ Best Employers for Women and one of Forbes’ Best Employers for Veterans in 2021, received the highest ranking given by 50/50 Women on Boards for balanced gender representation among the independent members of the Company’s Board of Directors.
We continue to benefit from America’s Best national television 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 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.
Our Sourcing and Supplier Relationships We purchase our merchandise from a wide variety of vendors, with a limited number of vendors supplying the majority of our eyeglass lenses and contact lenses. We are a large customer for all of our suppliers and we strive to form meaningful, long-lasting and mutually beneficial relationships with our vendors.
Our Sourcing and Supplier Relationships We purchase our frame merchandise from a wide variety of vendors, with a limited number of vendors supplying the majority of our eyeglass lenses and contact lenses. We are a large customer for all of our suppliers and we strive to form meaningful, long-lasting and mutually beneficial relationships with our vendors.
Its signature offer of “two pairs of eyeglasses for $69.95, 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.
The online sale of eyeglasses has not developed as quickly, but a number of firms are focused on this market, including Warby Parker and Zenni Optical. We also face potential competition from companies that employ emerging technologies in the optical industry, including, for example, online vision exams.
The online sale of eyeglasses has not developed as quickly, but a number of firms are primarily focused on this market, including Warby Parker and Zenni Optical. We also face potential competition from companies that employ emerging technologies in the optical retail industry, including, for example, online vision exams.
General We are one of the largest and fastest growing 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 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.
Eyeglass World also offers a value price point for customers, with an opening offer of “two pairs of eyeglasses for $78.” This brand is positioned as an eyeglass superstore with a broad selection of designer brands and price points, and offers a highly personalized level of service.
Eyeglass World also offers a value price point for customers, with an opening offer of “two pairs of eyeglasses for $89.” This brand is positioned as an eyeglass superstore with a broad selection of designer brands and price points, and offers a highly personalized level of service.
Source: Vision Monday The majority of eyewear purchases are driven by need, with two primary drivers of demand: (i) diminishing eyesight with increasing age, causing new customers to buy corrective eyewear and (ii) a steady and consistent replacement cycle, as customers replace or purchase new eyewear for a variety of reasons, including changes in prescriptions, fashion trends and necessity (e.g., lost or broken eyewear).
The majority of eyewear purchases are driven by need, with two primary drivers of demand: (i) diminishing eyesight with increasing age, causing new customers to buy corrective eyewear and (ii) a steady and consistent replacement cycle, as customers replace or purchase new eyewear for a variety of reasons, including changes in prescriptions, fashion trends and necessity (e.g., lost or broken eyewear).
Our new store model targets a store size between 3,500 to 4,500 square feet and an average new store cash investment of approximately $0.4 million to $0.5 million, in furniture, fixtures, leaseholds and equipment for new stores, net of tenant incentives.
Our new store model targets a store size between 3,500 to 4,500 square feet and an average new store cash investment of approximately $0.4 million to $0.6 million, in furniture, fixtures, leaseholds and equipment for new stores, net of tenant incentives.
We also offer contact lenses and accessories from all major contact lens manufacturers, including our own private label brands (Sofmed and Natural Eyes HydraWear, made by CooperVision) that are offered in our America’s Best and Eyeglass World stores. 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 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.
AC Lens operates five proprietary branded websites including, among others, aclens.com and discountcontacts.com. In addition, AC Lens operates and provides support services for nine third-party websites owned by other companies, including Walmart, Sam’s Club and Giant Eagle.
AC Lens operates five proprietary branded websites including, among others, aclens.com and discountcontacts.com. In addition, AC Lens operates and provides support services for seven third-party websites owned by other companies, including Walmart, Sam’s Club and Giant Eagle.
Eye care purchases are predominantly a medical necessity and are therefore considered non-discretionary in natur e. We estimate that optical consumers typically replace their eyeglasses every two to three years, while contact lens customers typically order new lenses every six to twelve months, reflecting the predictability of these recurring purchase behaviors.
Eye care purchases are predominantly a medical necessity and are therefore considered non-discretionary in nature. We estimate that optical consumers typically replace their eyeglasses every two to three years, while contact lens customers typically order new lenses every six to twelve months, reflecting the predictability of these recurring purchase behaviors.
Liabilities associated with the risks that are retained by us are estimated, in part, by considering historical claims experience, demographic factors, severity factors and other actuarial assumptions. Where we have retained risk through self-insurance or similar arrangements, we utilize third-party firms to assist management in assessing the financial impact of risk retention. 20 Table of Contents
Liabilities associated with the risks that are retained by us are estimated, in part, by considering historical claims experience, demographic factors, severity factors and other actuarial assumptions. Where we have retained risk through self-insurance or similar arrangements, we utilize third-party firms to assist management in assessing the financial impact of risk retention.
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. 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, 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.
“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.
“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.
National Vision was controlled by affiliates of KKR and private equity funds managed by Berkshire until July 30, 2018 and by August 2019, these private equity funds had sold their remaining holds of our common stock. 6 Table of Contents Our Business Model Our history of profitable growth is founded on a commitment to a relatively simple business model: providing exceptional value and convenience to customers, enabled by our low-cost operating platform.
National Vision was controlled by affiliates of KKR and private equity funds managed by Berkshire until July 30, 2018 and by August 2019, these private equity funds had sold their remaining holdings of our common stock. 6 Table of Contents Our Business Model Our history of profitable growth is founded on a commitment to providing exceptional value and convenience to customers, enabled by our low-cost operating platform.
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 14 Table of contents 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.
Since 2006, we have opened 850 stores in the aggregate, including 820 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 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.
SKU figures refer to eyeglass frame SKUs. ODs are Doctors of Optometry. 8 Table of Contents 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. All of our brands leverage our highly-efficient centralized laboratory network and distribution system, which helps us minimize production and distribution costs.
Within our Owned & Host segment, America’s Best offers its Eyecare Club programs primarily to its contact lens customers. As of January 1, 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 31, 2022, the Eyecare Club had approximately 1.6 million active members.
We believe our bundled offers, including two-pairs of eyeglasses plus an eye exam for $69.95 at America’s Best and two-pairs of eyeglasses for $78 at Eyeglass World, are among the lowest price offerings of any national chain.
We believe our bundled offers, including two pairs of eyeglasses plus an eye exam for $79.95 at America’s Best and two-pairs of eyeglasses for $89 at Eyeglass World, are among the lowest price offerings of any national chain.
We have long-term contracts with certain of our 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 2023.
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 three partner brands consisting of 230 Vision Centers in Walmart stores across the country, 54 Vista Optical locations on military bases and 29 Vista Optical locations within Fred Meyer stores as of January 1, 2022.
We have three partner brands consisting of 230 Vision Centers in Walmart stores across the country, 54 Vista Optical locations on military bases and 29 Vista Optical locations within Fred Meyer stores as of December 31, 2022.
We have an established partnership with a third party real estate data analytics firm to evaluate potential new America’s Best and Eyeglass World stores and most recently updated our analysis during 2020. The analysis suggests that we can grow America’s Best to at least 1,300 stores and Eyeglass World to at least 850 stores, inclusive of those already open.
We have an established partnership with a third party real estate data analytics firm to evaluate potential new America’s Best and Eyeglass World stores. The analysis suggests that we can grow America’s Best to at least 1,300 stores and Eyeglass World to at least 850 stores, inclusive of those already open.
Our new store model targets sales in the fifth year of operation in the range of $1.4 million to $1.6 million, with at least 60% of year five sales targeted in the first full year of operation. Our new store model targets vary for America’s Best and Eyeglass World stores to reflect differences by brand, markets and geography.
Our new store model targets sales in the fifth year of operation in the range of $1.5 million to $1.7 million, with at least 55% of year five sales targeted in the first full year of operation. Our new store model targets vary for America’s Best and Eyeglass World stores to reflect differences by brand, markets and geography.
We deliver exceptional value and convenience to our customers, with an opening price point that strives to be among the lowest in the industry, enabled by our low-cost operating platform. We reach our customers through a diverse portfolio of 1,278 retail stores across five brands and 18 consumer websites as of January 1, 2022, our 2021 fiscal year end.
We deliver exceptional value and convenience to our customers, with an opening price point that strives to be among the lowest in the industry, enabled by our low-cost operating platform. We reach our customers through a diverse portfolio of 1,354 retail stores across five brands and 16 consumer websites as of December 31, 2022, our 2022 fiscal year end.
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.
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.
Seasonality Our business is moderately seasonal in nature. Historically, our business has realized a higher portion of net revenue, operating income and cash flows from operations in the first half of the year, and a lower portion of net revenue, operating income and cash flows from operations in the fourth fiscal quarter.
Historically, our business has realized a higher portion of net revenue, operating income and cash flows from operations in the first half of the year, and a lower portion of net revenue, operating income and cash flows from operations in the fourth fiscal quarter.
This is further demonstrated by the customer mix of our mature stores, with existing customers representing 64% of total customers in 2021 and new customers representing the remaining 36% of total customers in 2021. • Attractive Store Economics .
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 .
The steady growth of the industry and its resilience to economic cycles is due in large part to the medical, non-discretionary and recurring nature of eye care purchases.
We believe the industry’s continued growth and its resilience to economic cycles is due in large part to the medical, non-discretionary and recurring nature of eye care purchases.
These stores typically stock approximately 1,300 eyeglass frame SKUs, including imports from low-cost overseas manufacturers, higher-margin private label brands and discounted well-known frame brands. America’s Best stores, which average approximately 3,500 square feet, are primarily located in high-traffic strip centers next to other value-focused retailers. Our Eyeglass World Brand.
These stores typically stock eyeglass frame imports from low-cost overseas manufacturers, higher-margin private label brands and discounted well-known frame brands. America’s Best stores are primarily located in high-traffic strip centers next to other value-focused retailers. Our Eyeglass World Brand.
Convenience encompasses multiple vectors: (i) retail locations near where our customers work and shop, with easy, convenient parking, (ii) store hours that fit their lifestyles, (iii) product selection that achieves aesthetic and/or fashion goals, (iv) availability of on-site eye exams and (v) acceptance of certain vision insurance benefits.
Convenience encompasses multiple vectors: (i) retail locations near where our customers work and shop, with easy, convenient parking, (ii) store hours that fit their lifestyles, (iii) product selection that achieves aesthetic and/or fashion goals, (iv) availability of on-site eye exams and (v) acceptance of certain vision insurance benefits. 11 Table of Contents Our Sales and Marketing We developed our marketing strategy based on the in-depth knowledge we have of our customers.
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. In addition, in certain locations, eye exam services may be provided utilizing a remote medicine platform.
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.
Consumers could also alter how they utilize tax refund proceeds. 15 Table of Contents 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 consumer’s holiday spending budgets, therefore reducing spending on personal vision correction during the weeks preceding December 25th of each year.
In the U.S., through our partnership with charitable organizations, we provide free vision screenings, eye exams and eyeglasses to young Americans and other underserved communities.
Our financial success has helped fuel our ever-growing philanthropic engine. In the U.S., through our partnership with charitable organizations, we provide free vision screenings, eye exams and eyeglasses to young Americans and other underserved communities.
The 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 “Great Deals Everywhere You Look” “Fantastic Military Pricing” “Everyday Low Price” Employed ODs Mostly Independent ODs Mostly Independent ODs Mostly Independent ODs Mostly Independent ODs 840 Stores 125 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. ~1,300 SKUs ~1,900 SKUs ~600 SKUs ~700 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 (9) Note: Store count as of January 1, 2022.
The 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.
A delay in the issuance of tax refunds can accordingly have a timing impact on our quarterly financial results in the first half of the year.
A delay in the issuance of tax refunds can accordingly have a timing impact on our quarterly financial results in the first half of the year. Consumers could also alter how they utilize tax refund proceeds.
We have invested in key leadership roles within the talent organization to refine our approach and have incorporated new technology to improve both the candidate and hiring manager experience.
Talent Acquisition At National Vision, we are committed to attracting talent aligned with our Vision, Mission and Values. We have invested in key leadership roles within the talent organization to refine our approach and have incorporated new technology to improve both the candidate and hiring manager experience.
We believe that television is a key channel for connecting with our customers. A significant p ortion of America’s Best and Eyeglass World’s advertising investments are on traffic-driving television advertisements, which we leverage broadly across multiple stores in each television 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 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.
In 2005, private equity funds managed by Berkshire Partners LLC (“Berkshire”) acquired both NVI and Consolidated Vision Group, Inc., which operated America’s Best Contacts and Eyeglasses (“America’s Best”) stores, and merged these entities, with NVI surviving. In 2009, NVI acquired the Eyeglass World store chain. In 2011, after a multi-year partnership, NVI acquired Arlington Contact Lens Service, Inc.
Our Corporate History Through its predecessors, NVI commenced operations in 1990. In 2005, private equity funds managed by Berkshire Partners LLC (“Berkshire”) acquired both NVI and Consolidated Vision Group, Inc., which operated America’s Best Contacts and Eyeglasses (“America’s Best”) stores, and merged these entities, with NVI surviving. In 2009, NVI acquired the Eyeglass World store chain.
We offer our customers an engaging digital shopping experience through an established platform of four omni-channel store websites, and 14 dedicated e-commerce consumer websites. Our omni-channel store websites augment our America’s Best, Eyeglass World, Vision Center and Vista Optical in military brands and provide a customer experience that extends across our in-store, mobile and e-commerce channels.
Our omni-channel store websites augment our America’s Best, Eyeglass World, Vision Center and Vista Optical in military brands and provide a customer experience that extends across our in-store, mobile and e-commerce channels.
In addition, our Eyeglass World stores are equipped with on-site laboratories, which typically process less complicated customer orders with same-day service. All lens orders that are not processed or completed in-store are processed or completed by our centralized laboratory network.
In addition, our Eyeglass World stores are equipped with on-site laboratories, which typically process less complicated customer orders with same-day service.
Our Sales and Marketing We developed our marketing strategy based on the in-depth knowledge we have of our customers. 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.
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.
We are also subject to the requirements of the Occupational Safety and Health Administration (OSHA) and other federal and state agencies that address employee health, including from infectious diseases such as COVID-19, and safety.
These laws also apply generally to all our properties. Our failure to comply with these laws can subject us to criminal and civil liabilities. Occupational Safety and Health Administration (“OSHA”) We are also subject to the requirements of OSHA and other federal and state agencies that address employee health, including from infectious diseases such as COVID-19, and safety.
We believe our current systems allow us to identify and respond to operating trends in our business. Examples of areas in which we have invested and continue to invest in include software systems to enhance the growth of our omni-channel, customer engagement efforts, remote medicine, cybersecurity programs and our overall security posture and our point-of-sale system.
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).
Some of our promotions, such as our America’s Best offer of a “free” eye exam, are subject to compliance with laws and regulations governing use of this term.
We are required to register our centralized laboratories with the FDA. Consumer Protection Laws Federal and state consumer protection laws and regulations can apply to our operations and retail offers. Some of our promotions, such as our America’s Best offer of a “free” eye exam, are subject to compliance with laws and regulations governing use of this term.
Our strategic relationship with Walmart is in its 32 nd year and our partnerships with Fred Meyer and the U.S. military have been maintaine d for over 20 ye ars. Our partner brands all compete within the value segment of the U.S. optical retail industry.
Our strategic relationship with Walmart is in its 33rd year and our partnerships with Fred Meyer and the U.S. military have been maintained for over 20 years. Our partner brands all compete within the value segment of the U.S. optical retail industry. These brands combine a broad selection of products and attentive customer service with the convenience of one-stop shopping.
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 at certain Eyeglass World stores, which subject us to the FDA’s registration, listing and quality requirements.
Our philanthropic culture instills a sense of purpose and engagement in our associates, from in-store team members to senior management. Our associates feel pride in the positive work they are doing, which allows us to attract and retain both store associates and vision care professionals, thus improving the customer experience in our stores.
Our associates feel pride in the positive work they are doing, which allows us to attract and retain both store associates and vision care professionals, thus improving the customer experience in our stores. In addition, our mission has been essential to the recruitment and retention of our management team, whose extensive experience is a key component of our business success.
In 2021, we continued our focus on reviewing best practices and initiatives and conducted listen and learn sessions with associates and optometrists to solicit feedback and identify opportunity areas.
As we move forward in our DEI journey, we are focused on advancing diversity in our recruitment, training, career mentorship and development, employment, branding and community service. In 2021, we continued our focus on reviewing best practices and initiatives and conducted listen and learn sessions with associates and optometrists to solicit feedback and identify opportunity areas.
Competition is based on many factors, including price and the density of the provider network. Several large managed care payors are vertically integrated, with substantial retail networks. We have, in the past, and may, in the future, experience heightened challenges to be admitted as a provider to these networks or to maintain our status in them.
Competition is based on many factors, including price and the density of the provider network. Several large managed care payors are vertically integrated, with substantial retail networks.
Within this segment, we also provide low-cost vision care products and services to American military service members by operating Vista Optical locations on select military bases across the country. Our Legacy segment consists of our long-term strategic relationship with Walmart to operate Vision Centers in select Walmart stores. In addition, our wholly-owned subsidiary, FirstSight Vision Services, Inc.
Our Owned & Host segment includes our two owned brands, America’s Best and Eyeglass World, and our Vista Optical locations in select Fred Meyer stores. Within this segment, we also provide low-cost vision care products and services to American military service members by operating Vista Optical locations on select military bases across the country.
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 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.
Nonetheless, our diverse product portfolio encompasses many brand names and thousands of SKUs. Depending on the brand, our stores display approximately 600 to 1,900 eyeglass frame SKUs, covering all age groups. Offerings include both brand name designers, like Ray-Ban, Guess and Calvin Klein, as well as private label options at attractive prices.
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.
Lens orders that are not completed in-store are completed by our centralized laboratory network. Due to the wider brand selection and on-site laboratories, Eyeglass World stores average approximately 4,500 square feet and typically stock approximately 1,900 eyeglass frame SKUs. 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 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.
We have developed a high-volume, low-cost lens processing model to provide seven-day turnaround service through our domestic owned laboratories and our international partner laboratories. 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 in both segments to provide efficiency and scale.
These laws, which have been adopted in a number of states, require the licensing or registration of organizations that provide discounted access to health care providers. 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.
These laws, which have been adopted in a number of states, require the licensing or registration of organizations that provide discounted access to health care providers.
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. Shortly after our IPO, we established the National Vision Crisis Relief Fund to help support associates who are facing financial hardship as a result of a natural disaster, family emergency or other unexpected events.
Shortly after our IPO, we established the National Vision Crisis Relief Fund to help support associates who are facing financial hardship as a result of a natural disaster, family emergency or other unexpected events. Donations made to the Crisis Relief Fund are matched by the Company.
Pursuant to a January 2020 amendment to our management & services agreement with Walmart, we added five additional Vision Centers in Walmart stores in fiscal year 2020. The current term of the management & services agreement between NVI and Walmart ends on February 23, 2024. We have strong, long-standing relationships with these partners.
Pursuant to a January 2020 amendment to our management & services agreement with Walmart, we added five additional Vision Centers in Walmart stores in fiscal year 2020.
In the aggregate, sales from our omni-channel and e-commerce platforms, which includes “buy-in-store and ship-to-home” transactions, represented approximately 10.5% and 12.0% of our 2021 and 2020 fiscal year net revenue, respectively. 9 Table of Contents Our Industry 1 The U.S. optical retail industry, defined by Vision Monday to include optical retailers’ revenues from the sales of products (including managed vision care benefit revenues and omni-channel and e-commerce sales) and eye care services provided by vision care professionals, including eye exams, is a $31 billion industry that has exhibited consistent, stable growth across economic cycles.
In the aggregate, sales from our omni-channel and e-commerce platforms, which includes “buy-in-store and ship-to-home” transactions, represented approximately 11.2% and 10.5% of our 2022 and 2021 fiscal year net revenue, respectively. 9 Table of Contents Our Industry 1 We operate in the U.S. optical retail industry, which is defined by The Vision Council to include the sale of exams, frames, lenses, contact lenses, plano sunglasses, and readers.
(“AC Lens”) to bolster its e-commerce platform. In March 2014, NVI was acquired (the “KKR Acquisition”) by affiliates of KKR & Co. Inc. (“KKR”). National Vision Holdings, Inc. was incorporated in Delaware on February 14, 2014 under the name “Nautilus Parent, Inc.” and NVI became our wholly-owned subsidiary in connection with the KKR Acquisition.
National Vision Holdings, Inc. was incorporated in Delaware on February 14, 2014 under the name “Nautilus Parent, Inc.” and NVI became our wholly-owned subsidiary in connection with the KKR Acquisition. In 2017, we changed our name to “National Vision Holdings, Inc.” In October 2017, we completed the initial public offering of our common stock (the “IPO”).
Item 8. of this Form 10-K for additional information. 11 Table of Contents Our Customers Our customers need to see their best to perform their jobs, care for their families and contribute to their communities. Purchasing decisions are based on value, quality of service, fashion, location and eye health, among others.
Our Customers Our customers need to see their best to perform their jobs, care for their families and contribute to their communities. Purchasing decisions are based on value, quality of service, fashion, location and eye health, among others. Based on a variety of third-party research studies, we have found that our customers typically prioritize value and convenience above other considerations.
We focus on sourcing low-cost products, including discounted well-known frame brands, secondary frame brands, direct import frames and private label contact lenses.
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.
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.
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.
Through one-on-one consultative-selling, our sales associates have a number of opportunities to share information about value-added lenses, including thinner, higher-quality lenses and photochromatic options, which carry higher margins. As a result, a significant number of A merica’s Best customers and Eyeglass World customers who purchase eyeglasses choose upgraded lenses and/or frames instead of each brand’s base offer.
We also offer a broad portfolio of lenses, including single vision and bifocal lenses, with a variety of treatments to enhance vision. Through one-on-one consultative-selling, our sales associates have a number of opportunities to share information about value-added lenses, including thinner, higher-quality lenses and photochromatic options, which carry higher margins.
We have a 118,000 square foot distribution center in Lawrenceville, Georgia and a 52,000 square foot distribution center in Columbus, Ohio. 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.
All lens orders that are not processed or completed in-store are processed or completed by our centralized laboratory network. 12 Table of Contents We have a 118,000 square foot distribution center in Lawrenceville, Georgia and a 52,000 square foot distribution center in Columbus, Ohio. We utilize third-party carriers to transport products from these centers to customers and store locations.
Most optometrists recommend annual eye exams as a preventive measure against serious eye conditions and to help patients identify changes in their vision correction needs. According to The Vision Council, an estimated 197 million people in the United States using vision correction devices received over 121 million eye exams that year, implying an average interval between exams of 19 months.
Most optometrists recommend annual eye exams as a preventive measure against serious eye conditions and to help patients identify changes in their vision correction needs.
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 centralized optical laboratories handle all aspects of customizing eyeglass lenses, and have digital capabilities for grinding, coating and edging to customer prescription and eyeglass frame specifications.
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.
We have never experienced a strike or work stoppage, and we believe that our relations with our associates and optometrists are good. 13 Table of contents Talent Acquisition At National Vision, we are committed to attracting talent aligned with our Vision, Mission and Values.
We are not a party to any collective bargaining agreements. We have never experienced a strike or work stoppage, and we believe that our relations with our associates and optometrists are good.
We provide associates and optometrists with several opportunities and mechanisms through which they can provide feedback and allow us to continue developing programs for training and growth. Benefits and Wellness We strive to ensure our people always feel supported so they can bring their best selves to work every day.
Benefits and Wellness We strive to ensure our people always feel supported so they can bring their best selves to work every day. We demonstrate this commitment through many of our benefits and wellness offerings.
To mitigate the impact the COVID-19 pandemic and temporary closure of our stores had on our traditional recruiting efforts and hiring cycles in 2020, we transitioned to online platforms for job fairs and on-campus events, selectively offered key incentives, such as a student loan repayment program, and educated applicants on the health and safety protocols implemented in our stores.
We have utilized in person events and online platforms for job fairs and on-campus events, selectively offered key incentives, such as a student loan repayment program, and educated applicants on the health and safety protocols implemented in our stores. 13 Table of contents Talent Development We have a proven record of opening new stores with high-quality training support.
We demonstrate this commitment through many of our benefits and wellness offerings. Programs like our health plan, wellness and disease management programs, including personalized programs for diabetes and hypertension, 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-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.
Donations made to the Crisis Relief Fund are matched by the Company. Since its creation, over $1.1 million have been provided to associates for assistance, with over 95% provided since the beginning of the COVID-19 pandemic.
Since its creation, over $1.3 million have been provided to associates for assistance, with over 95% provided since the beginning of the COVID-19 pandemic. Diversity, Equity and Inclusion We are committed to a diverse and inclusive culture and in 2020, we formed a new Diversity, Equity and Inclusion (“DEI”) department within the Company.
These brands combine a broad selection of products and attentive customer service with the convenience of one-stop shopping. These brands also utilize our centralized laboratories and provide eye exams principally by independent optometrists in nearly all locations. Our Omni-Channel and E-Commerce Platforms.
These brands also utilize our centralized laboratories and provide eye exams principally by independent optometrists in nearly all locations. Our Omni-Channel and E-Commerce Platforms. We offer our customers an engaging digital shopping experience through an established platform of four omni-channel store websites, and 12 dedicated e-commerce consumer websites.
Based on a variety of third-party research studies, we have found that our customers typically prioritize value and convenience above other considerations. Value encompasses a combination of eye health with quality products and services, all offered at a fair price.
Value encompasses a combination of eye health with quality products and services, all offered at a fair price.
We were also recognized as one of Forbes’ Best Employers for Diversity in 2021 for, among other things, our proactive diversity and inclusion initiatives. COVID-19 The COVID-19 pandemic has presented unique challenges for our associates, doctors, customers and patients.
We were also recognized as one of Forbes’ Best Employers for Diversity in 2021 for, among other things, our proactive 14 Table of contents diversity and inclusion initiatives and were named one of Newsweek’s America’s Most Responsible Companies for 2023 for our corporate responsibility and citizenship.
As of January 1, 2022, we had 13,735 full-time and part-time associates. In addition, the professional corporations or similar entities with which we contract employed 1,256 optometrists as of January 1, 2022. We are not a party to any collective bargaining agreements.
We also work collaboratively with others in the industry to help a portion of the world’s population who live with uncorrected vision problems. Human Capital Management As of December 31, 2022, we had 13,975 full-time and part-time associates. In addition, the professional corporations or similar entities with which we contract employed 1,841 optometrists as of December 31, 2022.
Furthermore, this increased focus on health means that people are living longer, which increases the overall demand for vision care and the frequency with which people visit their eye care practitioners for vision care products and services. Our Products and Services Within our two reportable segments, we primarily offer two products and one service: eyeglasses, contact lenses and eye exams.
Furthermore, this increased focus on health means that people are living longer, which increases the overall demand for vision care and the frequency with which people visit their eye care practitioners for vision care products and services. 1 Our industry section in prior annual reports on Form 10-K includes the most recently available industry information from The Vision Council, published in its Market inSights report.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe scope and duration of the pandemic, including the current wave of outbreaks from the emergence and spread of variants of COVID-19 throughout the United States and globally and other future resurgences, the pace at which government restrictions are lifted or re-instated to contain the virus, the impact on our ability to maintain sufficient personnel and recruit employees, the impact on our customers and suppliers, the speed and extent to which markets fully recover from the disruptions caused by the pandemic, and the impact of these factors on our business, will depend on future developments that are highly uncertain and cannot be predicted with confidence.
Biggest changeA number of factors, including future resurgences, the pace at which government restrictions are lifted or re-instated to contain the virus, the impact on our ability to maintain sufficient personnel and recruit employees, including related labor costs, the impact on our customers and suppliers, inflationary pressures, any impairment in the fair value of our assets, the impact on our ability to access capital markets on favorable terms, the speed and extent to which markets fully recover from the disruptions caused by the pandemic, and the impact of these factors on our business, will depend on future developments that are highly uncertain and cannot be predicted with confidence.
Our 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. 38 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.
Our 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.
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 manage 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 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 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. 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 existing and new markets, and operating our new stores successfully.
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 headquarters, 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 AC Lens corporate office, the FirstSight corporate office, our laboratories in Georgia, Texas and Utah and our distribution centers.
Our ability to successfully open and operate new stores 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; • achieve and maintain brand awareness in new and existing markets; and • identify and satisfy the merchandise and other preferences of our customers.
We derive significant revenues and operating cash flows from our relationships with our Legacy and Host partners through our operations of 230 Vision Centers in select Walmart stores, 29 Vista Optical locations within select Fred Meyer stores and 54 Vista Optical locations on select military bases.
We derive revenues and operating cash flows from our relationships with our Legacy and Host partners through our operations of 230 Vision Centers in select Walmart stores, 29 Vista Optical locations within select Fred Meyer stores and 54 Vista Optical locations on select military bases.
Our failure to effectively implement the required or addressable data privacy and security safeguards and breach notification procedures, or our failure to accurately anticipate the application or interpretation of these statutes, regulations and standards, could lead to invalidation or modification of our agreements with optometrists or professional corporations or similar entities owned by eye care practitioners, create material civil and/or criminal liability for us or require us to change our business practices, which could result in adverse publicity and loss of consumer trust, and have a material adverse effect on our business, financial condition and results of operations.
Our failure to effectively implement the required or addressable data privacy and security safeguards, breach notification procedures, and implement consumer data rights processes, or our failure to accurately anticipate the application or interpretation of these statutes, regulations and standards, could lead to invalidation or modification of our agreements with optometrists or professional corporations or similar entities owned by eye care practitioners, create material civil and/or criminal liability for us or require us to change our business practices, which could result in adverse publicity and loss of consumer trust, and have a material adverse effect on our business, financial condition and results of operations.
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.
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.
Increasing consolidation in the optical industry may give such payors greater market power which may adversely affect our ability to negotiate reimbursement rates under managed care arrangements.
Increasing consolidation in the optical retail industry may give such payors greater market power which may adversely affect our ability to negotiate reimbursement rates under managed care arrangements.
Global sourcing and foreign trade involve numerous factors and uncertainties beyond our control including increased shipping costs, the imposition of additional import or trade restrictions, including legal or economic restrictions on overseas suppliers’ ability to produce and deliver products, increased custom duties and tariffs, unforeseen delays in customs clearance of goods, more restrictive quotas, loss of a most favored nation trading status, currency exchange rates, transportation delays, port of entry issues and foreign government regulations, political instability and economic uncertainties in the countries from which we or our vendors source our products.
Global sourcing and foreign trade involve numerous factors and uncertainties beyond our control including increased shipping costs, the imposition of additional import or trade restrictions, including legal or economic restrictions on overseas suppliers’ ability to produce and deliver products, increased custom duties and tariffs, unforeseen delays in customs clearance of goods, more restrictive quotas, loss of a most favored nation trading status, currency exchange rates, transportation delays, port of entry issues and foreign government regulations, political instability, public health emergencies and economic uncertainties in the countries from which we or our vendors source our products.
Additionally, shifts in weather patterns caused by climate change are expected to increase the frequency, severity or duration of certain adverse weather conditions, which could cause more significant business interruptions that result in increased costs, increased liabilities, and decreased revenues. Such losses could materially and adversely effect our business, financial condition and results of operations.
Additionally, shifts in weather patterns caused by climate change are expected to increase the frequency, severity or duration of certain adverse weather conditions, which could cause more significant business interruptions that result in increased costs, increased liabilities, and decreased revenues. Such losses could materially and adversely affect our business, financial condition and results of operations.
Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition. Item 1B.
Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
Further, if we are unable to comply with the security standards established by banks and the payment card industry, we may be subject to fines, restrictions and expulsion from card acceptance programs, which could adversely affect our retail operations. As privacy and information security laws and regulations change, we may incur additional compliance costs.
Further, if we are unable to comply with the security standards established by banks and the payment card industry, we may be subject to fines, restrictions and expulsion from card acceptance programs, which could adversely affect our retail operations. As privacy and information security laws and regulations change and vary from state-to-state, we may incur additional compliance costs.
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.
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.
An increasing percentage of our customers receive vision insurance coverage through managed care payors. These payors represent an increasingly significant portion of our overall revenues and our revenue growth and represented approximately one third of our overall revenues in fiscal year 2021.
An increasing percentage of our customers receive vision insurance coverage through managed care payors. These payors represent an increasingly significant portion of our overall revenues and our revenue growth and represented approximately one third of our overall revenues in fiscal year 2022.
We also lease our Vista Optical locations inside Fred Meyer stores. As a result, we are susceptible to changes in the property rental market and increases in our occupancy costs. 32 Table of Contents The success of our business depends, in part, on our ability to identify suitable premises for our stores and to negotiate acceptable lease terms.
We also lease our Vista Optical locations inside Fred Meyer stores. As a result, we are susceptible to changes in the property rental market and increases in our occupancy costs. The success of our business depends, in part, on our ability to identify suitable premises for our stores and to negotiate acceptable lease terms.
Technological advances in vision care, including the development of telemedicine 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 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.
Any significant returns or warranty claims, as well as the timing of such returns or claims, could result in significant additional costs to us and could adversely affect our results of operations. We rely on our suppliers to control the quality of both eyeglass components and contact lenses.
Any significant returns or warranty claims, as well as the timing of such returns or claims, could result in significant additional costs to us and could adversely affect our results of operations. 35 Table of Contents We rely on our suppliers to control the quality of both eyeglass components and contact lenses.
“Business-Government Regulation.” A material change in our relationship with vision care professionals, whether resulting from 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.” 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.
We can provide no assurance and make no representation that our risk mitigation efforts, although we believe they are reasonable, will be successful. Risks Related to Our Business and Our Industry The COVID-19 pandemic has had, and may in the future continue to have, a material adverse impact on our business.
We can provide no assurance and make no representation that our risk mitigation efforts, although we believe they are reasonable, will be successful. Risks Related to Our Business and Operations The COVID-19 pandemic and related impacts, have had, and may in the future continue to have, a material adverse impact on our business.
The COVID-19 pandemic and its continued evolution has impacted and may continue to impact us in the following ways: • a disruption to our growth strategy, supply chain, delivery of merchandise, professional recruitment, ability to staff stores, typical seasonality and customer demand; • newly enacted state, local and federal healthcare laws in response to COVID-19, including any vaccine mandate, and exposure to potential lawsuits, workforce attrition and difficulty in maintaining professional recruitment; and • an inability to maintain sufficient levels of cash flow from our operations to fund our business and growth strategy and difficulty in obtaining additional financing on terms that are favorable to us.
The COVID-19 pandemic and its effects has impacted and may continue to impact us in the following ways: • a disruption to our growth strategy, supply chain, delivery of merchandise, professional recruitment, ability to staff stores, typical seasonality and customer demand; • newly enacted state, local and federal healthcare laws in response to COVID-19, and exposure to potential lawsuits, workforce attrition and difficulty in maintaining professional recruitment; and • an inability to maintain sufficient levels of cash flow from our operations to fund our business and growth strategy and difficulty in obtaining additional financing on terms that are favorable to us.
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. 23 Table of Contents 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. We may be unable to establish or maintain satisfactory relationships with managed care and other third-party payors.
Risks Related to Our Indebtedness and Ownership of Common Stock 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 limiting our business flexibility and preventing us from meeting our debt obligations. We have a significant amount of indebtedness.
Coverage restrictions and reductions in reimbursement levels or payment 34 Table of Contents methodologies may negatively impact our sales and profits. Many third-party payors may continue to explore cost-containment strategies that may potentially impact coverage and/or payment levels for our services and products and impose utilization restrictions and risk-based compensation arrangements.
Coverage restrictions and reductions in reimbursement levels or payment methodologies may negatively impact our sales and profits. Many third-party payors may continue to explore cost-containment strategies that may potentially impact coverage and/or payment levels for our services and products and impose utilization restrictions and risk-based compensation arrangements.
Risks associated with our e-commerce and omni-channel business include: • uncertainties associated with our websites 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; • 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 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, 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.
If such financing is not available to us, or is not available on satisfactory terms, our ability to operate and expand our business could be curtailed and we may need to delay, limit or eliminate planned store openings or operations or other elements of our growth strategy. We depend on our distribution centers and optical laboratories.
If such financing is not available to us, or is not available on satisfactory terms, our ability to operate and expand our business could be curtailed and we may need to delay, limit or eliminate planned store openings or operations or other elements of our growth strategy.
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, personal injury, intellectual property, consumer product safety, 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 laws, immigration and employment law matters.
Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. Our stock price may be volatile or may decline regardless of our operating performance.
Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. Risks Related to Ownership of Common Stock Our stock price may be volatile or may decline regardless of our operating performance.
Prior to February 15, 2025, the 2025 Notes are convertible at the option of the holders of such notes under certain circumstances as provided in the governing indenture and, as of January 1, 2022, those circumstances were in effect.
Prior to February 15, 2025, the 2025 Notes are convertible at the option of the holders of such notes under certain circumstances as provided in the governing indenture and, as of December 31, 2022, those circumstances were in effect.
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 in 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 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.
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, war and fears of war (including the recent Russian invasion of Ukraine), inclement weather, natural disasters, terrorism, 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, 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.
We refer you to “Management’s Discussion and Analysis of Financial Position and Results of Operations” for a more detailed discussion of the potential impact of the COVID-19 pandemic and associated economic disruptions, and the actual operational and financial impacts that we have experienced to date. 21 Table of Contents An overall decline in the health of the economy and other factors impacting consumer spending, including inflation, recessionary conditions, the timing and issuance of tax refunds, governmental instability and natural disasters, may affect consumer purchases, which could reduce demand for our products and materially harm our sales, profitability and financial condition.
We refer you to “Management’s Discussion and Analysis of Financial Position and Results of Operations” for a more detailed discussion of the actual operational and financial impacts that we have experienced to date. 20 Table of Contents Market volatility, an overall decline in the health of the economy and other factors impacting consumer spending, including inflation, recessionary conditions, the timing and issuance of tax refunds, governmental instability and natural disasters, may affect consumer purchases, which could reduce demand for our products and materially harm our sales, profitability and financial condition.
During fiscal year 2021, 90% of lens expenditures were from this vendor and 92% of contact lens expenditures were with three vendors. We are less exposed to a supplier risk for our eyeglass frames as only 57% of frame expenditures were with two vendors.
During fiscal year 2022, 87% of lens expenditures were from this vendor and 92% of contact lens expenditures were with three vendors. We are less exposed to a supplier risk for our eyeglass frames as only 53% of frame expenditures were with two vendors.
A change in interest rates or discontinuation, reform or replacement of LIBOR and other benchmark rates, or uncertainty related to the potential for any of the foregoing, may adversely affect our business. As of January 1, 2022, $150.0 million of term loan borrowings were subject to variable interest rates, with a weighted average borrowing rate of 2.5%.
A change in interest rates or replacement of LIBOR and other benchmark rates, or uncertainty related to the potential for any of the foregoing, may adversely affect our business. 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%.
We face risks associated with vendors from whom our products are sourced and are dependent on a limited number of suppliers. We purchase all of our merchandise from domestic and international vendors.
Risks Related to Our Dependence on Third Parties We face risks associated with vendors from whom our products are sourced and are dependent on a limited number of suppliers. We purchase all of our merchandise from domestic and international vendors.
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. Our success depends upon our marketing, advertising and promotional efforts.
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.
Reduced customer confidence and spending cutbacks may result in reduced demand for our merchandise and may force us to take inventory markdowns. Reduced demand also may require increased selling and promotional expenses. Prolonged or pervasive economic downturns could slow the pace of new store openings or cause current stores to close.
Reduced customer confidence and spending cutbacks may result in reduced demand for our merchandise and may force us to take inventory markdowns, increased selling and promotional expenses or, if part of a prolonged or pervasive economic downturn, may slow the pace of new store openings or cause current stores to close.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other associates or stockholders which may discourage lawsuits with respect to such claims.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other associates or stockholders which may discourage lawsuits with respect to such claims. Application of the choice of forum provision may be limited in some instances by law.
These increased demands could strain our resources and cause us to operate our business less effectively, which in turn could cause the performance of our new and existing stores to suffer. 31 Table of Contents As our store base grows, we will need to continually evaluate the adequacy of our laboratory, distribution and information technology capabilities.
These increased demands could strain our resources and cause us to operate our business less effectively, which in turn could cause the performance of our new and existing stores to suffer. As our store base grows, we will need to continually evaluate the adequacy of our laboratory, distribution and information technology capabilities, including those related to our remote medicine offerings.
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 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.
On May 12, 2020, we completed the issuance of 2.50% convertible senior notes due on May 15, 2025 (the “2025 Notes”). The 2025 Notes are convertible into cash, shares of common stock or a combination of cash and shares of common stock at our election, based on the applicable conversion rate at such time.
On May 12, 2020, we completed the issuance of the 2025 Notes. The 2025 Notes are convertible into cash, shares of common stock or a combination of cash and shares of common stock at our election, based on the applicable conversion rate at such time.
As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than your purchase price.
As a result, investors may not receive any return on an investment in our common stock unless they sell our common stock for a price greater than their purchase price.
If we are unable to mitigate the full impact of the enacted tariffs or if there is a further escalation of tariffs, costs on a significant portion of our products may increase further and our financial results may be negatively affected.
If we are unable to mitigate the full impact of the enacted tariffs or if there is a further escalation of tariffs, costs on a significant portion of our products may increase further and our financial results may be negatively affected. Material changes in the pricing practices of our suppliers could negatively impact our profitability.
In addition, oversaturation, or the risk of oversaturation, may reduce or adversely affect the number or location of stores we plan to open, and could thereby materially and adversely affect our growth plans overall or in particular markets.
In addition, oversaturation, or the risk of oversaturation, may reduce or adversely affect the number or location of stores we plan to open, and could thereby materially and adversely affect our growth plans overall or in particular markets. Our success depends upon our marketing, advertising and promotional efforts.
Costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology such as those necessary to achieve compliance with the PCI Standard or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations.
Costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology such as those necessary to achieve compliance with the PCI Standard or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations. We rely on third-party vendors to handle PCI matters and ensure compliance.
If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and financial results could be harmed and we could fail to meet our financial reporting obligations. 41 Table of Contents Anti-takeover provisions in our organizational documents could delay or prevent a change of control.
If we fail to maintain the adequacy of our internal controls, including any failure to 41 Table of Contents implement required new or improved controls, or if we experience difficulties in their implementation, our business and financial results could be harmed and we could fail to meet our financial reporting obligations.
Furthermore, many states require that opticians be licensed to dispense and fit eyeglasses and contact lenses. In addition, failure to have vision care professionals available in or near our stores could adversely affect our ability to win managed vision care contracts. Our ability to attract and retain vision care professionals depends on several factors.
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.
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.
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
At January 1, 2022, the carrying value of goodwill and intangible assets at our Host and Legacy brands was $23.1 million and $79.0 million, respectively. We review the carrying value of our goodwill and intangibles for impairment annually, or more frequently when impairment indicators exist.
At December 31, 2022, the carrying value of goodwill and intangible assets at our Host and Legacy brands was $21.6 million and $73.0 million, respectively. We review the carrying value of our goodwill and intangibles for impairment annually, or more frequently when impairment indicators exist.
We may not continue to be able to successfully compete against existing or future competitors. Our inability to respond effectively to competitive pressures, improved performance by our competitors and changes in the retail markets could result in lost market share and have a material adverse effect on our business, financial condition and results of operations.
We operate in the highly competitive optical retail industry and we may be unable to successfully compete against existing or future competitors. Our inability to respond effectively to competitive pressure or improved performance by our competitors could result in lost market share and have a material adverse effect on our business, financial condition and results of operations.
We rely heavily on our information technology systems for many functions across our operations, including managing our supply chain and inventory, processing customer transactions in our stores, allocating lens processing jobs to the appropriate laboratories, our financial accounting and reporting, compensating our associates and operating our websites.
We rely heavily on our information technology systems for many functions across our operations, including managing our supply chain and inventory, processing customer transactions in our stores, allocating lens processing jobs to the appropriate laboratories, providing and maintaining our remote medicine and EHR platform, our financial accounting and reporting systems, operating our websites, and human resources administration.
The secure processing, maintenance and transmission of this information is critical to our operations. Our systems may be subject to damage or interruption from power outages or damages, telecommunications problems, data corruption, software errors, network failures, acts of war or terrorist attacks, fire, flood, ransomware and natural disasters.
Our systems may be subject to damage or interruption from power outages or damages, telecommunications problems, data corruption, software errors, network failures, acts of war or terrorist attacks, fire, flood, ransomware and natural disasters.
If we determine that impairment indicators exist and that there are other-than-temporary declines in the fair value of the investment, we may be required to write down the investments to their fair value and recognize the related write-down as an investment loss.
If any of these companies fail, we could lose all or part of our investment in that company. If we determine that impairment indicators exist and that there are other-than-temporary declines in the fair value of the investment, we may be required to write down the investments to their fair value and recognize the related write-down as an investment loss.
Any material disruption or slowdown of our systems or those of our third-party service providers and business partners, could have a material adverse effect on our business, financial condition and results of operations. We are a low-cost provider and our business model relies on the low cost of inputs.
Any material disruption or slowdown of our systems or those of our third-party service providers and business partners, could have a material adverse effect on our business, financial condition and results of operations.
The COVID-19 pandemic and the travel restrictions, quarantines, and other related public health measures and actions taken by governments and the private sector have adversely affected global economies, financial markets and the overall environment for our business, and the extent to which it may continue to impact our future results of operations and overall financial performance remains uncertain.
The COVID-19 pandemic and the related actions taken by governments and the private sector to contain and combat the outbreak and spread of COVID-19 have adversely affected global economies, financial markets and the overall environment for our business, and the extent to which these may continue to impact our future results of operations and overall financial performance remains uncertain.
It is possible that state regulators could determine that we are operating as a discount medical plan and as such are subject to various registration, disclosure and solvency requirements. We could incur increased compliance costs as a result. We would also be subject to the risk of cease and desist orders and monetary penalties.
It is possible that state regulators could determine that we are operating as a discount medical plan and as such are subject to various registration, disclosure and solvency requirements. We could incur increased compliance costs as a result.
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 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.
Some of our products are sourced from suppliers or with significantly reduced prices for specific reasons, and we are not always able to purchase specific merchandise on a recurring basis and we may not have control over the supply, design, cost or availability of some products we offer for sale in our stores.
We are not always able to purchase specific merchandise on a recurring basis and we may not have control over the supply, design, cost or availability of some products we offer for sale in our stores. We also compete with other retailers for discounted merchandise to sell in our stores.
These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. In addition, price volatility may be greater if the public float and trading volume of our common stock is low. In the past, following periods of market volatility, stockholders have instituted securities class action litigation.
These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. In addition, price volatility may be greater if the public float and trading volume of our common stock is low. We are and may in the future be the target of securities-related litigation.
We have no current plans to pay cash dividends on our common stock. The declaration, amount and payment of any future dividends on our common stock will be at the sole discretion of our Board of Directors.
The declaration, amount and payment of any future dividends on our common stock will be at the sole discretion of our Board of Directors.
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 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.
Several companies have developed technologies for and some companies are incorporating the remote delivery of eye examinations and eye refractions. We have begun to pilot remote medicine technologies in a limited number of locations to enable the provision of remote eye examinations.
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.
Moreover, if we are unable to successfully defend against such claims, we may be prevented from using our trademarks, service marks or other intellectual property rights in the future and may be liable for damages, which in turn could materially adversely affect our business, financial condition or results of operations. 37 Table of Contents 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.
Moreover, if we are unable to successfully defend against such claims, we may be prevented from using our trademarks, service marks or other intellectual property rights in the future and may be liable for damages, which in turn could materially adversely affect our business, financial condition or results of operations.
Our business requires disciplined execution at all levels of our organization. This execution requires an experienced and talented management team. If we were to lose the benefit of the experience, efforts and abilities of key executive personnel, it could have a material adverse effect on our business, financial condition and results of operations.
If we were to lose the benefit of the experience, efforts and abilities of key executive personnel, it could have a material adverse effect on our business, financial condition and results of operations.
Our failure to comply with the restrictive covenants described above as well as others contained in our future debt instruments from time to time could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their maturity dates.
We cannot guarantee that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants. 38 Table of Contents Our failure to comply with the restrictive covenants described above as well as others contained in our future debt instruments from time to time could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their maturity dates.
For instance, as an entity that collects and maintains personally identifiable information and protected health information, we could be forced, in the event of a data breach, to report the breach not only to affected customers, but also to various public agencies and media outlets, potentially harming our reputation and our business Our business partners may have contractual rights of indemnification against us or seek to terminate our contracts with them in the event that their customer or proprietary business information is released as a result of a breach of our information technology.
For instance, as an entity that collects and maintains personally identifiable information and protected health information, we could be forced, in the event of a data breach, to report the breach not only to affected customers, but also to various public agencies and media outlets, potentially harming our reputation and our business.
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.
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.
Our business is partly dependent on our ability to strategically source a sufficient volume and variety of brand name merchandise at opportunistic pricing.
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.
As of January 1, 2022, we had approximately $552.5 million of aggregate principal amount of indebtedness associated with our first lien term loan in the aggregate principal amount of $420.0 million (the “term loan”) and 2025 Notes outstanding (excluding finance lease obligations).
As of December 31, 2022, we had approximately $552.5 million of aggregate principal amount of indebtedness associated with our first lien term loan in the aggregate principal amount of $150.0 million (the “term loan”) and $402.5 million of 2.50% convertible senior notes due on May 15, 2025 (the “2025 Notes”) outstanding (excluding finance lease obligations).
Our operating results could be negatively impacted by developments in these areas due to the costs of compliance in addition to possible civil and criminal penalties, litigation and exclusion from government healthcare programs in the event of deemed noncompliance. 25 Table of Contents In addition, a person who offers or transfers to a federal healthcare program beneficiary any remuneration, including the transfer of items or services for free or other than fair market value, that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of Medicare or Medicaid payable items or services, may be liable for significant civil monetary penalties.
In addition, a person who offers or transfers to a federal healthcare program beneficiary any remuneration, including the transfer of items or services for free or other than fair market value, that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of Medicare or Medicaid payable items or services, may be liable for significant civil monetary penalties.
Our substantial lease obligations could have significant negative consequences, including: • requiring that a substantial portion of our available cash be applied to pay our rental obligations, reducing cash available for other purposes and reducing our operating profitability; • increasing our vulnerability to general adverse economic and industry conditions; • limiting our flexibility in planning for, or reacting to changes in, our business or in the industry in which we compete; and • limiting our ability to obtain additional financing.
Our substantial lease obligations could have significant negative consequences, including: • requiring that a substantial portion of our available cash be applied to pay our rental obligations, reducing cash available for other purposes and reducing our operating profitability; • increasing our vulnerability to general adverse economic and industry conditions; • limiting our flexibility in planning for, or reacting to changes in, our business or in the industry in which we compete; and • limiting our ability to obtain additional financing. 25 Table of Contents If we are not able to make the required payments under our leases, landlords with a contractual or statutory security interest in the assets of the relevant stores may, among other things, repossess those assets, which could adversely affect our ability to conduct our operations.
It is possible that regulators in certain states could determine that our warranty plans should be subject to these laws and mandate that we comply with various registration, disclosure and financial requirements. 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.
It is possible that regulators in certain states could determine that our warranty plans should be subject to these laws and mandate that we comply with various registration, disclosure and financial requirements.
We face additional risks related to the laboratories in China and Mexico, including port of entry risks such as longshoremen strikes, import restrictions, foreign government regulations, trade restrictions, customs and duties. We source merchandise from suppliers located in China, a significant amount of domestically-purchased merchandise is manufactured in China, and one of our outsourced third-party laboratories is located in China.
We face additional risks related to the laboratories in China and Mexico, including port of entry risks such as longshoremen strikes, import restrictions, foreign government regulations, trade restrictions, customs and duties.
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.
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.
Any material interruptions or failures in our payment-related systems could have a material adverse effect on our business, financial condition and results of operations. 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.
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 we are unable to allow real-time and accurate visibility to product availability when customers are ready to purchase, quickly and efficiently fulfill our customers’ orders using the fulfillment and payment methods they demand, provide a convenient and consistent experience for our customers regardless of the ultimate sales channel or effectively manage our online sales, our ability to compete and our results of operations could be adversely affected. 35 Table of Contents Furthermore, if our e-commerce and omni-channel business successfully grows, it may do so in part by attracting existing customers, rather than new customers, who choose to purchase products from us online rather than from our brick and mortar stores, thereby detracting from the financial performance of our stores.
If we are unable to allow real-time and accurate visibility to product availability when customers are ready to purchase, quickly and efficiently fulfill our customers’ orders using the fulfillment and payment methods they demand, provide a convenient and consistent experience for our customers regardless of the ultimate sales channel or effectively manage our online sales, our ability to compete and our results of operations could be adversely affected.
Additionally, the greater availability and acceptance, or reductions in the cost, of vision correction alternatives to prescription eyeglasses and contact lenses, such as corneal refractive surgery procedures, photo-refractive keratotomy, or PRK and LASIK, may reduce the demand for our products, lower our sales and thereby adversely impact our business and profitability. 33 Table of Contents If we fail to retain our existing senior management team or attract qualified new personnel, such failure could have a material adverse effect on our business, financial condition and results of operations.
Additionally, the greater availability and acceptance, or reductions in the cost, of vision correction alternatives to prescription eyeglasses and contact lenses, such as corneal refractive surgery procedures, photo-refractive keratotomy, or PRK and LASIK, may reduce the demand for our products, lower our sales and thereby adversely impact our business and profitability.
Our ability to seek recourse for liabilities and recover costs from our vendors depends on our contractual rights as well as on the financial condition and integrity of the vendors.
Our ability to seek recourse for liabilities and recover costs from our vendors depends on our contractual rights as well as on the financial condition and integrity of the vendors. Moreover, we engage in certain manufacturing, repackaging and relabeling activities at our optical laboratories and at certain Eyeglass World stores.
“Legal Proceedings.” Such allegations, claims and proceedings may be brought by third parties, including our customers, associates, governmental or regulatory bodies or competitors and may include class actions.
From time to time, we are subject to allegations, and may be party to legal claims and regulatory proceedings, relating to our business operations. See Part I. Item 3. “Legal Proceedings.” Such allegations, claims and proceedings may be brought by third parties, including our shareholders, customers, associates, governmental or regulatory bodies or competitors and may include class actions.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeA summary of our stores by location as of January 1, 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 17 1 3 3 NC 19 — 36 2 AR — — — 1 ND — — — — AZ 25 10 9 2 NE 4 1 — 1 CA 70 20 43 4 NH — — 2 — CO 24 1 7 3 NJ 34 — 3 1 CT 10 — 7 — NM — 2 6 3 DE — — — — NV — 3 2 1 FL 80 36 2 2 NY 35 — 13 1 GA 40 3 30 5 OH 32 1 — 1 HI — — 3 — OK — — — — IA 8 1 — — OR 11 — 3 9 ID 6 — — — PA 37 4 13 — IL 51 2 — — RI — — — — IN 15 10 — — SC 15 3 6 1 KS — 1 8 2 SD — — 1 — KY 5 1 — 2 TN 22 2 — — LA 15 — 1 1 TX 111 5 3 5 MA — — 2 — UT 13 5 — 1 MD 22 — 1 1 VA 28 — 16 1 ME — — — — VT — — — — MI 30 11 — — WA 14 1 1 19 MN 15 — — — WI 11 — — — MO 20 1 — 1 WV — — 6 — MS — — — 2 WY 1 — 1 — ___________ Note: ‘Other’ includes Vista Optical in Fred Meyer stores and on military bases.
Biggest changeA 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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 8. of this Form 10-K. 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.
Biggest changeIssuer 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.
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 18, 2022, there were approximately 20 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 24, 2023, there were approximately 19 holders of record of our common stock.
On November 29, 2021, the Company’s Board of Directors authorized a share repurchase program up 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. Shares may be repurchased under the program through December 30, 2023.
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.
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 October 26, 2017 (the Company’s initial day of trading) through January 1, 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 29, 2017 through December 31, 2022.
On February 23, 2022, our Board of Directors authorized a $100 million increase to the share repurchase authorization, for a total authorization of $200 million. Following repurchases in fiscal year 2021, $130 million remains available under the share repurchase authorization.
On February 23, 2022, our Board of Directors authorized a $100 million increase to the share repurchase authorization, for a total authorization of $200 million.
The timing and amounts of any such repurchases will depend on a variety of factors, including the market price of the Company’s shares and general market and economic conditions. Dividends We have not paid dividends in the past and have no current plans to pay dividends on our common stock.
Dividends We have not paid dividends in the past and have no current plans to pay dividends on our common stock.
Removed
Issuer Purchases of Equity Securities The following table summarizes the repurchases of the Company’s common stock during the three months ended January 1, 2022: In thousands, except per share amounts Period Total Number of Shares Purchased (1) Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) October 3, 2021 - October 30, 2021 — — — — October 31, 2021 - December 4, 2021 1,425 $ 49.04 1,425 $ 30,060 December 5, 2021 - January 1, 2022 — — — — Total 1,425 $ 49.04 1,425 $ 30,060 (1) See above for information about the Company’s share repurchases, as well as Note 1.“Business and Significant Accounting Policies”, in the consolidated financial statements included in Part II.
Added
Repurchases 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.
Added
The timing and amounts of any such repurchases will depend on a variety of factors, including the market price of the Company’s shares, general market and economic conditions, legal requirements and tax implications. The Company expects to fund the share repurchases using cash on hand.
Added
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.

Item 7. Management's Discussion & Analysis

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

140 edited+32 added−61 removed115 unchanged
Biggest change(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.
Biggest changeComparable store sales growth (1) Stores open at end of period Net revenue (2) In thousands, except percentage and store data Fiscal Year 2022 Fiscal Year 2021 Fiscal Year 2022 Fiscal Year 2021 Fiscal Year 2022 Fiscal Year 2021 Owned & Host segment America’s Best (7.7) % 23.5 % 905 840 $ 1,366,019 68.1 % $ 1,423,386 68.4 % Eyeglass World (6.7) % 25.2 % 136 125 217,727 10.9 % 225,096 10.8 % Military (4.3) % 15.8 % 54 54 22,114 1.1 % 23,103 1.1 % Fred Meyer (5.1) % 13.4 % 29 29 11,508 0.6 % 12,130 0.6 % Owned & Host segment total 1,124 1,048 $ 1,617,368 80.6 % $ 1,683,715 80.9 % Legacy segment (8.4) % 19.3 % 230 230 151,877 7.6 % 165,477 8.0 % Corporate/Other — — — — 242,822 12.1 % 236,299 11.4 % Reconciliations — — — — (6,663) (0.3) % (5,966) (0.3) % Total (7.5) % 22.4 % 1,354 1,278 $ 2,005,404 100.0 % $ 2,079,525 100.0 % Adjusted Comparable Store Sales Growth (3) (7.6) % 23.0 % _________ (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.
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 14. “Segment Reporting” in our consolidated financial statements included in Part II.
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.
We define Operating Margin as Adjusted Operating Income as a percentage of net revenue. We define EBITDA as net income, plus interest expense, income tax provision (benefit) and depreciation and amortization.
We define Adjusted Operating Margin as Adjusted Operating Income as a percentage of net revenue. We define EBITDA as net income, plus interest expense (income), net, income tax provision (benefit) and depreciation and amortization.
GAAP to be added back for diluted earnings per share, losses (gains) on change in fair value of derivatives, 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, 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.
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 2021.
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.
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 2021. 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.
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.
No such penalties have been assessed under our current arrangement, which began in 2012. We also sell to our Legacy partner merchandise that is stocked in retail locations we manage pursuant to a separate supplier agreement, and provide centralized laboratory services for the finished eyeglasses for our Legacy partner’s customers in stores that we manage.
No such penalties have been assessed under our current arrangement, which began in 2012. We also sell to our Legacy partner merchandise that is stocked in retail locations we m anage pursuant to a separate supplier agreement, and provide centralized laboratory services for the finished eyeglasses for our Legacy partner’s customers in stores that we manage.
The increases in comparable store sales growth and Adjusted Comparable Store Sales Growth were primarily driven by an increase in customer transactions and, to a lesser extent, higher average ticket as a result 55 Table of Contents of customer demand, primarily the effect of our stores being temporarily closed for a portion of fiscal year 2020 and government stimulus.
The increases in comparable store sales growth and Adjusted Comparable Store Sales Growth were primarily driven by an increase in customer transactions and, to a lesser extent, higher average ticket as a result 58 Table of Contents of customer demand, primarily the effect of our stores being temporarily closed for a portion of fiscal year 2020 and government stimulus.
We define Adjusted EBITDA as net income, plus interest expense, income tax provision (benefit) and depreciation and amortization, further adjusted to exclude stock compensation expense, loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, and 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, and certain other expenses.
“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 long-term debt. (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 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.
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 2021 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 2022 by approximately $2 million; this amount would have been recognized at different times over the contract period.
We define Adjusted Diluted EPS as diluted earnings per share, adjusted for the per share impact of stock 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, amortization of debt discounts and deferred financing costs of our term loan borrowings, amortization of the conversion feature and deferred financing costs of our 2025 N otes when not required under U.S.
We define Adjusted Diluted EPS as diluted earnings per share, adjusted for the per share impact of 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, amortization of debt discounts and deferred financing costs of our term loan borrowings, amortization of the conversion feature and deferred financing costs related to our 2025 N otes when not required under U.S.
Our e-commerce business consists of five proprietary branded websites, including aclens.com, discountglasses.com and discountcontactlenses.com, and nine th ird-party websites with established retailers, such as Walmart, Sam’s Club and Giant Eagle as well as mid-sized vision insurance providers.
Our e-commerce business consists of five proprietary branded websites, including aclens.com, discountglasses.com and discountcontactlenses.com, and seven th ird-party websites with established retailers, such as Walmart, Sam’s Club and Giant Eagle as well as mid-sized vision insurance providers.
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, 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 expense or the cash necessary to pay income taxes; • 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; 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.
For further information, please see “Risk Factors” and “Forward-Looking Statements.” Overview We are one of the largest and fastest growing 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 and a leader in the attractive value segment of the U.S. optical retail industry.
The decrease was driven by lower growth in optometrist-related costs and higher eye exam revenue, primarily the impact of the temporary store closures to the public in fiscal year 2020. 56 Table of Contents Legacy segment costs of services and plans.
The decrease was driven by lower growth in optometrist-related costs and higher eye exam revenue, primarily the impact of the temporary store closures to the public in fiscal year 2020. 59 Table of Contents Legacy segment costs of services and plans.
This exposes us to concentration of customer risk. Our consolidated results also include the following activity recorded in our Corporate/Other category: • Our e-commerce platform of 14 dedicated websites managed by AC Lens.
This exposes us to concentration of customer risk. Our consolidated results also include the following activity recorded in our Corporate/Other category: • Our e-commerce platform of 12 dedicated websites managed by AC Lens.
The 2025 Notes pay interest semi-annually in arrears on May 15 and November 15 of each year, commencing on November 15, 2020, at an annual rate of 2.50%. Share Repurchase Authority 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.
The 2025 Notes pay interest semi-annually in arrears on May 15 and November 15 of each year, commencing on November 15, 2020, at an annual rate of 2.50%. 65 Table of Contents Share Repurchase Authority 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.
(i) Amortization of deferred financing costs and other non-cash charges related to our long-term debt, including amortization of the conversion feature related to the 2025 Notes of $10.0 million for fiscal year 2020.
(e) Amortization of deferred financing costs and other non-cash charges related to our long-term debt, including amortization of the conversion feature related to the 2025 Notes of $10.0 million for fiscal year 2020.
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.
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.
Net Cash Used for Investing Activities Net cash used for investing activities increased by $16.5 million, to $92.9 million, during fiscal year 2021 from $76.4 million during fiscal year 2020. The increase was primarily due to new store openings, offset partially by proceeds of $2.4 million in connection with the sale of the Company’s equity method investee.
Net cash used for investing activities increased by $16.5 million, to $92.9 million, during fiscal year 2021 from $76.4 million during fiscal year 2020. The increase was primarily due to new store openings, offset partially by proceeds of $2.4 million in connection with the sale of the Company’s equity method investee. Refer to Note 1.
Management compensates for these limitations by primarily relying on our U.S. GAAP results in addition to using EBITDA and the Company Non-GAAP Measures. 61 Table of Contents The presentations of these measures have limitations as analytical tools and should not be considered in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP.
Management compensates for these limitations by primarily relying on our U.S. GAAP results in addition to using EBITDA and the Company Non-GAAP Measures. The presentations of these measures have limitations as analytical tools and should not be considered in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP.
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 also distributes contact lenses wholesale to Walmart and Sam’s Club. We incur costs at a higher percentage of sales than other product categories.
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. • Wholesale contact lenses distribution to Walmart and Sam’s Club by AC Lens. We incur costs at a higher percentage of sales than other product categories.
As of January 1, 2022, our total inventory balance was $123.7 million. A 10% increase in the obsolescence and shrinkage reserves will not have a material impact on our financial position. See Note 2. “Business and Significant Accounting Policies” to our consolidated financial statements included in Part II. Item 8 of this Form 10-K.
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.
AC Lens sales associated with Walmart and Sam’s Club contact lenses distribution arrangements represen ted 6.5% of c onsolidated net revenue. • 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.
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.
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 2021: In thousands Interest Rate (2) Amount Outstanding Amount Available for Additional Borrowing 2025 Notes, due May 15, 2025 Fixed $ 402,500 $ — Term loan, due July 18, 2024 Variable 150,000 — Revolving credit facility, due July 18, 2024 (1) Variable — 293,619 Total $ 552,500 $ 293,619 ____________ (1) At January 1, 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 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.
(l) Tax benefit associated with accounting guidance requiring excess tax benefits related to stock option exercises to be recorded in earnings as discrete items in the reporting period in which they occur. (m) Represents the income tax effect of the total adjustments at our combined statutory federal and state income tax rates.
(h) Tax benefit associated with accounting guidance requiring excess tax benefits related to stock option exercises to be recorded in earnings as discrete items in the reporting period in which they occur. (i) Represents the income tax effect of the total adjustments at our combined statutory federal and state income tax rates.
Interim Results and Seasonality 51 Table of Contents Historically, our business has realized a higher portion of net revenue, operating income, and cash flows from operations in the first half of the fiscal year, and a lower portion of net revenue, operating income, and cash flows from operations in the fourth fiscal quarter.
Interim Results and Seasonality Historically, our business has realized a higher portion of net revenue, operating income, and cash flows from operations in the first half of the fiscal year, and a lower portion of net revenue, operating income, and cash flows from operations in the fourth fiscal quarter.
(2) The interest rate on the term loan and revolving credit facility pursuant to the Credit Agreement is at an Applicable Margin of 1.25% for LIBOR Loans with LIBOR to not be lower than 0.00% in any period, and an Applicable Margin of 0.25% for ABR Loans, as of fiscal year end 2021.
(2) The interest rate on the term loan and revolving credit facility pursuant to the Credit Agreement is at an Applicable Margin range from 1.25% to 2.00% for LIBOR Loans with LIBOR to not be lower than 0.00% in any period, and an Applicable Margin range from 0.25% to 1.00% for ABR Loans, as of fiscal year end 2022.
This strategic relationship with Walmart is in its 32 nd year. Pursuant to a January 2020 amendment to our management & services agreement with Walmart, we added five additional Vision Centers in Walmart stores in fiscal year 2020 .
This strategic relationship with Walmart is in its 33rd year. Pursuant to a January 2020 amendment to our management & services agreement with Walmart, we added five additional Vision Centers in Walmart stores in fiscal year 2020.
The decrease in cash provided by financing activities was primarily due to the prepayment of our term loan of $167.4 million and increases in purchases of treasury stock of $72.6 million in the current fiscal year compared to proceeds of $548.8 million from the issuance of the 2025 Notes and borrowings on our revolving credit facility partially offset by principal payments on long-term debt of $369.3 million during fiscal year 2020.
The decrease was primarily due to the prepayment of our term loan of $167.4 million and increases in purchases of treasury stock of $72.6 million during fiscal year 2021 compared to proceeds of $548.8 million from the issuance of the 2025 Notes and borrowings on our revolving credit facility partially offset by principal payments on long-term debt of $369.3 million during fiscal year 2020.
We began reopening our stores to the public on April 27, 2020 and on June 8, 2020, we announced the successful completion of the reopening process. Comparisons of current year results to prior year results reflect the material and unprecedented impact of these temporary store closures.
We began reopening our stores to the public on April 27, 2020 and on June 8, 2020, we announced the successful completion of the reopening process. Comparisons of fiscal year 2021 results to fiscal year 2020 results reflect the material and unprecedented impact of these temporary store closures.
The timing and amounts of any such repurchases will depend on a variety of factors, including the market price of the Company’s shares and general market and economic conditions. The Company expects to fund the share repurchases using cash on hand.
The timing and amounts of any such repurchases will depend on a variety of factors, including the market price of the Company’s shares, general market and economic conditions, legal requirements and tax implications. The Company expects to fund the share repurchases using cash on hand.
Our lease arrangements require us to pay executory costs such as insurance, real estate taxes and common area maintenance and some of our leases are based on a percentage of sales. These expenses are generally variable, not included above, and were approximately $30.6 million during fiscal year ended 2021. Refer to Note 8.
Our lease arrangements require us to pay executory costs such as insurance, real estate taxes and common area maintenance and some of our leases are based on a percentage of sales. These expenses are generally variable, not included above, and were approximately $33.1 million during fiscal year ended 2022. Refer to Note 8.
We lease space from Walmart within or adjacent to each of the locations we manage and use this space for vision care services provided by independent optometrists or optometrists employed by us or by independent professional corporations or similar entities. During the fiscal year 2021, sales associated with this arrangement represented 8.0% of consolidated net revenue.
We lease space from Walmart within or adjacent to each of the locations we manage and use this space for vision care services provided by independent optometrists or optometrists employed by us or by independent professional corporations or similar entities. During the fiscal year 2022, sales associated with this arrangement represented 7.6% of consolidated net revenue.
(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 0.4% and a decrease of 0.1% from total comparable store sales growth based on consolidated net revenue for fiscal year 2020 and fiscal year 2019, 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 0.2% from total comparable store sales growth based on consolidated net revenue for the fiscal years 2020 and 2019, 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 an increase of 0.7% from total comparable store sales growth based on consolidated net revenue for fiscal year 2021 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 2022 and 2021, respectively.
(k) 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) including our share of (gains) losses on equity method investments of $(2.4) million and $1.8 million for fiscal years 2021 and 2019, respectively; and other expenses and adjustments which are primarily related to excess payroll taxes on stock option exercises, executive severance and relocation.
(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.
Brand and Segment Information Our operations consist of two reportable segments: • Owned & Host – As of fiscal ye ar end 2021, our owned brands consisted of 840 America’s Best Contacts and Eyeglasses (“America’s Best”) retail stores and 125 Eyeglass World retail stores.
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.
As of fiscal year end 2021, we had $305.8 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 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.
Fiscal year 2020 includes 53 weeks. 64 Table of Contents Net Cash Provided by Operating Activities Cash flows provided by operating activities increased by $24.0 million to $258.9 million, or 10.2%, during fiscal year 2021 from $235.0 million during fiscal year 2020 as a result of net income of $92.0 million, offset by a decrease in non-cash expense items of $13.2 million , and changes in net working capital and other assets and liabilities, which used an additional $54.8 million in cash compared to fiscal year 2020.
Cash flows provided by operating activities increased by $24.0 million to $258.9 million, or 10.2%, during fiscal year 2021 from $235.0 million during fiscal year 2020 as a result of net income of $92.0 million, offset by a decrease in non-cash expense items of $13.2 million, and changes in net working capital and other assets and liabilities, which used an additional $54.8 million in cash compared to fiscal year 2020. 64 Table of Contents Working capital was most significantly impacted by changes in inventories, accounts payable, other liabilities, and accounts receivable.
Fiscal year 2020 includes 53 weeks. 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. (b) Reflects write-off of deferred financing fees related to the extinguishment of debt.
Fiscal year 2020 includes 53 weeks. 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.
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 • effects and relevant risk exposures may be exacerbated by the ongoing threat of the COVID-19 pandemic A new store is included in the comparable store sales calculation during the 13th full fiscal month following the store’s opening.
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.
In the impairment analysis for goodwill, fair value exceeded carrying value by at least 30% for all of our reporting units. Future changes in 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.
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.
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 cash on hand and cash expected to be generated from operations. We follow U.S.
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.
References herein to “fiscal year 2021” relate to the 52 weeks ended January 1, 2022, references herein to “fiscal year 2020” relate to the 53 weeks ended January 2, 2021 and references herein to “fiscal year 2019” relate to the 52 weeks ended December 28, 2019.
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.
GAAP and should not be considered as an alternative to net income or income from operations as a measure of financial performance or cash flows provided by operating activities as a measure of liquidity, or any other performance measure derived in accordance with U.S. GAAP.
EBITDA and the Company Non-GAAP Measures are not recognized terms under U.S. GAAP and should not be considered as an alternative to net income or income from operations as a measure of financial performance or cash flows provided by operating activities as a measure of liquidity, or any other performance measure derived in accordance with U.S. GAAP.
Decreases in managed care mix increase costs of products as a percentage of net product sales and have a corresponding positive 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.
In comparison, the income tax benefit associated with fiscal year 2019, reflected income tax expense at our statutory federal and state rate of 25.5% offset by a $10.1 million income tax benefit resulting from stock option exercises. 60 Table of Contents Non-GAAP Financial Measures We define Adjusted Operating Income as net income, plus interest expense and income tax provision (benefit), further adjusted to exclude stock 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 other expenses.
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.
The increase in store asset impairment charges during fiscal year 2020 was primarily related to our Owned & Host segment and was driven by lower than projected customer sales volume in certain stores and other entity-specific assumptions.
The store asset impairment charge is primarily related to our Owned & Host segment and is driven by lower than projected customer sales volume in certain stores and other entity-specific assumptions.
We estimate that optical consumers typically replace their eyeglasses every two to three years, and contact lens customers order new lenses every six to 12 months, reflecting the predictability of these recurring purchase behaviors; however, the long-term effects of the COVID-19 pandemic on consu mer preferences and recurring purchase behaviors remain uncertain.
We estimate that optical consumers typically replace their eyeglasses every two to three years, and contact lens customers order new lenses every six to 12 months, reflecting the predictability of these recurring purchase behaviors; however, the effects of the current economic environment and the impact of the COVID-19 pandemic on consu mer preferences resulted in reduced customer demand in 2022.
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. We did not test any finite-lived intangible assets for impairment in fiscal year 2021.
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.
The following table summarizes cash flows provided by (used for) operating activities, investing activities and financing activities for the periods indicated: In thousands Fiscal Year 2021 Fiscal Year 2020 Fiscal Year 2019 Cash flows provided by (used for): Operating activities $ 258,938 $ 234,981 $ 165,081 Investing activities (92,897) (76,410) (100,631) Financing activities (234,324) 176,281 (42,141) Net increase (decrease) in cash, cash equivalents and restricted cash $ (68,283) $ 334,852 $ 22,309 Note: Fiscal years 2021 and 2019 include 52 weeks.
The following table summarizes cash flows provided by (used for) operating activities, investing activities and financing activities for the periods indicated: In thousands Fiscal Year 2022 Fiscal Year 2021 Fiscal Year 2020 Cash flows provided by (used for): Operating activities $ 119,198 $ 258,938 $ 234,981 Investing activities (110,894) (92,897) (76,410) Financing activities (84,556) (234,324) 176,281 Net increase (decrease) in cash, cash equivalents and restricted cash $ (76,252) $ (68,283) $ 334,852 Note: Fiscal years 2022 and 2021 include 52 weeks.
Working capital was most significantly impacted by changes in inventories, accounts payable, other liabilities, and accounts receivable. Increases in inventory and decreases in accounts payable, which used $26.3 million and $24.6 million in year-over-year cash, respectively, were primarily due to increased purchases including inventory forward buys and other payments during 2021.
Increases in inventory and decreases in accounts payable, which used $26.3 million and $24.6 million in year-over-year cash, respectively, were primarily due to increased purchases including inventory forward buys and other payments during 2021.
Asset impairment We recognized $22.0 million for impairment primarily of tangible long-lived assets and ROU assets associated with our retail stores in fiscal year 2020 compared to $8.9 million recognized in fiscal year 2019.
Asset impairment We recognized $5.8 million for impairment primarily of tangible long-lived assets and ROU assets associated with our retail stores in fiscal year 2022 compared to $4.4 million recognized in fiscal year 2021.
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. We continue to prioritize cash conservation and prudent use of cash, while safely conducting normal operations.
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.
Capital Expenditures In thousands Fiscal Year 2021 Fiscal Year 2020 Fiscal Year 2019 New stores (owned brands) $ 40,058 $ 27,865 $ 37,734 Laboratories, distribution centers and optometric equipment 20,900 19,882 19,690 Information technology and other 34,557 29,076 43,901 Total $ 95,515 $ 76,823 $ 101,325 Note: Fiscal years 2021 and 2019 include 52 weeks.
Capital Expenditures In thousands Fiscal Year 2022 Fiscal Year 2021 Fiscal Year 2020 New stores (owned brands) $ 49,761 $ 40,058 $ 27,865 Laboratories, distribution centers and optometric equipment 30,073 20,900 19,882 Information technology and other 33,713 34,557 29,076 Total $ 113,547 $ 95,515 $ 76,823 Note: Fiscal years 2022 and 2021 include 52 weeks.
We adjust for amortization of deferred financing costs related to the 2025 Notes only when adjusting these costs is not required in the calculation of diluted earnings per share in accordance with the if-converted method under U.S. GAAP.
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 base our estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances.
We base our estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions.
Costs of products as a percentage of net product sales increased from 46.2% for fiscal year 2019 to 47.8% for fiscal year 2020. The increase was primarily driven by increased contact lens mix and a higher mix of non-managed care customer transactions versus managed care customer transactions.
Costs of products as a percentage of net product sales decreased from 47.7% for fiscal year 2021 to 46.8% for fiscal year 2022. The decrease was primarily driven by a higher mix of managed care customer transactions versus non-managed care customer transactions.
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 the Company’s goodwill balance at fiscal year-end.
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.
Closed stores are removed from the calculation for time periods that are not comparable. In the past, we have closed stores as a result of poor store performance, lease expiration or non-renewal and/or the terms of our arrangements with our Host and Legacy partners. Managed Care and Insurance Managed care has become increasingly important to the optical retail industry.
In the past, we have closed stores as a result of poor store performance, lease expiration or non-renewal and/or the terms of our arrangements with our Host and Legacy partners. Managed Care and Insurance Managed care has become increasingly important to the optical retail industry. An increasing percentage of our customers receive vision care insurance coverage through managed care payors.
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 2021 by approximately $2 million.
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.
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 a rate of 7.5% in fiscal year 2021. We had $346.4 million of property and equipment, net, and ROU assets of $354.9 million as of January 1, 2022.
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.
In thousands, except earnings per share, percentage and store data Fiscal Year 2021 Fiscal Year 2020 Fiscal Year 2019 Revenue: Net product sales $ 1,718,344 $ 1,418,283 $ 1,426,136 Net sales of services and plans 361,181 293,477 298,195 Total net revenue 2,079,525 1,711,760 1,724,331 Costs applicable to revenue (exclusive of depreciation and amortization): Products 633,116 551,783 574,351 Services and plans 271,663 234,841 232,168 Total costs applicable to revenue 904,779 786,624 806,519 Operating expenses: Selling, general and administrative expenses 900,798 724,985 744,488 Depreciation and amortization 97,089 91,585 87,244 Asset impairment 4,427 22,004 8,894 Other expense (income), net (2,505) (445) 3,611 Total operating expenses 999,809 838,129 844,237 Income from operations 174,937 87,007 73,575 Interest expense, net 25,612 48,327 33,300 Loss on extinguishment of debt — — 9,786 Earnings before income taxes 149,325 38,680 30,489 Income tax provision (benefit) 21,081 2,403 (2,309) Net income $ 128,244 $ 36,277 $ 32,798 Operating data: Number of stores open at end of period 1,278 1,205 1,151 New stores opened during the period 75 62 75 Adjusted Operating Income $ 204,749 $ 134,148 $ 114,300 Diluted EPS $ 1.43 $ 0.44 $ 0.40 Adjusted Diluted EPS $ 1.48 $ 0.91 $ 0.75 Adjusted EBITDA 1 $ 294,350 $ 218,307 $ 194,139 Note: Fiscal years 2021 and 2019 include 52 weeks.
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.
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.
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.
The following table reconciles our Adjusted Operating Income, Adjusted Operating Margin, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin to net income; and Adjusted Diluted EPS for the periods presented: In thousands Fiscal Year 2021 Fiscal Year 2020 Fiscal Year 2019 Net income $ 128,244 6.2 % $ 36,277 2.1 % $ 32,798 1.9 % Interest expense 25,612 1.2 % 48,327 2.8 % 33,300 1.9 % Income tax provision (benefit) 21,081 1.0 % 2,403 0.1 % (2,309) (0.1) % Stock compensation expense (a) 14,886 0.7 % 10,740 0.6 % 12,670 0.7 % Loss on extinguishment of debt (b) — — % — — % 9,786 0.6 % Asset impairment (c) 4,427 0.2 % 22,004 1.3 % 8,894 0.5 % Litigation settlement (d) 1,500 0.1 % 4,395 0.3 % — — % Secondary offering expenses (e) — — % — — % 401 — % Management realignment expenses (f) — — % — — % 2,155 0.1 % Long-term incentive plan (g) — — % — — % 2,830 0.2 % Amortization of acquisition intangibles (h) 7,488 0.4 % 7,426 0.4 % 7,405 0.4 % Other (k) 1,511 0.1 % 2,576 0.2 % 6,370 0.4 % Adjusted Operating Income / Adjusted Operating Margin $ 204,749 9.8 % $ 134,148 7.8 % $ 114,300 6.6 % Note: Fiscal years 2021 and 2019 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 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.
In thousands, except per share amounts Fiscal Year 2021 Fiscal Year 2020 Fiscal Year 2019 Diluted EPS $ 1.43 $ 0.44 $ 0.40 Stock compensation expense (a) 0.15 0.13 0.16 Loss on extinguishment of debt (b) — — 0.12 Asset impairment (c) 0.05 0.27 0.11 Litigation settlement (d) 0.02 0.05 — Secondary offering expenses (e) — — 0.00 Management realignment expenses (f) — — 0.03 Long-term incentive plan expense (g) — — 0.03 Amortization of acquisition intangibles (h) 0.08 0.09 0.09 Amortization of debt discounts and deferred financing costs (i) 0.02 0.14 0.02 Losses (gains) on change in fair value of derivatives (j) (0.03) 0.05 — Other (n) (0.01) 0.03 0.08 Tax benefit of stock option exercises (l) (0.15) (0.10) (0.12) Tax effect of total adjustments (m) (0.08) (0.19) (0.16) Adjusted Diluted EPS $ 1.48 $ 0.91 $ 0.75 Weighted average diluted shares outstanding 96,134 82,793 81,683 Note: Fiscal years 2021 and 2019 include 52 weeks.
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.
During fiscal year 2021, the Company repurchased 1.4 million shares of its common stock for $69.9 million under the share repurchase program. After these repurchases, $130 million remains available under the share repurchase authorization.
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.
We continue to evaluate our use of the Company Non-GAAP measures in the context of the development of our business, and may introduce or discontinue certain measures in the future as we deem appropriate.
GAAP results with Non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than U.S. GAAP results alone. We continue to evaluate our use of the Company Non-GAAP measures in the context of the development of our business, and may introduce or discontinue certain measures in the future as we deem appropriate.
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. Our mission is to make quality eye care and eyewear affordable and accessible to all Americans. We achieve this by providing eye exams, eyeglasses and contact lenses to value seeking and lower income consumers.
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. We achieve this by providing eye exams, eyeglasses and contact lenses to value seeking and lower income consumers with an opening price point that strives to be among the lowest in the industry.
Fiscal year 2020 includes 53 weeks. 1 Adjusted EBITDA no longer excludes new store pre-opening expenses and non-cash rent. Refer to Non-GAAP Financial Measures section below for our presentation of Adjusted EBITDA.
Fiscal year 2020 includes 53 weeks. (1) Refer to Non-GAAP Financial Measures section below for our presentation of Adjusted Operating Income, Adjusted Diluted EPS and Adjusted EBITDA.
Fiscal year 2020 includes 53 weeks. 66 Table of Contents We expect capital expenditures in fiscal year 2022 to be approximately between $110 million and $115 million and to be used primarily in supporting the Company’s growth through investments in new stores and information technology improvements.
Fiscal year 2020 includes 53 weeks. We expect capital expenditures in fiscal year 2023 to be approximately between $115 million and $120 million and to be used primarily in supporting the Company’s growth through investments in new stores, remote medicine, EHR, optical laboratories, and IT infrastructure.
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.
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.
Net cash provided by (used fo r) financing activities increased $218.4 million, from $42.1 million use of cash to $176.3 million provision of cash during fiscal year 2020.
Net cash provided by (used for) financing activities decreased $410.6 million, from $176.3 million provision of cash during fiscal year 2020 to $234.3 million use of cash during fiscal year 2021.
Fiscal Year 2021 Fiscal Year 2020 Fiscal Year 2019 Percentage of net revenue: Total costs applicable to revenue 43.5 % 46.0 % 46.8 % Selling, general and administrative 43.3 % 42.4 % 43.2 % Total operating expenses 48.1 % 49.0 % 49.0 % Income from operations 8.4 % 5.1 % 4.3 % Net income 6.2 % 2.1 % 1.9 % Adjusted Operating Income 9.8 % 7.8 % 6.6 % Adjusted EBITDA 14.2 % 12.8 % 11.3 % 54 Table of Contents Fiscal Year 2021 compared to Fiscal Year 2020 As a result of the COVID-19 pandemic, our retail stores closed to the public beginning on March 19, 2020.
Fiscal 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.
Risk Factors.” 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 49 Table of Contents openings. As stores mature, profitability typically increases significantly.
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.
Changes in estimates and assumptions used in our impairment testing of property and equipment could result in future impairment losses, which could be material. 68 Table of Contents Impairment of Goodwill and Intangible Assets We calculate the fair value of our reporting units using the income approach based on discounted cash flows analysis whereby estimated after-tax cash flows are discounted using a weighted average cost of capital.
Impairment of Goodwill and Intangible Assets We calculate the fair value of our reporting units using the income approach based on discounted cash flows analysis whereby estimated after-tax cash flows are discounted using a weighted average cost of capital. The cash flows used in the analysis are based on financial forecasts developed internally by management and require significant judgment.
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. We have made significant investments in information technology systems, supply chain systems, marketing, and personnel, including experienced industry executives, and management and merchandising teams to support our long-term growth objectives.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+0 added−0 removed0 unchanged
Biggest changeAs of fiscal year 2021, $150.0 million of term loan borrowings were subject to variable interest rates, with a weighted average borrowing rate of 2.5%. An increase to market rates of 1.0% as of January 1, 2022 would not result in a material increase to interest expense.
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%.
If market interest rates increase, the interest rate on our variable rate debt will increase and will create higher debt service requirements, which would adversely affect our cash flow and could adversely impact our results of operations. Our interest rate collar is intended to mitigate some of the effects of increases in interest rates.
If market interest rates increase, the interest rate on our variable rate debt will increase and will create higher debt service requirements, which would adversely affect our cash flow and could adversely impact our results of operations. Our interest rate collar is intended to mitigate some of the effects of increases in interest rates. Refer to Note 1.
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 9. “Fair Value Measurement” and Note 12.
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.
“Interest Rate Derivatives” to our consolidated financial statements included in Part II. Item 8 of this Form 10-K. 69 Table of contents A portion of our debt bears interest at variable rates.
“Fair Value Measurement” to our consolidated financial statements included in Part II. Item 8 of this Form 10-K. A portion of our debt bears interest at variable rates.
Assuming a decrease to market rates of 1.0%, the resulting impact to interest expense related to the interest rate derivative would be approximately $8 million. 70 Table of Contents
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

Other EYE 10-K year-over-year comparisons