SECURITIES AND EXCHANGE COMMISSION

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

EYE

NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class						Outstanding at July ~~30, 2021~~29, 2022
Common stock, $0.01 par value						~~81,875,123~~78,887,096

NATIONAL VISION HOLDINGS, INC. AND SUBSIDIARIES

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. All statements, other than statements of historical facts included in this Form 10-Q, including statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, results of operations, financial position, business outlook, business trends and other information, may be forward-looking statements.

Words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “estimates,” or “anticipates,” and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts or guarantees of future performance and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and projections will result or be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Form 10-Q. Such risks, uncertainties and other important factors that could cause actual results to differ include, among others, the risks, uncertainties and factors set forth in Part II, Item 1A - “Risk Factors” in this Form 10-Q and Part I, Item 1A - “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended January ~~2, 2021~~1, 2022 (the ~~“2020~~“2021 Annual Report on Form 10-K”), as filed with the Securities and Exchange Commission (the “SEC”), as such risk factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov, and also include the following:

•the COVID-19 pandemic and its resurgence and variants, and the impact of evolving federal, state, and local governmental actions in response ~~thereto;~~thereto, including risks stemming from vaccination and testing programs and mandates;

•customer behavior in response to the continuing pandemic and its more recent outbreaks of ~~variants;~~variants, including the impact of such behavior on in-store traffic and sales;

•overall decline in the health of the economy and other factors impacting consumer spending, including inflation, rising interest rates and geopolitical instability;

•our ability to ~~keep our reopened~~open and operate new stores ~~open~~ in a ~~safe~~timely and cost-effective manner, or ~~at all,~~keep stores safely open in light of the continuing COVID-19 pandemic, and ~~its resurgence and variants;~~to successfully enter new markets;

•our ability to recruit and retain vision care professionals for our stores in general and in light of the pandemic;

•our ability to develop, maintain and extend relationships with managed vision care companies, vision insurance providers and other third-party payors;

•our ability to maintain the performance of our ~~host~~Host and ~~legacy~~Legacy brands and our current operating relationships with our ~~host~~Host and ~~legacy~~Legacy partners;

•our ability to adhere to extensive state, local and federal vision care and healthcare laws and regulations;

•our compliance with managed vision care laws and regulations;

•our ability to maintain sufficient levels of cash flow from our operations to execute or sustain our growth strategy or obtain additional financing at satisfactory terms or at all;

•the loss of, or disruption in the operations of, one or more of our distribution centers and/or optical laboratories, resulting in the inability to fulfill customer orders and deliver our products in a timely manner;

•risks associated with vendors from whom our products are sourced, including our dependence on a limited number of suppliers;

•our ability to compete successfully;

•our ability to effectively operate our information technology systems and prevent interruption or security breach;

•~~our growth strategy straining our existing resources and causing the performance of our existing stores to suffer;~~

•the impact of wage rate increases, inflation, cost increases and increases in raw material prices and energy prices;

•our growth strategy straining our existing resources and causing the performance of our existing stores to suffer;

•our ability to successfully and efficiently implement our marketing, advertising and promotional efforts;

•risks associated with leasing substantial amounts of space, including future increases in occupancy costs;

•the impact of certain technological advances, and the greater availability of, or increased consumer preferences for, vision correction alternatives to prescription eyeglasses or contact lenses, and future drug development for the correction of vision-related problems;

•our ability to retain our existing senior management team and attract qualified new personnel;

•our ability to manage our inventory;

•seasonal fluctuations in our operating results and inventory levels;

•our reliance on third-party coverage and reimbursement, including government programs, for an increasing portion of our revenues;

•risks associated with our e-commerce and omni-channel business;

•product liability, product recall or personal injury issues;

•our failure to comply with, or changes in, laws, regulations, enforcement activities and other requirements;

•the impact of any adverse litigation judgments or settlements resulting from legal proceedings relating to our business operations;

•risk of losses arising from our investments in technological innovators in the optical retail industry;

•our ability to adequately protect our intellectual property;

•risks associated with environmental, social and governance issues, including climate change;

•our significant amount of indebtedness and our ability to generate sufficient cash flow to satisfy our debt obligations;

•a change in interest rates as well as changes in benchmark rates and uncertainty related to the foregoing;

•restrictions in our credit agreement that limits our flexibility in operating our business;

•potential dilution to existing stockholders upon the conversion of our convertible notes; and

•risks related to owning our common stock, including our ability to comply with requirements to design and implement and maintain effective internal controls.

We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. There can be no assurance that (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct or (iv) our strategy, which is based in part on this analysis, will be successful. All forward-looking statements in this Form 10-Q apply only as of the date of this Form 10-Q or as of the date they were made and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

All references to “we,” “us,” “our,” or the “Company” in this Form 10-Q mean National Vision Holdings, Inc. and its subsidiaries, unless the context otherwise requires. References to “eye care practitioners” in this Form 10-Q mean optometrists and ophthalmologists and references to “vision care professionals” mean optometrists (including optometrists employed by us or by professional corporations owned by eye care practitioners with which we have arrangements) and opticians.

We use our website www.nationalvision.com as a channel of distribution of Company information. Financial and other important information regarding the Company is routinely accessible through and posted on our website. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive e-mail alerts and other information about National Vision Holdings, Inc. when you enroll your e-mail address by visiting the “Email Alerts” page of the Investor Resources section of our website at www.nationalvision.com/investors. The contents of our website are not, however, a part of this Form 10-Q.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

National Vision Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

~~As of July 3, 2021 and January 2, 2021~~

In Thousands, Except Par Value

The accompanying notes are an integral part of these condensed consolidated financial statements.

National Vision Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income

~~For the Three and Six Months Ended July 3, 2021 and June 27, 2020~~

In Thousands, Except Earnings Per Share

The accompanying notes are an integral part of these condensed consolidated financial statements.

National Vision Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

~~For the Three and Six Months Ended July 3, 2021~~

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

~~Table of Contents~~

National Vision Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of ~~Stockholders’ Equity~~

~~For the Three and Six Months Ended June 27, 2020~~Cash Flows

In Thousands

(Unaudited)

Three and Six Months Ended June 27, 2020
Common Stock Additional
Paid-In
Capital Accumulated
Other
Comprehensive
Loss Retained Earnings Treasury
Stock Total
Stockholders'
Equity
Shares Amount
Balances at December 28, 2019 79,678 $ 805 $ 700,121 $ (3,814) $ 107,132 $ (27,807) $ 776,437
Cumulative effect of change in accounting principle — — — — (529) — (529)
Balances at December 29, 2019 - as adjusted 79,678 805 700,121 (3,814) 106,603 (27,807) 775,908
Issuance of common stock 602 6 5,114 — — — 5,120
Stock based compensation — — 2,066 — — — 2,066
Purchase of treasury stock (2) — — — — (74) (74)
Unrealized gain (loss) on hedge instruments, net of tax — — — (6,602) — — (6,602)
Net income — — — — 9,742 — 9,742
Balances at March 28, 2020 80,278 $ 811 $ 707,301 $ (10,416) $ 116,345 $ (27,881) $ 786,160
Issuance of common stock 137 1 877 — — — 878
Stock based compensation — — 3,324 — — — 3,324
Conversion option related to convertible senior notes, net of allocated costs and tax — — 71,349 — — — 71,349
Unrealized gain (loss) on hedge instruments, net of tax — — — 3,061 — — 3,061
Net income (loss) — — — — (43,833) — (43,833)
Balances at June 27, 2020 80,415 $ 812 $ 782,851 $ (7,355) $ 72,512 $ (27,881) $ 820,939


	Six Months Ended
	July 2, 2022		July 3, 2021
Cash flows from operating activities:
Net income	$	39,881	$	81,033
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	50,396		47,580
Amortization of debt discount and deferred financing costs	1,584		2,268
Asset impairment	3,915		1,478
Deferred income tax expense	3,512		14,582
Stock based compensation expense	7,372		10,201
Losses (gains) on change in fair value of derivatives	(10,745)		125
Inventory adjustments	1,429		619
Other	2,455		1,253
Changes in operating assets and liabilities:
Accounts receivable	(8,661)		2,393
Inventories	(7,253)		(10,208)
Operating lease right of use assets and lease liabilities	568		149
Other assets	2,246		(1,148)
Accounts payable	5,669		12,816
Deferred and unearned revenue	3,253		18,782
Other liabilities	(7,590)		7,885
Net cash provided by operating activities	88,031		189,808
Cash flows from investing activities:
Purchase of property and equipment	(55,714)		(38,812)
Other	20		22
Net cash used for investing activities	(55,694)		(38,790)
Cash flows from financing activities:
Repayments on long-term debt	(4)		(117,375)
Proceeds from issuance of common stock	2,246		5,738
Purchase of treasury stock	(83,632)		(1,466)
Payments of debt issuance costs	—		(900)
Payments on finance lease obligations	(2,218)		(2,526)
Net cash used for financing activities	(83,608)		(116,529)
Net change in cash, cash equivalents and restricted cash	(51,271)		34,489
Cash, cash equivalents and restricted cash, beginning of year	306,876		375,159
Cash, cash equivalents and restricted cash, end of period	$	255,605	$	409,648

Supplemental cash flow disclosure information:
Cash paid for interest	$	9,329	$	14,640
Cash paid for taxes	$	5,632	$	6,995
Capital expenditures accrued at the end of the period	$	9,300	$	8,827

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

National Vision Holdings, Inc. and Subsidiaries

Index to Notes to Condensed Consolidated Financial Statements ~~of Cash Flows~~

~~For the Six Months Ended July 3, 2021 and June 27, 2020~~

~~In Thousands~~

~~(Unaudited)~~

Six Months Ended
July 3, 2021 June 27, 2020
Cash flows from operating activities:
Net income (loss) $ 81,033 $ (34,091)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 47,580 46,734
Amortization of debt discount and deferred financing costs 2,268 2,717
Asset impairment 1,478 13,766
Deferred income tax expense (benefit) 14,582 (13,686)
Stock based compensation expense 10,201 5,445
Losses (gains) on change in fair value of derivatives 125 4,871
Inventory adjustments 619 2,883
Other 1,253 3,328
Changes in operating assets and liabilities:
Accounts receivable 2,393 (14,408)
Inventories (10,208) 6,814
Operating lease right of use assets and lease liabilities 149 1,174
Other assets (1,148) 2,047
Accounts payable 12,816 11,630
Deferred and unearned revenue 18,782 8,025
Other liabilities 7,885 24,171
Net cash provided by operating activities 189,808 71,420
Cash flows from investing activities:
Purchase of property and equipment (38,812) (25,796)
Other 22 265
Net cash used for investing activities (38,790) (25,531)
Cash flows from financing activities:
Borrowings on long-term debt, net of discounts 0 548,769
Repayments on long-term debt (117,375) (369,269)
Proceeds from exercise of stock options 5,738 5,998
Purchase of treasury stock (1,466) (74)
Payments of debt issuance costs (900) (12,400)
Payments on finance lease obligations (2,526) (1,587)
Net cash provided by (used for) financing activities (116,529) 171,437
Net change in cash, cash equivalents and restricted cash 34,489 217,326
Cash, cash equivalents and restricted cash, beginning of year 375,159 40,307
Cash, cash equivalents and restricted cash, end of period $ 409,648 $ 257,633
Supplemental cash flow disclosure information:
Cash paid for interest $ 14,640 $ 13,810
Cash paid (received) for taxes $ 6,995 $ (1,452)
Capital expenditures accrued at the end of the period $ 8,827 $ 11,265

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

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National Vision Holdings, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Description of Business and Basis of Presentation

Nature of Operations

National Vision Holdings, Inc. (“NVHI,” the “Company,” “we,” “our,” or “us”) is a holding company whose operating subsidiaries include its indirect ~~wholly owned~~wholly-owned subsidiary, National Vision, Inc. (“NVI”) and NVI’s ~~wholly owned~~wholly-owned subsidiaries. We are a leading value retailer of eyeglasses and contact lenses in the United States. We ~~operated 1,249~~operated 1,314 and ~~1,205~~1,278 retail optical locations in the United States and its territories as of July ~~3, 2021~~2, 2022 and January ~~2, 2021,~~1, 2022, respectively, through our 5 store brands, including America’s Best Contacts and Eyeglasses (“America’s Best”), Eyeglass World, Vista Optical locations on select U.S. Army/Air Force military bases (“Military”) and within select Fred Meyer stores, and our management & services arrangement with Walmart (“Legacy”).

Basis of Presentation and Principles of Consolidation

We prepare our unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and, therefore, do not include all information and disclosures required by U.S. GAAP for complete consolidated financial statements. The ~~condensed consolidated balance sheet~~Condensed Consolidated Balance Sheet as of January ~~2, 2021~~1, 2022 has been derived from the audited consolidated balance sheet for the fiscal year then ended. These condensed consolidated financial statements reflect all normal and recurring adjustments which are, in the opinion of management, necessary to present fairly the Company’s consolidated results of the interim period. ~~Certain prior year amounts in the Condensed Consolidated Statements of Cash Flows have been reclassified to conform to the current presentation.~~

Certain information and disclosures normally included in our annual consolidated financial statements have been condensed or omitted; however, we believe that the disclosures included herein are sufficient for a fair presentation of the information presented. These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the fiscal year ended January ~~2, 2021~~1, 2022 included in the ~~2020~~2021 Annual Report on Form 10-K. The Company’s significant accounting policies are set forth in Note 1 within those consolidated financial statements. We use the same accounting policies in preparing interim condensed consolidated financial information and annual consolidated financial statements. There were no changes to our significant accounting policies during the six months ended July ~~3, 2021, except for the adoption of Accounting Standards Update (“ASU”) No. 2020-06,~~ Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ~~(“ASU 2020-06”)~~. ~~See “Adoption of New Accounting Pronouncements” below for further discussion.~~2, 2022.

The condensed consolidated financial statements include our accounts and those of our ~~subsidiaries, all of which are wholly-owned.~~wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain amounts within the Condensed Consolidated Statements of Operations and Comprehensive Income and footnotes to the condensed consolidated financial statements for fiscal year 2021 have been reclassified to conform to the fiscal year 2022 presentation.

The Company has consolidated certain entities meeting the definition of a variable interest entity (“VIE”) as the Company concluded that it is the primary beneficiary of the entities under the provisions of Accounting Standards Codification 810, Consolidation. At July 2, 2022, the variable interest entities include 31 professional corporations. The total assets of the consolidated VIEs included in the accompanying Condensed Consolidated Balance Sheets as of July 2, 2022 and January 1, 2022, were $5.7 million and $6.0 million, respectively, and the total liabilities of the consolidated VIEs were $6.2 million and $6.8 million, respectively.

Fiscal Year

Our fiscal year consists of 52 or 53 weeks ending on the Saturday closest to December 31. Fiscal year ~~2021~~2022 contains 52 weeks and will end on ~~January 1,~~December 31, 2022. All three and six month periods presented herein contain 13 and 26 weeks, respectively. All references to years and quarters relate to fiscal periods rather than calendar periods.

Table of ~~contents~~c ontents

Seasonality

The consolidated results of operations for the three and six months ended July 2, 2022 and July 3, 2021, ~~and June 27, 2020,~~ are not necessarily indicative of the results to be expected for the full fiscal year due to seasonality and uncertainty of general economic conditions that may impact our key end markets. Historically, our business has realized a higher portion of net revenue, income from operations, and cash flows from operations in the first half of the year, and a lower portion of net revenue, income from operations, and cash flows from operations in the fourth fiscal quarter. The first half seasonality is attributable primarily to the timing of our customers’ personal income tax refunds and annual health insurance program start/reset ~~periods.~~periods, although delays in tax refund timing have occurred in 2020 and 2021, and may continue to occur in future years. Seasonality related to fourth quarter holiday spending by retail customers generally does not impact our business. Our quarterly consolidated results generally may also be affected by the timing of new store openings, store closings, and certain holidays.

~~The~~Consumer behavior driven by the COVID-19 pandemic, shifting macroeconomic trends, consumer preferences and demand have resulted in a departure from seasonal norms we have experienced in recent years. We expect COVID-19 and the ~~temporary closure of our stores for a portion of the first half of fiscal year 2020 and caused changes in fiscal year 2020 seasonality. COVID-19 may~~current macroeconomic environment to continue to ~~cause changes to~~impact the seasonality we have historically ~~experienced in fiscal year 2021 and beyond.~~experienced.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Income Taxes

Our ~~income~~effective tax ~~provision~~rates for the three months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~were 32.4% and~~reflected~~ 15.8%, respectively, reflecting our statutory federal and state ~~rate~~rate of 25.5%~~, offset by discrete benefits from stock option exercises~~ and effects of ~~$4.1 million and $0.3 million, respectively.~~other permanent items. Our ~~income~~effective tax ~~provision~~rates for the six months ended July 2, 2022 and July 3, 2021 were 28.6% and ~~June 27, 2020 reflected~~18.8%, respectively, reflecting our statutory federal and state ~~rate~~rate of 25.5% ~~offset by discrete benefits from stock option exercises~~and effects of ~~$4.5 million and $3.0 million, respectively, and~~other permanent items as well as a stranded tax effect of $2.1 million associated with our matured interest rate swaps during the six months ended July 3, 2021.

~~Adoption of New Accounting Pronouncements~~Share Repurchases

~~Convertible Instruments and Contracts in an Entity’s Own Equity.~~ ~~In August 2020,~~During the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06. This new guidance simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity’s own equity. The guidance also requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. ASU 2020-06 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021. The company early adopted the guidance in the first quarter of 2021 using the modified retrospective approach and recognized a cumulative effect of the change of $7.3 million as an adjustment to the opening balance of retained earnings. Upon adoption of ASU 2020-06 the Company eliminated the equity components related to its convertible debt and increased the related liability components by $82.9 million. In addition, as a result of the adoption, our deferred tax liabilities decreased by $18.8 million and additional paid-in capital decreased by $71.4 million. The adoption did not have an impact on the calculated weighted average shares outstanding used in the calculation of diluted EPS since the Company was using the if-converted method prior to the adoption of ASU 2020-06. Refer to Note 11. “Earnings per Share” for more information.

~~The following tables summarize the impact of adoption on the Company’s condensed consolidated statement of operations for the three and~~ six months ended July ~~3, 2021:~~

~~Table~~2, 2022, the Company repurchased 2.7 million shares of ~~contents~~

Three Months Ended July 3, 2021
In thousands (except earnings per share) With ASU 2020-06 Adoption Without ASU 2020-06 Adoption Impact of Adoption
Income from operations $ 54,829 $ 54,829 $ 0
Interest expense, net 10,096 14,040 (3,944)
Debt issuance costs 92 92 0
Earnings before income taxes 44,641 40,697 3,944
Income tax provision 7,040 6,144 896
Net income $ 37,601 $ 34,553 $ 3,048
Earnings per share:
Basic $ 0.46 $ 0.42 $ 0.04
Diluted $ 0.42 $ 0.42 $ 0
Impact of adoption on basic earnings per share is calculated using impact on net income divided by basic weighted average shares outstanding during the period.

Six Months Ended July 3, 2021
In thousands (except earnings per share) With ASU 2020-06 Adoption Without ASU 2020-06 Adoption Impact of Adoption
Income from operations $ 116,277 $ 116,277 $ 0
Interest expense, net 16,426 24,176 (7,750)
Debt issuance costs 92 92 0
Earnings before income taxes 99,759 92,009 7,750
Income tax provision 18,726 17,010 1,716
Net income $ 81,033 $ 74,999 $ 6,034
Earnings per share:
Basic $ 0.99 $ 0.92 $ 0.07
Diluted $ 0.89 $ 0.89 $ 0
Impact of adoption on basic earnings per share is calculated using impact on net income divided by basic weighted average shares outstanding during the period.

its common stock for $80.0 million under the share repurchase program. After these repurchases, $50.0 million remains available under the share repurchase authorization.

Future Adoption of Accounting Pronouncements

Reference Rate Reform. In March 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). This guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions that may be affected by the cessation of the London Inter-bank Offered Rate (“LIBOR.”) An entity may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 through December 31, 2022. A portion of our debt is subject to interest payments that are indexed to LIBOR; additionally, we are party to an interest rate derivative based on LIBOR. We are currently evaluating the effect of this guidance and have not applied the provisions of this guidance during the current fiscal year.

The FASB issued other accounting guidance during the period that is not currently applicable or expected to have a material impact on the Company’s condensed consolidated financial statements, and therefore, is not described above.

1211

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2. Details of Certain Balance Sheet Accounts

In thousands As of
July 3, 2021 As of
January 2, 2021
Accounts receivable, net:
Trade receivables $ 28,742 $ 28,405
Credit card receivables 19,830 21,557
Other receivables 6,556 8,460
Allowance for credit losses (395) (433)
$ 54,733 $ 57,989
The following table provides a reconciliation of cash and cash equivalents reported within the Condensed Consolidated Balance sheets to the total of Cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statement of Cash Flows:

In thousands As of
July 3, 2021 As of
January 2, 2021
Inventories:
Raw materials and work in process (1)
$ 55,246 $ 55,473
Finished goods 65,617 55,801
$ 120,863 $ 111,274
(1)Due to the immaterial amount of estimated work in process and the short lead times for the conversion of raw materials to finished goods, the Company does not separately present raw materials and work in process.

In thousands As of
July 3, 2021 As of
January 2, 2021
Other payables and accrued expenses:
Associate compensation and benefits (1)
$ 53,251 $ 51,081
Advertising 4,503 2,173
Self-insurance liabilities 9,634 8,650
Reserves for customer returns and remakes 9,301 8,084
Capital expenditures 8,827 8,455
Legacy management & services agreement 6,722 5,386
Fair value of derivative liabilities 4,077 5,116
Supplies and other store support expenses 2,820 3,461
Litigation settlements 1,720 1,107
Lease concessions 737 3,142
Other 14,916 13,654
$ 116,508 $ 110,309
(1) Includes the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act deferred employer payroll taxes in the amount of $0.0 million and $12.8 million as of July 3, 2021 and January 2, 2021, respectively.

In thousands As of
July 3, 2021 As of
January 2, 2021
Other non-current liabilities:
Fair value of derivative liabilities $ 4,217 $ 7,663
Self-insurance liabilities 7,491 7,046
Other 2,564 2,706
$ 14,272 $ 17,415


	Six Months Ended
In thousands	July 2, 2022		July 3, 2021
Cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	254,382	$	408,301
Restricted cash included in other assets	1,223		1,347
	$	255,605	$	409,648

The following tables provide additional details of certain balance sheet accounts as of the dates shown below:


In thousands	As of July 2, 2022		As of January 1, 2022
Accounts receivable, net:
Trade receivables	$	32,951	$	32,504
Credit card receivables	17,189		17,010
Other receivables (1)	14,336		6,685
Allowance for credit losses	(702)		(502)
	$	63,774	$	55,697
(1) Includes Coronavirus Aid, Relief, and Economic Security (“CARES”) Act receivable in the amount of $6.7 million as of July 2, 2022.


In thousands	As of July 2, 2022		As of January 1, 2022
Inventories:
Raw materials and work in process (1)	$	63,062	$	65,262
Finished goods	66,431		58,407
	$	129,493	$	123,669
(1)Due to the immaterial amount of estimated work in process and the short lead times for the conversion of raw materials to finished goods, the Company does not separately present raw materials and work in process.


In thousands	As of July 2, 2022		As of January 1, 2022
Other payables and accrued expenses:
Associate compensation and benefits (1)	$	47,929	$	55,670
Self-insurance liabilities	9,107		9,034
Capital expenditures	9,300		10,571
Advertising	5,102		6,962
Reserves for customer returns and remakes	7,762		7,556
Legacy management & services agreement	5,129		5,518
Income taxes payable	3,863		310
Supplies and other store support expenses	3,468		5,511
Litigation settlements	321		2,100
Fair value of derivative liabilities	—		2,846
Other	15,597		13,245
	$	107,578	$	119,323
(1) Includes the CARES Act deferred employer payroll taxes in the amount of $6.7 million as of July 2, 2022.

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In thousands	As of July 2, 2022		As of January 1, 2022
Other non-current liabilities:
Fair value of derivative liabilities	$	—	$	488
Self-insurance liabilities	6,274		6,170
Other	2,769		2,316
	$	9,043	$	8,974

3. Fair Value Measurement

Recurring fair value measurements

Interest Rate Derivatives

We recognize as assets or liabilities at fair value the estimated amounts we would receive or pay upon a termination of interest rate derivatives prior to their scheduled expiration dates. The fair value is based on information that is model-driven and whose inputs were observable (Level 2 inputs). such as LIBOR forward rates. See Note 5. “Interest Rate Derivatives” for further details.

~~Nonrecurring~~Non-recurring fair value measurements

Tangible Long-lived and Right of Use (“ROU”) Store Assets

We recognized impairments ~~of $0.5~~of $3.5 million and ~~$1.5~~$3.9 million ~~during~~during the three and six months ended July 2, 2022, respectively, and $0.5 million and $1.5 millionduring the three and six months ended July 3, 2021, respectively, related to our long-lived tangible store assets and ROU assets. The impairments were primarily driven by lower than projected customer sales volume in certain stores. The cash flows used in estimating fair value were discounted using a market ~~rate of~~rates from 7.5% to ~~7.5%~~7.8%. W~~e consider market-based indications of prevailing rental rates for retail space, market participant discount rates, and lease incentives when estimating the fair values of ROU assets.~~ A decrease in the estimated cash flows would lead to a lower fair value measurement, as would an increase in the discount rate. These non-recurring fair value measurements are classified as Level 3 measurements in the fair value hierarchy. The estimated remaining fair value of the assets impaired ~~as of~~during thesix months ended July 2, 2022 and July 3, 2021 was $4.0 million and $2.9 ~~million.~~million, respectively; the estimated remaining fair values include amounts estimated at various dates during the related fiscal years. Substantially all of the remaining fair value of the impaired store assets ~~in fiscal year 2021~~ represents the fair value of ROU assets.

Additional fair value information

Long-term Debt - 2025 Notes

The Company ~~has $402.5~~has $402.5 million in aggregate principal amount of 2.50% convertible senior notes due on May 15, 2025 (the “2025 Notes”) issued and outstanding as of July ~~3, 2021.~~2, 2022. Refer to Note 4. “Long-term Debt” for more information on the 2025 Notes. The estimated fair value of the 2025 Notes was approximately ~~$705.2~~$453.5 million and ~~$655.3~~$674.9 million as of July ~~3, 2021~~2, 2022 and January ~~2, 2021,~~1, 2022, respectively. The estimated fair value of the 2025 Notes is based on the prices the 2025 Notes have traded in the market, ~~as of July 3, 2021,~~ as well as overall market conditions on the date of valuation, stated coupon rates, the number of coupon payments each year and the maturity ~~date,~~dates, and represents a Level 2 measurement in the fair value hierarchy. Refer to Note 4. “Long-term Debt” for more information on the 2025 Notes.

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4. Long-term Debt

Long-term debt consists of the following:

In thousands As of
July 3, 2021 As of
January 2, 2021
2025 Notes, due May 15, 2025 $ 402,500 $ 402,500
Term loan, due July 18, 2024 200,000 317,375
Long-term debt before debt discount 602,500 719,875
Unamortized discount and issuance costs - 2025 Notes (9,153) (93,123)
Unamortized discount and issuance costs - term loan (1,515) (2,141)
Long-term debt less debt discount 591,832 624,611
Less current maturities 0 0
Long-term debt - non-current portion 591,832 624,611
Finance lease obligations 28,613 30,750
Less current maturities (4,285) (3,598)
Long-term debt and finance lease obligations, less current portion and debt discount $ 616,160 $ 651,763

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In thousands	As of July 2, 2022		As of January 1, 2022
2025 Notes, due May 15, 2025	$	402,497	$	402,500
Term loan, due July 18, 2024	150,000		150,000
Revolving credit facility, due July 18, 2024	—		—
Long-term debt before debt discount	552,497		552,500
Unamortized discount and issuance costs - 2025 Notes	(6,913)		(7,986)
Unamortized discount and issuance costs - term loan	(762)		(948)
Long-term debt less debt discount	544,822		543,566
Less current maturities	—		—
Long-term debt - non-current portion	544,822		543,566
Finance lease obligations	23,981		26,514
Less current maturities	(4,651)		(3,999)
Long-term debt and finance lease obligations, less current portion and debt discount	$	564,152	$	566,081

Credit Agreement

During the second quarter of 2021, the Company voluntarily prepaid $117.4 million of term loan principal and wrote off associated deferred debt issuance costs of $0.7 million. The Company also amended its credit agreement to, among other things, add customary LIBOR replacement provisions, modify the applicable margins used to calculate the rate of interest payable on the first lien term loans thereunder to a range of 1.25% to 2.00% for LIBOR Loans and a range of 0.25% to 1.00% for ABR Loans, modify certain financial covenants related to maximum leverage and minimum interest coverage and remove the LIBOR floor, such that LIBOR shall be deemed to be no less than 0.00% per annum (instead of 1.00% per annum previously in effect).

~~As a result of the principal prepayments made by the Company, we have no additional mandatory principal payments on the remaining $200.0 million term loan balance until maturity on July 18, 2024.~~

Capitalized terms used but not defined herein shall have the meanings assigned to such terms in our credit agreement. Pursuant to our credit agreement, the Company will not permit (i) the Consolidated Total Debt to Consolidated EBITDA Ratio to be negative or greater than (x) 4.50 to 1.00 with respect to the last day of the Company’s second and third fiscal quarters of 2021 and (y) 4.25 to 1.00 from and after the last day of the Company’s fourth fiscal quarter of 2021, subject to certain step-ups after the consummation of a Material Acquisition, or (ii) the Consolidated Interest Coverage Ratio of the Company as of the last day of any fiscal quarter of the Company to be less than 3.00 to 1.00. We were in compliance with all covenants related to our long-term debt as of July ~~3, 2021.~~2, 2022.

2025 Notes

The Company adopted ASU 2020-06 as of January 3, 2021. ASU 2020-06 eliminates the cash conversion and the beneficial conversion feature models. Under the new convertible debt framework, the Company eliminated the equity components and increased the debt balance. Refer to Note 1. “Description of Business and Basis of Presentation” for further discussion of the adoption of ASU 2020-06. As a result of adopting ASU 2020-06, our effective interest rate decreased from 9.1% as of January 2, 2021 to 3.2% starting in the first quarter of 2021. We recognized ~~$2.5 million and $0.5 million~~the following in interest expense ~~for~~(income), net related to the ~~interest coupon and amortization of issuance costs, respectively, during the three months ended July 3, 2021 and $5.0 million and $1.0 million, respectively during the six months ended July 3, 2021.~~ 2025 Notes:


	Three Months Ended				Six Months Ended
In thousands	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Contractual interest expense	$	2,516	$	2,516	$	5,031	$	5,031
Amortization of issuance costs	$	560	$	542	$	1,080	$	1,046

As of July ~~3, 2021,~~2, 2022, the remaining period for the unamortized debt issuance costs balance was approximately ~~four~~three years. An immaterial amount of the principal balance of the 2025 Notes was converted during the six months ended July 2, 2022.

As of July ~~3, 2021,~~2, 2022, the stock price conditions under which the 2025 Notes can be converted ~~by holders. The conversion rate will be subject to adjustment upon~~at the ~~occurrence of certain specified events including, but~~holders’ option were not limited to: issuance of stock dividends, splits and combinations; distribution of rights, options and warrants; spin-offs and other distributed property; cash dividends or distributions; tender offers or exchange offers; and certain other corporate transactions. The holders of our term loan would have preference over the holders of the 2025 Notes in the event of a liquidation.met.

5. Interest Rate Derivatives

We are party to an interest rate collar to offset the variability of cash flows in LIBOR-indexed debt interest payments. To manage credit risk associated with our interest rate hedging program, we select as counterparties major financial institutions with investment grade credit ratings. The aggregate notional amount of the interest rate collar, which is not designated as a cash flow hedge, was ~~$375.0~~$350.0 million as of July ~~3, 2021.~~2, 2022. The fair value of our interest rate collar instrument was ~~$8.3~~an asset of $7.9 million ($4.2 million in Prepaid expenses and other current assets and $3.7 million in Other assets) as of July ~~3, 2021~~2, 2022, and ~~is not designated as~~ a ~~cash flow hedge. The interest rate swaps we held at the end~~liability of ~~fiscal year 2020 matured~~$3.3 million ($2.8 million in ~~the first quarter of 2021. The fair value of our interest rate derivative instruments was $12.8~~Other payables and accrued expenses and $0.5 million in Other non-current liabilities) as of January ~~2, 2021, $1.5 million of which was designated as a cash flow hedge.~~1, 2022. See Note 3. “Fair Value Measurement” for further details.

~~Gains (losses)~~We recognized (gains) losses on the change in fair value of the interest rate collar of ~~approximately $(0.5)~~$(0.8) million and ~~$1.5~~$(9.8) million ~~were recorded in interest expense, net~~during the three and six months ended July 2, 2022, respectively, and $0.5 million and $(1.5) million during the three and six months ended July 3, 2021, ~~respectively. Interest~~respectively, in interest expense (income), net. We recognized $1.5 million in interest expense (income), net ~~related to our interest rate derivatives considered to be highly effective hedges for~~during the six months ended July 3, 2021 ~~was $1.5 million.~~related to our interest rate swaps that were considered to be highly effective hedges and that matured during the six months ended July 3, 2021.

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Cash flows related to derivatives qualifying as hedges are included in the same section of the Condensed Consolidated Statements of Cash Flows as the underlying assets and liabilities being hedged. Cash flows during the six months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~ related to derivatives not qualifying as hedges were included in the operating section of the Condensed Consolidated Statements of Cash Flows and were immaterial.

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During the second quarter of 2021, as a result of the partial repayment of the Company’s LIBOR based term-loan debt balances, certain forecasted hedged transactions were deemed not probable of occurring. The Company subsequently reclassified unrealized losses of $2.5 million from AOCL to interest expense on $115.0 million of interest rate collar notional, during the three and six months ended July 3, 2021. As of July ~~3, 2021, the Company expects~~2, 2022 we expect to reclassify approximately ~~$0.9~~$0.8 million of unrealized losses on derivative instruments, net of tax, from Accumulated other comprehensive loss (“AOCL”) into earnings in the next 12 months as the derivative instruments mature. See Note ~~13.~~12. “Accumulated Other Comprehensive Loss” for further details.

During the second quarter of 2020, as a result of the partial repayment of the Company’s LIBOR based debt balances, certain forecasted hedged transactions were deemed not probable of occurring. The Company subsequently discontinued hedge accounting on $78.0 million of interest rate swap notional and $58.0 million of interest rate collar notional, reclassifying net unrealized losses of approximately $2.5 million from AOCL to interest expense, net during the three and six months ended June 27, 2020. Additionally, due to changes in the interest rates applicable to the Company’s term loan and revolver, the interest rate collar ceased to be a highly effective hedge. Losses on the change in fair value of the interest rate collar of approximately $2.6 million were recorded in interest expense, net during the quarter ended June 27, 2020. Interest expense, net related to derivatives considered to be highly effective hedges for the three and six months ended June 27, 2020 was $2.0 million and $3.9 million, respectively.

6. Stock Incentive Plans

During the six months ended July ~~3, 2021,~~2, 2022, the Company granted ~~107,319 stock options, 108,817~~158,985 performance-based restricted stock units (“PSUs”) and ~~126,161~~303,264 time-based restricted stock units (“RSUs”) to eligible employees under the National Vision Holdings, Inc. 2017 Omnibus Incentive Plan (the “2017 Omnibus Incentive Plan”). The time-based options granted in fiscal 2021 vest in 3 equal annual installments, with one-third of the total options vesting on each of the first, second, and third anniversaries of the grant date, subject to continued employment through the applicable vesting date. The PSUs granted in fiscal ~~2021~~2022 are settled after the end of the performance period (i.e., cliff vesting), which begins on the first day of our ~~2021~~2022 fiscal year and ends on the last day of our ~~2023~~2024 fiscal year, and are based on the Company’s achievement of certain performance targets. The RSUs granted in fiscal ~~2021~~2022 vest primarily in 3 equal installments.

During the six months ended July 3, 2021, the Company granted 16,539 restricted stock awards (“RSAs”) to eligible members of the Company’s Board of Directors under the 2017 Omnibus Incentive Plan. The awards vest one year from the grant date.

7. Revenue From Contracts With Customers

The majority of our revenues are recognized either at the point of sale or upon delivery and customer acceptance, paid for at the time of sale in cash, credit card, or on account with managed care payors having terms generally between 14 and 120 days, with most paying within 90 days. For sales of in-store non-prescription eyewear and related accessories, and paid eye exams, we recognize revenue at the point of sale. Our point in time revenues include 1) retail sales of prescription and non-prescription eyewear, contact lenses and related accessories to retail customers (including those covered by managed care), 2) eye exams and 3) wholesale sales of inventory in which our customer is another retail entity. Revenues recognized over time primarily include product protection plans (i.e. warranties), eye care club memberships and management fees earned from our ~~legacy~~Legacy partner.

The following disaggregation of revenues depicts our revenue based on the timing of revenue recognition:

Three Months Ended Six Months Ended
In thousands July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020
Revenues recognized at a point in time $ 504,969 $ 229,536 $ 998,407 $ 663,715
Revenues recognized over time 44,520 30,471 85,262 65,996
Total net revenue $ 549,489 $ 260,007 $ 1,083,669 $ 729,711

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	Three Months Ended				Six Months Ended
In thousands	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Revenues recognized at a point in time	$	468,245	$	504,969	$	953,330	$	998,407
Revenues recognized over time	41,310		44,520		83,936		85,262
Total net revenue	$	509,555	$	549,489	$	1,037,266	$	1,083,669

Refer to Note 10. “Segment Reporting” for the Company’s disaggregation of net revenue by reportable ~~segment and product type.~~segment. As the reportable segments are aligned by similar economic factors, trends and customers, the reportable segment disaggregation view best depicts how the nature, amount and uncertainty of revenue and cash flows are affected by economic factors.

We record reductions in revenue for estimated price concessions granted to managed care providers. 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; we reduced our net revenue for variable ~~considerations~~consideration of ~~$1.6~~$3.0 million and ~~an immaterial amount~~$1.6 million during the three months ended July 2, 2022 and July 3, 2021, ~~and June 27, 2020,~~ respectively, and ~~$4.4~~$5.7 million and ~~$3.7~~$4.4 million during the six months ended July 2, 2022 and July 3, 2021, ~~and June 27, 2020,~~ respectively.

Contract Assets and Liabilities

The Company’s contract assets and contract liabilities primarily result from timing differences between the performance of our obligations and the customer’s payment.

Accounts Receivable

Credit loss expense recognized on our receivables, which is presented in SG&A expenses in the Company’s condensed consolidated statements of operations, were $0.5 million and $0.2 million for the three months ended July 2, 2022 and July 3, 2021, respectively, as compared to $0.6 million and $0.3 million for the six months ended July 2, 2022 and July 3, 2021, ~~as compared to an immaterial amount and $0.4 million for the three and six months ended June 27, 2020,~~ respectively.

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Unsatisfied Performance Obligations (Contract Liabilities)

During the three months ended July 2, 2022 and July 3, 2021, we recognized $23.9 million and $23.0 million, respectively, of deferred revenues outstanding at the beginning of each respective period. During the six months ended July 2, 2022 and July 3, 2021, we recognized $43.3 million and $37.3 million, respectively, of deferred revenues outstanding at the beginning of each respective period.

Our deferred revenue balance as of July ~~3, 2021~~2, 2022 was ~~$92.1~~$87.3 million. We expect future revenue recognition of this balance of ~~$44.6~~$41.7 million, ~~$34.0~~$33.0 million, ~~$11.6~~$10.9 million, ~~$1.8~~$1.5 million and ~~$0.1~~$0.2 million in fiscal years ~~2021,~~ 2022, 2023, 2024, 2025 and 2025, respectively. We recognized $23.0 million and $37.3 million of previously deferred revenues during the three and six months ended July 3, 2021, respectively and $24.2 million and $52.2 million during the three and six months ended June 27, 2020,thereafter, respectively.

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8. Leases

Our lease costs for the three and six months ended July 2, 2022 and July 3, 2021 ~~and June 27, 2020~~ were as follows:


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
In thousands	In thousands	July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020		In thousands	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Operating lease cost	Operating lease cost									Operating lease cost
Fixed lease cost (a)	Fixed lease cost (a)	$	20,903	$	19,100	$	41,554	$	38,412	Fixed lease cost (a)	$	22,488	$	20,903	$	44,437	$	41,554
Variable lease cost (b)	Variable lease cost (b)	7,515		6,356		14,918		13,166		Variable lease cost (b)	8,255		7,515		16,353		14,918
Sublease income (c)	Sublease income (c)	(919)		(292)		(1,829)		(882)		Sublease income (c)	(945)		(919)		(1,820)		(1,829)

Finance lease cost	Finance lease cost									Finance lease cost
Amortization of finance lease assets	Amortization of finance lease assets	1,113		1,125		2,236		2,281		Amortization of finance lease assets	1,080		1,113		2,161		2,236

Interest expense, net:
Interest on finance lease liabilities	Interest on finance lease liabilities	743		851		1,523		1,724		Interest on finance lease liabilities	611		743		1,258		1,523

Net lease cost	Net lease cost	$	29,355	$	27,140	$	58,402	$	54,701	Net lease cost	$	31,489	$	29,355	$	62,389	$	58,402
																			(a) Includes short-term leases, which are immaterial.	(b) Includes costs for insurance, real estate taxes and common area maintenance expenses, which are variable, as are lease costs above minimum thresholds for Fred Meyer stores and lease costs for Military stores.
(c) Income from sub-leasing of stores includes rental income from leasing space to ophthalmologists and optometrists who are independent contractors.
(c) Income from sub-leasing of stores includes rental income from leasing space to independent optometrists.										(c) Income from sub-leasing of stores includes rental income from leasing space to independent optometrists.

Weighted average discount rate (a)

(a) The discount rate used to determine the lease assets and lease liabilities was derived upon considering (i) incremental borrowing rates on our term loan and revolving credit facility; (ii) fixed rates on interest rate swaps; (iii) LIBOR margins for issuers of similar credit rating; and (iv) effect of collateralization. As a majority of our leases are five-year and 10-year leases, we determined a lease discount rate for such tenors and determined this discount rate is reasonable for leases that were entered into during the period.

The following table summarizes the maturity of our lease liabilities as of July ~~3, 2021:~~2, 2022:

Operating Leases (a)

Present value of lease liabilities (c)

9. Commitments and Contingencies

From time to time, the Company is involved in various legal proceedings incidental to its business. Because of the nature and inherent uncertainties of litigation, we cannot predict with certainty the ultimate resolution of these actions and, should the outcome of these actions be unfavorable, the Company’s business, financial position, results of operations or cash flows could be materially and adversely affected.

The Company reviews the status of its legal proceedings and records a provision for a liability when it is considered probable that both a liability has been incurred and the amount of the loss can be reasonably estimated. This review is updated periodically as additional information becomes available. If either or both of the criteria are not met, we reassess whether there is at least a reasonable possibility that a loss, or additional losses, may be incurred. If there is a reasonable possibility that a loss may be incurred, we disclose the estimate of the amount of the loss or range of losses, or that an estimate of loss cannot be made. The Company expenses its legal fees as incurred.

We are currently and may in the future become subject to various claims and pending or threatened lawsuits in the ordinary course of our business.

Our subsidiary, FirstSight Vision Services, Inc. (“FirstSight”), is a defendant in a purported class action in the U.S. District Court for the Southern District of California that alleges that FirstSight participated in arrangements that caused the illegal delivery of eye examinations and that FirstSight thereby violated, among other laws, the corporate practice of optometry and the unfair competition and false advertising laws of California. The lawsuit was filed in 2013 and FirstSight was added as a defendant in 2016. In March 2017, the court granted the motion to dismiss previously filed by FirstSight and dismissed the complaint with prejudice. The plaintiffs filed an appeal with the U.S. Court of Appeals for the Ninth Circuit in April 2017. In July 2018, the U.S. Court of Appeals for the Ninth Circuit vacated in part, and reversed in part, the district court’s dismissal and remanded for further proceedings. In October 2018, the plaintiffs filed a second amended complaint with the district court, and, in November 2018, FirstSight filed a motion to dismiss. On March 23, 2020, the district court granted FirstSight’s motion to dismiss the second amended complaint. On April 24, 2020, the plaintiffs filed a third amended complaint. FirstSight filed a motion to dismiss the third amended complaint on May 8, 2020. On February 4, 2021, the district court granted FirstSight’s motion in part and denied it in part. FirstSight’s answer to the remaining claims was filed February 18, 2021. The parties participated in mediation on July 6, 2021 and, in order to avoid the burden and expense of litigation, agreed to a settlement of all claims alleged by the named plaintiffs.

In November 2019, the Company agreed to enter into a pre-litigation settlement with 6 former associates who asserted, on behalf of themselves and a proposed class, violations of the Fair Labor Standards Act and of California wage and hour laws. In order to avoid the burden and expense of litigation, and without admitting liability, the Company agreed to a settlement with the named claimants and all participating class members for a maximum settlement amount of $895,000. This settlement was submitted by the parties for approval through arbitration and an order granting final approval of the settlement and dismissing the action was issued by the arbitrator on July 13, 2021.

10. Segment Reporting

The Company provides its principal products and services through 2 reportable segments: Owned & Host and Legacy. The “Corporate/Other” category includes the results of operations of our other operating segments, AC Lens and FirstSight, as well as corporate overhead support. The “Reconciliations” category represents other adjustments to reportable segment results necessary for the presentation of consolidated financial results in accordance with U.S. GAAP for the 2 reportable segments. ~~Beginning in the first quarter of 2021, incremental~~Incremental expenses related to the COVID-19 pandemic ~~were~~are allocated to the reportable segments but were included in the Corporate/Other category in 2020. Changes in unearned revenue and deferred revenue recognized in the Reconciliations category reflect the effects of our stores being temporarily closed to the public for a portion of 2020.segments.

Our reportable segment profit measure is earnings before interest, tax, depreciation and amortization (“EBITDA”), or net revenue, less costs applicable to revenue, less SG&A expenses. Depreciation and amortization, asset impairment, ~~litigation settlement~~ and other corporate costs that are not allocated to the reportable segments, including interest expense (income) are excluded from segment EBITDA. There are no revenue transactions between our reportable segments. There are no differences between the measurement of our reportable segments’ assets and consolidated assets. There have been no changes from prior periods in the measurement methods used to determine reportable segment profit or loss, and there have been no asymmetrical allocations to segments.

The following is a summary of certain financial data for each of our segments. Reportable segment information is presented on the same basis as our consolidated financial statements, except for net revenue and associated costs applicable to revenue, which are presented on a cash basis, including point of sales for managed care payors and excluding the effects of unearned and deferred revenue, consistent with what the Chief Operating Decision Maker (“CODM”) regularly reviews.

Asset information is not included in the following summary since the CODM does not regularly review such information for the reportable segments.

Three Months Ended July 3, 2021
In thousands Owned & Host Legacy Corporate/Other Reconciliations Total
Net product services $ 361,377 $ 26,855 $ 61,520 $ 8,454 $ 458,206
Net sales of services and plans 78,780 16,745 0 (4,242) 91,283
Total net revenue 440,157 43,600 61,520 4,212 549,489
Cost of products 98,539 12,910 53,683 1,896 167,028
Cost of services and plans 62,448 6,470 0 0 68,918
Total costs applicable to revenue 160,987 19,380 53,683 1,896 235,946
SG&A 158,913 14,802 60,520 0 234,235
Asset impairment 0 0 519 0 519
Other expense (income), net 0 0 (65) 0 (65)
Debt issuance costs 0 0 92 0 92
EBITDA $ 120,257 $ 9,418 $ (53,229) $ 2,316
Depreciation and amortization 24,025
Interest expense, net 10,096
Earnings before income taxes $ 44,641


	Three Months Ended July 3, 2021
In thousands	Owned & Host		Legacy		Corporate/Other		Reconciliations		Total
Net product sales	$	361,377	$	26,855	$	61,520	$	8,454	$	458,206
Net sales of services and plans	78,780		16,745		—		(4,242)		91,283
Total net revenue	440,157		43,600		61,520		4,212		549,489
Cost of products	98,539		12,910		53,683		1,896		167,028
Cost of services and plans	62,448		6,470		—		—		68,918
Total costs applicable to revenue	160,987		19,380		53,683		1,896		235,946
SG&A	158,913		14,802		60,520		—		234,235
Asset impairment	—		—		519		—		519
Other expense (income), net	—		—		(65)		—		(65)
EBITDA	$	120,257	$	9,418	$	(53,137)	$	2,316
Depreciation and amortization									24,025
Interest expense (income), net									10,188
Earnings before income taxes									$	44,641

Six Months Ended July 3, 2021
In thousands Owned & Host Legacy Corporate/Other Reconciliations Total
Net product sales $ 730,747 $ 54,275 $ 122,738 $ (6,487) $ 901,273
Net sales of services and plans 161,857 32,907 0 (12,368) 182,396
Total net revenue 892,604 87,182 122,738 (18,855) 1,083,669
Costs of products 195,643 25,769 106,709 (1,402) 326,719
Costs of services and plans 121,252 12,665 0 0 133,917
Total costs applicable to revenue 316,895 38,434 106,709 (1,402) 460,636
SG&A 308,876 29,095 119,857 0 457,828
Asset impairment 0 0 1,478 0 1,478
Other expense (income), net 0 0 (130) 0 (130)
Debt issuance costs 0 0 92 0 92
EBITDA $ 266,833 $ 19,653 $ (105,268) $ (17,453)
Depreciation and amortization 47,580
Interest expense, net 16,426
Earnings before income taxes $ 99,759


	Six Months Ended July 3, 2021
In thousands	Owned & Host		Legacy		Corporate/Other		Reconciliations		Total
Net product sales	$	730,747	$	54,275	$	122,738	$	(6,487)	$	901,273
Net sales of services and plans	161,857		32,907		—		(12,368)		182,396
Total net revenue	892,604		87,182		122,738		(18,855)		1,083,669
Costs of products	195,643		25,769		106,709		(1,402)		326,719
Costs of services and plans	121,252		12,665		—		—		133,917
Total costs applicable to revenue	316,895		38,434		106,709		(1,402)		460,636
SG&A	308,876		29,095		119,857		—		457,828
Asset impairment	—		—		1,478		—		1,478
Other expense (income), net	—		—		(130)		—		(130)
EBITDA	$	266,833	$	19,653	$	(105,176)	$	(17,453)
Depreciation and amortization									47,580
Interest expense (income), net									16,518
Earnings before income taxes									$	99,759

Six Months Ended June 27, 2020
In thousands Owned & Host Legacy Corporate/Other Reconciliations Total
Net product sales $ 459,343 $ 40,672 $ 117,044 $ (14,511) $ 602,548
Net sales of services and plans 99,589 21,198 0 6,376 127,163
Total net revenue 558,932 61,870 117,044 (8,135) 729,711
Costs of products 136,814 20,496 100,045 (3,350) 254,005
Costs of services and plans 94,167 11,162 0 0 105,329
Total costs applicable to revenue 230,981 31,658 100,045 (3,350) 359,334
SG&A 221,418 24,192 84,713 0 330,323
Asset impairment 0 0 13,766 0 13,766
Litigation settlement 0 0 4,395 0 4,395
Other expense (income), net 0 0 (158) 0 (158)
Debt issuance costs 0 0 136 0 136
EBITDA $ 106,533 $ 6,020 $ (85,853) $ (4,785)
Depreciation and amortization 46,734
Interest expense, net 22,957
Earnings (loss) before income taxes $ (47,776)

11. Earnings Per Share

Diluted EPS related to the 2025 Notes ~~in the current year~~ is calculated using the if-converted method; the number of dilutive shares is based on the initial conversion rate associated with the 2025 Notes. ~~Prior to the fourth quarter of the fiscal year 2020, we intended to settle the principal amount of the outstanding~~The 2025 Notes ~~in cash and, therefore, used~~were antidilutive for the ~~treasury stock method for calculating the potential effect of dilutive securities related to the 2025 Notes, if applicable.~~three months ended July 2, 2022. A reconciliation of the numerators and denominators of the basic and diluted EPS calculations is as follows:

~~Table of contents~~

12. ~~Restricted Cash~~

The following table provides a reconciliation of cash and cash equivalents reported within the condensed consolidated balance sheets to the total of cash, cash equivalents and restricted cash shown in the condensed consolidated statement of cash flows:

Six Months Ended
In thousands July 3, 2021 June 27, 2020
Cash and cash equivalents $ 408,301 $ 256,292
Restricted cash included in other assets 1,347 1,341
Total cash, cash equivalents and restricted cash $ 409,648 $ 257,633

~~13.~~ Accumulated Other Comprehensive Loss

Changes in the fair value of the Company’s cash flow hedge derivative instruments from their inception are recorded in AOCL if the instruments are deemed to be highly effective as cash flow hedges. The following table presents the changes in AOCL, net of tax during the three and six months ended July 2, 2022 and July 3, 2021, ~~and June 27, 2020,~~ respectively:

See Note 5. “Interest Rate Derivatives” for a description of the Company’s use of cash flow hedging derivatives.

13. Subsequent Events

On July 19, 2022, the Company entered into an amendment to the letter agreement dated November 12, 2018 with Essilor of America, Inc. (“Essilor”), which, among other things, extends the term of the Company’s contractual agreement with Essilor for three years from May 31, 2023 to May 31, 2026. Under the agreement, Essilor has the sole and exclusive right to supply certain lenses for eyeglasses to the Company.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following contains management’s discussion and analysis of our financial condition and results of operations and should be read together with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Form 10-Q (this “Form 10-Q”) and the audited consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on January ~~2, 2021~~1, 2022 (the ~~“2020~~“2021 Annual Report on Form ~~10-K”~~10-K.”). This discussion contains forward-looking statements that reflect our plans, estimates and beliefs as of the date hereof and we undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law. These forward-looking statements involve numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of the ~~2020~~2021 Annual Report on Form 10-K and in the “Risk Factors” section of this Form 10-Q, as such risk factors may be updated from time to time in our periodic filings with the SEC. Actual results may differ materially from those contained in any forward-looking statements. You should carefully read “Special Note Regarding Forward-Looking Statements” in this Form 10-Q.

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. 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 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 ~~1,249~~1,314 retail stores across five brands and 1917 consumer websites as of July ~~3, 2021.~~2, 2022.

Ongoing macroeconomic uncertainty of the U.S. economy, constraints to exam capacity and the COVID-19 pandemic continued to adversely affect our sales in the second quarter of 2022 and may continue to impact our performance going forward.

Consumer preferences and demand, as well as spending habits, including for our goods and services, are impacted by the prevailing macroeconomic conditions and uncertainty, inflation, salaries and wages, consumer confidence and consumer perception. The U.S. economy is experiencing high inflation because of changing economic conditions, labor shortages, supply chain constraints, logistics challenges, the conflict in Ukraine, and steps taken by governments and central banks in response to the pandemic as well as other stimulus and spending programs. These overall economic trends continued to impact consumer demand and adversely impact our sales in the second quarter of 2022.

Exam capacity, which encompasses the overall availability of vision care professionals, is impacted by several factors including retention, hiring, coverage and work schedules, and continued to be constrained in the second quarter of 2022. We remain focused on our strategy to provide our customers and patients reliable and quality low cost eye care and eyewear, ~~by prioritizing~~and are taking certain actions to enhance our exam capacity through recruitment, retention and remote medicine initiatives.

As a result of the ~~health~~emergence of the Omicron variant and ~~safety~~subvariants, the COVID-19 pandemic resulted in increased associate and vision care professional absences, adjusted work schedules and reduced consumer traffic to our stores in 2022. The ultimate impact of our associates, customers and patients. We have taken a variety of measures, as described in Part I. Item 1A. “Risk Factors” and Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2020 Annual Report on Form 10-K, which had a significant impactCOVID-19 on our operations and financial performance in future periods remains uncertain and will depend on future pandemic-related developments, including the duration of ~~fiscal year 2020 and continue to have a significant impact on our operations and performance of fiscal year 2021. Please also refer to those Items for further discussion regarding~~ the pandemic, potential ~~future impacts~~subsequent waves of COVID-19 infection or potential new variants, the effectiveness and adoption of COVID-19 vaccines and therapeutics, supplier impacts and related ~~economic conditions on us. We continue~~government actions to ~~monitor the evolving situation as there remain many uncertainties regarding the pandemic~~prevent and more recent outbreaks of variants, including its anticipated duration, related healthcare authority guidelines and efficacy of vaccination initiatives. We could experience potential disruptions of product deliveries with the recent shutdowns in countries which support our supply chain. Prolonged periods of shutdown in these countries or a deterioration of conditions in other countries that are part of our supply chain could result in product availability delays, as well as potential increased costs to obtain and ship these products to meet customer demand. We will continue to evaluate additional measures that we may elect to take as a response to the pandemic, including, where appropriate, future action to reduce store hours and patient appointments or temporarily close stores. There can be no assurance whether or when any such measures will be adopted. Our net revenue in the current fiscal period increased compared to prior fiscal period due in part to strong customer demand,manage disease spread, including the ~~effects~~implementation of ~~our stores being temporarily closed to the public in fiscal year 2020~~any federal, state, local or foreign vaccine mandates, all of which are uncertain and ~~government stimulus as a result of COVID-19.~~cannot be predicted.

The disclosures contained in this Form 10-Q are made only as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law. For further information, please see “Forward-Looking Statements.”

Brand and Segment Information

Our operations consist of two reportable segments:

•Owned & Host - As of July ~~3, 2021,~~2, 2022, our owned brands consisted of ~~813~~872 America’s Best Contacts and Eyeglasses retail stores and ~~123~~129 Eyeglass World retail stores. In America’s Best stores, vision care services are provided by optometrists employed by us or by independent professional corporations or similar entities. America’s Best stores are primarily located in high-traffic strip centers next to value-focused retailers. Eyeglass World locations primarily feature eye care services provided by independent optometrists and optometrists employed by independent professional corporations or similar entities and on-site optical laboratories that enable stores to quickly fulfill many customer orders and make repairs on site. Eyeglass World stores are primarily located in freestanding or in-line locations near high-foot-traffic shopping centers. Our ~~host~~Host brands consisted of 54 Vista Optical locations on select military bases and 29 Vista Optical locations within select Fred Meyer stores as of July ~~3, 2021.~~2, 2022. We have strong, long-standing relationships with our ~~host~~Host partners and have maintained each partnership for over 2122 years. These brands provide eye exams primarily by independent optometrists. All brands utilize our centralized laboratories. This segment also includes sales from our America’s Best, Eyeglass World, and Military omni-channel websites.

•Legacy - We manage the operations of, and supply inventory and laboratory processing services to, 230 Vision Centers in Walmart retail locations as of July ~~3, 2021.~~2, 2022. This strategic relationship with Walmart is in its 3132stnd 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. On July 17, 2020, NVI and Walmart extended the current term and economics of the management & services agreement by three years to February 23, 2024. Under the management & services agreement, our responsibilities include ordering and maintaining merchandise inventory; arranging the provision of optometry services; providing managers and staff at each location; training personnel; providing sales receipts to customers; maintaining necessary insurance; obtaining and holding required licenses, permits and accreditations; owning and maintaining store furniture, fixtures and equipment; and developing annual operating budgets and reporting. We earn management fees as a result of providing such services and therefore we record revenue related to sales of products and product protection plans to our ~~legacy~~Legacy partner’s customers on a net basis. Our management & services agreement also allows our ~~legacy~~Legacy partner to collect penalties if the Vision Centers do not generate a requisite amount of revenues. No such penalties have been assessed under our current arrangement, which began in 2012. We also sell to our ~~legacy~~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~~Legacy partner’s customers in stores that we manage. 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 six months ended July ~~3, 2021,~~2, 2022, sales associated with this arrangement represented ~~8.0%~~7.7% of consolidated net revenue. 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 1513 dedicated websites managed by AC Lens. Our e-commerce business consists of ~~six~~five proprietary branded websites, including aclens.com, discountglasses.com and discountcontactlenses.com, and ~~nine~~eight third-party websites with established retailers, such as Walmart, Sam’s Club and Giant Eagle as well as mid-sized vision insurance providers. 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 sales associated with Walmart and Sam’s Club contact lenses distribution arrangements represented ~~6.5%~~ 6.9% of consolidated 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. Corporate overhead expenses also include field services for our five retail brands.

Reportable segment information is presented on the same basis as our condensed consolidated financial statements, except reportable segment sales which are presented on a cash basis including point of sales for managed care payors and excluding the effects of unearned and deferred revenue, consistent with what our CODM regularly reviews. Reconciliations of segment results to consolidated results include financial information necessary to adjust reportable segment revenues to a consolidated basis in accordance with U.S. GAAP, specifically the change in unearned and deferred revenues during the period. There are no revenue transactions between reportable segments, and there are no other items in the reconciliations other than the effects of unearned and deferred revenue. See Note 10. “Segment Reporting” in our condensed consolidated financial statements included in Part I. Item 1. of this Form 10-Q.

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. Unearned revenue represents the timing difference of when we collect cash from the customer and delivery/customer acceptance, and includes sales of prescription eyewear during approximately the last seven to 10 days of the reporting period.

Trends and Other Factors Affecting Our Business

Various trends and other factors will affect or have affected our operating results, including:

Overall economic trends, consumer preferences and demand

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 Russian invasion of Ukraine), inclement weather, natural disasters, terrorism, outbreak of viruses or widespread illness and consumer perceptions of personal well-being and security. Over the past few years, global markets and economic conditions have been challenging, particularly in light of the COVID-19 pandemic. During periods of economic downturn and uncertainty, our customers especially benefit from our low prices. The long-term effects of the COVID-19 pandemic and other macroeconomic and geopolitical events on consumer preferences and demand remain uncertain. We believe, but cannot be certain, our business model of providing exceptional value and convenience to customers, enabled by our low-cost operating platform will mitigate these impacts to a certain extent; however uncertainties and risk exposures may be exacerbated by the immediate and ongoing impacts of these factors.

Vision care professional recruitment, coverage, and expanded offerings

Our ability to continue to attract and retain qualified vision care professionals affect exam capacity and is critical to our operations. Our operations, like those of many of our competitors, depend on our ability to offer both eyewear and eye exams. We compete with other optical retail companies, health systems and group practices for vision care

professionals. We, as well as the professional corporations or similar entities that employ optometrists in certain of our retail locations, could face difficulties attracting and retaining qualified professionals if we or such corporations fail to offer competitive compensation and benefits. Increased compensation for vision care professionals could raise our costs and negatively affect our margins. We believe the impacts of the COVID-19 pandemic on vision care professional availability, including a competitive recruiting market and preferences for adjusted work schedules, and the demand for optometrists exceeding supply in certain areas in the first half of fiscal year 2022 have caused constraints in exam capacity. Due to these factors the costs to employ or retain optometrists may increase, potentially materially, from current levels. We are investing in recruitment and retention initiatives along with continuing our implementation of remote medicine technologies.

The COVID-19 pandemic has had far-reaching impacts, directly and indirectly, on our operations. We continue to monitor the evolving situation as there remain many uncertainties regarding the pandemic and more recent outbreaks of variants, including anticipated duration, vision care professional availability, related healthcare authority guidelines and efficacy of vaccination initiatives, including the impact of, and associated risks regarding, federal, state and local vaccination and testing programs. We continue to monitor potential impacts on our stores and exam capacity, lab network, and potential disruptions of product and equipment deliveries. To date, we have been able to meet customer demand with operations at our laboratories and our supply chain partners. However, prolonged shutdowns in countries which support our supply chain or a deterioration of conditions in such countries and others or increasing strains on international and domestic supply chain infrastructure could result in product and equipment availability ~~delays.~~delays in the future. We could experience further material impacts as a result of COVID-19, including, but not limited to, charges from additional asset impairments and deferred tax valuation ~~allowances and further changes in the effectiveness of our hedging instrument.~~allowances. We will continue to evaluate additional measures that we may elect to take as a response to the pandemic, including, where appropriate, future action to reduce store hours and patient appointments, or temporarily close ~~stores.~~stores or make additional forward buys. There can be no assurance whether or when any such measures will be adopted. For a discussion of significant risks that have the potential to cause our actual results to differ materially from our expectations, refer to Part II. Item 1A. “Risk Factors” in this Form 10-Q and Part I. Item 1A. “Risk Factors,” included in our ~~2020~~2021 Annual Report on Form 10-K.

~~Table~~We are committed to providing our products to our customers at low prices. We generally employ a simple low price/high value strategy that consistently delivers savings to our customers without the need for extensive promotions. Inflationary pressures, including wage investments, consumer confidence and preferences and increased raw material costs, could impact our profitability and lead us to attempt to offset such increases through various pricing actions. Effective May 9, 2022 we changed the price of ~~Contents~~

our America’s Best signature offer to “two pairs of eyeglasses for $79.95, including a free eye exam” from its original $69.95 price. Effective March 14, 2022, we changed the price of our Eyeglass World opening offer to “two pairs of eyeglasses for $89” from its original price of $78. We believe that these changes will enable us to continue to offer the best possible value and service to our customers at prices that allow us to maintain our brands’ strong value propositions in the marketplace.

Comparable store sales growth

Comparable store sales growth is a key driver of our ~~business. The~~business and our value proposition will continue to drive comparable store sales growth as we attract new customers and ~~Adjusted Comparable Store Sales Growth benefited in~~increase loyalty with existing customers. During the ~~current period from the effect of our stores being temporarily closed to the public in the prior year~~six months ended July 2, 2022 comparable store sales growth was negatively impacted due to overall economic trends impacting consumer preferences and demand, constraints on exam capacity in certain markets and the Omicron COVID-19 ~~pandemic.~~variant. We believe our business model of providing exceptional value and convenience to customers, enabled by our low-cost operating platform will mitigate these impacts to a certain extent. Our strategies to mitigate these effects include, but are not limited to, investing in recruitment and retention initiatives along with continuing our implementation of remote medicine technologies and optimizing our marketing investments. The impact of macroeconomic factors, the COVID-19 pandemic and constraints on exam capacity on our comparable store sales growth remains uncertain, and ~~affects~~effects and relevant risk exposures may be exacerbated in the future.

Substantial increases in product costs due to increases in materials cost or general inflation could lead to greater profitability pressure as we may not be able to pass costs on to consumers. To date, changes in materials prices and general inflation have not materially impacted our business. However, targeted wage investments, including increases in compensation and other expenses for our optometrists and associates, have impacted our costs applicable to revenue and selling, general and administrative expenses. Any further wage investments, along with increased raw materials costs as a result of inflation or supply chain issues, increases in energy and fuel prices and lease and utility costs, would increase our costs applicable to revenue or selling, general and administrative

expenses. Such cost increases may not be offset by ~~the immediate~~leverage from revenue growth, productivity efficiency and, ~~ongoing threat~~as appropriate, various pricing actions which could impact our profitability and results of ~~the COVID-19 pandemic.~~operations.

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. ~~This seasonality, and our interim results were impacted during fiscal year 2020 because our stores were temporarily closed to the public for a portion of the first half of the year due to~~Consumer behavior driven by the COVID-19 ~~pandemic. Our net revenue~~pandemic, impacts on overall economic trends, consumer preferences and demand has resulted in a departure from seasonal norms we have experienced in recent years and we expect it will continue to disrupt the ~~current fiscal period is higher compared to the sales prior to the pandemic due to new store openings and strong customer demand, including the likely effects~~historical quarterly cadence of our ~~stores being temporarily closed to the public in fiscal year 2020 and government stimulus.~~results of operations for an unknown period of time.

We remain committed to our long-term vision and continue to position ourselves to make progress against our key initiatives while balancing the near-term challenges and uncertainty presented by the COVID-19 ~~pandemic.~~pandemic and other macroeconomic factors. We believe the following factors may continue to influence our short-term and long-term results:

•New store openings;

•Managed care and insurance;

•~~Vision care professional recruitment and coverage;~~

•~~Overall economic trends;~~

•~~Consumer preferences and demand;~~

•Infrastructure ~~and~~ investment;

•~~Pricing strategy;~~

•Our ability to source and distribute products ~~effectively~~

•~~Market wage pressure and unemployment levels;~~effectively; and

•~~Consolidation in the industry~~Industry competition and consolidation

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. In addition, we also review store growth, Adjusted Comparable Store Sales Growth, Adjusted Operating Income, Adjusted Operating Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Diluted EPS.

We report as net revenue amounts generated in transactions with retail customers who are the end users of our products, services, and plans. ~~Net product~~Comparable store sales ~~include sales~~growth and new store openings are key drivers of ~~prescription~~net revenue and ~~non-prescription eyewear, contact lenses, and related accessories as well as eye exam services associated with our America’s Best brand’s signature offer~~are discussed below. Also, the timing of ~~two pairs of eyeglasses and~~unearned revenue can affect revenue recognized in a free eye exam for one low price (“two-pair offer”) to retail customers and sales of inventory in which our customer is another retail entity. Net sales of services and plans include sales of eye exams, eye care club memberships, product protection plans (i.e., warranties), and single service eye care plans in California. Net sales of services and plans also include fees we earn for managing certain Vision Centers located in Walmart stores and for laboratory services provided to Walmart.

~~Table of Contents~~

particular period.

Costs Applicable to Revenue

Costs applicable to revenue include both costs of net product sales and costs of net sales of services and plans. Costs of net product sales include (i) costs to procure non-prescription eyewear, contact lenses, and accessories, which we purchase and sell in finished form, (ii) costs to manufacture finished prescription eyeglasses, including direct materials, labor, and overhead, and (iii) remake costs, warehousing and distribution expenses, and internal transfer costs. Costs of services and plans include costs associated with product protection plan programs, eye care club memberships, single service eye care plans in California, eye care practitioner and eye exam technician payroll, taxes and benefits and optometric service costs. Customer tastes and preferences, product mix, changes in technology, significant increases or slowdowns in production, and other factors impact costs applicable to revenue. The components of our costs applicable to revenue may not be comparable to other retailers.

Selling, General and Administrative

Selling, general and administrative expenses, or SG&A, include store associate (including optician) payroll, taxes and benefits, occupancy, advertising and promotion, field services, corporate support and other costs associated with the provision of vision care services. SG&A generally fluctuates consistently with revenue due to the variable store, field office and corporate support costs; however, some fixed costs slightly improve as a percentage of net revenue as our net revenues grow over time.

The total number of new stores per year and the timing of store openings has, and will continue to have, an impact on our results. ~~In an effort to conserve cash early in the COVID-19 pandemic, we temporarily paused new store openings during a portion of the fiscal year 2020.~~ We expect to open ~~approximately 75~~at least 80 stores in the current year. We will continue to monitor and determine our plans for future new store openings based on ~~based~~ on health, safety and economic conditions.

Adjusted Comparable Store Sales Growth

We measure Adjusted Comparable Store Sales Growth as the increase or decrease in sales recorded by the comparable store base in any reporting period, compared to sales recorded by the comparable store base in the prior reporting period, which we calculate as follows: (i) sales are recorded on a cash basis (i.e., when the order is placed and paid for or submitted to a managed care payor, compared to when the order is delivered), utilizing cash basis point of sale information from stores; (ii) stores are added to the calculation during the 13th full fiscal month following the store’s opening; (iii) closed stores are removed from the calculation for time periods that are not comparable; (iv) sales from partial months of operation are excluded when stores do not open or close on the first day of the month; and (v) when applicable, we adjust for the effect of the 53rd week. Quarterly, year-to-date and annual adjusted comparable store sales are aggregated using only sales from all whole months of operation included in both the current reporting period and the prior reporting period. When a partial month is excluded from the calculation, the corresponding month in the subsequent period is also excluded from the calculation. There may be variations in the way in which some of our competitors and other retailers calculate comparable store sales. As a result, our adjusted comparable store sales may not be comparable to similar data made available by other retailers. ~~We did not revise our calculation of Adjusted Comparable Store Sales Growth for the temporary closure of our stores to the public as a result of the COVID-19 pandemic.~~

Adjusted Comparable Store Sales Growth is a non-GAAP financial measure, which we believe is useful because it provides timely and accurate information relating to the two core metrics of retail sales: number of transactions and value of transactions. We use Adjusted Comparable Store Sales Growth as the basis for key operating decisions, such as allocation of advertising to particular markets and implementation of special marketing programs. Accordingly, we believe that Adjusted Comparable Store Sales Growth provides timely and accurate information relating to the operational health and overall performance of each brand. 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. The Company Non-GAAP Measures are also frequently used by analysts, investors and other interested parties. We use the Company Non-GAAP Measures to supplement U.S. GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation and to compare our performance against that of other peer companies using similar measures. See “Non-GAAP Financial Measures” for definitions of the Company Non-GAAP Measures and for additional information.

Results of Operations

The following table summarizes key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net revenue.

Three Months Ended July ~~3, 2021~~2, 2022 compared to Three Months Ended ~~June 27, 2020~~

As a result of the COVID-19 pandemic, our retail stores were temporarily closed to the public beginning on March 19, 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.July 3, 2021

The following presents, by segment and by brand, comparable store sales growth, stores open at the end of the period and net revenue for the three months ended July ~~3, 2021~~2, 2022 compared to the three months ended ~~June 27, 2020.~~July 3, 2021.

Comparable store sales growth(1)

Adjusted Comparable Store Sales Growth(3)

(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 10. “Segment Reporting” in our unaudited condensed consolidated financial statements included in Part I. Item 1. of this Form 10-Q, 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.


Delaware						46-4841717
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2435 Commerce Ave
Building 2200						30096
Duluth, Georgia						(Zip Code)
(Address of principal executive offices)


			Page
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			3
~~Part~~PART I – ~~Financial Information~~FINANCIAL INFORMATION			5
	Item 1.	Financial Statements (Unaudited)	5
		Condensed Consolidated Balance Sheets	5
		Condensed Consolidated Statements of Operations and Comprehensive Income	6
		Condensed Consolidated Statements of Stockholders’ Equity	7
		Condensed Consolidated Statements of Cash Flows	98
		Notes to Condensed Consolidated Financial Statements	109
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2422
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4238
	Item 4.	Controls and Procedures	4339
~~Part~~PART II – ~~Other Information~~OTHER INFORMATION			4440
	Item 1.	Legal Proceedings	4440
	Item 1A.	Risk Factors	4440
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4440
	Item 3.	Defaults Upon Senior Securities	4440
	Item 4.	Mine Safety Disclosures	4440
	Item 5.	Other Information	4440
	Item 6.	Exhibits	4541
		Signatures	4642


							As of July 2, 2022		As of January 1, 2022
ASSETS	ASSETS	As of July 3, 2021		As of January 2, 2021		ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	408,301	$	373,903	Cash and cash equivalents	$	254,382	$	305,800
Accounts receivable, net	Accounts receivable, net	54,733		57,989		Accounts receivable, net	63,774		55,697
Inventories	Inventories	120,863		111,274		Inventories	129,493		123,669
Prepaid expenses and other current assets	Prepaid expenses and other current assets	24,466		23,484		Prepaid expenses and other current assets	32,821		29,410
Total current assets	Total current assets	608,363		566,650		Total current assets	480,470		514,576

Noncurrent assets:						Noncurrent assets:
Property and equipment, net	Property and equipment, net	335,504		341,293		Property and equipment, net	350,840		346,436
Other assets:
Goodwill	Goodwill	777,613		777,613		Goodwill	777,613		777,613
Trademarks and trade names	Trademarks and trade names	240,547		240,547		Trademarks and trade names	240,547		240,547
Other intangible assets, net	Other intangible assets, net	45,766		49,511		Other intangible assets, net	38,275		42,020
Right of use assets	Right of use assets	343,708		340,141		Right of use assets	372,121		354,900
Other assets	Other assets	17,715		17,743		Other assets	18,477		16,999
Total non-current assets	Total non-current assets	1,760,853		1,766,848		Total non-current assets	1,797,873		1,778,515
Total assets	Total assets	$	2,369,216	$	2,333,498	Total assets	$	2,278,343	$	2,293,091

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	77,677	$	64,861	Accounts payable	$	70,000	$	64,331
Other payables and accrued expenses	Other payables and accrued expenses	116,508		110,309		Other payables and accrued expenses	107,578		119,323
Unearned revenue	Unearned revenue	39,071		32,657		Unearned revenue	34,329		29,895
Deferred revenue	Deferred revenue	68,612		58,899		Deferred revenue	64,295		65,325
Current maturities of long-term debt and finance lease obligations	Current maturities of long-term debt and finance lease obligations	4,285		3,598		Current maturities of long-term debt and finance lease obligations	4,651		3,999
Current operating lease obligations	Current operating lease obligations	64,330		58,356		Current operating lease obligations	72,938		60,930
Total current liabilities	Total current liabilities	370,483		328,680		Total current liabilities	353,791		343,803

Noncurrent liabilities:						Noncurrent liabilities:
Long-term debt and finance lease obligations, less current portion and debt discount	Long-term debt and finance lease obligations, less current portion and debt discount	616,160		651,763		Long-term debt and finance lease obligations, less current portion and debt discount	564,152		566,081
Non-current operating lease obligations	Non-current operating lease obligations	326,478		327,371		Non-current operating lease obligations	350,186		342,241
Other non-current liabilities:
Deferred revenue	Deferred revenue	23,483		20,828		Deferred revenue	23,015		23,166
Other liabilities	Other liabilities	14,272		17,415		Other liabilities	9,043		8,974
Deferred income taxes, net	Deferred income taxes, net	80,003		80,939		Deferred income taxes, net	86,487		82,846
Total other non-current liabilities		117,758		119,182
Total non-current liabilities						Total non-current liabilities	1,032,883		1,023,308
Commitments and contingencies (See Note 9)	Commitments and contingencies (See Note 9)	0		0		Commitments and contingencies (See Note 9)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, $0.01 par value; 200,000 shares authorized; 82,828 and 82,183 shares issued as of July 3, 2021 and January 2, 2021, respectively; 81,855 and 81,239 shares outstanding as of July 3, 2021 and January 2, 2021, respectively		828		821
Common stock, $0.01 par value; 200,000 shares authorized; 84,147 and 83,840 shares issued as of July 2, 2022 and January 1, 2022, respectively; 78,885 and 81,405 shares outstanding as of July 2, 2022 and January 1, 2022, respectively						Common stock, $0.01 par value; 200,000 shares authorized; 84,147 and 83,840 shares issued as of July 2, 2022 and January 1, 2022, respectively; 78,885 and 81,405 shares outstanding as of July 2, 2022 and January 1, 2022, respectively	841		838
Additional paid-in capital	Additional paid-in capital	739,380		795,697		Additional paid-in capital	759,562		750,478
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(3,093)		(4,400)		Accumulated other comprehensive loss	(1,562)		(1,940)
Retained earnings	Retained earnings	231,184		142,880		Retained earnings	318,276		278,395
Treasury stock, at cost; 973 and 944 shares as of July 3, 2021 and January 2, 2021, respectively		(29,962)		(28,496)
Treasury stock, at cost; 5,262 and 2,435 shares as of July 2, 2022 and January 1, 2022, respectively						Treasury stock, at cost; 5,262 and 2,435 shares as of July 2, 2022 and January 1, 2022, respectively	(185,448)		(101,791)
Total stockholders’ equity	Total stockholders’ equity	938,337		906,502		Total stockholders’ equity	891,669		925,980
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	2,369,216	$	2,333,498	Total liabilities and stockholders’ equity	$	2,278,343	$	2,293,091


Lease Term and Discount Rate	Lease Term and Discount Rate	As of July 3, 2021		As of January 2, 2021		Lease Term and Discount Rate	As of July 2, 2022		As of January 1, 2022
Weighted average remaining lease term (months)	Weighted average remaining lease term (months)					Weighted average remaining lease term (months)
Operating leases	Operating leases	77		77		Operating leases	76		76
Finance leases	Finance leases	76		79		Finance leases	68		72
Weighted average discount rate (a)	Weighted average discount rate (a)					Weighted average discount rate (a)
Operating leases	Operating leases	4.7	%	4.7	%	Operating leases	4.4	%	4.5	%
Finance leases (b)	Finance leases (b)	12.0	%	12.3	%	Finance leases (b)	11.3	%	11.7	%

(a) The discount rate used to determine the lease assets and lease liabilities was derived upon considering (i) incremental borrowing rates on our term loan and revolving credit facility; (ii) fixed rates on interest rate swaps; (iii) LIBOR margins for issuers of similar credit rating; and (iv) effect of collateralization. As a majority of our leases are five-year and 10-year leases, we determined a lease discount rate for such tenors and determined this discount rate is reasonable for leases that were entered into during the period.	(a) The discount rate used to determine the lease assets and lease liabilities was derived upon considering (i) incremental borrowing rates on our term loan and revolving credit facility; (ii) fixed rates on interest rate swaps; (iii) LIBOR margins for issuers of similar credit rating; and (iv) effect of collateralization. As a majority of our leases are five-year and 10-year leases, we determined a lease discount rate for such tenors and determined this discount rate is reasonable for leases that were entered into during the period.	(a) The discount rate used to determine the lease assets and lease liabilities was derived upon considering (i) incremental borrowing rates on our term loan and revolving credit facility; (ii) fixed rates on interest rate swaps; (iii) LIBOR margins for issuers of similar credit rating; and (iv) effect of collateralization. As a majority of our leases are five-year and 10-year leases, we determined a lease discount rate for such tenors and determined this discount rate is reasonable for leases that were entered into during the period.
(b) The discount rate on finance leases is higher than operating leases because the present value of minimum lease payments was higher than the fair value of leased properties for certain leases entered into prior to adoption of ASC 842. The discount rate differential for those leases is not material to our results of operations.


In thousands	In thousands		Six Months Ended July 3, 2021		Six Months Ended June 27, 2020		In thousands		Six Months Ended
Other Information	Other Information	Six Months Ended July 3, 2021						July 2, 2022		July 3, 2021

Operating cash outflows - operating leases	Operating cash outflows - operating leases		$	43,860	$	35,548	Operating cash outflows - operating leases				$	47,337	$	43,860
Right of use assets acquired under finance leases			$	0	$	1,257

Right of use assets acquired under operating leases	Right of use assets acquired under operating leases		$	44,544	$	35,870	Right of use assets acquired under operating leases				$	58,180	$	44,544


		Three and Six Months Ended July 3, 2021														Three and Six Months Ended July 2, 2022
		Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total Stockholders' Equity			Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total Stockholders’ Equity
		Shares	Amount													Shares	Amount
Balances at January 2, 2021		81,239	$	821	$	795,697	$	(4,400)	$	142,880	$	(28,496)	$	906,502
Cumulative effect of change in accounting principle		—	—		(71,385)		—		7,271		—		(64,114)
Balances at January 3, 2021 - as adjusted		81,239	821		724,312		(4,400)		150,151		(28,496)		842,388
Balances at January 1, 2022															Balances at January 1, 2022	81,405	$	838	$	750,478	$	(1,940)	$	278,395	$	(101,791)	$	925,980
Issuance of common stock															Issuance of common stock	289	3		1,366		—		—		—		1,369
Stock based compensation															Stock based compensation	—	—		3,692		—		—		—		3,692
Purchase of treasury stock															Purchase of treasury stock	(272)	—		—		—		—		(10,649)		(10,649)
Settlement of 2025 Notes															Settlement of 2025 Notes	—	—		(1)		—		—		—		(1)
Unrealized gain (loss) on hedge instruments, net of tax															Unrealized gain (loss) on hedge instruments, net of tax	—	—		—		188		—		—		188
Net income															Net income	—	—		—		—		30,147		—		30,147
Balances at April 2, 2022															Balances at April 2, 2022	81,422	$	841	$	755,535	$	(1,752)	$	308,542	$	(112,440)	$	950,726
Issuance of common stock	Issuance of common stock	174	2		1,056		—		—		—		1,058		Issuance of common stock	18	—		421		—		—		—		421
Stock based compensation	Stock based compensation	—	—		2,971		—		—		—		2,971		Stock based compensation	—	—		3,606		—		—		—		3,606
Purchase of treasury stock	Purchase of treasury stock	(28)	—		—		—		—		(1,421)		(1,421)		Purchase of treasury stock	(2,555)	—				—		—		(73,008)		(73,008)
Unrealized gain (loss) on hedge instruments, net of tax	Unrealized gain (loss) on hedge instruments, net of tax	—	—		—		(896)		—		—		(896)		Unrealized gain (loss) on hedge instruments, net of tax	—	—		—		190		—		—		190
Net income	Net income	—	—		—		—		43,432		—		43,432		Net income	—	—		—		—		9,734		—		9,734
Balances at April 3, 2021		81,385	$	823	$	728,339	$	(5,296)	$	193,583	$	(29,917)	$	887,532
Issuance of common stock		471	5		3,863		—		—		—		3,868
Stock based compensation		—	—		7,178		—		—		—		7,178
Purchase of treasury stock		(1)	—				—		—		(45)		(45)
Unrealized gain (loss) on hedge instruments, net of tax		—	—		—		2,203		—		—		2,203
Net income		—	—		—		—		37,601		—		37,601
Balances at July 3, 2021		81,855	$	828	$	739,380	$	(3,093)	$	231,184	$	(29,962)	$	938,337
Balances at July 2, 2022															Balances at July 2, 2022	78,885	$	841	$	759,562	$	(1,562)	$	318,276	$	(185,448)	$	891,669


	Three Months Ended July 3, 2021
In thousands (except earnings per share)	With ASU 2020-06 Adoption		Without ASU 2020-06 Adoption		Impact of Adoption

Income from operations	$	54,829	$	54,829	$	0
Interest expense, net	10,096		14,040		(3,944)
Debt issuance costs	92		92		0
Earnings before income taxes	44,641		40,697		3,944
Income tax provision	7,040		6,144		896
Net income	$	37,601	$	34,553	$	3,048
Earnings per share:
Basic	$	0.46	$	0.42	$	0.04
Diluted	$	0.42	$	0.42	$	0
Impact of adoption on basic earnings per share is calculated using impact on net income divided by basic weighted average shares outstanding during the period.


	Three Months Ended July 2, 2022
In thousands	Owned & Host		Legacy		Corporate/Other		Reconciliations		Total
Net product services	$	326,000	$	24,301	$	61,885	$	9,414	$	421,600
Net sales of services and plans	73,158		13,536		—		1,261		87,955
Total net revenue	399,158		37,837		61,885		10,675		509,555
Cost of products	95,264		11,506		54,499		2,092		163,361
Cost of services and plans	65,314		5,892		—		—		71,206
Total costs applicable to revenue	160,578		17,398		54,499		2,092		234,567
SG&A	156,234		14,758		56,837		—		227,829
Asset impairment	—		—		3,509		—		3,509
Other expense (income), net	—		—		34		—		34
EBITDA	$	82,346	$	5,681	$	(52,994)	$	8,583
Depreciation and amortization									25,245
Interest expense (income), net									3,963
Earnings before income taxes									$	14,408


		Three Months Ended June 27, 2020											Six Months Ended July 2, 2022
In thousands	In thousands	Owned & Host		Legacy		Corporate/Other		Reconciliations		Total		In thousands	Owned & Host		Legacy		Corporate/Other		Reconciliations		Total
Net product sales	Net product sales	$	177,430	$	16,254	$	50,472	$	(34,449)	$	209,707	Net product sales	$	683,904	$	51,931	$	123,582	$	(4,564)	$	854,853
Net sales of services and plans	Net sales of services and plans	34,275		9,159		0		6,866		50,300		Net sales of services and plans	153,173		28,064		—		1,176		182,413
Total net revenue	Total net revenue	211,705		25,413		50,472		(27,583)		260,007		Total net revenue	837,077		79,995		123,582		(3,388)		1,037,266
Cost of products		54,898		9,093		42,135		(8,491)		97,635
Cost of services and plans		38,573		4,572		0		0		43,145
Costs of products												Costs of products	196,304		24,413		107,964		(1,101)		327,580
Costs of services and plans												Costs of services and plans	130,915		12,109		—		—		143,024
Total costs applicable to revenue	Total costs applicable to revenue	93,471		13,665		42,135		(8,491)		140,780		Total costs applicable to revenue	327,219		36,522		107,964		(1,101)		470,604
SG&A	SG&A	86,704		10,561		39,317		0		136,582		SG&A	313,695		29,864		112,824		—		456,383
Asset impairment	Asset impairment	0		0		2,411		0		2,411		Asset impairment	—		—		3,915		—		3,915
Other expense (income), net		0		0		(92)		0		(92)
Debt issuance costs		0		0		136		0		136
Other expense, net												Other expense, net	—		—		265		—		265
EBITDA	EBITDA	$	31,530	$	1,187	$	(33,435)	$	(19,092)			EBITDA	$	196,163	$	13,609	$	(101,386)	$	(2,287)
Depreciation and amortization	Depreciation and amortization									21,924		Depreciation and amortization									50,396
Interest expense, net										15,502
Earnings (loss) before income taxes										$	(57,236)
Interest expense (income), net												Interest expense (income), net									(181)
Earnings before income taxes												Earnings before income taxes									$	55,884


		Comparable store sales growth(1)				Stores open at end of period		Net revenue(2)									Comparable store sales growth(1)				Stores open at end of period		Net revenue(2)
In thousands, except percentage and store data	In thousands, except percentage and store data	Three Months Ended July 3, 2021		Three Months Ended June 27, 2020		July 3, 2021	June 27, 2020	Three Months Ended July 3, 2021				Three Months Ended June 27, 2020				In thousands, except percentage and store data	Three Months Ended July 2, 2022		Three Months Ended July 3, 2021		July 2, 2022	July 3, 2021	Three Months Ended July 2, 2022				Three Months Ended July 3, 2021
Owned & Host segment	Owned & Host segment															Owned & Host segment
America’s Best	America’s Best	81.8	%	(37.1)	%	813	752	$	372,846	67.9	%	$	176,196	67.8	%	America’s Best	(13.0)	%	81.8	%	872	813	$	336,366	66.0	%	$	372,846	67.9	%
Eyeglass World	Eyeglass World	67.6	%	(31.6)	%	123	118	58,061		10.6	%	30,357		11.7	%	Eyeglass World	(9.1)	%	67.6	%	129	123	54,228		10.6	%	58,061		10.6	%
Military	Military	65.0	%	(44.6)	%	54	54	6,007		1.1	%	3,328		1.3	%	Military	(6.1)	%	65.0	%	54	54	5,640		1.1	%	6,007		1.1	%
Fred Meyer	Fred Meyer	61.1	%	(48.6)	%	29	29	3,243		0.6	%	1,824		0.7	%	Fred Meyer	(9.8)	%	61.1	%	29	29	2,924		0.6	%	3,243		0.6	%
Owned & Host segment total	Owned & Host segment total					1,019	953	$	440,157	80.1	%	$	211,705	81.4	%	Owned & Host segment total					1,084	1,019	$	399,158	78.3	%	$	440,157	80.1	%
Legacy segment	Legacy segment	58.2	%	(35.8)	%	230	231	43,600		7.9	%	25,413		9.8	%	Legacy segment	(12.9)	%	58.2	%	230	230	37,837		7.4	%	43,600		7.9	%
Corporate/Other	Corporate/Other	—	%	—	%	—	—	61,520		11.2	%	50,472		19.4	%	Corporate/Other	—	%	—	%	—	—	61,885		12.1	%	61,520		11.2	%
Reconciliations	Reconciliations	—	%	—	%	—	—	4,212		0.8	%	(27,583)		(10.6)	%	Reconciliations	—	%	—	%	—	—	10,675		2.1	%	4,212		0.8	%
Total	Total	99.1	%	(44.7)	%	1,249	1,184	$	549,489	100.0	%	$	260,007	100.0	%	Total	(11.0)	%	99.1	%	1,314	1,249	$	509,555	100.0	%	$	549,489	100.0	%
Adjusted Comparable Store Sales Growth(3)	Adjusted Comparable Store Sales Growth(3)	76.7	%	(36.5)	%											Adjusted Comparable Store Sales Growth(3)	(12.4)	%	76.7	%


	Three Months Ended				Six Months Ended
In thousands, except per share amounts	July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
Diluted EPS	$	0.42	$	(0.55)	$	0.89	$	(0.42)
Stock compensation expense (a)	0.08		0.04		0.11		0.07
Asset impairment (b)	0.01		0.03		0.02		0.17
Litigation settlement (c)	—		—		—		0.05
Amortization of acquisition intangibles (d)	0.02		0.02		0.04		0.05
Amortization of debt discount and deferred financing costs (e)	0.01		0.03		0.01		0.03
Losses (gains) on change in fair value of derivatives (f)	0.02		0.06		—		0.06
Other (j)	0.01		—		(0.01)		0.01
Tax benefit of stock option exercises (h)	(0.04)		—		(0.05)		(0.04)
Tax effect of total adjustments (i)	(0.04)		(0.05)		(0.05)		(0.12)
Adjusted Diluted EPS	$	0.48	$	(0.41)	$	0.97	$	(0.13)

Weighted average diluted shares outstanding	96,082		80,325		96,044		80,226
Note: Some of the totals in the table above do not foot due to rounding differences


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)
April 3, 2022 - April 30, 2022	181	$	39.82	181	$	115,795
May 1, 2022 - June 4, 2022	2,373	$	27.71	2,373	$	50,041
June 5, 2022 - July 2, 2022	—	—		—	$	50,041
Total	2,554	$	28.56	2,554	$	50,041
(1) Information regarding the Company’s share repurchases can be found in Note 1, Description of Business and Basis of Presentation, in the condensed consolidated financial statements included in Part I. Item 1. of this Form 10-Q. 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. On November 29, 2021 and February 23, 2022, the Board authorized increases of $50 million and $100 million, respectively, to the share repurchase program for a total authorization of $200 million. The share repurchase authorization expires on December 30, 2023. Following repurchases in the second quarter of fiscal year 2022, $50.0 million remains available under the share repurchase authorization. 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.


Exhibit No.						Exhibit Description
3.1						Third Amended and Restated Certificate of Incorporation of National Vision Holdings, Inc. -incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 10, 2021.
3.2						Third Amended and Restated Bylaws of National Vision Holdings, Inc. -incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on June 10, 2021.
10.1						Form of Restricted Stock Unit Agreement under the 2017 Omnibus Incentive Plan, as adopted April 10, 2022 -incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed May 10, 2022.
10.2						Form of Restricted Stock Unit Agreement under the 2017 Omnibus Incentive Plan, as adopted June 15, 2022.
10.3						First Amendment ~~No. 2, dated June 2, 2021,~~to the ~~Amended and Restated Credit~~Direct Lens Letter Agreement, dated ~~as of~~ July ~~18, 2019,~~19, 2022, by and ~~among Nautilus Acquisition Holdings,~~between Essilor of America, Inc., and National Vision, Inc.~~, certain subsidiaries of National Vision, Inc., as guarantors, Bank of America, N.A., as administrative agent and collateral agent, and the lenders from time to time party thereto~~ -incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed ~~on June 3, 2021.~~July 25, 2022.
31.1						Certification of Periodic Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2						Certification of Periodic Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1						Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2						Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
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101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104						The cover page of the Company’s Quarterly report on Form 10-Q for the quarter ended July ~~3, 2021,~~2, 2022, formatted in Inline XBRL (included within the Exhibit 101 attachments)


	National Vision Holdings, Inc.

Dated: August ~~12, 2021~~11, 2022	By:	/s/ L. Reade Fahs
		Chief Executive Officer and Director
		(Principal Executive Officer)

Dated: August ~~12, 2021~~11, 2022	By:	/s/ Patrick R. Moore
		Senior Vice President, Chief Financial Officer
		(Principal Financial Officer)