What changed in this filing

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Item 1. Business

2021-03-03 compared with 2020-02-26 · 111 added, 56 removed, 332 unchanged (33% of the section changed)

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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 1,151 retail stores across five brands and 19 consumer websites as of December 28, 2019 , our 2019 fiscal year end.

We reach our customers through a diverse portfolio of 1,205 retail stores across five brands and 19 consumer websites as of January 2, 2021, our 2020 fiscal year end.

Our common stock trades on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “EYE.” Our principal executive offices are located at 2435 Commerce Avenue, Bldg.

2200, Duluth, Georgia 30096.

Our Corporate History

Through its predecessors, NVI commenced operations in 1990.

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In October 2017, we completed the initial public offering of our common stock (the “IPO”).

National Vision was controlled by affiliates of KKR and private equity funds managed by Berkshire until July 30, 2018.

Effective March 5, 2019, the remaining shares of our common stock held by private equity funds managed by Berkshire were distributed to its partners and members.

Effective August 12, 2019, National Vision completed an underwritten offering and concurrent share repurchase pursuant to which KKR sold its remaining holdings of our common stock.

National Vision was controlled by affiliates of KKR and private equity funds managed by Berkshire until July 30, 2018 and by August 2019, these private equity funds had sold their remaining holds of our common stock.

COVID-19 Pandemic Impact on NVI’s Business

The outbreak of COVID-19 in 2020 resulted in a global pandemic and a significant slowdown of economic activity including worldwide travel restrictions, prohibitions of non-essential work activities, disruption and shutdown of businesses, changes in consumer behavior and greater uncertainty in global financial markets, which in turn, had a significant impact on our operations and performance in fiscal 2020.

We prioritized the safety of our associates, optometrists, customers and patients by closing our stores to the public for a temporary period of time in the first half of 2020 in order to implement enhanced safety protocols.

Through the dedication of our associates and doctors, we were able to continue to provide our customers and patients reliable and quality low cost eye care and eyewear.

Our strategy has guided us during these most challenging times and reinforces our confidence in our business model.

As the pandemic endures and continues to have an impact on global economic activity, the extent to which COVID-19 adversely impacts our future business operations, financial performance and results of operations is uncertain and will depend on many factors outside the Company’s control.

For a further discussion of the risks, uncertainties and actions taken in response to COVID-19, refer to Item 1A “Risk Factors” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Our Business Model

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• Recurring Revenue Characteristics .

Eye care purchases are predominantly a medical necessity and are therefore considered non-discretionary in nature.

Eye care purchases are predominantly a medical necessity and are therefore considered non-discretionary in natur e.

We estimate that optical consumers typically replace their eyeglasses every two to three years, while contact lens customers typically order new lenses every six to twelve months, reflecting the predictability of these recurring purchase behaviors.

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Our store economics are based on low capital investment, steady ramping of sales in new locations, low operating costs and consistent sales volume and earnings growth in mature stores, which result in attractive returns on capital.

The majority of our owned stores have achieved profitability during the second year of operation and have paid back invested capital in three to five years.

By consistently replicating the key characteristics of our store model, we execute a formula-based approach to opening new stores and managing existing stores, which has delivered predictable store performance across vintages, diverse geographies and new and existing markets.

Our new store model targets a store size between 3,500 to 4,500 square feet and an average new store cash investment of approximately $0.4 million to $0.5 million, in furniture, fixtures, leaseholds and equipment for new stores, net of tenant incentives.

Our new store model targets sales in the fifth year of operation in the range of $1.4 million to $1.6 million, with at least 60% of year five sales targeted in the first full year of operation.

Our new store model targets vary for America’s Best and Eyeglass World stores to reflect differences by brand, markets and geography.

The majority of our owned stores have achieved profitability during the second year of operation and have paid back invested capital in three to five years.

• Grow Our Store Base.

We believe that we continue to have significant expansion opportunities in the United States.

We have adopted a disciplined expansion strategy designed to leverage the strengths of our compelling and distinct value proposition and recognized America’s Best and Eyeglass World brand names to develop new stores successfully in an array of markets that are primed for growth, including new, existing, small and large markets.

We have an established partnership with a third party real estate data analytics firm to evaluate potential new America’s Best and Eyeglass World stores and updated our analysis during 2020.

This updated analysis suggests that we can grow America’s Best to at least 1,300 stores and Eyeglass World to at least 850 stores, inclusive of those already open.

We believe that these two brands can accordingly grow from 892 stores as of January 2, 2021 to a total of at least 2,150 stores, with similar economics to the existing store base.

We believe that our consistent track record of successfully opening stores across vintages, geographies and markets demonstrates our ability to further increase our store count and, as a result, we believe that our current level of new store growth of approximately 75 stores per annum is sustainable for the foreseeable future.

Our Mission and Philanthropic Efforts

Our mission is to help people by making quality eye care and eyewear more affordable and accessible.

Our philanthropic culture instills a sense of purpose and engagement in our associates, from in-store staff to senior management.

Our philanthropic culture instills a sense of purpose and engagement in our associates, from in-store team members to senior management.

Our associates feel pride in the positive work they are doing, which allows us to attract and retain both store associates and vision care professionals, thus improving the customer experience in our stores.

In addition, our mission has been essential to the formation and retention of our management team, whose extensive experience is a key component of our business success.

In addition, our mission has been essential to the recruitment and retention of our management team, whose extensive experience is a key component of our business success.

Our financial success has helped fuel our ever-growing philanthropic engine.

In the U.S., through our partnership with the Boys & Girls Clubs of America and work with other charitable organizations, we provide free vision screenings, eye exams and eyeglasses to young Americans and other underserved communities.

In the U.S., through our partnership with charitable organizations, we provide free vision screenings, eye exams and eyeglasses to young Americans and other underserved communities.

In addition, through multiple charitable partnerships with organizations such as VisionSpring, RestoringVision and VOSH International, we both directly assist and indirectly help improve the vision of millions of individuals globally.

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our Owned & Host segment and our Legacy segment.

Our Owned & Host segment includes our two owned brands, America’s Best and Eyeglass World, and our Vista Optical locations in Fred Meyer stores.

Our Owned & Host segment includes our two owned brands, America’s Best and Eyeglass World, and our Vista Optical locations in select Fred Meyer stores.

Within this segment, we also provide low-cost vision care products and services to American military service members by operating Vista Optical locations on select military bases across the country.

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In addition, our wholly-owned subsidiary, FirstSight Vision Services, Inc.

(“FirstSight”), which is licensed as a single-service health plan under California law, issues individual vision care benefit plans in connection with our America’s Best operations in California and arranges for the provision of optometric services at optometric offices next to certain Walmart stores throughout California.

(“FirstSight”), which is licensed as a single-service health plan under California law, issues individual vision plans in connection with our America’s Best operations in California and arranges for the provision of optometric services at optometric offices next to certain Walmart stores throughout California.

We support our owned brands and our Vista Optical military operations through our omni-channel offerings and we also have an established standalone e-commerce business.

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Overview of Our Brands and Omni-channel & E-commerce Platform

Owned & Host Brands

Eyewear Value Superstore

Shop-Within-A-Shop

Commissary Store

Shop-Within-A-Shop

Owned & Host Brands Legacy

Lowest Price Eyewear Value Superstore Shop-Within-A-Shop Commissary Store Shop-Within-A-Shop

“Great Deals Everywhere You Look”

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“Everyday Low Price”

Mostly Independent ODs

Centralized Lab

Lab in Store / Centralized Lab

Centralized Lab

Employed ODs Mostly Independent ODs Mostly Independent ODs Mostly Independent ODs Mostly Independent ODs

773 Stores 119 Stores 29 Stores 54 Stores 230 Stores

~1,300 SKUs ~1,900 SKUs ~600 SKUs ~700 SKUs ~800 SKUs

Centralized Lab Lab in Store / Centralized Lab Centralized Lab Centralized Lab Centralized Lab

OMNI-CHANNEL & E-COMMERCE

Sister Sites (4)

Proprietary Sites (6)

Partner Sites (9)

Store count as of December 28, 2019.

Sister Sites (4) Proprietary Sites (6) Partner Sites (9)

Store count as of January 2, 2021.

SKU figures refer to eyeglass frame SKUs.

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Our Eyeglass World Brand.

Eyeglass World also offers a value price point for customers, with an opening offer of “two pairs of eyeglasses for $78” and eye exams starting at $49.

This brand is positioned as an eyeglass superstore with a broad selection of designer brands and price points, and offers a highly personalized level of service.

Eyeglass World also offers a value price point for customers, with an opening offer of “two pairs of eyeglasses for $78.” This brand is positioned as an eyeglass superstore with a broad selection of designer brands and price points, and offers a highly personalized level of service.

We source eyeglass frames for our Eyeglass World stores from leading designer brands, private label manufacturers and low-cost overseas manufacturers.

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Our Partner Brands.

We have three partner brands consisting of 226 Vision Centers in Walmart stores across the country, 54 Vista Optical locations on military bases and 29 Vista Optical locations within Fred Meyer stores as of December 28, 2019 .

Pursuant to a recent amendment to our management & services agreement with Walmart, we will be adding five additional Vision Centers in Walmart stores in 2020.

We have three partner brands consisting of 230 Vision Centers in Walmart stores across the country, 54 Vista Optical locations on military bases and 29 Vista Optical locations within Fred Meyer stores as of January 2, 2021.

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.

We have strong, long-standing relationships with these partners.

Our strategic relationship with Walmart is in its 30 th year and our partnerships with Fred Meyer and the U.S.

military have been maintained for over 20 years.

Our strategic relationship with Walmart is in its 31 st year and our partnerships with Fred Meyer and the U.S.

military have been maintaine d for over 20 ye ars.

Our partner brands all compete within the value segment of the U.S.

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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.

In the aggregate, sales from our omni-channel and e-commerce platforms represented approximately 4% of our net revenue in fiscal year 2019 .

In the aggregate, sales from our omni-channel and e-commerce platforms, which includes “buy-in-store and ship-to-home” transactions, represented approximately 12.0% and 10.3% of our 2020 and 2019 fiscal year net revenue, respectively.

Our Industry 1

optical retail industry, defined by Vision Monday to include optical retailers’ revenues from the sales of products (including managed vision care benefit revenues and omni-channel and e-commerce sales) and eye care services provided by vision care professionals, including eye exams, is a $37 billion industry that has exhibited consistent, stable growth across economic cycles.

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Vision Monday

1 This section includes the most recently available industry information, primarily as of 2019.

We expect industry data for 2020, that would include the impacts of COVID-19, to be available later in 2021.

The majority of eyewear purchases are driven by need, with two primary drivers of demand:

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This is anticipated to result in a larger percentage of the population suffering from screen-related vision problems, driving incremental sales of vision correction devices, such as traditional eyeglasses and contact lenses, as well as higher margin products designed specifically to counteract the effect of looking at screens for prolonged stretches of time.

We believe that remote working and learning arrangements that have been necessitated by the COVID-19 pandemic have led to increased use of electronic screens.

• Growing Focus on Health and Wellness .

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Through one-on-one consultative-selling, our sales associates have a number of opportunities to share information about value-added lenses, including thinner, higher-quality lenses and photochromatic options, which carry higher margins.

As a result, a significant number of America’s Best customers and Eyeglass World customers who purchase eyeglasses choose upgraded lenses and/or frames instead of each brand’s base offer.

As a result, a significant number of A merica’s Best customers and Eyeglass World customers who purchase eyeglasses choose upgraded lenses and/or frames instead of each brand’s base offer.

We also offer contact lenses and accessories from all major contact lens manufacturers, including our own private label brands (Softmed and Natural Eyes HydraWear, made by CooperVision) that are offered in our America’s Best and Eyeglass World stores.

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In both of our reportable segments, eye exam services are provided by optometrists employed by us or by professional corporations or similar entities owned by eye care practitioners with whom we have contractual arrangements or by independent optometrists with whom we have contracted.

In addition, in certain locations, eye exam services may be provided utilizing a remote medicine platform.

Within our Owned & Host segment, America’s Best offers its Eyecare Club programs primarily to its contact lens customers.

As of December 28, 2019 , the Eyecare Club had approximately 1.4 million active members.

As of January 2, 2021, the Eyecare Club had approximately 1.5 million active members.

Benefits of the Eyecare Club include two free eye exams per year for the duration of the multi-year membership, 10% off all contact lenses and eyeglasses and other periodic benefits and discounts.

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For a prescription to be current, customers generally need to have an eye exam every one or two years, depending on the state in which they reside.

The multiyear nature of these memberships, which customers pay in full at the time they join, facilitates repeat traffic to America’s Best stores for exams and contact lens purchases and builds customer loyalty.

“Revenue from Contracts With Customers” in our audited consolidated financial statements included in Part II.

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(i) retail locations near where our customers work and shop, with easy, convenient parking, (ii) store hours that fit their lifestyles, (iii) product selection that achieves aesthetic and/or fashion goals, (iv) availability of on-site eye exams and (v) acceptance of certain vision insurance benefits.

For our two owned brands, we have developed specific customer demographic profiles.

More specifically, we estimate that our typical America’s Best customer has a household income between $35,000 to $100,000, is a high school graduate, holds a blue collar job and is between 35 to 64 years old, while our typical Eyeglass World customer is slightly more affluent, has a college degree or higher, holds a professional or technical job and is between 35 to 79 years old.

These profiles demonstrate that, even within the same market, our America’s Best and Eyeglass World brands appeal to and attract a different consumer, which speaks favorably to our growth potential and our ability to open new stores of both brands in the same markets.

Our Sales and Marketing

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We believe that television is a key channel for connecting with our customers.

A significant portion of America’s Best and Eyeglass World’s advertising investments are on traffic-driving television advertisements, which we leverage broadly across multiple stores in each television market to gain a larger share of voice, and, in turn, drive traffic and margins.

Additional advertising investments include digital media, search, direct mail, email and local store marketing.

A significant p ortion of America’s Best and Eyeglass World’s advertising investments are on traffic-driving television advertisements, which we leverage broadly across multiple stores in each television market to gain a larger share of voice, and, in turn, drive traffic and margins.

We continue to benefit from America’s Best national television advertising campaigns, which we believe are cost effective and help raise our brand awareness in both existing and new markets.

Additional advertising investments include digital media, search, direct mail, email and local store marketing.

We are continually tracking consumer media consumption behaviors and adjusting our media plan accordingly.

For our host and legacy brands, we rely on our host and legacy partners’ marketing initiatives to drive traffic into their stores, and then we develop and execute highly targeted local marketing campaigns within stores to create awareness of our service and product offerings.

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Our Optical Laboratories and Distribution Network

We use a highly-efficient mix of four domestic, company-operated processing facilities and two international, outsourced facilities.

We use a highly-efficient mix o f four domestic, company-operated processing facilities and two international, outsourced facilities.

We have state-of-the-art lens processing capabilities in our four geographically-diverse, company-operated production facilities in Lawrenceville, Georgia;

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All lens orders that are not processed or completed in-store are processed or completed by our centralized laboratory network.

We have a 66,000 square foot distribution center in Lawrenceville, Georgia and a 52,000 square foot distribution center in Columbus, Ohio.

We have an 86,000 square foot distribution center in Lawrenceville, Georgia and a 52,000 square foot distribution center in Columbus, Ohio.

We utilize third-party carriers to transport products from these centers to customers and store locations.

Our Employees

As of December 28, 2019 , we had 11,781 full-time and part-time employees.

In addition, the professional corporations or similar entities with which we contract employed 1,159 optometrists as of December 28, 2019 .

Human Capital Management

We aim to maintain a strong and resonating culture guided by our Vision, Mission and Values.

We believe everyone deserves to see their best to live their best and our goal is to help people achieve this by making quality eye care and eyewear more affordable and accessible.

This purpose is supported by our associates and their values – they are empowered to do what is right, committed to creating happiness every day and energized to serve.

With an inclusive and people-first culture, we are focused on celebrating and respecting our backgrounds, empowering, rewarding and developing our associates and aiming to give back to the communities in which we serve.

Our human capital initiatives are focused on attracting highly qualified individuals and providing them with continued opportunities for growth and development.

As of January 2, 2021, we had 12,792 full-time and part-time associates.

In addition, the professional corporations or similar entities with which we contract employed 1,200 optometrists as of January 2, 2021.

We are not a party to any collective bargaining agreements.

We have never experienced a strike or work stoppage, and we believe that our relations with employees are good.

We have never experienced a strike or work stoppage, and we believe that our relations with our associates and optometrists are good.

Talent Acquisition

At National Vision, we are committed to attracting talent aligned with our Vision, Mission and Values.

We have invested in key leadership roles within the talent organization to refine our approach and have incorporated new technology to improve both the candidate and hiring manager experience.

In addition, we have partnered with schools and other organizations to promote the profession of optometry, including continuing our multi-year sponsorship of the Association of Schools and Colleges campaign “Optometry Gives Me Life” targeted at high school and college students.

To mitigate the impact the COVID-19 pandemic and temporary closure of our stores had on our traditional recruiting efforts and hiring cycles, we transitioned to online platforms for job fairs and on-campus events, selectively offered key incentives, such as a student loan repayment program, and educated applicants on the health and safety protocols implemented in our stores.

Talent Development

We have a proven record of opening new stores with high-quality training support.

As a result of the COVID-19 pandemic, we adapted our new store training approach by introducing and enhancing virtual instructor-led training classes, allowing for a continuation of high touch training to prepare stores to open safely and effectively.

We also increased ongoing training, especially in the areas of safety protocol procedures and customer interactions.

We provide our associates and optometrists with several opportunities and mechanisms through which they can provide feedback and allow us to continue developing programs for training and growth.

Benefits and Wellness

We strive to ensure our people always feel supported so they can bring their best selves to work every day.

We demonstrate this commitment through many of our benefits and wellness offerings.

Programs like our health plan, wellness and disease management programs, including personalized programs for diabetes and hypertension, and a financial protection resource, provide the needed resources essential for helping our people care for themselves and their families.

We also offer free on-demand mental and behavioral health resources, to provide needed guidance when work and personal challenges affect an associate’s overall well-being.

Shortly after our IPO, we established the National Vision Crisis Relief Fund to help support associates who are facing financial hardship as a result of a natural disaster, family emergency or other unexpected events.

Donations made to the Crisis Relief Fund are matched by the Company.

Since its creation, over $800,000 have been provided to associates for assistance, with over 90% provided since the beginning of the COVID-19 pandemic.

Diversity, Equity and Inclusion

We are committed to a diverse and inclusive culture and in 2020, we formed a new Diversity, Equity and Inclusion (“DEI”) department within the Company.

The DEI department is supported by our DEI Council, composed of a cross-section of associates and optometrists.

In 2020, we focused on reviewing best practices and initiatives and conducted listen and learn sessions with associates and optometrists to solicit feedback and identify opportunity areas.

As we move forward in our DEI journey, we are focused on advancing diversity in our recruitment, training, career mentorship and development, employment branding and community service.

As a part of these efforts, in 2020, we collaborated with non-profit and educational institutions with the goal of increasing the percentage of Black doctors in the industry, including sponsoring and participating in the first ever “Impact HBCU” event sponsored by Black Eyecare Perspectives with the goal of increasing awareness in the field among HBCU students.

The COVID-19 pandemic has presented unique challenges for our associates, doctors, customers and patients.

We prioritized the safety of our associates, optometrists, customers and patients by voluntarily closing our stores to the public for a temporary period of time in 2020 to implement enhanced safety and cleaning protocols in order to serve our customers and patients with everyone’s health and safety in mind.

We also created multiple resources for associates, including frequent and transparent communication tools, additional leave of absence and paid leave options, and centralized support to address COVID-19 questions and concerns, including regarding the availability of vaccines.

We paid one-time appreciation bonuses to customer-facing associates, granted additional company holidays in the fourth quarter of fiscal year 2020 and paid benefits for associates furloughed in response to the COVID-19 pandemic.

In addition, contributions to our Crisis Relief Fund more than doubled, reflecting the empathetic nature of our community.

Managed Vision Care

Our managed care business relates to vision care programs and associated benefits (i) sponsored by employees or other groups, (ii) provided by insurers and managed care entities, such as health maintenance organizations to individuals, and (iii) delivered, typically on a fee-for-service or capitated basis, by health care providers, such as ophthalmologists, optometrists and opticians.

Our managed care business relates to vision care programs and associated benefits (i) sponsored by associates or other groups, (ii) provided by insurers and managed care entities, such as health maintenance organizations to individuals, and (iii) delivered, typically on a fee-for-service or capitated basis, by health care providers, such as ophthalmologists, optometrists and opticians.

Our managed care business primarily consists of participation in private managed care programs.

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Our quarterly results may also be affected by the timing of new store openings and store closings, the amount of sales contributed by new and existing stores, the timing of certain holidays, as well as the timing of weather-related store closures.

Due to the COVID-19 pandemic and the resulting temporary closure of our stores for a portion of the first half of 2020, there have been changes in fiscal year 2020 seasonality and COVID-19 may cause changes beyond 2020 to the seasonality we have historically experienced.

Information Technology

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We utilize a combination of co-location data center and cloud-based solutions for our infrastructure and the majority of our applications consist of standard, integrated software solutions.

Our systems provide the data analysis and automation necessary to support our marketing, merchandising, inventory, distribution, store operations and point-of-sale, e-commerce, finance, accounting and human resources initiatives.

Our systems provide the data analysis and automation necessary to support our marketing, merchandising, inventory, distribution, store operations and point-of-sale, e-commerce, remote medicine, finance, accounting and human resources initiatives.

We believe our current systems allow us to identify and respond to operating trends in our business.

Examples of areas in which we have invested and continue to invest in include software systems to enhance the growth of our omni-channel and customer engagement efforts, cybersecurity programs and our overall security posture and our point-of-sale system.

Examples of areas in which we have invested and continue to invest in include software systems to enhance the growth of our omni-channel, customer engagement efforts, remote medicine, cybersecurity programs and our overall security posture and our point-of-sale system.

We believe these investments, along with maintenance of our existing information technology capabilities, will provide the flexibility and capacity to accommodate our future growth plans.

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A violation of the Contact Lens Rule constitutes an unfair or deceptive act or practice under the FTC Act.

In 2019, the FTC published a Supplemental Notice of Proposed Rulemaking seeking comment regarding proposed changes to the Contact Lens Rule under the FCLCA, that include, among other topics, updates to the “passive verification” requirement, updates to certain other prescription requirements and new requirements regarding automated telephone verification messages.

In 2020, the FTC adopted changes to the Contact Lens Rule under the FCLCA, that include, among other topics, updates to the “passive verification” requirement, updates to certain other prescription requirements and new requirements regarding automated telephone verification messages.

Our e-commerce business must comply with various federal and state laws, most notably the FCLCA.

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Environmental and Safety Regulation

Our optical laboratories in the United States and our in-store laboratories in our Eyeglass World locations subject us to various federal, state and local laws, regulations and other requirements pertaining to protection of the environment, public health and employee safety, including, for example, regulations governing the management of hazardous substances, and the maintenance of safe working conditions.

Our optical laboratories in the United States and our in-store laboratories in our Eyeglass World locations subject us to various federal, state and local laws, regulations and other requirements pertaining to protection of the environment, public health and associate safety, including, for example, regulations governing the management of hazardous substances, and the maintenance of safe working conditions.

These laws also apply generally to all our properties.

Our failure to comply with these laws can subject us to criminal and civil liabilities.

COVID-19-Related Regulations

Certain federal and state laws and regulations have been adopted in response to the COVID-19 pandemic that, among other things, include liability protections for certain businesses.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted in response to the COVID-19 pandemic.

The CARES Act, among other things, provides tax relief to businesses, including the deferral of certain payroll taxes, relief for retaining employees, accelerating a company’s ability to recover Alternative Minimum Tax (“AMT”) refundable credits and other income tax provisions.

We have elected to apply the AMT refundable credit provision and the employee retention credit provisions of the CARES Act.

“Business and Significant Accounting Policies” for more details.

Additional federal or state laws and regulations may be adopted in the future in response to the pandemic and continued impact of the pandemic.

We are also subject to the requirements of the Occupational Safety and Health Administration (OSHA) and other federal and state agencies that address employee health, including from infectious diseases such as COVID-19, and safety.

In general, we believe we are meeting state and federal rules and regulations protecting the health and safety of our employees.

Based on new or revised regulatory developments, we may be required to increase expenditures in the future to comply with higher industry and regulatory safety standards.

However, there are no known new or revised regulations which will require a material increase in our expenditures.

Insurance and Risk Management

We use a combination of insurance and self-insurance for workers’ compensation, general liability, property insurance, director and officers’ liability insurance, vehicle liability and employee health-care benefits, among others.

Liabilities associated with the risks that are retained by us are estimated, in part, by considering historical claims experience, demographic factors, severity factors and other actuarial assumptions.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business