What changed in this filing

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Item 1. Business

2022-02-28 compared with 2021-03-03 · 65 added, 57 removed, 386 unchanged (24% of the section changed)

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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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We believe our success is driven by our low prices, convenient locations, broad assortment of branded and private label merchandise and the high levels of in-store service provided by our well-trained and passionate store associates and vision care professionals.

We believe our bundled offers, including two-pairs of eyeglasses plus an eye exam for $69.95 at America’s Best and two-pairs of eyeglasses for $78 at Eyeglass World, represent among the lowest price offerings of any national chain.

We believe our bundled offers, including two-pairs of eyeglasses plus an eye exam for $69.95 at America’s Best and two-pairs of eyeglasses for $78 at Eyeglass World, are among the lowest price offerings of any national chain.

Our ability to utilize national advertising for America’s Best allows us to communicate this value proposition to a meaningfully greater number of current and potential customers.

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

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

We believe that these two brands can accordingly grow from 965 stores as of January 1, 2022 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 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 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 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.

We also work collaboratively with others in the industry to help a portion of the world’s population who live with uncorrected vision problems.

From time to time we work with the data analytics firm to update the analysis of our expansion opportunities.

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 at least 75 stores per annum is sustainable for the foreseeable future.

We have two reportable segments:

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America’s Best strives to be the value leader in virtually every market in which it operates.

Its signature offer of “two pairs of eyeglasses for $69.95, including a free eye exam”, is typically priced significantly lower than the competition on a per-pair basis and provides customers with a wide selection of frame choices at this entry point.

Its signature offer of “two pairs of eyeglasses for $69.95, including a free eye exam”, is typically priced significantly lower than the competition and provides customers with a wide selection of frame choices at this entry point.

In America’s Best stores, vision care services are provided by optometrists employed either by us or by independent professional corporations or similar entities.

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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.

The current term of the management & services agreement between NVI and Walmart ends on February 23, 2024.

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

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

Our strategic relationship with Walmart is in its 32 nd year and our partnerships with Fred Meyer and the U.S.

military have been maintaine d for over 20 ye ars.

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Our dedicated e-commerce websites are managed by our subsidiary, AC Lens.

AC Lens operates six proprietary branded websites including, among others, aclens.com and discountcontacts.com.

AC Lens operates five proprietary branded websites including, among others, aclens.com and discountcontacts.com.

In addition, AC Lens operates and provides support services for nine third-party websites owned by other companies, including Walmart, Sam’s Club and Giant Eagle.

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According to Vision Monday, over the period from 2007 to 2019, the industry grew from $26 billion to $37 billion in annual sales, representing a compound annual growth rate (“CAGR”) of 3.2%.

Due to the impact of the COVID-19 pandemic, industry sales in 2020 declined 16.2% from 2019.

Over the period from 2007 to 2020, industry sales grew at a CAGR of 1.5%.

The industry experienced only a modest decline during the 2008 to 2009 recession and rebounded with robust post-recession sales growth of 2.0% CAGR from 2009 to 2020, according to Vision Monday.

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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:

(i) diminishing eyesight with increasing age, causing new customers to buy corrective eyewear and (ii) a steady and consistent replacement cycle, as customers frequently replace or purchase new eyewear for a variety of reasons, including changes in prescriptions, fashion trends and necessity (e.g., lost or broken eyewear).

(i) diminishing eyesight with increasing age, causing new customers to buy corrective eyewear and (ii) a steady and consistent replacement cycle, as customers replace or purchase new eyewear for a variety of reasons, including changes in prescriptions, fashion trends and necessity (e.g., lost or broken eyewear).

The need for eyesight correction is diagnosed through eye tests and eye exams.

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population should result in incremental sales of eyewear and related accessories.

• Frequent Replacement Cycle .

• Consistent Replacement Cycle .

The repetitive and predictable nature of customer behavior results in a significant volume of recurring revenue for the optical retail industry.

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Most optometrists recommend annual eye exams as a preventive measure against serious eye conditions and to help patients identify changes in their vision correction needs.

According to The Vision Council, an estimated 196 million people in the United States using vision correction devices in 2019 received nearly 118 million eye exams that year, implying an average interval between exams of 20 months.

According to The Vision Council, an estimated 197 million people in the United States using vision correction devices received over 121 million eye exams that year, implying an average interval between exams of 19 months.

The interval between exams contributes to the industry’s stability and shortening this interval represents an opportunity to increase the frequency of customer purchases.

1 This section includes the most recently available industry information, primarily as of 2020.

We expect industry data for 2021, that would include the impacts of COVID-19, to be available later in 2022.

• Increased Usage of Computer and Mobile Screens .

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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.

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

Collectively, our broad product offerings deliver consistent financial results and reduce our reliance on any individual product, style or trend.

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Under our agreement with Essilor, Essilor has the sole and exclusive right to supply certain lenses for eyeglasses to us.

We extended our agreement with Essilor in November 2018 and the current term runs through May 2023.

The current term of our agreement with Essilor runs through May 2023.

Thereafter, the agreement will automatically renew on a month-to-month basis unless either party gives 30 days’ prior written notice of termination, and we also have the ability to unilaterally extend the agreement an additional calendar quarter after the proposed termination date.

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

We have a 118,000 square foot distribution center in Lawrenceville, Georgia and a 52,000 square foot distribution center in Columbus, Ohio.

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

Our Mission and Philanthropic Efforts

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

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

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 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, the International Agency for the Prevention of Blindness and VOSH International, we both directly assist and indirectly help improve the vision of millions of individuals globally.

We also work collaboratively with others in the industry to help a portion of the world’s population who live with uncorrected vision problems.

Human Capital Management

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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.

In addition, we have partnered with schools and other organizations to promote the profession of optometry, including continuing our multi-year sponsorship of the Association of Schools and Colleges of Optometry campaign “Optometry Gives Me Life” targeted at high school and college students, and ensuring that graduating optometrists are educated on the variety of career options available to them.

Additionally, we increased accessibility to our own internal National Vision Doctor of Optometry Tuition Reimbursement program, which provides for the reimbursement of education expenses to associates attending optometry school.

To mitigate the impact the COVID-19 pandemic and temporary closure of our stores had on our traditional recruiting efforts and hiring cycles in 2020, we transitioned to online platforms for job fairs and on-campus events, selectively offered key incentives, such as a student loan repayment program, and educated applicants on the health and safety protocols implemented in our stores.

We have continued with both online platform recruitment as well as in person events as part of our recruitment and hiring efforts in 2021.

Talent Development

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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.

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

Benefits and Wellness

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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.

Since its creation, over $1.1 million have been provided to associates for assistance, with over 95% provided since the beginning of the COVID-19 pandemic.

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.

In 2021, we continued our focus on reviewing best practices and initiatives and conducted listen and learn sessions with associates and optometrists to solicit feedback and identify opportunity areas.

As a part of these efforts, 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 “Impact HBCU” event sponsored by Black Eyecare Perspectives with the goal of increasing awareness in the field among historically black college and university (“HBCU”) students.

In 2021, our Chief Executive Officer became a signatory to the CEO Action for Diversity and Inclusion pledge, committing to a series of actions related to diversity, equity and inclusion across the Company, industry and communities.

We were named one of Forbes’ Best Employers for Women and one of Forbes’ Best Employers for Veterans in 2021 and received the highest ranking given by 50/50 Women on Boards for balanced gender representation among the independent members of the Company’s Board of Directors.

We were also recognized as one of Forbes’ Best Employers for Diversity in 2021 for, among other things, our proactive diversity and inclusion initiatives.

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.

our customers and patients with everyone’s health and safety in mind.

Health and safety remain at the forefront for us as the pandemic and variants continue to evolve and present challenges for us.

Beginning in 2020, we 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.

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

Managed Vision Care

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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.

The COVID-19 pandemic has caused changes to the seasonality we have historically experienced, including the resulting temporary closure of our stores for a portion of the first half of 2020 and impacts from the emergence of variants or delays in the issuance of tax refunds, and may continue to cause changes for the foreseeable future.

Information Technology

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Corporate Practice of Medicine/Optometry and Similar Laws

Many states prohibit the corporate practice of medicine/optometry where a business corporation practices medicine or employs a physician to provide professional medical services.

Many states prohibit the corporate practice of medicine/optometry where an unlicensed entity practices medicine or employs a physician or optometrist to provide professional medical services.

Many states interpret the corporate practice of medicine/optometry rules broadly to prohibit employment of eye care practitioners by corporations like us and to prohibit various financial arrangements, such as fee-splitting, between eye care practitioners and other entities.

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The dispensing of prescription eyewear is also regulated in most states in which we do business.

In some states, we are required to register our stores.

In some states, we are required to register our stores as optical dispensaries.

Fairness to Contact Lens Consumers Act (“FCLCA”) and E-commerce Laws

In connection with our sales of contact lenses, we must comply with the FCLCA, and its implementing regulations promulgated by The Federal Trade Commission (“FTC”), and the Contact Lens Rule, which establish a national uniform standard in the United States with regard to releasing and verifying contact lens prescriptions.

In connection with our sales of contact lenses, we must comply with the FCLCA, and its implementing regulations, including the Contact Lens Rule, promulgated by the Federal Trade Commission (“FTC”), which establish a national uniform standard in the United States with regard to releasing and verifying contact lens prescriptions.

This law and rule require that we verify the prescriptions we receive from our customers prior to selling contact lenses online.

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

Our online business must also be registered in various states.

Our online business must also be registered in various states as a non-resident contact lens seller.

Managed Care Regulation

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Nearly all states have adopted their own data breach laws with comparable (and sometimes conflicting) standards and requirements.

These state laws apply to breaches of specified elements of personal information.

In addition, states may amend or adopt new laws or regulations regarding data privacy that may be applicable to us, such as the California Consumer Privacy Act of 2018, which went into effect January 2020.

These state laws apply to breaches of specified elements of PII.

In addition, states may amend or adopt new laws or regulations regarding data privacy that may be applicable to us, such as the California Consumer Privacy Act of 2018 (the “CCPA”), which went into effect January 2020, and the amendments to the CCPA made by the California Privacy Rights Act of 2020, which will go into effect in January 2023.

Laws Related to Reimbursement by Government Programs

Our participation in federal reimbursement programs, such as Medicare and Medicaid, subjects us to federal anti-kickback, false claims, self-referral and similar laws.

Our participation in federal reimbursement programs, such as Medicare and Medicaid, subjects us to state and federal anti-kickback, false claims, physician self-referral and similar laws.

The federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, paying, receiving or providing remuneration, directly or indirectly, to induce, or in exchange for, the referral of an individual or purchasing, furnishing, recommending or arranging for a good or service for which payment may be made under a federal healthcare program, such as Medicare or Medicaid.

The definition of “remuneration” has been broadly interpreted to include anything of value, including, for example, gifts, certain discounts, the furnishing of free supplies, equipment or services, credit arrangements, payment of cash and waivers of payments.

Several courts have found a violation of the statute’s intent requirement if a single purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered businesses.

The definition of “remuneration” has been broadly interpreted to include anything of value, including, for example, gifts, certain discounts, the furnishing of free supplies, equipment, office space or services, credit arrangements, payment of cash and waivers of payments.

Healthcare providers that have financial relationships may structure their arrangements to meet certain voluntary safe harbors under the federal Anti-Kickback Statute so that such financial relationships and business practices are not treated as offenses under the statute.

Several courts have found a violation of the statute’s intent requirement if a single purpose of an arrangement involving remuneration is to induce referrals of patients or consumers purchasing healthcare goods or services paid for, in whole or in part, by federal government programs.

There are also a number of healthcare fraud statutes that impose criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services.

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The Social Security Act also imposes significant penalties for false or improper Medicare and Medicaid billings.

Physician Self-Referral Law, or the Stark Law, generally prohibits physicians (which the Stark Law defines to also include optometrists) from referring, for certain services, Medicare or Medicaid beneficiaries to any entity with which the physician or an immediate family member of the physician has a financial relationship.

Physician Self-Referral Law, or the Stark Law, generally prohibits physicians (which the Stark Law defines to also include optometrists) from referring, for “designated health services” (as defined by the Centers for Medicare & Medicaid Services), Medicare or Medicaid beneficiaries to any entity with which the physician or an immediate family member of the physician has a financial relationship.

Designated health services do not include optometric services for physician referrals.

This law further prohibits the entity receiving a prohibited referral from presenting a claim for reimbursement by Medicare or Medicaid for services furnished pursuant to the prohibited referral.

The Stark Law has a number of specific mandatory exceptions for financial hardships between regulated healthcare providers that do not pose a risk of abuse to Medicare programs or patient abuse.

Many states have adopted similar self-referral laws which are not limited to Medicare or Medicaid reimbursed services.

In some cases, the rental of space constitutes a financial relationship under this law.

The Stark Law is a strict liability law, meaning that intent is not required;

the mere presence of a prohibited relationship may constitute a Stark Law violation if certain mandatory exceptions are not met.

Federal Food and Drug Administration (“FDA”) Regulation

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The FTC has authority under Section 5 of the Federal Trade Commission Act (the “FTC Act”) to investigate and prosecute practices that are “unfair trade practices,” “deceptive trade practices,” or “unfair methods of competition.” State attorneys general typically have comparable authority and many states permit private plaintiffs to bring actions on the basis of these laws.

In addition, state regulators or boards of optometry may challenge our promotional practices, including America’s Best’s bundled offers, as, among other things, violating applicable state laws regarding unfair competition or false advertising to consumers.

Foreign Corrupt Practices Act (“FCPA”)

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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.

While we are not currently subject to any vaccine mandate, it continues to be our policy to encourage each of our employees to be fully vaccinated against COVID-19.

To the extent we become subject to a vaccine mandate in the future, our implementation of the mandate could result in employee attrition, including attrition of critical skilled labor, and difficulty meeting future labor requirements.

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 take additional actions or increase expenditures in the future to comply with higher industry and regulatory safety standards.

Insurance and Risk Management

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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