What changed in this filing

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Item 1A. Risk Factors

2022-02-28 compared with 2021-03-03 · 88 added, 75 removed, 523 unchanged (24% of the section changed)

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The COVID-19 pandemic has had, and may in the future continue to have, a material adverse impact on our business.

The COVID-19 pandemic and the travel restrictions, quarantines, other and related public health measures and actions taken by governments and the private sector have adversely affected global economies, financial markets and the overall environment for our business, and the extent to which it may continue to impact our future results of operations and overall financial performance remains uncertain.

The COVID-19 pandemic and the travel restrictions, quarantines, and other related public health measures and actions taken by governments and the private sector have adversely affected global economies, financial markets and the overall environment for our business, and the extent to which it may continue to impact our future results of operations and overall financial performance remains uncertain.

The global macroeconomic effects of the pandemic may persist for an indefinite period of time, even after the pandemic has subsided.

As a result of the pandemic and the recommendations of U.S.

government and health authorities, our retail stores closed to the public beginning on March 19, 2020.

government and health authorities, our retail stores closed to the public beginning on March 19, 2020, which had a material adverse impact on our sales and profitability.

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.

While we expect to be able to continue operations for the duration of the pandemic, our store operations are subject to change based on market conditions and the continued evolution of the pandemic.

The resurgence of the COVID-19 pandemic and its continued evolution has impacted and may continue to impact the following areas:

• a disruption to our growth strategy, supply chain, delivery of merchandise, professional recruitment, ability to staff stores, typical seasonality, customer demand;

• newly enacted state, local and federal healthcare laws in response to COVID-19 and exposure to potential lawsuits;

The COVID-19 pandemic and its continued evolution has impacted and may continue to impact us in the following ways:

• a disruption to our growth strategy, supply chain, delivery of merchandise, professional recruitment, ability to staff stores, typical seasonality and customer demand;

• newly enacted state, local and federal healthcare laws in response to COVID-19, including any vaccine mandate, and exposure to potential lawsuits, workforce attrition and difficulty in maintaining professional recruitment;

• an inability to maintain sufficient levels of cash flow from our operations to fund our business and growth strategy and difficulty in obtaining additional financing on terms that are favorable to us.

The scope and duration of the pandemic, including the current resurgences in various regions in the United States and globally and other future resurgences, the pace at which government restrictions are lifted or whether additional actions may be taken to contain the virus, the impact on our customers and suppliers, the speed and extent to which markets fully recover from the disruptions caused by the pandemic, and the impact of these factors on our business, will depend on future developments that are highly uncertain and cannot be predicted with confidence.

The scope and duration of the pandemic, including the current wave of outbreaks from the emergence and spread of variants of COVID-19 throughout the United States and globally and other future resurgences, the pace at which government restrictions are lifted or re-instated to contain the virus, the impact on our ability to maintain sufficient personnel and recruit employees, the impact on our customers and suppliers, the speed and extent to which markets fully recover from the disruptions caused by the pandemic, and the impact of these factors on our business, will depend on future developments that are highly uncertain and cannot be predicted with confidence.

It is possible that changes in economic conditions and steps taken by the federal government and the Federal Reserve in response to the COVID-19 pandemic could lead to higher inflation than we had anticipated, which could in turn lead to an increase in our costs of products and services and other operating expenses.

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We refer you to “Management’s Discussion and Analysis of Financial Position and Results of Operations” for a more detailed discussion of the potential impact of the COVID-19 pandemic and associated economic disruptions, and the actual operational and financial impacts that we have experienced to date.

An overall decline in the health of the economy and other factors impacting consumer spending, including inflation, recessionary conditions, the timing and issuance of tax refunds, governmental instability and natural disasters, may affect consumer purchases, which could reduce demand for our products and materially harm our sales, profitability and financial condition.

Our business depends on consumer demand for our products and, consequently, is sensitive to a number of factors that influence consumer confidence and spending, such as general economic conditions, consumer disposable income, energy and fuel prices, recession and fears of recession, unemployment, minimum wages, availability of consumer credit, consumer debt levels, conditions in the housing market, interest rates, tax rates and policies, inflation, consumer confidence in future economic conditions and political conditions, war and fears of war (including the recent Russian invasion of Ukraine), inclement weather, natural disasters, terrorism, outbreak of viruses or widespread illness and consumer perceptions of personal well-being and security.

Over the past few years, global markets and economic conditions have been challenging, particularly in light of the COVID-19 pandemic and resulting temporary retail store closures that we instated in the first half of 2020.

More recently, in January 2022 the consumer price index rose 7.5% on an annual basis, the highest reading since 1982.

In addition, from time to time we have temporarily closed certain stores due to hurricanes, natural disasters or civil unrest.

Such store closures due to factors that are outside of our control could materially adversely affect our sales and profitability.

Reduced customer confidence and spending cutbacks may result in reduced demand for our merchandise and may force us to take inventory markdowns.

Reduced demand also may require increased selling and promotional expenses.

Prolonged or pervasive economic downturns could slow the pace of new store openings or cause current stores to close.

Furthermore, our target market, which consists of value seeking and lower income consumers, is sensitive to various factors outside of our control.

For example, this population relies on tax refunds to pay for eyewear and eye care.

A delay in the issuance of tax refunds can accordingly have a negative impact on our financial results.

Consumers could also alter how they utilize tax refund proceeds.

In addition, periods of instability in the government generally, or a renewed emphasis on immigration matters, can also cause this population to either delay or refrain from making such purchases.

A continuation of these and similar circumstances could have a material negative impact on our financial performance.

Because of the importance of the first half of the fiscal year for us, a significant downward trend in the first half could have a substantial negative impact on our annual financial results.

If we fail to open and operate new stores in a timely and cost-effective manner or fail to successfully enter new markets, our financial performance could be materially and adversely affected.

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Increased compensation for vision care professionals could raise our costs and put pressure on our margins.

We believe that the demand for optometrists in particular may continue to exceed supply in certain areas for a period of time and that the costs to employ or retain optometrists may increase, potentially materially, from current levels.

Additionally, our ability to recruit, hire and/or contract with vision care professionals is closely regulated.

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An increasing percentage of our customers receive vision insurance coverage through managed care payors.

These payors represent an increasingly significant portion of our overall revenues and our revenue growth.

These payors represent an increasingly significant portion of our overall revenues and our revenue growth and represented approximately one third of our overall revenues in fiscal year 2021.

While we have relationships with almost all vision care insurers in the United States and with all of the major carriers, currently, a relatively small number of payors comprise the majority of our managed care revenues, subjecting us to concentration risk.

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In addition, delays in receiving or the failure to receive reimbursements under our managed care arrangements, significant changes to the economics of a managed care contract or relationship or the loss of a significant managed care contract or relationship could have a significant negative impact on our business, financial condition and results of operations.

If the performance of our host and legacy brands declines or we are unable to maintain our operating relationships with our host and legacy partners, our business, profitability and cash flows may be adversely affected and we may be required to incur impairment charges.

We derive significant revenues and operating cash flows from our relationships with our legacy and host partners through our operations of 230 Vision Centers in Walmart stores, 29 Vista Optical locations within Fred Meyer stores and 54 Vista Optical locations on military bases.

Termination of our host and legacy agreements would result in a reduction of our revenues and operating cash flows, which could be material and which could adversely affect our business, financial condition and results of operations including an impairment of the intangible assets.

If the performance of our Host and Legacy brands declines or we are unable to maintain or extend our operating relationships with our Host and Legacy partners, our business, profitability and cash flows may be adversely affected and we may be required to incur impairment charges.

We derive significant revenues and operating cash flows from our relationships with our Legacy and Host partners through our operations of 230 Vision Centers in select Walmart stores, 29 Vista Optical locations within select Fred Meyer stores and 54 Vista Optical locations on select military bases.

Termination or expiration of our Host and Legacy agreements would result in a reduction of our revenues and operating cash flows, which could be material and which could adversely affect our business, financial condition and results of operations including an impairment of the intangible assets.

The loss of our Vision Centers or Vista Optical locations could impair our ability to attract and retain management and retail associates, compete for managed vision care contracts, obtain favorable terms, such as discounts and rebates, from optical vendors and generate cash to fund our business and service our debt obligations.

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The impairment test requires us to analyze a number of factors, including evaluating the useful life of intangible assets, and make estimates that require judgment.

During the fourth quarter of fiscal 2018, we fully impaired goodwill at the Military and Fred Meyer brands of approximately $15.1 million.

Future changes in the business profitability, expected cash flows, changes in our business strategy and external market conditions, among other factors, could require us to record impairment charges for goodwill or intangible assets, which could lead to decreased assets and reduced net income.

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As such, we must monitor our compliance with laws in every jurisdiction in which we operate on an ongoing basis and we cannot guarantee that subsequent interpretation of, or changes to, the applicable laws will not negatively affect our business operations.

For example, the arrangements we have implemented with optometrists and professional corporations or similar entities owned by eye care practitioners could subject us to scrutiny by federal and state regulatory bodies regarding federal and state fraud and abuse or other laws.

In addition, our failure, or the failure of vision care professionals who are our associates or with whom we have contractual arrangements, to obtain and maintain appropriate licenses could result in the unavailability of vision care professionals in or near our stores, loss of sales and/or the closure of our stores without licensed professionals.

We must comply with the FCLCA and its implementing regulations with respect to verifying contact lens prescriptions in connection with our online sales of contact lenses.

Our extended warranty plans may subject us to state laws, which vary by state, that regulate the sale of product service contracts.

Our extended warranty plans may subject us to state laws, which vary by state, that regulate the sale of product service contracts or insurance-like arrangements.

It is possible that regulators in certain states could determine that our warranty plans should be subject to these laws and mandate that we comply with various registration, disclosure and financial requirements.

In such event, we could be required to incur enhanced compliance costs, as well as the risk of cease and desist orders and monetary penalties.

We are subject to HIPAA, the HITECH Act and the health data privacy, security and breach notification regulations issued pursuant to these statutes, which govern our collection, use, access, disclosure, transmission and/or storage of PHI, in connection with the sales of our products and services, customer service, billing and employment practices.

In addition, there are existing state privacy, security and breach notification laws and regulations that apply to both PHI and PII collected by us.

These existing laws and regulations may be amended and states may adopt new laws or regulations regarding data privacy (such as the California Consumer Privacy Act of 2018, which became effective in January 2020).

Our failure to effectively implement the required or addressable data privacy and security safeguards and breach notification procedures, or our failure to accurately anticipate the application or interpretation of these statutes, regulations and standards, could lead to invalidation or modification of our agreements with optometrists or professional corporations or similar entities owned by eye care practitioners, create material civil and/or criminal liability for us or require us to change our business practices, which could result in adverse publicity, and have a material adverse effect on our business, financial condition and results of operations.

These existing laws and regulations may be amended and states may adopt new laws or regulations regarding consumer data privacy (such as the California Consumer Privacy Act of 2018, which became effective in January 2020).

Our failure to effectively implement the required or addressable data privacy and security safeguards and breach notification procedures, or our failure to accurately anticipate the application or interpretation of these statutes, regulations and standards, could lead to invalidation or modification of our agreements with optometrists or professional corporations or similar entities owned by eye care practitioners, create material civil and/or criminal liability for us or require us to change our business practices, which could result in adverse publicity and loss of consumer trust, and have a material adverse effect on our business, financial condition and results of operations.

Our participation in federal healthcare programs, such as Medicare and Medicaid, requires us to comply with laws regarding the way in which we conduct business and submit claims.

These laws include the federal Anti-Kickback Statute, which attaches criminal liability to unlawful inducements for the referral of business reimbursable under federally-funded healthcare programs;

the federal self-referral laws, which attach repayment and monetary damages where a healthcare service provider seeks reimbursement for providing certain services to a patient who was referred by a physician that has certain types of direct or indirect financial relationships with such service provider;

and the FCA, which attaches per-claim liability and potentially treble damages to the filing of false claims for federal payment.

the federal physician self-referral laws, which attach repayment and monetary damages where a healthcare service provider seeks reimbursement for providing certain services to a patient who was referred by a physician that has certain types of direct or indirect financial relationships with such service provider;

and the FCA, which attaches per-claim liability and potentially treble damages to the filing of false claims for payment under federally funded programs.

Many states have also adopted similar laws that apply to any third-party payor including commercial plans.

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In addition, a person who offers or transfers to a federal healthcare program beneficiary any remuneration, including the transfer of items or services for free or other than fair market value, that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of Medicare or Medicaid payable items or services, may be liable for significant civil monetary penalties.

Although this prohibition applies only to federal healthcare program beneficiaries, the provision of free items and services to patients covered by commercial payors may implicate applicable state laws related to, among other things, unlawful schemes to defraud, excessive fees for services, tortious interference with patient contracts and statutory or common law fraud.

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

Although this prohibition applies only to federal healthcare program beneficiaries;

the provision of free items and services to patients covered by commercial payors may implicate applicable state laws related to, among other things, unlawful schemes to defraud, excessive fees for services, tortious interference with patient contracts and statutory or common law fraud.

To the extent our promotional programs are found to be inconsistent with applicable laws, we may be required to restructure or discontinue such programs, or be subject to other significant penalties.

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This approval process can be complex and can cause delays in the projected opening of our stores.

The sale of managed care products by FirstSight is essential to our expansion of America’s Best in California, and the suspension or loss of our license and our failure to comply with applicable regulatory requirements could have a material adverse impact on our expansion plans in California.

The sale of managed care products by FirstSight is essential to our expansion of America’s Best in California, and the suspension or loss of our license or our failure to otherwise comply with applicable regulatory requirements could have a material adverse impact on our expansion plans in California.

In addition, our Eyecare Club programs may be subject to regulation under managed care and related state laws, including those of California, where these programs are offered by FirstSight.

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government granted a temporary exclusion for plastic and metal frames with a retroactive effective date of September 1, 2019, and such exclusion expired in September 2020.

Given the recent change in the U.S.

Given the current U.S.

presidential administration, there is uncertainty whether there will be, and the resulting impacts of, any changes to U.S.

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If we are unable to mitigate the full impact of the enacted tariffs or if there is a further escalation of tariffs, costs on a significant portion of our products may increase further and our financial results may be negatively affected.

While it is too early to predict how the China tariffs will impact our business, our financial results may also be impacted by consumers’ fear of a prolonged trade war with China and an economic slowdown.

If we change the transportation companies we use, we could face logistical difficulties that could adversely affect deliveries and we could incur costs and expend resources in connection with such change.

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Global sourcing and foreign trade involve numerous factors and uncertainties beyond our control including increased shipping costs, the imposition of additional import or trade restrictions, including legal or economic restrictions on overseas suppliers’ ability to produce and deliver products, increased custom duties and tariffs, unforeseen delays in customs clearance of goods, more restrictive quotas, loss of a most favored nation trading status, currency exchange rates, transportation delays, port of entry issues and foreign government regulations, political instability and economic uncertainties in the countries from which we or our vendors source our products.

For example our product sourcing could be impacted by current and future travel restrictions and/or the shut-down of certain businesses in China or elsewhere due to the COVID-19 pandemic.

Our product sourcing could be impacted by current and future travel restrictions and/or the shut-down of certain businesses in China or elsewhere due to the COVID-19 pandemic and the resurgence of variants.

Supply chain disruptions arising from COVID-19 may impact our ability to make products, the cost for such products and the ability to deliver products to customers in a timely fashion.

Our sourcing operations may also be hurt by health concerns regarding infectious diseases in countries in which our merchandise is produced.

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The secure processing, maintenance and transmission of this information is critical to our operations.

Our systems may be subject to damage or interruption from power outages or damages, telecommunications problems, data corruption, software errors, network failures, acts of war or terrorist attacks, fire, flood and natural disasters, our existing safety systems, data backup, access protection, user management and information technology emergency planning may not be sufficient to prevent data loss or long-term network outages.

Our existing safety systems, data backup, access protection, user management and information technology emergency planning may not be sufficient to prevent data loss or long-term network outages.

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Our systems and those of our third-party service providers and business partners may be vulnerable to security breaches, attacks by hackers, acts of vandalism, computer viruses, misplaced or lost data, human errors or other similar events.

If unauthorized parties gain access to our networks or databases, or those of our third-party service providers or business partners, they may be able to steal, publish, delete, use inappropriately or modify our private and sensitive third-party information including personal health information, credit card information and personal identification information.

In addition, associates may intentionally or inadvertently cause data or security breaches that result in unauthorized release of personal or confidential information.

Security breaches, computer malware and computer hacking have become more prevalent across industries and are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated organized groups and individuals.

As a result of the COVID-19 pandemic, we may face increased cybersecurity risks due to our reliance on internet technology and the increased number of employees working remotely.

If unauthorized parties gain access to our networks or databases, or those of our third-party service providers or business partners, they may be able to steal, publish, delete, use inappropriately or modify our private and sensitive third-party information including protected health information, payment card information and personal identification information.

In addition, associates may intentionally or inadvertently cause data or security breaches that result in unauthorized release of sensitive or confidential information.

Because the techniques used to circumvent security systems can be highly sophisticated, change frequently, are often not recognized until launched against a target and may originate from less regulated and remote areas around the world, we may be unable to proactively address all possible techniques or implement adequate preventive measures for all situations.

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The regulatory environment surrounding information security and privacy is increasingly demanding, with the frequent imposition of new and changing requirements across our business.

For instance, as a health care provider, we could be forced, in the event of a data breach, to report the breach not only to affected customers, but also to various public agencies and media outlets, potentially harming our reputation and our business Our business partners may have contractual rights of indemnification against us or seek to terminate our contracts with them in the event that their customer or proprietary business information is released as a result of a breach of our information technology.

For instance, as an entity that collects and maintains personally identifiable information and protected health information, we could be forced, in the event of a data breach, to report the breach not only to affected customers, but also to various public agencies and media outlets, potentially harming our reputation and our business Our business partners may have contractual rights of indemnification against us or seek to terminate our contracts with them in the event that their customer or proprietary business information is released as a result of a breach of our information technology.

Additionally, business partners may also face a data breach, allowing for our customer or proprietary business information to be released, could result in a loss of consumer confidence in our security measures, harm our business and also lead to costly investigations and litigation.

Such a data breach of a business partner also may not be adequately covered under contractual rights of indemnification or cyber insurance.

Further, if we are unable to comply with the security standards established by banks and the payment card industry, we may be subject to fines, restrictions and expulsion from card acceptance programs, which could adversely affect our retail operations.

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Any material disruption or slowdown of our systems or those of our third-party service providers and business partners, could have a material adverse effect on our business, financial condition and results of operations.

We are a low-cost provider and our business model relies on the low cost of inputs.

Factors such as wage rate increases, inflation, cost increases, increases in raw material prices and energy prices could have a material adverse effect on our business, financial condition and results of operations.

Increases in compensation, wage pressure and other expenses for vision care professionals, as well as our other associates, may adversely affect our profitability.

Increases in minimum wages and other wage and hour regulations can exacerbate this risk.

Additional tariffs or other future cost increases, such as increases in the cost of merchandise, shipping rates, raw material prices, freight costs and store occupancy costs, may also reduce our profitability.

These cost increases may be the result of inflationary pressures which could further reduce our sales or profitability.

Increases in other operating costs, including changes in energy prices and lease and utility costs, may increase our cost of products sold or selling, general and administrative expenses.

Our low price model and competitive pressures in the optical retail industry may inhibit our ability to reflect these increased costs in the prices of our products, in which case such increased costs could have a material adverse effect on our business, financial condition and results of operations.

Our growth strategy could strain our existing resources and cause the performance of our existing stores to suffer.

Our planned expansion will place increased demands on our existing operational, managerial, supply-chain and administrative resources.

Our planned expansion has and continues to place increased demands on our existing operational, managerial, supply-chain and administrative resources.

These increased demands could strain our resources and cause us to operate our business less effectively, which in turn could cause the performance of our new and existing stores to suffer.

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We cannot anticipate all of the demands that our expanding operations will impose on our business, personnel and systems and our failure to address such demands and to profitably manage our growth could have a material adverse effect on our business, financial condition and results of operations.

We are a low-cost provider and our business model relies on the low cost of inputs.

Increases in compensation, wage pressure and other expenses for vision care professionals, as well as our other associates, may adversely affect our profitability.

Increases in minimum wages and other wage and hour regulations can exacerbate this risk.

These cost increases may be the result of inflationary pressures which could further reduce our sales or profitability.

Increases in other operating costs, including changes in energy prices and lease and utility costs, may increase our cost of products sold or selling, general and administrative expenses.

Our success depends upon our marketing, advertising and promotional efforts.

If we are unable to implement them successfully, or if our competitors are more effective than we are, it could have a material adverse effect on our business, financial condition and results of operations.

If we are unable to implement them successfully or efficiently, or if our competitors are more effective than we are, it could have a material adverse effect on our business, financial condition and results of operations.

We use marketing and promotional programs to attract customers to our stores and to encourage purchases by our customers.

If we fail to successfully develop and implement marketing, advertising and promotional strategies, we may be unable to achieve and maintain brand awareness, and customer traffic to our stores and/or websites may be reduced.

If we fail to successfully or efficiently develop and implement marketing, advertising and promotional strategies, we may be unable to achieve and maintain brand awareness, and customer traffic to our stores and/or websites may be reduced.

We may not be able to advertise cost-effectively in new or smaller markets in which we have lower store density, which could slow growth at such stores.

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Our failure to achieve these thresholds could cause our occupancy costs for these locations to increase materially on a percentage of sales basis.

The leases generally require us to pay insurance, utilities, real estate taxes and common area maintenance expenses.

The leases generally require us to pay insurance, utilities, real estate taxes and common area maintenance expenses, which are highly variable over time.

Our substantial lease obligations could have significant negative consequences, including:

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If an existing or future store is not profitable and we decide to close it, we may nonetheless be obligated to perform our obligations under the applicable lease including, among other things, paying the base rent and other charges for the balance of the lease term.

Even if a lease has an early cancellation clause, we may not satisfy the contractual requirements for early cancellation under that lease.

Even if a lease has an early cancellation clause, we may not satisfy the contractual requirements for early cancellation under that lease and/or be required to pay substantial termination fees.

As we expand our store base, particularly in certain markets that are more expensive, such as California and the Northeast, our lease expense and our cash outlays for rent under lease agreements may increase.

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Technological advances in vision care, including the development of telemedicine and other new or improved products, as well as future drug development for the correction of vision-related problems, could significantly change how eye exams may be conducted and make our existing products less attractive or even obsolete.

Several companies have developed technologies for and some companies are incorporating the remote delivery of eye examinations and eye refracti ons.

Several companies have developed technologies for and some companies are incorporating the remote delivery of eye examinations and eye refractions.

We have begun to pilot remote medicine technologies in a limited number of locations to enable the provision of remote eye examinations.

If consumers accept the use of these technologies, consumers could become less likely to obtain an in-person eye examination and therefore less likely to shop at our retail locations.

We also may not be able to successfully incorporat e remote medicine technologies into our business which could make our exam process less attractive to customers.

Additionally, the greater availability and acceptance, or reductions in the cost, of vision correction alternatives to prescription eyeglasses and contact lenses, such as corneal refractive surgery procedures, including radial-keratotomy, photo-refractive keratotomy, or PRK and LASIK, may reduce the demand for our products, lower our sales and thereby adversely impact our business and profitability.

We also may not be able to successfully incorporate remote medicine technologies into our business which could make our exam process less attractive to customers.

Additionally, the greater availability and acceptance, or reductions in the cost, of vision correction alternatives to prescription eyeglasses and contact lenses, such as corneal refractive surgery procedures, photo-refractive keratotomy, or PRK and LASIK, may reduce the demand for our products, lower our sales and thereby adversely impact our business and profitability.

If we fail to retain our existing senior management team or attract qualified new personnel, such failure could have a material adverse effect on our business, financial condition and results of operations.

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Competition for skilled and experienced management is intense, and we may not be successful in attracting and retaining new qualified personnel required to grow and operate our business profitably.

An overall decline in the health of the economy and other factors impacting consumer spending, such as recessionary conditions, the timing and issuance of tax refunds, governmental instability and natural disasters, may affect consumer purchases, which could reduce demand for our products and materially harm our sales, profitability and financial condition.

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, inclement weather, natural disasters, terrorism, outbreak of viruses or widespread illness and consumer perceptions of personal well-being and security.

As a result of the COVID-19 pandemic, we temporarily closed our retail stores to the public in the first half of 2020, which had a material adverse impact on our sales and profitability.

In addition, from time to time we have temporarily closed certain stores due to hurricanes, natural disasters or civil unrest.

Such store closures due to factors that are outside of our control could materially adversely affect our sales and profitability.

Reduced customer confidence and spending cutbacks may result in reduced demand for our merchandise and may force us to take inventory markdowns.

Reduced demand also may require increased selling and promotional expenses.

Prolonged or pervasive economic downturns could slow the pace of new store openings or cause current stores to close.

Furthermore, our target market, which consists of value seeking and lower income consumers, is sensitive to various factors outside of our control.

For example, this population relies on tax refunds to pay for eyewear and eye care.

A delay in the issuance of tax refunds can accordingly have a negative impact on our quarterly financial results.

Consumers could also alter how they utilize tax refund proceeds.

In addition, periods of instability in the government generally, or a renewed emphasis on immigration matters, can also cause this population to either delay or refrain from making such purchases.

A continuation of these and similar circumstances could have a material negative impact on our financial performance.

Because of the importance of the first half of the fiscal year for us, a significant downward trend in the first half could have a substantial negative impact on our annual financial results.

We benefited from U.S.

government assistance that we received through the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act in fiscal year 2020.

Such assistance under the CARES Act or pursuant to additional relief efforts may not be available in future years.

Our profitability and cash flows may be negatively affected if we are not successful in managing our inventory balances and inventory shrinkage.

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Coverage and payment levels are determined at each third-party payor’s discretion, and we have limited control over third-party payor’s decision-making with respect to coverage and payment levels.

Coverage restrictions and reductions in reimbursement levels or payment methodologies may negatively impact our sales and profits.

Coverage restrictions and reductions in reimbursement levels or payment

methodologies may negatively impact our sales and profits.

Many third-party payors may continue to explore cost-containment strategies that may potentially impact coverage and/or payment levels for our services and products and impose utilization restrictions and risk-based compensation arrangements.

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• disruptions in telephone service or power outages;

• reliance on third parties for computer hardware and software, as well as delivery of merchandise to our customers;

• reliance on third parties for computer hardware and software, web-hosting, as well as delivery of merchandise to our customers;

• rapid technology changes;

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Moreover, if we are unable to successfully defend against such claims, we may be prevented from using our trademarks, service marks or other intellectual property rights in the future and may be liable for damages, which in turn could materially adversely affect our business, financial condition or results of operations.

Environmental, social and governance (ESG) issues, including those related to climate change, could have a material adverse effect on our business, financial condition and results of operations.

Investors, customers, employees and other stakeholders have increasingly focused on the ESG practices of companies in recent years.

As we published our first Corporate Responsibility Report in 2021 and continue to develop our corporate responsibility strategy, our ESG practices will be evaluated against stakeholders’ evolving expectations and standards for responsible corporate citizenship.

If our practices in the areas of social impact, employee empowerment, environmental stewardship and corporate governance fail to meet such expectations and standards, our reputation and employee and customer retention may be negatively impacted.

Additionally, increased regulatory requirements in environmental stewardship could also lead to increased operational costs.

If we do not adapt to new regulations or meet evolving stakeholder expectations on ESG issues, investors may reconsider their investment in the company and customers may choose to find alternative providers, which could have a material adverse effect on our business, financial condition and results of operations.

Changing climate and weather patterns leading to severe weather and disasters may cause significant business interruptions and expenditures.

Severe weather conditions and other natural phenomena resulting from changing weather patterns and rising sea levels or other causes, including hurricanes, floods, fires, landslides, extreme temperatures, significant precipitation, and earthquakes, may result in damage to our stores or other facilities and unavailability of our workforce.

Additionally, shifts in weather patterns caused by climate change are expected to increase the frequency, severity or duration of certain adverse weather conditions, which could cause more significant business interruptions that result in increased costs, increased liabilities, and decreased revenues.

Such losses could materially and adversely effect our business, financial condition and results of operations.

Climate change may also have indirect effects on our business, including for example, leading to increased costs (or unavailability) of property or other insurance policies.

Additionally, changes in federal or state legislation and regulation on climate change could result in increased capital expenditures to improve the energy efficiency of our existing stores and other facilities and could also require us to spend more on new stores or facilities without a corresponding increase in revenue.

Risks Related to Our Indebtedness and Ownership of Common Stock

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A change in interest rates or discontinuation, reform or replacement of LIBOR and other benchmark rates, or uncertainty related to the potential for any of the foregoing, may adversely affect our business.

As of January 2, 2021, after inclusion of $317.0 million interest rate swaps fixing a portion of the variable rate debt, $0.4 million, or 0.1%, of our Term Loan was subject to variable rates.

In fiscal year 2021, following the maturity of the interest rate swaps, the interest rate collar will hedge some of the variability in Company’s interest rates.

A decrease in LIBOR below a certain threshold could require payments to the counterparty of our interest rate collar derivative and could materially reduce our profitability and cash flows.

As of January 1, 2022, $150.0 million of term loan borrowings were subject to variable interest rates, with a weighted average borrowing rate of 2.5%.

In fiscal year 2021, following the maturity of the interest rate swaps, the interest rate collar hedged some of the variability in Company’s interest rates.

A decrease in LIBOR, or any alternative rate, below a certain threshold could require payments to the counterparty of our interest rate collar derivative and could materially reduce our profitability and cash flows.

An increase in interest rates, whether because of an increase in market interest rates or a decrease in our creditworthiness, could also increase the cost of servicing our debt and could materially reduce our profitability and cash flows.

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Even if financial instruments are transitioned to alternative benchmarks, such as SOFR, successfully, the new benchmarks are likely to differ from LIBOR, and our interest expense associated with our outstanding indebtedness or any future indebtedness we incur may increase.

Further, transitioning to an alternative benchmark rate, such as SOFR, may result in us incurring significant expense and legal risks, as renegotiation and changes to documentation may be required in effecting the transition.

Further, transitioning to an alternative benchmark rate, such as SOFR, may result in us incurring significant expense and legal risks.

In 2021, we amended our credit agreement to, among other things, add customary LIBOR replacement provisions.

Any alternative benchmark rate may be calculated differently than LIBOR and may increase the interest expense associated with our existing or future indebtedness.

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On May 12, 2020, we completed the issuance of 2.50% convertible senior notes due on May 15, 2025 (the “2025 Notes”).

The 2025 Notes will be convertible into cash, shares of common stock or a combination of cash and shares of common stock at our election, based on the applicable conversion rate at such time.

Prior to February 15, 2025, the 2025 Notes will be convertible at the option of the holders of such notes under certain circumstances as provided in the governing indenture.

The 2025 Notes are convertible into cash, shares of common stock or a combination of cash and shares of common stock at our election, based on the applicable conversion rate at such time.

Prior to February 15, 2025, the 2025 Notes are convertible at the option of the holders of such notes under certain circumstances as provided in the governing indenture and, as of January 1, 2022, those circumstances were in effect.

Based on the initial conversion rate of the 2025 Notes, which is subject to adjustment, the 2025 Notes are convertible into 12.9 million shares of our common stock with a maximum possible issuance of 16.5 million shares.

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These provisions provide for, among other things:

• a classified board of directors, as a result of which our Board of Directors is divided into three classes, with each class serving for staggered three-year terms;

• the ability of our Board of Directors to issue one or more series of preferred stock;

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• certain limitations on convening special stockholder meetings.

• the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2∕3 % of the shares of common stock entitled to vote generally in the election of directors;

• that certain provisions may be amended only by the affirmative vote of at least 66 2∕3 % of shares of common stock entitled to vote generally in the election of directors.

These anti-takeover provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders.

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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 1A. Risk Factors