9 unchanged sentences
in a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations.
−Removed: References herein to “fiscal year 2021” relate to the 52 weeks ended January 1, 2022, references herein to “fiscal year 2020” relate to the 53 weeks ended January 2, 2021 and references herein to “fiscal year 2019” relate to the 52 weeks ended December 28, 2019.
+Added: References herein to “fiscal year 2022” relate to the 52 weeks ended December 31, 2022, references herein to “fiscal year 2021” relate to the 52 weeks ended January 1, 2022 and references herein to “fiscal year 2020” relate to the 53 weeks ended January 2, 2021.
The disclosures contained in this Form 10-K are made only as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law.
For further information, please see “Risk Factors” and “Forward-Looking Statements.”
−Removed: We are one of the largest and fastest growing optical retailers in the United States and a leader in the attractive value segment of the U.S.
+Added: We are one of the largest optical retailers in the United States and a leader in the attractive value segment of the U.S.
optical retail industry.
We believe that vision is central to quality of life and that people deserve to see their best to live their best, regardless of their budget.
−Removed: Our mission is to make quality eye care and eyewear affordable and accessible to all Americans.
−Removed: We achieve this by providing eye exams, eyeglasses and contact lenses to value seeking and lower income consumers.
−Removed: 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.
+Added: We achieve this by providing eye exams, eyeglasses and contact lenses to value seeking and lower income consumers with an opening price point that strives to be among the lowest in the industry.
We reach our customers through a diverse portfolio of 1,354 retail stores across five brands and 16 consumer websites as of fiscal year end 2022.
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• Legacy – We manage the operations of, and supply inventory and laboratory processing services to, 230 Vision Centers in Walmart retail locations as of fiscal year end 2022.
−Removed: This strategic relationship with Walmart is in its 32 nd year.
+Added: This strategic relationship with Walmart is in its 33rd year.
Pursuant to a January 2020 amendment to our management & services agreement with Walmart, we added five additional Vision Centers in Walmart stores in fiscal year 2020.
−Removed: 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;
+Added: Our current management & services agreement with Walmart expires on February 23, 2024, and will automatically renew for a three-year period unless, no later than July 2023, either party gives written notice of non-renewal ;
refer to Note 14.
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No such penalties have been assessed under our current arrangement, which began in 2012.
−Removed: We also sell to our Legacy partner merchandise that is stocked in retail locations we manage pursuant to a separate supplier agreement, and provide centralized laboratory services for the finished eyeglasses for our Legacy partner’s customers in stores that we manage.
+Added: We also sell to our Legacy partner merchandise that is stocked in retail locations we m anage pursuant to a separate supplier agreement, and provide centralized laboratory services for the finished eyeglasses for our Legacy partner’s customers in stores that we manage.
We lease space from Walmart within or adjacent to each of the locations we manage and use this space for vision care services provided by independent optometrists or optometrists employed by us or by independent professional corporations or similar entities.
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• Our e-commerce platform of 12 dedicated websites managed by AC Lens.
−Removed: Our e-commerce business consists of five proprietary branded websites, including aclens.com, discountglasses.com and discountcontactlenses.com, and nine th ird-party websites with established retailers, such as Walmart, Sam’s Club and Giant Eagle as well as mid-sized vision insurance providers.
+Added: Our e-commerce business consists of five proprietary branded websites, including aclens.com, discountglasses.com and discountcontactlenses.com, and seven th ird-party websites with established retailers, such as Walmart, Sam’s Club and Giant Eagle as well as mid-sized vision insurance providers.
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.
−Removed: • AC Lens also distributes contact lenses wholesale to Walmart and Sam’s Club.
+Added: • Wholesale contact lenses distribution to Walmart and Sam’s Club by AC Lens.
We incur costs at a higher percentage of sales than other product categories.
−Removed: AC Lens sales associated with Walmart and Sam’s Club contact lenses distribution arrangements represen ted 6.5% of c onsolidated net revenue.
+Added: AC Lens sales associated with Walmart and Sam’s Club contact lenses distribution arrangements represen ted 7.0% of c onsolidated net revenue during fiscal year 2022 .
• Managed care business conducted by FirstSight, our wholly-owned subsidiary that is licensed as a single-service health plan under California law, which arranges for the provision of optometric services at the offices next to certain Walmart stores throughout California, and also issues individual vision plans in connection with our America’s Best operations in California.
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Trends and Other Factors Affecting Our Business
−Removed: Various trends and other factors will affect or have affected our operating results, including:
−Removed: Impact of COVID-19
−Removed: The COVID-19 pandemic and related federal, state and local governmental and healthcare authority guidelines materially impacted our business and results of operations in 2020 and continue to impact our business results.
−Removed: In 2020, the COVID-19 pandemic directly and indirectly impacted our operations, consumer behavior, comparable store sales, our associates and optometrists and the overall market.
−Removed: In the early stages of the pandemic, we temporarily closed all of our stores to the public across the U.S.
−Removed: on March 19, 2020 and announced the successful completion of the reopening process with enhanced safety and cleaning protocols on June 8, 2020.
−Removed: The decrease in revenue from our temporary store closures was not offset by proportional decreases in expense, as we continued to incur store occupancy costs even while stores were temporarily closed, costs directly related to adapting the Company’s operations to the COVID-19 pandemic such as personal protective equipment and other supplies needed to operate our stores safely and certain other costs such as compensation, a tangible appreciation bonus paid to our customer-facing doctors and associates, and other administrative expenses, resulting in a negative effect on profitability.
−Removed: We also implemented capital spending and expense reduction initiatives, including a temporary pause in new store openings between March and June 2020, reduced near term marketing, a temporary reduction in compensation across the organization until the second quarter of 2020, a suspension of non-essential travel, implementation of a remote work policy for certain corporate associates, and we worked with a base of vendors and landlords to extend payment terms and modify existing contracts.
−Removed: While we experienced stronger comparable store sales growth in the third and fourth quarters of 2020, the comparable store sales growth figure of (5.6)% for fiscal year 2020 reflected the effects of store closures and the pandemic.
−Removed: During fiscal year 2021, our business continued to be impacted by the pandemic, including continued volatility in the overall market, targeted and temporary reductions in certain store hours and temporary store closures, and changes in consumer purchasing patterns.
−Removed: Despite the continued COVID-19 disruption and volatility, our net revenue in fiscal year 2021 increased compared to fiscal year 2020 due in part to the effects of our stores being temporarily closed to the public in fiscal year 2020 and government stimulus as a result of COVID-19.
−Removed: Our net revenue in 2020 was essentially flat in comparison to fiscal year 2019.
−Removed: As a result, comparability of our financial performance between these periods may be impacted and our rate of growth should not be viewed as indicative of our potential results in future periods.
−Removed: The COVID-19 pandemic has resulted in, and may continue to result in, state, city or local quarantines, labor stoppages and shortages, changes in consumer purchasing patterns, mandatory or voluntary shut-downs of retail locations, supply chain issues, severe market volatility, liquidity disruptions, and overall economic instability, which, in many cases, have had, and could continue to have, adverse impacts on our business, financial condition and results of operations.
−Removed: The scope and nature of these impacts continue to evolve on a daily basis.
−Removed: Although the global distribution of vaccines continues to progress, the future impact of the COVID-19 pandemic remains highly uncertain.
−Removed: Resurgences of COVID-19 cases and the emergence of new variants have led to reduced consumer confidence and changes in shopping patterns, which may adversely impact store traffic.
−Removed: We continue to monitor the evolving situation as there remain many uncertainties regarding the pandemic, its resurgence through new variants, its anticipated duration, related healthcare authority guidelines, efficacy of vaccination initiatives, and potential federal and state level vaccine and testing mandates.
−Removed: We could experience further material impacts as a result of COVID-19.
+Added: We have remained focused on our long-term growth initiatives despite the ongoing macroeconomic uncertainty.
+Added: We opened 80 new stores in 2022, and as of December 31, 2022 enabled remote medicine in approximately 300 stores.
+Added: Our core growth initiatives include, but are not limited to, continuing with the expansion of our remote medicine capabilities;
+Added: maintaining and improving our optometric retention levels;
+Added: increasing our marketing efficiency and omnichannel capabilities;
+Added: increasing our participation in vision insurance programs;
+Added: the further digitization of our stores and corporate office;
+Added: continuing to position ourselves to capture whitespace opportunity for our stores;
+Added: and incorporating our corporate sustainability strategy into our operations.
+Added: We operate in the highly competitive and fragmented U.S.
+Added: optical retail industry.
+Added: We face competition from mass merchants, specialty retail chains, online retailers and independent eye practitioners and opticians, along with large national retailers.
+Added: Increased consolidation activity in the industry may enable our competitors to benefit from purchasing advantages and the ability to leverage management capabilities across a larger business base.
+Added: Along with our competitors, we are affected by a number of various trends and factors, including, but not limited to, economic conditions, inflation, consumer preferences and demand, and the COVID-19 pandemic.
+Added: The overall economic environment continues to be challenging and macroeconomic factors that may affect customer spending patterns, and thereby our results of operations, include employment rates, business conditions, changes in the housing market, the availability of credit, interest rates, tax rates and fuel and energy costs.
+Added: Rising inflation can result in increased materials costs and greater profitability pressure for us.
+Added: Changes in raw materials prices did not materially impact our costs applicable to revenue in fiscal year 2022.
+Added: We anticipate that pressures from increases to our raw materials prices could have an impact on our costs applicable to revenue in fiscal year 2023.
+Added: Such an inflationary environment and labor market challenges can also result in wage pressures in certain markets.
+Added: Wage investments as a result of inflation and an increasingly competitive recruiting market for vision care professionals due to the pandemic and related effects have had, and may continue to have, an impact on our profitability.
+Added: Targeted wage investments, including increases in compensation for optometrists and associates, impacted costs applicable to revenue and selling, general and administrative expenses in fiscal year 2022.
+Added: We anticipate that wage pressures in certain markets will continue in 2023.
+Added: For example, retention bonuses granted to associates in the fourth quarter of fiscal year 2022 resulted in a $5.0 million impact .
+Added: Wage investment pressure, increases to costs applicable to revenue from increases in raw materials prices and potential freight price increases in fiscal year 2023 may not be able to be fully offset by leverage from revenue growth, productivity efficiency and, as appropriate, various pricing actions.
+Added: As part of our growth strategy we have invested in remote medicine capabilities, and as of December 31, 2022 this new technology has been enabled in approximately 300 of our America’s Best locations.
+Added: We believe remote medicine not only helps provide more access to eye care for patients, it also helps address constraints in exam capacity.
+Added: Additionally, as part of the remote medicine rollout, we also invested in the transition to an EHR platform as locations became remote enabled.
+Added: We anticipate continuing the investment in these capabilities primarily in America’s Best stores in the near term.
+Added: Training our personnel to efficiently use these new technologies may increase our costs and negatively impact our profitability even if exam capacity increases.
+Added: We estimate that optical consumers typically replace their eyeglasses every two to three years, and contact lens customers order new lenses every six to 12 months, reflecting the predictability of these recurring purchase behaviors;
+Added: however, the effects of the current economic environment and the impact of the COVID-19 pandemic on consu mer preferences resulted in reduced customer demand in 2022.
+Added: The predictability of recurring purchase behavior for the future remains uncertain.
+Added: Additionally, resurgences of COVID-19 cases and the emergence of new variants have led to reduced consumer confidence and changes in shopping patterns, which have adversely impacted store traffic.
+Added: A significant recession could also negatively impact our results if consumers faced widespread layoffs that resulted in the loss of employer-subsidized managed vision care insurance.
We also continue to monitor any potential COVID-19 related impacts on our domestic labs and our outsourced third party optical laboratories in China and Mexico, and potential disruptions of product deliveries.
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We source merchandise from suppliers located in China and a significant amount of domestically-purchased merchandise is manufactured in China.
−Removed: We have partnered with our suppliers and third party laboratories to mitigate any potential significant delays in delivery of merchandise.
+Added: We have partnered with our suppliers and third party laboratories to mitigate any potential significant delays in delivery
+Added: of merchandise.
We have made, and may continue to make, inventory forward buys to help manage potential supply chain disruptions.
−Removed: It is possible that our preparations for the events listed above are not adequate to mitigate their impact, and that these events could further adversely affect our business and results of operations.
−Removed: For a discussion of significant risks that have the potential to cause our actual results to differ materially from our expectations, refer to “Item 1A.
−Removed: Risk Factors.”
+Added: In addition to central factors impacting our business outlined above, we have identified the following key drivers, challenges and risks on which we are focused and which are detailed below .
+Added: Vision Care Professional Recruitment, Coverage and Expanded Offerings
+Added: Our ability to continue to attract and retain qualified vision care professionals affect exam capacity.
+Added: Our operations, like those of many of our competitors, depend on our ability to offer both eyewear and eye exams.
+Added: We believe the impacts of the COVID-19 pandemic on vision care professional availability, including a competitive recruiting market and preferences for adjusted work schedules, and the demand for optometrists exceeding supply in certain areas during fiscal year 2022 have caused constraints in exam capacity which are continuing.
+Added: Due to these factors the costs to employ or retain optometrists have increased and may increase further, potentially materially.
+Added: Targeted wage investments, including increases in compensation for our optometrists and associates, and flexibility initiatives have impacted our costs applicable to revenue and selling, general and administrative expenses.
+Added: We are continuing to strategically invest in recruitment and retention initiatives, including flexible adjusted work schedules, along with continuing our implementation of remote medicine technologies, which has expanded our offerings while also increasing costs.
New Store Openings
We expect that new stores will be a key driver of growth in our net revenue and operating profit in the future.
−Removed: Our results of operations have been and will continue to be materially affected by the timing and number of new store
+Added: Our results of operations have been and will continue to be materially affected by the timing and number of new store openings.
As stores mature, profitability typically increases significantly.
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• impact and timing of weather related store closures;
−Removed: • effects and relevant risk exposures may be exacerbated by the ongoing threat of the COVID-19 pandemic
+Added: • public health emergencies, like COVID-19, which may exacerbate the effects and relevant risk exposures listed above.
A new store is included in the comparable store sales calculation during the 13th full fiscal month following the store’s opening.
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An increasing percentage of our customers receive vision care insurance coverage through managed care payors.
−Removed: Our participation in these programs represent an increasingly significant portion of our overall revenues and represented approximately one third of our overall revenues in fiscal year 2021.
+Added: Our participation in these programs represent an increasingly significant portion of our overall revenues and represented approximately one third of our
+Added: overall revenues in fiscal year 2022.
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, as our participation in managed care programs continues to approach overall industry penetration levels, we expect our associated managed care revenue growth rate to slow over time.
−Removed: Vision Care Professional Recruitment, Coverage and Expanded Offerings
−Removed: Our ability to continue to attract and retain qualified vision care professionals is key to store operations, as well as maintaining our relationships with independent optometrists and professional corporations owned by eye care practitioners that provide vision care services in our stores.
−Removed: We have also begun to pilot remote medicine technologies in a limited number of locations to enable the provision of remote eye examinations, which have expanded our offerings.
−Removed: The effects and relevant risk exposures of labor shortages, increased wage rates to attract and retain vision care professionals or other increases in labor costs may be exacerbated by the ongoing threat of the COVID-19 pandemic and resulting macroeconomic factors.
−Removed: Overall Economic Trends
−Removed: Macroeconomic factors that may affect customer spending patterns, and thereby our results of operations, include employment rates, business conditions, changes in the housing market, the availability of credit, interest rates, tax rates and fuel and energy costs.
−Removed: During periods of economic downturn and uncertainty, our customers especially benefit from our low prices.
−Removed: Additionally, eye care purchases are predominantly a medical necessity and are considered non-discretionary in nature.
−Removed: Therefore, the overall economic environment and related changes in consumer behavior may have less of an impact on our business than for retailers in other industries;
−Removed: however, the long-term effects of the COVID-19 pandemic on overall economic trends and consumer spending patterns remain uncertain.
−Removed: Substantial increases in product costs due to increases in materials cost or general inflation could lead to greater profitability pressure as we may not be able to pass costs on to consumers.
−Removed: To date, changes in materials prices and general inflation have not materially impacted our business.
−Removed: Wage investments, along with increased raw material costs as a result of inflation or supply issues, may have an impact on our profitability that may not be offset by leverage from revenue growth, productivity efficiency and, as appropriate, various pricing actions.
−Removed: Consumer Preferences and Demand
−Removed: Our ability to maintain our appeal to existing customers and attract new customers depends on our ability to originate, develop and offer a compelling product assortment responsive t o customer preferences and design trends.
−Removed: We estimate that optical consumers typically replace their eyeglasses every two to three years, and contact lens customers order new lenses every six to 12 months, reflecting the predictability of these recurring purchase behaviors;
−Removed: however, the long-term effects of the COVID-19 pandemic on consu mer preferences and recurring purchase behaviors remain uncertain.
Infrastructure Investment
−Removed: Our historical results of operations reflect the impact of our ongoing investments in infrastructure to support our growth, including additional investments in remote medicine.
−Removed: We have made significant investments in information technology systems, supply chain systems, marketing, and personnel, including experienced industry executives, and management and merchandising teams to support our long-term growth objectives.
−Removed: We intend to continue to make targeted investments in our infrastructure to support our growth.
+Added: Our historical results of operations reflect the impact of our ongoing investments in infrastructure to support our growth, including additional investments in remote medicine and EHR platforms.
+Added: We have made significant investments in information technology systems, including our point-of-sale system and enterprise resource planning (ERP), supply chain systems, marketing, and personnel, as well as experienced industry executives, and management and merchandising teams to support our long-term growth objectives.
+Added: We intend to continue to make targeted investments in our infrastructure to support our growth and continue the digitization of our stores and corporate office.
Pricing Strategy
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Inflationary pressures, including wage investments, consumer confidence and preferences and increased raw material costs, could impact our profitability and lead us to attempt to offset such increases through various pricing actions.
−Removed: Our Ability to Source and Distribute Products Effectively
−Removed: Our revenue and operating income are affected by our ability to purchase our products in sufficient quantities at competitive prices.
−Removed: We have made, and may continue to make, inventory forward buys to help manage supply chain disruptions.
−Removed: While we believe our vendors have adequate capacity to meet our current and anticipated demand, our level of revenue could be adversely affected in the event we face a worsening of constraints in our supply chain, including the inability of our vendors to produce sufficient quantities of merchandise in a manner that is able to match market demand from our customers due to a worsening COVID-19 pandemic or other factors.
−Removed: We rely on a small number of vendors to supply the majority of our eyeglass lenses and contact lenses, and are thus exposed to supplier concentration risk.
−Removed: In particular, we have agreed to exclusively purchase almost all of our spectacle lenses from one supplier.
−Removed: During fi scal year 2021, 90% of spectacle lens expenditures were from this vendor and 92% of contact lens expenditures were with three vendors.
−Removed: We are less exposed to a supplier risk for our eyeglass frames as only 57% of frame expenditures were with two vendors.
−Removed: We source merchandise from suppliers located in China, a significant amount of our domestically-purchased merchandise is manufactured in China, and one of our outsourced third-party laboratories is located in China.
−Removed: Historically, tariffs have not materially affected our financial results, and we believe that less than 15% of costs applicable to revenue are subject to tariffs on Chinese imports.
−Removed: We continue to monitor ongoing political relations between China and the United States.
+Added: Effective May 9, 2022 we changed the price of our America’s Best signature offer to “two pairs of eyeglasses for $79.95, including a free eye exam” from its prior $69.95 price.
+Added: Effective March 14, 2022, we changed the price of our Eyeglass World opening offer to “two pairs of eyeglasses for $89” from its prior price of $78.
+Added: We believe that these changes will enable us to continue to offer the best possible value and service to our customers at prices that allow us to maintain our brands’ strong value propositions in the marketplace.
Interim Results and Seasonality
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Consumer behavior driven by the COVID-19 pandemic has resulted in a departure from seasonal norms we have experienced in recent years and may continue to disrupt the historical quarterly cadence of our results of operations for an unknown period of time.
−Removed: For fiscal year 2021, approximately 23% of our revenue was recorded in the fourth quarter, but approximately 25% of annual SG&A costs were recorded in the fourth quarter.
−Removed: Compared to prior fiscal years, in fiscal year 2020, we experienced stronger comparable store sales growth in the fourth quarter from strong customer demand, including the effect of our stores being temporarily closed to the public earlier in the year.
−Removed: Additionally, SG&A costs, primarily advertising expense, during the second and third quarters of fiscal year 2020 were lower than in the corresponding quarters of prior fiscal years due to impacts of the COVID-19 pandemic.
−Removed: Industry Competition and Consolidation
−Removed: optical retail industry is highly competitive and fragmented with competition generally based upon brand name recognition, price, convenience, selection, service and product quality.
−Removed: We operate within the value segment, which emphasizes price and value, and compete with mass merchants, specialty retail chains, online retailers and independent eye practitioners and opticians.
−Removed: We also compete with large national retailers such as, in alphabetical order, LensCrafters, Pearle Vision and Visionworks.
−Removed: Ongoing consolidation activity has created, and further consolidation activity may create, organizations that are involved in virtually every sector of the optical industry, from retail and wholesale to frames, spectacle lenses, and managed vision care.
−Removed: This increased consolidation activity may enable these companies to benefit from purchasing advantages and the ability to leverage management capabilities across a larger business base.
−Removed: The COVID-19 pandemic may lead to changes in both the number and positioning of our competitors.
+Added: For fiscal years 2022 and 2021, approximately 23% of our revenue was recorded in the fourth quarter, but approximately 26% and 25% of annual SG&A costs were recorded in the respective fourth quarters of these fiscal years.
How We Assess the Performance of Our Business
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Asset impairment 5,783 4,427 22,004
−Removed: Other expense (income), net (2,505) (445) 3,611
+Added: Other income, net (2,552) (2,505) (445)
Total operating expenses 1,018,542 999,809 838,129
1 unchanged sentence
Interest expense, net 462 25,612 48,327
−Removed: Loss on extinguishment of debt — — 9,786
Earnings before income taxes 60,813 149,325 38,680
−Removed: Income tax provision (benefit) 21,081 2,403 (2,309)
+Added: Income tax provision 18,691 21,081 2,403
Net income $ 42,122 $ 128,244 $ 36,277
−Removed: Operating data:
+Added: Supplemental operating data:
Number of stores open at end of period 1,354 1,278 1,205
1 unchanged sentence
Adjusted Operating Income (1)
+Added: $ 87,795 $ 204,749 $ 134,148
Diluted EPS $ 0.52 $ 1.43 $ 0.44
Adjusted Diluted EPS (1)
+Added: $ 0.65 $ 1.48 $ 0.91
Adjusted EBITDA (1)
2 unchanged sentences
Fiscal year 2020 includes 53 weeks.
−Removed: 1 Adjusted EBITDA no longer excludes new store pre-opening expenses and non-cash rent.
−Removed: Refer to Non-GAAP Financial Measures section below for our presentation of Adjusted EBITDA.
+Added: (1) Refer to Non-GAAP Financial Measures section below for our presentation of Adjusted Operating Income, Adjusted Diluted EPS and Adjusted EBITDA.
Fiscal Year 2022 Fiscal Year 2021 Fiscal Year 2020
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Total costs applicable to revenue 46.2 % 43.5 % 46.0 %
−Removed: Selling, general and administrative 43.3 % 42.4 % 43.2 %
+Added: Selling, general and administrative expenses 45.6 % 43.3 % 42.4 %
Total operating expenses 50.8 % 48.1 % 49.0 %
4 unchanged sentences
Fiscal Year 2022 compared to Fiscal Year 2021
−Removed: As a result of the COVID-19 pandemic, our retail stores closed to the public beginning on March 19, 2020.
−Removed: 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.
−Removed: Comparisons of current year results to prior year results reflect the material and unprecedented impact of these temporary store closures.
−Removed: Fiscal year 2021 consists of 52 weeks compared to 53 weeks in fiscal year 2020.
The following presents, by segment and by brand, comparable store sales growth, stores open at the end of the period and net revenue for fiscal year 2022 compared to fiscal year 2021.
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(7.6) % 23.0 %
−Removed: Fiscal year 2021 includes 52 weeks.
−Removed: Fiscal year 2020 includes 53 weeks.
(1) We calculate total comparable store sales based on consolidated net revenue excluding the impact of (i) Corporate/Other segment net revenue, (ii) sales from stores opened less than 13 months, (iii) stores closed in the periods presented, (iv) sales from partial months of operation when stores do not open or close on the first day of the month and (v) if applicable, the impact of a 53rd week in a fiscal year.
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(3) There are two differences between total comparable store sales growth based on consolidated net revenue and Adjusted Comparable Store Sales Growth:
−Removed: (i) Adjusted Comparable Store Sales Growth includes the effect of deferred and unearned revenue as if such revenues were earned at the point of sale, resulting in an increase of 0.7% and a decrease of 0.4% from total comparable store sales growth based on consolidated net revenue for fiscal year 2021 and fiscal year 2020, respectively, and (ii) Adjusted Comparable Store Sales Growth includes retail sales to the Legacy partner’s customers (rather than the revenues recognized consistent with the management & services agreement with the Legacy partner), resulting in a decrease of 0.1% and a decrease of 0.1% from total comparable store sales growth based on consolidated net revenue for the fiscal years 2021 and 2020, respectively.
−Removed: Total net revenue of $2,079.5 million for fiscal year 2021 increased $367.7 million, or 21.5%, from $1,711.8 million for fiscal year 2020.
−Removed: Of the increase approximately 90% was driven by comparable store sales growth driven by customer demand, primarily the effect of our stores being temporarily closed to the public for a portion of fiscal year 2020 and government stimulus, approximately 20% was driven by new store growth and maturation and was partially offset by $32.2 million (or approximately 10%) of net revenue attributable to the 53rd week in fiscal year 2020.
−Removed: During fiscal year 2021, we opened 69 new America’s Best stores and six new Eyeglass World stores and closed two America’s Best stores.
−Removed: The total net new locations in fiscal year 2021 for America’s Best and Eyeglass World are 67 and six, respectively.
+Added: (i) Adjusted Comparable Store Sales Growth includes the effect of deferred and unearned revenue as if such revenues were earned at the point of sale, resulting in an increase of 0.7% from total comparable store sales growth based on consolidated net revenue for fiscal year 2021 and (ii) Adjusted Comparable Store Sales Growth includes retail sales to the Legacy partner’s customers (rather than the revenues recognized consistent with the management & services agreement with the Legacy partner), resulting in a decrease of 0.1% and a decrease of 0.1% from total comparable store sales growth based on consolidated net revenue for the fiscal years 2022 and 2021, respectively.
+Added: Total net revenue of $2,005.4 million for fiscal year 2022 decreased $74.1 million, or 3.6%, from $2,079.5 million for fiscal year 2021.
+Added: The decrease was driven primarily by reduced Adjusted Comparable Store Sales Growth and to a lesser extent the negative impact of unearned revenue, partially offset by growth from new store sales and recognition of deferred revenue.
+Added: During fiscal year 2022, we opened 69 new America’s Best stores and 11 new Eyeglass World stores and closed four America’s Best stores.
+Added: The total net new locations in fiscal year 2022 for America’s Best and Eyeglass World are 65 and 11, respectively.
Overall, store count grew 5.9% from the end of fiscal year 2021 to the end of fiscal year 2022.
−Removed: Comparable store sales growth and Adjusted Comparable Store Sales Growth for fiscal year 2021 were 22.4% and 23.0%, respectively.
−Removed: The increases in comparable store sales growth and Adjusted Comparable Store Sales Growth were primarily driven by an increase in customer transactions and, to a lesser extent, higher average ticket as a result
−Removed: of customer demand, primarily the effect of our stores being temporarily closed for a portion of fiscal year 2020 and government stimulus.
+Added: Comparable store sales growth and Adjusted Comparable Store Sales Growth for fiscal year 2022 were (7.5)% and (7.6)%, respectively, primarily due to a decrease in customer transactions, and to a lesser extent, lower average ticket.
+Added: The decreases in comparable store sales growth and Adjusted Comparable Store Sales growth during fiscal year 2022 reflect overall economic trends impacting customer demand, constraints affecting exam capacity in certain markets and the Omicron COVID-19 variant impacting customer transactions.
Net product sales comprised 82.2% and 82.6% of total net revenue for fiscal years 2022 and 2021, respectively.
−Removed: Net product sales increased $300.1 million, or 21.2% during fiscal year 2021 compared to fiscal year 2020, primarily due to a $255.3 million, or 27.0% increase in eyeglass sales and to a lesser extent, a $35.0 million, or 10.3% increase in contact lens sales.
−Removed: Net sales of services and plans increased $67.7 million, or 23.1%, primarily driven by a $38.4 million, or 25.4% increase in eye exam revenue and a $15.9 million, or 26.4% increase in product protection plan revenue, primarily the effect of our stores being temporarily closed for a portion of fiscal year 2020.
+Added: Net product sales decreased $70.0 million, or 4.1% during fiscal year 2022 compared to fiscal year 2021, primarily due to a $80.7 million, or 6.7%, decrease in eyeglass sales, which was partially offset by a $6.4 million, or 1.7%, increase in contact lens sales and a $4.3 million, or 3.2%, increase in wholesale fulfillment.
+Added: Net sales of services and plans decreased $4.1 million, or 1.1%, driven primarily by a $7.1 million, or 16.9%, decrease in management fees from our Legacy partner, which was partially offset by a $5.6 million, or 2.9%, increase in exam revenues.
Owned & Host segment net revenue.
−Removed: Net revenue increased $341.3 million, or 25.4%, driven primarily by comparable store sales growth and new store openings.
+Added: Net revenue declined $66.3 million, or 3.9%, driven primarily by negative comparable store sales growth partially offset by new store openings.
Legacy segment net revenue.
−Removed: Net revenue grew $23.5 million, or 16.5%, driven by comparable store sales growth.
+Added: Net revenue declined $13.6 million, or 8.2%, driven by negative comparable store sales growth.
Corporate/Other segment net revenue.
−Removed: Net revenue increased $1.9 million, or 0.8%, due to increases in wholesale fulfillment.
+Added: Net revenue increased $6.5 million, or 2.8%, driven primarily by increases in wholesale fulfillment.
Net revenue reconciliations.
−Removed: The impact of reconciliations positively impacted net revenue by $1.1 million during fiscal year 2021 compared to fiscal year 2020.
−Removed: Net revenue was positively impacted by $7.6 million due to the timing of unearned revenue.
−Removed: The balance of unearned revenue as of fiscal year 2020 reflected pent-up demand following the temporary closure of our stores to the public.
−Removed: Net revenue was negatively impacted by $6.5 million due to higher product protection plan and club membership deferred revenue balances in current period compared to the prior year period.
−Removed: Product protection plan and club membership deferred revenue balances were lower in the prior year, primarily due to the effect of our stores being temporarily closed for a portion of fiscal year 2020.
+Added: The impact of reconciliations negatively impacted net revenue by $0.7 million during fiscal year 2022 compared to fiscal year 2021.
+Added: Net revenue was negatively impacted by $14.2 million due to the timing of unearned revenue.
+Added: The balance of unearned revenue reflected increased sales in the last week of fiscal year 2022 compared to the same period in 2021.
+Added: Net revenue was positively impacted by $13.5 million due to higher sales of product protection plan and club memberships in fiscal year 2021 compared to fiscal year 2022, thus causing recognition of previous deferrals to exceed cash collected for sales in fiscal year 2022.
Costs applicable to revenue
Costs applicable to revenue of $925.6 million for fiscal year 2022 increased $20.8 million, or 2.3%, from $904.8 million for fiscal year 2021.
−Removed: As a percentage of net revenue, costs applicable to revenue decreased from 46.0% for fiscal year 2020 to 43.5% for fiscal year 2021.
−Removed: This decrease as a percentage of net revenue was primarily driven by increased eyeglass mix and lower growth in optometrist-related costs, primarily due to the effect of our stores being temporarily closed for a portion of fiscal year 2020 not experienced in fiscal year 2021.
−Removed: Costs of products as a percentage of net product sales decreased from 38.9% for fiscal year 2020 to 36.8% for fiscal year 2021 primarily driven by increased eyeglass mix and higher eyeglass and contact lens margin, primarily the effect of our stores being temporarily closed for a portion of fiscal year 2020 not experienced in fiscal year 2021.
+Added: As a percentage of net revenue, costs applicable to revenue increased from 43.5% for fiscal year 2021 to 46.2% for fiscal year 2022.
+Added: This increase as a percentage of net revenue was primarily driven by higher growth in optometrist-related costs, reduced eyeglass mix and lower eyeglass margin.
+Added: Costs of products as a percentage of net product sales increased from 36.8% for fiscal year 2021 to 38.6% for fiscal year 2022 primarily driven by reduced eyeglass mix and lower eyeglass margin.
Owned & Host segment costs of products.
−Removed: Costs of products as a percentage of net product sales decreased from 28.0% for fiscal year 2020 to 27.4% for fiscal year 2021 driven by increased eyeglass mix and higher eyeglass margin, primarily the effect of the temporary store closures in fiscal year 2020.
+Added: Costs of products as a percentage of net product sales increased from 27.4% for fiscal year 2021 to 28.9% for fiscal year 2022 primarily driven by reduced eyeglass mix and lower eyeglass margin.
Legacy segment costs of products.
−Removed: Costs of products as a percentage of net product sales decreased slightly from 47.8% for fiscal year 2020 to 47.7% for fiscal year 2021.
−Removed: The decrease was primarily driven by the effect of the temporary store closures in fiscal year 2020, which was partially offset by a lower mix of managed care customer transactions versus non-managed care customer transactions.
+Added: Costs of products as a percentage of net product sales decreased from 47.7% for fiscal year 2021 to 46.8% for fiscal year 2022.
+Added: The decrease was primarily driven by a higher mix of managed care customer transactions versus non-managed care customer transactions.
Legacy segment managed care net product revenue is recorded in net product sales while revenue associated with servicing non-managed care customers is recorded in net sales of services and plans.
1 unchanged sentence
Increases in managed care mix decrease costs of products as a percentage of net product sales and have a corresponding negative impact on costs of services as a percentage of net sales of services and plans in our Legacy segment.
−Removed: Costs of services and plans as a percentage of net sales of services and plans decreased from 80.0% for fiscal year 2020 to 75.2% for fiscal year 2021.
−Removed: The decrease was driven by lower growth in optometrist-related costs and higher eye exam revenue, primarily due to the impact of the temporary store closures to the public in fiscal year 2020 not experienced in fiscal year 2021.
−Removed: These improvements were partially offset by the deferred revenue effects mentioned above.
+Added: Costs of services and plans as a percentage of net sales of services and plans increased from 75.2% for fiscal year 2021 to 81.0% for fiscal year 2022.
+Added: The increase was primarily driven by higher growth in optometrist-related costs, which were partially offset by higher eye exam revenue.
Owned & Host segment costs of services and plans.
−Removed: Costs of services and plans as a percentage of net sales of services and plans decreased from 86.0% for fiscal year 2020 to 80.1% for fiscal year 2021.
−Removed: The decrease was driven by lower growth in optometrist-related costs and higher eye exam revenue, primarily the impact of the temporary store closures to the public in fiscal year 2020.
+Added: Costs of services and plans as a percentage of net sales of services and plans increased from 80.1% for fiscal year 2021 to 88.6% for fiscal year 2022.
+Added: The increase was primarily driven by higher growth in optometrist-related costs, which were partially offset by higher eye exam revenue.
Legacy segment costs of services and plans.
−Removed: Costs of services and plans as a percentage of net sales of services and plans decreased from 46.5% for fiscal year 2020 to 40.7% for fiscal year 2021.
−Removed: The decrease was primarily driven by higher management fees from our Legacy partner and lower growth in optometrist-related costs, the effect of the temporary store closures to the public in fiscal year 2020.
+Added: Costs of services and plans as a percentage of net sales of services and plans increased from 40.7% for fiscal year 2021 to 44.9% for fiscal year 2022.
+Added: The increase was primarily driven by higher growth in optometrist-related costs.
Selling, general and administrative
1 unchanged sentence
As a percentage of net revenue, SG&A increased from 43.3% for fiscal year 2021 to 45.6% for fiscal year 2022.
−Removed: This increase as a percentage of net revenue was primarily driven by increases in advertising and performance-based incentive compensation partially offset by decreases in store payroll and occupancy expenses, which were primarily due to the effect of temporary store closures to the public in fiscal year 2020 not experienced in fiscal year 2021, and an individual one-time cash bonus paid in fiscal year 2020 to our front-line associates and doctors.
+Added: The increase in SG&A as a percentage of net revenue was primarily driven by increases in store payroll, other corporate overhead, including legal, professional, travel and entertainment, and occupancy expense, partially offset by lower performance-based incentive compensation and lower advertising expense.
+Added: The Company paid $5.0 million of discretionary bonuses during fiscal year 2022.
SG&A for fiscal year 2022 and fiscal year 2021 includes $0.6 million and $1.5 million, respectively, of incremental costs directly related to adapting the Company’s operations during the COVID-19 pandemic.
−Removed: of these costs, $0.6 million were reflected as adjustments for the Company’s presentation of non-GAAP measures below for fiscal year 2020.
Owned & Host segment SG&A.
−Removed: SG&A as a percentage of net revenue increased from 36.5% for fiscal year 2020 to 36.7% for fiscal year 2021.
−Removed: This increase as a percentage of net revenue was primarily driven by higher advertising expense partially offset by payroll and occupancy leverage, the effect of the temporary store closures to the public in fiscal year 2020.
+Added: SG&A as a percentage of net revenue increased from 36.7% for fiscal year 2021 to 38.9% for fiscal year 2022 driven primarily by higher payroll and occupancy expense, partially offset by lower advertising expense.
Legacy segment SG&A.
−Removed: SG&A as a percentage of net revenue decreased from 36.5% for fiscal year 2020 to 35.0% for fiscal year 2021 primarily driven by payroll and occupancy leverage, the effect of the temporary store closures to the public in fiscal year 2020.
+Added: SG&A as a percentage of net revenue increased from 35.0% for fiscal year 2021 to 38.3% for fiscal year 2022 driven primarily by higher payroll expense.
Depreciation and amortization
−Removed: Depreciation and amortization expense of $97.1 million for fiscal year 2021 increased $5.5 million, or 6.0%, from $91.6 million for fiscal year 2020 primarily driven by new store openings.
+Added: Depreciation and amortization expense of $100.0 million for fiscal year 2022 increased $2.9 million, or 3.0%, from $97.1 million for fiscal year 2021 primarily driven by new store openings and investments in remote medicine.
Asset impairment
4 unchanged sentences
and the remaining useful lives of the assets.
−Removed: The asset impairment expense for fiscal years 2021 and 2020 also includes $0.8 million and $1.1 million, respectively, related to a write-off of certain software assets that were deemed to be obsolete.
+Added: The asset impairment expense for fiscal year 2021 also includes $0.8 million, related to a write-off of certain software assets that were deemed to be obsolete.
Asset impairment expenses were recognized in Corporate/Other.
Other expense (income), net
−Removed: We recognized a gain of $2.4 million in Other expense (income), net in fiscal year 2021 in connection with the acquisition of our equity method investee by a third party.
+Added: We recognized a gain of $2.7 million and $2.4 million in Other expense (income), net in fiscal years 2022 and 2021, respectively, in connection with the acquisition of our equity method investee by a third party.
“Business and Significant Accounting Policies” for further details.
1 unchanged sentence
Interest expense, net, of $0.5 million for fiscal year 2022 decreased $25.2 million, or 98.2%, from $25.6 million for fiscal year 2021.
−Removed: The decrease was primarily driven by lower derivative costs of $10.9 million, reduced term loan outstanding balance and credit facility utilization, and lower interest expense on the 2025 Notes as a result of the adoption of ASU 2020-06.
+Added: The decrease was primarily a result of lower derivative costs of $19.0 million on our interest rate derivatives, reduced term loan outstanding balance and income on cash balances.
Income tax provision
−Removed: Our income tax provision for fiscal year 2021 reflected our statutory federal and state rate of 25.5% , offset by a benefit of $16.5 million primarily from the exercise of stock options and stranded tax effect associated with our interest rate swaps that matured in the first quarter of 2021.
−Removed: In comparison, the income tax provision associated with fiscal year 2020 reflected our statutory federal and state rate of 25.5% combined with a benefit of $8.0 million associated primarily with the stock option exercises.
+Added: Our effective tax rate for fiscal year 2022 was 30.7%, reflecting our statutory federal and state rate of 25.4% and effects of other permanent items.
+Added: Our effective tax rate for fiscal year 2021 was 14.1%, reflecting a benefit of $16.5 million primarily from the exercise of stock options and stranded tax effect associated with our matured interest rate swaps during the first quarter of 2021 .
Fiscal Year 2021 compared to Fiscal Year 2020
+Added: As a result of the COVID-19 pandemic, our retail stores closed to the public beginning on March 19, 2020.
+Added: 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.
+Added: Comparisons of fiscal year 2021 results to fiscal year 2020 results reflect the material and unprecedented impact of these temporary store closures.
+Added: Fiscal year 2021 consists of 52 weeks compared to 53 weeks in fiscal year 2020.
The following presents, by segment and by brand, comparable store sales growth, stores open at the end of the period and net revenue for fiscal year 2021 compared to fiscal year 2020.
22 unchanged sentences
(3) There are two differences between total comparable store sales growth based on consolidated net revenue and Adjusted Comparable Store Sales Growth:
−Removed: (i) Adjusted Comparable Store Sales Growth includes the effect of deferred and unearned revenue as if such revenues were earned at the point of sale, resulting in a decrease of 0.4% and a decrease of 0.1% from total comparable store sales growth based on consolidated net revenue for fiscal year 2020 and fiscal year 2019, respectively, and (ii) Adjusted Comparable Store Sales Growth includes retail sales to the Legacy partner’s customers (rather than the revenues recognized consistent with the management & services agreement with the Legacy partner), resulting in a decrease of 0.1% and a decrease of 0.2% from total comparable store sales growth based on consolidated net revenue for the fiscal years 2020 and 2019, respectively.
−Removed: Total net revenue of $1,711.8 million for fiscal year 2020 decreased $12.5 million, or 0.7%, from $1,724.3 million for fiscal year 2019.
−Removed: This decrease was driven by the temporary closure of our stores to the public for a portion of fiscal year 2020 due to the COVID-19 pandemic, and was partially offset by new store sales as well as $32.2 million of net revenue attributable to the 53rd week in fiscal year 2020.
−Removed: Total net revenue was also negatively impacted by changes in unearned revenue.
−Removed: During fiscal year 2020, we opened 55 new America’s Best stores, two new Eyeglass World stores, and transitioned five additional Legacy stores to our management.
−Removed: During fiscal year 2020, we closed seven America’s Best stores and one Legacy store as a result of our Legacy partner’s decision to cease its overall operations at the location.
−Removed: The total net new locations in fiscal year 2020 for America’s Best, Eyeglass Word, and Legacy are 48, two and four, respectively.
+Added: (i) Adjusted Comparable Store Sales Growth includes the effect of deferred and unearned revenue as if such revenues were earned at the point of sale, resulting in an increase of 0.7% and a decrease of 0.4% from total comparable store sales growth based on consolidated net revenue for fiscal year 2021 and fiscal year 2020, respectively, and (ii) Adjusted Comparable Store Sales Growth includes retail sales to the Legacy partner’s customers (rather than the revenues recognized consistent with the management & services agreement with the Legacy partner), resulting in a decrease of 0.1% and a decrease of 0.1% from total comparable store sales growth based on consolidated net revenue for the fiscal years 2021 and 2020, respectively.
+Added: Total net revenue of $2,079.5 million for fiscal year 2021 increased $367.7 million, or 21.5%, from $1,711.8 million for fiscal year 2020.
+Added: Of the increase approximately 90% was driven by comparable store sales growth driven by customer demand, primarily the effect of our stores being temporarily closed to the public for a portion of fiscal year 2020 and government stimulus, approximately 20% was driven by new store growth and maturation and was partially offset by $32.2 million (or approximately 10%) of net revenue attributable to the 53rd week in fiscal year 2020.
+Added: During fiscal year 2021, we opened 69 new America’s Best stores and six new Eyeglass World stores and closed two America’s Best stores.
+Added: The total net new locations in fiscal year 2021 for America’s Best and Eyeglass World are 67 and six, respectively.
Overall, store count grew 6.1% from the end of fiscal year 2020 to the end of fiscal year 2021.
Comparable store sales growth and Adjusted Comparable Store Sales Growth for fiscal year 2021 were 22.4% and 23.0%, respectively.
−Removed: The decreases in comparable store sales growth and Adjusted Comparable Store Sales Growth were driven by the temporary closure of our stores to the public.
+Added: The increases in comparable store sales growth and Adjusted Comparable Store Sales Growth were primarily driven by an increase in customer transactions and, to a lesser extent, higher average ticket as a result
+Added: of customer demand, primarily the effect of our stores being temporarily closed for a portion of fiscal year 2020 and government stimulus.
Net product sales comprised 82.6% and 82.9% of total net revenue for fiscal years 2021 and 2020, respectively.
−Removed: Net product sales decreased $7.9 million, or 0.6% during fiscal year 2020 compared to fiscal year 2019, primarily due to the temporary closure of our stores to the public and lower wholesale fulfillment that was partially offset by additional revenue from the 53 rd week and increased sales of contact lenses.
−Removed: Net sales of services and plans decreased $4.7 million, or 1.6%, primarily due to the temporary closure of our stores to the public.
+Added: Net product sales increased $300.1 million, or 21.2% during fiscal year 2021 compared to fiscal year 2020, primarily due to a $255.3 million, or 27.0% increase in eyeglass sales and to a lesser extent, a $35.0 million, or 10.3% increase in contact lens sales.
+Added: Net sales of services and plans increased $67.7 million, or 23.1%, primarily driven by a $38.4 million, or 25.4% increase in eye exam revenue and a $15.9 million, or 26.4% increase in product protection plan revenue, primarily the effect of our stores being temporarily closed for a portion of fiscal year 2020.
Owned & Host segment net revenue.
−Removed: Net revenue increased $17.4 million, or 1.3% as stronger sales in fiscal year 2020, and in the 53 rd week, were partially offset by declines due to the temporary closure of our stores to the public.
+Added: Net revenue increased $341.3 million, or 25.4%, driven primarily by comparable store sales growth and new store openings.
Legacy segment net revenue.
−Removed: Net revenue declined $18.0 million, or 11.3%, due to the temporary closure of our stores to the public.
+Added: Net revenue grew $23.5 million, or 16.5%, driven by comparable store sales growth.
Corporate/Other segment net revenue.
−Removed: Net revenue declined $10.8 million, or 4.4%, due to lower wholesale fulfillment, partially offset by growth in our online retail business.
+Added: Net revenue increased $1.9 million, or 0.8%, due to increases in wholesale fulfillment.
Net revenue reconciliations.
−Removed: Reconciliations for fiscal year 2020 and fiscal year 2019 include increases in deferred revenue of $2.3 million and $5.1 million, respectively and increases in unearned revenue of $4.8 million and $0.8 million, respectively.
−Removed: The increase in deferred revenue for fiscal year 2020 was driven by growth in eye care club membership sales;
−Removed: we believe that the increases in deferred revenue were limited somewhat by the temporary closure of our stores to the public.
−Removed: The increase in unearned revenue compared to the prior period is due to higher sales in the 53 rd week of the fiscal year.
−Removed: In 53-week fiscal years we have historically experienced higher volumes in the 53 rd week compared to the 52 nd week.
+Added: The impact of reconciliations positively impacted net revenue by $1.1 million during fiscal year 2021 compared to fiscal year 2020.
+Added: Net revenue was positively impacted by $7.6 million due to the timing of unearned revenue.
+Added: The balance of unearned revenue as of fiscal year 2020 reflected pent-up demand following the temporary closure of our stores to the public.
+Added: Net revenue was negatively impacted by $6.5 million due to higher product protection plan and club membership deferred revenue balances in current period compared to the prior year period.
+Added: Product protection plan and club membership deferred revenue balances were lower in the prior year, primarily due to the effect of our stores being temporarily closed for a portion of fiscal year 2020.
Costs applicable to revenue
−Removed: Costs applicable to revenue of $786.6 million for fiscal year 2020 decreased $19.9 million, or 2.5%, from $806.5 million for fiscal year 2019.
+Added: Costs applicable to revenue of $904.8 million for fiscal year 2021 increased $118.2 million, or 15.0%, from $786.6 million for fiscal year 2020.
As a percentage of net revenue, costs applicable to revenue decreased from 46.0% for fiscal year 2020 to 43.5% for fiscal year 2021.
−Removed: This decrease as a percentage of net revenue was driven by higher eyeglass margin, partially offset by increased contact lens mix and optometrist costs while our stores were temporarily closed to the public.
−Removed: Costs of products as a percentage of net product sales decreased from 40.3% for fiscal year 2019 to 38.9% for fiscal year 2020, driven by higher eyeglass margin, partially offset by increased contact lens mix.
+Added: This decrease as a percentage of net revenue was primarily driven by increased eyeglass mix and lower growth in optometrist-related costs, primarily due to the effect of our stores being temporarily closed for a portion of fiscal year 2020 not experienced in fiscal year 2021.
+Added: Costs of products as a percentage of net product sales decreased from 38.9% for fiscal year 2020 to 36.8% for fiscal year 2021 primarily driven by increased eyeglass mix and higher eyeglass and contact lens margin, primarily the effect of our stores being temporarily closed for a portion of fiscal year 2020 not experienced in fiscal year 2021.
Owned & Host segment costs of products.
−Removed: Costs of products as a percentage of net product sales decreased from 28.9% for fiscal year 2019 to 28.0% for fiscal year 2020 driven by higher eyeglass margin, partially offset by increased contact lens mix.
+Added: Costs of products as a percentage of net product sales decreased from 28.0% for fiscal year 2020 to 27.4% for fiscal year 2021 driven by increased eyeglass mix and higher eyeglass margin, primarily the effect of the temporary store closures in fiscal year 2020.
Legacy segment costs of products.
−Removed: Costs of products as a percentage of net product sales increased from 46.2% for fiscal year 2019 to 47.8% for fiscal year 2020.
−Removed: The increase was primarily driven by increased contact lens mix and a higher mix of non-managed care customer transactions versus managed care customer transactions.
+Added: Costs of products as a percentage of net product sales decreased slightly from 47.8% for fiscal year 2020 to 47.7% for fiscal year 2021.
+Added: The decrease was primarily driven by the effect of the temporary store closures in fiscal year 2020, which was partially offset by a lower mix of managed care customer transactions versus non-managed care customer transactions.
Legacy segment managed care net product revenue is recorded in net product sales while revenue associated with servicing non-managed care customers is recorded in net sales of services and plans.
Eyeglass and contact lens product costs for both managed care and non-managed care net revenue are recorded in costs of products.
−Removed: Decreases in managed care mix increase costs of products as a percentage of net product sales and have a corresponding positive impact on costs of services as a percentage of net sales of services and plans in our Legacy segment.
−Removed: Costs of services and plans as a percentage of net sales of services and plans increased from 77.9% for fiscal year 2019 to 80.0% for fiscal year 2020.
−Removed: The increase was primarily driven by optometrist costs incurred during the temporary closure of our stores to the public.
+Added: Increases in managed care mix decrease costs of products as a percentage of net product sales and have a corresponding negative impact on costs of services as a percentage of net sales of services and plans in our Legacy segment.
+Added: Costs of services and plans as a percentage of net sales of services and plans decreased from 80.0% for fiscal year 2020 to 75.2% for fiscal year 2021.
+Added: The decrease was driven by lower growth in optometrist-related costs and higher eye exam revenue, primarily due to the impact of the temporary store closures to the public in fiscal year 2020 not experienced in fiscal year 2021.
+Added: These improvements were partially offset by the deferred revenue effects mentioned above.
Owned & Host segment costs of services and plans.
−Removed: Costs of services and plans as a percentage of net sales of services and plans increased from 83.2% for fiscal year 2019 to 86.0% for fiscal year 2020.
−Removed: The increase was driven by optometrist and technician costs incurred during the temporary closure of our stores to the public.
+Added: Costs of services and plans as a percentage of net sales of services and plans decreased from 86.0% for fiscal year 2020 to 80.1% for fiscal year 2021.
+Added: The decrease was driven by lower growth in optometrist-related costs and higher eye exam revenue, primarily the impact of the temporary store closures to the public in fiscal year 2020.
Legacy segment costs of services and plans.
−Removed: Costs of services and plans as a percentage of net sales of services and plans increased from 46.3% for fiscal year 2019 to 46.5% for fiscal year 2020.
−Removed: The increase was primarily driven by optometrist costs incurred during the temporary closure of our stores to the public.
+Added: Costs of services and plans as a percentage of net sales of services and plans decreased from 46.5% for fiscal year 2020 to 40.7% for fiscal year 2021.
+Added: The decrease was primarily driven by higher management fees from our Legacy partner and lower growth in optometrist-related costs, the effect of the temporary store closures to the public in fiscal year 2020.
Selling, general and administrative
−Removed: SG&A of $725.0 million for fiscal year 2020 decreased $19.5 million, or 2.6%, from fiscal year 2019.
−Removed: As a percentage of net revenue, SG&A decreased from 43.2% for fiscal year 2019 to 42.4% for fiscal year 2020.
−Removed: This decrease as a percentage of net revenue was primarily driven by lower advertising investment partially offset by store and corporate payroll and occupancy costs incurred during the temporary closure of our stores to the public.
−Removed: SG&A for fiscal year 2020 includes $8.6 million of incremental costs directly related to adapting the Company’s operations during the COVID-19 pandemic;
−Removed: of these costs, $0.6 million were reflected as adjustments for the Company’s presentation of non-GAAP measures below.
+Added: SG&A of $900.8 million for fiscal year 2021 increased $175.8 million, or 24.3%, from fiscal year 2020.
+Added: As a percentage of net revenue, SG&A increased from 42.4% for fiscal year 2020 to 43.3% for fiscal year 2021.
+Added: This increase as a percentage of net revenue was primarily driven by increases in advertising and performance-based incentive compensation partially offset by decreases in store payroll and occupancy expenses, which were primarily due to the effect of temporary store closures to the public in fiscal year 2020 not experienced in fiscal year 2021, and an individual one-time cash bonus paid in fiscal year 2020 to our front-line associates and doctors.
+Added: SG&A for fiscal year 2021 and fiscal year 2020 includes $1.5 million and $8.6 million, respectively, of incremental costs directly related to adapting the Company’s operations during the COVID-19 pandemic;
+Added: of these costs, $0.6 million were reflected as adjustments for the Company’s presentation of non-GAAP measures below for fiscal year 2020.
Owned & Host segment SG&A.
−Removed: SG&A as a percentage of net revenue decreased from 38.4% for fiscal year 2019 to 36.5% for fiscal year 2020.
−Removed: This decrease as a percentage of net revenue was primarily driven by lower
−Removed: advertising investment partially offset by store payroll and occupancy costs incurred during the temporary closure of our stores to the public.
+Added: SG&A as a percentage of net revenue increased from 36.5% for fiscal year 2020 to 36.7% for fiscal year 2021.
+Added: This increase as a percentage of net revenue was primarily driven by higher advertising expense partially offset by payroll and occupancy leverage, the effect of the temporary store closures to the public in fiscal year 2020.
Legacy segment SG&A.
−Removed: SG&A as a percentage of net revenue increased from 35.1% for fiscal year 2019 to 36.5% for fiscal year 2020 primarily driven by store payroll costs incurred during the temporary closure of our stores to the public.
+Added: SG&A as a percentage of net revenue decreased from 36.5% for fiscal year 2020 to 35.0% for fiscal year 2021 primarily driven by payroll and occupancy leverage, the effect of the temporary store closures to the public in fiscal year 2020.
Depreciation and amortization
−Removed: Depreciation and amortization expense of $91.6 million for fiscal year 2020 increased $4.3 million, or 5.0%, from $87.2 million for fiscal year 2019 primarily driven by new store openings and investments in information technology and doctor equipment.
−Removed: Our property and equipment balance, net, decreased $25.5 million, or 6.9%, during fiscal year 2020, reflective of $76.2 million in purchases of property and equipment, $1.1 million in new finance leases, less $84.2 million in depreciation expense and $18.6 million in impairment and other adjustments.
+Added: Depreciation and amortization expense of $97.1 million for fiscal year 2021 increased $5.5 million, or 6.0%, from $91.6 million for fiscal year 2020 primarily driven by new store openings.
Asset impairment
We recognized $4.4 million for impairment primarily of tangible long-lived assets and ROU assets associated with our retail stores in fiscal year 2021 compared to $22.0 million recognized in fiscal year 2020.
−Removed: Expenses recognized in fiscal year 2020 were related to impairments of long-lived tangible assets at our retail stores and right of use (“ROU”) assets related to our retail stores.
−Removed: The increase in store asset impairment charges during fiscal year 2020 was primarily related to our Owned & Host segment and was driven by lower than projected customer sales volume in certain stores and other entity-specific assumptions.
+Added: The store asset impairment charge is primarily related to our Owned & Host segment and is driven by lower than projected customer sales volume in certain stores and other entity-specific assumptions.
We considered multiple factors including, but not limited to:
forecasted scenarios related to store performance and the likelihood that these scenarios would be ultimately realized;
−Removed: the historical performance of the stores before the temporary closure of our stores to the public;
−Removed: the effect of store closures and uncertainty in store revenues over the remaining useful life of the asset group as a result of the COVID-19 pandemic;
and the remaining useful lives of the assets.
−Removed: The asset impairment expense for fiscal year 2020 also includes $1.1 million related to a write-off of certain software assets that were deemed to be obsolete.
+Added: The asset impairment expense for fiscal years 2021 and 2020 also includes $0.8 million and $1.1 million, respectively, related to a write-off of certain software assets that were deemed to be obsolete.
Asset impairment expenses were recognized in Corporate/Other.
+Added: Other expense (income), net
+Added: We recognized a gain of $2.4 million in Other expense (income), net in fiscal year 2021 in connection with the acquisition of our equity method investee by a third party.
+Added: “Business and Significant Accounting Policies” for further details.
Interest expense, net
−Removed: Interest expense, net, of $48.3 million for fiscal year 2020 increased $15.0 million, or 45.1%, from $33.3 million for fiscal year 2019.
−Removed: The increase was primarily driven by losses related to immediate recognition of changes in fair value of ineffective hedges of $4.0 million and charges related to interest payments and amortization of debt discounts related to the 2025 Notes of $17.3 million that were partially offset by a reduction in our term loan and Revolving Credit Facility utilization.
+Added: Interest expense, net, of $25.6 million for fiscal year 2021 decreased $22.7 million, or 47.0%, from $48.3 million for fiscal year 2020.
+Added: The decrease was primarily driven by lower derivative costs of $10.9 million, reduced term loan outstanding balance and credit facility utilization, and lower interest expense on the 2025 Notes as a result of the adoption of ASU 2020-06.
Income tax provision
−Removed: Our income tax provision for fiscal year 2020 reflected our statutory federal and state rate of 25.5%, combined with a discrete benefit of $8.0 million associated primarily with the exercise of stock options.
−Removed: In comparison, the income tax benefit associated with fiscal year 2019, reflected income tax expense at our statutory federal and state rate of 25.5% offset by a $10.1 million income tax benefit resulting from stock option exercises.
+Added: Our income tax provision for fiscal year 2021 reflected our statutory federal and state rate of 25.5% , offset by a benefit of $16.5 million primarily from the exercise of stock options and stranded tax effect associated with our interest rate swaps that matured in the first quarter of 2021.
+Added: In comparison, the income tax provision associated with fiscal year 2020 reflected our statutory federal and state rate of 25.5% combined with a benefit of $8.0 million associated primarily with the stock option exercises.
Non-GAAP Financial Measures
−Removed: We define Adjusted Operating Income as net income, plus interest expense and income tax provision (benefit), further adjusted to exclude stock compensation expense, loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, amortization of acquisition intangibles and other expenses.
−Removed: We define Operating Margin as Adjusted Operating Income as a percentage of net revenue.
−Removed: We define EBITDA as net income, plus interest expense, income tax provision (benefit) and depreciation and amortization.
−Removed: We define Adjusted EBITDA as net income, plus interest expense, income tax provision (benefit) and depreciation and amortization, further adjusted to exclude stock compensation expense, loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, and other expenses.
+Added: Adjusted Operating Income, Adjusted Operating Margin, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Diluted EPS
+Added: We define Adjusted Operating Income as net income, plus interest expense (income), net and income tax provision (benefit), further adjusted to exclude stock based compensation expense, loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, amortization of acquisition intangibles and certain other expenses.
+Added: We define Adjusted Operating Margin as Adjusted Operating Income as a percentage of net revenue.
+Added: We define EBITDA as net income, plus interest expense (income), net, income tax provision (benefit) and depreciation and amortization.
+Added: We define Adjusted EBITDA as net income, plus interest expense (income), net, income tax provision (benefit) and depreciation and amortization, further adjusted to exclude stock based compensation expense, loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, and certain other expenses.
We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of net revenue.
−Removed: We define Adjusted Diluted EPS as diluted earnings per share, adjusted for the per share impact of stock compensation expense, loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, amortization of acquisition intangibles, amortization of debt discounts and deferred financing costs of our term loan borrowings, amortization of the conversion feature and deferred financing costs of our 2025 N otes when not required under U.S.
−Removed: GAAP to be added back for diluted earnings per share, losses (gains) on change in fair value of derivatives, other expenses, and tax benefit of stock option exercises, less the tax effect of these adjustments.
−Removed: In 2020, we introduced Adjusted Operating Income and Adjusted Operating Margin as measures of performance we planned to use in addition to Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Diluted EPS.
−Removed: We believe Adjusted Operating Income and Adjusted Operating Margin enhance an understanding of our performance by highlighting the results from ongoing operations and the profitability of our business.
−Removed: We continue to evaluate our use of the Company Non-GAAP measures in the context of the development of our business, and may introduce or discontinue certain measures in the future as we deem appropriate.
−Removed: Further, consistent with our presentation of Adjusted Operating Income, we no longer exclude new store pre-opening expenses and non-cash rent from our presentation of Adjusted EBITDA and Adjusted Diluted EPS.
−Removed: New store pre-opening expenses totaled $3.4 million, $2.6 million and $3.3 million for the fiscal years 2021, 2020 and 2019, respectively;
−Removed: and non-cash rent totaled $1.3 million, $2.6 million and $3.2 million for fiscal years 2021, 2020 and 2019, respectively.
−Removed: The presentation of Adjusted EBITDA and Adjusted Diluted EPS for the fiscal year end 2019 has been recast to reflect these changes.
−Removed: See our Form 8-K filed with the SEC on February 26, 2020 for more information.
+Added: We define Adjusted Diluted EPS as diluted earnings per share, adjusted for the per share impact of stock based compensation expense, loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, amortization of acquisition intangibles, amortization of debt discounts and deferred financing costs of our term loan borrowings, amortization of the conversion feature and deferred financing costs related to our 2025 N otes when not required under U.S.
+Added: GAAP to be added back for diluted earnings per share, losses (gains) on change in fair value of derivatives, certain other expenses, and tax benefit of stock option exercises, less the tax effect of these adjustments.
+Added: We adjust for amortization of costs related to the 2025 Notes only when adjustment for these costs is not required in the calculation of diluted earnings per share according to U.S.
EBITDA and the Company Non-GAAP Measures can vary substantially in size from one period to the next, and certain types of expenses are non-recurring in nature and consequently may not have been incurred in any of the periods presented below.
7 unchanged sentences
GAAP results alone.
+Added: We continue to evaluate our use of the Company Non-GAAP measures in the context of the development of our business, and may introduce or discontinue certain measures in the future as we deem appropriate.
EBITDA and the Company Non-GAAP Measures are not recognized terms under U.S.
9 unchanged sentences
• they do not reflect changes in, or cash requirements for, our working capital needs;
−Removed: • EBITDA, Adjusted EBITDA and Adjusted Operating Income do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;
−Removed: • EBITDA, Adjusted EBITDA and Adjusted Operating Income do not reflect period to period changes in taxes, income tax expense or the cash necessary to pay income taxes;
+Added: • EBITDA, Adjusted EBITDA and Adjusted Operating Income do not reflect the interest expense (income), net or the cash requirements necessary to service interest or principal payments, on our debt;
+Added: • EBITDA, Adjusted EBITDA and Adjusted Operating Income do not reflect period to period changes in taxes, income tax provision or the cash necessary to pay income taxes;
• they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations;
3 unchanged sentences
The following table reconciles our Adjusted Operating Income, Adjusted Operating Margin, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin to net income;
−Removed: and Adjusted Diluted EPS for the periods presented:
+Added: and Adjusted Diluted EPS to diluted EPS for the periods presented:
In thousands Fiscal Year 2022 Fiscal Year 2021 Fiscal Year 2020
1 unchanged sentence
Interest expense 462 0.0 % 25,612 1.2 % 48,327 2.8 %
−Removed: Income tax provision (benefit) 21,081 1.0 % 2,403 0.1 % (2,309) (0.1) %
−Removed: Stock compensation expense (a)
−Removed: 14,886 0.7 % 10,740 0.6 % 12,670 0.7 %
−Removed: Loss on extinguishment of debt (b)
−Removed: — — % — — % 9,786 0.6 %
−Removed: Asset impairment (c)
−Removed: 4,427 0.2 % 22,004 1.3 % 8,894 0.5 %
−Removed: Litigation settlement (d)
−Removed: 1,500 0.1 % 4,395 0.3 % — — %
−Removed: Secondary offering expenses (e)
+Added: Income tax provision 18,691 0.9 % 21,081 1.0 % 2,403 0.1 %
+Added: Stock based compensation expense (a)
13,512 0.7 % 14,886 0.7 % 10,740 0.6 %
−Removed: Management realignment expenses (f)
+Added: Asset impairment (b)
5,783 0.3 % 4,427 0.2 % 22,004 1.3 %
−Removed: Long-term incentive plan (g)
+Added: Litigation settlement (c)
— — % 1,500 0.1 % 4,395 0.3 %
−Removed: Amortization of acquisition intangibles (h)
+Added: Amortization of acquisition intangibles (d)
7,488 0.4 % 7,488 0.4 % 7,426 0.4 %
8 unchanged sentences
Interest expense 462 0.0 % 25,612 1.2 % 48,327 2.8 %
−Removed: Income tax provision (benefit) 21,081 1.0 % 2,403 0.1 % (2,309) (0.1) %
+Added: Income tax provision 18,691 0.9 % 21,081 1.0 % 2,403 0.1 %
Depreciation and amortization 99,956 5.0 % 97,089 4.7 % 91,585 5.4 %
EBITDA 161,231 8.0 % 272,026 13.1 % 178,592 10.4 %
−Removed: Stock compensation expense (a)
−Removed: 14,886 0.7 % 10,740 0.6 % 12,670 0.7 %
−Removed: Loss on extinguishment of debt (b)
−Removed: — — % — — % 9,786 0.6 %
−Removed: Asset impairment (c)
−Removed: 4,427 0.2 % 22,004 1.3 % 8,894 0.5 %
−Removed: Litigation settlement (d)
−Removed: 1,500 0.1 % 4,395 0.3 % — — %
−Removed: Secondary offering expenses (e)
+Added: Stock based compensation expense (a)
13,512 0.7 % 14,886 0.7 % 10,740 0.6 %
−Removed: Management realignment expenses (f)
+Added: Asset impairment (b)
5,783 0.3 % 4,427 0.2 % 22,004 1.3 %
−Removed: Long-term incentive plan (g)
+Added: Litigation settlement (c)
— — % 1,500 0.1 % 4,395 0.3 %
7 unchanged sentences
Diluted EPS $ 0.52 $ 1.43 $ 0.44
−Removed: Stock compensation expense (a)
+Added: Stock based compensation expense (a)
0.17 0.15 0.13
−Removed: Loss on extinguishment of debt (b)
−Removed: Asset impairment (c)
+Added: Asset impairment (b)
0.07 0.05 0.27
−Removed: Litigation settlement (d)
−Removed: Secondary offering expenses (e)
−Removed: Management realignment expenses (f)
−Removed: Long-term incentive plan expense (g)
−Removed: Amortization of acquisition intangibles (h)
+Added: Litigation settlement (c)
+Added: Amortization of acquisition intangibles (d)
0.09 0.08 0.09
−Removed: Amortization of debt discounts and deferred financing costs (i)
+Added: Amortization of debt discounts and deferred financing costs (e)
0.04 0.02 0.14
−Removed: Losses (gains) on change in fair value of derivatives (j)
+Added: Losses (gains) on change in fair value of derivatives (f)
(0.20) (0.03) 0.05
(0.00) (0.01) 0.03
−Removed: Tax benefit of stock option exercises (l)
+Added: Tax benefit of stock option exercises (h)
(0.00) (0.15) (0.10)
−Removed: Tax effect of total adjustments (m)
+Added: Tax effect of total adjustments (i)
(0.04) (0.08) (0.19)
5 unchanged sentences
(a) Non-cash charges related to stock-based compensation programs, which vary from period to period depending on the timing of awards and performance vesting conditions.
−Removed: (b) Reflects write-off of deferred financing fees related to the extinguishment of debt.
−Removed: (c) Reflects write-off of primarily property, equipment and lease related assets on closed or underperforming stores.
−Removed: (d) Expenses associated with settlement of certain litigation.
−Removed: (e) Expenses related to our secondary public offerings.
−Removed: (f) Expenses related to a non-recurring management realignment described on Form 8-K filed with the SEC on January 10, 2019.
−Removed: (g) Expenses pursuant to a long-term incentive plan for non-executive associates who were not participants in the management equity plan.
−Removed: This plan was effective in 2014 following the acquisition of the Company by affiliates of KKR & Co.
−Removed: (the “KKR Acquisition”).
−Removed: (h) Amortization of the increase in carrying values of finite-lived intangible assets resulting from the application of purchase accounting to the KKR Acquisition.
−Removed: (i) Amortization of deferred financing costs and other non-cash charges related to our long-term debt, including amortization of the conversion feature related to the 2025 Notes of $10.0 million for fiscal year 2020.
−Removed: We adjust for amortization of deferred financing costs related to the 2025 Notes only when adjusting these costs is not required in the calculation of diluted earnings per share in accordance with the if-converted method under U.S.
−Removed: Amortization of debt discount and deferred financing costs total $2.1 million, $11.9 million and $1.3 million for the fiscal years 2021, 2020 and 2019, respectively.
−Removed: (j) Reflects losses (gains) recognized in interest expense on change in fair value of de-designated hedges of $(3.3) million and $4.0 million for fiscal years 2021 and 2020 .
−Removed: (k) Other adjustments include amounts that management believes are not representative of our operating performance (amounts in brackets represent reductions in Adjusted Operating Income, Adjusted Diluted EPS and Adjusted EBITDA) including our share of (gains) losses on equity method investments of $(2.4) million and $1.8 million for fiscal years 2021 and 2019, respectively;
−Removed: and other expenses and adjustments which are primarily related to excess payroll taxes on stock option exercises, executive severance and relocation.
−Removed: (l) Tax benefit associated with accounting guidance requiring excess tax benefits related to stock option exercises to be recorded in earnings as discrete items in the reporting period in which they occur.
−Removed: (m) Represents the income tax effect of the total adjustments at our combined statutory federal and state income tax rates.
−Removed: (n) Reflects other expenses in (k) above, including the impact of stranded tax effect of $(2.1) million for fiscal year 2021 associated with our interest rate swaps that matured in 2021.
+Added: (b) Reflects write-off of primarily property, equipment and lease related assets on closed or underperforming stores.
+Added: (c) Expenses associated with settlement of certain litigation.
+Added: (d) Amortization of the increase in carrying values of finite-lived intangible assets resulting from the application of purchase accounting to the KKR Acquisition.
+Added: (e) Amortization of deferred financing costs and other non-cash charges related to our long-term debt, including amortization of the conversion feature related to the 2025 Notes of $10.0 million for fiscal year 2020.
+Added: We adjust for amortization of deferred financing costs related to the 2025 Notes only when adjustment for these costs is not required in the calculation of diluted earnings per share under U.S.
+Added: (f) Reflects losses (gains) recognized in interest expense on change in fair value of de-designated hedges.
+Added: (g) Other adjustments include amounts that management believes are not representative of our operating performance (amounts in brackets represent reductions in Adjusted Operating Income, Adjusted Diluted EPS and Adjusted EBITDA), which are primarily related to excess payroll taxes on stock option exercises, executive severance and relocation and other expenses and adjustments, including our share of (gains) losses on equity method investments of $(2.7) million and $(2.4) million for fiscal years 2022 and 2021, respectively, and losses on other investments of $0.3 million for fiscal year 2022.
+Added: (h) Tax benefit associated with accounting guidance requiring excess tax benefits related to stock option exercises to be recorded in earnings as discrete items in the reporting period in which they occur.
+Added: (i) Represents the income tax effect of the total adjustments at our combined statutory federal and state income tax rates.
+Added: (j) Reflects other expenses in (g) above, including the impact of stranded tax effect of $(2.1) million for fiscal year 2021 associated with our interest rate swaps that matured in 2021, and $0.1 million and $0.2 million of debt issuance costs for fiscal years 2021 and 2020, respectively.
Liquidity and Capital Resources
−Removed: Our primary cash needs are for inventory, payroll, store rent, advertising, capital expenditures associated with new stores and updating existing stores, as well as information technology and infrastructure, including our corporate office, distribution centers and laboratories.
+Added: Our primary cash needs are for inventory, payroll, store rent, advertising, capital expenditures associated with new stores and updating existing stores, as well as information and remote medicine technology and infrastructure, including our corporate office, distribution centers and laboratories.
When appropriate, the Company may utilize excess liquidity towards debt service requirements, including voluntary debt prepayments, or required interest and principal payments, if any, as well as repurchases of common stock, based on excess cash flows.
−Removed: We continue to prioritize cash conservation and prudent use of cash, while safely conducting normal operations.
The most significant components of our operating assets and liabilities are inventories, accounts receivable, prepaid expenses and other assets, accounts payable, deferred and unearned revenue and other payables and accrued expenses.
−Removed: While we have historically exercised prudence in our use of cash, the COVID-19 pandemic has required us to closely monitor various items related to cash flow including, but not limited to, cash receipts, cash disbursements, payment terms and alternative sources of funding.
+Added: We exercise prudence in our use of cash and closely monitor various items related to cash flow including, but not limited to, cash receipts, cash disbursements, payment terms and alternative sources of funding.
We continue to be focused on these items in addition to other key measures we use to determine how our consolidated business and operating segments are performing.
15 unchanged sentences
Net Cash Provided by Operating Activities
+Added: Cash flows provided by operating activities decreased by $139.7 million to $119.2 million, during fiscal year 2022 from $258.9 million during fiscal year 2021 as a result of a $86.1 million decrease in net income, changes in net working capital and other assets and liabilities, which used an additional $38.6 million in cash and a decrease in non-cash expense adjustments of $15.0 million, in each case, as compared to fiscal year 2021.
+Added: Working capital was most significantly impacted by changes in other liabilities, accounts receivable and inventories.
+Added: Decreases in other liabilities used $30.9 million in year-over-year cash primarily due to decreases in compensation related and advertising accruals, partially offset by increases in payroll taxes payable.
+Added: Increases in accounts receivable balances used $26.0 million in year-over-year cash primarily due to year-over-year increases in trade and credit card receivables as a result of higher sales in the last week of fiscal year 2022 when compared to the same period of 2021, as well as increases in other receivables.
+Added: Decreases in inventory contributed $13.0 million in year-over-year cash primarily due to increased purchases, including inventory forward buys, during 2021.
Cash flows provided by operating activities increased by $24.0 million to $258.9 million, or 10.2%, during fiscal year 2021 from $235.0 million during fiscal year 2020 as a result of net income of $92.0 million, offset by a decrease in non-cash expense items of $13.2 million, and changes in net working capital and other assets and liabilities, which used an additional $54.8 million in cash compared to fiscal year 2020.
3 unchanged sentences
Offsetting these items were decreases in accounts receivable balances, which contributed $14.9 million in year-over-year cash, primarily due to year-over-year decreases in outstanding credit card receivables as a result of lower sales in the last week of fiscal year 2021 when compared to the same period of 2020.
−Removed: Cash flows provided by operating activities increased by $69.9 million to $235.0 million, or 42.3%, during fiscal year 2020 from $165.1 million during fiscal year 2019.
−Removed: The increase in net cash provided by operating activities consisted of an increase in net income of $3.5 million, and an increase in non-cash expense items of $12.0 million including asset impairment charges of $13.1 million, amortization of debt discount and deferred financing costs of $10.6 million, depreciation and amortization of $4.3 million, deferred income tax expense of $2.1 million and losses recognized for the changes in fair value of derivatives of $4.0 million partially offset by a decrease in loss on extinguishment of debt of $9.8 million, decrease of stock compensation expense of $1.9 million, and decrease of $11.0 million in other non-cash expenses.
−Removed: Changes in net working capital and other assets and liabilities contributed an additional $54.5 million in cash compared to fiscal year 2019.
−Removed: Increases in other liabilities contributed $17.6 million in year-over-year cash primarily due to an increase in deferral of employer payroll taxes of $12.8 million as a result of the CARES Act, increases in compensation related accruals of $2.2 million due primarily to timing, increases of $3.1 million due to lease concessions and deferrals and other increases in miscellaneous accruals due to timing, partially offset by decreases in accrued advertising and payments of litigation settlements during the year.
−Removed: Increases in accounts payabl e contributed $26.9 million i n year-over-year cash, primarily as a result of increased purchases and replenishing activity due to both store growth and increased sales in December of 2020 as compared to the same period of 2019 and increases in advertising.
−Removed: Decreases in inventory contributed $27.3 million in year-over-year cash, primarily due to no forward buys occurring after the first quarter of 2020.
−Removed: Offsetting these items were increases in other assets which used $14.0 million in year-over-year cash, consisting of $8.9 million of cloud hosted software asset development costs, $6.2 million in rent-related items and other prepaid balances.
−Removed: Additionally, accounts receivable balances used $6.8 million in year-over-year cash, primarily reflective of year-over-year increases in outstanding credit card receivables due to higher sales in the last week of 2020 as compared to the same period of 2019 and timing of credit card processing.
−Removed: Changes in deferred revenue contributed $2.8 million less cash when compared to 2019 driven by decreased sales of our eye care club membership and product protection plans.
−Removed: This was more than offset by a $3.9 million increase in year-over-year cash due to timing of unearned revenue.
Net Cash Used for Investing Activities
Net cash used for investing activities increased by $18.0 million, to $110.9 million, during fiscal year 2022 from $92.9 million during fiscal year 2021.
+Added: The increase was primarily due to increased capital investments in remote medicine and new store openings.
+Added: We purchased $113.5 million in capital items during fiscal year 2022.
+Added: Approximately 80% to 85% of o ur capital spend is related to our expected growth (i.e., new stores, remote medicine infrastructure, EHR, optometric equipment, additional capacity in our optical laboratories and distribution centers, and our IT infrastructure, including omni-channel platform related investments).
+Added: Net cash used for investing activities increased by $16.5 million, to $92.9 million, during fiscal year 2021 from $76.4 million during fiscal year 2020.
The increase was primarily due to new store openings, offset partially by proceeds of $2.4 million in connection with the sale of the Company’s equity method investee.
1 unchanged sentence
“Business and Significant Accounting Policies” for more information on the sale.
−Removed: We purchased $95.5 million in capital items during fiscal year 2021.
−Removed: Approximately 80% of o ur capital spend is related to our expected growth (i.e., new stores, optometric equipment, additional capacity in our optical laboratories and distribution centers, and our IT infrastructure, including omni-channel platform related investments).
−Removed: Net cash used for investing activities decreased by $24.2 million, to $76.4 million, during fiscal year 2020 from $100.6 million during fiscal year 2019.
−Removed: The decrease was primarily due to cash conservation measures during the temporary store closure period, which resulted in reduced store openings and lower IT investment for the full year.
Net Cash Provided by (Used for) Financing Activities
−Removed: Net cash provided by (used fo r) financing activities decreased $410.6 million , from $176.3 million provision of cash to $234.3 million use of cash during fiscal year 2021.
−Removed: The decrease in cash provided by financing activities was primarily due to the prepayment of our term loan of $167.4 million and increases in purchases of treasury stock of $72.6 million in the current fiscal year compared to proceeds of $548.8 million from the issuance of the 2025 Notes and borrowings on our revolving credit facility partially offset by principal payments on long-term debt of $369.3 million during fiscal year 2020.
−Removed: Net cash provided by (used fo r) financing activities increased $218.4 million, from $42.1 million use of cash to $176.3 million provision of cash during fiscal year 2020.
−Removed: The increase in cash provided by financing activities was primarily due to lower repayments on long-term debt of $222.6 million and decreased purchases of treasury stock of $25 million, offset by decreases in cash provided by borrowings on long-term debt of $17.8 million and an increase in cash used for payments of debt issuance costs of $9.5 million.
+Added: Net cash used for financing activities decreased $149.8 million, from $234.3 million use of cash during fiscal year 2021 to $84.6 million use of cash during fiscal year 2022 .
+Added: The decrease in cash used for financing activities was primarily due to voluntary term loan prepayments of $167.4 million in fiscal year 2021 that did not recur in fiscal year 2022, partially offset by increases in purchases of treasury stock of $11.1 million and decreases in proceeds from issuance of common stock of $8.1 million during fiscal year 2022.
+Added: Net cash provided by (used for) financing activities decreased $410.6 million, from $176.3 million provision of cash during fiscal year 2020 to $234.3 million use of cash during fiscal year 2021.
+Added: The decrease was primarily due to the prepayment of our term loan of $167.4 million and increases in purchases of treasury stock of $72.6 million during fiscal year 2021 compared to proceeds of $548.8 million from the issuance of the 2025 Notes and borrowings on our revolving credit facility partially offset by principal payments on long-term debt of $369.3 million during fiscal year 2020.
Long-term Debt
7 unchanged sentences
Total $ 552,497 $ 293,619
−Removed: (1) At January 1, 2022, the amount available under our revolving credit facility reflected a reduction of $6.4 million of letters of credit outstanding.
−Removed: (2) The interest rate on the term loan and revolving credit facility pursuant to the Credit Agreement is at an Applicable Margin of 1.25% for LIBOR Loans with LIBOR to not be lower than 0.00% in any period, and an Applicable Margin of 0.25% for ABR Loans, as of fiscal year end 2021.
+Added: (1) At December 31, 2022, the amount available under our revolving credit facility reflected a reduction of $6.4 million of letters of credit outstanding.
+Added: (2) The interest rate on the term loan and revolving credit facility pursuant to the Credit Agreement is at an Applicable Margin range from 1.25% to 2.00% for LIBOR Loans with LIBOR to not be lower than 0.00% in any period, and an Applicable Margin range from 0.25% to 1.00% for ABR Loans, as of fiscal year end 2022.
The 2025 Notes pay interest semi-annually in arrears on May 15 and November 15 of each year, commencing on November 15, 2020, at an annual rate of 2.50%.
5 unchanged sentences
Shares may be repurchased under the program through December 30, 2023.
−Removed: The timing and amounts of any such repurchases will depend on a variety of factors, including the market price of the Company’s shares and general market and economic conditions.
+Added: The timing and amounts of any such repurchases will depend on a variety of factors, including the market price of the Company’s shares, general market and economic conditions, legal requirements and tax implications.
The Company expects to fund the share repurchases using cash on hand.
−Removed: During fiscal year 2021, the Company repurchased 1.4 million shares of its common stock for $69.9 million under the share repurchase program.
−Removed: After these repurchases, $130 million remains available under the share repurchase authorization.
+Added: During fiscal years 2022 and 2021, the Company repurchased 2.7 million shares of its common stock for $80.0 million, and 1.4 million shares of its common stock for $69.9 million, respectively, under the share repurchase program.
+Added: After these repurchases, approximately $50 million remains available under the share repurchase authorization as of December 31, 2022.
Capital Expenditures
6 unchanged sentences
Fiscal year 2020 includes 53 weeks.
−Removed: We expect capital expenditures in fiscal year 2022 to be approximately between $110 million and $115 million and to be used primarily in supporting the Company’s growth through investments in new stores and information technology improvements.
+Added: We expect capital expenditures in fiscal year 2023 to be approximately between $115 million and $120 million and to be used primarily in supporting the Company’s growth through investments in new stores, remote medicine, EHR, optical laboratories, and IT infrastructure.
We expect to fund capital expenditures with cash flows from operations, but may also use existing cash balances or funds available through our revolving credit facility.
19 unchanged sentences
“Long-term Debt” to our consolidated financial statements included in Part II.
−Removed: Item 8 of this Form 10-K for more information on our term loan long-term debt.
+Added: Item 8 of this Form 10-K for more information on our term loan.
(b) Refer to Note 4.
3 unchanged sentences
“Long-term Debt” for more information on our revolving credit facility.
−Removed: (d) We have estimated our interest payments on our term loan based on our current interest elections described in “Liquidity and Capital Resources.” Amounts and timing may be different from our estimated interest payments due to potential voluntary prepayments, borrowings and interest rate fluctuations.
+Added: (d) We have estimated our interest payments on our term loan based on LIBOR as of the end of fiscal year 2022.
+Added: Amounts and timing may be different from our estimated interest payments due to potential voluntary prepayments, borrowings, interest rate fluctuations and the expected discontinuation of LIBOR.
Expected obligations on our hedging instruments are excluded from estimated interest presented in the table above.
+Added: Refer to Note 1.
+Added: “Business and Significant Accounting Policies” for more information on the cessation of LIBOR.
(e) We lease our retail stores, optometric examination offices, distribution centers, office space and all of our optical laboratories with the exception of our St.
12 unchanged sentences
(g) Other commitments include minimum purchase commitments with certain trade vendors and contractual agreements to purchase goods or services in the ordinary course of business.
−Removed: In addition to lease commitments and contractual obligations, our material cash requirements also include operating expenses such as payroll, store rent, and advertising expenses, which we expect to fund primarily with cash on hand and cash expected to be generated from operations.
+Added: In addition to lease commitments and contractual obligations, our material cash requirements also include operating expenses such as payroll, store rent, and advertising expenses, which we expect to fund primarily with existing cash balances and cash flows from operations.
We follow U.S.
36 unchanged sentences
Developing the estimates and assumptions used in our recovery and impairment evaluations require significant judgment.
−Removed: The cash flows used in estimating fair value were discounted using a rate of 7.5% in fiscal year 2021.
−Removed: We had $346.4 million of property and equipment, net, and ROU assets of $354.9 million as of January 1, 2022.
+Added: The cash flows used in estimating fair value were discounted using market rates from 7.5% to 10% in fiscal year 2022.
+Added: We had $359.8 million of property and equipment, net, and ROU assets of $382.8 million as of December 31, 2022.
Changes in estimates and assumptions used in our impairment testing of property and equipment could result in future impairment losses, which could be material.
+Added: We recognized impairments of $5.8 million, $4.4 million and $22.0 million in fiscal years 2022, 2021 and 2020, respectively, primarily related to our long-lived tangible store assets and ROU assets.
Impairment of Goodwill and Intangible Assets
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of this Form 10-K for further detail on goodwill impairment.
−Removed: As of January 1, 2022, we had $777.6 million of goodwill, $240.5 million of non-amortizing intangible assets, and $42.0 million of other intangible assets, net of accumulated amortization.
+Added: As of December 31, 2022, we had $777.6 million of goodwill, $240.5 million of non-amortizing intangible assets, and $34.7 million of other intangible assets, net of accumulated amortization.
Changes in estimates and assumptions used in our impairment testing could result in future impairment losses, which could be material.
Significant judgments and assumptions are required in our impairment evaluations.
−Removed: In the impairment analysis for goodwill, fair value exceeded carrying value by at least 30% for all of our reporting units.
−Removed: Future changes in reporting unit’s business profitability, expected cash flows, changes in business strategy and external market conditions, among other factors, could require us to record an impairment charge for goodwill.
−Removed: A 100 basis point increase in discount rates used to estimate the fair value of the Company’s reporting units would not result in an impairment of the Company’s goodwill balance at fiscal year-end.
+Added: In our most recent goodwill impairment test, the fair value of our Legacy segment, to which $60.0 million of goodwill is allocated, exceeded its carrying value by approximately 9%.
+Added: Our Legacy segment has been affected by the challenging macroeconomic environment.
+Added: Considering the challenging environment, the fair value of our Legacy segment assumes lower levels of profitability in the near term than the Legacy segment has historically experienced, followed by a gradual improvement in profitability to the low end of the Legacy segment’s historical profitability range.
+Added: The fair values of our other reporting units exceeded their respective carrying values by at least 60%.
+Added: Future changes in a reporting unit’s business profitability, expected cash flows, changes in business strategy and external market conditions, among other factors, could require us to record an impairment charge for goodwill.
+Added: A 100 basis point increase in discount rates used to estimate the fair value of the Company’s reporting units would result in an approximate $3 million impairment of the Company’s goodwill balance in the Legacy segment at the end of fiscal year 2022.
+Added: The Legacy segment’s operations are sensitive to customer concentration.
When evaluating indefinite-lived, non-amortizing trademarks and trade names for impairment, we use the relief-from-royalty method to estimate fair value, whereby an estimated royalty rate is determined based on comparable licensing arrangements, which is then applied to the revenue projections for the subject asset.
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If the projected net undiscounted cash flows are less than the carrying value of the related assets, we then measure impairment based on a discounted cash flow model and record an impairment charge as the excess of carrying value over the estimated fair value.
−Removed: We did not test any finite-lived intangible assets for impairment in fiscal year 2021.
+Added: A 100 basis point increase in the discount rate used to estimate the fair value of the Company’s Legacy segment contracts and relationships asset would not result in an impairment at fiscal year-end.
Calculations and assessments of uncertain tax positions involve estimates and complex judgments because the ultimate tax outcomes are uncertain and future events are unpredictable.
−Removed: Our net deferred liability balance as of January 1, 2022 was $82.8 million.
+Added: Our net deferred liability balance as of December 31, 2022 was $93.9 million.
Changes in assumptions in our estimates could result in material changes to these balances.
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Actual shrinkage is recorded throughout the year based upon periodic physical counts.
−Removed: As of January 1, 2022, our total inventory balance was $123.7 million.
+Added: As of December 31, 2022, our total inventory balance was $123.2 million.
A 10% increase in the obsolescence and shrinkage reserves will not have a material impact on our financial position.
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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.