What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2024-02-27 compared with 2023-03-01 · 360 added, 238 removed, 1125 unchanged (35% of the section changed)

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Item 8 of this Form 10-K for more information on the cessation of LIBOR.

As of December 31, 2022, $150.0 million of term loan borrowings were subject to variable interest rates, with a weighted average borrowing rate of 3.1%.

As of December 30, 2023, $146.3 million of term loan borrowings were subject to variable interest rates and we had total borrowings of $448.7 million with a weighted average borrowing rate of 3.4%, inclusive of the effects of our interest rate collar.

An increase to market rates of 1.0% as of December 30, 2023 would not result in a material increase to interest expense.

Assuming a decrease to market rates of 1.0%, the resulting impact to interest expense related to the interest rate derivative would be approximately $1 million.

Our exposure to risk from changes in the interest rates will change upon the maturity of our interest rate collar on July 18, 2024.

“Interest Rate Derivatives” to our consolidated financial statements included in Part II.

Item 8 of this Form 10-K for more information on our interest rate collar.

Consolidated Financial Statements and Supplementary Data

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Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets as of December 31, 2022 and January 1, 2022

Consolidated Statements of Operations and Comprehensive Income for the Fiscal Years Ended December 31, 2022 , January 1, 2022 and January 2, 2021

Consolidated Statements of Stockholders’ Equity for the Fiscal Years Ended December 31, 2022 , January 1, 2022 and January 2, 2021

Consolidated Statements of Cash Flows for the Fiscal Years Ended December 31, 2022 , January 1, 2022 and January 2, 2021

Consolidated Balance Sheets as of December 3 0 , 202 3 and Decembe r 31, 202 2

Consolidated Statements of Operations and Comprehensive Income for the Fiscal Years Ended December 3 0 , 202 3 , December 3 1, 2022 , and January 1, 2022

Consolidated Statements of Stockholders’ Equity for the Fiscal Years Ended December 30, 2023, December 3 1 , 202 2 , and January 1, 2022

Consolidated Statements of Cash Flows for the Fiscal Years Ended December 30, 2023, December 31, 2022 , and January 1, 2022

Notes to Consolidated Financial Statements

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of National Vision Holdings, Inc.

To the Stockholders and the Board of Directors of National Vision Holdings, Inc.

and Subsidiaries

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We have audited the accompanying consolidated balance sheets of National Vision Holdings, Inc.

and subsidiaries (the "Company") as of December 31, 2022 and January 1, 2022, the related consolidated statements of operations and comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and January 1, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

and subsidiaries (the “Company”) as of December 30, 2023 and December 31, 2022, the related consolidated statements of operations and comprehensive income, stockholders’equity, and cash flows, for each of the three years in the period ended December 30, 2023, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 30, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for debt with conversion options for the year ended January 1, 2022 due to the adoption of Accounting Standards Update No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—

Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an

Entity’s Own Equity.

Basis for Opinion

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill — Legacy Segment Reporting Unit — Refer to Notes 1 and 3 to the financial statements

Goodwill and Trademark and Trade name — Eyeglass World — Refer to Notes 1 and 4 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value.

The Company used the income approach, which is based on a discounted cash flow analysis and calculated the fair value of reporting units by estimating after-tax cash flows discounted using a weighted average cost of capital discount rate.

The determination of fair value using the discounted cash flow method requires management to make significant estimates and assumptions related to the discount rate.

Changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, or both.

The goodwill balance was $777.6 million as of December 31, 2022, of which $60.1 million was allocated to the Legacy Segment Reporting Unit.

The fair value of the Legacy Segment Reporting Unit exceeded its

carrying value as of the measurement date and, therefore, no impairment was recognized.

The Legacy Segment Reporting Unit’s operations are sensitive to customer concentration.

We identified goodwill for the Legacy Segment Reporting Unit as a critical audit matter because of the significant judgments made by management to estimate the fair value of the reporting unit and the difference between its fair value and carrying value.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to selection of the discount rate, specifically due to the customer concentration within the reporting unit.

The Company tests goodwill and trademarks and trade names for impairment annually, or more frequently as warranted by events or changes in circumstances which indicate that the carrying value of assets may not be recoverable.

The Company evaluates impairment for Eyeglass World by comparing the fair value of the reporting unit and trademark and trade names with their respective carrying value.

For each reporting unit, the Company used the income approach, which is based on a discounted cash flow analysis and calculated the fair value of the reporting unit by estimating after-tax cash flows discounted using a discount rate.

For each trademark and trade name, the Company used the relief-from-royalty method, which involves estimating a royalty rate based on comparable licensing arrangements, applying that rate to the revenue projections for the subject asset, and then estimating fair value using a discounted cash flow analysis.

The determination of fair value requires management to make significant estimates and assumptions related to the discount rate.

The discount rate may also incorporate certain risk premiums, such as a company-specific risk premium (CSRP), which represents the incremental return that investors may require to compensate for the risks, uncertainties and variability in the estimated future cash flows.

The changes in these assumptions could have a significant impact on the fair value which could lead to an impairment charge.

As of December 30, 2023, the Company’s consolidated balance of goodwill was $717.5 million, of which $111.1 million relates to Eyeglass World.

The consolidated balance of trademarks and trade names at the same date was

$240.5 million, of which $40.0 million relates to Eyeglass World.

The fair value of the reporting unit and trademark and trade name for Eyeglass World exceeded the carrying value as of the measurement date and, therefore, no impairment was recognized.

We identified the valuation of the reporting unit and trademark and trade name for Eyeglass World as a critical audit matter because of the significant judgments made by management to estimate the fair value and the difference between its fair value and carrying value.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the selection of the discount rate, including the CSRP.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the discount rate used by management to estimate the fair value of the Legacy Segment Reporting Unit included the following, among others:

• We tested the design, implementation, and operating effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value and related to management’s selection of the discount rate.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) the selected discount rate by:

Our audit procedures related to the discount rate, including the CSRP, used by management to estimate the fair value of the reporting unit and trademark and trade name for Eyeglass World included the following, among others:

• We tested the design and operating effectiveness of controls over management’s goodwill and trademarks and trade names impairment evaluation, including those over the determination of the fair value and related to management’s selection of the discount rate.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) the selected discount rate, including the CSRP, by:

– Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation.

– Developing a range of independent estimates and comparing those to the discount rate selected by management.

– Evaluating the interaction between the discount rate and the forecasts to understand and sensitize management’s assumptions regarding risk inherent in the forecasts.

/s/ Deloitte & Touche LLP

Atlanta, Georgia

February 26, 2024

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December 30, 2023 As of

January 1, 2022

December 31, 2022

Current assets:

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200,000 shares authorized;

84,273 and 83,840 shares issued as of December 31, 2022 and January 1, 2022, respectively;

78,992 and 81,405 shares outstanding as of December 31, 2022 and January 1, 2022, respectively

84,831 and 84,273 shares issued as of December 30, 2023 and December 31, 2022, respectively;

78,311 and 78,992 shares outstanding as of December 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 788,967 767,112

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Treasury stock, at cost;

5,281 and 2,435 shares as of December 31, 2022 and January 1, 2022, respectively

6,520 and 5,281 shares as of December 30, 2023 and December 31, 2022, respectively

( 214,594 ) ( 186,179 )

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Asset impairment 82,413 5,783 4,427

Other income, net ( 2,552 ) ( 2,505 ) ( 445 )

Other expense (income), net

( 164 ) ( 2,552 ) ( 2,505 )

Total operating expenses 1,172,384 1,018,542 999,809

Income from operations 61,275 174,937 87,007

Income (loss) from operations

( 46,826 ) 61,275 174,937

Interest expense, net 14,339 462 25,612

Earnings before income taxes 60,813 149,325 38,680

Loss on extinguishment of debt

Earnings (loss) before income taxes

( 61,764 ) 60,813 149,325

Income tax provision 4,137 18,691 21,081

Net income $ 42,122 $ 128,244 $ 36,277

Earnings per share:

Net income (loss)

$ ( 65,901 ) $ 42,122 $ 128,244

Earnings (loss) per share:

Basic $ ( 0.84 ) $ 0.53 $ 1.57

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Diluted 78,313 80,298 96,134

Comprehensive income:

Net income $ 42,122 $ 128,244 $ 36,277

Unrealized gain (loss) on hedge instruments 1,020 6,158 ( 780 )

Tax provision (benefit) of unrealized gain (loss) on hedge instruments 259 3,698 ( 194 )

Comprehensive income $ 42,883 $ 130,704 $ 35,691

Fiscal years 2022 and 2021 include 52 weeks.

Fiscal year 2020 includes 53 weeks.

Comprehensive income (loss):

Net income (loss)

$ ( 65,901 ) $ 42,122 $ 128,244

Unrealized gain on hedge instruments

1,019 1,020 6,158

Tax provision of unrealized gain on hedge instruments

259 259 3,698

Comprehensive income (loss)

$ ( 65,141 ) $ 42,883 $ 130,704

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

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Shares Amount

Balances at December 28, 2019 79,678 $ 805 $ 700,121 $ ( 3,814 ) $ 107,132 $ ( 27,807 ) $ 776,437

Balances at January 2, 2021 81,239 821 $ 795,697 $ ( 4,400 ) $ 142,880 $ ( 28,496 ) $ 906,502

Cumulative effect of change in accounting principle — — ( 71,385 ) — 7,271 — ( 64,114 )

Balances at December 29, 2019 - as adjusted 79,678 805 700,121 ( 3,814 ) 106,603 ( 27,807 ) 775,908

Balances at January 3, 2021 - as adjusted 81,239 821 724,312 ( 4,400 ) 150,151 ( 28,496 ) 842,388

Issuance of common stock 1,657 17 11,465 — — — 11,482

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Purchase of treasury stock ( 1,491 ) — — — — ( 73,295 ) ( 73,295 )

Conversion option related to convertible senior notes, net of allocated costs and tax — — 71,385 — — — 71,385

Unrealized gain (loss) on hedge instruments, net of tax — — — ( 586 ) — — ( 586 )

Unrealized gain on hedge instruments, net of tax — — — 2,460 — — 2,460

Net income — — — — 128,244 — 128,244

Balances at January 1, 2022 81,405 838 750,478 ( 1,940 ) 278,395 ( 101,791 ) 925,980

Cumulative effect of change in accounting principle — — ( 71,385 ) — 7,271 — ( 64,114 )

Balances at January 3, 2021 - as adjusted 81,239 821 724,312 ( 4,400 ) 150,151 ( 28,496 ) 842,388

Issuance of common stock 433 4 3,282 — — — 3,286

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Purchase of treasury stock ( 2,846 ) — — — — ( 84,388 ) ( 84,388 )

Unrealized gain (loss) on hedge instruments, net of tax — — — 2,460 — — 2,460

Repurchase of 2025 Notes — — ( 1 ) — — — ( 1 )

Unrealized gain on hedge instruments, net of tax — — — 761 — — 761

Net income — — — — 42,122 — 42,122

Balances at January 1, 2022 81,405 838 750,478 ( 1,940 ) 278,395 ( 101,791 ) 925,980

Balances at December 31, 2022 78,992 842 767,112 ( 1,179 ) 320,517 ( 186,179 ) 901,113

Issuance of common stock 558 6 1,832 — — — 1,838

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Purchase of treasury stock ( 1,239 ) — — — — ( 28,415 ) ( 28,415 )

Settlement of 2025 Notes — — ( 1 ) — — — ( 1 )

Unrealized gain (loss) on hedge instruments, net of tax — — — 761 — — 761

Net income — — — — 42,122 — 42,122

Unrealized gain on hedge instruments, net of tax — — — 760 — — 760

Net income (loss) — — — — ( 65,901 ) — ( 65,901 )

Balances at December 30, 2023 78,311 848 $ 788,967 $ ( 419 ) $ 254,616 $ ( 214,594 ) $ 829,418

Fiscal years 2022 and 2021 include 52 weeks.

Fiscal year 2020 includes 53 weeks.

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

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Cash flows from operating activities:

Net income $ 42,122 $ 128,244 $ 36,277

Adjustments to reconcile net income to cash provided by operating activities:

Net income (loss)

$ ( 65,901 ) $ 42,122 $ 128,244

Adjustments to reconcile net income (loss) to cash provided by operating activities:

Depreciation and amortization 98,252 99,956 97,089

Amortization of debt discount and deferred financing costs 3,351 3,314 4,321

Amortization of cloud computing implementation costs

3,170 6,012 4,714

Asset impairment 82,413 5,783 4,427

Deferred income tax expense (benefit)

( 5,989 ) 11,024 16,701

Stock-based compensation expense

20,174 13,512 14,886

Losses (gains) on change in fair value of derivatives ( 1,274 ) ( 16,377 ) ( 3,286 )

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Payments on finance lease obligations ( 3,918 ) ( 3,908 ) ( 4,592 )

Net cash provided by (used for) financing activities ( 84,556 ) ( 234,324 ) 176,281

Net cash used for financing activities

( 136,808 ) ( 84,556 ) ( 234,324 )

Net change in cash, cash equivalents and restricted cash ( 79,597 ) ( 76,252 ) ( 68,283 )

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Capital expenditures accrued at the end of the period $ 5,412 $ 9,594 $ 10,571

Fiscal years 2022 and 2021 include 52 weeks.

Fiscal year 2020 includes 53 weeks.

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

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and Subsidiaries

Index to Notes to Condensed Consolidated Financial Statements

Index to Notes to Consolidated Financial Statements

Business and Significant Accounting Policies

Termination of Walmart Partnership

Details of Certain Balance Sheet Accounts

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Stock Incentive Plans

Revenue From Contracts With Customers

Revenue f rom Contracts w ith Customers

Fair Value Measurement

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(“NVI”) and NVI’s direct wholly owned subsidiaries.

We are a leading value retailer of eyeglasses and contact lenses in the United States.

We operated 1,354 and 1,278 retail optical locations in the United States and its territories as of the fiscal years ended December 31, 2022 and January 1, 2022, respectively, through our five store brands, including America’s Best Contacts and Eyeglasses (“America’s Best”), Eyeglass World, Vista Optical locations on select U.S.

We are a leading value retailer of eyeglasses and contact lenses in the United States (“U.S”).

We operated 1,413 and 1,354 retail optical locations in the U.S.

and its territories as of the fiscal years ended December 30, 2023 and December 31, 2022, respectively, through our five store brands, including America’s Best Contacts and Eyeglasses (“America’s Best”), Eyeglass World, Vista Optical locations on select U.S.

Army/Air Force military bases (“Military”) and within select Fred Meyer stores, and our management & services arrangement with Walmart (“Legacy”).

Refer to Note 2.

“Termination of Walmart Partnership” for developments related to the Walmart exit.

We sell eyeglasses, contact lenses and optical accessory products to retail customers through proprietary retail web sites and web sites on behalf of certain independent retailers and insurance companies.

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We also operate a specialized health maintenance organization (“HMO”) that is licensed as a single-service health plan under California law.

The HMO issues individual vision plans in connection with our America’s Best operations in California, and provides, or arranges for the provision of, optometric services at the offices next to certain Walmart stores throughout California.

The HMO issues individual vision plans in connection with our America’s Best operations in California, and until February 23, 2024, provided, or arranged for the provision of, optometric services at the offices next to certain Walmart stores throughout California.

We operate on a retail fiscal calendar that results in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to December 31.

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in a 53-week fiscal year, each of the first, second and third quarters include 13 weeks of operations and the fourth quarter includes 14 weeks of operations.

References herein to “fiscal year 2022” and “fiscal year 2021,” relate to the 52 weeks ended December 31, 2022 and January 1, 2022, respectively, and references to “fiscal year 2020,” relate to the 53 weeks ended January 2, 2021.

References herein to “fiscal year 2023”, “fiscal year 2022” and “fiscal year 2021,” relate to the 52 weeks ended December 30, 2023, December 31, 2022, and January 1, 2022, respectively.

Unless otherwise stated, references to years in this report relate to fiscal years rather than calendar years.

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The Company has consolidated certain entities meeting the definition of a variable interest entity (“VIE”) as the Company concluded that it is the primary beneficiary of the entities under the provisions of Accounting Standards Codification 810, Consolidation.

At December 31, 2022, the variable interest entities include 31 professional corporations.

The total assets of the consolidated VIEs included in the accompanying Consolidated Balance Sheets as of December 31, 2022 and January 1, 2022, were $ 7.9 million and $ 6.0 million, respectively, and the total liabilities of the consolidated VIEs were $ 8.3 million and $ 6.8 million, respectively.

As of December 30, 2023, the variable interest entities include 32 professional corporations.

The total assets of the consolidated VIEs included in the accompanying Consolidated Balance Sheets as of December 30, 2023 and December 31, 2022, were $ 8.3 million and $ 7.9 million, respectively, and the total liabilities of the consolidated VIEs were $ 9.8 million and $ 8.3 million, respectively.

Certain fiscal year 2022 and fiscal year 2021 amounts within the Consolidated Statements of Cash Flows and footnotes to the financial statements have been reclassified to conform to the fiscal year 2023 presentation.

Use of Estimates

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Share Repurchases

Effective November 8, 2021, the Company's Board of Directors authorized the Company to repurchase up to $ 50 million aggregate amount of shares of the Company's common stock.

On November 29, 2021, the Company’s Board of Directors authorized an increase from $ 50 million to $ 100 million in aggregate amount of shares of the Company’s common stock that may be repurchased under the Company’s current share repurchase program.

Effective November 8, 2021, the Company’s Board of Directors (the “Board”) authorized the Company to repurchase up to $ 50 million aggregate amount of shares of the Company's common stock.

On November 29, 2021, the Board authorized an increase from $ 50 million to $ 100 million in aggregate amount of shares of the Company’s

common stock that may be repurchased under the Company’s current share repurchase program.

On February 23, 2022, our Board of Directors authorized a $ 100 million increase to the share repurchase authorization, for a total authorization of $ 200 million.

Repurchases may be made from time to time in the Company’s discretion through one or more open market or privately negotiated transactions, and pursuant to pre-set trading plans meeting

the requirements of all applicable securities laws and regulations.

Shares may be repurchased under the program through December 30, 2023.

During fiscal years 2023, 2022, and 2021, the Company repurchased 1.1 million shares of its common stock for $ 25.0 million, 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.

The Company’s original share repurchase authorization expired on December 30, 2023, and had remaining capacity of $ 25 million.

Effective February 23, 2024, the Board authorized the Company to repurchase up to $ 50 million aggregate amount of shares of the Company’s common stock until January 3, 2026.

The authorization permits the Company to make purchases of its common stock from time to time in the open market or privately negotiated transactions, and pursuant to pre-set trading plans meeting the requirements of all applicable securities laws and regulations.

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.

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.

After these repurchases, approximately $ 50 million remains available under the share repurchase authorization.

The Company expects to fund any future share repurchases using existing cash balances.

The Company expects to fund the share repurchases using cash on hand.

Repurchased shares are reflected in Treasury stock on the Consolidated Balance Sheets.

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The CARES Act, among other things, accelerates a company’s ability to recover Alternative Minimum Tax (“AMT”) refundable credits that otherwise could have been claimed in 2020 and 2021, to 2018 and 2019, with an option to elect recovery of the full credit amount for 2018.

In addition, as a result of the employee retention credits made available under the CARES Act for U.S.

associates the Company recognized $ 0.4 million as a reduction to costs of products, $ 6.2 million as a reduction to costs of services and plans, and $ 4.4 million as a reduction to SG&A during fiscal year 2020.

The Company recognizes government grants for which there is a reasonable assurance of compliance with grant conditions and receipt of credits.

Amounts receivable under the CARES Act were $ 9.0 million as of December 31, 2022 and $ 0.0 million as of January 1, 2022.

We elected to offset credits recognized under the CARES Act against payroll taxes that would otherwise be payable as of January 1, 2022.

Amounts receivable under the CARES Act were $ 9.0 million as of both December 30, 2023 and December 31, 2022.

Credits recognized under the CARES Act offset deferred payroll taxes that would otherwise be payable as of January 1, 2022.

In addition to the CARES Act, the Consolidated Appropriations Act, 2021, H.R.

133 was signed into law on December 27, 2020 and, among other things, allows for 100% deductibility of meals and entertainment expenses for the tax years ending in 2022 and 2021.

In 2023, the deductibility was reduced to 50% of meals and 0% of entertainment expenses.

Cash and Cash Equivalents

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Trade receivables consist primarily of receivables from managed care payors and receivables from major retailers.

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.

While we have relationships with almost all vision care insurers in the U.S.

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.

Accounts receivable are reduced by allowances for credit losses.

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Inventory values are adjusted for estimated obsolescence and written down to NRV based on estimates of current and anticipated demand, customer preference, merchandise age, planned promotional activities, contact lens vendor return acceptance activity, and estimates of future retail sales prices.

Shrinkage is estimated and recorded throughout the period in cost of sales based on historical results and current inventory levels.

Shrinkage is estimated and recorded throughout the period in costs applicable to revenue based on historical results and current inventory levels.

Actual shrinkage is recorded throughout the year based upon periodic physical counts.

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The term of the lease includes renewal options for additional periods if the exercise of the renewal is considered to be reasonably assured.

Cloud Computing Arrangements

The Company capitalizes certain costs related to the acquisition and development of internal use software, including implementation costs incurred in a cloud computing arrangement during the application development stages of projects.

Capitalized implementation costs are amortized on a straight-line basis over the expected term of the hosting arrangement, which includes consideration of the non-cancellable contractual term and reasonably certain renewals.

Costs incurred during the preliminary project or the post-implementation stages of the project are expensed as incurred.

Implementation costs are included in Other assets in our Consolidated Balance Sheets.

Amortization of capitalized implementation costs is included in Selling, general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income.

Goodwill and Intangible Assets

Indefinite-lived intangible assets include goodwill and our trademarks and tradenames;

we evaluate these assets annually for impairment, or more frequently if events and circumstances indicate that it is more likely than not that goodwill is impaired.

Our annual testing date for impairment of goodwill and indefinite-lived intangible assets is the first day of the fourth fiscal quarter, which for fiscal years 2022 and 2021 was October 2, 2022, and October 3, 2021, respectively.

we evaluate these assets annually for impairment, or more frequently if events and circumstances indicate that it is more likely than not that goodwill or intangible assets are impaired.

Our annual testing date for impairment of goodwill and indefinite-lived intangible assets is the first day of the fourth fiscal quarter, which for fiscal year 2023 was October 1, 2023.

Costs to renew intangible assets are expensed as incurred.

Finite-lived, amortizing intangible assets primarily consist of our contracts and relationships with certain retailers and our customer database tool.

We amortize finite-lived intangible assets on a straight-line basis over their estimated useful lives, ranging from three to 23 years.

Finite-lived, amortizing intangible assets primarily consist of our contracts and relationships with certain retailers.

We amortize finite-lived intangible assets on a straight-line basis over their estimated useful lives.

Amortization expense associated with finite-lived intangible assets is included in Depreciation and amortization in the accompanying Consolidated Statements of Operations.

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We consider each of our operating segments to be reporting units.

We estimate the fair value of our reporting units using the income approach, which is based on a discounted cash flow analysis and calculate the fair value of reporting units by estimating after-tax cash flows discounted using a weighted average cost of capital.

The cash flows used in the analysis are based on financial forecasts developed internally by management and require significant judgment.

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We use the relief-from-royalty method to estimate fair value of our trademarks and trade names, which involves estimating a royalty rate based on comparable licensing arrangements, applying that rate to the revenue projections for the subject asset, and then estimating fair value using a discounted cash flow analysis;

the discounted cash flow analysis uses a weighted average cost of capital that includes a company-specific risk premium.

We record an impairment charge as the excess of carrying value over estimated fair value.

“Termination of Walmart Partnership” and Note 4.

“Goodwill and Intangible Assets” for further detail on impairment of goodwill and intangible assets.

Equity Method Investment

The Company previously had an investment in a private start-up company whose principal business is licensing software to eyeglass retailers.

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These proceeds were included in Other in the investing section of the Consolidated Statements of Cash Flows.

As a result of this transaction, and as the carrying value of the investment was zero , the Company recorded a gain on sale of equity method investment in Other income, net on the Consolidated Statement of Operations of $ 2.7 million in fiscal year 2022 and $ 2.4 million in fiscal year 2021.

As a result of this transaction, and as the carrying value of the investment was zero , the Company recorded a gain on sale of equity method investment in Other expense (income), net on the Consolidated Statement of Operations of $ 2.7 million in fiscal year 2022 and $ 2.4 million in fiscal year 2021.

In the second quarter of fiscal year 2023, we completed an investment in an entity specializing in applying artificial intelligence-powered screening and diagnostic tools to retinal imaging.

The initial investment of $ 0.9 million and subsequent milestone payment of $ 0.9 million were both recognized in Other assets in the Consolidated Balance Sheets as of December 30, 2023 and in Other in the investing section of the Consolidated Statements of Cash Flows for fiscal year 2023.

We have agreed to invest up to an additional $ 1.5 million in the entity upon the completion of certain milestones.

Fair Value Measurement of Assets and Liabilities

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December 30, 2023 As of

January 1, 2022

December 31, 2022

Current portion Prepaid Expenses and Other Current Assets $ 990 $ 1,047

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Derivative Financial Instruments

The Company uses interest rate derivatives to manage the exposure of its LIBOR-based debt to fluctuations in interest rates.

The Company uses interest rate derivatives to manage the exposure of its Term Secured Overnight Financing Rate (“Term SOFR”)-based debt to fluctuations in interest rates.

If our derivatives are designated as cash flow hedges, we formally document our hedge relationships, including identification of the hedging instruments and the hedged items, as well as our risk management objectives and strategies for undertaking the hedge transactions.

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Fair value represents estimated amounts we would receive or pay upon a termination of interest rate derivatives prior to their scheduled expiration dates.

The fair value was based on information that is model-driven and whose inputs were observable (Level 2 inputs) such as LIBOR forward rates.

The fair value was based on information that is model-driven and whose inputs were observable (Level 2 inputs) such as Term SOFR forward rates.

We do not hold or enter into financial instruments for trading or speculative purposes.

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As the rate implicit in the Company’s leases is not easily determinable, the Company’s incremental borrowing rate is used in calculating the present value of the sum of the lease payments.

Factors incorporated into the calculation of the lease incremental borrowing rate include lease term, borrowing rates

on the Company’s long-term debt, fixed rates on interest rate swaps, LIBOR margins for issuers of similar credit rating to NVI and effect of collateralization.

Factors incorporated into the calculation of the lease incremental borrowing rate include lease term, borrowing rates on the Company’s long-term debt, fixed rates on interest rate swaps, Term SOFR margins for issuers of similar credit rating to NVI and effect of collateralization.

For finance leases, a lease ROU asset is recorded as property and equipment and corresponding amounts are recorded as finance lease debt obligations at the net present value of the minimum lease payments to be made over the lease term for new finance leases.

Stock-Based Compensation

We measure stock-based compensation cost, which consists of grants of stock options, restricted stock units (“RSUs”), performance stock units (“PSUs”), and restricted stock awards (“RSAs”) to associates and non-employee directors, based on the estimated grant date fair value of the awards.

We measure stock-based compensation cost, which consists of grants of stock options, performance stock units (“PSUs”), and restricted stock units (“RSUs”), to associates and non-employee directors, based on the estimated grant date fair value of the awards.

We recognize compensation expense for all awards containing only a service requirement over the requisite service period using a straight-line recognition method.

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We assess non-store long-lived assets, including capitalized software costs in use or under development, for impairment if events or changes in circumstances indicate that the carrying value of those assets may not be recoverable.

The asset impairments recognized in fiscal years 2021 and 2020 include $ 0.8 million and $ 1.1 million, respectively, related to a write-off of certain capitalized software costs that were deemed to be obsolete due to a decision to cease further development.

In fiscal year 2021, we impaired $ 0.8 million related to a write-off of certain capitalized software costs that were deemed to be obsolete due to a decision to cease further development.

We did not recognize impairment related to capitalized software costs in fiscal year 2022.

In fiscal year 2023, we impaired $ 5.6 million of capitalized software costs related to the impending termination of the agreement between AC Lens and Walmart.

Refer to Note 2.

“Termination of Walmart Partnership” for more information related to impairment charges related to the Legacy segment and AC Lens.

We account for deferred income taxes based on the asset and liability method.

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GAAP to contracts, hedging relationships, and other transactions that may be affected by the cessation of the London Inter-bank Offered Rate (“LIBOR.”) We are currently able to apply this new guidance for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 through December 31, 2024.

A portion of our debt is subject to interest payments that are indexed to LIBOR;

additionally, we are party to an interest rate derivative based on LIBOR.

We are currently evaluating the effect of this guidance and have not applied the provisions of this guidance during the current fiscal year.

Our credit agreement contains methodologies for replacing LIBOR with an alternative reference rate;

our interest rate derivative does not contain replacement provisions, but we expect an orderly transition of our derivative’s reference rate.

We currently do not anticipate material effects on our operating results, financial position or cash flows as a result of adopting the new guidance.

Notwithstanding, it is possible that the adoption of this guidance will have a material adverse effect on any or all of our operating results, financial position or cash flows.

The FASB issued other accounting guidance during fiscal year 2022 that is not currently applicable or expected to have a material impact on the Company’s consolidated financial statements, and therefore, is not described above.

Refer to Note 5.

“Long-term Debt” and Note 13.

“Interest Rate Derivatives” for more information on our transition from LIBOR to Term SOFR.

Segment reporting.

In November 2023, the FASB issued Accounting Standards Update ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

This update provides, among other things, enhanced segment disclosure requirements including disclosures about significant segment expenses.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements.

The Company is currently evaluating the impact of the guidance on the consolidated financial statements and disclosures.

Income taxes.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”).

ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures.

The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and for interim periods within fiscal years beginning after December 15, 2025.

The Company is currently evaluating the impact of the guidance on the consolidated financial statements and disclosures.

The FASB issued other accounting guidance during fiscal year 2023 that is not currently applicable or expected to have a material impact on the Company’s financial statements, and therefore, is not described above.

Termination of Walmart Partnership

On July 20, 2023, the Company received a notice of non-renewal from Walmart Inc.

(“Walmart”) of the Management & Services Agreement by and between NVI and Walmart, dated as of May 1, 2012 (as amended, supplemented or otherwise modified from time to time, the “Walmart MSA”).

In accordance with the terms of the Walmart MSA and the notice, the agreement terminated as of February 23, 2024 (the “Termination Date”).

In connection with the termination of the Walmart MSA, the Amended and Restated Supplier Agreement between NVI and Walmart, dated as of January 17, 2017 (the “Walmart Supplier Agreement”), and certain other related agreements also terminated as of the Termination Date.

The Walmart MSA includes provisions governing the transition period and post-termination obligations of the parties.

In connection with the termination of the Walmart MSA, the agreement between FirstSight Vision Services, Inc.

(“FirstSight”), a wholly-owned subsidiary of the Company, and Walmart, which arranged for the provision by FirstSight of optometric services at optometric offices next to certain Walmart stores throughout California, also terminated as of the Termination Date.

Additionally, another wholly-owned subsidiary of the Company, Arlington Contacts Lens Service, Inc.

(“AC Lens”), has delivered notices of non-renewal of the agreements it has with Walmart and its affiliate Sam’s Club regarding wholesale contact lenses distribution and related services, such that these agreements will terminate as of June 30, 2024, unless an earlier date is agreed by the parties, and the Company will wind down its remaining AC Lens operations, including the closure of its Ohio distribution center, which largely supported the wholesale distribution and e-commerce contact lens services that the Company provided to Walmart and Sam’s Club.

Additionally, in view of the termination of the Walmart MSA and impending wind down of AC Lens operations, the Company took actions in fiscal year 2023 to streamline corporate overhead including optimizing non-customer facing labor costs, as well as reducing travel expenses and third-party spend.

The following table details charges recognized in the periods shown.

We may incur other exit-related costs, which may be material.

We anticipate approximately $ 8 million of additional costs to be incurred in connection with the termination of the Walmart partnership in 2024.

Fiscal Year 2023

Impairment charges

Employee compensation benefits

Professional fees and other expenses

Inventory obsolescence

The table below summarized the Company’s Other payables and accrued expenses balance related to the termination of the Walmart partnership.

Employee Compensation Benefits

Balance at December 31, 2022

Expenses recognized during the period

Expenses paid during the period

Balance at December 30, 2023

Impairment charges

We determined that the various terminations of agreements described above as well as the subsequent decision to consolidate our distribution network and close the distribution center in Ohio constituted triggering events, and accordingly, performed impairment tests during the year ended December 30, 2023 on assets related to the Walmart partnership.

We used the discounted cash flow method of the income approach in our analyses and considered projected cash flows for the remaining terms of the various agreements and other costs related to the termination of the Walmart partnership, and used discount rates between 7.8 % and 10.0 % depending on the asset or asset group being valued.

A decrease in the estimated cash flows would lead to a lower fair value measurement, as would an increase in the discount rate.

These non-recurring fair value measurements are classified as Level 3 measurements in the fair value hierarchy.

The impairment charges recognized during the year ended December 30, 2023 resulting from the termination of the Walmart partnership include $ 60.1 million related to goodwill of the Legacy segment, $ 9.1 million related to the Walmart contracts and relationship intangible asset, and $ 10.5 million related to property and equipment at Walmart stores and associated with our AC Lens business.

These expenses were recognized in Corporate/Other, and the impairment charges are reflected in Asset impairment in the Consolidated Statements of Operations and Comprehensive Income.

The assets impaired during the year ended December 30, 2023 as a result of the termination of the Walmart partnership were written down to their fair values totaling $ 1.5 million as of the respective valuation dates.

We adjusted the useful lives of the impaired intangible and fixed assets to be aligned with the respective contract termination dates.

The impairment testing date for (i) goodwill related to the Legacy segment, (ii) the Walmart contracts and relationships intangible asset and (iii) property and equipment located in Walmart stores was contemporaneous with the date that we received notice of non-renewal from Walmart.

Other assets related to the AC Lens operations and Walmart partnership were tested at various dates during the third and fourth quarters.

We did not impair certain assets that we believe can be sold or used in other stores in our Owned & Host segment after the Termination Date.

We determined that all long-lived Walmart and AC Lens assets were held and used as of December 30, 2023 and were not available for immediate sale.

Refer to the Note 1.

“Description of Business and Basis of Presentation” for more details on our impairment testing.

Employee compensation benefits

During the year ended December 30, 2023, we recognized $ 0.6 million in Costs of services and plans and $ 5.1 million in Selling, general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income, in the Corporate/Other category, related to retention bonus programs implemented for certain associates to ensure continuity of business, as well as termination benefits for certain associates that have occurred and are probable to occur within the next 12 months.

Of the amounts recorded in Selling, general and administrative expenses, $ 1.5 million is related to termination benefits for associates affected by the actions taken to streamline corporate overhead.

The liability for employee compensation benefits is recorded in Other payables and accrued expenses in the Consolidated Balance Sheets.

Professional Fees and Other expenses

During the year ended December 30, 2023, we recognized $ 1.2 million in Selling, general, and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income, in the Corporate/Other category, related to professional fees and other expenses, including advisory fees to assist with the exit.

Inventory Obsolescence

During the year ended December 30, 2023, we recognized $ 0.2 million in Costs applicable to revenue in the Consolidated Statements of Operations and Comprehensive Income, in the Corporate/Other category, related to inventory obsolescence.

Details of Certain Balance Sheet Accounts

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December 30, 2023 As of

January 1, 2022

December 31, 2022

Accounts receivable, net:

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Other receivables (1)

15,747 15,478

Allowance for credit losses ( 316 ) ( 519 )

$ 86,854 $ 79,892

(1) Includes CARES Act receivable in the amount of $ 9.0 million and $ 0.0 million as of December 31, 2022 and January 1, 2022, respectively.

(1) Includes CARES Act receivable in the amount of $ 9.0 million and $ 9.0 million as of December 30, 2023 and December 31, 2022, respectively.

In thousands As of

December 30, 2023 As of

January 1, 2022

December 31, 2022

Raw materials and work in process (1)

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December 30, 2023 As of

January 1, 2022

December 31, 2022

Property and equipment, net:

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December 30, 2023 As of

January 1, 2022

December 31, 2022

Other payables and accrued expenses:

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Legacy management & services agreement 6,068 6,488

Income tax payable 1,863 103

Supplies and other store support expenses 5,434 4,215

Litigation settlements 500 2,100

Fair value of derivative liabilities — 2,846

Other 17,219 16,143

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December 30, 2023 As of

January 1, 2022

December 31, 2022

Other noncurrent liabilities:

Fair value of derivative liabilities $ — $ 488

Self-insurance liabilities $ 5,657 $ 6,292

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December 30, 2023 As of

January 1, 2022

December 31, 2022

In thousands Gross Carrying

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$ 805,077 $ ( 87,533 ) $ 805,077 $ ( 27,464 )

Accumulated goodwill impairment relates to our Fred Meyer, Military and AC Lens reporting units.

The Owned & Host Segment’s goodwill contains $ 606.5 million related to America’s Best and $ 111.1 million related to Eyeglass World.

Accumulated goodwill impairment relates to our Legacy, Fred Meyer, Military and AC Lens reporting units.

Indefinite-lived intangible assets by major asset class are as follows:

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December 30, 2023 As of

January 1, 2022

December 31, 2022

Trademarks and trade names:

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renewals will take place as needed.

Finite-lived, amortizing intangible assets by major asset class are as follows:

As of December 31, 2022 As of January 1, 2022

Finite-lived, amortizing intangible assets by major asset class are as shown in the following table.

We remove assets from the table below once they are fully amortized.

As of December 30, 2023 As of December 31, 2022

In thousands Gross Carrying

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Contracts and relationships:

Legacy $ 65,000 $ 52,080 2 $ 65,000 $ 46,117 3

$ 345 $ ( 247 ) 0 $ 65,000 $ ( 52,080 ) 2

Fred Meyer 35,000 ( 14,915 ) 13 35,000 ( 13,389 ) 14

Customer database 4,400 4,400 — 4,400 4,400 —

Other 151 ( 62 ) 2 897 ( 759 ) 3

$ 35,496 $ ( 15,224 ) $ 100,897 $ ( 66,228 )

We extended our relationship with Walmart in fiscal year 2020.

(1) We recognized an impairment of $ 9.1 million on the Legacy contracts and relationships in fiscal year 2023.

The gross carrying amount shown for this asset as of December 30, 2023 reflects the fair value as of the impairment testing date.

We extended our relationship with Fred Meyer in fiscal year 2022.

Refer to Note 2.

“Segment Reporting” for more information on these relationships.

“Termination of Walmart Partnership” for more information on our relationship with Walmart.

We intend to maintain our intangible assets.

We amortized $ 5.3 million, $ 7.5 million, and $ 7.5 million in 2023, 2022, and 2021, respectively.

Aggregate amortization expense is included in Depreciation and amortization in the accompanying Consolidated Statements of Operations.

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December 30, 2023 As of

January 1, 2022

December 31, 2022

2025 Notes, due May 15, 2025 $ 302,497 $ 402,497

Term loan, due July 18, 2024 150,000 150,000

Revolving credit facility, due July 18, 2024 — —

Long-term debt before debt discount 552,497 552,500

Term Loan A, due June 13, 2028

146,250 150,000

Revolving Loans, due June 13, 2028

Long-term debt before unamortized discount and issuance costs

448,747 552,497

Unamortized discount and issuance costs - 2025 Notes ( 2,497 ) ( 5,696 )

Unamortized discount and issuance costs - term loan ( 570 ) ( 948 )

Long-term debt less debt discount 546,231 543,566

Unamortized discount and issuance costs - Term Loan A

( 1,066 ) ( 570 )

Long-term debt less debt discount and issuance costs

445,184 546,231

Less current maturities ( 7,500 ) —

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Less current maturities ( 2,980 ) ( 4,137 )

Long-term debt and finance lease obligations, less current portion and debt discount $ 563,388 $ 566,081

Long-term debt and finance lease obligations, less current portion, discount, and issuance costs

$ 450,771 $ 563,388

In May 2020, we completed the issuance of $ 402.5 million in aggregate principal amount of 2.50 % convertible senior notes due on May 15, 2025 (the “2025 Notes”), pursuant to an indenture between the Company and U.S.

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The Company can choose to settle upon conversion in cash, shares or a combination.

Based on the initial conversion rate, the 2025 Notes are convertible into 12.9 million shares of our common stock and we reserved for the possible issuance of 16.5 million shares, which is the maximum amount that could be issued upon conversion.

Based on the initial conversion rate, the 2025 Notes were convertible into 12.9 million shares of our common stock and we reserved for the possible issuance of 16.5 million shares, which is the maximum amount that could be issued upon conversion.

As of December 30, 2023, the 2025 Notes are convertible into 9.7 million shares of our common stock and a maximum of 12.4 million shares of our common stock.

“Earnings Per Share” for the treatment of earnings per share in relation to the 2025 Notes.

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As a result of adopting ASU 2020-06, our effective interest rate decreased from 9.1 % as of January 2, 2021 to 3.2 % starting in the first quarter of 2021.

On November 14, 2023, the Company repurchased $ 100.0 million aggregate principal amount of the 2025 Notes for an aggregate cash repurchase price of $ 99.3 million.

The repurchase of the 2025 Notes was accounted for as an extinguishment of debt and resulted in a loss on extinguishment of debt of $ 0.6 million on its Consolidated Statement of Operations during fiscal year ended December 30, 2023, which includes a write-off of related deferred issuance costs of $ 0.9 million and third-party fees of $ 0.4 million.

After giving effect to the repurchase, $ 302.5 million principal amount remains outstanding from an initial issued principal balance of $ 402.5 million.

An immaterial amount of the principal balance of the 2025 Notes was converted during fiscal year 2022.

We recognized the following in Interest expense, net related to the 2025 Notes:

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Amortization of issuance costs $ 2,293 $ 2,283 $ 2,213

As of December 31, 2022, the remaining period for the unamortized debt issuance costs balance was approximately two years .

An immaterial amount of the principal balance of the 2025 Notes was converted during fiscal year 2022.

As of December 30, 2023, the remaining period for the unamortized debt issuance costs balance related to the 2025 Notes was approximately one year .

As of December 30, 2023, the stock price conditions under which the 2025 Notes can be converted at the holders’ option were not met.

Credit Agreement

On July 18, 2019, our credit agreement, dated as of October 9, 2018 was amended and restated to establish a new first lien term loan of $ 420.0 million to repay all principal, interest fees and other amounts outstanding before the amendment and establish a new revolving credit facility in an aggregate principal amount of $ 300.0 million, including a $ 20.0 million letter of credit sublimit.

Capitalized terms used but not defined herein shall have the meanings assigned to such terms in our credit agreement.

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

Pursuant to our credit agreement, the Company will not permit (i) the Consolidated Total Debt to Consolidated EBITDA Ratio to be negative or greater than (x) 4.50 to 1.00 with respect to the last day of the Company’s second and third fiscal quarters of 2021 and (y) 4.25 to 1.00 from and after the last day of the Company’s fourth fiscal quarter of 2021, subject to certain step-ups after the consummation of a Material Acquisition, or (ii) the Consolidated Interest Coverage Ratio of the Company as of the last day of any fiscal quarter of the Company to be less than 3.00 to 1.00.

The amendment also contains covenants that, among other things, limit NVI’s ability to incur additional debt, create liens against assets, make acquisitions, pay dividends or distributions on its stock, merge or consolidate with another entity and transfer or sell assets.

Reference is made to (i) that certain Second Joinder and Restatement Agreement, dated as of June 13, 2023 (the “Second Restatement Agreement”), by and among the New Lenders party thereto, the Letter of Credit Issuers party thereto, Nautilus Acquisition Holdings, Inc.

(“Holdings”), a Delaware corporation and a wholly-owned subsidiary of the Company, NVI, the subsidiaries of NVI party thereto, as guarantors, Bank of America, N.A.

in its capacity as administrative agent and as collateral agent and (ii) the Second Amended and Restated Credit Agreement, dated as of June 13, 2023 (the “Credit Agreement”).

On June 13, 2023 (the “Second Restatement Effective Date”), the Second Restatement Agreement amended and restated the Joinder and Amendment and Restatement Agreement, dated as of July 18, 2019 (as amended, restated, amended and restated, supplemented or otherwise modified prior to the Second Restatement Agreement, the “Original Credit Agreement”) to, among other things, (i) establish new Term Loan A to repay all principal, interest, fees and other amounts outstanding (other than contingent obligations) under the Original Credit Agreement immediately prior to the Second Restatement Effective Date, (ii) establish new Revolving Loans, (iii) provide for a Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York (or a successor administrator) (“SOFR”)-based rate, with a credit spread adjustment of 10 basis points for all Interest Periods and a SOFR floor of 0.00 % per annum, and (iv) as set forth below, modify the Applicable Margins used to calculate the rate of interest payable with respect to the Term Loan A and Revolving Loans (collectively, the “Loans”).

The Credit Agreement, as amended by the Second Restatement Agreement, provides that the Loans mature on the fifth anniversary of the Second Restatement Effective Date, subject to a springing maturity date, which is 91 days before the maturity date of the Company’s 2025 Notes if Minimum Liquidity is less than the sum of the redemption value of such convertible notes on that date plus $ 25.0 million (the “Maturity Date”).

Commencing on the last day of the first full fiscal quarter ended after the Second Restatement Effective Date, the Term Loan A will amortize in equal calendar quarterly installments at a rate of 5.00 % per calendar year.

The $ 114.4 million balance (assuming the springing maturity date does not occur) will be payable on the Maturity Date.

The new Applicable Margins were initially (i) 1.75 % for the Loans that are Term SOFR Loans and (ii) 0.75 % for the Loans that are Alternative Base Rate (“ABR”) Loans.

Following the delivery of the financial statements for the period ending on September 30, 2023, the Applicable Margins for the Loans will instead be based on NVI’s total leverage ratio as follows:

(a) if NVI’s consolidated total debt to consolidated EBITDA ratio is greater than 2.50 to 1.00, the Applicable Margin will be 2.25 % for Term SOFR Loans and 1.25 % for ABR Loans, (b) if NVI’s consolidated total debt to consolidated EBITDA ratio is less than or equal to 2.50 to 1.00 but greater than 1.75 to 1.00, the Applicable Margin will be 2.00 % for Term SOFR Loans and 1.00 % for ABR Loans, (c) if NVI’s consolidated total debt to consolidated EBITDA ratio is less than or equal to 1.75 to 1.00 but greater than 0.75 to 1.00, the Applicable Margin will be 1.75 % for Term SOFR Loans and 0.75 % for ABR Loans, (d) if NVI’s consolidated total debt to consolidated EBITDA ratio is less than or equal to 0.75 to 1.00, the Applicable Margin will be 1.50 % for Term SOFR Loans and 0.50 % for ABR Loans.

In connection with the Second Amended and Restated Credit Agreement, we deferred $ 2.0 million of debt issuance costs related to the Revolving Loans in Other assets and $ 0.9 million of debt issuance costs related to the Term Loan A in Long-term debt and finance lease obligations, less current portion and debt discount on our Consolidated Balance Sheets.

We will amortize these costs over the term of the amended credit agreement.

We wrote off previously unamortized debt issuance costs of $ 0.2 million in Interest expense (income), net during fiscal year 2023 related to lenders who were parties to the Original Credit Agreement but are not parties to the Second Restatement Agreement.

We recognized $ 0.2 million of other refinancing fees in Interest expense (income), net during fiscal year 2023.

The Second Restatement Agreement contains customary affirmative covenants, negative covenants, and events of default substantially comparable to the Original Credit Agreement.

The Second Restatement Agreement also contains covenants that, among other things, limit NVI’s ability to incur additional debt, create liens against assets, make acquisitions, pay dividends or distributions on its stock, merge or consolidate with another entity and transfer or sell assets.

We were in compliance with all covenants related to our long-term debt as of December 30, 2023.

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During the fourth quarter of 2021, the Company partially prepaid $ 50.0 million of term loan principal and wrote off associated deferred debt issuance costs of $ 0.3 million.

As a result of prepayments of term loan principal, the Company has no additional mandatory principal payments on the term loan until maturity on July 18, 2024 and no amounts outstanding under the revolving credit facility.

The borrowing capacity remaining as of December 30, 2023 was $ 293.6 million due to a reduction of $ 6.4 million for letters of credit outstanding.

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The total number of shares of common stock that may be issued under the 2017 Omnibus Incentive Plan is 4,000,000 .

The plan authorizes the grant of stock options, stock appreciation rights, RSAs, RSUs, PSUs, other equity-based awards and other cash-based awards to our associates, non-employee directors, officers, consultants and advisers.

The plan authorizes the grant of stock options, stock appreciation rights, restricted stock awards (“RSAs”), RSUs, PSUs, other equity-based awards and other cash-based awards to our associates, non-employee directors, officers, consultants and advisers.

The Vision Holding Corp.

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Pre-tax stock-based compensation expense

$ 20,174 $ 13,512 $ 14,886

Income tax benefit ( 5,085 ) ( 3,428 ) ( 3,788 )

After-tax stock-based compensation expense

$ 15,089 $ 10,084 $ 11,098

Stock options RSUs and PSUs

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The following tables summarize service-based stock option activity.

No service-based options were granted in fiscal year 2022.

No service-based options were granted in fiscal years 2023 and 2022.

Number of Options Outstanding (In thousands) Weighted Average Exercise Price ($) Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (In thousands) ($)

Outstanding options at January 1, 2022 726 $ 28.91 6.83 $ 13,891

Outstanding options at December 31, 2022 628 $ 29.07 5.95 $ 6,733

Exercised ( 16 ) 15.59

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Expected volatility 52.49 % to 54.03 %

39.54 % to 55.81 %

Expected term range (in years) 6.00

Expected risk-free interest rate 0.97 % to 1.07 %

0.47 % to 1.13 %

The expected term was based on the mid-point between the weighted average time to vesting and the contractual time to maturity .

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Number of Options Outstanding (In thousands) Weighted Average Exercise Price ($) Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (In thousands) ($)

Outstanding options at January 1, 2022 50 $ 15.70 5.56 $ 1,604

Outstanding options at December 31, 2022 49 $ 15.74 4.56 $ 1,132

Exercised — —

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There were no vests of performance-based options during fiscal years 2023, 2022, and 2021.

The fair value of performance-based options vested during fiscal year 2020 was $ 1.4 million.

The aggregate intrinsic value of performance-based options exercised during fiscal years 2022 was immaterial .

The aggregate intrinsic value of performance-based options exercised during fiscal years 2021 and 2020 was $ 37.3 million and $ 20.0 million, respectively.

The following tables summarize RSU, PSU and RSA awards activity:

There were no exercises of performance-based options during fiscal year 2023.

The aggregate intrinsic value of performance-based options exercised during fiscal years 2022 and 2021 was immaterial and $ 37.3 million, respectively.

The following tables summarize RSU and PSU awards activity:

(In thousands) Weighted average grant date fair value ($) PSUs

(In thousands) Weighted average grant date fair value ($) RSAs

(In thousands) Weighted average grant date fair value ($)

Outstanding at January 1, 2022 364 $ 36.67 317 $ 38.34 17 $ 48.39

Outstanding at December 31, 2022 786 $ 35.36 361 $ 38.86

Granted 725 22.65 451 22.35

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Restricted stock units (RSUs)

Most RSUs vest in three equal installments on the first, second and third anniversary of the grant date.

Most RSUs vest in three equal annual installments on the first, second and third anniversary of the grant date.

The RSUs outstanding as of December 30, 2023 have $ 22.2 million intrinsic value.

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While the PSU amounts shown in the tables above reflect achievement at target, the number of PSUs ultimately vested will be based on a comparison of certified performance results to predefined performance criteria that include threshold, target and maximum attainment levels.

Associate Stock Purchase Plan (ASPP)

Associate Stock Purchase Plan

Under the ASPP, eligible associates receive a 10 % discount from the market trading value of common stock of the Company at the time of purchase.

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Income tax provision (benefit) $ 4,137 $ 18,691 $ 21,081

Our income tax provision (benefit) differs from the amounts computed by multiplying earnings before income taxes by the statutory federal income tax rate as shown in the following table:

Our income tax provision (benefit) differs from the amounts computed by multiplying earnings (loss) before income taxes by the statutory federal income tax rate as shown in the following table:

In thousands Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021

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Executive compensation limitation 354 1,218 283

Goodwill impairment

Stranded tax effect of matured interest rate swaps — — ( 2,125 )

Tax benefit of equity-based compensation deductions ( 27 ) ( 14,408 ) ( 7,996 )

Tax provision (benefit) of equity-based compensation deductions

1,211 ( 27 ) ( 14,408 )

Other, net ( 615 ) 725 ( 716 )

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In August 2022, the U.S.

government enacted the Inflation Reduction Act (“IRA”) which, among other things, provides for a 15% corporate alternative minimum tax based on a prescribed measure of income as well as a 1% excise tax on stock repurchases.

We are continuing to evaluate the provisions of the IRA but currently do not anticipate either of these provisions will have a material effect on our financial statements or operations, or our current share repurchase program.

The sources of the differences between the financial accounting and tax bases of our assets and liabilities that give rise to the deferred tax assets and deferred tax liabilities and the tax effects of each are as follows:

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December 30, 2023 As of

January 1, 2022

December 31, 2022

Deferred tax assets:

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Stock-based compensation 6,050 5,214

Unrealized losses on hedging instruments — 849

Operating lease liabilities 119,916 115,870

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Revenues recognized over time primarily include product protection plans, eye care club memberships and management fees earned from our Legacy partner.

Refer to Note 2.

“Termination of Walmart Partnership” for developments related to the Legacy segment, AC Lens and FirstSight;

the following discussion of revenues generated by these businesses is applicable to fiscal years 2023, 2022 and 2021.

Revenues Recognized at a Point in Time

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Corporate/Other

Revenues from our non-reportable Corporate/Other segment are attributable to wholly owned subsidiaries AC Lens and FirstSight Vision Services Inc.

(“FirstSight”).

Revenues from our non-reportable Corporate/Other segment are attributable to wholly owned subsidiaries AC Lens and FirstSight.

AC Lens sells contact lenses and optical accessory products to retail customers through e-commerce, and recognizes revenue when products have been delivered to the customer.

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This revenue is recorded on a gross basis as AC Lens is the principal in the arrangement since AC Lens controls the products in those transactions before the products are transferred to the customer.

FirstSight issues individual vision plans in connection with our America’s Best operations in California, and provides or arranges for the provision of optometric services at certain optometric offices next to Walmart and Sam’s Club stores in California.

FirstSight issues individual vision plans in connection with our America’s Best operations in California, and, until February 23, 2024, provided or arranged for the provision of optometric services at certain optometric offices next to Walmart and Sam’s Club stores in California.

Revenues Recognized Over Time

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As the reportable segments are aligned by similar economic factors, trends and customers, the reportable segment disaggregation view best depicts how the nature, amount and uncertainty of revenue and cash flows are affected by economic factors.

In response to the COVID-19 pandemic, we began seeking relief from our landlords while our stores were temporarily closed to the public.

On April 10, 2020, the Financial Accounting Standards Board staff issued a question-and-answer document providing guidance for lease concessions provided to lessees in response to the effects of COVID-19.

Such guidance allows lessees to make an election to account for lease concessions as though the enforceable rights and obligations existed in the original lease.

This election is only available when the concessions do not result in a substantial increase in the obligations of the lessee.

During the second quarter of 2020, we reached rent concession agreements where certain of these concession arrangements included lease payment and term extensions between three and 12 months.

The Company has elected to account for lease concessions and deferrals resulting directly from the COVID-19 pandemic as though the enforceable rights and obligations to the deferrals existed in the respective contracts at lease inception and will not account for the concessions as lease modifications, unless the concession results in a substantial increase in the Company’s obligations.

The majority of leases where we received a concession did not result in a substantial increase in our obligations.

Lease concessions of $ 0.3 million and $ 0.4 million were recorded in Other payables and accrued expenses as of December 31, 2022 and January 1, 2022, respectively.

Information related to our leases is presented below:

In thousands As of

December 30, 2023 As of

January 1, 2022

December 31, 2022

Type Classification

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We used the incremental borrowing rate on December 30, 2018 for operating leases that commenced prior to that date.

(a) Finance lease assets are recorded net of accumulated amortization of $ 21.3 million and $ 16.8 million as of December 31, 2022 and January 1, 2022, respectively.

(b) TIA and deferred rent are treated as reductions of lease payments used to measure ROU assets in the accompanying Consolidated Balance Sheets as of December 31, 2022 and January 1, 2022.

(c) Current operating lease liabilities are measured net of TIA receivables of $ 6.7 million and $ 6.6 million as of December 31, 2022 and January 1, 2022, respectively.

(a) Finance lease assets are recorded net of accumulated amortization of $ 25.4 million and $ 21.3 million as of December 30, 2023 and December 31, 2022, respectively.

(b) TIA and deferred rent are treated as reductions of lease payments used to measure ROU assets in the accompanying Consolidated Balance Sheets as of December 30, 2023 and December 31, 2022.

(c) Current operating lease liabilities are measured net of TIA receivables of $ 4.6 million and $ 6.7 million as of December 30, 2023 and December 31, 2022, respectively.

In thousands Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021

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December 30, 2023 As of

January 1, 2022

December 31, 2022

Weighted average remaining lease term (months)

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(ii) fixed rates on interest rate swaps;

(iii) LIBOR margins for issuers of similar credit rating;

(iii) Term SOFR margins for issuers of similar credit rating;

and (iv) effect of collateralization.

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Operating cash outflows - operating leases $ 106,168 $ 88,867 $ 89,324

Right of use assets acquired under finance leases $ — $ — $ 1,257

Right of use assets acquired under operating leases $ 111,792 $ 110,387 $ 91,451

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We recognize as assets or liabilities at fair value the estimated amounts we would receive or pay upon a termination of interest rate derivatives prior to their scheduled expiration dates.

The fair value is based on information that is model-driven and whose inputs were observable (Level 2 inputs) such as LIBOR forward rates.

The fair value is based on information that is model-driven and whose inputs were observable (Level 2 inputs) such as Term SOFR forward rates.

“Interest Rate Derivatives” for further details.

Non-recurring fair value measurements

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

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.

The impairments were primarily driven by lower than projected customer sales volume in certain stores.

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

Refer to Note 2.

“Termination of Walmart Partnership” for more information on impairment charges related to the termination of the Walmart partnership.

This section discusses fair value measurements unrelated to the termination of the Walmart partnership.

We recognized impairments of $ 2.8 million, $ 5.8 million and $ 4.4 million in fiscal years 2023, 2022 and 2021, respectively, primarily related to our store assets.

The cash flows used in estimating fair value were discounted using market rates from 10.8 % to 11.5 %.

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The carrying amounts of accounts payable and other payables and accrued expenses approximate fair value due to the short-term nature of those items.

Long-term Debt - Term Loan and Revolving Credit Facility

Since the borrowings under the term loan and revolving credit facility utilize variable interest rate setting mechanisms such as LIBOR, the fair values of these borrowings are deemed to approximate the carrying values.

We also considered the effect of our own credit risk on the fair values of our term loan and revolving credit facility.

Long-term Debt - Term Loan A and Revolving Loans

Since the borrowings under the $ 146.3 million outstanding principal Term Loan A and $ 300.0 million aggregate principal Revolving Loans utilize variable interest rate setting mechanisms such as Term SOFR, the fair values of these borrowings are deemed to approximate the carrying values.

We also considered the effect of our own credit risk on the fair values of our Term Loan A and Revolving Loans.

Refer to Note 5.

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Long-term Debt - 2025 Notes

The estimated fair value of the 2025 Notes was approximately $ 553.9 million and $ 674.9 million, as of December 31, 2022 and January 1, 2022, respectively.

The estimated fair value of the 2025 Notes was approximately $ 303.3 million and $ 553.9 million, as of December 30, 2023 and December 31, 2022, respectively.

The estimated fair value of the 2025 Notes is based on the prices the 2025 Notes have traded in the market as well as overall market conditions on the date of valuation, stated coupon rates, the number of coupon payments each year and the maturity dates, and represents a Level 2 measurement.

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Because of the nature and inherent uncertainties of litigation, we cannot predict with certainty the ultimate resolution of these actions and, should the outcome of these actions be unfavorable, the Company’s business, financial position, results of operations or cash flows could be materially and adversely affected.

The Company reviews the status of its legal proceedings and records a provision for a liability when it is considered probable that both a liability has been incurred and the amount of the loss can be reasonably estimated.

The Company reviews the status of its legal proceedings and records a provision for a liability when it is considered probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

This review is updated periodically as additional information becomes available.

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On December 9, 2022, the case was removed to the federal District Court for the Northern District of California.

We believe that the claims are without merit and intend to oppose the certification of a class and to defend the litigation vigorously.

On January 18, 2023, we were served with a related representative action filed in California state court pursuant to California’s Private Attorneys General Act.

We filed an answer to this action on February 17, 2023.

On September 29, 2023, the state court set the PAGA action for trial on October 7, 2024.

Mediation has been scheduled in March 2024.

The Company continues to dispute the plaintiff’s allegations and will vigorously defend the litigation.

On June 6, 2023, the Company was served with notice of a former employee’s intention to file a representative action against the Company pursuant to California’s Private Attorneys General Act based on alleged violations of California’s wage and hour laws.

On June 22, 2023, the Company was served with a related lawsuit filed by the former employee in California state court alleging, on behalf of a proposed class of employees, violations of California wage and hour laws.

On July 24, 2023, the Company filed its answer and a notice of removal of the case to the federal District Court for the Southern District of California.

On July 28, 2023, the Company filed a Notice of Related Cases, seeking for both the case currently pending in the Northern District of California and described in the paragraph above and this case to be assigned to the same Judge/Magistrate Judge in an effort to save judicial effort and avoid duplication of labor.

On August 15, 2023, the parties filed a stipulation to stay the case in the Southern District of California pending the resolution of the lawsuit pending in the Northern District of California.

On August 21, 2023, the court entered an Order to Show Cause why the action should not be either dismissed or transferred to

the federal court for the Northern District of California.

Following the parties’ submission of their respective responses, the court dismissed the action without prejudice on September 11, 2023.

The plaintiff retains his ability to pursue a PAGA action in state court pursuant to the June 6, 2023 notice.

On January 22, 2024, the plaintiff filed a demand for arbitration of the claims set forth in the Complaint previously filed in state court in June 2023.

We dispute the plaintiff’s allegations and intend to vigorously defend the litigation.

On January 27, 2023, a purported class action complaint was filed in federal court in the Northern District of Georgia against the Company and two of the Company’s officers.

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The complaint seeks unspecified damages as well as equitable relief.

We believe that the claims alleged are without merit and intend to defend the litigation vigorously.

On March 28, 2023, the original plaintiff, City of Southfield General Employees Retirement System, and a new plaintiff, International Union of Operating Engineers, Local No.

793, Members Pension Benefit Trust of Ontario, filed a lead plaintiff motion, seeking to be appointed co-lead plaintiffs.

On April 3, 2023, the Company along with its named officers filed a motion to dismiss the complaint.

On May 19, 2023, the court granted the lead plaintiff motion.

On June 30, 2023, the plaintiffs filed an Amended Complaint, which added a claim under Section 20A of the Exchange Act and extended the alleged class period to February 28, 2023.

On August 21, 2023, the Company filed a Motion to Dismiss the Amended Complaint.

The plaintiffs filed their Response in Opposition to this motion on October 5, 2023.

The court heard oral argument on this motion on January 18, 2024.

We dispute these allegations and intend to defend the litigation vigorously.

Interest Rate Derivatives

We are party to an interest rate collar to offset the variability of cash flows in LIBOR-indexed debt interest payments.

We are party to an interest rate collar to offset the variability of cash flows in Term SOFR-indexed debt interest payments.

During the second quarter of 2023, we amended the reference rate of the collar from LIBOR to Term SOFR.

The aggregate notional amount of the interest rate collar, which is not designated as a cash flow hedge, was $ 325.0 million as of December 30, 2023.

The fair value of our interest rate collar instrument was an asset of $ 5.6 million, which is recorded in Prepaid expenses and other current assets as of December 30, 2023.

The fair value of our interest rate collar instrument was an asset of $ 14.1 million ($ 10.0 million in Prepaid expenses and other current assets and $ 4.1 million in Other assets) as of December 31, 2022.

The fair value of our interest rate collar instrument was a liability of $ 3.3 million ($ 2.8 million in Other payables and accrued expenses and $ 0.5 million in Other liabilities) as of January 1, 2022.

“Details of Certain Balance Sheet Accounts” and Note 10.

“Fair Value Measurement” for further details.

We recognized (gains) losses on the change in fair value of the interest rate collar of $( 18.0 ) million and $( 4.2 ) million in interest expense , net during fiscal years 2022 and 2021, respectively.

We recognized $ 1.5 million in interest expense, net during fiscal year 2021 related to our interest rate swaps that were considered to be highly effective hedges and that matured during fiscal year 2021.

We recognized (gains) losses on the change in fair value of the interest rate collar of $( 2.3 ) million, $( 18.0 ) million, and $( 4.2 ) million in interest expense , net during fiscal years 2023, 2022, and 2021, respectively.

The interest rate collar will mature on July 18, 2024.

Cash flows related to derivatives qualifying as hedges are included in the same section of the Consolidated Statements of Cash Flows as the underlying assets and liabilities being hedged.

Cash flows during fiscal years 2023 and 2022 related to derivatives not qualifying as hedges were included in the operating section of the Consolidated Statements of Cash Flows and were immaterial.

During the second and fourth quarters of 2021, as a result of the partial repayments of the Company’s LIBOR based term-loan debt balances, the Company subsequently reclassified unrealized losses of $ 3.4 million from AOCL to interest expense, net during fiscal year 2021.

As of December 30, 2023, the Company expects to reclassify approximately $ 0.4 million of unrealized losses on derivative instruments, net of tax, from AOCL into earnings in the next 12 months as the derivative instruments mature.

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Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding for the period.

Diluted EPS is computed by dividing net income by the weighted average shares outstanding for the period and includes the dilutive impact of potential new shares issuable upon vesting and exercise of stock options, vesting of restricted stock units, and assumed conversion of $ 402.5 million of aggregate principal amount of the 2025 Notes.

Potential shares of common stock are excluded from the computation of diluted EPS if their effect is anti-dilutive.

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the number of dilutive shares is based on the initial conversion rate associated with the 2025 Notes.

Prior to the fourth quarter of the fiscal year 2020, we intended to settle the principal amount of the outstanding 2025 Notes in cash and, therefore, used the treasury stock method for calculating the potential effect of dilutive securities related to the 2025 Notes, if applicable.

A reconciliation of the numerators and denominators of the basic and diluted EPS calculations is as follows:

In thousands, except EPS Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021

Net income $ 42,122 $ 128,244 $ 36,277

Net income (loss)

$ ( 65,901 ) $ 42,122 $ 128,244

After-tax interest expense for 2025 Notes — — 9,483

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

Eyeglass World locations primarily feature independent optometrists to perform eye exams and on-site laboratories.

Eyeglass World locations offer eye exams, primarily provided by independent optometrists, and have on-site laboratories.

Our two Host operating segments consist of Military and Fred Meyer.

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We have aggregated our America’s Best, Eyeglass World, Military and Fred Meyer operating segments into a single reportable segment due to similar economic characteristics and similarity of the nature of products and services, production processes, class of customers, regulatory environment and distribution methods of those brands.

• Legacy - The Company manages the operations of, and supplies inventory and lab processing services to, 230 Legacy retail Vision Centers.

We earn management fees as a result of providing such services and therefore we record revenue related to sales of products and product protection plans to our Legacy partner’s customers on a net basis.

We also sell to our Legacy partner wholesale merchandise that is stocked in retail locations, and provide central lab processing for the finished eyeglasses and frames expected to be sold to our Legacy partner’s customers.

We lease space from our Legacy partner within or adjacent to each of the locations we manage and use this space for providing optometric examination services.

Sales of services and plans in our Legacy segment consist of fees earned for managing the operations of our Legacy partner and revenues associated with the provision of eye exams for our managed care customers.

• Legacy - As of December 30, 2023, the Company managed the operations of, and supplied inventory and lab processing services to, 225 Legacy retail Vision Centers.

We earned management fees as a result of providing such services and therefore we recorded revenue related to sales of products and product protection plans to our Legacy partner’s customers on a net basis.

We also sold to our Legacy partner wholesale merchandise that was stocked in retail locations and provided central lab processing for the finished eyeglasses and frames expected to be sold to our Legacy partner’s customers.

Sales of services and plans in our Legacy segment consisted of fees earned for managing the operations of our Legacy partner and revenues associated with the provision of eye exams for our managed care customers.

Revenues associated with managing operations of our Legacy partner were $ 30.6 million, $ 34.7 million and $ 41.7 million for fiscal years ended 2023, 2022 and 2021, respectively.

Our management & services agreement also allows our Legacy partner to collect penalties if the Vision Centers do not generate a requisite amount of revenues.

No such penalties have been assessed under our current arrangement.

On January 22, 2020, we entered into an amendment to our management & services agreement with Walmart which provided for a six month extension of the term and added five additional Vision Centers in Walmart stores to the agreement in fiscal year 2020.

On July 17, 2020, NVI and Walmart entered into a further amendment to the management & services agreement, to extend the current term and economics of the agreement by three years , to 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 .

In addition, the amendment deleted certain provisions that are no longer applicable and updated certain administrative provisions.

All other terms and conditions of the agreement remain in effect.

The Walmart MSA terminated on February 23, 2024 and we no longer operate Vision Centers for Walmart.

Refer to Note 2.

“Termination of Walmart Partnership” for developments related to the Legacy segment, AC Lens and FirstSight.

The “Corporate/Other” category includes the results of operations of our other operating segments and corporate overhead support.

Revenues from the Corporate/Other segments are attributable to the AC Lens and FirstSight operating segments.

Revenues from the Corporate/Other segments are attributable to the AC Lens and FirstSight

operating segments.

AC Lens primarily sells contact lenses and optical accessory products to retail customers through e-commerce.

AC Lens also distributes contact lenses to certain Walmart and Sam’s Club under fee for services arrangements.

FirstSight sells single service health plans in connection with the operations of America’s Best operations in California, and arranges for the provision of optometric services at the offices next to Walmart and Sam’s Club stores throughout California.

FirstSight sells single service health plans in connection with the operations of America’s Best operations in California, and, until February 23, 2024, arranged for the provision of optometric services at the offices next to Walmart stores throughout California, at which time the agreements between FirstSight and Walmart terminated.

None of those segments met the quantitative thresholds for determining reportable segments for any of the periods presented.

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There have been no changes from prior periods in the measurement methods used to determine reportable segment profit or loss, and there have been no asymmetrical allocations to segments.

We incurred $ 0.6 million, $ 1.5 million and $ 8.6 million of costs during fiscal years 2022, 2021 and 2020, respectively, 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 in fiscal year 2020, and other administrative expenses.

Incremental expenses related to the COVID-19 pandemic were allocated to the reportable segments in fiscal years 2022 and 2021 but were included in the Corporate/Other category in fiscal year 2020.

We incurred $ 0.6 million and $ 1.5 million of costs during fiscal years 2022 and 2021, respectively, 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 and other administrative expenses.

Incremental expenses related to the COVID-19 pandemic were allocated to the reportable segments.

The following is a summary of certain financial data for each of our segments.

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Asset impairment — — 82,413 — 82,413

Other income, net — — ( 2,552 ) — ( 2,552 )

Other expense (income), net

— — ( 164 ) — ( 164 )

Loss on extinguishment of debt

— — 599 — 599

EBITDA $ 347,683 $ 23,202 $ ( 314,803 ) $ ( 5,255 )

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Interest expense, net 14,339

Earnings before income taxes $ 60,813

Earnings (loss) before income taxes

Fiscal Year 2022

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Asset impairment — — 5,783 — 5,783

Other income, net — — ( 2,505 ) — ( 2,505 )

Other expense (income), net

— — ( 2,552 ) — ( 2,552 )

EBITDA $ 341,632 $ 23,620 $ ( 199,998 ) $ ( 4,023 )

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Asset impairment — — 4,427 — 4,427

Other income, net — — ( 445 ) — ( 445 )

Other expense (income), net

— — ( 2,505 ) — ( 2,505 )

EBITDA $ 441,471 $ 33,060 $ ( 195,840 ) $ ( 6,665 )

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Total net product revenues $ 1,744,136 $ 1,648,315 $ 1,718,344

In fiscal years 2022, 2021 and 2020, respectively, revenues from Walmart, recognized in our Legacy segment and Corporate/Other category, represented $ 291.5 million, $ 300.8 million and $ 268.8 million of our total net revenue, subjecting us to customer concentration risk.

In fiscal years 2023, 2022 and 2021, respectively, revenues from Walmart, recognized in our Legacy segment and Corporate/Other category, represented $ 297.1 million, $ 291.5 million and $ 300.8 million of our total net revenue.

Accumulated Other Comprehensive Loss

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In Thousands, Except Par Value

As of December 31, 2022 As of January 1, 2022

As of December 30, 2023 As of December 31, 2022

Current assets:

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200,000 shares authorized;

84,273 and 83,840 shares issued as of December 31, 2022 and January 1, 2022, respectively;

78,992 and 81,405 shares outstanding as of December 31, 2022 and January 1, 2022, respectively

84,831 and 84,273 shares issued as of December 30, 2023 and December 31, 2022, respectively;

78,311 and 78,992 shares outstanding as of December 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 788,967 767,112

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Treasury stock, at cost;

5,281 and 2,435 shares as of December 31, 2022 and January 1, 2022, respectively

6,520 and 5,281 shares as of December 30, 2023 and December 31, 2022, respectively

( 214,594 ) ( 186,179 )

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Total liabilities and stockholders’ equity $ 1,211,769 $ 1,376,988

Fiscal years 2022 and 2021 include 52 weeks.

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

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Interest expense, net 12,040 12,345 12,275

Loss on extinguishment of debt

Earnings (loss) before income taxes ( 12,853 ) ( 12,611 ) ( 12,531 )

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Earnings (loss) before equity in net income of subsidiaries ( 10,452 ) ( 9,742 ) ( 9,633 )

Net income of subsidiaries 51,864 137,877 49,878

Net income $ 42,122 $ 128,244 $ 36,277

Comprehensive income:

Net income $ 42,122 $ 128,244 $ 36,277

Unrealized gain (loss) on hedge instruments 1,020 6,158 ( 780 )

Tax provision (benefit) of unrealized gain (loss) on hedge instruments 259 3,698 ( 194 )

Net income (loss) of subsidiaries

( 55,449 ) 51,864 137,877

Net income (loss)

$ ( 65,901 ) $ 42,122 $ 128,244

Comprehensive income:

Fiscal years 2022 and 2021 include 52 weeks.

Fiscal year 2020 includes 53 weeks.

Net income (loss)

$ ( 65,901 ) $ 42,122 $ 128,244

Unrealized gain on hedge instruments

1,019 1,020 6,158

Tax provision of unrealized gain on hedge instruments

259 259 3,698

Comprehensive income (loss)

$ ( 65,141 ) $ 42,883 $ 130,704

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

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Cash and cash equivalents, end of year $ 233 $ 841 $ 1,683

Fiscal years 2022 and 2021 include 52 weeks.

Fiscal year 2020 includes 53 weeks.

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

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There were no financial transactions between the inception date and March 13, 2014, the date the majority ownership of NVI was transferred from private equity funds managed by Berkshire Partners LLC to affiliates of Kohlberg Kravis Roberts & Co.

In October 2017, we completed the initial public offering of our common stock.

By August 2019, each of KKR and Berkshire had sold their remaining holdings of our common stock.

In the parent-company-only financial statements, NVHI’s investment in subsidiaries is stated at cost, plus equity in undistributed earnings of subsidiaries since the date of acquisition, less dividends.

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NVHI contributed the proceeds from the 2025 Notes to NVI as additional investments during the fiscal year 2020.

“Long-term Debt” to the NVHI consolidated financial statements for details of the 2025 Notes.

“Long-term Debt” to the NVHI consolidated financial statements for details of the 2025 Notes, including information on a repurchase of $ 100.0 million aggregate principal amount of our 2025 Notes in November 2023.

Guarantees and Restrictions

As described in Note 4.

“Long-term Debt” to the NVHI consolidated financial statements, NVI used proceeds from the 2025 Notes to fully repay the outstanding amount on its revolving credit facility of $ 294.3 million and partially repaid $ 75 million on the term loan.

As of December 31, 2022, NVI had $ 150.0 million of principal amount of long-term debt outstanding under its term loan and no outstanding cash borrowings under its $ 300.0 million revolving credit facility, which includes $ 6.4 million in outstanding letters of credit.

As of December 30, 2023, NVI had $ 146.3 million of principal amount of long-term debt outstanding under its Term Loan A and no outstanding cash borrowings under its $ 300.0 million Revolving Loans, which includes $ 6.4 million in outstanding letters of credit.

Under the terms of NVI’s amended credit agreement, provided no event of default has occurred and is continuing, NVI is permitted to pay dividends to NVHI with certain restrictions.

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

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk