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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________
FORM 10-Q
_______________________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from           to         
Commission file number 001-38257
_______________________________________________________________________
National Vision Holdings, Inc.
(Exact name of registrant as specified in its charter)
_______________________________________________________________________
Delaware 46-4841717
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2435 Commerce Ave 
Building 220030096
Duluth, Georgia
(Zip Code)
(Address of principal executive offices)
(770822‑3600
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
_______________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act
Title of each class Trading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareEYENASDAQ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class Outstanding at October 29, 2021
Common stock, $0.01 par value 82,700,895



NATIONAL VISION HOLDINGS, INC. AND SUBSIDIARIES


Table of Contents
Page





SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. All statements, other than statements of historical facts included in this Form 10-Q, including statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, results of operations, financial position, business outlook, business trends and other information, may be forward-looking statements.
Words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “estimates,” or “anticipates,” and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts or guarantees of future performance and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and projections will result or be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.
There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Form 10-Q. Such risks, uncertainties and other important factors that could cause actual results to differ include, among others, the risks, uncertainties and factors set forth in Part II, Item 1A - “Risk Factors” in this Form 10-Q and Part I, Item 1A - “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended January 2, 2021 (the “2020 Annual Report on Form 10-K”), as filed with the Securities and Exchange Commission (the “SEC”), as such risk factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov, and also include the following:
the COVID-19 pandemic and its resurgence and variants, and the impact of evolving federal, state, and local governmental actions in response thereto, including risks stemming from vaccination and testing programs and mandates;
customer behavior in response to the continuing pandemic and its more recent outbreaks of variants;
our ability to keep our reopened stores open in a safe and cost-effective manner, or at all, in light of the continuing COVID-19 pandemic and its resurgence and variants;
our ability to recruit and retain vision care professionals for our stores in general and in light of the pandemic;
our ability to develop, maintain and extend relationships with managed vision care companies, vision insurance providers and other third-party payors;
our ability to maintain the performance of our host and legacy brands and our current operating relationships with our host and legacy partners;
our ability to adhere to extensive state, local and federal vision care and healthcare laws and regulations;
our compliance with managed vision care laws and regulations;
our ability to maintain sufficient levels of cash flow from our operations to execute or sustain our growth strategy or obtain additional financing at satisfactory terms or at all;
the loss of, or disruption in the operations of, one or more of our distribution centers and/or optical laboratories, resulting in the inability to fulfill customer orders and deliver our products in a timely manner;
risks associated with vendors from whom our products are sourced, including our dependence on a limited number of suppliers;
our ability to compete successfully;
our ability to effectively operate our information technology systems and prevent interruption or security breach;
our growth strategy straining our existing resources and causing the performance of our existing stores to suffer;
the impact of wage rate increases, inflation, cost increases and increases in raw material prices and energy prices;
our ability to successfully implement our marketing, advertising and promotional efforts;
risks associated with leasing substantial amounts of space, including future increases in occupancy costs;
the impact of certain technological advances, and the greater availability of, or increased consumer preferences for, vision correction alternatives to prescription eyeglasses or contact lenses, and future drug development for the correction of vision-related problems;
our ability to retain our existing senior management team and attract qualified new personnel;
overall decline in the health of the economy and other factors impacting consumer spending;
our ability to manage our inventory;
seasonal fluctuations in our operating results and inventory levels;
our reliance on third-party coverage and reimbursement, including government programs, for an increasing portion of our revenues;
3


risks associated with our e-commerce and omni-channel business;
product liability, product recall or personal injury issues;
our failure to comply with, or changes in, laws, regulations, enforcement activities and other requirements;
the impact of any adverse litigation judgments or settlements resulting from legal proceedings relating to our business operations;
risk of losses arising from our investments in technological innovators in the optical retail industry;
our ability to adequately protect our intellectual property;
our significant amount of indebtedness and our ability to generate sufficient cash flow to satisfy our debt obligations;
a change in interest rates as well as changes in benchmark rates and uncertainty related to the foregoing;
restrictions in our credit agreement that limits our flexibility in operating our business;
potential dilution to existing stockholders upon the conversion of our convertible notes; and
risks related to owning our common stock, including our ability to comply with requirements to design and implement and maintain effective internal controls.
We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. There can be no assurance that (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct or (iv) our strategy, which is based in part on this analysis, will be successful. All forward-looking statements in this Form 10-Q apply only as of the date of this Form 10-Q or as of the date they were made and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
All references to “we,” “us,” “our,” or the “Company” in this Form 10-Q mean National Vision Holdings, Inc. and its subsidiaries, unless the context otherwise requires. References to “eye care practitioners” in this Form 10-Q mean optometrists and ophthalmologists and references to “vision care professionals” mean optometrists (including optometrists employed by us or by professional corporations owned by eye care practitioners with which we have arrangements) and opticians.
Website Disclosure
We use our website www.nationalvision.com as a channel of distribution of Company information. Financial and other important information regarding the Company is routinely accessible through and posted on our website. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive e-mail alerts and other information about National Vision Holdings, Inc. when you enroll your e-mail address by visiting the “Email Alerts” page of the Investor Resources section of our website at www.nationalvision.com/investors. The contents of our website are not, however, a part of this Form 10-Q.
4

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)

National Vision Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
As of October 2, 2021 and January 2, 2021
In Thousands, Except Par Value
(Unaudited)
ASSETS As of
October 2, 2021
As of
January 2, 2021
Current assets:
Cash and cash equivalents$439,117 $373,903 
Accounts receivable, net54,080 57,989 
Inventories124,637 111,274 
Prepaid expenses and other current assets28,553 23,484 
Total current assets646,387 566,650 
Property and equipment, net333,820 341,293 
Other assets:
Goodwill777,613 777,613 
Trademarks and trade names240,547 240,547 
Other intangible assets, net43,893 49,511 
Right of use assets344,341 340,141 
Other assets18,870 17,743 
Total non-current assets1,759,084 1,766,848 
Total assets$2,405,471 $2,333,498 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$76,124 $64,861 
Other payables and accrued expenses98,749 110,309 
Unearned revenue35,328 32,657 
Deferred revenue68,763 58,899 
Current maturities of long-term debt and finance lease obligations4,418 3,598 
Current operating lease obligations65,454 58,356 
Total current liabilities348,836 328,680 
Long-term debt and finance lease obligations, less current portion and debt discount615,620 651,763 
Non-current operating lease obligations325,786 327,371 
Other non-current liabilities:
Deferred revenue23,992 20,828 
Other liabilities13,586 17,415 
Deferred income taxes, net89,094 80,939 
Total other non-current liabilities126,672 119,182 
Commitments and contingencies (See Note 9)
Stockholders’ equity:
Common stock, $0.01 par value; 200,000 shares authorized; 83,667 and 82,183 shares issued as of October 2, 2021 and January 2, 2021, respectively; 82,693 and 81,239 shares outstanding as of October 2, 2021 and January 2, 2021, respectively
836 821 
Additional paid-in capital748,422 795,697 
Accumulated other comprehensive loss(2,840)(4,400)
Retained earnings272,176 142,880 
Treasury stock, at cost; 974 and 944 shares as of October 2, 2021 and January 2, 2021, respectively
(30,037)(28,496)
Total stockholders’ equity988,557 906,502 
Total liabilities and stockholders’ equity$2,405,471 $2,333,498 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

National Vision Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income
For the Three and Nine Months Ended October 2, 2021 and September 26, 2020
In Thousands, Except Earnings Per Share
(Unaudited)
Three Months EndedNine Months Ended
October 2, 2021September 26, 2020October 2, 2021September 26, 2020
Revenue:
Net product sales$425,594 $403,336 $1,326,867 $1,005,884 
Net sales of services and plans 92,411 82,017 274,807 209,180 
Total net revenue518,005 485,353 1,601,674 1,215,064 
Costs applicable to revenue (exclusive of depreciation and amortization):
Products158,371 148,274 485,090 402,279 
Services and plans68,087 62,535 202,004 167,864 
Total costs applicable to revenue226,458 210,809 687,094 570,143 
Operating expenses:
Selling, general and administrative expenses218,214 190,518 676,042 520,841 
Depreciation and amortization25,059 22,236 72,639 68,970 
Asset impairment 7,150 1,478 20,916 
Litigation settlement   4,395 
Other expense (income), net(2,437)(154)(2,567)(312)
Total operating expenses 240,836 219,750 747,592 614,810 
Income from operations50,711 54,794 166,988 30,111 
Interest expense, net5,743 12,475 22,169 35,432 
Debt issuance costs  92 136 
Earnings (loss) before income taxes44,968 42,319 144,727 (5,457)
Income tax provision (benefit)3,976 7,030 22,702 (6,655)
Net income$40,992 $35,289 $122,025 $1,198 
Earnings per share:
Basic$0.50 $0.44 $1.49 $0.01 
Diluted$0.45 $0.42 $1.34 $0.01 
Weighted average shares outstanding:
Basic82,290 80,676 81,729 80,376 
Diluted96,508 83,795 96,193 82,718 
Comprehensive income (loss):
Net income$40,992 $35,289 $122,025 $1,198 
Unrealized gain (loss) on hedge instruments340 1,894 4,949 (2,853)
Tax provision (benefit) of unrealized gain (loss) on hedge instruments87 483 3,389 (723)
Comprehensive income (loss)$41,245 $36,700 $123,585 $(932)
The accompanying notes are an integral part of these condensed consolidated financial statements.
6


National Vision Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
For the Three and Nine Months Ended October 2, 2021
In Thousands
(Unaudited)
Three and Nine Months Ended October 2, 2021
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Retained EarningsTreasury
Stock
Total
Stockholders'
Equity
SharesAmount
Balances at January 2, 202181,239 $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 January 3, 2021 - as adjusted81,239 821 724,312 (4,400)150,151 (28,496)842,388 
Issuance of common stock174 2 1,056 — — — 1,058 
Stock based compensation— — 2,971 — — — 2,971 
Purchase of treasury stock(28)— — — — (1,421)(1,421)
Unrealized gain (loss) on hedge instruments, net of tax— — — (896)— — (896)
Net income— — — — 43,432 — 43,432 
Balances at April 3, 202181,385 $823 $728,339 $(5,296)$193,583 $(29,917)$887,532 
Issuance of common stock471 5 3,863 — — — 3,868 
Stock based compensation— — 7,178 — — — 7,178 
Purchase of treasury stock(1)— — — (45)(45)
Unrealized gain (loss) on hedge instruments, net of tax— — — 2,203 — — 2,203 
Net income— — — — 37,601 — 37,601 
Balances at July 3, 202181,855 $828 $739,380 $(3,093)$231,184 $(29,962)$938,337 
Issuance of common stock839 8 5,423 — — — 5,431 
Stock based compensation— — 3,619 — — — 3,619 
Purchase of treasury stock(1)— — — — (75)(75)
Unrealized gain (loss) on hedge instruments, net of tax— — — 253 — — 253 
Net income— — — — 40,992 — 40,992 
Balances at October 2, 202182,693 $836 $748,422 $(2,840)$272,176 $(30,037)$988,557 


7

National Vision Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
For the Three and Nine Months Ended September 26, 2020
In Thousands
(Unaudited)
Three and Nine Months Ended September 26, 2020
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Retained EarningsTreasury
Stock
Total
Stockholders'
Equity
SharesAmount
Balances at December 28, 201979,678 $805 $700,121 $(3,814)$107,132 $(27,807)$776,437 
Cumulative effect of change in accounting principle — — — — (529)— (529)
Balances at December 29, 2019 - as adjusted79,678 805 700,121 (3,814)106,603 (27,807)775,908 
Issuance of common stock602 6 5,114 — — — 5,120 
Stock based compensation— — 2,066 — — — 2,066 
Purchase of treasury stock(2)— — — — (74)(74)
Unrealized gain (loss) on hedge instruments, net of tax— — — (6,602)— — (6,602)
Net income— — — — 9,742 — 9,742 
Balances at March 28, 202080,278 $811 $707,301 $(10,416)$116,345 $(27,881)$786,160 
Issuance of common stock137 1 877 — — — 878 
Stock based compensation— — 3,324 — — — 3,324 
Conversion option related to convertible senior notes, net of allocated costs and tax— — 71,349 — — — 71,349 
Unrealized gain (loss) on hedge instruments, net of tax— — — 3,061 — — 3,061 
Net income (loss)— — — — (43,833)— (43,833)
Balances at June 27, 202080,415 $812 $782,851 $(7,355)$72,512 $(27,881)$820,939 
Issuance of common stock575 6 4,474 — — — 4,480 
Stock based compensation— — 2,863 — — — 2,863 
Purchase of treasury stock(1)— — — — (19)(19)
Unrealized gain (loss) on hedge instruments, net of tax— — — 1,411 — — 1,411 
Net income— — — — 35,289 — 35,289 
Balances at September 26, 202080,989 $818 $790,188 $(5,944)$107,801 $(27,900)$864,963 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8

National Vision Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended October 2, 2021 and September 26, 2020
In Thousands
(Unaudited)
Nine Months Ended
October 2, 2021September 26, 2020
Cash flows from operating activities:
Net income$122,025 $1,198 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization72,639 68,970 
Amortization of debt discount and deferred financing costs3,140 7,248 
Asset impairment 1,478 20,916 
Deferred income tax expense (benefit) 23,585 (6,735)
Stock based compensation expense13,866 8,335 
Losses (gains) on change in fair value of derivatives(421)4,596 
Inventory adjustments1,546 3,502 
Other(242)4,238 
Changes in operating assets and liabilities:
Accounts receivable2,746 (5,685)
Inventories(14,909)12,354 
Operating lease right of use assets and lease liabilities(456)(1,258)
Other assets(6,813)1,044 
Accounts payable11,263 27,847 
Deferred and unearned revenue15,699 16,940 
Other liabilities(11,339)40,206 
Net cash provided by operating activities233,807 203,716 
Cash flows from investing activities:
Purchase of property and equipment(58,920)(40,837)
Other2,475 323 
Net cash used for investing activities(56,445)(40,514)
Cash flows from financing activities:
Borrowings on long-term debt, net of discounts 548,769 
Repayments on long-term debt(117,375)(369,269)
Proceeds from exercise of stock options 11,170 10,478 
Purchase of treasury stock(1,414)(93)
Payments of debt issuance costs(900)(12,462)
Payments on finance lease obligations(3,546)(2,517)
Net cash provided by (used for) financing activities(112,065)174,906 
Net change in cash, cash equivalents and restricted cash65,297 338,108 
Cash, cash equivalents and restricted cash, beginning of year375,159 40,307 
Cash, cash equivalents and restricted cash, end of period$440,456 $378,415 
Supplemental cash flow disclosure information:
Cash paid for interest$17,316 $19,508 
Cash paid (received) for taxes$9,293 $(693)
Capital expenditures accrued at the end of the period$10,455 $13,516 
The accompanying notes are an integral part of these condensed consolidated financial statements.
9

National Vision Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)


1. Description of Business and Basis of Presentation
Nature of Operations
National Vision Holdings, Inc. (“NVHI,” the “Company,” “we,” “our,” or “us”) is a holding company whose operating subsidiaries include its indirect wholly owned subsidiary, National Vision, Inc. (“NVI”) and NVI’s wholly owned subsidiaries. We are a leading value retailer of eyeglasses and contact lenses in the United States. We operated 1,262 and 1,205 retail optical locations in the United States and its territories as of October 2, 2021 and January 2, 2021, 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”).
Basis of Presentation
We prepare our unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and, therefore, do not include all information and disclosures required by U.S. GAAP for complete consolidated financial statements. The condensed consolidated balance sheet as of January 2, 2021 has been derived from the audited consolidated balance sheet for the fiscal year then ended. These condensed consolidated financial statements reflect all normal and recurring adjustments which are, in the opinion of management, necessary to present fairly the Company’s consolidated results of the interim period. Certain prior year amounts in the Condensed Consolidated Statements of Cash Flows have been reclassified to conform to the current presentation.
Certain information and disclosures normally included in our annual consolidated financial statements have been condensed or omitted; however, we believe that the disclosures included herein are sufficient for a fair presentation of the information presented. These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the fiscal year ended January 2, 2021 included in the 2020 Annual Report on Form 10-K. The Company’s significant accounting policies are set forth in Note 1 within those consolidated financial statements. We use the same accounting policies in preparing interim condensed consolidated financial information and annual consolidated financial statements. There were no changes to our significant accounting policies during the nine months ended October 2, 2021, except for the adoption of Accounting Standards Update (“ASU”) 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 (“ASU 2020-06”). See “Adoption of New Accounting Pronouncements” below for further discussion.
The condensed consolidated financial statements include our accounts and those of our subsidiaries, all of which are wholly-owned. All intercompany balances and transactions have been eliminated in consolidation.
Fiscal Year
Our fiscal year consists of 52 or 53 weeks ending on the Saturday closest to December 31. Fiscal year 2021 contains 52 weeks and will end on January 1, 2022. All three and nine month periods presented herein contain 13 and 39 weeks, respectively. All references to years and quarters relate to fiscal periods rather than calendar periods.
10

Seasonality
The consolidated results of operations for the three and nine months ended October 2, 2021 and September 26, 2020, are not necessarily indicative of the results to be expected for the full fiscal year due to seasonality and uncertainty of general economic conditions that may impact our key end markets. Historically, our business has realized a higher portion of net revenue, income from operations, and cash flows from operations in the first half of the year, and a lower portion of net revenue, income from operations, and cash flows from operations in the fourth fiscal quarter. The first half seasonality is attributable primarily to the timing of our customers’ personal income tax refunds and annual health insurance program start/reset periods. Seasonality related to fourth quarter holiday spending by retail customers generally does not impact our business. Our quarterly consolidated results generally may also be affected by the timing of new store openings, store closings, and certain holidays.
The COVID-19 pandemic resulted in the temporary closure of our stores for a portion of the first half of fiscal year 2020 and caused changes in fiscal year 2020 seasonality. COVID-19 may continue to cause changes to the seasonality we have historically experienced in fiscal year 2021 and beyond.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Income Taxes
Our income tax provision for the three months ended October 2, 2021 and September 26, 2020 reflected our statutory federal and state rate of 25.5%, offset by discrete benefits from stock option exercises of $9.1 million and $3.0 million, respectively. Our income tax provision (benefit) for the nine months ended October 2, 2021 and September 26, 2020 reflected our statutory federal and state rate of 25.5% offset by discrete benefits from stock option exercises of $13.6 million and $6.0 million, respectively, and a stranded tax effect of $2.1 million associated with our matured interest rate swaps during the nine months ended October 2, 2021.
Sale of Equity Method Investee
During the third quarter of fiscal year 2021, the Company’s equity method investee was acquired by a third party and in connection therewith the Company sold all of its ownership interests and received $2.4 million upon the consummation of the sale. These proceeds were included in the investing section of the Condensed Consolidated Statements of Cash Flows for the nine months ended October 2, 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 of $2.4 million in Other expense (income), net on the Condensed Consolidated Statements of Operations for the three and nine months ended October 2, 2021. In connection with the transaction, the Company is a party to an earnout agreement whereby we may be entitled to certain variable earnout payments based upon the achievement by the investee of certain performance metrics over a one year period. The Company will recognize income for payments received under the earnout once they are realized or realizable.
Adoption of New Accounting Pronouncements
Convertible Instruments and Contracts in an Entity’s Own Equity. In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06. This new guidance simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity’s own equity. The guidance also requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. ASU 2020-06 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021. The company early adopted the guidance in the first quarter of 2021 using the modified retrospective approach and recognized a cumulative effect of the change of $7.3 million as an adjustment to the opening balance of retained earnings. Upon adoption of ASU 2020-06 the Company eliminated the equity components related to its convertible debt and increased the related liability components by $82.9 million. In addition, as a result of the adoption, our deferred tax liabilities decreased by $18.8 million and additional paid-in capital decreased by $71.4 million. The adoption did not have an impact on the calculated weighted average shares outstanding used in the calculation of diluted EPS since the Company was using the if-converted method prior to the adoption of ASU 2020-06. Refer to Note 11. “Earnings per Share” for more information.
11

The following tables summarize the impact of adoption on the Company’s condensed consolidated statement of operations for the three and nine months ended October 2, 2021:
Three Months Ended October 2, 2021
In thousands (except earnings per share)With ASU 2020-06 AdoptionWithout ASU 2020-06 AdoptionImpact of Adoption
Income from operations$50,711 $50,711 $ 
Interest expense, net5,743 9,829 (4,086)
Earnings before income taxes44,968 40,882 4,086 
Income tax provision 3,976 3,046 930 
Net income$40,992 $37,836 $3,156 
Earnings per share:
Basic$0.50 $0.46 $0.04 
Diluted$0.45 $0.45 $ 
Impact of adoption on basic earnings per share is calculated using impact on net income divided by basic weighted average shares outstanding during the period.

Nine Months Ended October 2, 2021
In thousands (except earnings per share)With ASU 2020-06 AdoptionWithout ASU 2020-06 AdoptionImpact of Adoption
Income from operations$166,988 $166,988 $ 
Interest expense, net22,169 34,005 (11,836)
Debt issuance costs92 92  
Earnings before income taxes144,727 132,891 11,836 
Income tax provision 22,702 20,056 2,646 
Net income$122,025 $112,835 $9,190 
Earnings per share:
Basic$1.49 $1.38 $0.11 
Diluted$1.34 $1.34 $ 
Impact of adoption on basic earnings per share is calculated using impact on net income divided by basic weighted average shares outstanding during the period.

Future Adoption of Accounting Pronouncements
Reference Rate Reform. In March 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). This guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions that may be affected by the cessation of the London Inter-bank Offered Rate (“LIBOR.”) An entity may elect to apply the amendments 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, 2022. 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.
The FASB issued other accounting guidance during the period that is not currently applicable or expected to have a material impact on the Company’s condensed consolidated financial statements, and therefore, is not described above.

12

Table of contents
2. Details of Certain Balance Sheet Accounts
In thousandsAs of
October 2, 2021
As of
January 2, 2021
Accounts receivable, net:
Trade receivables$29,356 $28,405 
Credit card receivables18,606 21,557 
Other receivables6,644 8,460 
Allowance for credit losses(526)(433)
$54,080 $57,989 
In thousandsAs of
October 2, 2021
As of
January 2, 2021
Inventories:
Raw materials and work in process (1)
$65,094 $55,473 
Finished goods59,543 55,801 
$124,637 $111,274 
(1)Due to the immaterial amount of estimated work in process and the short lead times for the conversion of raw materials to finished goods, the Company does not separately present raw materials and work in process.
In thousandsAs of
October 2, 2021
As of
January 2, 2021
Other payables and accrued expenses:
Associate compensation and benefits (1)
$39,466 $51,081 
Advertising3,219 2,173 
Self-insurance liabilities9,519 8,650 
Reserves for customer returns and remakes7,274 8,084 
Capital expenditures10,455 8,455 
Legacy management & services agreement5,649 5,386 
Fair value of derivative liabilities4,023 5,116 
Supplies and other store support expenses2,353 3,461 
Litigation settlements637 1,107 
Lease concessions491 3,142 
Other15,663 13,654 
$98,749 $110,309 
 (1) Includes the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act deferred employer payroll taxes in the amount of $0.0 million and $12.8 million as of October 2, 2021 and January 2, 2021, respectively.
In thousandsAs of
October 2, 2021
As of
January 2, 2021
Other non-current liabilities:
Fair value of derivative liabilities$3,385 $7,663 
Self-insurance liabilities7,761 7,046 
Other2,440 2,706 
$13,586 $17,415 

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3. Fair Value Measurement

Recurring fair value measurements
Interest Rate Derivatives
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). See Note 5. “Interest Rate Derivatives” for further details.
Nonrecurring fair value measurements
Tangible Long-lived and Right of Use (“ROU”) Store Assets
We recognized no impairments during the three months ended October 2, 2021, and $1.5 million during the nine months ended October 2, 2021, respectively, 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. The cash flows used in estimating fair value were discounted using a market rate of 7.5%. We consider market-based indications of prevailing rental rates for retail space, market participant discount rates, and lease incentives when estimating the fair values of ROU assets. 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 estimated remaining fair value of the assets impaired during the nine months ended October 2, 2021 was $2.9 million; this value includes fair value estimates related to impairments recorded in the first and second quarters of 2021. Substantially all of the remaining fair value of the impaired store assets in fiscal year 2021 represents the fair value of ROU assets.
Additional fair value information
Long-term Debt - 2025 Notes
The Company has $402.5 million in aggregate principal amount of 2.50% convertible senior notes due on May 15, 2025 (the “2025 Notes”) issued and outstanding as of October 2, 2021. Refer to Note 4. “Long-term Debt” for more information on the 2025 Notes. The estimated fair value of the 2025 Notes was approximately $757.7 million and $655.3 million as of October 2, 2021 and January 2, 2021, respectively. The estimated fair value of the 2025 Notes is based on the prices the 2025 Notes have traded in the market as of October 2, 2021, as well as overall market conditions on the date of valuation, stated coupon rates, the number of coupon payments each year and the maturity date, and represents a Level 2 measurement in the fair value hierarchy.

4. Long-term Debt

Long-term debt consists of the following:
In thousandsAs of
October 2, 2021
As of
January 2, 2021
2025 Notes, due May 15, 2025$402,500 $402,500 
Term loan, due July 18, 2024200,000 317,375 
Long-term debt before debt discount602,500 719,875 
Unamortized discount and issuance costs - 2025 Notes(8,572)(93,123)
Unamortized discount and issuance costs - term loan(1,402)(2,141)
Long-term debt less debt discount592,526 624,611 
Less current maturities  
Long-term debt - non-current portion592,526 624,611 
Finance lease obligations27,512 30,750 
Less current maturities(4,418)(3,598)
Long-term debt and finance lease obligations, less current portion and debt discount$615,620 $651,763 
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Credit Agreement
During the second quarter of 2021, the Company voluntarily prepaid $117.4 million of term loan principal and wrote off associated deferred debt issuance costs of $0.7 million. The Company also 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).
As a result of the principal prepayments made by the Company, we have no additional mandatory principal payments on the remaining term loan balance until maturity on July 18, 2024.
Capitalized terms used but not defined herein shall have the meanings assigned to such terms in our credit agreement. 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. We were in compliance with all covenants related to our long-term debt as of October 2, 2021. See Note 14. “Subsequent Events” for developments on our term loan occurring after the date of the financial statements.
2025 Notes
The Company adopted ASU 2020-06 as of January 3, 2021. ASU 2020-06 eliminates the cash conversion and the beneficial conversion feature models. Under the new convertible debt framework, the Company eliminated the equity components and increased the debt balance. Refer to Note 1. “Description of Business and Basis of Presentation” for further discussion of the adoption of ASU 2020-06. 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. We recognized $2.5 million and $0.6 million in interest expense for the interest coupon and amortization of issuance costs, respectively, during the three months ended October 2, 2021 and $7.5 million and $1.6 million, respectively during the nine months ended October 2, 2021. As of October 2, 2021, the remaining period for the unamortized debt issuance costs balance was approximately four years.
As of October 2, 2021, the 2025 Notes can be converted by holders. The conversion rate will be subject to adjustment upon the occurrence of certain specified events including, but not limited to: issuance of stock dividends, splits and combinations; distribution of rights, options and warrants; spin-offs and other distributed property; cash dividends or distributions; tender offers or exchange offers; and certain other corporate transactions. The holders of our term loan would have preference over the holders of the 2025 Notes in the event of a liquidation.

5. Interest Rate Derivatives
We are party to an interest rate collar to offset the variability of cash flows in LIBOR-indexed debt interest payments. The aggregate notional amount of the interest rate collar was $375.0 million as of October 2, 2021. The fair value of our interest rate collar instrument was $7.4 million as of October 2, 2021 and is not designated as a cash flow hedge. The interest rate swaps we held at the end of fiscal year 2020 matured in the first quarter of 2021. The fair value of our interest rate derivative instruments was $12.8 million as of January 2, 2021, $1.5 million of which was designated as a cash flow hedge. See Note 3. “Fair Value Measurement” for further details.
Gains (losses) on the change in fair value of the interest rate collar of approximately $(0.2) million and $1.3 million were recorded in interest expense, net during the three and nine months ended October 2, 2021, respectively. Interest expense, net related to our interest rate derivatives considered to be highly effective hedges for the nine months ended October 2, 2021 was $1.5 million.
Cash flows related to derivatives qualifying as hedges are included in the same section of the Condensed Consolidated Statements of Cash Flows as the underlying assets and liabilities being hedged. Cash flows during the nine months ended October 2, 2021 and September 26, 2020 related to derivatives not qualifying as hedges were included in the operating section of the Condensed Consolidated Statements of Cash Flows and were immaterial.
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During the second quarter of 2021, as a result of the partial repayment of the Company’s LIBOR based term-loan debt balances, certain forecasted hedged transactions were deemed not probable of occurring. The Company subsequently reclassified unrealized losses of $2.5 million from AOCL to interest expense on $115.0 million of interest rate collar notional, during the nine months ended October 2, 2021. As of October 2, 2021, the Company expects to reclassify approximately $0.9 million of unrealized losses on derivative instruments, net of tax, from Accumulated other comprehensive loss (“AOCL”) into earnings in the next 12 months as the derivative instruments mature. See Note 13. “Accumulated Other Comprehensive Loss” for further details.
During the second quarter of 2020, as a result of the partial repayment of the Company’s LIBOR based debt balances, certain forecasted hedged transactions were deemed not probable of occurring. The Company subsequently discontinued hedge accounting on $78.0 million of interest rate swap notional and $58.0 million of interest rate collar notional, reclassifying net unrealized losses of approximately $2.5 million from AOCL to interest expense, net during the nine months ended September 26, 2020. Additionally, due to changes in the interest rates applicable to the Company’s term loan and revolver, the interest rate collar ceased to be a highly effective hedge. Losses on the change in fair value of the interest rate collar of approximately $2.6 million were recorded in interest expense, net during the nine months ended September 26, 2020. Interest expense, net related to derivatives considered to be highly effective hedges for the three and nine months ended September 26, 2020 was $2.0 million and $5.9 million, respectively.

6. Stock Incentive Plans
During the nine months ended October 2, 2021, the Company granted 110,531 stock options, 111,601 performance-based restricted stock units (“PSUs”) and 132,327 time-based restricted stock units (“RSUs”) to eligible employees under the National Vision Holdings, Inc. 2017 Omnibus Incentive Plan (the “2017 Omnibus Incentive Plan”). The time-based options granted in fiscal 2021 vest in three equal annual installments, with one-third of the total options vesting on each of the first, second, and third anniversaries of the grant date, subject to continued employment through the applicable vesting date. The PSUs granted in fiscal 2021 are settled after the end of the performance period (i.e., cliff vesting), which begins on the first day of our 2021 fiscal year and ends on the last day of our 2023 fiscal year, and are based on the Company’s achievement of certain performance targets. The RSUs granted in fiscal 2021 vest primarily in three equal installments.
During the nine months ended October 2, 2021, the Company granted 16,539 restricted stock awards (“RSAs”) to eligible members of the Company’s Board of Directors under the 2017 Omnibus Incentive Plan. The awards vest one year from the grant date.

7. Revenue From Contracts With Customers
The majority of our revenues are recognized either at the point of sale or upon delivery and customer acceptance, paid for at the time of sale in cash, credit card, or on account with managed care payors having terms generally between 14 and 120 days, with most paying within 90 days. For sales of in-store non-prescription eyewear and related accessories, and paid eye exams, we recognize revenue at the point of sale. Our point in time revenues include 1) retail sales of prescription and non-prescription eyewear, contact lenses and related accessories to retail customers (including those covered by managed care), 2) eye exams and 3) wholesale sales of inventory in which our customer is another retail entity. Revenues recognized over time primarily include product protection plans (i.e. warranties), eye care club memberships and management fees earned from our legacy partner.
The following disaggregation of revenues depicts our revenue based on the timing of revenue recognition:
Three Months EndedNine Months Ended
In thousandsOctober 2, 2021September 26, 2020October 2, 2021September 26, 2020
Revenues recognized at a point in time$473,449 $447,403 $1,471,856 $1,111,118 
Revenues recognized over time44,556 37,950 129,818 103,946 
Total net revenue $518,005 $485,353 $1,601,674 $1,215,064 
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Table of contents

Refer to Note 10. “Segment Reporting” for the Company’s disaggregation of net revenue by reportable segment. 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.
We record reductions in revenue for estimated price concessions granted to managed care providers. The Company considers its revenue from managed care customers to include variable consideration and estimates such amounts associated with managed care customer revenues using the history of concessions provided and cash receipts from managed care providers; we reduced our net revenue for variable considerations of $2.4 million and $1.8 million during the three months ended October 2, 2021 and September 26, 2020, respectively, and $7.0 million and $5.9 million during the nine months ended October 2, 2021 and September 26, 2020, respectively.
Contract Assets and Liabilities
The Company’s contract assets and contract liabilities primarily result from timing differences between the performance of our obligations and the customer’s payment.
Accounts Receivable
Credit loss expense recognized on our receivables, which is presented in SG&A expenses in the Company’s condensed consolidated statements of operations, was $0.3 million for the three months ended October 2, 2021 and $0.6 million for the nine months ended October 2, 2021 as compared to $0.1 million and $0.5 million for the three and nine months ended September 26, 2020, respectively.
Unsatisfied Performance Obligations (Contract Liabilities)
We recognized $24.6 million and $50.4 million of deferred revenues outstanding at the beginning of each respective period during the three and nine months ended October 2, 2021, respectively, and $9.2 million and $46.5 million of revenues from sale of club memberships and product protection plans during the three and nine months ended October 2, 2021, respectively. We recognized $18.6 million and $48.1 million of deferred revenues outstanding at the beginning of each respective period during the three and nine months ended September 26, 2020, respectively, and $9.3 million and $31.9 million of revenues from sale of club memberships and product protection plans during the three and nine months ended September 26, 2020, respectively.
Our deferred revenue balance as of October 2, 2021 was $92.8 million. We expect future revenue recognition of this balance of $25.2 million, $49.1 million, $14.7 million, $3.5 million and $0.3 million in fiscal years 2021, 2022, 2023, 2024 and thereafter, respectively.



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Table of contents

8. Leases

Our lease costs for the three months ended October 2, 2021 and September 26, 2020 were as follows:
Three Months EndedNine Months Ended
In thousandsOctober 2, 2021September 26, 2020October 2, 2021September 26, 2020
Operating lease cost
Fixed lease cost (a)
$21,035 $19,473 $62,589 $57,885 
Variable lease cost (b)
7,976 7,203 22,894 20,369 
Sublease income (c)
(866)(896)