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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 1, 2022
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 28, 2022
Common stock, $0.01 par value 78,912,459



NATIONAL VISION HOLDINGS, INC. AND SUBSIDIARIES


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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 1, 2022 (the “2021 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, including the impact of such behavior on in-store traffic and sales;
overall decline in the health of the economy and other factors impacting consumer spending, including inflation, rising interest rates and geopolitical instability;
our ability to open and operate new stores in a timely and cost-effective manner, or keep stores safely open in light of the continuing COVID-19 pandemic, and to successfully enter new markets;
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;
the impact of wage rate increases, inflation, cost increases and increases in raw material prices and energy prices;
our growth strategy straining our existing resources and causing the performance of our existing stores to suffer;
our ability to successfully and efficiently 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;
3

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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;
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;
risks associated with environmental, social and governance issues, including climate change;
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.
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PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)

National Vision Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
In Thousands, Except Par Value
(Unaudited)
As of
October 1, 2022
As of
January 1, 2022
ASSETS
Current assets:
Cash and cash equivalents$256,209 $305,800 
Accounts receivable, net63,823 55,697 
Inventories122,032 123,669 
Prepaid expenses and other current assets34,999 29,410 
Total current assets477,063 514,576 
Noncurrent assets:
Property and equipment, net358,599 346,436 
Goodwill777,613 777,613 
Trademarks and trade names240,547 240,547 
Other intangible assets, net36,402 42,020 
Right of use assets379,668 354,900 
Other assets21,844 16,999 
Total non-current assets1,814,673 1,778,515 
Total assets$2,291,736 $2,293,091 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$68,979 $64,331 
Other payables and accrued expenses100,878 119,323 
Unearned revenue32,691 29,895 
Deferred revenue63,875 65,325 
Current maturities of long-term debt and finance lease obligations3,975 3,999 
Current operating lease obligations66,227 60,930 
Total current liabilities336,625 343,803 
Noncurrent liabilities:
Long-term debt and finance lease obligations, less current portion and debt discount564,180 566,081 
Non-current operating lease obligations364,796 342,241 
Deferred revenue22,572 23,166 
Other liabilities8,945 8,974 
Deferred income taxes, net87,693 82,846 
Total non-current liabilities1,048,186 1,023,308 
Commitments and contingencies (See Note 9)
Stockholders’ equity:
Common stock, $0.01 par value; 200,000 shares authorized; 84,173 and 83,840 shares issued as of October 1, 2022 and January 1, 2022, respectively; 78,910 and 81,405 shares outstanding as of October 1, 2022 and January 1, 2022, respectively
841 838 
Additional paid-in capital763,166 750,478 
Accumulated other comprehensive loss(1,372)(1,940)
Retained earnings329,778 278,395 
Treasury stock, at cost; 5,263 and 2,435 shares as of October 1, 2022 and January 1, 2022, respectively
(185,488)(101,791)
Total stockholders’ equity906,925 925,980 
Total liabilities and stockholders’ equity$2,291,736 $2,293,091 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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National Vision Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income
In Thousands, Except Earnings Per Share
(Unaudited)
Three Months EndedNine Months Ended
October 1, 2022October 2, 2021October 1, 2022October 2, 2021
Revenue:
Net product sales$410,701 $425,594 $1,265,554 $1,326,867 
Net sales of services and plans 88,506 92,411 270,919 274,807 
Total net revenue499,207 518,005 1,536,473 1,601,674 
Costs applicable to revenue (exclusive of depreciation and amortization):
Products160,645 158,371 488,225 485,090 
Services and plans72,155 68,087 215,179 202,004 
Total costs applicable to revenue232,800 226,458 703,404 687,094 
Operating expenses:
Selling, general and administrative expenses225,028 218,214 681,411 676,042 
Depreciation and amortization24,852 25,059 75,248 72,639 
Asset impairment1,263  5,178 1,478 
Other expense (income), net(95)(2,437)170 (2,567)
Total operating expenses 251,048 240,836 762,007 747,592 
Income from operations15,359 50,711 71,062 166,988 
Interest expense (income), net(1,977)5,743 (2,158)22,261 
Earnings before income taxes17,336 44,968 73,220 144,727 
Income tax provision5,834 3,976 21,837 22,702 
Net income$11,502 $40,992 $51,383 $122,025 
Earnings per share:
Basic$0.15 $0.50 $0.64 $1.49 
Diluted$0.15 $0.45 $0.63 $1.34 
Weighted average shares outstanding:
Basic78,910 82,290 80,133 81,729 
Diluted79,304 96,508 93,477 96,193 
Comprehensive income:
Net income$11,502 $40,992 $51,383 $122,025 
Unrealized gain on hedge instruments255 340 762 4,949 
Tax provision of unrealized gain on hedge instruments65 87 194 3,389 
Comprehensive income $11,692 $41,245 $51,951 $123,585 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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National Vision Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
In Thousands
(Unaudited)
Three and Nine Months Ended October 1, 2022
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Retained EarningsTreasury
Stock
Total
Stockholders’
Equity
SharesAmount
Balances at January 1, 202281,405 $838 $750,478 $(1,940)$278,395 $(101,791)$925,980 
Issuance of common stock289 3 1,366 — — — 1,369 
Stock based compensation— — 3,692 — — — 3,692 
Purchase of treasury stock(272)— — — — (10,649)(10,649)
Settlement of 2025 Notes— — (1)— — — (1)
Unrealized gain (loss) on hedge instruments, net of tax— — — 188 — — 188 
Net income— — — — 30,147 — 30,147 
Balances at April 2, 202281,422 $841 $755,535 $(1,752)$308,542 $(112,440)$950,726 
Issuance of common stock18 — 421 — — — 421 
Stock based compensation— — 3,606 — — — 3,606 
Purchase of treasury stock(2,555)— — — (73,008)(73,008)
Unrealized gain (loss) on hedge instruments, net of tax— — — 190 — — 190 
Net income— — — — 9,734 — 9,734 
Balances at July 2, 202278,885 $841 $759,562 $(1,562)$318,276 $(185,448)$891,669 
Issuance of common stock26 — 483 — — — 483 
Stock based compensation— — 3,121 — — — 3,121 
Purchase of treasury stock(1)— — — — (40)(40)
Unrealized gain (loss) on hedge instruments, net of tax— — — 190 — — 190 
Net income— — — — 11,502 — 11,502 
Balances at October 1, 202278,910 $841 $763,166 $(1,372)$329,778 $(185,488)$906,925 

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National Vision Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
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 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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National Vision Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
In Thousands
(Unaudited)
Nine Months Ended
October 1, 2022October 2, 2021
Cash flows from operating activities:
Net income$51,383 $122,025 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization75,248 72,639 
Amortization of debt discount and deferred financing costs2,456 3,140 
Asset impairment 5,178 1,478 
Deferred income tax expense 4,652 23,585 
Stock based compensation expense10,540 13,866 
Losses (gains) on change in fair value of derivatives(16,724)(421)
Inventory adjustments2,218 1,546 
Other3,531 (242)
Changes in operating assets and liabilities:
Accounts receivable(8,896)2,746 
Inventories(582)(14,909)
Operating lease right of use assets and lease liabilities262 (456)
Other assets3,070 (6,813)
Accounts payable4,648 11,263 
Deferred and unearned revenue752 15,699 
Other liabilities(16,399)(11,339)
Net cash provided by operating activities121,337 233,807 
Cash flows from investing activities:
Purchase of property and equipment(86,120)(58,920)
Other53 2,475 
Net cash used for investing activities(86,067)(56,445)
Cash flows from financing activities:
Repayments on long-term debt(4)(117,375)
Proceeds from issuance of common stock2,515 11,170 
Purchase of treasury stock(83,676)(1,414)
Payments of debt issuance costs (900)
Payments on finance lease obligations(3,459)(3,546)
Net cash used for financing activities(84,624)(112,065)
Net change in cash, cash equivalents and restricted cash(49,354)65,297 
Cash, cash equivalents and restricted cash, beginning of year306,876 375,159 
Cash, cash equivalents and restricted cash, end of period$257,522 $440,456 
Supplemental cash flow disclosure information:
Cash paid for interest$11,000 $17,316 
Cash paid for taxes$6,617 $9,293 
Capital expenditures accrued at the end of the period$11,167 $10,455 
    
The accompanying notes are an integral part of these condensed consolidated financial statements.
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National Vision Holdings, Inc. and Subsidiaries
Index to Notes to Condensed Consolidated Financial Statements


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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 1,332 and 1,278 retail optical locations in the United States and its territories as of October 1, 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. Army/Air Force military bases (“Military”) and within select Fred Meyer stores, and our management & services arrangement with Walmart (“Legacy”).
Basis of Presentation and Principles of Consolidation
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 1, 2022 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 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 1, 2022 included in the 2021 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 1, 2022.
The condensed consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain amounts within the Condensed Consolidated Statements of Operations and Comprehensive Income and footnotes to the condensed consolidated financial statements for fiscal year 2021 have been reclassified to conform to the fiscal year 2022 presentation.
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 October 1, 2022, the variable interest entities include 31 professional corporations. The total assets of the consolidated VIEs included in the accompanying Condensed Consolidated Balance Sheets as of October 1, 2022 and January 1, 2022, were $3.3 million and $6.0 million, respectively, and the total liabilities of the consolidated VIEs were $3.7 million and $6.8 million, respectively.
Fiscal Year
Our fiscal year consists of 52 or 53 weeks ending on the Saturday closest to December 31. Fiscal year 2022 contains 52 weeks and will end on December 31, 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.
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Seasonality
The consolidated results of operations for the three and nine months ended October 1, 2022 and October 2, 2021, 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, although delays in tax refund timing have occurred in 2020 and 2021, and may continue to occur in future years. 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.
Consumer behavior driven by the COVID-19 pandemic, shifting macroeconomic trends, consumer preferences and demand have resulted in a departure from seasonal norms we have experienced in recent years. We expect COVID-19 and the current macroeconomic environment to continue to impact the seasonality we have historically experienced.
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 effective tax rates for the three months ended October 1, 2022 and October 2, 2021 were 33.7% and 8.8%, respectively, reflecting our statutory federal and state rate of 25.5% and effects of other permanent items as well as discrete benefits from stock option exercises of $9.1 million during the three months ended October 2, 2021. Our effective tax rates for the nine months ended October 1, 2022 and October 2, 2021 were 29.8% and 15.7%, respectively, reflecting our statutory federal and state rate of 25.5% and effects of other permanent items, discrete benefits from stock option exercises of $13.6 million, as well as 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, a former 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.
Share Repurchases
During the nine months ended October 1, 2022, the Company repurchased 2.7 million shares of its common stock for $80.0 million under the share repurchase program. After these repurchases, $50.0 million remains available under the share repurchase authorization.
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.
Inflation Reduction Act. 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 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.
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2. Details of Certain Balance Sheet Accounts
The following table provides a reconciliation of cash and cash equivalents reported within the Condensed Consolidated Balance sheets to the total of Cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statement of Cash Flows:
Nine Months Ended
In thousandsOctober 1, 2022October 2, 2021
Cash, cash equivalents and restricted cash:
Cash and cash equivalents$256,209 $439,117 
Restricted cash included in other assets1,313 1,339 
$257,522 $440,456 

The following tables provide additional details of certain balance sheet accounts as of the dates shown below:

In thousandsAs of
October 1, 2022
As of
January 1, 2022
Accounts receivable, net:
Trade receivables$34,213 $32,504 
Credit card receivables16,266 17,010 
Other receivables (1)
13,988 6,685 
Allowance for credit losses(644)(502)
$63,823 $55,697 
(1) Includes Coronavirus Aid, Relief, and Economic Security (“CARES”) Act receivable in the amount of $6.7 million as of October 1, 2022.

In thousandsAs of
October 1, 2022
As of
January 1, 2022
Inventories:
Raw materials and work in process (1)
$65,834 $65,262 
Finished goods56,198 58,407 
$122,032 $123,669 
(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 1, 2022
As of
January 1, 2022
Other payables and accrued expenses:
Associate compensation and benefits (1)
$36,761 $55,670 
Self-insurance liabilities9,108 9,034 
Capital expenditures11,167 10,571 
Advertising2,122 6,962 
Reserves for customer returns and remakes6,841 7,556 
Legacy management & services agreement4,966 5,518 
Income taxes payable7,427 310 
Supplies and other store support expenses3,679 5,511 
Litigation settlements309 2,100 
Fair value of derivative liabilities 2,846 
Other18,498 13,245 
$100,878 $119,323 
(1) Includes the CARES Act deferred employer payroll taxes in the amount of $6.7 million as of October 1, 2022.
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In thousandsAs of
October 1, 2022
As of
January 1, 2022
Other non-current liabilities:
Fair value of derivative liabilities$ $488 
Self-insurance liabilities6,390 6,170 
Other2,555 2,316 
$8,945 $8,974 


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) such as LIBOR forward rates. See Note 5. “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 $1.3 million and $5.2 million during the three and nine months ended October 1, 2022, respectively, and no impairment and $1.5 million during the three and 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 market rates from 7.5% to 9.3%. 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 1, 2022 and October 2, 2021 was $5.5 million and $2.9 million, respectively; the estimated remaining fair values include amounts estimated at various dates during the related fiscal years. Substantially all of the remaining fair value of the impaired store assets 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 1, 2022. Refer to Note 4. “Long-term Debt” for more information on the 2025 Notes. The estimated fair value of the 2025 Notes was approximately $498.2 million and $674.9 million as of October 1, 2022 and January 1, 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 in the fair value hierarchy. Refer to Note 4. “Long-term Debt” for more information on the 2025 Notes.

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4. Long-term Debt

Long-term debt consists of the following:
In thousandsAs of
October 1, 2022
As of
January 1, 2022
2025 Notes, due May 15, 2025$402,497 $402,500 
Term loan, due July 18, 2024150,000 150,000 
Revolving credit facility, due July 18, 2024  
Long-term debt before debt discount552,497 552,500 
Unamortized discount and issuance costs - 2025 Notes(6,314)(7,986)
Unamortized discount and issuance costs - term loan(663)(948)
Long-term debt less debt discount545,520 543,566 
Less current maturities  
Long-term debt - non-current portion545,520 543,566 
Finance lease obligations22,635 26,514 
Less current maturities(3,975)(3,999)
Long-term debt and finance lease obligations, less current portion and debt discount$564,180 $566,081 
Credit Agreement
We were in compliance with all covenants related to our long-term debt as of October 1, 2022.
2025 Notes
We recognized the following in interest expense (income), net related to the 2025 Notes:
Three Months EndedNine Months Ended
In thousandsOctober 1, 2022October 2, 2021October 1, 2022October 2, 2021
Contractual interest expense $2,516 $2,516 $7,547 $7,547 
Amortization of issuance costs$599 $581 $1,679 $1,627 
As of October 1, 2022, the remaining period for the unamortized debt issuance costs balance was approximately three years. An immaterial amount of the principal balance of the 2025 Notes was converted during the nine months ended October 1, 2022.
As of October 1, 2022, the stock price conditions under which the 2025 Notes can be converted at the holders’ option were not met.

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. To manage credit risk associated with our interest rate hedging program, we select as counterparties major financial institutions with investment grade credit ratings. The aggregate notional amount of the interest rate collar, which is not designated as a cash flow hedge, was $350.0 million as of October 1, 2022. The fair value of our interest rate collar instrument was an asset of $14.2 million ($8.2 million in Prepaid expenses and other current assets and $6.0 million in Other assets) as of October 1, 2022, and a liability of $3.3 million ($2.8 million in Other payables and accrued expenses and $0.5 million in Other non-current liabilities) as of January 1, 2022. See Note 3. “Fair Value Measurement” for further details.
We recognized (gains) losses on the change in fair value of the interest rate collar of $(6.7) million and $(16.5) million during the three and nine months ended October 1, 2022, respectively, and $0.2 million and $(1.3) million during the three and nine months ended October 2, 2021, respectively, in interest expense (income), net. We recognized $1.5 million in interest expense (income), net during the nine months ended October 2, 2021 related to our interest rate swaps that were considered to be highly effective hedges and that matured during the nine months ended October 2, 2021.
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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 1, 2022 and October 2, 2021 related to derivatives not qualifying as hedges were included in the operating section of the Condensed Consolidated Statements of Cash Flows and were immaterial.
As of October 1, 2022 we expect to reclassify approximately $0.8 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 12. “Accumulated Other Comprehensive Loss” for more information about AOCL.

6. Stock Incentive Plans
During the nine months ended October 1, 2022, the Company granted 163,062 performance-based restricted stock units (“PSUs”) and 317,203 time-based restricted stock units (“RSUs”) to eligible employees and non-employee directors under the National Vision Holdings, Inc. 2017 Omnibus Incentive Plan (the “2017 Omnibus Incentive Plan”). The PSUs granted in fiscal 2022 are settled after the end of the performance period (i.e., cliff vesting), which begins on the first day of our 2022 fiscal year and ends on the last day of our 2024 fiscal year, and are based on the Company’s achievement of certain performance targets. The RSUs granted in fiscal 2022 vest primarily in three equal installments.

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 1, 2022October 2, 2021October 1, 2022October 2, 2021
Revenues recognized at a point in time$459,196 $473,449 $1,412,526 $1,471,856 
Revenues recognized over time40,011 44,556 123,947 129,818 
Total net revenue $499,207 $518,005 $1,536,473 $1,601,674 
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 consideration of $4.3 million and $2.4 million during the three months ended October 1, 2022 and October 2, 2021, respectively, and $10.0 million and $7.0 million during the nine months ended October 1, 2022 and October 2, 2021, 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.
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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, were $0.2 million and $0.3 million for the three months ended October 1, 2022 and October 2, 2021, respectively, as compared to $0.8 million and $0.6 million for the nine months ended October 1, 2022 and October 2, 2021, respectively.
Unsatisfied Performance Obligations (Contract Liabilities)
During the three months ended October 1, 2022 and October 2, 2021, we recognized $23.3 million and $24.6 million, respectively, of deferred revenues outstanding at the beginning of each respective period. During the nine months ended October 1, 2022 and October 2, 2021, we recognized $56.8 million and $50.4 million, respectively, of deferred revenues outstanding at the beginning of each respective period.
Our deferred revenue balance as of October 1, 2022 was $86.4 million. We expect future revenue recognition of this balance of $23.0 million, $46.5 million, $13.7 million, $3.1 million and $0.1 million in fiscal years 2022, 2023, 2024, 2025 and thereafter, respectively.

8. Leases

Our lease costs for the three and nine months ended October 1, 2022 and October 2, 2021 were as follows:
Three Months EndedNine Months Ended
In thousandsOctober 1, 2022October 2, 2021October 1, 2022October 2, 2021
Operating lease cost
Fixed lease cost (a)
$22,985 $21,035 $67,422 $62,589 
Variable lease cost (b)
8,215 7,976 24,568 22,894 
Sublease income (c)
(930)(866)(2,750)(2,695)
Finance lease cost
Amortization of finance lease assets1,025 1,113 3,186 3,349 
Interest on finance lease liabilities572 716 1,830 2,239 
Net lease cost$31,867 $29,974 $94,256 $88,376 
(a) Includes short-term leases, which are immaterial.
(b) Includes costs for insurance, real estate taxes and common area maintenance expenses, which are variable, as are lease costs above minimum thresholds for Fred Meyer stores and lease costs for Military stores.
(c) Income from sub-leasing of stores includes rental income from leasing space to independent optometrists.
Lease Term and Discount RateAs of
October 1, 2022
As of
January 1, 2022
Weighted average remaining lease term (months)
Operating leases7676
Finance leases6772
Weighted average discount rate (a)
Operating leases4.4 %4.5 %
Finance leases (b)
11.0 %11.7 %
(a) The discount rate used to determine the lease assets and lease liabilities was derived upon considering (i) incremental borrowing rates on our term loan and revolving credit facility; (ii) fixed rates on interest rate swaps; (iii) LIBOR margins for issuers of similar credit rating; and (iv) effect of collateralization. As a majority of our leases are five-year and 10-year leases, we determined a lease discount rate for such tenors and determined this discount rate is reasonable for leases that were entered into during the period.
(b) The discount rate on finance leases is higher than operating leases because the present value of minimum lease payments was higher than the fair value of leased properties for certain leases entered into prior to adoption of ASC 842. The discount rate differential for those leases is not material to our results of operations.
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In thousandsNine Months Ended
Other Information October 1, 2022October 2, 2021
Operating cash outflows - operating leases$71,859 $66,358 
Right of use assets acquired under operating leases$86,722 $64,260 
The following table summarizes the maturity of our lease liabilities as of October 1, 2022:
In thousands
Operating Leases (a)
Finance Leases (b)
Fiscal Year
2022