Delaware (State or other jurisdiction of incorporation or organization) | 46‑4841717 (I.R.S. Employer Identification No.) | |
2435 Commerce Ave, Building 2200 Duluth, Georgia (Address of principal executive offices) | 30096 (Zip Code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) | |
(770) 822‑3600 (Registrant’s telephone number, including area code) |
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.42 |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | Description |
National Vision Holdings, Inc. Press Release dated August 14, 2018. |
National Vision Holdings, Inc. | ||||
Date: August 14, 2018 | By: | /s/ Patrick R. Moore | ||
Name: | Patrick R. Moore | |||
Title: | Senior Vice President, Chief Financial Officer |
• | Net revenue increased 14.2% to $385.5 million |
• | Comparable store sales growth of 10.4%; Adjusted comparable store sales growth of 8.8% |
• | 66th consecutive quarter of positive comparable store sales growth |
• | Net income of $13.1 million; Adjusted net income increased 131.8% to $16.2 million |
• | Adjusted EBITDA increased 18.2% to $46.8 million. |
• | Diluted EPS of $0.17; Adjusted diluted EPS increased 68.0% to $0.21 |
• | Net revenue increased 14.2% to $385.5 million from $337.5 million for the second quarter of 2017. Net revenue growth was positively impacted by approximately 100 basis points by the timing of unearned revenue. |
• | Comparable store sales growth of 10.4% and adjusted comparable store sales growth of 8.8% were primarily driven by increases in customer transactions and, to a lesser extent, average ticket. |
• | The Company opened 25 new stores, closed two stores and ended the quarter with 1,050 stores. Overall, store count grew 7.1% from July 1, 2017 to June 30, 2018. |
• | As a result of changes in California law, in the third quarter of 2017, the Legacy segment began providing eye examination services that previously had been provided by FirstSight Vision Services, Inc. (“FirstSight”), the Company's HMO subsidiary, increasing Legacy comparable store sales growth by 195 basis points in the second quarter. Also, in the fourth quarter of 2017, FirstSight ceased the sale of vision care products in Walmart locations that were not operated by the Company, reducing its net revenue and associated costs by approximately $1.8 million, with an immaterial impact on income from operations. |
• | Costs applicable to revenue increased 13.2% to $177.1 million from $156.4 million for the second quarter of 2017. As a percentage of net revenue, costs applicable to revenue decreased 40 basis points to 45.9% from 46.3% for the second quarter of 2017. This decrease as a percentage of net revenue was primarily driven by a higher mix of eye exam sales as a result of our growing managed care business and an increased eyeglass sales mix, partially offset by higher optometrist costs. |
• | Selling, general and administrative expenses (“SG&A”) increased 14.1% to $165.0 million from $144.7 million for the second quarter of 2017. As a percentage of net revenue, SG&A decreased 10 basis points to 42.8% from 42.9% for the second quarter of 2017. This decrease as a percentage of net revenue was primarily driven by store payroll, partially offset by advertising expenses. |
• | Depreciation and amortization expense increased 18.6% to $17.3 million from $14.6 million for the second quarter of 2017, primarily driven by new store openings, as well as investments in optical laboratories, distribution centers and information technology infrastructure, including omni-channel platform related investments. |
• | Interest expense, net, decreased $5.2 million compared to the second quarter of 2017, primarily driven by a $4.5 million decrease resulting from the payoff of the $125.0 million in second lien term loans and $235.0 million in outstanding amount of first lien term loans during the fourth quarter of 2017. |
• | The effective tax rate was 20.1% for the second quarter of 2018, which reflects the reduced federal statutory rate as part of the Tax Cuts and Jobs Act of 2017 as well as an 8.4% reduction due to a $1.4 million income tax benefit resulting from stock option exercises. |
• | Net income was $13.1 million compared to a net loss of $1.5 million for the second quarter of 2017. Net margin increased 380 basis points to 3.4% from a 0.4% decline for the second quarter of 2017. Diluted EPS was $0.17 compared to $0.03 loss per share for the second quarter of 2017. |
• | Adjusted net income increased 131.8% to $16.2 million compared to $7.0 million for the second quarter of 2017. Adjusted diluted EPS increased 68.0% to $0.21 per diluted share compared to $0.12 per diluted share for the second quarter of 2017. |
• | Adjusted EBITDA increased 18.2% to $46.8 million compared to $39.6 million for the second quarter of 2017. Adjusted EBITDA growth benefited 630 basis points from the net change in margin on unearned revenue. Adjusted EBITDA margin increased 40 basis points to 12.1% from 11.7% for the second quarter of 2017. |
• | Net revenue increased 12.2% to $793.5 million from $707.4 million for the same period of 2017. |
• | Comparable store sales growth of 7.5% and adjusted comparable store sales growth of 6.5% were primarily driven by increases in customer transactions and, to a lesser extent, average ticket. |
• | The Company opened 40 new stores, closed three stores and ended the period with 1,050 stores. Overall, store count grew 7.1% from July 1, 2017 to June 30, 2018. |
• | As a result of changes in California law, in the third quarter of 2017, the Legacy segment began providing eye examination services that previously had been provided by FirstSight, increasing Legacy comparable store sales growth by 200 basis points. Also, in the fourth quarter of 2017, FirstSight ceased the sale of vision care products in Walmart locations that are not operated by the Company, reducing its net revenue and associated costs by approximately $3.6 million, with an immaterial impact on income from operations. |
• | Costs applicable to revenue increased 11.0% to $357.5 million from $322.2 million for the same period of 2017. As a percentage of net revenue, costs applicable to revenue decreased 40 basis points to 45.1% from 45.5% for the same period of 2017. This decrease as a percentage of net revenue was primarily driven by a higher mix of exam sales as a result of the growing managed care business and a $2.3 million inventory write-off in the same period of 2017, partially offset by higher optometrist costs. |
• | SG&A increased 13.8% to $335.1 million from $294.5 million for the same period of 2017. As a percentage of net revenue, SG&A increased 60 basis points to 42.2% from 41.6% for the same period of 2017. This increase as a percentage of net revenue was primarily driven by advertising expenses. |
• | Depreciation and amortization expense increased 20.5% to $35.0 million from $29.1 million for the same period of 2017, primarily driven by new store openings, as well as investments in optical laboratories, distribution centers and information technology infrastructure, including omni-channel platform related investments. |
• | Interest expense, net, decreased $7.4 million compared to the same period of 2017, primarily driven by a $8.9 million decrease resulting from the payoff of the $125.0 million in second lien term loans and $235.0 million in outstanding amount of first lien term loans during the fourth quarter of fiscal year 2017, partially offset by approximately $2.2 million in interest paid to counterparties associated with the Company's derivative cash flow hedges. |
• | The effective tax rate was 18.4% compared to 36.9% for the same period of 2017. The decrease in the effective tax rate was primarily due to the reduced federal statutory rate as part of the Tax Cuts and Jobs Act of 2017 as well as an 8.7% reduction due to a $4.1 million income tax benefit resulting from stock option exercises. |
• | Net income was $38.1 million compared to $15.6 million for the same period of 2017. Net margin increased 260 basis points to 4.8% from 2.2% for the same period of 2017. Diluted EPS was $0.49 compared to $0.27 for the same period of 2017. |
• | Adjusted net income increased 42.3% to $43.0 million compared to $30.2 million for the same period of 2017. Adjusted diluted EPS increased 6.6% to $0.55 per diluted share compared to $0.52 per diluted share for the same period of 2017. |
• | Adjusted EBITDA increased 9.5% to $107.9 million compared to $98.5 million for the same period of 2017. Adjusted EBITDA margin declined 30 basis points to 13.6% from 13.9% for the same period of 2017. The decline in adjusted EBITDA margin was primarily due to higher optometrist costs, advertising, and public company expenses. |
• | The Company’s cash balance was $34.6 million as of June 30, 2018. The Company had no borrowings under its $100 million first lien revolving credit facility, exclusive of letters of credit of $5.5 million. |
• | Total debt was $574.3 million as of June 30, 2018, consisting of outstanding first lien term loans and capital lease obligations. |
• | Cash flows from operating activities for the first six months of 2018 were $80.1 million compared to $67.9 million for the same period of 2017. |
• | Capital expenditures for the first six months of 2018 totaled $48.7 million compared to $44.2 million for the same period of 2017. |
Fiscal 2018 Outlook | |
New Stores | ~75 |
Adjusted Comparable Store Sales Growth | 3 - 5% |
Net Revenue | $1.485 - $1.515 billion |
Adjusted EBITDA | $172 - $177 million |
Adjusted Net Income | $52 - $56 million |
Depreciation and Amortization | $72 - $73 million |
Interest | $37 - $38 million |
Tax Rate (1) | ~26.0% |
Capital Expenditures | $100 - $105 million |
(1) Excluding the impact of stock option exercises |
ASSETS | As of June 30, 2018 | As of December 30, 2017 | |||||
Current assets: | |||||||
Cash and cash equivalents | $ | 34,642 | $ | 4,208 | |||
Accounts receivable, net | 45,075 | 43,193 | |||||
Inventories | 94,909 | 91,151 | |||||
Prepaid expenses and other current assets | 24,803 | 23,925 | |||||
Total current assets | 199,429 | 162,477 | |||||
Property and equipment, net | 328,035 | 304,132 | |||||
Other assets: | |||||||
Goodwill | 792,744 | 792,744 | |||||
Trademarks and trade names | 240,547 | 240,547 | |||||
Other intangible assets, net | 68,716 | 72,903 | |||||
Other assets | 9,970 | 10,988 | |||||
Total non-current assets | 1,440,012 | 1,421,314 | |||||
Total assets | $ | 1,639,441 | $ | 1,583,791 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 32,784 | $ | 35,708 | |||
Other payables and accrued expenses | 72,405 | 77,611 | |||||
Unearned revenue | 23,160 | 27,739 | |||||
Deferred revenue | 53,221 | 62,993 | |||||
Current maturities of long-term debt | 7,694 | 7,258 | |||||
Total current liabilities | 189,264 | 211,309 | |||||
Long-term debt, less current portion and debt discount | 566,565 | 561,980 | |||||
Other non-current liabilities: | |||||||
Deferred revenue | 20,496 | 31,222 | |||||
Other liabilities | 42,294 | 46,044 | |||||
Deferred income taxes, net | 91,235 | 73,648 | |||||
Total other non-current liabilities | 154,025 | 150,914 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Common stock, $0.01 par value; 200,000 shares authorized; 75,334 and 74,654 shares issued and outstanding as of June 30, 2018 and December 30, 2017, respectively | 753 | 746 | |||||
Additional paid-in capital | 638,377 | 631,798 | |||||
Accumulated other comprehensive loss | (2,746 | ) | (9,868 | ) | |||
Retained earnings | 94,296 | 37,145 | |||||
Treasury stock, at cost; 53 and 28 shares as of June 30, 2018 and December 30, 2017, respectively | (1,093 | ) | (233 | ) | |||
Total stockholders’ equity | 729,587 | 659,588 | |||||
Total liabilities and stockholders’ equity | $ | 1,639,441 | $ | 1,583,791 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, 2018 | July 1, 2017 | June 30, 2018 | July 1, 2017 | ||||||||||||
Revenue: | |||||||||||||||
Net product sales | $ | 319,408 | $ | 276,960 | $ | 658,185 | $ | 583,544 | |||||||
Net sales of services and plans | 66,124 | 60,581 | 135,322 | 123,856 | |||||||||||
Total net revenue | 385,532 | 337,541 | 793,507 | 707,400 | |||||||||||
Costs applicable to revenue (exclusive of depreciation and amortization): | |||||||||||||||
Products | 127,731 | 112,314 | 258,609 | 233,347 | |||||||||||
Services and plans | 49,328 | 44,094 | 98,904 | 88,869 | |||||||||||
Total costs applicable to revenue | 177,059 | 156,408 | 357,513 | 322,216 | |||||||||||
Operating expenses: | |||||||||||||||
Selling, general and administrative expenses | 165,038 | 144,655 | 335,140 | 294,459 | |||||||||||
Depreciation and amortization | 17,346 | 14,629 | 35,000 | 29,052 | |||||||||||
Asset impairment | — | 1,000 | — | 1,000 | |||||||||||
Litigation settlement | — | 7,000 | — | 7,000 | |||||||||||
Other expense, net | 296 | 77 | 418 | 179 | |||||||||||
Total operating expenses | 182,680 | 167,361 | 370,558 | 331,690 | |||||||||||
Income from operations | 25,793 | 13,772 | 65,436 | 53,494 | |||||||||||
Interest expense, net | 9,424 | 14,622 | 18,737 | 26,114 | |||||||||||
Debt issuance costs | — | — | — | 2,702 | |||||||||||
Earnings (loss) before income taxes | 16,369 | (850 | ) | 46,699 | 24,678 | ||||||||||
Income tax provision | 3,292 | 646 | 8,575 | 9,104 | |||||||||||
Net income (loss) | $ | 13,077 | $ | (1,496 | ) | $ | 38,124 | $ | 15,574 | ||||||
Earnings (loss) per share: | |||||||||||||||
Basic | $ | 0.17 | $ | (0.03 | ) | $ | 0.51 | $ | 0.28 | ||||||
Diluted | $ | 0.17 | $ | (0.03 | ) | $ | 0.49 | $ | 0.27 | ||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 75,249 | 56,414 | 74,983 | 56,337 | |||||||||||
Diluted | 77,858 | 56,414 | 77,879 | 58,339 | |||||||||||
Comprehensive income (loss): | |||||||||||||||
Net income (loss) | $ | 13,077 | $ | (1,496 | ) | $ | 38,124 | $ | 15,574 | ||||||
Change in unrealized gain (loss) on hedge instruments | 3,359 | 251 | 9,575 | (79 | ) | ||||||||||
Tax (provision) benefit of change in unrealized gain (loss) on hedge instruments | (861 | ) | (96) | (2,453 | ) | 30 | |||||||||
Comprehensive income (loss) | $ | 15,575 | $ | (1,341 | ) | $ | 45,246 | $ | 15,525 |
Six Months Ended | |||||||
June 30, 2018 | July 1, 2017 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 38,124 | $ | 15,574 | |||
Adjustments to reconcile net income to cash provided by operating activities: | |||||||
Depreciation of property and equipment | 30,814 | 24,835 | |||||
Amortization of intangible assets | 4,186 | 4,217 | |||||
Amortization of loan costs | 858 | 2,042 | |||||
Asset impairment | — | 1,000 | |||||
Deferred income tax expense | 8,377 | 8,765 | |||||
Non-cash stock option compensation | 3,120 | 1,989 | |||||
Non-cash inventory adjustments | 1,322 | 3,880 | |||||
Bad debt expense | 3,349 | 2,572 | |||||
Debt issuance costs | — | 2,702 | |||||
Other | 737 | 68 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (5,231 | ) | (6,358 | ) | |||
Inventories | (5,080 | ) | (6,192 | ) | |||
Other assets | (599 | ) | 1,792 | ||||
Accounts payable | (2,924 | ) | (4,967 | ) | |||
Deferred revenue | 5,278 | 7,576 | |||||
Other liabilities | (2,196 | ) | 8,438 | ||||
Net cash provided by operating activities | 80,135 | 67,933 | |||||
Cash flows from investing activities: | |||||||
Purchase of property and equipment | (48,684 | ) | (44,219 | ) | |||
Other | 116 | 84 | |||||
Net cash used for investing activities | (48,568 | ) | (44,135 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from issuance of long-term debt | — | 173,712 | |||||
Proceeds from exercise of stock options | 3,530 | 1,088 | |||||
Principal payments on long-term debt | (2,850 | ) | (4,157 | ) | |||
Purchase of treasury stock | (860 | ) | — | ||||
Payments on capital lease obligations | (759 | ) | (424 | ) | |||
Debt issuance costs | — | (2,702 | ) | ||||
Dividend to stockholders | — | (170,983 | ) | ||||
Net cash used for financing activities | (939 | ) | (3,466 | ) | |||
Net change in cash, cash equivalents and restricted cash | 30,628 | 20,332 | |||||
Cash, cash equivalents and restricted cash, beginning of year | 5,193 | 5,687 | |||||
Cash, cash equivalents and restricted cash, end of period | $ | 35,821 | $ | 26,019 |
Six Months Ended | |||||||
June 30, 2018 | July 1, 2017 | ||||||
Cash and cash equivalents | $ | 34,642 | $ | 24,864 | |||
Restricted cash included in other assets | 1,179 | 1,155 | |||||
Total cash, cash equivalents and restricted cash | $ | 35,821 | $ | 26,019 |
Three Months Ended | Six Months Ended | |||||||||||||||||||
In thousands | June 30, 2018 | July 1, 2017 | June 30, 2018 | July 1, 2017 | ||||||||||||||||
Net income (loss) | $ | 13,077 | 3.4% | $ | (1,496 | ) | (0.4)% | $ | 38,124 | 4.8% | $ | 15,574 | 2.2% | |||||||
Interest expense | 9,424 | 2.4% | 14,622 | 4.3% | 18,737 | 2.4% | 26,114 | 3.7% | ||||||||||||
Income tax provision | 3,292 | 0.9% | 646 | 0.2% | 8,575 | 1.1% | 9,104 | 1.3% | ||||||||||||
Depreciation and amortization | 17,346 | 4.5% | 14,629 | 4.3% | 35,000 | 4.4% | 29,052 | 4.1% | ||||||||||||
EBITDA | 43,139 | 11.2 | % | 28,401 | 8.4% | 100,436 | 12.7% | 79,844 | 11.3% | |||||||||||
Stock compensation expense (a) | 1,524 | 0.4% | 885 | 0.3% | 3,120 | 0.4% | 1,989 | 0.3% | ||||||||||||
Debt issuance costs (b) | — | —% | — | —% | — | —% | 2,702 | 0.4% | ||||||||||||
Asset impairment (c) | — | —% | 1,000 | 0.3% | — | —% | 1,000 | 0.1% | ||||||||||||
Non-cash inventory write-offs (d) | — | —% | 256 | 0.1% | — | —% | 2,271 | 0.1% | ||||||||||||
Management fees (e) | — | —% | 290 | 0.1% | — | —% | 574 | 0.1% | ||||||||||||
New store pre-opening expenses (f) | 756 | 0.2% | 660 | 0.2% | 1,230 | 0.2% | 1,278 | 0.2% | ||||||||||||
Non-cash rent (g) | 508 | 0.1% | 296 | 0.1% | 808 | 0.1% | 654 | 0.1% | ||||||||||||
Litigation settlement (h) | — | —% | 7,000 | 2.1% | — | —% | 7,000 | 1.0% | ||||||||||||
Secondary offering expenses (i) | 177 | —% | — | —% | 1,140 | 0.1% | — | 1.0% | ||||||||||||
Other (j) | 726 | 0.2% | 831 | 0.2% | 1,185 | 0.3% | 1,213 | 0.2% | ||||||||||||
Adjusted EBITDA/ Adjusted EBITDA Margin | $ | 46,830 | 12.1% | $ | 39,619 | 11.7% | $ | 107,919 | 13.6% | $ | 98,525 | 13.9% | ||||||||
Note: Percentages reflect line item as a percentage of net revenue |
Three Months Ended | Six Months Ended | ||||||||||||||
In thousands | June 30, 2018 | July 1, 2017 | June 30, 2018 | July 1, 2017 | |||||||||||
Net income (loss) | $ | 13,077 | $ | (1,496 | ) | $ | 38,124 | $ | 15,574 | ||||||
Stock compensation expense (a) | 1,524 | 885 | 3,120 | 1,989 | |||||||||||
Debt issuance costs (b) | — | — | — | 2,702 | |||||||||||
Asset impairment (c) | — | 1,000 | — | 1,000 | |||||||||||
Non-cash inventory write-offs (d) | — | 256 | — | 2,271 | |||||||||||
Management fees (e) | — | 290 | — | 574 | |||||||||||
New store pre-opening expenses (f) | 756 | 660 | 1,230 | 1,278 | |||||||||||
Non-cash rent (g) | 508 | 296 | 808 | 654 | |||||||||||
Litigation settlement (h) | — | 7,000 | — | 7,000 | |||||||||||
Secondary offering expenses (i) | 177 | — | 1,140 | — | |||||||||||
Other (j) | 726 | 831 | 1,185 | 1,213 | |||||||||||
Amortization of acquisition intangibles and deferred financing costs (k) | 2,281 | 2,885 | 4,562 | 5,744 | |||||||||||
Tax benefit of stock option exercises (l) | (1,371 | ) | — | (4,066 | ) | — | |||||||||
Tax effect of total adjustments (m) | (1,528 | ) | (5,641 | ) | (3,083 | ) | (9,770 | ) | |||||||
Adjusted Net Income | $ | 16,150 | $ | 6,966 | $ | 43,020 | $ | 30,229 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, 2018 | July 1, 2017 | June 30, 2018 | July 1, 2017 | ||||||||||||
Diluted EPS | $ | 0.17 | $ | (0.03 | ) | $ | 0.49 | $ | 0.27 | ||||||
Stock compensation expense (a) | 0.02 | 0.02 | 0.04 | 0.03 | |||||||||||
Debt issuance costs (b) | — | — | — | 0.05 | |||||||||||
Asset impairment (c) | — | 0.02 | — | 0.02 | |||||||||||
Non-cash inventory write-offs (d) | — | — | — | 0.04 | |||||||||||
Management fees (e) | — | 0.01 | — | 0.01 | |||||||||||
New store pre-opening expenses (f) | 0.01 | 0.01 | 0.02 | 0.02 | |||||||||||
Non-cash rent (g) | 0.01 | 0.01 | 0.01 | 0.01 | |||||||||||
Litigation settlement (h) | — | 0.12 | — | 0.12 | |||||||||||
Secondary offering expenses (i) | — | — | 0.01 | — | |||||||||||
Other (j) | 0.01 | 0.01 | 0.02 | 0.02 | |||||||||||
Amortization of acquisition intangibles and deferred financing costs (k) | 0.03 | 0.05 | 0.06 | 0.10 | |||||||||||
Tax benefit of stock option exercises (l) | (0.02 | ) | — | (0.05 | ) | — | |||||||||
Tax effect of total adjustments (m) | (0.02 | ) | (0.10 | ) | (0.04 | ) | (0.17 | ) | |||||||
Adjusted Diluted EPS | $ | 0.21 | $ | 0.12 | $ | 0.55 | $ | 0.52 | |||||||
Weighted average diluted shares outstanding | 77,858 | 56,414 | 77,879 | 58,339 | |||||||||||
Note: Some of the totals in the table above do not foot due to rounding differences |
(a) | Non-cash charges related to stock-based compensation programs, which vary from period to period depending on the timing of awards. |
(b) | Fees associated with the borrowing of $175.0 million in additional principal under our first lien credit agreement during the first quarter of 2017. |
(c) | Non-cash charges related to impairment of long-lived assets, primarily the complete write-off of a cost based investment. |
(d) | Reflects write-offs of inventory relating to the expiration of a specific type of contact lenses that could not be sold and required disposal. |
(e) | Reflects management fees paid to Kohlberg Kravis Roberts & Co. L.P. ("KKR") and Berkshire Partners LLC ("Berkshire") in accordance with our monitoring agreement with them. The monitoring agreement was terminated automatically in accordance with its terms upon the consummation of the initial public offering (the "IPO") in October 2017. |
(f) | Pre-opening expenses, which include marketing and advertising, labor and occupancy expenses incurred prior to opening a new store, are generally higher than comparable expenses incurred once such store is open and generating revenue. We believe that such higher pre-opening expenses are specific in nature and amount to opening a new store and as such, are not indicative of ongoing core operating performance. We adjust for these costs to facilitate comparisons of store operating performance from period to period. Pre-opening costs are permitted exclusions in our calculation of Adjusted EBITDA pursuant to the terms of our existing credit agreements. |
(g) | Consists of the non-cash portion of rent expense, which reflects the extent to which our straight-line rent expense recognized under GAAP exceeds or is less than our cash rent payments. |
(h) | Amounts accrued related to settlement of litigation. See Note 7. “Commitments and Contingencies “ in our unaudited condensed consolidated financial statements included in Part I. Item 1. of our quarterly report on Form 10-Q. |
(i) | Expenses related to our secondary public offerings for the three and six months ended June 30, 2018. |
(j) | Other adjustments include amounts that management believes are not representative of our operating performance, including our share of losses on equity method investments of $0.4 million, $0.2 million, $0.6 million and $0.3 million for the three months ended June 30, 2018 and July 1, 2017 and six months ended June 30, 2018 and July 1, 2017, respectively; the amortization impact of adjustments related to the acquisition of the Company by affiliates of KKR in March 2014 (the "KKR Acquisition") (e.g., fair value of leasehold interests) of $52,000, $(72,000), $69,000, and $(0.2) million for the three months ended June 30, 2018 and July 1, 2017 and the six months ended June 30, 2018 and July 1, 2017, respectively; expenses related to preparation for being an SEC registrant that were not directly attributable to the IPO and therefore not charged to equity of $0.7 million and $1.2 million for the three and six months ended July 1, 2017; differences between the timing of expense versus cash payments related to contributions to charitable organizations of $(0.3) million for each of the three months ended June 30, 2018 and July 1, 2017 and $(0.5) million for each of the six months ended June 30, 2018 and July 1, 2017, respectively; costs of severance and relocation of $0.3 million for each of the three months ended June 30, 2018 and July 1, 2017 and, $0.5 million and $0.3 million for the six months ended June 30, 2018 and July 1, 2017 respectively; and other expenses and adjustments totaling $0.2 million for the three months ended June 30, 2018 and $0.5 million and $71,000 for the six months ended June 30, 2018 and July 1, 2017, respectively. |
(k) | Amortization of acquisition intangibles related to the increase in the carrying values of intangible assets as a result of the KKR Acquisition of $1.9 million for each of the three months ended June 30, 2018 and July 1, 2017 and $3.7 million for each of the six months ended June 30, 2018 and July 1, 2017. Amortization of deferred financing costs is primarily associated with the March 2014 term loan borrowings in connection with the KKR Acquisition and, to a lesser extent, amortization of deferred loan discount costs associated with the May 2015 and February 2017 incremental first lien term loans and the November 2017 first lien term loan refinancing, aggregating to $0.4 million, $1.0 million, $0.8 million and $2.0 million for the three months ended June 30, 2018 and July 1, 2017 and six months ended June 30, 2018 and July 1, 2017, respectively. |
(l) | Tax benefit associated with accounting guidance adopted at the beginning of fiscal year 2017 (Accounting Standards Update 2016-09, Compensation - Stock Compensation), requiring excess tax benefits to be recorded in earnings as discrete items in the reporting period in which they occur. |
(m) | Represents the tax effect of the total adjustments at our estimated annual effective tax rate. |
Comparable store sales growth (a) | |||||||||||||
Three Months Ended June 30, 2018 | Three Months Ended July 1, 2017 | Six Months Ended June 30, 2018 | Six Months Ended July 1, 2017 | 2018 Outlook | |||||||||
Owned & host segment | |||||||||||||
America’s Best | 10.2 | % | 12.2 | % | 7.2 | % | 9.3 | % | |||||
Eyeglass World | 9.5 | % | 9.2 | % | 7.8 | % | 6.3 | % | |||||
Military | (5.2 | )% | (5.9 | )% | (1.1 | )% | (7.1 | )% | |||||
Fred Meyer | 5.2 | % | (2.2 | )% | 5.6 | % | (3.4 | )% | |||||
Legacy segment | 4.4 | % | 0.9 | % | 3.8 | % | (1.1 | )% | |||||
Total comparable store sales growth | 10.4 | % | 8.5 | % | 7.5 | % | 7.0 | % | 3.5 - 5.5% | ||||
Adjusted comparable store sales growth(b) | 8.8 | % | 9.1 | % | 6.5 | % | 6.5 | % | 3 - 5% |
(a) | Total comparable store sales calculated based on consolidated net revenue excluding the impact of (i) corporate/other segment net revenue, (ii) sales from stores opened less than 12 months, (iii) stores closed in the periods presented, (iv) sales from partial months of operation when stores do not open or close on the first day of the month, and (v) if applicable, the impact of a 53rd week in a fiscal year. Comparable store sales growth for America's Best, Eyeglass World, Military, and Fred Meyer is calculated based on cash basis revenues consistent with what the Chief Operating Decision Maker reviews, and consistent with reportable segment revenues presented in Note 8. "Segment Reporting" in our condensed consolidated financial statements included in Part I. Item 1. of our quarterly report on Form 10-Q, with the exception of the legacy segment, which is adjusted as noted in (b) (ii) below. |
(b) | There are two differences between total comparable store sales growth based on consolidated net revenue and adjusted comparable store sales growth: (i) adjusted comparable store sales growth includes the effect of deferred and unearned revenue as if such revenues were earned at the point of sale, resulting in a decrease of 1.5% and an increase of 0.8% from total comparable store sales growth based on consolidated net revenue for the three months ended June 30, 2018 and July 1, 2017, respectively, and a decrease of 1.0% and 0.1% from total comparable store sales growth based on consolidated net revenue for the six months ended June 30, 2018 and July 1, 2017, respectively, and (ii) adjusted comparable store sales growth includes retail sales to the legacy partner’s customers (rather than the revenues recognized consistent with the management and services agreement), resulting in a decrease of 0.1% and 0.2% from total comparable store sales growth based on consolidated net revenue for the three months ended June 30, 2018 and July 1, 2017, respectively, and a decrease of 0.4% from total comparable store sales growth based on consolidated net revenue for the the six months ended July 1, 2017. |