On July 20, 2023, the Company received a notice of non-renewal from Walmart Inc. (“Walmart”) of the Management & Services Agreement by and between NVI and Walmart, dated as of May 1, 2012 (as amended, supplemented or otherwise modified from time to time, the “Walmart MSA”). In accordance with the terms of the Walmart MSA and the notice, the agreement terminated as of February 23, 2024 (the “Termination Date”). In connection with the termination of the Walmart MSA, the Amended and Restated Supplier Agreement between NVI and Walmart, dated as of January 17, 2017 (the “Walmart Supplier Agreement”), and certain other related agreements also terminated as of the Termination Date. The Walmart MSA includes provisions governing the transition period and post-termination obligations of the parties.

In connection with the termination of the Walmart MSA, the agreement between FirstSight Vision Services, Inc. (“FirstSight”), a wholly-owned subsidiary of the Company, and Walmart, which arranged for the provision by FirstSight of optometric services at optometric offices next to certain Walmart stores throughout California, also terminated as of the Termination Date. Additionally, another wholly-owned subsidiary of the Company, Arlington Contacts Lens Service, Inc. (“AC Lens”), has delivered notices of non-renewal of the agreements it has with Walmart and its affiliate Sam’s Club regarding wholesale contact lenses distribution and related services, such that these agreements will terminate as of June 30, 2024, unless an earlier date is agreed by the parties, and the Company will wind down its remaining AC Lens operations, including the closure of its Ohio distribution center, which largely supported the wholesale distribution and e-commerce contact lens services that the Company provided to Walmart and Sam’s Club. Additionally, in view of the termination of the Walmart MSA and impending wind down of AC Lens operations, the Company took actions in fiscal year 2023 to streamline corporate overhead including optimizing non-customer facing labor costs, as well as reducing travel expenses and third-party spend.

We determined that the various terminations of agreements described above as well as the subsequent decision to consolidate our distribution network and close the distribution center in Ohio constituted triggering events, and accordingly, performed impairment tests during the year ended December 30, 2023 on assets related to the Walmart partnership. We used the discounted cash flow method of the income approach in our analyses and considered projected cash flows for the remaining terms of the various agreements and other costs related to the termination of the Walmart partnership, and used discount rates between 7.8% and 10.0% depending on the asset or asset group being valued. A decrease in the estimated cash flows would lead to a lower fair value measurement, as would an increase in the discount rate. These non-recurring fair value measurements are classified as Level 3 measurements in the fair value hierarchy. The impairment charges recognized during the year ended December 30, 2023 resulting from the termination of the Walmart partnership include $60.1 million related to goodwill of the Legacy segment, $9.1 million related to the Walmart contracts and relationship intangible asset, and $10.5 million related to property and equipment at Walmart stores and associated with our AC Lens business. These expenses were recognized in Corporate/Other, and the impairment charges are reflected in Asset impairment in the Consolidated Statements of Operations and Comprehensive Income. The assets impaired during the year ended December 30, 2023 as a result of the termination of the Walmart partnership were written down to their fair values totaling $1.5 million as of the respective valuation dates. We adjusted the useful lives of the impaired intangible and fixed assets to be aligned with the respective contract termination dates. The impairment testing date for (i) goodwill related to the Legacy segment, (ii) the Walmart contracts and relationships intangible asset and (iii) property and equipment located in Walmart stores was contemporaneous with the date that we received notice of non-renewal from Walmart. Other assets related to the AC Lens operations and Walmart partnership were tested at various dates during the third and fourth quarters. We did not impair certain assets that we believe can be sold or used in other stores in our Owned & Host segment after the Termination Date. We determined that all long-lived Walmart and AC Lens assets were held and used as of December 30, 2023 and were not available for immediate sale. Refer to the Note 1. “Description of Business and Basis of Presentation” for more details on our impairment testing.

During the year ended December 30, 2023, we recognized $0.6 million in Costs of services and plans and $5.1 million in Selling, general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income, in the Corporate/Other category, related to retention bonus programs implemented for certain associates to ensure continuity of business, as well as termination benefits for certain associates that have occurred and are probable to occur within the next 12 months. Of the amounts recorded in Selling, general and administrative expenses, $1.5 million is related to termination benefits for associates affected by the actions taken to streamline corporate overhead. The liability for employee compensation benefits is recorded in Other payables and accrued expenses in the Consolidated Balance Sheets.