National Vision’s comparable store sales fell sharply in March as it temporarily closed stores due to the Covid-19 pandemic. The company is issuing a $350 million convertible note to refinance its debt.

National Vision’s net revenues increased by 1.8 percent year-on-year to $469.7 million in the first quarter of 2020, benefiting from a 6.0 percentage point uplift by the timing of unearned revenues, while comparable store sales declined by 2.9 percent and adjusted comparable store sales fell by 10.3 percent. Over the period, contact lens revenue growth outpaced eyeglasses.

In the first two months of the year, comparable store sales growth was 5.6 percent but with the closure of stores on the 19th, March same-store sales fell by 18.8 percent. On an adjusted basis, comparable store sales rose by 5.7 percent in the first two months and plummeted by 41.5 percent in March. The company had 1,173 stores at the end of March, up by 22 from 1,151 three months earlier. It put a halt to store openings at the end of March.

Net income decreased by 44.1 percent to $9.7 million. Cash flow from operating activities for the first quarter was $86.1 million compared to $83.0 million a year earlier.

Capital expenditure was slashed to $13.1 million from $26.0 million in the first quarter of 2019, primarily due to the planned timing and postponement of capital projects.

Launches $350 million convertible note

National Vision launched a private offering for $350.0 million of convertible senior notes. It granted to the initial buyers an option to purchase up to an additional $52.5 million.The offering is expected to close on May 12.

The notes will pay interest semi-annually on May 15 and November 15 at an annual rate of 2.50 percent, commencing on November 15, 2020. They will mature on May 15, 2025, unless earlier converted, redeemed or repurchased. The company will have the option to redeem the notes at any time from May 22, 2023 and on or before the 40th scheduled trading day immediately before the maturity date.

The notes will be convertible based on an initial rate of 32.0783 shares of the company’s common stock per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $31.17, which represents a 27.5 percent premium to the last price of $24.45 per share of National Vision’s common stock on the Nasdaq Global Select Market on May 7.

The company estimates net proceeds to be $339.5 million, or $390.6 million if the option for additional notes is fully exercised. It expects to use the net proceeds to repay $75.0 million of outstanding term loans and $264.5 million of the outstanding revolving loans under its credit facilities. If the option is exercised, the company intends to repay the remaining $29.8 million of the outstanding revolving loans and use any remainder for general corporate purposes.