PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Academy Sports and Outdoors, Inc., along with detailed notes on accounting and financial items [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of July 30, 2022, total assets were $4.65 billion, with merchandise inventories increasing and cash decreasing, while liabilities remained stable and equity grew Consolidated Balance Sheet Highlights (in thousands) | Account | July 30, 2022 | Jan 29, 2022 | July 31, 2021 | | :--- | :--- | :--- | :--- | | **Total Assets** | **$4,653,969** | **$4,584,940** | **$4,634,027** | | Cash and cash equivalents | $399,857 | $485,998 | $553,825 | | Merchandise inventories, net | $1,304,556 | $1,171,808 | $1,115,020 | | **Total Liabilities** | **$3,132,698** | **$3,117,994** | **$3,186,409** | | Accounts payable | $778,016 | $737,826 | $816,427 | | Long-term debt, net | $683,065 | $683,585 | $684,103 | | **Total Stockholders' Equity** | **$1,521,271** | **$1,466,946** | **$1,447,618** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) For Q2 2022, net sales decreased to $1.69 billion, net income remained flat at $188.8 million, while diluted EPS increased to $2.22 due to share reduction Consolidated Income Statement Summary (in thousands, except per share data) | Metric | Thirteen Weeks Ended July 30, 2022 | Thirteen Weeks Ended July 31, 2021 | Twenty-Six Weeks Ended July 30, 2022 | Twenty-Six Weeks Ended July 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,686,915 | $1,791,530 | $3,154,645 | $3,371,863 | | Gross Margin | $596,063 | $642,496 | $1,117,487 | $1,206,197 | | Operating Income | $256,734 | $254,558 | $462,227 | $493,632 | | Net Income | $188,801 | $190,510 | $338,607 | $368,306 | | Diluted EPS | $2.22 | $1.99 | $3.90 | $3.82 | | Diluted Shares | 84,906 | 95,891 | 86,792 | 96,391 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow decreased to $258.4 million, while financing cash outflow increased to $296.4 million due to stock repurchases, resulting in a net cash decrease of $86.1 million Cash Flow Summary (in thousands) | Cash Flow Activity | Twenty-Six Weeks Ended July 30, 2022 | Twenty-Six Weeks Ended July 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $258,406 | $405,674 | | Net cash used in investing activities | ($48,134) | ($33,767) | | Net cash used in financing activities | ($296,413) | ($195,686) | | **Net (decrease) increase in cash** | **($86,141)** | **$176,221** | - The primary use of cash in financing activities was the repurchase of common stock for retirement, amounting to **$288.6 million** in the first half of 2022, compared to **$100.0 million** in the same period of 2021[16](index=16&type=chunk) [Condensed Notes to Consolidated Financial Statements](index=9&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements) These notes detail the company's operations, accounting policies, share repurchase programs, sales breakdown, debt structure, and subsequent events like dividends - As of July 30, 2022, the company operated **261** "Academy Sports + Outdoors" retail locations in 16 states and three distribution centers[20](index=20&type=chunk) - On June 2, 2022, the Board authorized a new share repurchase program for up to **$600 million**, with approximately **$500.2 million** remaining available as of July 30, 2022[29](index=29&type=chunk)[30](index=30&type=chunk) Net Sales by Merchandise Division (in thousands) | Merchandise Division | Thirteen Weeks Ended July 30, 2022 | Thirteen Weeks Ended July 31, 2021 | | :--- | :--- | :--- | | Outdoors | $492,804 | $539,497 | | Sports and recreation | $400,244 | $410,491 | | Apparel | $463,729 | $493,471 | | Footwear | $322,558 | $337,290 | | **Total Merchandise Sales** | **$1,679,335** | **$1,780,749** | - E-commerce sales grew to **10.0%** of merchandise sales for the thirteen weeks ended July 30, 2022, up from **8.4%** in the prior-year period[34](index=34&type=chunk) - On September 1, 2022, the Board of Directors declared a quarterly cash dividend of **$0.075 per share**, payable on October 13, 2022[72](index=72&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 and H1 2022 financial performance, highlighting decreased sales against a strong prior year, gross margin pressures, SG&A management, non-GAAP measures, liquidity, and share repurchases [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Q2 2022 net sales decreased 5.8% to $1.69 billion, and H1 sales decreased 6.4% to $3.15 billion, primarily due to lower comparable sales against a strong prior year, though operating income slightly increased Q2 2022 vs Q2 2021 Performance (in thousands) | Metric | Thirteen Weeks Ended July 30, 2022 | Thirteen Weeks Ended July 31, 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $1,686,915 | $1,791,530 | ($104,615) | (5.8)% | | Gross margin | $596,063 | $642,496 | ($46,433) | (7.2)% | | SG&A expenses | $339,329 | $387,938 | ($48,609) | (12.5)% | | Operating income | $256,734 | $254,558 | $2,176 | 0.9% | | Net income | $188,801 | $190,510 | ($1,709) | (0.9)% | - Q2 2022 comparable sales decreased by **6.0%**, driven by lower transaction volume across all merchandise divisions, partially offset by a higher average ticket, against a strong prior year impacted by COVID-19 demand and government stimulus[110](index=110&type=chunk)[111](index=111&type=chunk) - Q2 2022 gross margin rate decreased by **60 basis points** to **35.3%**, primarily due to unfavorable inventory overhead, higher e-commerce shipping costs, and increased import freight costs[112](index=112&type=chunk) - Q2 2022 SG&A expenses decreased by **$48.6 million**, improving by **160 basis points** to **20.1%** of sales, mainly due to lower equity compensation and incentive costs[113](index=113&type=chunk) [Non-GAAP Measures](index=30&type=section&id=Non-GAAP%20Measures) The company presents non-GAAP measures like Adjusted EBITDA ($292.5 million for Q2 2022) and Adjusted Net Income ($194.9 million), and Adjusted Free Cash Flow ($210.3 million for H1 2022) to show core operating performance Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Reconciliation Item | Thirteen Weeks Ended July 30, 2022 | Thirteen Weeks Ended July 31, 2021 | | :--- | :--- | :--- | | Net income | $188,801 | $190,510 | | Interest expense, net | $11,157 | $12,157 | | Income tax expense | $58,217 | $50,387 | | Depreciation and amortization | $26,274 | $26,010 | | Equity compensation | $6,158 | $27,331 | | Other adjustments | $1,864 | $18,021 | | **Adjusted EBITDA** | **$292,471** | **$324,416** | Reconciliation of Net Income to Adjusted Net Income (in thousands) | Reconciliation Item | Thirteen Weeks Ended July 30, 2022 | Thirteen Weeks Ended July 31, 2021 | | :--- | :--- | :--- | | Net income | $188,801 | $190,510 | | Adjustments (pre-tax) | $8,022 | $45,352 | | Tax effects of adjustments | ($1,887) | ($11,312) | | **Adjusted Net Income** | **$194,936** | **$224,550** | Adjusted Free Cash Flow (in thousands) | Metric | Twenty-Six Weeks Ended July 30, 2022 | Twenty-Six Weeks Ended July 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $258,406 | $405,674 | | Net cash used in investing activities | ($48,134) | ($33,767) | | **Adjusted Free Cash Flow** | **$210,272** | **$371,907** | [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) As of July 30, 2022, the company maintained strong liquidity with $399.9 million in cash and $980.3 million available under its ABL facility, while engaging in significant share repurchases and dividend payments - As of July 30, 2022, the company had **$399.9 million** in cash and cash equivalents and **$980.3 million** in available borrowing capacity under its ABL Facility[139](index=139&type=chunk)[144](index=144&type=chunk) - The company repurchased **7,823,241 shares** for a total of **$288.6 million** in the first half of 2022[153](index=153&type=chunk) - Total dividends paid in the first half of 2022 amounted to **$12.8 million**, at a rate of **$0.075 per share per quarter**[155](index=155&type=chunk) - Projected capital expenditures for fiscal year 2022 are approximately **$140.0 million**, allocated to corporate/IT programs (**45%**), new stores (**35%**), and existing store/DC updates (**20%**)[156](index=156&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes in its primary market risk exposures or their management since the last Annual Report on Form 10-K - There have been **no material changes** in the company's primary risk exposures or management of market risks since the last Annual Report[164](index=164&type=chunk) [Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** at a reasonable assurance level as of the end of the quarter[166](index=166&type=chunk) - **No material changes** occurred during the quarter that have affected, or are reasonably likely to affect, the company's internal control over financial reporting[167](index=167&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various lawsuits incidental to its business, but management does not expect a material impact on its financial position or results - The company is a defendant in various lawsuits incidental to its business but does not expect any individual or group of cases to have a **material effect** on its operations or financial condition[168](index=168&type=chunk) [Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) The company reports no material changes to previously disclosed risk factors in its Annual Report on Form 10-K, advising investors to consider existing risks potentially amplified by global conditions - There have been **no material changes** to the risk factors discussed in the company's Annual Report[170](index=170&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q2 2022, the company repurchased 5.55 million shares for $200.1 million, with approximately $500.2 million remaining available under authorized repurchase programs Share Repurchases in Q2 2022 | Period | Total Shares Purchased | Average Price Paid per Share | Total Amount Repurchased | | :--- | :--- | :--- | :--- | | May 1 - May 28, 2022 | — | $— | $— | | May 29 - July 2, 2022 | 4,502,121 | $36.20 | ~$162.9M | | July 3 - July 30, 2022 | 1,048,771 | $35.43 | ~$37.2M | | **Total Q2 2022** | **5,550,892** | **$36.05** | **~$200.1M** | - As of July 30, 2022, approximately **$500.2 million** remained available for share repurchases under the company's combined 2021 and 2022 Share Repurchase Programs[172](index=172&type=chunk) [Defaults Upon Senior Securities](index=38&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - None[173](index=173&type=chunk) [Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not Applicable[173](index=173&type=chunk) [Other Information](index=38&type=section&id=Item%205.%20Other%20Information) No other material information was reported - None[173](index=173&type=chunk) [Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and compensatory agreements - Exhibits filed include CEO and CFO certifications (**31.1, 31.2, 32.1, 32.2**) and various compensatory agreements[174](index=174&type=chunk)

Sales Performance - For the first quarter of 2022, comparable sales decreased by 7.5% compared to an increase of 38.9% in the first quarter of 2021, influenced by prior U.S. government stimulus packages [93]. - Net sales decreased by $112.6 million, or 7.1%, in the first quarter of 2022 compared to the same period in 2021, primarily due to a 7.5% decline in comparable sales [110]. - E-commerce net sales increased by $21.9 million, or 18.8%, in the first quarter of 2022, representing 9.5% of merchandise sales compared to 7.4% in the first quarter of 2021 [112]. Store Operations - As of April 30, 2022, the company operated 260 stores, an increase from 259 stores in the prior year quarter [86]. - The average store size is approximately 70,000 gross square feet, with locations primarily in the southern United States [86]. - The company plans to open at least eight new stores in 2022, with expectations for significant new store openings over the next five years [99]. Financial Performance - Adjusted EBITDA for the thirteen weeks ended April 30, 2022, was $236,229 thousand, compared to $270,993 thousand for the same period in 2021, reflecting a decrease of approximately 12.8% [122]. - Adjusted Net Income for the thirteen weeks ended April 30, 2022, was $153,227 thousand, down from $182,531 thousand in the prior year, representing a decline of about 16.1% [125]. - Adjusted Earnings per Share (EPS) for the thirteen weeks ended April 30, 2022, was $1.77 (basic) and $1.73 (diluted), compared to $1.98 (basic) and $1.89 (diluted) for the same period in 2021, indicating a decrease of 10.6% and 8.5% respectively [125]. Cost Management - Selling, general and administrative (SG&A) expenses decreased by $8.7 million, or 2.7%, to $315.9 million in the first quarter of 2022, but as a percentage of net sales, SG&A increased to 21.5% [114]. - SG&A expenses as a percentage of sales declined from 25.9% in 2019 to 21.3% in 2021, indicating improved cost management [102]. - The gross margin is influenced by factors such as promotional activities, product mix, and cost control measures [100]. Cash Flow and Debt - As of April 30, 2022, the company had cash and cash equivalents totaling $472.4 million, which is expected to be sufficient to meet cash requirements for at least the next 12 months [130]. - The company repaid $99.0 million of outstanding borrowings under the Term Loan, leaving an outstanding principal balance of $300.0 million under the Amended Credit Agreement [131]. - The total debt obligations for the company amount to $402,727 thousand for the fiscal year 2022, with a total of $544,000 thousand due by 2026 and beyond [133]. Share Repurchase and Dividends - As of April 30, 2022, the company has $100.2 million remaining available for share repurchases under the 2021 Share Repurchase Program, which allows for up to $500 million in total [138]. - In the fiscal year ended January 29, 2022, the company repurchased a total of 10,566,796 shares for $411.4 million, with an average price of $38.93 per share [140]. - The company declared a quarterly cash dividend of $0.075 per share, totaling $6.5 million paid in the first quarter of 2022 [143]. Investment and Capital Expenditures - The company expects capital expenditures for fiscal year 2022 to be approximately $140 million, with 50% allocated to corporate, e-commerce, and IT programs [144]. - Cash used in investing activities increased by $0.5 million in the first quarter of 2022 compared to the first quarter of 2021, primarily due to higher capital expenditures [148]. Omnichannel Strategy - The company aims to deepen customer relationships through enhanced omnichannel capabilities, integrating e-commerce with physical stores [86]. - The company continues to invest in enhancing its omnichannel capabilities, which have driven growth in net sales and gross margin [98]. Supply Chain and Inventory Management - The product assortment for the first quarter of 2022 included outdoor (31%), sports & recreation (24%), apparel (24%), and footwear (21%) categories [84]. - The company has implemented new tools for inventory management, improving handling and vendor relations to better meet customer demand [96]. - The impact of COVID-19 has led to supply chain disruptions, affecting transportation and inventory costs [101].

[Cautionary Statement Regarding Forward-Looking Statements](index=4&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) Forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from expectations Part I [Item 1. Business](index=8&type=section&id=Item%201.%20Business) Academy Sports + Outdoors is a leading US sporting goods retailer with 259 stores, focusing on omnichannel growth and managing regulatory risks - Academy Sports + Outdoors is one of the leading full-line sporting goods and outdoor recreation retailers in the United States, operating **259 stores** across **16 contiguous states** as of January 29, 2022[18](index=18&type=chunk)[36](index=36&type=chunk) 2021 Net Sales by Product Category | Category | % of 2021 Net Sales | | :------------------ | :------------------ | | Outdoor | 32% | | Apparel | 27% | | Sports & Recreation | 22% | | Footwear | 19% | - Approximately **80% of 2021 merchandise sales** were national brand products, with **20 owned brands** accounting for approximately **20% of sales**[21](index=21&type=chunk)[28](index=28&type=chunk) - Key strategic priorities for 2022 include creating a consistent omnichannel business, providing a great customer experience, growing the store base, strengthening the supply chain, developing an industry-leading retail team, and maintaining/scaling IT capabilities[23](index=23&type=chunk) - Firearms, ammunition, and related accessories represented approximately **6% of net sales in 2021** and are subject to numerous federal, state, and local laws and regulations[65](index=65&type=chunk) [Item 1A. Risk Factors](index=23&type=section&id=Item%201A.%20Risk%20Factors) Significant risks include economic dependence, supply chain disruptions, competition, regulatory compliance, and indebtedness - The company's results are highly dependent on the **U.S. economy and consumer discretionary spending**[70](index=70&type=chunk) - The **COVID-19 pandemic** has negatively impacted global supply chains, increased operating costs, and shifted consumer demand, creating ongoing uncertainty[74](index=74&type=chunk)[77](index=77&type=chunk)[80](index=80&type=chunk) - A significant portion of merchandise is manufactured in foreign countries, primarily **China**, exposing the company to risks from tariffs, trade disputes, and supply chain disruptions[85](index=85&type=chunk)[86](index=86&type=chunk) - The company's indebtedness, approximately **$297.8 million** under the Term Loan and **$400.0 million** under the Notes as of January 29, 2022, requires substantial cash flows for debt service and imposes restrictive covenants[132](index=132&type=chunk)[137](index=137&type=chunk) - Ownership of common stock carries risks of dilution from future equity issuances, high stock price volatility, and uncertainty regarding future dividend payments[144](index=144&type=chunk)[145](index=145&type=chunk)[148](index=148&type=chunk) [Item 1B. Unresolved Staff Comments](index=48&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments - There are no unresolved staff comments[157](index=157&type=chunk) [Item 2. Properties](index=48&type=section&id=Item%202.%20Properties) Academy's headquarters and key facilities are in Texas, with all 259 retail stores leased under long-term agreements - Academy's headquarters are located at **1800 North Mason Road, Katy, Texas**[157](index=157&type=chunk) Key Properties and Facilities | Location | Use | Approximate Square Footage (sq ft) | | :------------------------- | :------------------------ | :--------------------------------- | | Katy, Texas | Corporate Office Building 1 | 400,000 | | Katy, Texas | Corporate Office Building 2 | 200,000 | | Katy, Texas | Bulk Warehouse | 200,000 | | Katy, Texas | Distribution Center | 1,400,000 | | Twiggs County, Georgia | Distribution Center | 1,600,000 | | Cookeville, Tennessee | Distribution Center | 1,600,000 | | Kowloon, Hong Kong | Global Sourcing Office | 5,000 | - All retail stores are leased under long-term agreements, typically **15 to 20 years**, with total leased store square footage of approximately **18.3 million square feet** as of January 29, 2022[158](index=158&type=chunk) [Item 3. Legal Proceedings](index=48&type=section&id=Item%203.%20Legal%20Proceedings) Academy faces various lawsuits, maintaining adequate reserves with no material financial impact expected, and some major claims recently dismissed - Academy is a defendant in lawsuits, claims, and demands arising in the ordinary course of business, primarily alleging product, premises, employment, and/or commercial liability[159](index=159&type=chunk) - The company believes, considering its indemnities, defenses, insurance, and reserves, that the ultimate resolution of these matters will not have a **material impact** on its financial position, results of operations, or cash flows[159](index=159&type=chunk) - Nine lawsuits related to a November 2017 shooting in Sutherland Springs, Texas, were **statutorily barred** by the Supreme Court of Texas in June 2021, with remaining similar claims expected to be dismissed[160](index=160&type=chunk) [Item 4. Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable[161](index=161&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=50&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Academy's common stock began trading on Nasdaq in October 2020, with **$65.6 million** in Q4 2021 share repurchases and an initial **$0.075** quarterly dividend - Academy's common stock began trading on the Nasdaq Stock Market LLC under the symbol **"ASO"** on **October 2, 2020**[163](index=163&type=chunk) Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Number of Shares Purchased | Average Price per Share ($) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Dollar Value of Shares that May be Purchased Under the Plans Programs ($) | | :----------------------------------- | :------------------------------- | :-------------------------- | :------------------------------------------------------------------------------- | :------------------------------------------------------------------------ | | Oct 31, 2021 to Nov 27, 2021 | — | — | — | — | | Nov 28, 2021 to Jan 1, 2022 | 906,256 | $40.73 | 906,256 | $217,290,407 | | Jan 2, 2022 to Jan 29, 2022 | 707,674 | $40.49 | 707,674 | $188,648,157 | | **Total** | **1,613,930** | **$40.63** | **1,613,930** | **$188,648,157** | - On September 2, 2021, the Board authorized a share repurchase program of up to **$500 million** over three years, with **$188.6 million** remaining available as of January 29, 2022[167](index=167&type=chunk)[229](index=229&type=chunk) - On March 3, 2022, the Board declared a quarterly cash dividend of **$0.075 per share** for the quarter ended January 29, 2022, payable on April 14, 2022[170](index=170&type=chunk) [Item 6. Reserved](index=51&type=section&id=Item%206.%20Reserved) This item is reserved - Item 6 is reserved[171](index=171&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=52&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Academy reported **19.1% net sales growth** to **$6.77 billion** in 2021, with **18.9% comparable sales growth**, improved gross margin, and net income more than doubling Key Financial Highlights | Metric | 2021 (in thousands) | 2020 (in thousands) | Change (Dollars in thousands) | Change (Percent) | | :--------------------------------------- | :------------------ | :------------------ | :---------------------------- | :--------------- | | Net sales | $6,773,128 | $5,689,233 | $1,083,895 | 19.1% | | Gross margin | $2,351,095 | $1,734,045 | $617,050 | 35.6% | | Operating income | $907,947 | $420,398 | $487,549 | 116.0% | | Net income | $671,381 | $308,764 | $362,617 | 117.4% | - Comparable sales increased by **18.9% in 2021**, driven by strong performance across all merchandise divisions, particularly apparel and footwear[204](index=204&type=chunk) - Gross margin as a percentage of net sales increased by **420 basis points to 34.7% in 2021**, primarily due to higher merchandise margins and lower inventory overhead, partially offset by increased import freight costs[205](index=205&type=chunk) - SG&A expenses as a percentage of net sales decreased by **180 basis points to 21.3% in 2021**, mainly due to leveraging property and facility fees and employee costs on increased sales[206](index=206&type=chunk) - Interest expense decreased by **$37.5 million (43.4%) in 2021** due to a lower outstanding balance on long-term debt from refinancing and principal repurchases[208](index=208&type=chunk) - As of January 29, 2022, the company had **$486.0 million in cash and cash equivalents** and an available borrowing capacity of approximately **$874.8 million** under its ABL Facility[221](index=221&type=chunk)[242](index=242&type=chunk) - Capital expenditures for fiscal year 2022 are expected to be approximately **$140.0 million**, with **50% allocated** to corporate, e-commerce, and information technology programs[237](index=237&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=73&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risk is interest rate exposure from variable-rate debt, with a **100 basis point increase** raising 2021 interest expense by **$3.0 million**, plus seasonal fluctuations - The company's primary exposure to changes in interest rates results from its variable-rate ABL Facility and Term Loan[260](index=260&type=chunk) - A hypothetical **100 basis point increase** in interest rates on current borrowings would increase interest expense by approximately **$3.0 million** for 2021[260](index=260&type=chunk) - The company historically used derivative financial instruments (interest rate swaps) to mitigate interest rate risk but had **no outstanding derivative financial instruments** as of January 29, 2022[260](index=260&type=chunk)[351](index=351&type=chunk) - The business is subject to seasonal fluctuations, with a significant portion of net sales and profits driven by summer holidays (Q2) and the November/December holiday selling season (Q4)[261](index=261&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=74&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Academy's audited consolidated financial statements for fiscal years 2020-2022, including balance sheets, income, equity, and cash flows, with detailed notes - The financial statements required to be filed are set forth on pages **68 through 105** of this Annual Report on Form 10-K[261](index=261&type=chunk) [Index to Consolidated Financial Statements](index=80&type=section&id=INDEX%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This index lists the consolidated financial statements and accompanying notes, including balance sheets, income statements, and cash flows - The index provides a roadmap to the audited consolidated financial statements and accompanying notes within the report[286](index=286&type=chunk) [Report of Independent Registered Public Accounting Firm](index=81&type=section&id=REPORT%20OF%20INDEPENDENT%20REGISTERED%20PUBLIC%20ACCOUNTING%20FIRM) Deloitte & Touche LLP issued unqualified opinions on Academy's 2022 financial statements and internal controls, identifying merchandise inventories as a critical audit matter - Deloitte & Touche LLP issued an **unqualified opinion** on the consolidated financial statements for the year ended January 29, 2022, affirming fair presentation in all material respects[289](index=289&type=chunk) - An **unqualified opinion** was also issued on the effectiveness of the company's internal control over financial reporting as of January 29, 2022[290](index=290&type=chunk) - Merchandise inventories were identified as a **critical audit matter** due to high transaction volume and reliance on highly automated systems, necessitating extensive IT expertise in audit procedures[294](index=294&type=chunk) [Consolidated Balance Sheets](index=83&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Academy's 2022 balance sheets show total assets at **$4.58 billion**, liabilities at **$3.12 billion**, and stockholders' equity at **$1.47 billion** Consolidated Balance Sheet Highlights | Metric | January 29, 2022 (in thousands) | January 30, 2021 (in thousands) | | :-------------------------- | :------------------------------ | :------------------------------ | | Cash and cash equivalents | $485,998 | $377,604 | | Merchandise inventories, net | $1,171,808 | $990,034 | | Total current assets | $1,715,747 | $1,415,020 | | Total assets | $4,584,940 | $4,384,482 | | Total current liabilities | $1,127,110 | $1,167,093 | | Long-term debt, net | $683,585 | $781,489 | | Total liabilities | $3,117,994 | $3,272,499 | | Total stockholders' / partners' equity | $1,466,946 | $1,111,983 | [Consolidated Statements of Income](index=84&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Academy's 2022 income statements show **19.1% net sales growth** to **$6.77 billion**, gross margin up **35.6%**, operating income more than doubled, and net income surged **117.4%** Consolidated Statements of Income Highlights | Metric | Fiscal Year Ended Jan 29, 2022 (in thousands) | Fiscal Year Ended Jan 30, 2021 (in thousands) | Fiscal Year Ended Feb 1, 2020 (in thousands) | | :--------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | | NET SALES | $6,773,128 | $5,689,233 | $4,829,897 | | GROSS MARGIN | $2,351,095 | $1,734,045 | $1,431,154 | | OPERATING INCOME | $907,947 | $420,398 | $179,421 | | NET INCOME | $671,381 | $308,764 | $120,043 | | EARNINGS PER COMMON SHARE: BASIC | $7.38 | $3.96 | $1.66 | | EARNINGS PER COMMON SHARE: DILUTED | $7.12 | $3.79 | $1.60 | [Consolidated Statements of Comprehensive Income](index=85&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Academy's 2022 total comprehensive income was **$674.7 million**, significantly higher than **$313.5 million** in 2021, driven by net income growth Consolidated Statements of Comprehensive Income Highlights | Metric | Fiscal Year Ended Jan 29, 2022 (in thousands) | Fiscal Year Ended Jan 30, 2021 (in thousands) | Fiscal Year Ended Feb 1, 2020 (in thousands) | | :--------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | | Net income | $671,381 | $308,764 | $120,043 | | Unrealized loss on interest rate swaps | — | $(6,653) | $(16,096) | | Recognized interest (income) expense on interest rate swaps | $2,344 | $11,045 | $(418) | | Loss on swaps from debt refinancing | — | $1,330 | — | | Tax benefit (expense) | $980 | $(980) | — | | **Total comprehensive income** | **$674,705** | **$313,506** | **$103,529** | [Consolidated Statements of Stockholders' / Partners' Equity](index=86&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS%27%20%2F%20PARTNERS%27%20EQUITY) Total equity increased from **$1.11 billion** in 2021 to **$1.47 billion** in 2022, driven by net income, offset by **$411.4 million** in share repurchases - Total stockholders' / partners' equity increased from **$1,111,983 thousand** as of January 30, 2021, to **$1,466,946 thousand** as of January 29, 2022[307](index=307&type=chunk)[308](index=308&type=chunk) - Key drivers of equity changes in 2021 included net income of **$671,381 thousand** and equity compensation of **$39,264 thousand**, partially offset by **$411,409 thousand** in common stock repurchases for retirement[307](index=307&type=chunk)[308](index=308&type=chunk) [Consolidated Statements of Cash Flows](index=88&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Net cash from operations decreased to **$673.3 million** in 2022, investing activities used **$76.0 million**, and financing activities used **$488.9 million**, increasing cash by **$108.4 million** Consolidated Statements of Cash Flows Highlights | Activity | Fiscal Year Ended Jan 29, 2022 (in thousands) | Fiscal Year Ended Jan 30, 2021 (in thousands) | Fiscal Year Ended Feb 1, 2020 (in thousands) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | | Net cash provided by operating activities | $673,265 | $1,011,597 | $263,669 | | Net cash used in investing activities | $(76,017) | $(33,144) | $(66,783) | | Net cash used in financing activities | $(488,854) | $(750,234) | $(123,192) | | Net increase in cash and cash equivalents | $108,394 | $228,219 | $73,694 | | Cash and cash equivalents at end of period | $485,998 | $377,604 | $149,385 | - Cash paid for interest was **$44.7 million** in 2022, down from **$87.2 million** in 2021. Cash paid for income taxes was **$125.0 million** in 2022, up from **$15.5 million** in 2021[310](index=310&type=chunk) [Notes to the Consolidated Financial Statements](index=89&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) The notes detail Academy's operations, accounting policies, IPO, debt, and the absence of derivative instruments, with breakdowns of sales, e-commerce, and commitments - Academy Sports and Outdoors, Inc. became the parent holding company on **October 1, 2020**, following an IPO and reorganization transactions[312](index=312&type=chunk)[316](index=316&type=chunk) - The company completed several secondary offerings in 2021, including repurchases and simultaneous retirement of **3,229,974 shares** for **$100.0 million** in May 2021 and **4,500,000 shares** for approximately **$195.8 million** in September 2021[320](index=320&type=chunk)[323](index=323&type=chunk)[457](index=457&type=chunk) - Long-term debt as of January 29, 2022, included a Term Loan of **$297.8 million** and Notes of **$400.0 million**. The Term Loan was refinanced in May 2021, reducing the interest margin and outstanding balance[379](index=379&type=chunk)[386](index=386&type=chunk) - The company had **no derivative financial instruments** (interest rate swaps) outstanding as of January 29, 2022, having settled its remaining swaps in January 2021[351](index=351&type=chunk) Merchandise Sales by Division | Merchandise Division | Fiscal Year Ended Jan 29, 2022 (in thousands) | | :------------------- | :-------------------------------------------- | | Outdoors | $2,174,650 | | Sports and recreation | $1,463,172 | | Apparel | $1,810,345 | | Footwear | $1,290,197 | | **Total merchandise sales** | **$6,738,364** | - E-commerce sales constituted **9.3% of merchandise sales in 2021**, **10.4% in 2020**, and **5.1% in 2019**[376](index=376&type=chunk) - Equity compensation expense was **$39.3 million** in 2021, including approximately **$24.9 million** in non-cash expenses related to the 2021 Vesting Event[414](index=414&type=chunk) - As of January 29, 2022, the company had **$22.6 million** in technology-related, construction, and other contractual commitments, and **$20.7 million** in sponsorship and intellectual property commitments through 2027[463](index=463&type=chunk)[466](index=466&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=74&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) No changes or disagreements with accountants on accounting and financial disclosure have occurred - There have been no changes in and disagreements with accountants on accounting and financial disclosure[261](index=261&type=chunk) [Item 9A. Controls and Procedures](index=74&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal controls were effective as of January 29, 2022, with an unqualified attestation report and no material changes - Management, with the participation of the CEO and CFO, concluded that the company's disclosure controls and procedures were **effective** as of January 29, 2022[263](index=263&type=chunk) - Management concluded that the company's internal control over financial reporting was **effective** as of January 29, 2022, based on the COSO framework (2013)[266](index=266&type=chunk) - Deloitte & Touche LLP issued an **unqualified attestation report** on the effectiveness of the company's internal control over financial reporting[270](index=270&type=chunk) - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter[267](index=267&type=chunk) [Item 9B. Other Information](index=77&type=section&id=Item%209B.%20Other%20Information) No other information to report - No other information to report[275](index=275&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=77&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) No disclosure regarding foreign jurisdictions that prevent inspections - No disclosure regarding foreign jurisdictions that prevent inspections[275](index=275&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=77&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Executive officer information is in Part I, Item 1; further details on directors and governance will be in the 2022 proxy statement - Information concerning executive officers is set forth under the heading "Information about our Executive Officers" in Part I of this report[276](index=276&type=chunk) - Further information required by this item will be included in the definitive proxy statement for the 2022 Annual Meeting of Stockholders[276](index=276&type=chunk) [Item 11. Executive Compensation](index=77&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation will be included in the definitive proxy statement for the 2022 Annual Meeting of Stockholders - The information required by this item will be included in the definitive proxy statement for the 2022 Annual Meeting of Stockholders[277](index=277&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=77&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) As of January 29, 2022, **4,837,920 securities** were issuable under equity plans at a **$18.88** weighted average exercise price, with more shares available under other plans Equity Compensation Plan Information | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights ($) | | :------------------------------------- | :---------------------------------------------------------------------------------------- | :------------------------------------------------------------------------------ | | Service-Based Stock Options | 3,898,214 | $19.12 | | Performance-Based Stock Options | 396,909 | $16.48 | | Service-Based Restricted Stock Units | 338,879 | N/A | | Performance-Based Restricted Stock Units | 203,918 | N/A | | 2020 Employee Stock Purchase Plan | — | N/A | | **Total** | **4,837,920** | **$18.88** | - The **2020 Omnibus Incentive Plan** has **3,523,690 shares** available for future issuance, and the **2020 Employee Stock Purchase Plan** has **1,885,546 shares** available[279](index=279&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=78&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence will be included in the definitive proxy statement for the 2022 Annual Meeting of Stockholders - The information required by this item will be included in the definitive proxy statement for the 2022 Annual Meeting of Stockholders[280](index=280&type=chunk) [Item 14. Principal Accountant Fees and Services](index=78&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services will be included in the definitive proxy statement for the 2022 Annual Meeting of Stockholders - The information required by this item will be included in the definitive proxy statement for the 2022 Annual Meeting of Stockholders[281](index=281&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=79&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements, schedules, and exhibits filed as part of this Annual Report on Form 10-K - The section lists the consolidated Financial Statements, Financial Statement Schedule, and Exhibits filed as part of this Annual Report on Form 10-K[283](index=283&type=chunk)[284](index=284&type=chunk) [Item 16. Form 10-K Summary](index=119&type=section&id=Item%2016.%20Form%2010-K%20Summary) There is no Form 10-K Summary - There is no Form 10-K Summary[471](index=471&type=chunk)

Financial Performance - In 2020, Academy Sports + Outdoors served 30 million unique customers and completed approximately 80 million transactions, resulting in net sales of $5.7 billion[17]. - The company finished the fiscal year ended January 30, 2021, with approximately $5.7 billion in sales and $308.8 million in net income[26]. - In 2020, the company generated $5.7 billion in net sales, $308.8 million in net income, and $607.0 million in Adjusted EBITDA, reflecting an 88% growth compared to 2019[55]. - Total merchandise sales for the fiscal year ended January 30, 2021, reached $5.66 billion, a 17.7% increase from $4.81 billion in the previous year[79]. - The company reduced its net leverage ratio to 0.7x by the end of 2020, down from 4.1x and 5.2x at the end of 2019 and 2018, respectively[55]. Store Operations and Expansion - The company operates 259 stores across 16 contiguous states, with plans to open 8 to 10 new stores per year starting in 2022[19]. - The average store size is approximately 70,000 gross square feet, with a new smaller store format being tested that is about 40% smaller[72]. - The company has identified approximately 675 greenfield locations for potential expansion beyond its current footprint[71]. - Academy's retail locations range from 40,000 to 130,000 gross square feet, providing a spacious shopping experience[19]. Customer Engagement and Loyalty - Approximately 56% of customers purchased an owned brand item in 2020, indicating strong brand loyalty[22]. - The average customer visits the stores 2 to 3 times per year, with the best customers visiting 9 times per year, demonstrating strong customer loyalty[50]. - The Academy Credit Card program constituted approximately 4.5% of 2020 net sales, indicating a significant opportunity for customer loyalty[30]. - BOPIS (Buy Online, Pick Up In Store) orders accounted for 51% of all e-commerce sales during 2020, highlighting the importance of omnichannel offerings[57]. E-commerce and Omnichannel Strategy - The e-commerce platform achieved year-over-year sales growth of 138% in 2020, with e-commerce sales representing 10% of merchandise sales[24]. - E-commerce sales represented 10.4% of merchandise sales in 2020, with a significant increase of 406% in Q1 2020 compared to the same quarter in the previous year[56]. - E-commerce sales accounted for 10.4% of merchandise sales in 2020, up from 5.1% in 2019 and 4.9% in 2018, indicating a significant growth in online shopping[79]. - The omnichannel strategy includes a strong buy-online-pickup-in-store program, enhancing customer convenience and driving sales[17]. Merchandise and Inventory Management - The product assortment includes outdoor (35%), apparel (25%), sports & recreation (22%), and footwear (18%) categories, with nearly 20% of sales from owned brands[18][22]. - Inventory turns improved from 2.84x in 2019 to 3.89x in 2020 due to a new merchandise planning and allocation system[30]. - Average inventory turns improved from 2.84x in 2019 to 3.89x in 2020 due to enhanced inventory management practices[64]. - The company has a diverse merchandise offering, with no single vendor representing more than 12% of total purchases in 2020, ensuring a stable supply chain[76]. Market Trends and Industry Insights - The outdoor recreation industry is expected to see a long-term increase in customer base, with 49% of Americans planning to engage in more outdoor activities[32]. - The sporting goods and outdoor recreation industry was estimated at $70 billion in 2018, with expected sales growth of approximately 6% per annum from 2019 through 2027[41]. - Female customers constituted 48% of the customer base in 2020, highlighting the importance of targeted merchandise for this demographic[38]. Workforce and Corporate Culture - The company employs over 22,000 team members, with a balanced distribution of full-time and part-time employees[92]. - The company established a Diversity, Inclusion and Belonging Committee in 2020 to enhance team diversity and community representation[94]. - The company focuses on talent management through personal growth opportunities, cross-functional training, and annual performance reviews[95]. - The company engages in annual succession planning to identify internal candidates for key positions[95]. Safety and Regulatory Compliance - The company has implemented enhanced safety measures during the COVID-19 pandemic, including regular professional cleaning and social distancing protocols[97]. - The company has a commitment to a Safety-First culture, focusing on reducing the frequency and severity of safety incidents[96]. - The company is subject to various federal, state, and local regulations that could materially affect operations and financial results[99]. Seasonal Trends - The business is subject to seasonal fluctuations, with significant sales driven by summer holidays and the November/December holiday season[289]. - The business experiences seasonal fluctuations, with significant net sales driven by summer holidays and the November/December holiday season[91]. Financial Sensitivity - A hypothetical 100 basis point increase in interest rates would reduce income before income taxes by approximately $4.0 million for 2020[288]. Marketing Strategy - The company’s marketing strategy includes various media channels and community engagement events to drive customer traffic and enhance brand visibility[85][86]. COVID-19 Impact - Academy's stores have remained open during the COVID-19 pandemic, resulting in market share gains and increased community connections[19].

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited consolidated financial statements: balance sheets, income, comprehensive income, equity, cash flows, and notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Presents the company's financial position, showing increased cash, total assets, and total liabilities as of October 31, 2020 Consolidated Balance Sheet Highlights (Amounts in thousands) | Metric | Oct 31, 2020 | Feb 1, 2020 | Nov 2, 2019 | | :-------------------------- | :----------- | :---------- | :---------- | | Cash and cash equivalents | $869,725 | $149,385 | $43,538 | | Total current assets | $1,992,092 | $1,289,444 | $1,413,208 | | Total assets | $4,981,916 | $4,331,321 | $4,488,709 | | Accounts payable | $868,879 | $428,823 | $529,926 | | Total current liabilities | $1,241,102 | $750,649 | $841,420 | | Total liabilities | $3,997,352 | $3,340,284 | $3,516,808 | | Stockholders'/partners' equity | $984,564 | $988,219 | $969,083 | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Reveals strong financial performance with substantial year-over-year increases in net sales, gross margin, operating income, and net income Thirteen Weeks Ended October 31, 2020 vs November 2, 2019 (Amounts in thousands, except per share data) | Metric | Oct 31, 2020 | Nov 2, 2019 | Change | % Change | | :----------------- | :----------- | :---------- | :------- | :------- | | Net Sales | $1,349,076 | $1,145,203 | $203,873 | 17.8% | | Gross Margin | $440,511 | $362,422 | $78,089 | 21.5% | | Operating Income | $81,556 | $53,176 | $28,380 | 53.4% | | Net Income | $59,586 | $28,552 | $31,034 | 108.7% | | Basic EPS | $0.78 | $0.39 | $0.39 | 100.0% | | Diluted EPS | $0.74 | $0.38 | $0.36 | 94.7% | Thirty-Nine Weeks Ended October 31, 2020 vs November 2, 2019 (Amounts in thousands, except per share data) | Metric | Oct 31, 2020 | Nov 2, 2019 | Change | % Change | | :----------------- | :----------- | :---------- | :------- | :------- | | Net Sales | $4,091,797 | $3,459,405 | $632,392 | 18.3% | | Gross Margin | $1,234,957 | $1,060,622 | $174,335 | 16.4% | | Operating Income | $279,366 | $137,204 | $142,162 | 103.6% | | Net Income | $217,242 | $102,305 | $114,937 | 112.3% | | Basic EPS | $2.94 | $1.41 | $1.53 | 108.5% | | Diluted EPS | $2.82 | $1.37 | $1.45 | 105.8% | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Shows a significant increase in total comprehensive income for both periods, driven by net income and interest rate swap changes - Total comprehensive income for the thirteen weeks ended October 31, 2020, was **$62,898k**, a substantial increase from **$27,381k** in the prior year[8](index=8&type=chunk) - Total comprehensive income for the thirty-nine weeks ended October 31, 2020, was **$220,281k**, up from **$86,402k** in the prior year[8](index=8&type=chunk) [Consolidated Statements of Partners' / Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Partners'%20%2F%20Stockholders'%20Equity) Details equity evolution, reflecting Reorganization Transactions, IPO conversion of units to stock, net income, and distributions - Stockholders' equity as of October 31, 2020, was **$984,564k**[5](index=5&type=chunk) - The Reorganization Transactions involved the conversion of NAHC membership units to ASO, Inc. common stock at a **3.15:1 ratio**, impacting common stock, additional paid-in capital, and retained earnings[10](index=10&type=chunk)[25](index=25&type=chunk) - The IPO resulted in the issuance of **15,625,000 shares** of common stock, generating **$184,882k** in proceeds[10](index=10&type=chunk)[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Shows a substantial increase in net cash from operating activities and a significant net increase in cash for the thirty-nine weeks Cash Flow Summary (Thirty-Nine Weeks Ended, Amounts in thousands) | Cash Flow Activity | Oct 31, 2020 | Nov 2, 2019 | Change | | :------------------------------------------ | :----------- | :---------- | :------- | | Net cash provided by operating activities | $857,218 | $94,756 | $762,462 | | Net cash used in investing activities | $(13,790) | $(52,579) | $38,789 | | Net cash used in financing activities | $(123,088) | $(74,330) | $(48,758) | | Net increase (decrease) in cash and cash equivalents | $720,340 | $(32,153) | $752,493 | | Cash and cash equivalents at end of period | $869,725 | $43,538 | $826,187 | [Condensed Notes to Consolidated Financial Statements](index=11&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements) Provides essential context for financial statements, covering business, accounting policies, revenue, debt, derivatives, and equity [1. Nature of Operations](index=11&type=section&id=1.%20Nature%20of%20Operations) Describes Academy Sports and Outdoors, Inc. as a leading U.S. sporting goods retailer, detailing its stores, IPO, and Reorganization - The Company operates **259 'Academy Sports + Outdoors' retail locations** in **16 states** and **three distribution centers**, supported by its academy.com website[17](index=17&type=chunk) - On October 6, 2020, ASO, Inc. completed an IPO, issuing **15,625,000 shares** of common stock for approximately **$184.9 million** in net proceeds[18](index=18&type=chunk) - In connection with the IPO, Reorganization Transactions were completed, making New Academy Holding Company, LLC (NAHC) a wholly-owned subsidiary of ASO, Inc., which became the new parent holding company[19](index=19&type=chunk) [2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Outlines financial statement preparation, consolidation, estimates, reclassifications, and retrospective adjustments for ownership exchange - The unaudited financial statements are prepared in accordance with Rule 10-01 of Regulation S-X, with certain GAAP disclosures condensed or omitted[20](index=20&type=chunk) - All membership units and redeemable membership units have been retrospectively adjusted to reflect the **3.15:1 contribution and exchange ratio** from NAHC membership units to ASO, Inc. common stock, as if it occurred in all pre-IPO periods[25](index=25&type=chunk) - Redeemable Membership Units are classified as temporary equity, initially at fair value, and re-measured to fair value if redemption becomes probable[30](index=30&type=chunk) [3. Net Sales](index=14&type=section&id=3.%20Net%20Sales) Details revenue recognition for merchandise sales, providing a breakdown by division and highlighting significant e-commerce growth Net Sales by Merchandise Division (Amounts in thousands) | Division | Thirteen Weeks Ended Oct 31, 2020 | Thirteen Weeks Ended Nov 2, 2019 | Thirty-Nine Weeks Ended Oct 31, 2020 | Thirty-Nine Weeks Ended Nov 2, 2019 | | :-------------------- | :-------------------------------- | :-------------------------------- | :----------------------------------- | :----------------------------------- | | Outdoors | $487,401 | $364,944 | $1,448,987 | $1,002,138 | | Sports and recreation | $263,506 | $196,592 | $919,699 | $721,665 | | Apparel | $318,731 | $322,375 | $939,388 | $951,385 | | Footwear | $272,626 | $255,649 | $762,174 | $769,857 | | Total merchandise sales | $1,342,264 | $1,139,560 | $4,070,248 | $3,445,045 | | Other sales | $6,812 | $5,643 | $21,549 | $14,360 | | **Net Sales** | **$1,349,076** | **$1,145,203** | **$4,091,797** | **$3,459,405** | - E-commerce sales constituted **7.5%** of merchandise sales for the thirteen weeks ended October 31, 2020 (up from **4.5%** in 2019) and **9.8%** for the thirty-nine weeks ended October 31, 2020 (up from **3.8%** in 2019)[35](index=35&type=chunk) [4. Long-Term Debt](index=15&type=section&id=4.%20Long-Term%20Debt) Details the company's long-term debt, primarily the 2015 Term Loan and 2018 ABL Facility, including terms, rates, and refinancing Long-Term Debt (Amounts in thousands) | Metric | Oct 31, 2020 | Feb 1, 2020 | Nov 2, 2019 | | :-------------------------------- | :----------- | :---------- | :---------- | | Senior Secured Term Loan Facility | $1,429,667 | $1,466,402 | $1,470,695 | | Total long-term debt, net | $1,408,885 | $1,428,542 | $1,492,609 | - The 2015 Term Loan Facility, a **$1.8 billion** senior secured term loan, matures on **July 2, 2022**, with a weighted average interest rate of **5.00%** as of October 31, 2020[40](index=40&type=chunk) - The 2018 ABL Facility, a **$1 billion** secured asset-based revolving credit facility, matures on **May 22, 2023**, with an available borrowing capacity of **$844.7 million** as of October 31, 2020[41](index=41&type=chunk)[42](index=42&type=chunk) - During the thirty-nine weeks ended October 31, 2020, the company repurchased **$23.9 million** in principal on the 2015 Term Loan Facility for **$16.0 million**, recognizing a net gain of **$7.8 million**[41](index=41&type=chunk) [5. Derivative Financial Instruments](index=16&type=section&id=5.%20Derivative%20Financial%20Instruments) Explains the use of interest rate swap agreements to hedge market risk, detailing the reclassification of losses from accumulated other comprehensive loss (AOCI) due to planned debt refinancing and the de-designation of certain swaps - Approximately **$1.3 million** of losses were reclassified from AOCI to other (income) expense, net, for the thirteen and thirty-nine weeks ended October 31, 2020, due to a portion of underlying cash flows related to **$100.0 million** of swap notional principal no longer being probable[47](index=47&type=chunk) - A **$650 million** notional principal amount of interest rate swaps was de-designated as cash flow hedges, with the remaining **$4.0 million** loss in AOCI to be amortized to interest expense[47](index=47&type=chunk) - An estimated **$4.6 million** of the AOCI balance is expected to be reclassified as an increase in interest expense over the next **12 months**[50](index=50&type=chunk) [6. Fair Value Measurements](index=17&type=section&id=6.%20Fair%20Value%20Measurements) Outlines the three-level hierarchy for fair value measurements and provides the fair values for derivative financial instruments and the 2015 Term Loan Facility - Derivative financial instruments (interest rate swaps) are classified as **Level 2** in the fair value hierarchy, with a total net liability of **$5,882k** as of October 31, 2020[55](index=55&type=chunk) - The estimated fair value of the 2015 Term Loan Facility was **$1.4 billion** as of October 31, 2020, also classified as **Level 2**[56](index=56&type=chunk) - The company held **$767.0 million** in money market funds (U.S. Government treasury bills and securities) as of October 31, 2020[55](index=55&type=chunk) [7. Property and Equipment](index=19&type=section&id=7.%20Property%20and%20Equipment) Provides a breakdown of the company's property and equipment, net, including leasehold improvements, equipment, software, furniture, fixtures, construction in progress, and land, along with associated depreciation expense Property and Equipment, Net (Amounts in thousands) | Category | Oct 31, 2020 | Feb 1, 2020 | Nov 2, 2019 | | :-------------------------------- | :----------- | :---------- | :---------- | | Leasehold improvements | $435,094 | $436,807 | $433,266 | | Equipment and software | $543,147 | $537,364 | $527,845 | | Furniture and fixtures | $317,371 | $316,420 | $314,909 | | Construction in progress | $27,979 | $17,639 | $21,197 | | Land | $3,698 | $3,698 | $3,698 | | Total property and equipment | $1,327,289 | $1,311,928 | $1,300,915 | | Accumulated depreciation and amortization | $(944,669) | $(870,521) | $(846,509) | | **Property and equipment, net** | **$382,620** | **$441,407** | **$454,406** | - Depreciation expense was **$25.5 million** for the thirteen weeks ended October 31, 2020, and **$79.7 million** for the thirty-nine weeks ended October 31, 2020[59](index=59&type=chunk) [8. Leases](index=19&type=section&id=8.%20Leases) Details the company's lease accounting, including the impact of COVID-19 related lease concessions, lease modification accounting for extensions, and the components of net lease expense and operating lease information - The company received **$0.4 million** and **$2.4 million** in lease expense credit for landlord abated rent during the thirteen and thirty-nine weeks ended October 31, 2020, respectively, due to COVID-19 guidance[60](index=60&type=chunk) - Net lease expense was **$50,866k** for the thirteen weeks ended October 31, 2020, and **$150,414k** for the thirty-nine weeks ended October 31, 2020[61](index=61&type=chunk) - The weighted-average remaining lease term was **11.2 years** as of October 31, 2020, with a weighted-average incremental borrowing rate of **9.09%**[62](index=62&type=chunk) [9. Accrued Expenses and Other Current Liabilities](index=21&type=section&id=9.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Provides a detailed breakdown of the company's accrued expenses and other current liabilities, showing an increase in total liabilities, particularly in accrued personnel costs and property taxes, as of October 31, 2020 Accrued Expenses and Other Current Liabilities (Amounts in thousands) | Category | Oct 31, 2020 | Feb 1, 2020 | Nov 2, 2019 | | :-------------------------------- | :----------- | :---------- | :---------- | | Accrued interest | $6,996 | $7,835 | $3,261 | | Accrued personnel costs | $72,995 | $54,065 | $41,237 | | Accrued professional fees | $6,041 | $2,451 | $2,787 | | Accrued sales and use tax | $18,590 | $12,651 | $18,041 | | Accrued self-insurance | $13,136 | $14,107 | $13,912 | | Deferred revenue - gift cards and other | $54,557 | $70,220 | $49,603 | | Income taxes payable | $19,197 | $4,941 | $4,575 | | Interest rate swaps | $5,746 | $6,129 | $5,184 | | Property taxes | $49,679 | $16,919 | $50,066 | | Sales return allowance | $5,000 | $5,500 | $5,500 | | Other | $22,675 | $16,563 | $25,826 | | **Total accrued expenses and other current liabilities** | **$274,612** | **$211,381** | **$219,992** | [10. Equity and Share-Based Compensation](index=21&type=section&id=10.%20Equity%20and%20Share-Based%20Compensation) Outlines the adoption of the 2020 Omnibus Incentive Plan, the freezing of the prior 2011 Unit Incentive Plan, and details the types of equity awards, associated compensation expense, and the impact of a $257.0 million distribution to members - The **2020 Omnibus Incentive Plan** was adopted, reserving **5,150,000 shares** of common stock for issuance, while the 2011 Unit Incentive Plan was frozen[67](index=67&type=chunk)[71](index=71&type=chunk) - Equity compensation expense was **$23.4 million** for the thirteen weeks ended October 31, 2020 (including **$19.9 million** from IPO-related vesting), and **$27.0 million** for the thirty-nine weeks ended October 31, 2020[75](index=75&type=chunk) - A **$257.0 million** distribution was paid to NAHC members on August 28, 2020, with **$20.7 million** in cash payments for vested share-based awards through October 31, 2020[76](index=76&type=chunk) [11. Earnings per Common Share](index=23&type=section&id=11.%20Earnings%20per%20Common%20Share) Explains the calculation of basic and diluted earnings per common share and provides a table detailing the weighted average common shares outstanding and EPS for the thirteen and thirty-nine weeks ended October 31, 2020, and November 2, 2019 Earnings Per Common Share (Amounts in thousands, except per share data) | Metric | Thirteen Weeks Ended Oct 31, 2020 | Thirteen Weeks Ended Nov 2, 2019 | Thirty-Nine Weeks Ended Oct 31, 2020 | Thirty-Nine Weeks Ended Nov 2, 2019 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :----------------------------------- | :----------------------------------- | | Net income | $59,586 | $28,552 | $217,242 | $102,305 | | Weighted average common shares outstanding - basic | 76,771 | 72,484 | 73,908 | 72,480 | | Weighted average common shares outstanding - diluted | 80,714 | 75,201 | 77,171 | 74,766 | | Earnings per common share - basic | $0.78 | $0.39 | $2.94 | $1.41 | | Earnings per common share - diluted | $0.74 | $0.38 | $2.82 | $1.37 | [12. Income Taxes](index=24&type=section&id=12.%20Income%20Taxes) Details the company's income tax accounting, including the transition to being taxed as a U.S. corporation post-IPO, the resulting deferred tax liability, and the components of income tax expense/benefit and deferred tax assets/liabilities - Post-IPO (October 1, 2020), ASO, Inc. is treated as a **U.S. corporation** for federal, state, and local income tax purposes, incurring a provision for income taxes[85](index=85&type=chunk) - A net deferred tax liability of **$144.2 million** and a current tax liability of **$4.6 million** were recorded due to Reorganization Transactions, resulting in a **$148.8 million** cumulative adjustment to additional paid-in capital[86](index=86&type=chunk) Income Tax Expense (Benefit) (Amounts in thousands) | Category | Thirteen Weeks Ended Oct 31, 2020 | Thirteen Weeks Ended Nov 2, 2019 | Thirty-Nine Weeks Ended Oct 31, 2020 | Thirty-Nine Weeks Ended Nov 2, 2019 | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----------------------------------- | :----------------------------------- | | Total current tax expense | $10,546 | $588 | $12,064 | $2,160 | | Total deferred tax benefit | $(11,739) | $(82) | $(11,739) | $(246) | | **Total tax expense (benefit)** | **$(1,193)** | **$506** | **$325** | **$1,914** | - Net deferred tax asset (liability) was **$(132,701)k** as of October 31, 2020[91](index=91&type=chunk) [13. Related Party Transactions](index=26&type=section&id=13.%20Related%20Party%20Transactions) Details transactions with related parties, including the termination of the Monitoring Agreement with Kohlberg Kravis Roberts & Co. L.P. (KKR) affiliates upon IPO completion, fees for underwriting services, and the settlement of notes receivable from members - The Monitoring Agreement with KKR was terminated upon IPO completion, resulting in a final termination fee of **$12.3 million** accrued[96](index=96&type=chunk) - Advisory fees related to the Monitoring Agreement, including the termination fee, totaled approximately **$13.0 million** for the thirteen weeks and **$14.8 million** for the thirty-nine weeks ended October 31, 2020[96](index=96&type=chunk) - The company paid **$2.7 million** to KKR Capital Markets LLC (KCM), an affiliate of KKR, for underwriting services in connection with the IPO[97](index=97&type=chunk) - Outstanding notes receivable and related interest of **$8.5 million** from a member were offset and satisfied by a distribution on August 28, 2020[103](index=103&type=chunk) [14. Commitments and Contingencies](index=27&type=section&id=14.%20Commitments%20and%20Contingencies) Outlines various contractual commitments and potential liabilities, including technology-related obligations, the Monitoring Agreement termination fee, financial guarantees, legal proceedings, and sponsorship/intellectual property agreements - As of October 31, 2020, technology-related contractual commitments totaled **$15.2 million**, with approximately **$12.7 million** payable in the next **12 months**[104](index=104&type=chunk) - Obligations under the Monitoring Agreement, including the termination fee, amounted to **$13.3 million**, all payable within the next **12 months**[105](index=105&type=chunk) - Sponsorship and intellectual property commitments totaled **$12.8 million** through **2027**, with **$7.4 million** payable in the next **12 months**[109](index=109&type=chunk) - The company is a defendant in various lawsuits but believes the ultimate resolution will not materially impact its financial position, results of operations, or cash flows[108](index=108&type=chunk) [15. Subsequent Events](index=28&type=section&id=15.%20Subsequent%20Events) Reports significant events that occurred after the reporting period, including the partial exercise of the IPO over-allotment option and a major debt refinancing that restructured the company's long-term debt - On November 3, 2020, the company issued an additional **1,807,495 shares** of common stock from the IPO over-allotment exercise, generating approximately **$22.1 million** in net proceeds[110](index=110&type=chunk) - On November 6, 2020, the company completed a debt refinancing, issuing **$400.0 million** of **6.00%** senior secured notes (due Nov 15, 2027) and entering a new **$400.0 million** first lien term loan facility (due Nov 6, 2027)[111](index=111&type=chunk)[112](index=112&type=chunk)[120](index=120&type=chunk) - The refinancing also extended the maturity of the asset-based revolving credit facility (now 2020 ABL Facility) to **November 6, 2025**[125](index=125&type=chunk) - Net proceeds from the new notes and term loan, combined with cash on hand, were used to repay **$1,431.4 million** of the existing term loan[111](index=111&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's perspective on financial condition and operations, analyzing performance drivers, market trends, the impact of COVID-19, and liquidity [Cautionary Statement Regarding Forward-looking Statements](index=31&type=section&id=Cautionary%20Statement%20Regarding%20Forward-looking%20Statements) Warns readers that the report contains forward-looking statements that are subject to various risks and uncertainties, emphasizing that actual results may differ materially from projections - Forward-looking statements are subject to risks such as overall economic decline, changes in consumer tastes, intense competition, the impact of COVID-19, supply chain disruptions, and substantial indebtedness[127](index=127&type=chunk)[128](index=128&type=chunk) - The company undertakes no obligation to publicly update or review any forward-looking statement, except as required by applicable securities laws[130](index=130&type=chunk) [Overview](index=34&type=section&id=Overview) Overview of Academy Sports and Outdoors, Inc. as a leading U.S. sporting goods retailer, highlighting its extensive store footprint, localized merchandising, value proposition, and growing omnichannel capabilities - The company operates **259 stores** across **16 contiguous states**, with an average size of approximately **70,000 gross square feet**[139](index=139&type=chunk) - It offers a broad assortment of sporting and outdoor recreation products, including **17 owned brands**, and provides locally relevant offerings[138](index=138&type=chunk)[144](index=144&type=chunk) - The company is developing omnichannel capabilities, including its buy-online-pickup-in-store (BOPIS) program launched in **2019**, to deepen customer relationships and drive operating efficiencies[139](index=139&type=chunk) [Trends and Other Factors Affecting Our Business](index=35&type=section&id=Trends%20and%20Other%20Factors%20Affecting%20Our%20Business) Discusses various internal and external factors influencing the company's operating results, including macroeconomic conditions, evolving consumer preferences, strategic inventory management, competitive landscape, supply chain dynamics, and growth strategies [Overall Economic Trends](index=35&type=section&id=Overall%20Economic%20Trends) Sales are highly dependent on the U.S. economy and consumer discretionary spending, with macroeconomic factors such as consumer confidence, employment trends, and financial market volatility significantly impacting customer purchasing patterns - The company's results of operations are highly dependent on the **U.S. economy** and **U.S. consumer discretionary spending**[142](index=142&type=chunk) - Macroeconomic factors like consumer confidence, financial market volatility, wages, jobs, and unemployment trends affect customer spending patterns[142](index=142&type=chunk) [Consumer Preferences and Demands](index=35&type=section&id=Consumer%20Preferences%20and%20Demands) Success hinges on accurately and timely predicting evolving consumer tastes and preferences in sporting goods and outdoor recreation, requiring continuous identification and supply of attractive merchandise - Success is dependent on accurately and timely predicting consumer tastes and preferences, which are subject to change[142](index=142&type=chunk) - The company uses social media analysis, internet search analytics, internal customer insights, and vendor intelligence to identify relevant products and understand changing customer trends[142](index=142&type=chunk) [Strategic Inventory Management](index=35&type=section&id=Strategic%20Inventory%20Management) Effective inventory management is crucial, balancing sufficient stock of popular merchandise with avoiding excess; new tools improved handling and markdown strategies, leading to increased inventory turns - The company improved its inventory management, increasing average inventory turns from **1.96x** in year-to-date 2019 to **2.79x** in year-to-date 2020[143](index=143&type=chunk) - Significant inventory reductions from high sell-through in year-to-date 2020 are expected to require cash for replenishment, impacting net cash provided by operating activities for the **fourth quarter of 2020**[143](index=143&type=chunk) [Value Strategy](index=36&type=section&id=Value%20Strategy) Offers a broad assortment of products at competitive prices, complemented by value-added customer services such as free assembly and hunting/fishing license issuance, aiming to differentiate from specialty and mass retailers - The company offers value-added customer services, including free assembly of certain products, fitness equipment demonstrations, and issuance/renewal of hunting and fishing licenses[144](index=144&type=chunk) - A shift in sales mix towards owned brand products, generally priced lower than national brands of comparable quality, would positively impact gross margin[144](index=144&type=chunk) [E-commerce/BOPIS](index=36&type=section&id=E-commerce%2FBOPIS) Expansion and enhancement of omnichannel capabilities, particularly e-commerce and the Buy-Online-Pickup-In-Store (BOPIS) program, are key growth drivers, with significant investments and increased online sales observed, partly due to the COVID-19 pandemic - BOPIS accounted for approximately **50%** of e-commerce sales in the thirty-nine weeks ended October 31, 2020, up from **15%** in the prior year[145](index=145&type=chunk) - E-commerce sales saw a substantial increase in year-to-date 2020, attributed to changing consumer preferences due to COVID-19 and platform enhancements[145](index=145&type=chunk) [Competition](index=36&type=section&id=Competition) The U.S. sporting goods and outdoor recreation retail industries are highly competitive and fragmented, with the company facing pressure from various retailers across physical and online channels, potentially impacting pricing and margins - The company competes with specialty footwear and outdoor retailers, traditional sporting goods stores, large format sporting goods stores, mass general merchants, and catalogue and internet retailers[146](index=146&type=chunk) - Competitive pressures may necessitate price reductions or increased advertising, which could impact net sales goals and margins[146](index=146&type=chunk) [Sourcing and Supply Chain Management](index=36&type=section&id=Sourcing%20and%20Supply%20Chain%20Management) Sourcing and supply chain management face challenges from competition for resources, fluctuating raw material prices, and the impact of COVID-19; reliance on suppliers without long-term contracts and the effect of tariffs on imported goods are also key concerns - The company experienced rising inventory costs on owned brand products directly sourced from China due to tariffs, leading to higher prices and/or lower margins[147](index=147&type=chunk) - The absence of long-term written contracts with suppliers means terms can be modified, potentially increasing expenses and adversely affecting operations[147](index=147&type=chunk) [New Store Openings](index=37&type=section&id=New%20Store%20Openings) New store openings are expected to be a key driver of future net sales and gross margin growth, with plans to open 8-10 new stores per year starting in 2022; this expansion will place increased demands on operational and administrative resources - The company expects to open **eight to 10 new stores per year**, starting in **2022**[148](index=148&type=chunk) - Most new stores typically achieve profitability within the first **twelve months** of opening[148](index=148&type=chunk) [Interim Results and Seasonality](index=37&type=section&id=Interim%20Results%20and%20Seasonality) The company's business is subject to seasonal fluctuations, with a significant portion of net sales and profits generated during summer holidays and the November/December holiday selling season - A significant portion of net sales and profits is driven by summer holidays (Memorial Day, Father's Day, Independence Day) during the **second quarter**[149](index=149&type=chunk) - Net sales and profits are also impacted by the November/December holiday selling season and cold weather sporting goods sales during the **fourth quarter**[149](index=149&type=chunk) [53rd Week](index=37&type=section&id=53rd%20Week) The company operates on the retail industry's 4-5-4 calendar, which periodically includes an extra (53rd) week every five to six years to ensure sales comparability between fiscal years - The company operates on the retail industry's **4-5-4 calendar**, which adds a **53rd week** every **five to six years** for sales comparability[150](index=150&type=chunk) [Impact of COVID-19 on Our Business](index=37&type=section&id=Impact%20of%20COVID-19%20on%20Our%20Business) The COVID-19 pandemic significantly impacted the business, leading to the implementation of extensive safety measures, temporary operational adjustments, and a notable shift in consumer purchasing towards isolated recreation and outdoor activities, driving increased sales in specific merchandise categories and omnichannel platforms - The company implemented various safety measures, including professional cleaning, hand sanitizer stations, social distancing signage, face coverings, and protective shields, incurring increased costs[152](index=152&type=chunk) - Sales accelerated in categories like outdoor cooking, camping, shooting sports, hunting, fitness equipment, and backyard games as customers sought isolated recreation and outdoor activities during the pandemic[154](index=154&type=chunk) - A significant increase in omnichannel purchases, particularly curbside pickup, was observed as customers preferred to avoid crowded spaces[155](index=155&type=chunk) - Temporary furloughs and pay cuts were implemented, but all **259 stores**, distribution centers, and the corporate office were fully operational by **June 2020**[152](index=152&type=chunk) [How We Assess the Performance of Our Business](index=38&type=section&id=How%20We%20Assess%20the%20Performance%20of%20Our%20Business) Outlines the key financial and operating metrics used by management to evaluate business performance, including comparable sales, various Adjusted non-GAAP measures, and e-commerce penetration [Comparable Sales](index=38&type=section&id=Comparable%20Sales) Comparable sales are defined as the period-over-period net sales increase or decrease for stores open after thirteen full fiscal months, combined with all e-commerce sales, regardless of fulfillment method - Comparable sales include all e-commerce sales, whether shipped to home or picked up in-store/curbside through BOPIS[158](index=158&type=chunk) - Stores significantly remodeled or relocated are excluded from the calculation until they have been in operation for substantially all of the comparable periods[158](index=158&type=chunk) [Adjusted EBITDA, Adjusted Net Income, Pro Forma Adjusted Net Income, Pro Forma Adjusted Earnings per Share and Adjusted Free Cash Flow](index=39&type=section&id=Adjusted%20EBITDA%2C%20Adjusted%20Net%20Income%2C%20Pro%20Forma%20Adjusted%20Net%20Income%2C%20Pro%20Forma%20Adjusted%20Earnings%20per%20Share%20and%20Adjusted%20Free%20Cash%20Flow) These non-GAAP measures are utilized by management to supplement GAAP results, providing a consistent basis for evaluating business strategies, budgeting, incentive compensation, and peer comparisons by excluding items not indicative of core operating performance - These non-GAAP measures assist investors and analysts in comparing operating performance across reporting periods on a consistent basis by excluding items not indicative of core operating performance[160](index=160&type=chunk)[191](index=191&type=chunk) - Management uses these measures for evaluating business strategies, making budgeting decisions, establishing incentive compensation, and reporting compliance with debt covenants[160](index=160&type=chunk)[191](index=191&type=chunk) [E-commerce Penetration](index=39&type=section&id=E-commerce%20Penetration) E-commerce penetration is defined as the ratio of total e-commerce merchandise sales (including Buy-Online-Pickup-In-Store, or BOPIS) to total company merchandise sales - E-commerce penetration is calculated as total e-commerce merchandise sales (which includes BOPIS) divided by total Company merchandise sales[161](index=161&type=chunk) [Components of Our Results of Operations](index=39&type=section&id=Components%20of%20Our%20Results%20of%20Operations) Outlines the primary financial components that drive the company's profitability: net sales, gross margin, selling, general and administrative (SG&A) expenses, and income tax expense (benefit), detailing the factors influencing each [Net Sales](index=39&type=section&id=Net%20Sales) Net sales are derived from in-store and e-commerce merchandise sales, net of sales tax and returns, with fluctuations driven by new store openings, comparable sales, inventory management, seasonality, and promotional activities - Net sales fluctuations are influenced by new store openings, comparable sales, inventory adjustments, vendor relations, seasonality, weather, consumer shopping preferences, and market promotions[163](index=163&type=chunk) [Gross Margin](index=39&type=section&id=Gross%20Margin) Gross margin, calculated as net sales less cost of goods sold, is influenced by sales volume, promotional activities, product mix (including owned brands), and the effective management of procurement, warehousing, distribution, and e-commerce shipping costs - Gross margin depends on net sales, promotional activities, product mix (including owned brand merchandise), and control over cost of goods sold, such as inventory, logistics, freight, shrinkage, and e-commerce shipping costs[165](index=165&type=chunk) [Selling, General and Administrative Expenses](index=39&type=section&id=Selling%20General%20and%20Administrative%20Expenses) SG&A expenses encompass store and corporate payroll, occupancy costs, advertising, and IT, with both variable and fixed components; these expenses are anticipated to increase in future periods due to ongoing growth and the additional costs associated with being a newly public company - SG&A expenses are expected to increase in future periods due to continuing growth and additional legal, accounting, insurance, and other expenses incurred as a newly public company[166](index=166&type=chunk) [Income Tax Expense (Benefit)](index=39&type=section&id=Income%20Tax%20Expense%20%28Benefit%29) Prior to October 1, 2020, the company operated as a flow-through entity for federal income tax purposes; following the IPO and Reorganization Transactions, it is now treated as a U.S. corporation, incurring federal, state, and local income taxes - Prior to October 1, 2020, the company was a flow-through entity for U.S. federal income tax purposes, with tax primarily from state income taxes[167](index=167&type=chunk) - On and after October 1, 2020, following the IPO and Reorganization Transactions, Academy Sports and Outdoors, Inc. is treated as a **U.S. corporation** for federal, state, and local income tax purposes[167](index=167&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) Provides a detailed comparative analysis of the company's financial performance for the thirteen and thirty-nine weeks ended October 31, 2020, against the corresponding prior-year periods, highlighting key drivers of changes in net sales, gross margin, and expenses [Thirteen Weeks Ended October 31, 2020 Compared to Thirteen Weeks Ended November 2, 2019](index=40&type=section&id=Thirteen%20Weeks%20Ended%20October%2031%2C%202020%20Compared%20to%20Thirteen%20Weeks%20Ended%20November%202%2C%202019) For the thirteen weeks ended October 31, 2020, the company reported significant increases in net sales, gross margin, and net income, driven by strong comparable sales growth, a surge in e-commerce, and improved merchandise margins, despite increased employee and professional fees - Net sales increased by **$203.9 million (17.8%)** to **$1,349.1 million**, primarily due to a **16.5%** increase in comparable sales and contributions from new store locations[169](index=169&type=chunk) - Gross margin increased by **$78.1 million (21.5%)** to **$440.5 million**, with the gross margin percentage rising **1.1%** to **32.7%**, mainly due to **106 basis points** of favorability in merchandise margins from less clearance activity and lower markdowns[169](index=169&type=chunk)[173](index=173&type=chunk) - E-commerce net sales surged by **$49.5 million (95.9%)**, representing **7.5%** of merchandise sales, up from **4.5%** in the prior year, driven by changing consumer preferences and platform enhancements[171](index=171&type=chunk) - SG&A expenses decreased by **0.4%** as a percentage of net sales to **26.6%**, primarily due to leveraging property and facility fees (**165 bps** decrease) and advertising (**58 bps** decrease), partially offset by increased employee costs (**94 bps**) and professional fees (**87 bps**)[174](index=174&type=chunk) [Thirty-Nine Weeks Ended October 31, 2020 Compared to Thirty-Nine Weeks Ended November 2, 2019](index=42&type=section&id=Thirty-Nine%20Weeks%20Ended%20October%2031%2C%202020%20Compared%20to%20Thirty-Nine%20Weeks%20Ended%20November%202%2C%202019) For the thirty-nine weeks ended October 31, 2020, the company achieved substantial growth in net sales and net income, driven by strong comparable sales and a significant increase in e-commerce, despite a slight decrease in gross margin percentage due to import freight and vendor allowances - Net sales increased by **$632.4 million (18.3%)** to **$4,091.8 million**, driven by a **16.1%** increase in comparable sales and contributions from new store locations[180](index=180&type=chunk) - Gross margin increased by **$174.3 million (16.4%)** to **$1,235.0 million**, but as a percentage of net sales, it decreased by **0.5%** to **30.2%**, primarily due to **43 basis points** of unfavorability from import freight and **37 basis points** from decreased vendor allowances[183](index=183&type=chunk) - E-commerce net sales increased by **$270.1 million (208.6%)**, representing **9.8%** of merchandise sales, up from **3.8%** in the prior year, driven by changes in consumer shopping preferences and platform enhancements[182](index=182&type=chunk) - SG&A expenses decreased by **3.3%** as a percentage of net sales to **23.4%**, primarily due to leveraging property and facility fees (**171 bps** decrease), advertising (**96 bps** decrease), and employee costs (**78 bps** decrease)[184](index=184&type=chunk) - Gain on early retirement of debt, net, decreased by **$34.4 million (81.5%)** to **$7.8 million**, due to lower principal repurchases of the 2015 Term Loan Facility compared to the prior year[185](index=185&type=chunk) [Non-GAAP Measures](index=44&type=section&id=Non-GAAP%20Measures) Defines and reconciles various non-GAAP financial measures, including Adjusted EBITDA, Adjusted Net Income, Pro Forma Adjusted Net Income, Pro Forma Adjusted Earnings per Share, and Adjusted Free Cash Flow, which management uses to evaluate performance and liquidity by excluding non-core operating items [Adjusted EBITDA](index=46&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA is presented as a supplemental measure, reconciling net income by excluding interest, taxes, depreciation, amortization, and specific non-recurring or non-operating items such as consulting fees, Adviser monitoring fees, and equity compensation Adjusted EBITDA (Amounts in thousands) | Metric | Thirteen Weeks Ended Oct 31, 2020 | Thirteen Weeks Ended Nov 2, 2019 | Thirty-Nine Weeks Ended Oct 31, 2020 | Thirty-Nine Weeks Ended Nov 2, 2019 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :----------------------------------- | :----------------------------------- | | Net income | $59,586 | $28,552 | $217,242 | $102,305 | | Interest expense, net | $22,399 | $24,585 | $70,487 | $77,171 | | Income tax expense | $(1,193) | $506 | $325 | $1,914 | | Depreciation, amortization and impairment | $25,567 | $29,596 | $79,718 | $88,693 | | Consulting fees | $102 | $237 | $194 | $3,517 | | Adviser monitoring fee | $12,953 | $937 | $14,793 | $2,697 | | Equity compensation | $23,359 | $1,405 | $27,049 | $5,872 | | Gain on early extinguishment of debt, net | — | — | $(7,831) | $(42,265) | | Severance and executive transition costs | — | $1,237 | $4,137 | $1,237 | | Costs related to the COVID-19 pandemic | — | — | $17,632 | — | | Other adjustments | $2,965 | $1,704 | $4,894 | $4,455 | | **Adjusted EBITDA** | **$145,738** | **$88,759** | **$428,640** | **$245,596** | [Adjusted Net Income, Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings per Share](index=47&type=section&id=Adjusted%20Net%20Income%2C%20Pro%20Forma%20Adjusted%20Net%20Income%2C%20Pro%20Forma%20Adjusted%20Earnings%20per%20Share%20and%20Adjusted%20Free%20Cash%20Flow) This section provides reconciliations for Adjusted Net Income, Pro Forma Adjusted Net Income, and Pro Forma Adjusted Earnings per Share, adjusting net income for non-recurring items and applying a retrospective tax effect to reflect the company's C-Corporation status post-IPO Pro Forma Adjusted Net Income and EPS (Amounts in thousands, except per share data) | Metric | Thirteen Weeks Ended Oct 31, 2020 | Thirteen Weeks Ended Nov 2, 2019 | Thirty-Nine Weeks Ended Oct 31, 2020 | Thirty-Nine Weeks Ended Nov 2, 2019 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :----------------------------------- | :----------------------------------- | | Net income | $59,586 | $28,552 | $217,242 | $102,305 | | Adjusted Net Income | $98,894 | $34,062 | $278,001 | $77,862 | | Pro Forma Adjusted Net Income | $73,747 | $25,590 | $208,591 | $58,327 | | Pro Forma Adjusted Basic EPS | $0.96 | $0.35 | $2.82 | $0.80 | | Pro Forma Adjusted Diluted EPS | $0.91 | $0.34 | $2.70 | $0.78 | [Adjusted Free Cash Flow](index=48&type=section&id=Adjusted%20Free%20Cash%20Flow) Adjusted Free Cash Flow, calculated as net cash provided by operating activities less net cash used in investing activities, is presented as a useful measure of liquidity and the company's ability to generate cash Adjusted Free Cash Flow (Amounts in thousands) | Metric | Thirty-Nine Weeks Ended Oct 31, 2020 | Thirty-Nine Weeks Ended Nov 2, 2019 | | :------------------------------------------ | :----------------------------------- | :----------------------------------- | | Net cash provided by operating activities | $857,218 | $94,756 | | Net cash provided by (used in) investing activities | $(13,790) | $(52,579) | | **Adjusted Free Cash Flow** | **$843,428** | **$42,177** | [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the company's strategies for managing liquidity, including cost-cutting measures, the impact of a special distribution, proceeds from the IPO, and subsequent debt refinancing; it also outlines historical cash sources and uses, and future funding plans [Sources and Uses of Liquidity](index=48&type=section&id=Sources%20and%20Uses%20of%20Liquidity) The company's liquidity is primarily sourced from operating activities, debt issuances, and credit facilities, used for working capital, capital improvements, debt service, and distributions; recent IPO proceeds and debt refinancing significantly impacted its financial flexibility - Cash and cash equivalents totaled **$869.7 million** as of October 31, 2020[205](index=205&type=chunk) - The IPO generated approximately **$184.9 million** in net proceeds on October 6, 2020, with an additional **$22.1 million** from the over-allotment exercise on November 3, 2020[204](index=204&type=chunk)[209](index=209&type=chunk) - Proceeds from the IPO, new 2020 Notes, and 2020 Term Loan Facility, along with cash on hand, were used to repay **$1,431.4 million** of the existing term loan on November 6, 2020[210](index=210&type=chunk) - The company expects to fund anticipated capital expenditures, working capital needs, and scheduled debt service costs using existing cash balances, internally generated cash flows, and available borrowings under the 2020 ABL Facility[211](index=211&type=chunk) [Capital Expenditures](index=50&type=section&id=Capital%20Expenditures) Planned capital expenditures for fiscal year 2020 are approximately $46.6 million, with the majority allocated to corporate, e-commerce, and information technology programs, and the remainder to existing stores, distribution centers, and remodels - Expected capital expenditures for fiscal year 2020 are approximately **$46.6 million**[213](index=213&type=chunk) - Approximately **65%** of planned cash outflow relates to investments in corporate, e-commerce, and information technology programs, **30%** to existing stores and distribution centers, and **5%** to store remodels[213](index=213&type=chunk) [Cash Flows for the Thirty-Nine Weeks Ended October 31, 2020 and November 2, 2019](index=51&type=section&id=Cash%20Flows%20for%20the%20Thirty-Nine%20Weeks%20Ended%20October%2031%2C%202020%20and%20November%202%2C%202019) This section provides a detailed analysis of cash flow changes, highlighting a significant increase in net cash provided by operating activities, driven by improved operating assets and liabilities, higher net income, and increased non-cash charges, while also detailing changes in investing and financing activities - Net cash provided by operating activities increased by **$762.5 million** for the thirty-nine weeks ended October 31, 2020, compared to the prior year, primarily due to a **$599.1 million** net increase from operating assets and liabilities, a **$114.9 million** increase in net income, and a **$48.4 million** increase in non-cash charges[215](index=215&type=chunk) - Key drivers for the increase in operating cash flows include a **$214.5 million** decrease in merchandise inventories (due to high sell-through) and a **$340.1 million** increase in accounts payable (due to increased inventory receipts and extended vendor payment terms)[215](index=215&type=chunk) - Net cash used in investing activities decreased by **$38.8 million**, mainly due to **$26.7 million** less in capital expenditures and a **$12.1 million** increase from the repayment of notes receivable from a NAHC member[218](index=218&type=chunk) - Net cash used in financing activities increased by **$48.8 million**, driven by a **$277.7 million** distribution to NAHC's members, partially offset by **$184.9 million** in net IPO proceeds and **$88.6 million** lower term loan principal repurchases[219](index=219&type=chunk) [Critical Accounting Policies and Estimates](index=52&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section reaffirms that the financial statements are prepared in accordance with GAAP and rely on management's estimates, particularly for merchandise inventories and impairment analyses of goodwill, intangibles, and long-lived assets, noting that the COVID-19 pandemic makes these estimates more challenging - The most significant estimates involve the valuation of merchandise inventories and performing goodwill, intangible, and long-lived asset impairment analyses[221](index=221&type=chunk) - The global economic climate and unforeseen effects from the COVID-19 pandemic are making these estimates more challenging, with actual results potentially differing materially from estimates[221](index=221&type=chunk) [Recent Accounting Pronouncements](index=52&type=section&id=Recent%20Accounting%20Pronouncements) This section incorporates by reference the information on recent accounting pronouncements detailed in Note 2 to the unaudited consolidated financial statements - Information on recent accounting pronouncements is incorporated by reference from Note 2 to the unaudited consolidated financial statements[222](index=222&type=chunk) [Related Party Transactions](index=53&type=section&id=Related%20Party%20Transactions) This section incorporates by reference the detailed information on related party transactions provided in Note 13 to the unaudited consolidated financial statements - Information on related party transactions is incorporated by reference from Note 13 to the unaudited consolidated financial statements[223](index=223&type=chunk) [Off-Balance Sheet Arrangements](index=53&type=section&id=Off-Balance%20Sheet%20Arrangements) The company's off-balance sheet arrangements primarily consist of future minimum guaranteed contractual payments and letters of credit, with no material changes reported during the quarter ended October 31, 2020 - Off-balance sheet contractual obligations and commercial commitments relate to future minimum guaranteed contractual payments and letters of credit[224](index=224&type=chunk) - There have been no other material changes in off-balance sheet arrangements during the quarter ended October 31, 2020[224](index=224&type=chunk) [Contractual Obligations and Commercial Commitments](index=53&type=section&id=Contractual%20Obligations%20and%20Commercial%20Commitments) The company's contractual obligations and commercial commitments primarily involve debt facilities, operating leases, technology-related commitments, the Monitoring Agreement, and sponsorship/intellectual property agreements, with no material changes during the quarter other than the termination of the Monitoring Agreement - Contractual obligations and commercial commitments primarily relate to debt facilities, senior secured notes, operating leases, technology-related commitments, the Monitoring Agreement, and sponsorship and intellectual property agreements[225](index=225&type=chunk) - No material changes occurred during the quarter ended October 31, 2020, other than fluctuations from ordinary course business and the termination of the Monitoring Agreement[225](index=225&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes in the company's primary market risk exposures or management strategies from those previously disclosed in the Prospectus, except for the subsequent events detailed in Note 15 - No material changes in primary risk exposures or management of market risks have occurred, except as disclosed in Note 15 to the consolidated financial statements[226](index=226&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and procedures and confirms no material changes in internal control over financial reporting during the period [Evaluation of Disclosure Controls and Procedures](index=53&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of the end of the reporting period and concluded they were effective at a reasonable assurance level - The CEO and CFO concluded that the design and operation of the company's disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report[227](index=227&type=chunk) [Changes in Internal Control over Financial Reporting](index=53&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No changes in the company's internal control over financial reporting occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting - No changes in internal control over financial reporting occurred during the period that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[228](index=228&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various lawsuits and claims typical of its business, but does not anticipate any individual or group of cases to materially affect its operations, financial position, or liquidity, and believes established reserves are adequate - The company is a defendant or co-defendant in lawsuits, claims, and demands relating to product, premises, employment, and/or commercial liability[229](index=229&type=chunk) - No individual case, or group of cases, is expected to have a material effect on the manner in which the company conducts its business or on its results of operations, financial position, or liquidity[229](index=229&type=chunk) - Reserves have been established that management believes to be adequate based on current evaluations and experience[229](index=229&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors discussed in the Prospectus, with updates reflecting the Refinancing Transactions; it emphasizes the significant risks associated with the company's high level of indebtedness, which demands substantial cash flow for debt service and constrains financial flexibility and growth opportunities - The risk factors discussed in the Prospectus are incorporated, with updates provided due to the Refinancing Transactions[231](index=231&type=chunk)[232](index=232&type=chunk) - After giving effect to the Refinancing Transactions, the company would have had approximately **$800.0 million** of outstanding secured indebtedness as of October 31, 2020[234](index=234&type=chunk) - The high level of indebtedness requires a substantial portion of cash flows for debt service, reducing funds available for operations, capital expenditures, acquisitions, and other business opportunities[233](index=233&type=chunk)[235](index=235&type=chunk) - Despite current indebtedness, the company may incur substantially more debt, including off-balance sheet financings, which could further exacerbate financial risks[239](index=239&type=chunk)[240](index=240&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the completion of the company's initial public offering (IPO) and the subsequent partial exercise of the underwriters' over-allotment option, outlining the net proceeds received and their use to fully repay existing term loan borrowings - The company completed its IPO on **October 6, 2020**, selling **15,625,000 shares** of common stock for approximately **$184.9 million** in net proceeds[249](index=249&type=chunk) - On **November 3, 2020**, an additional **1,807,495 shares** were issued from the partial exercise of the underwriters' over-allotment option, generating approximately **$22.1 million** in further net proceeds[249](index=249&type=chunk) - The net proceeds from the IPO, along with proceeds from the 2020 Notes, the Term Loan Facility, and cash on hand, were used to repay **$1,431.4 million** of outstanding borrowings under the existing term loan[250](index=250&type=chunk) [Item 6. Exhibits](index=58&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report, including key organizational documents, incentive plans, and certifications, providing transparency into the company's governance and operational frameworks - Exhibits include the Amended and Restated Certificate of Incorporation and Bylaws of Academy Sports and Outdoors, Inc[253](index=253&type=chunk) - The **2020 Omnibus Incentive Plan** and various forms of equity award agreements are listed as exhibits[253](index=253&type=chunk) - Certifications of the Chief Executive Officer and Chief Financial Officer under Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 are included[253](index=253&type=chunk) [SIGNATURES](index=60&type=section&id=SIGNATURES) This section contains the official signatures of the company's principal executive and financial officers, certifying the accuracy and completeness of the Quarterly Report on Form 10-Q as of December 10, 2020 - The Quarterly Report on Form 10-Q was signed on **December 10, 2020**, by **Ken C. Hicks**, Chairman, President and Chief Executive Officer[256](index=256&type=chunk)[257](index=257&type=chunk) - The report was also signed by **Michael P. Mullican**, Executive Vice President and Chief Financial Officer[257](index=257&type=chunk)