Academy(ASO) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's discussion, market risk disclosures, and controls for the reported period Item 1. Financial Statements This section presents the unaudited consolidated financial statements, including balance sheets, income statements, statements of stockholders' equity, and cash flow statements, along with condensed notes providing further details on the company's operations, accounting policies, debt, and other financial commitments for the thirteen weeks ended May 4, 2024 Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific points in time | ASSETS / LIABILITIES AND STOCKHOLDERS' EQUITY | May 4, 2024 ($ thousands) | February 3, 2024 ($ thousands) | April 29, 2023 ($ thousands) | | :-------------------------------------------- | :------------------------ | :----------------------------- | :--------------------------- | | Cash and cash equivalents | 378,145 | 347,920 | 295,536 | | Merchandise inventories, net | 1,356,811 | 1,194,159 | 1,386,457 | | Total current assets | 1,816,976 | 1,644,900 | 1,728,790 | | Total assets | 4,873,879 | 4,676,713 | 4,641,934 | | Accounts payable | 735,563 | 541,077 | 712,643 | | Total current liabilities | 1,122,076 | 879,858 | 1,049,364 | | Total liabilities | 2,968,358 | 2,722,063 | 2,960,972 | | Stockholders' equity | 1,905,521 | 1,954,650 | 1,680,962 | Consolidated Statements of Income This statement details the company's revenues, expenses, and net income over the reported thirteen-week periods | Metric | Thirteen Weeks Ended May 4, 2024 ($ thousands) | Thirteen Weeks Ended April 29, 2023 ($ thousands) | Change ($ thousands) | Change (%) | | :---------------------- | :--------------------------------------------- | :------------------------------------------------ | :------------------- | :--------- | | NET SALES | 1,364,220 | 1,383,609 | (19,389) | (1.4)% | | GROSS MARGIN | 455,793 | 467,115 | (11,322) | (2.4)% | | OPERATING INCOME | 102,383 | 126,196 | (23,813) | (18.9)% | | INCOME BEFORE INCOME TAXES | 97,652 | 118,679 | (21,027) | (17.7)% | | NET INCOME | 76,465 | 93,970 | (17,505) | (18.6)% | | EARNINGS PER COMMON SHARE: | | | | | | BASIC | 1.03 | 1.22 | | | | DILUTED | 1.01 | 1.19 | | | Consolidated Statements of Stockholders' Equity This statement outlines changes in the company's equity accounts, including net income, share repurchases, and dividends, for the reported periods | Item | Thirteen Weeks Ended May 4, 2024 ($ thousands) | Thirteen Weeks Ended April 29, 2023 ($ thousands) | | :------------------------------------ | :--------------------------------------------- | :------------------------------------------------ | | Net income | 76,465 | 93,970 | | Equity compensation | 6,138 | 11,382 | | Repurchase of common stock for retirement | (123,500) | (50,264) | | Cash dividends declared | (8,182) | (6,929) | | Total Stockholders' Equity (End of Period) | 1,905,521 | 1,680,962 | Consolidated Statements of Cash Flows This statement categorizes cash inflows and outflows from operating, investing, and financing activities for the reported periods | Cash Flow Activity | Thirteen Weeks Ended May 4, 2024 ($ thousands) | Thirteen Weeks Ended April 29, 2023 ($ thousands) | | :-------------------------------------- | :--------------------------------------------- | :------------------------------------------------ | | Net cash provided by operating activities | 199,677 | 52,135 | | Net cash used in investing activities | (32,355) | (40,547) | | Net cash used in financing activities | (137,097) | (53,197) | | Net increase (decrease) in cash and cash equivalents | 30,225 | (41,609) | | Cash and cash equivalents at end of period | 378,145 | 295,536 | Condensed Notes to Consolidated Financial Statements These notes provide additional detail and context for the financial statements, covering accounting policies, debt, and other financial commitments 1. Nature of Operations This note describes the company's business as a leading sporting goods and outdoor recreational products retailer in the United States - The Company is a leading full-line sporting goods and outdoor recreational products retailer in the United States[14] - As of May 4, 2024, the Company operated 284 retail locations in 18 states and three distribution centers, complemented by its e-commerce website academy.com[14] 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements, including share repurchase programs and new pronouncements - The Company has active share repurchase programs (2022 and 2023 Share Repurchase Programs) with $574.3 million remaining available as of May 4, 2024[20][22] | Share Repurchases (Thirteen Weeks Ended) | May 4, 2024 | April 29, 2023 | | :--------------------------------------- | :---------- | :------------- | | Shares repurchased | 1,983,967 | 750,010 | | Aggregate amount paid ($ millions) | 123.5 | 50.3 | - The Company is evaluating the impact of new accounting pronouncements, ASU 2023-09 (Income Tax Disclosures) and ASU 2023-07 (Segment Reporting), on its financial disclosures[24][25] 3. Net Sales This note provides a breakdown of net sales by merchandise division and details changes in gift card liabilities | Merchandise Division Sales ($ thousands) | Thirteen Weeks Ended May 4, 2024 | Thirteen Weeks Ended April 29, 2023 | | :--------------------------------------- | :------------------------------- | :---------------------------------- | | Outdoors | 374,907 | 366,321 | | Sports and recreation | 350,588 | 366,300 | | Apparel | 335,621 | 345,231 | | Footwear | 292,441 | 296,301 | | Total merchandise sales | 1,353,557 | 1,374,153 | | Other sales | 10,663 | 9,456 | | Net Sales | 1,364,220 | 1,383,609 | - Gift card liability decreased to $82.3 million as of May 4, 2024, from $94.2 million at the beginning of the period[28] 4. Long-Term Debt This note details the company's long-term debt obligations, including term loans, notes, and available borrowing capacity under the ABL facility | Debt Type ($ thousands) | May 4, 2024 | February 3, 2024 | April 29, 2023 | | :---------------------- | :---------- | :--------------- | :------------- | | Term Loan | 91,000 | 91,750 | 194,000 | | Notes | 400,000 | 400,000 | 400,000 | | Total debt | 491,000 | 491,750 | 594,000 | | Long-term debt, net | 484,084 | 484,551 | 584,093 | - The Term Loan's weighted average interest rate was 9.19% as of May 4, 2024, with quarterly principal payments of $750 thousand and maturity on November 6, 2027[32] - The ABL Facility's maturity was extended to March 8, 2029, with $981.2 million available borrowing capacity and no outstanding borrowings as of May 4, 2024[36][37] 5. Fair Value Measurements This note provides information on the fair value of financial instruments, including money market funds and long-term debt - The Company held $324.0 million in money market funds as of May 4, 2024, a significant increase from $42.3 million on April 29, 2023[41] - The estimated fair value of the Term Loan and Notes was $0.5 billion as of May 4, 2024, classified as Level 2 within the fair value hierarchy[42] 6. Property and Equipment This note presents the carrying value of property and equipment, net of accumulated depreciation, and related depreciation expense | Property and Equipment ($ thousands) | May 4, 2024 | February 3, 2024 | April 29, 2023 | | :----------------------------------- | :---------- | :--------------- | :------------- | | Total property and equipment | 1,752,066 | 1,712,135 | 1,550,645 | | Accumulated depreciation and amortization | (1,295,472) | (1,266,926) | (1,185,621) | | Property and equipment, net | 456,594 | 445,209 | 365,024 | - Depreciation expense increased to $28.9 million for the thirteen weeks ended May 4, 2024, from $26.3 million in the prior year period[44] 7. Accrued Expenses and Other Current Liabilities This note provides a detailed breakdown of various accrued expenses and other current liabilities | Accrued Expenses and Other Current Liabilities ($ thousands) | May 4, 2024 | February 3, 2024 | April 29, 2023 | | :----------------------------------------------------------- | :---------- | :--------------- | :------------- | | Accrued personnel costs | 44,384 | 30,899 | 27,452 | | Deferred revenue - gift cards and other | 84,725 | 96,688 | 80,405 | | Income taxes payable | 31,234 | 9,313 | 18,837 | | Accrued expenses and other current liabilities | 262,048 | 217,932 | 221,388 | 8. Share-Based Compensation This note details the company's share-based compensation expense and the number of shares authorized for future issuance under incentive plans - Equity compensation expense decreased to $6.1 million for the thirteen weeks ended May 4, 2024, from $11.4 million in the prior year period[47] - As of May 4, 2024, 4,132,613 shares were authorized and available for future issuance under the 2020 Omnibus Incentive Plan, and 1,593,760 shares under the ESPP[46][47] 9. Earnings per Common Share This note presents basic and diluted earnings per common share and the weighted average shares outstanding for the reported periods | Earnings per Common Share | Thirteen Weeks Ended May 4, 2024 | Thirteen Weeks Ended April 29, 2023 | | :------------------------ | :------------------------------- | :---------------------------------- | | Basic | $1.03 | $1.22 | | Diluted | $1.01 | $1.19 | - Diluted weighted average common shares outstanding decreased to 75,798 thousand for the thirteen weeks ended May 4, 2024, from 79,288 thousand in the prior year period[53] 10. Commitments and Contingencies This note outlines the company's contractual commitments, potential legal liabilities, and contingent obligations - The Company has $95.0 million in technology-related and other contractual commitments, with $69.0 million payable in the next 12 months[54] - The Company is contesting U.S. Customs and Border Protection's determination of additional anti-dumping and/or countervailing duties on certain imported products[56] - Sponsorship and intellectual property commitments total $13.3 million through 2027, with $5.6 million payable in the next 12 months[58] 11. Subsequent Events This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On June 6, 2024, the Board of Directors declared a quarterly cash dividend of $0.11 per share, payable on July 18, 2024[59] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the thirteen weeks ended May 4, 2024, discussing key performance indicators, recent trends, and liquidity. It highlights a decrease in net sales and profitability, alongside an increase in operating cash flow Cautionary Statement Regarding Forward-looking Statements This statement advises that forward-looking statements are subject to risks and uncertainties and are not guarantees of future performance - Forward-looking statements are based on management's current expectations and are not guarantees of future performance, subject to various risks and uncertainties[62] - Principal risk factors include overall decline in the economy and consumer spending, ability to react to consumer tastes, supply chain disruptions, intense competition, and risks related to indebtedness[65][66][67][68] Overview This section provides a general description of the company's business, store count, and product assortment - The Company is a leading full-line sporting goods and outdoor recreation retailer in the United States, operating 284 stores in 18 states as of May 4, 2024[72][74] - Product assortment focuses on outdoor (28%), sports and recreation (26%), apparel (25%), and footwear (21%) of Q1 2024 net sales[72] | Store Activity | May 4, 2024 | April 29, 2023 | | :------------- | :---------- | :------------- | | Beginning stores | 282 | 268 | | Q1 new stores | 2 | 1 | | Ending stores | 284 | 269 | How We Assess the Performance of Our Business and Recent Trends This section explains the key metrics used to evaluate business performance and discusses recent trends in comparable sales and expenses - Comparable sales decreased by 5.7% in Q1 2024, an improvement compared to declines of 6.4% and 6.5% in 2022 and 2023, respectively[79] - The Q1 2024 comparable sales decrease was driven by 4.6% fewer comparable transactions and a 1.2% decline in average ticket[95] - Selling, General and Administrative (SG&A) expenses increased to 25.9% of net sales in Q1 2024 (from 24.6% in Q1 2023), primarily due to new store additions and deleverage from decreased sales[88][89][97] | Pre-opening Expenses ($ millions) | Thirteen Weeks Ended May 4, 2024 | Thirteen Weeks Ended April 29, 2023 | | :-------------------------------- | :------------------------------- | :---------------------------------- | | Number of new stores opened | 2 | 1 | | Total pre-opening expenses incurred | 1.4 | 1.6 | Results of Operations This section analyzes the company's financial performance, including changes in net sales, gross margin, operating income, and net income - Net sales decreased by $19.4 million (1.4%) to $1.36 billion in Q1 2024, primarily due to a 5.7% comparable sales decrease, partially offset by $35.2 million from new store locations[94] - Gross margin decreased by 40 basis points to 33.4% of net sales, mainly due to a higher sales mix of hard goods and increased promotional activity (80 bps unfavorability) and increased inventory valuation adjustments (23 bps unfavorability), partially offset by lower freight costs (41 bps favorability) and decreased inventory shrinkage (18 bps favorability)[96] - Interest expense decreased by $1.7 million (15.5%) due to a $100.0 million voluntary prepayment on the Term Loan, slightly offset by higher interest rates[97] - Net income decreased by $17.5 million (18.6%) to $76.5 million, with the effective income tax rate increasing to 21.7% in Q1 2024 from 20.8% in Q1 2023[93][98] Non-GAAP Measures This section presents financial performance metrics adjusted for certain items not included in GAAP, such as Adjusted EBITDA and Adjusted Free Cash Flow | Non-GAAP Metric ($ thousands) | Thirteen Weeks Ended May 4, 2024 | Thirteen Weeks Ended April 29, 2023 | | :---------------------------- | :------------------------------- | :---------------------------------- | | Adjusted EBITDA | 142,578 | 167,552 | | Adjusted EBIT | 113,725 | 141,291 | | Adjusted Net Income | 81,620 | 102,982 | | Adjusted Earnings per Share (Diluted) | 1.08 | 1.30 | | Cash Flow Metric ($ thousands) | Thirteen Weeks Ended May 4, 2024 | Thirteen Weeks Ended April 29, 2023 | | :----------------------------- | :------------------------------- | :---------------------------------- | | Net cash provided by operating activities | 199,677 | 52,135 | | Net cash used in investing activities | (32,355) | (40,547) | | Adjusted Free Cash Flow | 167,322 | 11,588 | Liquidity and Capital Resources This section discusses the company's ability to meet its short-term and long-term financial obligations, including cash position, debt, and capital expenditures - Cash and cash equivalents totaled $378.1 million as of May 4, 2024, and the Company believes its liquidity is sufficient for the foreseeable future[110] | Long-Term Debt Overview | Details | | :---------------------- | :------ | | Notes | $400 million principal, 6.00% fixed rate, due Nov 15, 2027 | | Term Loan | $91.0 million principal, 9.19% variable rate, due Nov 6, 2027 | | ABL Facility | $1.0 billion commitment, variable rate, no principal outstanding, due March 8, 2029 | - Available borrowing capacity under the ABL Facility was $981.2 million as of May 4, 2024[116] - The Company spent $122.4 million to repurchase 1,983,967 shares in Q1 2024, with $574.3 million remaining under share repurchase programs[119][121] - Capital expenditures for Q1 2024 were $32.2 million, with 55% forecasted for new stores, 25% for corporate/e-commerce/IT, and 20% for existing store/DC updates in fiscal year 2024[124][125] Cash Flows for the Thirteen Weeks Ended May 4, 2024 and April 29, 2023 This section provides a comparative analysis of cash flows from operating, investing, and financing activities between the two reported periods - Net cash provided by operating activities increased by $147.5 million in Q1 2024 compared to Q1 2023, primarily due to a $163.1 million net increase from operating assets and liabilities[127][128] - Net cash used in investing activities decreased by $8.2 million, mainly due to lower capital expenditures for Corporate, E-commerce, and IT programs[129] - Net cash used in financing activities increased by $83.9 million, driven by a $72.4 million increase in common stock repurchases, $5.7 million in debt issuance fees, and $1.3 million in increased dividends[129] Critical Accounting Policies and Estimates This section identifies accounting policies that require significant judgment and estimates, such as inventory valuation and impairment analyses - No material changes to critical accounting policies and estimates were reported compared to the Annual Report[131] - Significant estimates involve the valuation of merchandise inventories and performing goodwill, intangible, and long-lived asset impairment analyses[131] Recent Accounting Pronouncements This section refers to disclosures regarding new accounting standards and their potential impact on the financial statements - Information on recent accounting pronouncements is incorporated by reference from Note 2 to the consolidated financial statements[132] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes in the company's primary risk exposures or management of market risks since the Annual Report - No material changes in primary risk exposures or management of market risks from those disclosed in the Annual Report[133] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of May 4, 2024, and no material changes in internal control over financial reporting occurred during the quarter - The Company's disclosure controls and procedures were evaluated and deemed effective as of May 4, 2024[135] - No material changes in internal control over financial reporting occurred during the period covered by this Quarterly Report[136] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, defaults, mine safety, other information, and a list of exhibits Item 1. Legal Proceedings The company is involved in various lawsuits and claims, but no individual or group of cases is expected to materially affect its operations or financial position. The company is vigorously contesting additional duties from U.S. Customs and Border Protection - No individual or group of legal cases is expected to have a material effect on the Company's business, financial position, or liquidity[137] - The Company is vigorously contesting U.S. Customs and Border Protection's determination of additional anti-dumping and/or countervailing duties on certain imported products[137] - There have been no material developments in legal proceedings during the fiscal quarter ended May 4, 2024[138] Item 1A. Risk Factors This section refers readers to the "Risk Factors" section in the Annual Report for a comprehensive discussion of potential risks, confirming that no material changes to these factors have occurred - No material changes to the risk factors discussed in the Annual Report have occurred[139] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section summarizes the company's common stock repurchases and cancellations during the first quarter of 2024, totaling 1,983,967 shares for $122.4 million, with $574.3 million remaining available under current repurchase programs | Period (February 4, 2024 to May 4, 2024) | Total Number of Shares Purchased | Average Price Paid per Share | Total Amount Repurchased ($ thousands) | | :--------------------------------------- | :------------------------------- | :--------------------------- | :------------------------------------- | | First Quarter | 1,983,967 | $61.71 | 122,425 | - As of May 4, 2024, approximately $574.3 million remained available for share repurchases under the 2022 and 2023 Share Repurchase Programs[142] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reported period - No defaults upon senior securities occurred during the period[143] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company - Mine Safety Disclosures are not applicable[143] Item 5. Other Information This section reports that no director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended May 4, 2024[144] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, employment agreements, debt amendments, compensation policies, and certifications - Exhibits include Amended and Restated Certificate of Incorporation, Bylaws, employment agreements, Amendment No. 4 to the ABL Credit Agreement, Non-Employee Director Compensation Policy, and certifications under the Sarbanes-Oxley Act[145]