Academy(US:ASO)2022-03-28 16:00Cautionary Statement Regarding Forward-Looking Statements Forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from expectations Part I Item 1. Business 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, 20221836 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 sales2128 - 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 capabilities23 - Firearms, ammunition, and related accessories represented approximately 6% of net sales in 2021 and are subject to numerous federal, state, and local laws and regulations65 Item 1A. Risk Factors 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 spending70 - The COVID-19 pandemic has negatively impacted global supply chains, increased operating costs, and shifted consumer demand, creating ongoing uncertainty747780 - A significant portion of merchandise is manufactured in foreign countries, primarily China, exposing the company to risks from tariffs, trade disputes, and supply chain disruptions8586 - 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 covenants132137 - Ownership of common stock carries risks of dilution from future equity issuances, high stock price volatility, and uncertainty regarding future dividend payments144145148 Item 1B. Unresolved Staff Comments There are no unresolved staff comments - There are no unresolved staff comments157 Item 2. Properties 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, Texas157 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, 2022158 Item 3. Legal Proceedings 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 liability159 - 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 flows159 - 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 dismissed160 Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable161 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Academy's common stock began trading on Nasdaq in October 2020, with $65.6 million in Q4 2021 share repurchases and an initial $0.075 quarterly dividend - Academy's common stock began trading on the Nasdaq Stock Market LLC under the symbol "ASO" on October 2, 2020163 Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Number of Shares Purchased | Average Price per Share ($) | 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, 2022167229 - 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, 2022170 Item 6. Reserved This item is reserved - Item 6 is reserved171 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 footwear204 - 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 costs205 - 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 sales206 - 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 repurchases208 - 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 Facility221242 - Capital expenditures for fiscal year 2022 are expected to be approximately $140.0 million, with 50% allocated to corporate, e-commerce, and information technology programs237 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 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 Loan260 - A hypothetical 100 basis point increase in interest rates on current borrowings would increase interest expense by approximately $3.0 million for 2021260 - 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, 2022260351 - 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 Item 8. Financial Statements and Supplementary Data 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-K261 Index to Consolidated Financial Statements 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 report286 Report of Independent Registered Public Accounting Firm 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 respects289 - An unqualified opinion was also issued on the effectiveness of the company's internal control over financial reporting as of January 29, 2022290 - 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 procedures294 Consolidated Balance Sheets 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 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 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 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, 2022307308 - 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 retirement307308 Consolidated Statements of Cash Flows 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 2021310 Notes to the Consolidated Financial Statements 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 transactions312316 - 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 2021320323457 - 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 balance379386 - The company had no derivative financial instruments (interest rate swaps) outstanding as of January 29, 2022, having settled its remaining swaps in January 2021351 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 2019376 - Equity compensation expense was $39.3 million in 2021, including approximately $24.9 million in non-cash expenses related to the 2021 Vesting Event414 - 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 2027463466 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 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 disclosure261 Item 9A. Controls and Procedures 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, 2022263 - 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 - Deloitte & Touche LLP issued an unqualified attestation report on the effectiveness of the company's internal control over financial reporting270 - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter267 Item 9B. Other Information No other information to report - No other information to report275 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections No disclosure regarding foreign jurisdictions that prevent inspections - No disclosure regarding foreign jurisdictions that prevent inspections275 Part III Item 10. Directors, Executive Officers and Corporate Governance 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 report276 - Further information required by this item will be included in the definitive proxy statement for the 2022 Annual Meeting of Stockholders276 Item 11. Executive Compensation 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 Stockholders277 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 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 available279 Item 13. Certain Relationships and Related Transactions, and Director Independence 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 Stockholders280 Item 14. Principal Accountant Fees and Services 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 Stockholders281 Part IV Item 15. Exhibits and Financial Statement Schedules 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-K283284 Item 16. Form 10-K Summary There is no Form 10-K Summary - There is no Form 10-K Summary471