Academy(ASO) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements 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 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 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 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] Condensed Notes to Consolidated Financial Statements 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] - 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][30] 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] - On September 1, 2022, the Board of Directors declared a quarterly cash dividend of $0.075 per share, payable on October 13, 2022[72] Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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][111] - 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] - 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] Non-GAAP Measures 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 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][144] - The company repurchased 7,823,241 shares for a total of $288.6 million in the first half of 2022[153] - 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] - 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] Quantitative and Qualitative Disclosures About Market Risk 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] Controls and Procedures 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] - 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] PART II. OTHER INFORMATION Legal Proceedings 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] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds 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] Defaults Upon Senior Securities No defaults upon senior securities were reported - None[173] Mine Safety Disclosures This section is not applicable to the company's operations - Not Applicable[173] Other Information No other material information was reported - None[173] Exhibits 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]