Academy(US:ASO)2023-03-15 16:00Part I Business Academy Sports + Outdoors is a leading US sporting goods retailer operating 268 stores across 18 states, diversifying sales across Outdoors, Apparel, Sports & Recreation, and Footwear divisions - As of January 28, 2023, the company operates 268 stores in 18 contiguous states, primarily in the southern United States, with Texas having the highest concentration of stores (107)1736 FY2022 Merchandise Sales Breakdown by Division | Division | % of 2022 Net Sales | | :--- | :--- | | Outdoors | 31% | | Apparel | 28% | | Sports & Recreation | 21% | | Footwear | 20% | Net Sales by Merchandise Division (in thousands) | Merchandise Division | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Outdoors | $1,940,811 | $2,174,650 | $1,968,514 | | Sports & Recreation | $1,366,785 | $1,463,172 | $1,256,357 | | Apparel | $1,759,005 | $1,810,345 | $1,390,519 | | Footwear | $1,291,224 | $1,290,197 | $1,044,502 | | Total Merchandise Sales | $6,357,825 | $6,738,364 | $5,659,892 | - E-commerce sales constituted 10.7% of total merchandise sales in fiscal 2022, up from 9.3% in 202130 - The company plans to open 13 to 15 new stores in fiscal 2023, indicating a resumption of its expansion strategy36 - Firearms sales represented approximately 6% of net sales in fiscal 2022, with the company subject to extensive regulation as a federally licensed dealer63 Risk Factors The company faces significant risks including economic dependence, intense competition, supply chain disruptions, cybersecurity threats, extensive firearms regulations, high indebtedness, and stock price volatility - Business & Industry Risks: Performance is highly dependent on the U.S. economy, consumer spending, and ability to react to changing consumer tastes, with intense competition and reliance on foreign-manufactured goods (especially from China) posing significant threats676978 - Cybersecurity & Data Risks: The company faces risks of data breaches and system failures, which could result in lost sales, fines, and reputational damage, making protection of customer, team member, and vendor data critical7677 - Legal & Regulatory Risks: The company is subject to extensive regulations, particularly for firearms sales, which accounted for 6% of net sales in 2022, and changes in these laws or increased enforcement could reduce sales and profitability109 - Indebtedness Risks: The company's debt requires significant cash flow for service payments, limiting funds for other purposes, and covenants in debt agreements impose operational and financial restrictions118124 - Stock Ownership Risks: The stock price may be volatile, anti-takeover provisions in organizational documents could deter potential acquisitions, and future dividend payments are not guaranteed130132136 Properties The company is headquartered in Katy, Texas, and operates three leased distribution centers and 268 leased stores totaling approximately 18.8 million square feet, with typical initial lease terms of 15 to 20 years Corporate and Distribution Facilities | Location | Use | Approx. 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 | - All 268 retail stores are leased, with initial lease terms typically ranging from 15 to 20 years, totaling approximately 18.8 million square feet of leased store space143 Legal Proceedings The company is involved in various lawsuits incidental to its business, primarily related to product, premises, and employment liability, with no expected material effect on its financial position - The company states that no current legal proceeding is expected to have a material impact on its financial position, operations, or liquidity144 - Lawsuits filed against the company related to the 2017 Sutherland Springs, Texas shooting were dismissed with prejudice on April 13, 2022, following a favorable ruling from the Supreme Court of Texas145 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock (ASO) trades on the Nasdaq, with a $600 million share repurchase program authorized through June 2025, and consistent quarterly cash dividends paid since fiscal 2021 Share Repurchases (Q4 2022) | Period | Total Shares Purchased | Average Price per Share ($) | | :--- | :--- | :--- | | Nov 27 - Dec 31, 2022 | 1,125,350 | $52.38 | | Jan 1 - Jan 28, 2023 | 778,582 | $52.78 | | Total Q4 | 1,903,932 | $52.54 | - A $600 million share repurchase program was authorized on June 2, 2022, valid for three years, with approximately $299.4 million remaining available as of January 28, 2023151 - On March 2, 2023, the Board declared a quarterly cash dividend of $0.09 per share, payable on April 13, 2023153 Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal 2022, net sales decreased 5.6% to $6.40 billion and net income fell 6.5% to $628.0 million, driven by lower comparable sales and partially offset by e-commerce growth Results of Operations For fiscal year 2022, net sales decreased 5.6% to $6.40 billion due to a 6.4% drop in comparable sales, leading to a 6.5% decline in net income to $628.0 million Fiscal 2022 vs. 2021 Performance (in thousands) | Metric | FY 2022 | FY 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $6,395,073 | $6,773,128 | (5.6)% | | Gross Margin | $2,212,502 | $2,351,095 | (5.9)% | | Operating Income | $846,549 | $907,947 | (6.8)% | | Net Income | $628,001 | $671,381 | (6.5)% | - The 6.4% decrease in comparable sales was driven by an 8.2% decline in transactions, partially offset by a 2.0% increase in average ticket, attributed to the absence of prior-year government stimulus payments181 - E-commerce sales increased by 9.1% in 2022, representing 10.7% of merchandise sales compared to 9.3% in 2021182 - Gross margin as a percentage of net sales decreased by 10 basis points to 34.6%, primarily due to higher e-commerce shipping costs and unfavorable inventory valuation adjustments182 Non-GAAP Measures The company uses non-GAAP measures like Adjusted EBITDA and Adjusted EBIT to supplement GAAP results, with Adjusted EBITDA at $994.7 million and Pro Forma Adjusted Diluted EPS at $7.70 for fiscal 2022 Adjusted EBITDA and Adjusted EBIT Reconciliation (in thousands) | Metric | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Net Income | $628,001 | $671,381 | $308,764 | | Adjusted EBITDA | $994,661 | $1,073,842 | $607,023 | | Adjusted EBIT | $887,899 | $968,568 | $501,542 | Pro Forma Adjusted Earnings per Share (Diluted) | Metric | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Pro Forma Adjusted Diluted EPS | $7.70 | $7.60 | $3.83 | Liquidity and Capital Resources As of January 28, 2023, the company maintained strong liquidity with $337.1 million in cash and $947.8 million available under its ABL Facility, while repurchasing $489.5 million in stock and planning $200-$250 million in capital expenditures for fiscal 2023 - As of January 28, 2023, the company had $337.1 million in cash and cash equivalents and $947.8 million of available capacity under its ABL Facility198218 Cash Flow Summary (in thousands) | Activity | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $552,005 | $673,265 | $1,011,597 | | Net cash used in investing activities | ($108,806) | ($76,017) | ($33,144) | | Net cash used in financing activities | ($592,052) | ($488,854) | ($750,234) | | Net (Decrease) Increase in Cash | ($148,853) | $108,394 | $228,219 | - In fiscal 2022, the company repurchased 11.9 million shares for $489.5 million and paid $24.6 million in dividends207212 - Capital expenditures were $108.3 million in fiscal 2022, with a forecast of between $200 million and $250 million for fiscal 2023, with 55% allocated to new stores213214 Critical Accounting Policies and Estimates The company's critical accounting policies involve significant judgments and estimates for merchandise inventories, impairment of long-lived assets, goodwill, and intangible assets, with no impairment recorded in recent fiscal years - Merchandise Inventories: Valued at the lower of LIFO cost or net realizable value, requiring estimates for inventory shrinkage, vendor allowances, and valuation adjustments for slow-moving or obsolete items220221 - Impairment of Long-Lived Assets: Assets are reviewed for impairment when events indicate the carrying value may not be recoverable, comparing carrying value to estimated undiscounted future cash flows, with no impairment recorded in 2022, 2021, or 2020223316 - Goodwill and Intangible Assets: Goodwill and the indefinite-lived trade name are tested for impairment annually, with a qualitative assessment performed in 2022 determining a quantitative test was not necessary and no impairment recorded226230318321 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on variable-rate debt, with a 100 basis point increase raising annual interest expense by $2.0 million, and the business experiences significant seasonality in sales and profits - The company is exposed to interest rate risk from its variable-rate Term Loan and ABL Facility, where a hypothetical 100 basis point increase in interest rates would increase annual interest expense by approximately $2.0 million236 - The business experiences significant seasonality, with sales peaks in the second quarter (driven by summer holidays) and the fourth quarter (driven by the holiday selling season and cold weather products)237 Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for the fiscal year ended January 28, 2023, including Balance Sheets, Statements of Income, Statements of Stockholders' Equity, and Statements of Cash Flows, along with detailed notes Consolidated Balance Sheets As of January 28, 2023, total assets were $4.60 billion, with merchandise inventories at $1.28 billion and goodwill at $861.9 million, while total liabilities decreased to $2.97 billion and stockholders' equity increased to $1.63 billion Consolidated Balance Sheet Highlights (in thousands) | Account | Jan 28, 2023 | Jan 29, 2022 | | :--- | :--- | :--- | | Total Current Assets | $1,686,675 | $1,715,747 | | Cash and cash equivalents | $337,145 | $485,998 | | Merchandise inventories, net | $1,283,517 | $1,171,808 | | Total Assets | $4,595,439 | $4,584,940 | | Total Current Liabilities | $1,038,716 | $1,127,110 | | Accounts payable | $686,472 | $737,826 | | Long-term debt, net | $584,456 | $683,585 | | Total Liabilities | $2,967,133 | $3,117,994 | | Total Stockholders' Equity | $1,628,306 | $1,466,946 | Consolidated Statements of Income For fiscal year 2022, the company reported net sales of $6.40 billion, a gross margin of $2.21 billion, operating income of $846.5 million, and net income of $628.0 million, resulting in diluted earnings per share of $7.49 Consolidated Income Statement Summary (in thousands, except per share data) | Metric | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Net Sales | $6,395,073 | $6,773,128 | $5,689,233 | | Gross Margin | $2,212,502 | $2,351,095 | $1,734,045 | | Operating Income | $846,549 | $907,947 | $420,398 | | Net Income | $628,001 | $671,381 | $308,764 | | Diluted EPS | $7.49 | $7.12 | $3.79 | Consolidated Statements of Cash Flows For fiscal 2022, net cash provided by operating activities was $552.0 million, while net cash used in investing activities was $108.8 million and net cash used in financing activities was $592.1 million, resulting in a net decrease in cash of $148.9 million Consolidated Cash Flow Summary (in thousands) | Activity | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $552,005 | $673,265 | $1,011,597 | | Net cash used in investing activities | ($108,806) | ($76,017) | ($33,144) | | Net cash used in financing activities | ($592,052) | ($488,854) | ($750,234) | | Net (Decrease) Increase in Cash | ($148,853) | $108,394 | $228,219 | Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of January 28, 2023, a conclusion affirmed by the independent auditor - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of January 28, 2023241 - Management concluded that the company's internal control over financial reporting was effective as of January 28, 2023, based on the COSO framework243 - The independent registered public accounting firm, Deloitte & Touche LLP, issued an unqualified opinion on the company's internal control over financial reporting as of January 28, 2023247 Part III Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters This section details the company's equity compensation plans as of January 28, 2023, showing approximately 4.5 million securities to be issued upon exercise and over 4.1 million available for future issuance Equity Compensation Plan Information as of January 28, 2023 | Plan Category | Securities to be issued upon exercise (units) | Weighted-average exercise price ($) | Securities remaining for future issuance (units) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 4,525,208 | $23.83 | 4,148,311 | Part IV Exhibits and Financial Statement Schedules This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K, including consolidated financial statements, the auditor's consent, and various corporate and debt agreements - This part includes the Consolidated Financial Statements, the report of the Independent Registered Public Accounting Firm, and a schedule of Valuation and Qualifying Accounts260261 - A comprehensive list of exhibits is provided, including the company's certificate of incorporation, bylaws, debt indentures, credit agreements, equity incentive plans, and executive employment agreements445447449