aso-202109020001817358FALSE00018173582021-09-022021-09-02
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UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
Washington, D.C. 20549 |
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FORM 8-K |
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CURRENT REPORT |
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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Date of report (Date of earliest event reported): September 2, 2021 |
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Academy Sports and Outdoors, Inc. |
(Exact name of registrant as specified in its charter) |
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Delaware | 001-39589 | 85-1800912 |
(State or other jurisdiction of | (Commission | (I.R.S. Employer |
incorporation or organization) | File No.) | Identification No.) |
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| 1800 North Mason Road | |
| Katy, Texas 77449 | |
| (Address of principal executive offices) (Zip code) | |
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| (281) 646-5200 | |
| (Registrant’s Telephone Number, including Area Code) | |
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| Not Applicable | |
| (Former name or former address, if changed since last report) | |
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Securities registered pursuant to Section 12(b) of the Act: |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.01 par value per share | ASO | Nasdaq Global Select Market |
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). |
Emerging Growth Company ☐ | | | |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ |
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Item 2.02 Results of Operations and Financial Condition.
On September 9, 2021, Academy Sports and Outdoors, Inc. (the “Company”) issued a press release announcing financial results for the quarter ended July 31, 2021. A copy of the release is furnished herewith as Exhibit 99.1 and incorporated by reference herein.
The information in this Current Report on Form 8-K, including exhibits, is being furnished to the Securities and Exchange Commission (the “SEC”) pursuant to Item 2.02 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any of the Company’s filings with the SEC under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 8.01 Other Events.
On September 2, 2021, the Board of Directors (the “Board”) of the Company authorized a new share repurchase program under which the Company may purchase up to $500 million of its outstanding shares over the next three years.
Under the share repurchase program, repurchases can be made using a variety of methods, which may include open market purchases, block trades, privately negotiated transactions and/or a non-discretionary trading plan, all in compliance with the rules of the SEC and other applicable legal requirements. The timing, manner, price and amount of any common share repurchases will be determined by the Company in its discretion and will depend on a variety of factors, including legal requirements, price and economic and market conditions. The share repurchase program does not obligate the Company to acquire any particular number of common shares, and the program may be suspended, extended, modified or discontinued at any time.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
See the Exhibit Index immediately preceding the signature page hereto, which is incorporated herein by reference.
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Exhibit No. | | Description of Exhibit |
| | Academy Sports and Outdoors, Inc. Press Release September 9, 2021 |
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 8-K on its behalf by the undersigned, thereto duly authorized.
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ACADEMY SPORTS AND OUTDOORS, INC. |
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Date: September 9, 2021 | | By: | /s/ | Rene G. Casares |
| | Name: | Rene G. Casares |
| | Title: | Senior Vice President, General Counsel and Secretary |
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DocumentExhibit 99.1
Academy Sports + Outdoors Announces Record Sales and Earnings
for the Second Quarter and Raises 2021 Guidance
Net Sales Increased 11.5%; 44.8% Growth over Two Years
Pre-Tax Income Grew 42.8% to $240.9 million
Company Raises Full Year Diluted EPS Range to $5.45 to $5.80 from $4.15 to $4.50
Company Announces New $500 Million Share Repurchase Authorization
KATY, TEXAS (Globe Newswire — Sept 9, 2021) – Academy Sports and Outdoors, Inc. (Nasdaq: ASO) ("Academy" or the "Company") today announced its financial results for the second quarter ended July 31, 2021. Unless otherwise indicated, comparisons are to the same period in the prior fiscal year.
Second Quarter 2021 Results
Net sales increased 11.5% to an all-time quarterly high of $1.79 billion. When compared to the same quarter in 2019, sales increased 44.8%. Comparable sales grew 11.4% on top of 27.0% last year, making it the eighth consecutive quarter of positive comparable sales. The sales growth was driven by the sustained strength in the sporting goods and outdoor recreation market, improving in-stocks and strong consumer demand across all product categories. Sales were particularly strong in Apparel, Footwear, Field, Fitness and Team Sports. E-commerce sales declined slightly (0.9%) after growing 210.3% in the prior year quarter. When compared to the second quarter of 2019, E-commerce sales increased 207.2%.
Gross margin increased 29.4% to $642.5 million, the highest quarterly gross profit in the Company's history. The gross margin rate improved by 500 basis points to 35.9%. This growth was primarily driven by stronger merchandise margins from a favorable product mix shift, higher average unit retails and less promotional activity.
Selling, general and administrative ("SG&A") expenses were 21.7% of sales, a 220 basis point increase. The change was a result of higher advertising and payroll expenses that had been pared back last year due to the pandemic as well as non-recurring stock compensation and payroll expenses associated with accelerated share vesting. Excluding the non-recurring expenses, SG&A expenses would have been 19.2% of sales.
Pre-tax income increased by 42.8% to $240.9 million compared to $168.7 million.
Net income was $190.5 million compared to $167.7 million. Diluted earnings per share were $1.99 compared to $2.25 per share. The decline in earnings per share was the result of an increase in the number of shares outstanding and higher federal income tax. Pro forma adjusted net income, which excludes the impact of certain non-cash and extraordinary items, increased 67.1% to $224.6 million. Pro forma diluted earnings per share increased 29.3% to $2.34 compared to $1.81 per share.
"The Academy Sports + Outdoors team delivered the best quarterly financial results in the Company’s history as we surpassed the very strong store comparables from last year," said Ken Hicks, Chairman, President and Chief Executive Officer. "We plan to build on this continued success by further sharpening our focus on the fundamentals of the business and investing in our strategic initiatives with the goal of adding new customers, gaining market share and driving sales and profit growth. I am also excited to announce the authorization of our new share repurchase program. This program signifies the current strength of the Company and the confidence we have in the future of Academy."
Year-to-Date 2021 Results
Net sales increased 22.9% to $3.37 billion, while comparable sales increased 22.8%. Year-to-date sales grew 45.7% compared to 2019. E-commerce sales increased 241.9% compared to 2019 and declined 10.8% versus 2020.
Gross margin increased 51.8% to $1.21 billion. The gross margin rate improved by 680 basis points to 35.8%.
The growth in gross profit, coupled with 70 basis points of selling, general & administrative expense leverage, resulted in a 192.6% increase in pre-tax income to $465.8 million compared to $159.2 million.
Net income increased 133.6% to $368.3 million compared to $157.7 million. Diluted earnings per share were $3.82 compared to $2.12 per share in the prior year to date. Pro forma adjusted net income, which excludes the impact of certain non-cash and extraordinary items, increased 201.9% to $407.1 million. Pro forma diluted earnings per share were $4.22 compared to $1.81 per share in the prior year to date.
Balance Sheet Update
The company also took steps to enhance its balance sheet. As of the end of the second quarter, the Company’s cash and cash equivalents totaled $553.8 million with no outstanding balance on its credit facility. Adjusted free cash flow was $169.5 million. Merchandise inventories were $1.1 billion, an increase of 24.0% compared to the prior year quarter and 3.2% compared to Q1 2021.
As previously reported, Academy's largest shareholder (KKR) completed two transactions, reducing their ownership to approximately 20% of the Company as of the end of the quarter. As part of one of these events, Academy purchased and retired 3.2 million shares for approximately $100 million. In addition to the stock repurchase, the Company paid down $99 million of its outstanding term loan and refinanced the loan's interest rate from LIBOR + 5.0% to LIBOR + 3.75%. Based on these positive actions, S&P (B+ from B) and Moody's (Ba3 from B1) both upgraded the Company's debt rating.
Capital Allocation
On September 2, 2021, the Academy Board of Directors authorized a new share repurchase program under which the Company may purchase up to $500 million of its outstanding shares over the next three years.
2021 Outlook
Michael Mullican, Executive Vice President and Chief Financial Officer, said, "Our second quarter performance set Company records across numerous financial metrics, including revenue, gross margin dollars and rate, pre-tax income and net earnings. Importantly, we continue to improve profitability at a higher rate than our sales growth. As a result, we are increasing our fiscal 2021 guidance. Looking ahead, we expect to utilize our capabilities to accelerate our omnichannel, new store and other growth initiatives."
This forecast accounts for various market scenarios due to the uncertainty from the impact of COVID-19 on the economy and consumer. The new guidance is as follows:
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| Updated Fiscal 2021(e) Guidance | 2020 | 2019 | vs. 2020 | vs. 2019 |
(in millions, except per share amounts) | Low end | High end | | | | |
Net Sales | $6,465 | $6,620 | $5,689 | $4,830 | 15% | 35% |
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Comparable sales | 14.0% | 17.0% | 16.1% | (0.7)% | | |
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Income before taxes | $670 | $715 | $339 | $123 | 104% | 463% |
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Net income | $525 | $560 | $309 | $120 | 76% | 352% |
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Earnings per share-diluted | $5.45 | $5.80 | $3.79 | $1.60 | 48% | 252% |
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Diluted weighted average shares outstanding | 96,500 | 96,500 | 81,431 | 74,795 | | |
The EPS estimate reflects a tax rate of 22.0% and does not include any potential future share repurchases.
Conference Call Info
Academy will host a conference call today at 11:00 a.m. Eastern Time to discuss its financial results. Listeners may access the call by dialing 1-877-407-3982 (U.S.) or 1-201-493-6780 (International). The passcode is 13721945. A webcast of the call can be accessed at investors.academy.com.
A telephonic replay of the conference call will be available for approximately 30 days, by dialing 1-844-512-2921 (U.S.) or 1-412-317-6671 (International) and entering passcode 13721945. An archive of the webcast will be available at investors.academy.com for approximately 30 days.
About Academy Sports + Outdoors
Academy is a leading full-line sporting goods and outdoor recreation retailer in the United States. Originally founded in 1938 as a family business in Texas, Academy has grown to 259 stores across 16 contiguous states. Academy’s mission is to provide “Fun for All” and Academy fulfills this mission with a localized merchandising strategy and value proposition that strongly connects with a broad range of consumers. Academy’s product assortment focuses on key categories of outdoor, apparel, footwear and sports & recreation through both leading national brands and a portfolio of 19 private label brands, which go well beyond traditional sporting goods and apparel offerings.
All references to "Academy," "Academy Sports + Outdoors," "we," "us," "our" or the "Company" in this press release refer to (1) prior to October 1, 2020 (the "IPO pricing date"), New Academy Holding Company, LLC, a Delaware limited liability company ("NAHC") and the prior parent holding company for our operations, and its consolidated subsidiaries; and (2) on and after the IPO pricing date, Academy Sports and Outdoors, Inc., a Delaware corporation ("ASO, Inc.") and the current parent holding company of our operations, and its consolidated subsidiaries.
On the IPO pricing date, we completed a series of reorganization transactions (the "Reorganization Transactions") that resulted in NAHC being contributed to ASO, Inc. by its members and becoming a wholly owned subsidiary of ASO, Inc. and one share of common stock of ASO, Inc. issued to then-existing members of NAHC for every 3.15 membership units of NAHC contributed to ASO, Inc. (the "Contribution Ratio"). Unless indicated otherwise, the information in this press release has been adjusted to give retrospective effect to the Contribution Ratio.
Non-GAAP Measures
Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income (Loss), Pro Forma Adjusted Net Income (Loss), Pro Forma Adjusted Earnings Per Share, and Adjusted Free Cash Flow have been presented in this press release as supplemental measures of financial performance that are not required by, or presented in accordance with, generally accepted accounting principles (“GAAP”). These non-GAAP measures have limitations as analytical tools. For information on these limitations, as well as information on why management believes these non-GAAP measures are useful, please see our Annual Report for fiscal year 2020 filed on April 7, 2021 (the “Annual Report”), as such limitations and information may be updated from time to time in our periodic filings with the Securities and Exchange commission (the "SEC"), which are accessible on the SEC's website at www.sec.gov.
We compensate for these limitations by primarily relying on our GAAP results in addition to using these non-GAAP measures supplementally.
See “Reconciliations of Non-GAAP to GAAP Financial Measures” below for reconciliations of non-GAAP financial measures used in this press release to their most directly comparable GAAP financial measures.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on Academy's current expectations and are not guarantees of future performance. You can identify these forward-looking statements by the use of words such as “outlook,” “guidance,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. The forward-looking statements are subject to various risks, uncertainties, assumptions or changes in circumstances that are difficult to predict or quantify. Actual results may differ materially from these expectations due to changes in global, regional or local economic, business, competitive, market, regulatory and other factors, many of which are beyond Academy's control. Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in Academy's filings with the SEC, including the Annual Report, under the caption "Risk Factors," as may be updated from time to time in our periodic filings with the SEC. Any forward-looking statement in this press release speaks only as of the date of this release. Academy undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.
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Investor Contact | | Media Contact |
Matt Hodges | | Elise Hasbrook |
VP, Investor Relations | | VP, Communications |
281-646-5362 | | 281-944-6041 |
Matt.hodges@academy.com | | Elise.hasbrook@academy.com |
ACADEMY SPORTS AND OUTDOORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands, except per share data)
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| Thirteen Weeks Ended |
| July 31, 2021 | | Percentage of Sales (2) | | August 1, 2020 | | Percentage of Sales (2) |
Net sales | $ | 1,791,530 | | | 100.0 | % | | $ | 1,606,420 | | | 100.0 | % |
Cost of goods sold | 1,149,034 | | | 64.1 | % | | 1,109,919 | | 69.1 | % |
Gross margin | 642,496 | | | 35.9 | % | | 496,501 | | 30.9 | % |
Selling, general and administrative expenses | 387,938 | | | 21.7 | % | | 312,713 | | 19.5 | % |
Operating income | 254,558 | | | 14.2 | % | | 183,788 | | | 11.4 | % |
Interest expense, net | 12,157 | | | 0.7 | % | | 23,566 | | | 1.5 | % |
(Gain) loss on early extinguishment of debt, net | 2,239 | | | 0.1 | % | | (7,831) | | | (0.5) | % |
Other (income), net | (735) | | | 0.0 | % | | (628) | | | 0.0 | % |
Income before income taxes | 240,897 | | | 13.4 | % | | 168,681 | | | 10.5 | % |
Income tax expense | 50,387 | | | 2.8 | % | | 1,005 | | 0.1 | % |
Net income | $ | 190,510 | | | 10.6 | % | | $ | 167,676 | | | 10.4 | % |
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Earnings Per Common Share: | | | | | | | |
Basic (1) | $ | 2.06 | | | | | $ | 2.31 | | | |
Diluted (1) | $ | 1.99 | | | | | $ | 2.25 | | | |
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Weighted Average Common Shares Outstanding: | | | | | | | |
Basic (1) | 92,627 | | | | | 72,478 | | | |
Diluted (1) | 95,891 | | | | | 74,439 | | | |
(1) After effect of the retrospective presentation of the Reorganization Transactions and Contribution Ratio
(2) Column may not add due to rounding
ACADEMY SPORTS AND OUTDOORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands, except per share data)
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| Twenty-Six Weeks Ended |
| July 31, 2021 | | Percentage of Sales (2) | | August 1, 2020 | | Percentage of Sales (2) |
Net sales | $ | 3,371,863 | | | 100.0 | % | | $ | 2,742,721 | | | 100.0 | % |
Cost of goods sold | 2,165,666 | | | 64.2 | % | | 1,948,275 | | | 71.0 | % |
Gross margin | 1,206,197 | | | 35.8 | % | | 794,446 | | | 29.0 | % |
Selling, general and administrative expenses | 712,565 | | | 21.1 | % | | 596,636 | | | 21.8 | % |
Operating income | 493,632 | | | 14.6 | % | | 197,810 | | | 7.2 | % |
Interest expense, net | 26,706 | | | 0.8 | % | | 48,088 | | | 1.8 | % |
(Gain) loss on early extinguishment of debt, net | 2,239 | | | 0.1 | % | | (7,831) | | | (0.3) | % |
Other (income), net | (1,132) | | | 0.0 | % | | (1,621) | | | (0.1) | % |
Income before income taxes | 465,819 | | | 13.8 | % | | 159,174 | | | 5.8 | % |
Income tax expense | 97,513 | | | 2.9 | % | | 1,518 | | | 0.1 | % |
Net income | $ | 368,306 | | | 10.9 | % | | $ | 157,656 | | | 5.7 | % |
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Earnings Per Common Share: | | | | | | | |
Basic (1) | $ | 3.99 | | | | | $ | 2.18 | | | |
Diluted (1) | $ | 3.82 | | | | | $ | 2.12 | | | |
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Weighted Average Common Shares Outstanding: | | | | | | | |
Basic (1) | 92,357 | | | | | 72,476 | | | |
Diluted (1) | 96,391 | | | | | 74,487 | | | |
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(1) After effect of retrospective presentation of the Reorganization Transactions and Contribution Ratio
(2) Column may not add due to rounding
ACADEMY SPORTS AND OUTDOORS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollar amounts in thousands, except per share data)
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| | July 31, 2021 | | January 30, 2021 | | August 1, 2020 |
ASSETS | | | | | | |
CURRENT ASSETS: | | | | | | |
Cash and cash equivalents | | $ | 553,825 | | | $ | 377,604 | | | $ | 884,029 | |
Accounts receivable - less allowance for doubtful accounts of $822, $1,172 and $3,323, respectively | | 10,791 | | | 17,306 | | | 9,181 | |
Merchandise inventories, net | | 1,115,020 | | | 990,034 | | | 899,086 | |
Prepaid expenses and other current assets | | 39,050 | | | 28,313 | | | 30,495 | |
Assets held for sale | | 1,763 | | | 1,763 | | | 1,763 | |
Total current assets | | 1,720,449 | | | 1,415,020 | | | 1,824,554 | |
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PROPERTY AND EQUIPMENT, NET | | 362,784 | | | 378,260 | | | 396,559 | |
RIGHT-OF-USE ASSETS | | 1,105,272 | | | 1,143,699 | | | 1,171,736 | |
TRADE NAME | | 577,000 | | | 577,000 | | | 577,000 | |
GOODWILL | | 861,920 | | | 861,920 | | | 861,920 | |
OTHER NONCURRENT ASSETS | | 6,602 | | | 8,583 | | | 11,079 | |
Total assets | | $ | 4,634,027 | | | $ | 4,384,482 | | | $ | 4,842,848 | |
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LIABILITIES AND STOCKHOLDERS' / PARTNERS' EQUITY | | | | | | |
CURRENT LIABILITIES: | | | | | | |
Accounts payable | | $ | 816,427 | | | $ | 791,404 | | | $ | 726,666 | |
Accrued expenses and other current liabilities | | 277,157 | | | 291,351 | | | 245,072 | |
Current lease liabilities | | 84,981 | | | 80,338 | | | 76,485 | |
Current maturities of long-term debt | | 3,000 | | | 4,000 | | | 18,250 | |
Total current liabilities | | 1,181,565 | | | 1,167,093 | | | 1,066,473 | |
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LONG-TERM DEBT, NET | | 684,103 | | | 781,489 | | | 1,412,800 | |
LONG-TERM LEASE LIABILITIES | | 1,107,709 | | | 1,150,088 | | | 1,181,819 | |
DEFERRED TAX LIABILITIES, NET | | 185,765 | | | 138,703 | | | — | |
OTHER LONG-TERM LIABILITIES | | 27,267 | | | 35,126 | | | 29,683 | |
Total liabilities | | 3,186,409 | | | 3,272,499 | | | 3,690,775 | |
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COMMITMENTS AND CONTINGENCIES | | | | | | |
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REDEEMABLE MEMBERSHIP UNITS | | — | | | — | | | 2,977 | |
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STOCKHOLDERS' / PARTNERS' EQUITY (1): | | | | | | |
Preferred stock, $0.01 par value, authorized 50,000,000 shares; none issued and outstanding | | — | | | — | | | — | |
Partners' equity, membership units authorized, issued and outstanding were 72,478,106 as of August 1, 2020 | | — | | | — | | | 1,157,435 | |
Common stock, $0.01 par value, authorized 300,000,000 shares; 92,883,540 and 91,114,475 issued and outstanding as of July 31, 2021 and January 30, 2021 respectively. | | 929 | | | 911 | | | — | |
Additional paid-in capital | | 187,746 | | | 127,228 | | | — | |
Retained earnings | | 1,260,805 | | | 987,168 | | | — | |
Accumulated other comprehensive loss | | (1,862) | | | (3,324) | | | (8,339) | |
Stockholders' / partners' equity | | 1,447,618 | | | 1,111,983 | | | 1,149,096 | |
Total liabilities and stockholders' / partners' equity | | $ | 4,634,027 | | | $ | 4,384,482 | | | $ | 4,842,848 | |
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(1) After effect of retrospective presentation of the Reorganization Transactions and Contribution Ratio
ACADEMY SPORTS AND OUTDOORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
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| | Twenty-Six Weeks Ended |
| | July 31, 2021 | | August 1, 2020 |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | |
Net income | | $ | 368,306 | | | $ | 157,656 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
Depreciation and amortization | | 51,308 | | | 54,151 | |
Non-cash lease expense | | 691 | | | 14,049 | |
Equity compensation | | 33,205 | | | 3,690 | |
Amortization of terminated interest rate swaps, deferred loan and other costs | | 3,521 | | | 1,827 | |
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Deferred income taxes | | 46,628 | | | — | |
Non-cash (gain) loss on early retirement of debt, net | | 2,239 | | | (7,831) | |
Casualty loss | | — | | | 16 | |
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Changes in assets and liabilities: | | | | |
Accounts receivable, net | | 6,515 | | | 4,819 | |
Merchandise inventories, net | | (124,986) | | | 200,647 | |
Prepaid expenses and other current assets | | (10,737) | | | (1,623) | |
Other noncurrent assets | | 1,408 | | | (74) | |
Accounts payable | | 22,958 | | | 302,391 | |
Accrued expenses and other current liabilities | | 18,517 | | | 32,335 | |
Income taxes payable | | (12,996) | | | — | |
Other long-term liabilities | | (903) | | | 11,568 | |
Net cash provided by operating activities | | 405,674 | | | 773,621 | |
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CASH FLOWS FROM INVESTING ACTIVITIES: | | | | |
Capital expenditures | | (33,767) | | | (13,850) | |
Net cash used in investing activities | | (33,767) | | | (13,850) | |
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CASH FLOWS FROM FINANCING ACTIVITIES: | | | | |
Proceeds from ABL Facility | | — | | | 500,000 | |
Repayment of ABL Facility | | — | | | (500,000) | |
Repayment of Term Loan | | (100,750) | | | (25,090) | |
Debt issuance fees | | (927) | | | — | |
Share-Based Award Payments | | (11,214) | | | — | |
Proceeds from exercise of stock options | | 31,678 | | | — | |
Proceeds from issuance of common stock under employee stock purchase program | | 945 | | | — | |
Taxes paid related to net share settlement of equity awards | | (15,418) | | | — | |
Repurchase of common stock for retirement | | (100,000) | | | — | |
Repurchase of Redeemable Membership Units | | — | | | (37) | |
Net cash used in financing activities | | (195,686) | | | (25,127) | |
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NET INCREASE IN CASH AND CASH EQUIVALENTS | | 176,221 | | | 734,644 | |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | | 377,604 | | | 149,385 | |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | | $ | 553,825 | | | $ | 884,029 | |
ACADEMY SPORTS AND OUTDOORS, INC.
RECONCILIATIONS OF NON-GAAP TO GAAP FINANCIAL MEASURES
(Unaudited)
(Dollar amounts in thousands)
Adjusted EBITDA and Adjusted EBIT
We define “Adjusted EBITDA” as net income (loss) before interest expense, net, income tax expense and depreciation, amortization and impairment, further adjusted to exclude consulting fees, private equity sponsor monitoring fees, equity compensation expense, (gain) loss on early extinguishment of debt, net, severance and executive transition costs, costs related to the COVID-19 pandemic, payroll taxes associated with the 2021 Vesting Event and other adjustments. We define “Adjusted EBIT” as net income (loss) before interest expense, net, and income tax expense, further adjusted to exclude consulting fees, private equity sponsor monitoring fees, equity compensation expense, (gain) loss on early extinguishment of debt, net, severance and executive transition costs, costs related to the COVID-19 pandemic, payroll taxes associated with the 2021 Vesting Event and other adjustments. We describe these adjustments reconciling net income (loss) to Adjusted EBITDA and Adjusted EBIT in the following table.
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| | | Thirteen Weeks Ended | | Twenty-Six Weeks Ended |
| | | July 31, 2021 | | August 1, 2020 | | July 31, 2021 | | August 1, 2020 |
Net income | | $ | 190,510 | | | $ | 167,676 | | | $ | 368,306 | | | $ | 157,656 | |
Interest expense, net | | 12,157 | | | 23,566 | | | 26,706 | | | 48,088 | |
Income tax expense | | 50,387 | | | 1,005 | | | 97,513 | | | 1,518 | |
Depreciation and amortization | | 26,010 | | | 26,704 | | | 51,308 | | | 54,151 | |
Consulting fees (a) | | — | | | 36 | | | — | | | 92 | |
Private equity sponsor monitoring fee (b) | | — | | | 920 | | | — | | | 1,840 | |
Equity compensation (c) | | 27,331 | | | 1,581 | | | 33,205 | | | 3,690 | |
(Gain) Loss on early extinguishment of debt, net | | 2,239 | | | (7,831) | | | 2,239 | | | (7,831) | |
Severance and executive transition costs (d) | | — | | | 3,909 | | | — | | | 4,137 | |
Costs related to the COVID-19 pandemic (e) | | — | | | 10,987 | | | — | | | 17,632 | |
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Payroll taxes associated with the 2021 Vesting Event (f) | | 15,418 | | | — | | | 15,418 | | | — | |
Other (g) | | 364 | | | 1,092 | | | 714 | | | 1,929 | |
Adjusted EBITDA | | $ | 324,416 | | | $ | 229,645 | | | $ | 595,409 | | | $ | 282,902 | |
Less: Depreciation and amortization | | (26,010) | | | (26,704) | | | (51,308) | | | (54,151) | |
Adjusted EBIT | | $ | 298,406 | | | $ | 202,941 | | | $ | 544,101 | | | $ | 228,751 | |
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(a) | Represents outside consulting fees associated with our strategic cost savings and business optimization initiatives. |
(b) | Represents our contractual payments under a monitoring agreement ("Monitoring Agreement") with our private equity sponsor Kohlberg Kravis Roberts & Co. L.P. |
(c) | Represents non-cash charges related to equity based compensation, which vary from period to period depending on certain factors such as the 2021 Vesting Event, timing and valuation of awards, achievement of performance targets and equity award forfeitures. |
(d) | Represents severance costs associated with executive leadership changes and enterprise-wide organizational changes. |
(e) | Represents costs incurred during the thirteen and twenty-six weeks ended August 1, 2020, as a result of the COVID-19 pandemic, including temporary wage premiums, additional sick time, costs of additional cleaning supplies and third party cleaning services for the stores, corporate office and distribution centers, accelerated freight costs associated with shifting our inventory purchase earlier in the year to maintain stock, and legal fees associated with consulting in local jurisdictions. These costs were no longer added back beginning in the third quarter of 2020. |
(f) | Represents cash expenses related to taxes on equity-based compensation resulting from the 2021 Vesting Event. |
(g) | Other adjustments include (representing deductions or additions to Adjusted EBITDA and Adjusted EBIT) amounts that management believes are not representative of our operating performance, including investment income, installation costs for energy savings associated with our profitability initiatives, legal fees associated with our distribution and the omnibus incentive plan, store exit costs and other costs associated with strategic cost savings and business optimization initiatives. |
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Adjusted Net Income, Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings Per Share
We define “Adjusted Net Income (Loss)” as net income (loss), plus consulting fees, private equity sponsor monitoring fees, equity compensation expense, (gain) loss on early extinguishment of debt, net, severance and executive transition costs, costs related to the COVID-19 pandemic, payroll taxes associated with the 2021 Vesting Event and other adjustments, less the tax effect of these adjustments. We define “Pro Forma Adjusted Net Income (Loss)” as Adjusted Net Income (Loss) less the retroactive tax effect of Adjusted Net Income at our estimated effective tax rate of approximately 25% for periods prior to October 1, 2020, the effective date of our conversion to a C-Corporation. We define “Pro Forma Adjusted Earnings per Common Share, Basic” as Pro Forma Adjusted Net Income divided by the basic weighted average common shares outstanding during the period and “Pro Forma Adjusted Earnings per Common Share, Diluted” as Pro Forma Adjusted Net Income divided by the diluted weighted average common shares outstanding during the period. We describe these adjustments reconciling net income (loss) to Adjusted Net Income (Loss), Pro Forma Adjusted Net Income (Loss), and Pro Forma Adjusted Earnings Per Share in the following table.
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| | | Thirteen Weeks Ended | | Twenty-Six Weeks Ended |
| | | July 31, 2021 | | August 1, 2020 | | July 31, 2021 | | August 1, 2020 |
Net income | | $ | 190,510 | | | $ | 167,676 | | | $ | 368,306 | | | $ | 157,656 | |
Consulting fees (a) | | — | | | 36 | | | — | | | 92 | |
Private equity sponsor monitoring fee (b) | | — | | | 920 | | | — | | | 1,840 | |
Equity compensation (c) | | 27,331 | | | 1,581 | | | 33,205 | | | 3,690 | |
(Gain) loss on early extinguishment of debt, net | | 2,239 | | | (7,831) | | | 2,239 | | | (7,831) | |
Severance and executive transition costs (d) | | — | | | 3,909 | | | — | | | 4,137 | |
Costs related to the COVID-19 pandemic (e) | | — | | | 10,987 | | | — | | | 17,632 | |
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Payroll taxes associated with the 2021 Vesting Event (f) | | 15,418 | | | — | | | 15,418 | | | — | |
Other (g) | | 364 | | | 1,092 | | | 714 | | | 1,929 | |
Tax effects of these adjustments (h) | | (11,312) | | | (19) | | | (12,801) | | | (39) | |
Adjusted Net Income | | 224,550 | | | 178,351 | | | 407,081 | | | 179,106 | |
Estimated tax effect of change to C-Corporation status (i) | | — | | | (43,947) | | | — | | | (44,262) | |
Pro Forma Adjusted Net Income | | $ | 224,550 | | | $ | 134,404 | | | $ | 407,081 | | | $ | 134,844 | |
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Pro Forma Adjusted Earnings per Share | | | | | | | | |
Basic | | $ | 2.42 | | | $ | 1.85 | | | $ | 4.41 | | | $ | 1.86 | |
Diluted | | $ | 2.34 | | | $ | 1.81 | | | $ | 4.22 | | | $ | 1.81 | |
Weighted average common shares outstanding | | | | | | | | |
Basic (1) | | 92,627 | | | 72,478 | | | 92,357 | | | 72,476 | |
Diluted (1) | | 95,891 | | | 74,439 | | | 96,391 | | | 74,487 | |
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(1) | After effect of retrospective presentation of the Reorganization Transactions and Contribution Ratio |
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(a) | Represents outside consulting fees associated with our strategic cost savings and business optimization initiatives. |
(b) | Represents our contractual payments under our Monitoring Agreement with our private equity sponsor Kohlberg Kravis Roberts & Co. L.P. |
(c) | Represents non-cash charges related to equity based compensation, which vary from period to period depending on certain factors such as the 2021 Vesting Event, timing and valuation of awards, achievement of performance targets and equity award forfeitures. |
(d) | Represents severance costs associated with executive leadership changes and enterprise-wide organizational changes. |
(e) | Represents costs incurred during the thirteen and twenty-six weeks ended August 1, 2020, as a result of the COVID-19 pandemic, including temporary wage premiums, additional sick time, costs of additional cleaning supplies and third party cleaning services for the stores, corporate office and distribution centers, accelerated freight costs associated with shifting our inventory purchase earlier in the year to maintain stock, and legal fees associated with consulting in local jurisdictions. These costs were no longer added back beginning in the third quarter of 2020. |
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(f) | Represents cash expenses related to taxes on equity-based compensation resulting from the 2021 Vesting Event. |
(g) | Other adjustments include (representing deductions or additions to Adjusted Net Income) amounts that management believes are not representative of our operating performance, including investment income, installation costs for energy savings associated with our profitability initiatives, legal fees associated with a distribution to NAHC's members and our omnibus incentive plan, store exit costs and other costs associated with strategic cost savings and business optimization initiatives. |
(h) | For the thirteen and twenty-six weeks ended July 31, 2021, this represents the tax effect of the total adjustments made to arrive at Adjusted Net Income at the estimated effective tax rate for the fiscal year ended January 31, 2022. For thirteen and twenty-six weeks ended August 1, 2020, this represents the tax effect of the total adjustments made to arrive at Adjusted Net Income at our historical tax rate. |
(i) | Represents the retrospective tax effect of Adjusted Net Income at our estimated effective tax rate of approximately 25% for periods prior to October 1, 2020, the effective date of our conversion to a C-Corporation, upon which we became subject to federal income taxes. |
Adjusted Free Cash Flow
We define “Adjusted Free Cash Flow” as net cash provided by (used in) operating activities less net cash provided by (used in) investing activities. We describe these adjustments reconciling net cash provided by operating activities to Adjusted Free Cash Flow in the following table.
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| | Thirteen Weeks Ended | | Twenty-Six Weeks Ended |
| | July 31, 2021 | | August 1, 2020 | | July 31, 2021 | | August 1, 2020 |
Net cash provided by operating activities | | $ | 186,446 | | | $ | 682,865 | | | $ | 405,674 | | | $ | 773,621 | |
Net cash used in investing activities | | (16,959) | | | (3,924) | | | (33,767) | | | (13,850) | |
Adjusted Free Cash Flow | | $ | 169,487 | | | $ | 678,941 | | | $ | 371,907 | | | $ | 759,771 | |