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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended July 31, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________.
Commission File No. 001-39589
https://cdn.kscope.io/03ea95aa22c2075e10b9cc4334309216-aso-20210731_g1.jpg
Academy Sports and Outdoors, Inc.
(Exact name of registrant as specified in its charter)
Delaware85-1800912
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1800 North Mason Road
Katy, Texas 77449
(Address of principal executive offices) (Zip Code)
(281) 646-5200
(Registrant’s Telephone Number, including Area Code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareASONasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐Accelerated filer ☐
Non-accelerated filer
Smaller reporting company
Emerging growth company
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☑
As of September 1, 2021, Academy Sports and Outdoors, Inc. had 93,496,426 shares of common stock, par value $0.01 per share, outstanding.

1


ACADEMY SPORTS AND OUTDOORS, INC.
TABLE OF CONTENTS


Page

2


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACADEMY SPORTS AND OUTDOORS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollar amounts in thousands, except per share data)
July 31, 2021January 30, 2021August 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, net1,115,020 990,034 899,086 
Prepaid expenses and other current assets39,050 28,313 30,495 
Assets held for sale1,763 1,763 1,763 
Total current assets1,720,449 1,415,020 1,824,554 
PROPERTY AND EQUIPMENT, NET362,784 378,260 396,559 
RIGHT-OF-USE ASSETS1,105,272 1,143,699 1,171,736 
TRADE NAME577,000 577,000 577,000 
GOODWILL861,920 861,920 861,920 
OTHER NONCURRENT ASSETS6,602 8,583 11,079 
Total assets$4,634,027 $4,384,482 $4,842,848 
LIABILITIES AND STOCKHOLDERS' / PARTNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable$816,427 $791,404 $726,666 
Accrued expenses and other current liabilities277,157 291,351 245,072 
Current lease liabilities84,981 80,338 76,485 
Current maturities of long-term debt3,000 4,000 18,250 
Total current liabilities1,181,565 1,167,093 1,066,473 
LONG-TERM DEBT, NET684,103 781,489 1,412,800 
LONG-TERM LEASE LIABILITIES1,107,709 1,150,088 1,181,819 
DEFERRED TAX LIABILITIES, NET185,765 138,703  
OTHER LONG-TERM LIABILITIES27,267 35,126 29,683 
Total liabilities3,186,409 3,272,499 3,690,775 
COMMITMENTS AND CONTINGENCIES (NOTE 13)
REDEEMABLE MEMBERSHIP UNITS — 2,977 
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 capital187,746 127,228 — 
Retained earnings1,260,805 987,168 — 
Accumulated other comprehensive loss(1,862)(3,324)(8,339)
Stockholders' / partners' equity1,447,618 1,111,983 1,149,096 
Total liabilities and stockholders' / partners' equity$4,634,027 $4,384,482 $4,842,848 
(1) See Retrospective Presentation of Ownership Exchange in Note 2.
See Condensed Notes to Consolidated Financial Statements
3


ACADEMY SPORTS AND OUTDOORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands, except per share data)

Thirteen Weeks EndedTwenty-Six Weeks Ended
July 31, 2021August 1, 2020July 31, 2021August 1, 2020
NET SALES$1,791,530 $1,606,420 $3,371,863 $2,742,721 
COST OF GOODS SOLD1,149,034 1,109,919 2,165,666 1,948,275 
GROSS MARGIN642,496 496,501 1,206,197 794,446 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES387,938 312,713 712,565 596,636 
OPERATING INCOME254,558 183,788 493,632 197,810 
INTEREST EXPENSE, NET12,157 23,566 26,706 48,088 
(GAIN) LOSS ON EARLY RETIREMENT OF DEBT, NET2,239 (7,831)2,239 (7,831)
OTHER (INCOME), NET(735)(628)(1,132)(1,621)
INCOME BEFORE INCOME TAXES240,897 168,681 465,819 159,174 
INCOME TAX EXPENSE50,387 1,005 97,513 1,518 
NET INCOME$190,510 $167,676 $368,306 $157,656 
EARNINGS PER COMMON SHARE:
BASIC (1)
$2.06 $2.31 $3.99 $2.18 
DILUTED (1)
$1.99 $2.25 $3.82 $2.12 
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 
(1) See Retrospective Presentation of Ownership Exchange in Note 2.


See Condensed Notes to Consolidated Financial Statements
4


ACADEMY SPORTS AND OUTDOORS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Amounts in thousands)

Thirteen Weeks EndedTwenty-Six Weeks Ended
July 31, 2021August 1, 2020July 31, 2021August 1, 2020
COMPREHENSIVE INCOME:
Net income$190,510 $167,676 $368,306 $157,656 
Unrealized loss on interest rate swaps (606) (5,040)
Recognized interest expense on interest rate swaps699 2,874 1,895 4,767 
Tax expense(163) (433) 
Total comprehensive income$191,046 $169,944 $369,768 $157,383 

See Condensed Notes to Consolidated Financial Statements

5


ACADEMY SPORTS AND OUTDOORS, INC.
CONSOLIDATED STATEMENTS OF PARTNERS' / STOCKHOLDERS' EQUITY
(Unaudited)
(Amounts in thousands)

Redeemable Membership UnitsPartners' / Stockholders' EquityTotal Membership Units / Common Stock
Additional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Partners' /Stockholders' Equity
Partners' EquityCommon Stock
UnitsAmountUnitsAmountSharesAmountAmountAmountAmountAmountUnits / Shares
Balances as of January 30, 2021 $  $ 91,114 $911 $127,228 $987,168 $(3,324)$1,111,983 91,114 
Net income— — — — — — — 177,796 — 177,796 — 
Equity compensation— — — — — — 5,874 — — 5,874 — 
Settlement of vested Restricted Stock Units— — — — 87 1 (1)— —  87 
Share-Based Award Payments adjustment for forfeitures— — — — — — 39 — — 39 — 
Stock option exercises— — — — 2,686 27 17,230 — — 17,257 2,686 
Recognized interest expense on interest rate swaps (net of tax impact of $270)
— — — — — — — — 926 926 — 
Balances as of May 1, 2021— $— — $— 93,887 $939 $150,370 $1,164,964 $(2,398)$1,313,875 93,887 
Net income       190,510  190,510  
Equity compensation      27,331   27,331  
Repurchase of common stock for retirement    (3,230)(32)(5,299)(94,669) (100,000)(3,230)
Settlement of vested Restricted Stock Units    836 8 (8)   836 
Issuance of common stock under employee stock purchase plan    35  945   945 35 
Stock option exercises    1,356 14 14,407   14,421 1,356 
Recognized interest expense on interest rate swaps (net of tax impact of $163)
        536 536  
Balances as of July 31, 2021 $  $ 92,884 $929 $187,746 $1,260,805 $(1,862)$1,447,618 92,884 


See Condensed Notes to Consolidated Financial Statements
6


ACADEMY SPORTS AND OUTDOORS, INC.
CONSOLIDATED STATEMENTS OF PARTNERS' / STOCKHOLDERS' EQUITY
(Unaudited)
(Amounts in thousands)

Redeemable Membership UnitsPartners' / Stockholders' EquityTotal Membership Units / Common Stock
Additional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Partners' / Stockholders' Equity
Partners' EquityCommon Stock
Units (1)
Amount
Units (1)
Amount
Shares (1)
AmountAmountAmountAmountAmount
Units / Shares (1)
Balances as of February 1, 2020162 $2,818 72,306 $996,285 — $— $— $— $(8,066)$988,219 72,468 
Net loss— — — (10,020)— — — — — (10,020)— 
Equity compensation— — — 2,109 — — — — — 2,109 — 
Adjustment to Redeemable Membership Units for settlement of vested Restricted Units12 200 — (200)— — — — — (200)12 
Adjustment to Redeemable Membership Units for repurchase of units from Managers(2)(41)2 41 — — — — — 41 — 
Repurchase of Redeemable Membership Units— — (2)(37)— — — — — (37)(2)
Unrealized loss on interest rate swaps— — — — — — — — (4,434)(4,434)— 
Recognized interest expense on interest rate swaps— — — — — — — — 1,893 1,893 — 
Balances as of May 2, 2020172 $2,977 72,306 $988,178 — $— $— $— $(10,607)$977,571 72,478 
Net income— — — 167,676 — — — — — 167,676 — 
Equity compensation— — — 1,581 — — — — — 1,581 — 
Unrealized loss on interest rate swaps— — — — — — — — (606)(606)— 
Recognized interest expense on interest rate swaps— — — — — — — — 2,874 2,874 — 
Balances as of August 1, 2020172 $2,977 72,306 $1,157,435 — $— $— $— $(8,339)$1,149,096 72,478 
(1) See Retrospective Presentation of Ownership Exchange in Note 2.

See Condensed Notes to Consolidated Financial Statements
7


ACADEMY SPORTS AND OUTDOORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
Twenty-Six Weeks Ended
July 31, 2021August 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 amortization51,308 54,151 
Non-cash lease expense691 14,049 
Equity compensation33,205 3,690 
Amortization of terminated interest rate swaps, deferred loan and other costs3,521 1,827 
Deferred income taxes46,628  
Non-cash (gain) loss on early retirement of debt, net2,239 (7,831)
Casualty loss 16 
Changes in assets and liabilities:
Accounts receivable, net6,515 4,819 
Merchandise inventories, net(124,986)200,647 
Prepaid expenses and other current assets(10,737)(1,623)
Other noncurrent assets1,408 (74)
Accounts payable22,958 302,391 
Accrued expenses and other current liabilities18,517 32,335 
Income taxes payable(12,996) 
Other long-term liabilities(903)11,568 
Net cash provided by operating activities405,674 773,621 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures(33,767)(13,850)
Net cash used in investing activities(33,767)(13,850)
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 options31,678  
Proceeds from issuance of common stock under employee stock purchase program945  
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)
NET INCREASE IN CASH AND CASH EQUIVALENTS176,221 734,644 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD377,604 149,385 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$553,825 $884,029 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest$24,358 $46,694 
Cash paid for income taxes$64,211 $2,461 
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Non-cash issuance of common shares$501 $ 
Change in capital expenditures in accounts payable and accrued liabilities$2,065 $4,547 
Right-of-use assets obtained in exchange for new operating leases$5,939 $71,118 
See Condensed Notes to Consolidated Financial Statements
8


ACADEMY SPORTS AND OUTDOORS, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


1. Nature of Operations

The Company
All references to "we", "us," "our" or the "Company" in the financial statements refer to, (1) prior to October 1, 2020, 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 October 1, 2020, Academy Sports and Outdoors, Inc., a Delaware corporation ("ASO, Inc.") and the current parent holding company of our operations, and its consolidated subsidiaries. We conduct our operations primarily through our parent holding company's indirect subsidiary, Academy, Ltd., a Texas limited partnership doing business as "Academy Sports + Outdoors", or Academy, Ltd. Our fiscal year represents the 52 or 53 weeks ending on the Saturday closest to January 31. On August 3, 2011, an investment entity owned by investment funds and other entities affiliated with Kohlberg Kravis Roberts & Co. L.P. (collectively, "KKR"), acquired a majority interest in the Company. As of July 31, 2021, KKR held an ownership interest of approximately 20% in the Company.
The Company is one of the leading full-line sporting goods and outdoor recreational products retailers in the United States in terms of net sales. As of July 31, 2021, we operated 259 "Academy Sports + Outdoors" retail locations in 16 states and three distribution centers located in Katy, Texas, Twiggs County, Georgia and Cookeville, Tennessee. We also sell merchandise to customers across most of the United States via our academy.com website.
Initial Public Offering and Reorganization Transactions
On October 6, 2020, ASO, Inc. completed an initial public offering (the "IPO") in which we issued and sold 15,625,000 shares of common stock, $0.01 par value for cash consideration of $12.22 per share (representing an initial public offering price of $13.00 per share, net of underwriting discounts) to a syndicate of underwriters led by Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC, as representatives, resulting in net proceeds of approximately $184.9 million after deducting underwriting discounts, which included approximately $2.7 million paid to KKR Capital Markets LLC ("KCM"), an affiliate of KKR, for underwriting services in connection with the IPO, and $6.1 million in costs directly associated with the IPO ("Offering Costs"), such as legal and accounting fees. The shares sold in the offering were registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to our registration statement on Form S-1 (File No. 333-248683) (the "Registration Statement"), which was declared effective by the Securities and Exchange Commission (the "SEC") on October 1, 2020.
In connection with our IPO, we completed a series of reorganization transactions (the "Reorganization Transactions") that resulted in:
NAHC, the previous parent holding company for the Company, being contributed to ASO, Inc. by its members and becoming a wholly-owned subsidiary of ASO, Inc., which thereupon became our parent holding company; 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.
IPO Over-Allotment Exercise
On November 3, 2020, ASO, Inc. issued and sold an additional 1,807,495 shares of the Company's common stock, par value $0.01 per share, for cash consideration of $12.22 per share (representing an initial public offering price of $13.00 per share, net of underwriting discounts) to the IPO underwriters, resulting in approximately $22.1 million in proceeds net of underwriting discounts, which included $0.3 million paid to KCM for underwriting services, pursuant to the partial exercise by the underwriters of their option to purchase up to 2,343,750 additional shares to cover over-allotments in connection with the IPO (the "IPO Over-Allotment Exercise"). The option expired with respect to the remaining shares.
9


Secondary Offering
On January 27, 2021, ASO, Inc. entered into an Underwriting Agreement (the “Underwriting Agreement”), by and among ASO, Inc., Allstar LLC, Allstar Co-Invest Blocker L.P., KKR 2006 Allstar Blocker L.P., MSI 2011 LLC, MG Family Limited Partnership and the former management selling stockholder named therein (collectively, the “Selling Stockholders”), and Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC, as representatives of the several underwriters named therein (the “Underwriters”), relating to an underwritten offering of 12,000,000 shares of Common Stock (the “Secondary Offering”), pursuant to the Company’s Registration Statement on Form S-1 (File No. 333-252390), filed on January 25, 2021. The Selling Stockholders granted the Underwriters the option to purchase, within 30 days from the date of the Underwriting Agreement, an additional 1,800,000 shares of Common Stock. On January 29, 2021, the Underwriters exercised in full their option to purchase the additional shares. The Secondary Offering was completed on February 1, 2021. Pursuant to the Underwriting Agreement, the Underwriters purchased the shares from the Selling Stockholders at a price of $20.69375 per share. The Company did not receive any proceeds from the Secondary Offering.
May 2021 Secondary Offering and Stock Repurchase
On May 5, 2021, ASO, Inc. entered into an underwriting agreement (the “May 2021 Underwriting Agreement”), by and among ASO, Inc., Allstar LLC, Allstar Co-Invest Blocker L.P., KKR 2006 Allstar Blocker L.P., MSI 2011 LLC and MG Family Limited Partnership (collectively, the “May 2021 Selling Stockholders”), and Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC, as representatives of the several underwriters named therein (the “May 2021 Underwriters”), relating to an underwritten offering of 14,000,000 shares of Common Stock at $30.96 per share (the “May 2021 Secondary Offering”), pursuant to the Company’s Registration Statement on Form S-1 (File No. 333-255720), filed on May 3, 2021. The May 2021 Selling Stockholders granted the May 2021 Underwriters the option to purchase, within 30 days from the date of the May 2021 Underwriting Agreement, an additional 2,100,000 shares of Common Stock. On May 6, 2021, the May 2021 Underwriters exercised in full their option to purchase the additional shares. The May 2021 Secondary Offering was completed on May 10, 2021. The Company did not receive any proceeds from the May 2021 Secondary Offering.
The May 2021 Secondary Offering also included the Company's repurchase and simultaneous retirement of 3,229,974 shares out of the 14,000,000 shares at $30.96 per share, the same price granted to the underwriters. The Company allocated the excess of the repurchase price over the par value of shares acquired to Retained Earnings and Additional Paid-in Capital. The portion allocated to Additional Paid-in Capital is determined by dividing the number of shares to be retired by the number of shares issued multiplied by the balance of Additional Paid-in Capital as of the retirement date.
The May 2021 Secondary Offering reduced the KKR ownership interest in the Company, resulting in a vesting event (the "2021 Vesting Event") for awards granted under the 2011 Unit Incentive Plan, whereby unvested time awards and performance-based awards which had previously met their performance targets vested and unvested performance-based awards which had not previously met their performance targets were forfeited. As a result, we incurred approximately $24.9 million in non-cash expenses related to equity-based compensation and approximately $15.4 million of cash expenses related to taxes on equity-based compensation. Additionally, approximately $8.2 million of Share-Based Award Payments (see Note 9) for equity-based compensation distributions were accelerated during the 2021 second quarter.


2. Summary of Significant Accounting Policies
The accompanying unaudited financial statements of the Company have been prepared as though they were required to be in accordance with Rule 10-01 of Regulation S-X for interim financial statements, however, they do not include all information and footnotes required by United States generally accepted accounting principles ("GAAP") for complete financial statements. Certain information and footnote disclosures normally included in our annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted; however, we believe that the disclosures included herein are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 2021, as filed with the Securities and Exchange Commission on April 7, 2021 (the "Annual Report"). The information furnished herein reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The results of operations for the thirteen and twenty-six weeks ended July 31, 2021 are not necessarily indicative of the results that will be realized for the fiscal year ending January 29, 2022 or any other period. The balance
10


sheet as of January 30, 2021 has been derived from our audited financial statements as of that date. For further information, refer to our audited financial statements and notes thereto included in the Annual Report.

Basis of Presentation and Principles of Consolidation
These unaudited condensed consolidated financial statements include the accounts of ASO, Inc. and, its subsidiaries, NAHC, Academy Managing Co., LLC, Associated Investors, LLC, Academy, Ltd., the Company's operating company, and Academy International Limited. NAHC, Academy Managing Co., LLC, and Associated Investors, LLC are intermediate holding companies. All intercompany balances and transactions have been eliminated in consolidation. ASO Co-Invest Blocker Sub, L.P. and ASO Blocker Sub, L.P. were dissolved effective January 31, 2021.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Our management bases its estimates on historical experience and other assumptions it believes to be reasonable under the circumstances. Actual results could differ significantly from those estimates. Our most significant estimates and assumptions that materially affect the financial statements involve difficult, subjective or complex judgments by management including the valuation of merchandise inventories, and performing goodwill, intangible and long-lived asset impairment analyses. Given the global economic climate and additional unforeseen effects from the COVID-19 pandemic, these estimates remain more challenging, and actual results could differ materially from our estimates.
Reclassifications
Within the merchandise division sales table presented in Note 3, certain products and categories were recategorized amongst various categories and divisions, respectively, to better align with our current merchandising strategy and view of the business. As a result, we have reclassified sales between divisions in the thirteen and twenty-six weeks ended August 1, 2020 for comparability purposes. This reclassification is in divisional presentation only and did not impact the overall net sales balances previously disclosed.
Retrospective Presentation of Ownership Exchange
Prior to the IPO, ASO, Inc. was a wholly-owned subsidiary of NAHC. On the IPO pricing date (October 1, 2020), the then-existing members of NAHC contributed all of their membership units of NAHC to ASO, Inc. and, in exchange, received one share of common stock of ASO, Inc. for every 3.15 membership units of NAHC contributed to ASO, Inc. (such 3.15:1 contribution and exchange ratio, the "Contribution Ratio"). As a result of such contributions and exchanges, upon the IPO, NAHC became a wholly-owned subsidiary of ASO, Inc., which became our parent holding company. The par value and authorized shares of the common stock of ASO, Inc. of $0.01 and 300,000,000, respectively, remain unchanged as a result of such contributions and exchanges. All membership units and redeemable membership units in the financial statements and notes have been retrospectively adjusted to give effect to the Contribution Ratio, as if such contributions and exchanges occurred as of all pre-IPO periods presented, including the periods presented on the Balance Sheets, Statements of Income, Statements of Partners’ / Stockholders’ Equity, Note 9. Equity and Share-Based Compensation, and Note 10. Earnings per Common Share.
Redeemable Membership Units
Prior to October 1, 2020, Allstar Managers LLC, a Delaware limited liability company ("Managers"), owned membership units in NAHC (each, a "NAHC Membership Unit"). Managers was dissolved and its assets were distributed to its members on December 23, 2020. Managers was 100% owned by certain current and former executives and directors of the Company and was formed to facilitate the purchase of indirect contingently redeemable ownership interests in NAHC. Prior to October 1, 2020, certain executives and directors could acquire contingently redeemable membership units in Managers (the "Redeemable Membership Units"), either by (1) purchasing the Redeemable Membership Units with cash consideration, which was subsequently contributed to NAHC by Managers in exchange for a number of NAHC Membership Units equal to the number of Redeemable Membership Units purchased, or (2) by receiving the Redeemable Membership Units in settlement of vested restricted units awarded to the executive or director under the Company's 2011 Unit Incentive Plan (see Note 9). Each outstanding Redeemable Membership Unit in Managers corresponded to an outstanding NAHC Membership Unit, on a unit-for-unit basis.
11



On October 1, 2020, Managers received one share of ASO, Inc. common stock in exchange for every 3.15 membership units in NAHC that Managers contributed to ASO, Inc., and the Redeemable Membership Units in Managers that were held by its owners were reduced proportionately by the Contribution Ratio, so that the outstanding number of Redeemable Membership Units in Managers equal the number of shares of ASO, Inc. common stock held by Managers on a 1:1 basis.
NAHC was the sole managing member of Managers with a controlling voting interest, but no economic interest, in Managers. As the sole managing member of Managers, NAHC operated and controlled all business affairs of Managers.
The terms and conditions of the agreements governing the Redeemable Membership Units included provisions by which the holder, or its heirs, had the right to require Managers or NAHC to purchase the holder's Redeemable Membership Units upon the holder’s termination of employment due to death or disability for cash at fair value. The carrying value of the Redeemable Membership Units was classified as temporary equity, initially at fair value, as redemption was an event that was not solely within our control. If redemption became probable, we were required to re-measure the Redeemable Membership Units to fair value. Periodically, these rights lapsed due to contractual expiration or a holder's termination of employment for reasons other than death or disability.
Recent Accounting Pronouncements
ASU 2019-12 Income Taxes (Topic 740)

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes". ASU 2019-12 is effective for fiscal years and interim periods beginning after December 15, 2020. This update simplifies the accounting for income taxes by removing certain exceptions and amends existing guidance to improve consistent application. The Company adopted ASU 2019-12 on January 31, 2021 and it did not have a material impact on our financial position, results of operations or cash flows.
Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The adoption of this guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the expedients and exceptions provided by this amendment as it relates to our transition from LIBOR to another reference rate to determine the impact.
12



3. Net Sales
Revenue from merchandise sales is recognized, net of sales tax, when the Company’s performance obligation to the customer is met, which is when the Company transfers control of the merchandise to the customer. Store merchandise sales are recognized at the point of sale and e-commerce sales are recognized upon delivery to the customer.
The following table sets forth the approximate amount of sales by merchandise divisions for the periods presented (amounts in thousands):
Thirteen Weeks EndedTwenty-Six Weeks Ended
July 31, 2021August 1, 2020July 31, 2021August 1, 2020
Merchandise division sales (1)
Outdoors$539,498 $532,786 $1,025,156 $961,591 
Sports and recreation410,492 359,722 812,906 654,657 
Apparel493,470 413,702 869,244 622,178 
Footwear337,289 293,145 647,733 489,558 
Total merchandise sales (2)
1,780,749 1,599,355 3,355,039 2,727,984 
Other sales (3)
10,781 7,065 16,824 14,737 
Net Sales$1,791,530 $1,606,420 $3,371,863 $2,742,721 
(1) Certain products and categories were recategorized amongst various categories and divisions, respectively, to better align with our current merchandising strategy and view of the business. As a result, we have reclassified sales between divisions in the thirteen and twenty-six weeks ended August 1, 2020 for comparability purposes. This reclassification is in divisional presentation only and did not impact the overall net sales balances previously disclosed (see Note 2).
(2) E-commerce sales consisted of 8.4% and 7.9% of merchandise sales for the thirteen and twenty-six weeks ended July 31, 2021, respectively, and 9.4% and 10.9% for the thirteen and twenty-six weeks ended August 1, 2020, respectively.
(3) Other sales consisted primarily of the sales return allowance, gift card breakage income, credit card bounties and royalties, shipping income, net hunting and fishing license income and other items.
We sell gift cards in stores, online and in third-party retail locations. A liability for gift cards, which is recorded in accrued expenses and other liabilities on our balance sheets is established at the time of sale and revenues are recognized as the gift cards are redeemed in stores or on our website.
The following is a reconciliation of the gift card liability (amounts in thousands):
Thirteen Weeks EndedTwenty-Six Weeks Ended
July 31, 2021August 1, 2020July 31, 2021August 1, 2020
Gift card liability, beginning balance$63,242 $57,786 $74,253 $67,993 
Issued25,484 21,008 43,926 32,614 
Redeemed(27,253)(22,703)(55,743)(43,713)
Recognized as breakage income(947)(681)(1,910)(1,484)
Gift card liability, ending balance$60,526 $55,410 $60,526 $55,410 

13



4. Long-Term Debt

Our debt consisted of the following (amounts in thousands) as of:
July 31, 2021January 30, 2021August 1, 2020
ABL Facility, due November 2025$ $ $ 
Term Loan, due November 2027299,250 400,000 1,435,982 
Notes, due November 2027400,000 400,000  
Total debt699,250 800,000 1,435,982 
Less current maturities(3,000)(4,000)(18,250)
Less unamortized discount on Term Loan(2,682)(3,861)(2,017)
Less deferred loan costs (1)
(9,465)(10,650)(2,915)
Long-term debt, net$684,103 $781,489 $1,412,800 
(1) Deferred loan costs are related to the Term Loan and Notes.
As of July 31, 2021, January 30, 2021 and August 1, 2020, the balance in deferred loan costs related to the ABL Facility (as defined below) was approximately $4.9 million, $5.5 million and $2.9 million, respectively, and was included in other noncurrent assets on our consolidated balance sheets. Total amortization of deferred loan costs was $0.7 million and $1.4 million for the thirteen and twenty-six weeks ended July 31, 2021, respectively, and $0.6 million and $1.3 million for the thirteen and twenty-six weeks ended August 1, 2020, respectively. Total expenses related to accretion of original issuance discount were $0.2 million and $0.3 million for the thirteen and twenty-six weeks ended July 31, 2021, respectively, and $0.3 million and $0.5 million for the thirteen and twenty-six weeks ended August 1, 2020, respectively. The expenses related to amortization of deferred loan costs and accretion of original issuance discount are included in interest expense, net on the consolidated statements of income.
On November 6, 2020, the Company issued the Notes (as defined below), entered into the 2020 Term Loan (as defined below), and entered into the 2020 ABL Facility (the "Refinancing Transactions"). The Company used the net proceeds from the Notes and the net proceeds from the 2020 Term Loan, together with cash on hand, to repay in full outstanding borrowings under its then-existing term loan, in the amount of $1,431.4 million.
On May 25, 2021, the Company refinanced its 2020 Term Loan and paid down approximately $99.0 million of the 2020 Term Loan.
Term Loan

We refer to the 2015 Term Loan, the 2020 Term Loan and the Amendment collectively as the "Term Loan".
On July 2, 2015, Academy, Ltd. entered into a seven-year $1.8 billion senior secured term loan facility (the "2015 Term Loan") with Morgan Stanley Senior Funding, Inc., as the administrative and collateral agent, and other lenders, and a five-year $650 million secured asset-based revolving credit facility (the "2015 ABL Facility") with JPMorgan Chase Bank, N.A., as administrative agent, and other lenders. Academy, Ltd. received proceeds from the 2015 Term Loan of $1.8 billion, which was net of discount of $9.1 million. The 2015 Term Loan bore interest at our election, at either (1) LIBOR rate with a floor of 1.00%, plus a margin of 4.00%, or (2) a base rate equal to the highest of (a) the federal funds rate plus 0.50%, (b) Morgan Stanley Senior Funding, Inc.'s "prime rate," or (c) the one-month LIBOR rate plus 1.00%, plus a margin of 3.00%. Quarterly principal payments of approximately $4.6 million were required through June 30, 2022, with the balance due in full on the maturity date of July 2, 2022.

On November 6, 2020, Academy, Ltd. entered into a seven-year $400.0 million senior secured term loan (the "2020 Term Loan") with Credit Suisse AG, Cayman Island Branch ("Credit Suisse"), as the administrative agent and collateral agent and the several other lenders and parties. The 2020 Term Loan will mature on November 6, 2027. The 2020 Term Loan bore interest, at Academy, Ltd.’s election, at either (1) LIBOR rate with a floor of 0.75%, plus a margin of 5.00%, or (2) a base rate equal to the highest of (a) the federal funds rate plus 0.50%, (b) Credit Suisse’s "prime rate", or (c) the one-month LIBOR rate plus 1.00%, plus a margin of 4.00%. Quarterly principal payments of approximately $1.0 million were required through September 30, 2027, with the balance due in full on the maturity date of November 6, 2027.

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On May 25, 2021, Academy, Ltd. entered into Amendment No. 4 (the “Amendment”) to the Second Amended and Restated Credit Agreement, dated as of November 6, 2020, among Academy, Ltd., as Borrower, Credit Suisse AG, Cayman Islands Branch, as the administrative agent and collateral agent, the several lenders party thereto and the several other parties named therein (as previously amended, the “Existing Credit Agreement” and as amended by the Amendment, the “Amended Credit Agreement”). Pursuant to the terms of the Amendment, Academy, Ltd. (i) reduced the applicable margin on LIBOR borrowings under the Existing Credit Agreement from 5.00% to 3.75% and (ii) utilized cash on hand to repay $99.0 million of outstanding borrowings under the Existing Credit Agreement, leaving an outstanding principal balance of $300.0 million under the Amended Credit Agreement. Quarterly principal payments of $750.0 thousand are required through September 30, 2027 and borrowings under the Amended Credit Agreement will continue to mature on November 6, 2027. All other material terms and provisions of the 2020 Term Loan remain substantially the same as the terms and provisions in place immediately prior to the effectiveness of the Amendment. As of July 31, 2021, the weighted average interest rate was 4.50%, with interest payable monthly. The terms and conditions of the Amendment also require that the outstanding balance under the Loan is prepaid under certain circumstances. In connection with the 2020 Term Loan and the Amendment, the Company capitalized related professional fees of $5.8 million as deferred loan costs. As of July 31, 2021, no prepayment was due under the terms and conditions of the Term Loan.
In connection with the Amendment, the Company recognized a non-cash loss on early retirement of debt of $2.2 million in the thirteen and twenty-six weeks ended July 31, 2021 from the write-off of deferred loan costs and expense related to the original issuance discount associated with our 2020 Term Loan.
During the thirteen and twenty-six weeks ended August 1, 2020, we repurchased principal on our 2015 Term Loan, which was trading at a discount, in open market transactions. The following table provides further detail regarding these repurchases (amounts in millions):
Thirteen Weeks EndedTwenty-Six Weeks Ended
August 1, 2020August 1, 2020
Gross principal repurchased$23.9 $23.9 
Reacquisition price of debt$16.0 $16.0 
Net gain recognized$7.8 $7.8 
Notes
On November 6, 2020, Academy, Ltd. issued $400.0 million of 6.00% senior secured notes which are due November 15, 2027 (the "Notes"), pursuant to an indenture, dated as of November 6, 2020 (the "Indenture") with The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent. The Notes will pay interest semi-annually in arrears in cash on May 15 and November 15 of each year at a rate of 6.00% per year, commencing on May 15, 2021. In connection with issuance of the Notes, the Company capitalized related professional fees of $5.2 million as deferred loan costs.
On or after November 15, 2023, Academy, Ltd. may, at its option and on one or more occasions, redeem all or a part of the Notes at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. At any time prior to November 15, 2023, Academy, Ltd. may, at its option and on one or more occasions, redeem all or part of the Notes at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date, plus a "make-whole" premium as described in the Indenture. In addition, at any time prior to November 15, 2023, Academy, Ltd. may, at its option and on one or more occasions, redeem up to 40% of the aggregate principal amount of the Notes at a redemption price equal to 106.00% of the aggregate principal amount thereof, with an amount equal to or less than the net cash proceeds from one or more equity offerings to the extent such net cash proceeds are received by or contributed to Academy, Ltd., plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.
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ABL Facility
We refer to the 2015 ABL Facility and the 2020 ABL Facility collectively as the "ABL Facility".
On July 2, 2015, Academy, Ltd. entered into a five-year $650 million secured asset-based revolving credit facility (the "2015 ABL Facility"). On May 22, 2018, the Company amended the agreement governing the 2015 ABL Facility to increase the commitment on the facility from $650 million to $1 billion. In connection with the amendment to the 2015 ABL Facility, the Company capitalized related professional fees of $2.8 million as deferred loan costs and wrote off $0.1 million in previously capitalized deferred loan costs. The 2015 ABL Facility was scheduled to mature on May 22, 2023, subject to a springing maturity clause which could have been triggered 91 days before the July 2, 2022 maturity of the 2015 Term Loan.
On November 6, 2020, Academy, Ltd., as borrower, and the Guarantors, as guarantors, amended the 2015 ABL Facility by entering into an amendment to the First Amended and Restated ABL Credit Agreement, dated as of July 2, 2015, with JPMorgan Chase Bank, N.A. as the administrative agent and collateral agent, letter of credit issuer and swingline lender (the "ABL Agent") and the several lenders party thereto, which ABL Amendment, among other things, extended the maturity of Academy, Ltd.’s asset-based revolving credit facility thereunder to November 6, 2025 (the "2020 ABL Facility"). In connection with the 2020 ABL Facility, the Company capitalized related professional fees of $3.1 million as deferred loan costs.
The ABL Facility is used to provide financing for working capital and other general corporate purposes, as well as to support certain letters of credit requirements, and availability is subject to customary borrowing base and availability provisions. During the normal course of business, we periodically utilize letters of credit primarily for the purchase of import goods and in support of insurance contracts. As of July 31, 2021, we had outstanding letters of credit of approximately $19.5 million, of which $15.5 million were issued under the ABL Facility, and we had no borrowings outstanding under the ABL Facility, leaving the available borrowing capacity under the ABL Facility of $858.4 million.
Borrowings under the ABL Facility bear interest, at our election, at either (1) LIBOR plus a margin of 1.25% to 1.75%, or (2) a base rate equal to the highest of (a) the federal funds rate plus 0.50%, (b) JPMorgan Chase Bank, N.A.'s "prime rate", or (c) the one-month LIBOR rate plus