10-Q 1 aso-20220730.htm 10-Q aso-20220730
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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 30, 2022
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
aso-20220730_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 shareASOThe Nasdaq Stock Market LLC
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 August 31, 2022, Academy Sports and Outdoors, Inc. had 79,736,603 shares of common stock, par value $0.01 per share, outstanding.

1


ACADEMY SPORTS AND OUTDOORS, INC.
TABLE OF CONTENTS



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 30, 2022January 29, 2022July 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$399,857 $485,998 $553,825 
Accounts receivable - less allowance for doubtful accounts of $1,143, $732 and $822, respectively
14,521 19,718 10,791 
Merchandise inventories, net1,304,556 1,171,808 1,115,020 
Prepaid expenses and other current assets46,448 36,460 39,050 
Assets held for sale1,763 1,763 1,763 
Total current assets1,767,145 1,715,747 1,720,449 
PROPERTY AND EQUIPMENT, NET350,628 345,836 362,784 
RIGHT-OF-USE ASSETS1,087,085 1,079,546 1,105,272 
TRADE NAME577,299 577,215 577,000 
GOODWILL861,920 861,920 861,920 
OTHER NONCURRENT ASSETS9,892 4,676 6,602 
Total assets$4,653,969 $4,584,940 $4,634,027 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable$778,016 $737,826 $816,427 
Accrued expenses and other current liabilities251,569 303,207 277,157 
Current lease liabilities87,042 83,077 84,981 
Current maturities of long-term debt3,000 3,000 3,000 
Total current liabilities1,119,627 1,127,110 1,181,565 
LONG-TERM DEBT, NET683,065 683,585 684,103 
LONG-TERM LEASE LIABILITIES1,081,790 1,077,667 1,107,709 
DEFERRED TAX LIABILITIES, NET235,187 217,212 185,765 
OTHER LONG-TERM LIABILITIES13,029 12,420 27,267 
Total liabilities3,132,698 3,117,994 3,186,409 
COMMITMENTS AND CONTINGENCIES (NOTE 12)
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, authorized 50,000,000 shares; none issued and outstanding
   
Common stock, $0.01 par value, authorized 300,000,000 shares; 79,725,034; 87,079,394 and 92,883,540 issued and outstanding as of July 30, 2022, January 29, 2022 and July 31, 2021, respectively.
797 870 929 
Additional paid-in capital196,510 198,016 187,746 
Retained earnings1,323,964 1,268,060 1,260,805 
Accumulated other comprehensive loss  (1,862)
Stockholders' equity1,521,271 1,466,946 1,447,618 
Total liabilities and stockholders' equity$4,653,969 $4,584,940 $4,634,027 

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 30, 2022July 31, 2021July 30, 2022July 31, 2021
NET SALES$1,686,915 $1,791,530 $3,154,645 $3,371,863 
COST OF GOODS SOLD1,090,852 1,149,034 2,037,158 2,165,666 
GROSS MARGIN596,063 642,496 1,117,487 1,206,197 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES339,329 387,938 655,260 712,565 
OPERATING INCOME256,734 254,558 462,227 493,632 
INTEREST EXPENSE, NET11,157 12,157 22,077 26,706 
LOSS ON EARLY RETIREMENT OF DEBT 2,239  2,239 
OTHER (INCOME), NET(1,441)(735)(2,138)(1,132)
INCOME BEFORE INCOME TAXES247,018 240,897 442,288 465,819 
INCOME TAX EXPENSE58,217 50,387 103,681 97,513 
NET INCOME$188,801 $190,510 $338,607 $368,306 
EARNINGS PER COMMON SHARE:
BASIC$2.28 $2.06 $3.99 $3.99 
DILUTED$2.22 $1.99 $3.90 $3.82 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC82,960 92,627 84,809 92,357 
DILUTED84,906 95,891 86,792 96,391 



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 30, 2022July 31, 2021July 30, 2022July 31, 2021
COMPREHENSIVE INCOME:
Net income$188,801 $190,510 $338,607 $368,306 
Recognized interest expense on interest rate swaps 699  1,895 
Tax expense (163) (433)
Total comprehensive income$188,801 $191,046 $338,607 $369,768 

See Condensed Notes to Consolidated Financial Statements

5



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

Additional
Paid-In Capital
Retained EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
Common Stock
SharesAmount
Balances as of January 29, 202287,079 $870 $198,016 $1,268,060 $ $1,466,946 
Net income— — — 149,806 — 149,806 
Equity compensation— — 3,499 — — 3,499 
Repurchase of common stock for retirement(2,272)(23)(5,247)(83,231)— (88,501)
Settlement of vested Restricted Stock Units63 1 (1)— —  
Stock option exercises201 2 3,292 — — 3,294 
Cash dividends declared, $0.075 per share
— — — (6,536)— (6,536)
Balances as of April 30, 202285,071 $850 $199,559 $1,328,099 $ $1,528,508 
Net income   188,801  188,801 
Equity compensation  6,158   6,158 
Repurchase of common stock for retirement(5,551)(55)(13,391)(186,665) (200,111)
Settlement of vested Restricted Stock Units29 0 (0)   
Issuance of common stock under employee stock purchase plan93 1 2,796   2,797 
Stock option exercises83 1 1,388   1,389 
Cash dividends declared, $0.075 per share
   (6,271) (6,271)
Balances as of July 30, 202279,725 $797 $196,510 $1,323,964 $ $1,521,271 



See Condensed Notes to Consolidated Financial Statements


















6




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

Additional
Paid-In Capital
Retained EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
Common Stock
SharesAmount
Balances as of January 30, 202191,114 $911 $127,228 $987,168 $(3,324)$1,111,983 
Net income— — — 177,796 — 177,796 
Equity compensation— — 5,874 — — 5,874 
Settlement of vested Restricted Stock Units87 1 (1)— —  
Share-Based Award Payments adjustment for forfeitures— — 39 — — 39 
Stock option exercises2,686 27 17,230 — — 17,257 
Recognized interest expense on interest rate swaps (net of tax impact of $270)
— — — — 926 926 
Balances as of May 1, 202193,887 $939 $150,370 $1,164,964 $(2,398)$1,313,875 
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)
Settlement of vested Restricted Stock Units836 8 (8)— —  
Issuance of common stock under employee stock purchase plan35  945 — — 945 
Stock option exercises1,356 14 14,407 — — 14,421 
Recognized interest expense on interest rate swaps (net of tax impact of $163)
— — — — 536 536 
Balances as of July 31, 202192,884 $929 $187,746 $1,260,805 $(1,862)$1,447,618 


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 30, 2022July 31, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$338,607 $368,306 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization51,852 51,308 
Non-cash lease expense548 691 
Equity compensation9,657 33,205 
Amortization of terminated interest rate swaps, deferred loan and other costs1,552 3,521 
Deferred income taxes17,976 46,628 
Non-cash loss on early retirement of debt 2,239 
Changes in assets and liabilities:
Accounts receivable, net5,197 6,515 
Merchandise inventories, net(132,748)(124,986)
Prepaid expenses and other current assets(9,987)(10,737)
Other noncurrent assets(5,788)1,408 
Accounts payable31,596 22,958 
Accrued expenses and other current liabilities(47,447)18,517 
Income taxes payable(3,219)(12,996)
Other long-term liabilities610 (903)
Net cash provided by operating activities258,406 405,674 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures(48,050)(33,767)
Purchases of intangible assets(84) 
Net cash used in investing activities(48,134)(33,767)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Term Loan(1,500)(100,750)
Debt issuance fees (927)
Share-Based Award Payments (11,214)
Proceeds from exercise of stock options4,683 31,678 
Proceeds from issuance of common stock under employee stock purchase program2,797 945 
Taxes paid related to net share settlement of equity awards(974)(15,418)
Repurchase of common stock for retirement(288,612)(100,000)
Dividends paid(12,807) 
Net cash used in financing activities(296,413)(195,686)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS(86,141)176,221 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD485,998 377,604 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$399,857 $553,825 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest$20,056 $24,358 
Cash paid for income taxes$89,719 $64,211 
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES:
Non-cash issuance of common shares$ $501 
Change in capital expenditures in accounts payable and accrued liabilities$8,595 $2,065 
Right-of-use assets obtained in exchange for new operating leases$56,414 $5,939 
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 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. On October 6, 2020, ASO, Inc. completed an initial public offering and as of September 17, 2021, KKR no longer held an ownership interest 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 30, 2022, we operated 261 "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.
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 approximately $20.69 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 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, which was at a discount to the prevailing market price at the time of repurchase (see "Share Repurchases" in Note 2). The May 2021 Secondary Offering was completed on May 10, 2021. The Company did not receive any proceeds from the May 2021 Secondary Offering.

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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 29, 2022, as filed with the Securities and Exchange Commission on March 29, 2022 (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 30, 2022 are not necessarily indicative of the results that will be realized for the fiscal year ending January 28, 2023 or any other period. The balance sheet as of January 29, 2022 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, New Academy Holding Company, LLC ("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.
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 the possibility of additional unforeseen effects from the COVID-19 pandemic, these estimates remain 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 July 31, 2021 for comparability purposes. This reclassification is in divisional presentation only and did not impact the overall net sales balances previously disclosed.



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Share Repurchases
On September 2, 2021, the Board of Directors of the Company authorized a share repurchase program (the "2021 Share Repurchase Program") under which the Company may purchase up to $500 million of its outstanding shares during the three-year period ending September 2, 2024. On June 2, 2022, the Board of Directors of the Company authorized a new share repurchase program (the "2022 Share Repurchase Program") under which the Company may purchase up to $600 million of its outstanding shares during the three-year period ending June 2, 2025. The 2022 Share Repurchase Program and the 2021 Share Repurchase program are collectively referred to as the "Share Repurchase Programs".
Under the Share Repurchase Programs, repurchases can be made using a variety of methods, which may include open market purchases, block trades, privately negotiated transactions, accelerated share repurchase programs 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 under the Share Repurchase Programs are determined by the Company in its discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions. The Share Repurchase Programs do not obligate the Company to acquire any particular number of common shares, and the programs may be suspended, extended, modified or discontinued at any time.
During the thirteen and twenty-six weeks ended July 30, 2022, we repurchased and concurrently retired 5,550,892 and 7,823,241 shares of ASO, Inc. common stock for an aggregate amount of $200.1 million and $288.6 million, respectively, pursuant to the Share Repurchase Programs. During the thirteen and twenty-six weeks ended July 31, 2021, we repurchased and concurrently retired 3,229,974 shares of ASO, Inc. common stock for an aggregate amount of $100.0 million pursuant to the May 2021 Secondary Offering. As of July 30, 2022, approximately $500.2 million remained available for share repurchases pursuant to the Share Repurchase Programs.

Recent Accounting Pronouncements
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.
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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 30, 2022July 31, 2021July 30, 2022July 31, 2021
Merchandise division sales (1)
Outdoors$492,804 $539,497 $950,651 $1,025,155 
Sports and recreation400,244 410,491 754,291 812,905 
Apparel463,729 493,471 806,110 869,245 
Footwear322,558 337,290 625,686 647,734 
Total merchandise sales (2)
1,679,335 1,780,749 3,136,738 3,355,039 
Other sales (3)
7,580 10,781 17,907 16,824 
Net Sales$1,686,915 $1,791,530 $3,154,645 $3,371,863 
(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 July 31, 2021 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 10.0% and 9.8% of merchandise sales for the thirteen and twenty-six weeks ended July 30, 2022, respectively, and 8.4% and 7.9% for the thirteen and twenty-six weeks and July 31, 2021, 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 consolidated 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 30, 2022July 31, 2021July 30, 2022July 31, 2021
Gift card liability, beginning balance$73,489 $63,242 $86,568 $74,253 
Issued26,667 25,484 44,876 43,926 
Redeemed(29,367)(27,253)(59,645)(55,743)
Recognized as breakage income(830)(947)(1,840)(1,910)
Gift card liability, ending balance$69,959 $60,526 $69,959 $60,526 

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4. Long-Term Debt

Our debt consisted of the following (amounts in thousands) as of:
July 30, 2022January 29, 2022July 31, 2021
ABL Facility, due November 2025$ $ $ 
Term Loan, due November 2027296,250 297,750 299,250 
Notes, due November 2027400,000 400,000 400,000 
Total debt696,250 697,750 699,250 
Less current maturities(3,000)(3,000)(3,000)
Less unamortized discount on Term Loan(2,244)(2,463)(2,682)
Less deferred loan costs (1)
(7,941)(8,702)(9,465)
Long-term debt, net$683,065 $683,585 $684,103 
(1) Deferred loan costs are related to the Term Loan and Notes.
As of July 30, 2022, January 29, 2022 and July 31, 2021, the balance in deferred loan costs related to the ABL Facility (as defined below) was approximately $3.8 million, $4.3 million and $4.9 million, respectively, and was included in other noncurrent assets on our consolidated balance sheets. Total amortization of deferred loan costs was $0.6 million and $1.3 million for the thirteen and twenty-six weeks ended July 30, 2022, respectively, and $0.7 million and $1.4 million for the thirteen and twenty-six weeks ended July 31, 2021, respectively. Total expenses related to accretion of original issuance discount were $0.1 million and $0.2 million for the thirteen and twenty-six weeks ended July 30, 2022, respectively, and $0.2 million and $0.3 million for the thirteen and twenty-six weeks ended and July 31, 2021, 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.
Term Loan

We refer to the 2020 Term Loan and the Amendment collectively as the "Term Loan".
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.
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 30, 2022, the weighted average interest rate was 5.46%, with interest payable monthly. The terms and conditions of the Amendment also require that the outstanding balance under the Term Loan is prepaid under certain circumstances. As of July 30, 2022, 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.

13


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 require cash interest payments semi-annually in arrears on May 15 and November 15 of each year at a rate of 6.00% per year.

ABL Facility
On November 6, 2020, Academy, Ltd., as borrower, and the guarantors, amended the previously existing secured asset-based revolving credit 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 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 "ABL Facility").
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 30, 2022, we had outstanding letters of credit of approximately $19.7 million, all of which 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 $980.3 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 1.00%, plus a margin of 0.25% to 0.75%. The ABL Facility also provides a fee applicable to the unused commitments of 0.25%. The terms and conditions of the ABL Facility also require that we prepay outstanding loans under the ABL Facility under certain circumstances. As of July 30, 2022, no future prepayments of outstanding loans have been triggered under the terms and conditions of the ABL Facility.
Covenants. The ABL Facility, Term Loan and Notes agreements contain covenants, including, among other things, covenants that restrict Academy, Ltd.'s ability to incur certain additional indebtedness, create or permit liens on assets, engage in mergers or consolidations, pay dividends, make other restricted payments, make loans or advances, engage in transactions with affiliates or amend material documents. Additionally, at certain times, the ABL Facility is subject to a minimum adjusted fixed charge coverage ratio. These covenants are subject to certain qualifications and limitations. We were in compliance with these covenants as of July 30, 2022.


5. Derivative Financial Instruments
We have historically used interest rate swap agreements to hedge market risk relating to possible adverse changes in interest rates. All interest rate swaps had been designated as cash flow hedges of variable rate interest payments on borrowings under the Term Loan. As of July 30, 2022, we do not have any derivative financial instruments outstanding.
For derivatives which were designated as hedging instruments, amounts included in Accumulated Other Comprehensive Income (Loss) ("AOCI") were reclassified to interest expense in the same period during which the hedged transaction affected earnings, which was as interest expense was recorded on the underlying Term Loan.

14


The impact of gains and losses related to interest rate swaps that were deferred into AOCI and subsequently reclassified into expense are as follows (amounts in thousands):

Thirteen Weeks EndedTwenty-Six Weeks Ended
July 30, 2022July 31, 2021July 30, 2022July 31, 2021
Accumulated Other Comprehensive Loss, beginning$ $(2,398)$ $(3,324)
Increase to interest expense (net of tax impact of $163 and $433 in the thirteen and twenty-six weeks ended July 31, 2021, respectively)
 536  1,462 
Accumulated Other Comprehensive Loss, ending$ $(1,862)$ $(1,862)


6. Fair Value Measurements
Fair value is defined as an exit price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Authoritative guidance establishes a three-level hierarchy for disclosure that is based on the extent and level of judgment used to estimate the fair value of the assets and liabilities.
The fair value measurements are classified as either:
Level 1 which represents valuations based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 which represents valuations based on quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3 which represents valuations based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy in which the fair value measurement is classified in its entirety, is based on the lowest level input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. There were no transfers made into or out of the Level 1, 2 or 3 categories during any period presented.
Periodically we make cash investments in money market funds comprised of U.S. Government treasury bills and securities, which are classified as cash and redeemable on demand. As of July 30, 2022, January 29, 2022 and July 31, 2021, we held $321.4 million, $401.0 million and $383.0 million in money market funds, respectively.
The fair value of the Term Loan and Notes is estimated using a discounted cash flow analysis based on quoted market prices for the instrument in an inactive market and is therefore classified as Level 2 within the fair value hierarchy. As of July 30, 2022, January 29, 2022, and July 31, 2021 the estimated fair value of the Term Loan and Notes was $0.7 billion, respectively. As borrowings on the ABL Facility are generally repaid in less than 12 months, we believe that fair value approximates the carrying value.

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7. Property and Equipment
Property and equipment consists of the following (amounts in thousands) as of:
July 30, 2022January 29, 2022July 31, 2021
Leasehold improvements$464,621 $456,918 $448,275 
Equipment and software616,402 602,289 581,452 
Furniture and fixtures344,102 336,679 325,373 
Construction in progress37,922 11,147 21,846 
Land3,698 3,698 3,698 
Total property and equipment1,466,745 1,410,731 1,380,644 
Accumulated depreciation and amortization(1,116,117)(1,064,895)(1,017,860)
Property and equipment, net$350,628 $345,836 $362,784 

Depreciation expense was $26.3 million and $51.9 million, respectively, in the thirteen and twenty-six weeks ended July 30, 2022, and $26.0 million and $51.3 million in the thirteen and twenty-six weeks ended July 31, 2021, respectively, and is included in selling, general and administrative expenses on the consolidated statements of income.


8. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (amounts in thousands) as of:
July 30, 2022January 29, 2022July 31, 2021
Accrued interest$7,107 $6,583 $6,654 
Accrued personnel costs62,751 115,073 83,406 
Accrued professional fees1,179 4,534 2,578 
Accrued sales and use tax15,221 13,054 26,461 
Accrued self-insurance15,309 15,824 14,093 
Deferred revenue - gift cards and other73,995 88,713 64,492 
Income taxes payable6,382 9,602 10,734 
Property taxes37,413 17,747 36,451 
Sales return allowance7,100 6,200 6,700 
Other25,112 25,877 25,588 
Accrued expenses and other current liabilities$251,569 $303,207 $277,157 


9. Share-Based Compensation
On September 29, 2020, the ASO, Inc. Board of Directors adopted the 2020 Omnibus Incentive Plan (the "2020 Omnibus Incentive Plan"), which became effective on October 1, 2020. The 2020 Omnibus Incentive plan provides for the grant of certain equity incentive awards (each, an "Award"), such as options to purchase ASO, Inc. common stock (each, a "Stock Option") and restricted units that may settle in ASO, Inc. common stock (each, a "Restricted Stock Unit") to our directors, executives and eligible employees of the Company. Awards granted under the 2020 Omnibus Incentive Plan consist of Stock Options that vest upon the satisfaction of time-based requirements (each, a "Service Option"), Restricted Stock Units that vest upon the satisfaction of time-based requirements (each, a "Service Restricted Stock Unit") and Restricted Stock Units that vest upon the satisfaction of time and performance and/or market based requirements (each, a "Performance Restricted Stock Unit"). The plan reserved a total of 5,150,000 shares of common stock for issuance. As of July 30, 2022, there were 2,403,311 shares that were authorized and available for future issuance under the 2020 Omnibus Incentive Plan.
On September 29, 2020, the ASO, Inc. Board of Directors adopted the 2020 Employee Stock Purchase Plan (the "ESPP"), which became effective on October 1, 2020. We have reserved a total of 2,000,000 shares under the ESPP and as of July 30, 2022, there were 1,792,945 shares authorized and available for future issuance under the ESPP.
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Equity compensation expense was $6.2 million and $9.7 million for the thirteen and twenty-six weeks ended July 30, 2022, respectively. Equity compensation expense was $27.3 million and $33.2 million for the thirteen and twenty-six weeks ended July 31, 2021, respectively, which includes approximately $24.9 million in non-cash expenses related to the 2021 Vesting Event which occurred during the 2021 second quarter. These costs are included in selling, general and administrative expenses in the consolidated statements of income.
Distribution
On August 28, 2020, New Academy Holding Company, LLC, the parent holding company for our operations prior to our initial public offering, paid a $257.0 million distribution to its members of record as of August 25, 2020. Cash payments ("Share-Based Award Payments") of $32.2 million for unvested Awards were paid upon vesting of such Awards, which was completed and paid in-full as of July 31, 2021.

Service Option Fair Value Assumptions
The fair value for Service Options granted was estimated using a Black-Scholes option-pricing model. The expected lives of the Service Options granted were based on the "SEC simplified" method. Expected price volatility was determined based on the implied volatilities of comparable companies over a historical period that matches the expected life of the Award. The risk-free interest rate was based on the expected U.S. Treasury rate over the expected life. The dividend yield was calculated based on the most recent annualized quarterly dividend and the valuation date closing stock price. The assumptions used to calculate the fair value of Awards granted are evaluated and modified, as necessary, to reflect current market conditions and experience.
The following table presents the assumptions and grant date fair values for Service Options granted in the twenty-six weeks ended July 30, 2022:
Expected life in years6.2
Expected volatility
42.9% to 43.2%
Weighted-average volatility43.0 %
Risk-free interest rate
2.4% to 3.0%
Dividend yield0.8 %

The following table presents the Award grants during the twenty-six weeks ended July 30, 2022:
Service OptionsService Restricted Stock UnitsPerformance Restricted Stock Units
Number of shares813,922 183,984 169,393 
Weighted average grant date fair value per Award$16.33 $38.72 $39.18 
Weighted average exercise price per Award$39.18 N/AN/A

The following table presents the unrecognized compensation cost as of July 30, 2022:
Service OptionsService Restricted Stock UnitsPerformance Restricted Stock Units
Remaining expense$18,629,407 $14,042,372 $6,754,216 
Weighted average life remaining in years2.72.72.6


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10. Earnings per Common Share
Basic earnings per common share is calculated based on net income divided by the basic weighted average common shares outstanding during the period, and diluted earnings per common share is calculated based on net income divided by the diluted weighted average common shares outstanding. Diluted weighted average common shares outstanding is based on the basic weighted average common shares outstanding plus any potential dilutive effect of stock-based awards outstanding during the period using the treasury stock method, which assumes the potential proceeds received from the dilutive stock options are used to purchase treasury stock. Anti-dilutive stock-based awards do not include awards which have a performance or liquidity event target which has yet to be achieved.
Basic and diluted weighted average common shares outstanding and basic and diluted earnings per common share are calculated as follows (amounts in thousands except per share amounts):
Thirteen Weeks EndedTwenty-Six Weeks Ended
July 30, 2022July 31, 2021July 30, 2022July 31, 2021
Net income$188,801 $190,510 $338,607 $368,306 
Weighted average common shares outstanding - basic82,960 92,627 84,809 92,357 
Dilutive effect of Service Restricted Units and Service Restricted Stock Units49 61 68 54 
Dilutive effect of Performance Restricted Stock Units and Liquidity Event Restricted Units90 121 94 591 
Dilutive effect of Service Options1,546 2,614 1,577