BIG 5 SPORTING GOODS Corp [BGFV] Filings

10-Q 1 bgfv-20231001.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 1, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from _____________________ to ____________________

Commission file number: 000-49850

BIG 5 SPORTING GOODS CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		95-4388794
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

2525 East El Segundo Boulevard El Segundo, California		90245
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (310) 536-0611

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	BGFV	The 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 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 ☒

There were 22,444,422 shares of common stock, with a par value of $0.01 per share, outstanding as of October 24, 2023.

BIG 5 SPORTING GOODS CORPORATION

INDEX


		Page
PART I – FINANCIAL INFORMATION

Item 1	Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets as of October 1, 2023 and January 1, 2023	3
	Unaudited Condensed Consolidated Statements of Operations for the Thirteen and Thirty-Nine Weeks Ended October 1, 2023 and October 2, 2022	4
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Thirteen and Thirty-Nine Weeks Ended October 1, 2023 and October 2, 2022	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the Thirty-Nine Weeks Ended October 1, 2023 and October 2, 2022	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
	Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)	19
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4	Controls and Procedures	28

PART II – OTHER INFORMATION

Item 1	Legal Proceedings	29
Item 1A	Risk Factors	29
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3	Defaults Upon Senior Securities	29
Item 4	Mine Safety Disclosures	29
Item 5	Other Information	29
Item 6	Exhibits	30

SIGNATURES		31

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BIG 5 SPORTING GOODS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)


	October 1, 2023			January 1, 2023
ASSETS
Current assets:
Cash	$	17,870		$	25,565
Accounts receivable, net of allowances of $23 and $44, respectively		8,363			12,270
Merchandise inventories, net		291,257			303,493
Prepaid expenses		14,485			16,632
Total current assets		331,975			357,960
Operating lease right-of-use assets, net		269,345			276,016
Property and equipment, net		55,400			58,311
Deferred income taxes		8,978			9,991
Other assets, net of accumulated amortization of $1,710 and $1,359, respectively		8,394			6,515
Total assets	$	674,092		$	708,793
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	62,140		$	67,417
Accrued expenses		61,599			70,261
Current portion of operating lease liabilities		69,316			70,584
Current portion of finance lease liabilities		2,944			3,217
Total current liabilities		195,999			211,479
Operating lease liabilities, less current portion		208,115			214,584
Finance lease liabilities, less current portion		7,586			7,089
Other long-term liabilities		7,016			6,857
Total liabilities		418,716			440,009
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value, authorized 50,000,000 shares; issued 26,751,677 and 26,491,750 shares, respectively; outstanding 22,444,422 and 22,184,495 shares, respectively		267			264
Additional paid-in capital		128,051			126,512
Retained earnings		181,315			196,265
Less: Treasury stock, at cost; 4,307,255 shares		(54,257	)		(54,257	)
Total stockholders' equity		255,376			268,784
Total liabilities and stockholders' equity	$	674,092		$	708,793

See accompanying notes to unaudited condensed consolidated financial statements.

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BIG 5 SPORTING GOODS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


	13 Weeks Ended					39 Weeks Ended
	October 1, 2023			October 2, 2022		October 1, 2023			October 2, 2022
Net sales	$	239,889		$	261,445	$	688,395		$	757,226
Cost of sales		160,331			174,862		461,790			495,844
Gross profit		79,558			86,583		226,605			261,382
Selling and administrative expense		76,575			78,205		224,114			230,150
Operating income		2,983			8,378		2,491			31,232
Interest (income) expense		(95	)		69		(265	)		389
Income before income taxes		3,078			8,309		2,756			30,843
Income tax expense		1,220			1,940		987			6,437
Net income	$	1,858		$	6,369	$	1,769		$	24,406
Earnings per share:
Basic	$	0.09		$	0.30	$	0.08		$	1.13
Diluted	$	0.08		$	0.29	$	0.08		$	1.10
Weighted-average shares of common stock outstanding:
Basic		21,801			21,586		21,731			21,647
Diluted		22,045			21,930		22,003			22,121

See accompanying notes to unaudited condensed consolidated financial statements.

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BIG 5 SPORTING GOODS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)


	13 Weeks Ended October 1, 2023
							Additional						Treasury
	Common Stock						Paid-In			Retained			Stock,
	Shares			Amount			Capital			Earnings			At Cost			Total
Balance as of July 2, 2023		22,451,992		$	267		$	127,358		$	185,047		$	(54,257	)	$	258,415
Net income		—			—			—			1,858			—			1,858
Dividends on common stock ($0.25 per share)		—			—			—			(5,590	)		—			(5,590	)
Exercise of share option awards		5,875			—			16			—			—			16
Share-based compensation		—			—			677			—			—			677
Forfeiture of nonvested share awards		(13,445	)		—			—			—			—			—
Balance as of October 1, 2023		22,444,422		$	267		$	128,051		$	181,315		$	(54,257	)	$	255,376
	13 Weeks Ended October 2, 2022
							Additional						Treasury
	Common Stock						Paid-In			Retained			Stock,
	Shares			Amount			Capital			Earnings			At Cost			Total
Balance as of July 3, 2022		22,176,990		$	264		$	125,151		$	199,242		$	(54,242	)	$	270,415
Net income		—			—			—			6,369			—			6,369
Dividends on common stock ($0.25 per share)		—			—			—			(5,532	)		—			(5,532	)
Exercise of share option awards		13,450			—			62			—			—			62
Share-based compensation		—			—			641			—			—			641
Forfeiture of nonvested share awards		(4,710	)		—			—			—			—			—
Purchases of treasury stock		(1,400	)		—			—			—			(15	)		(15	)
Balance as of October 2, 2022		22,184,330		$	264		$	125,854		$	200,079		$	(54,257	)	$	271,940
	39 Weeks Ended October 1, 2023
							Additional						Treasury
	Common Stock						Paid-In			Retained			Stock,
	Shares			Amount			Capital			Earnings			At Cost			Total
Balance as of January 1, 2023		22,184,495		$	264		$	126,512		$	196,265		$	(54,257	)	$	268,784
Net income		—			—			—			1,769			—			1,769
Dividends on common stock ($0.75 per share)		—			—			—			(16,719	)		—			(16,719	)
Issuance of nonvested share awards		327,112			3			(3	)		—			—			—
Exercise of share option awards		36,550			1			108			—			—			109
Share-based compensation		—			—			2,060			—			—			2,060
Forfeiture of nonvested share awards		(23,670	)		—			—			—			—			—
Retirement of common stock for payment of withholding tax		(80,065	)		(1	)		(626	)		—			—			(627	)
Balance as of October 1, 2023		22,444,422		$	267		$	128,051		$	181,315		$	(54,257	)	$	255,376
	39 Weeks Ended October 2, 2022
							Additional						Treasury
	Common Stock						Paid-In			Retained			Stock,
	Shares			Amount			Capital			Earnings			At Cost			Total
Balance as of January 2, 2022		22,097,467		$	260		$	124,909		$	192,261		$	(50,121	)	$	267,309
Net income		—			—			—			24,406			—			24,406
Dividends on common stock ($0.75 per share)		—			—			—			(16,588	)		—			(16,588	)
Issuance of nonvested share awards		284,630			2			(2	)		—			—			—
Conversion of vested share unit awards		124,012			1			(1	)		—			—			—
Exercise of share option awards		81,200			1			333			—			—			334
Share-based compensation		—			—			1,827			—			—			1,827
Forfeiture of nonvested share awards		(29,920	)		—			—			—			—			—
Retirement of common stock for payment of withholding tax		(77,340	)		—			(1,212	)		—			—			(1,212	)
Purchases of treasury stock		(295,719	)		—			—			—			(4,136	)		(4,136	)
Balance as of October 2, 2022		22,184,330		$	264		$	125,854		$	200,079		$	(54,257	)	$	271,940

See accompanying notes to unaudited condensed consolidated financial statements.

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BIG 5 SPORTING GOODS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	39 Weeks Ended
	October 1, 2023			October 2, 2022
Cash flows from operating activities:
Net income	$	1,769		$	24,406
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization		13,665			13,424
Share-based compensation		2,060			1,827
Amortization of other assets		351			337
Loss on disposal of equipment		—			288
Noncash lease expense		52,474			51,374
Proceeds from insurance recovery - lost profit margin and expenses		619			—
Gain on recovery of insurance proceeds - lost profit margin and expenses		(338	)		—
Gain on recovery of insurance proceeds - property and equipment		(21	)		—
Deferred income taxes		1,013			1,645
Changes in operating assets and liabilities:
Accounts receivable, net		3,587			4,578
Merchandise inventories, net		12,236			(36,483	)
Prepaid expenses and other assets		(83	)		(1,380	)
Accounts payable		(4,791	)		(19,692	)
Operating lease liabilities		(53,540	)		(52,984	)
Accrued expenses and other long-term liabilities		(7,937	)		(17,258	)
Net cash provided by (used in) operating activities		21,064			(29,918	)

Cash flows from investing activities:
Purchases of property and equipment		(8,246	)		(8,827	)
Proceeds from insurance recovery - property and equipment		60			—
Proceeds from disposal of property and equipment		—			13
Net cash used in investing activities		(8,186	)		(8,814	)

Cash flows from financing activities:
Changes in book overdraft		(297	)		388
Principal payments under finance lease liabilities		(2,722	)		(2,690	)
Proceeds from exercise of share option awards		109			334
Cash purchases of treasury stock		—			(4,136	)
Tax withholding payments for share-based compensation		(627	)		(1,212	)
Dividends paid		(17,036	)		(16,933	)
Net cash used in financing activities		(20,573	)		(24,249	)

Net decrease in cash and cash equivalents		(7,695	)		(62,981	)

Cash and cash equivalents at beginning of period		25,565			97,420

Cash and cash equivalents at end of period	$	17,870		$	34,439

Supplemental disclosures of non-cash investing and financing activities:
Property and equipment acquired under finance leases	$	2,946		$	1,611
Property and equipment additions unpaid	$	1,154		$	3,054
Supplemental disclosures of cash flow information:
Interest paid	$	458		$	431
Income taxes paid	$	24		$	5,367

See accompanying notes to unaudited condensed consolidated financial statements.

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BIG 5 SPORTING GOODS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1)

Description of Business

Big 5 Sporting Goods Corporation (the “Company”) is a leading sporting goods retailer in the western United States, operating 430 stores and an e-commerce platform as of October 1, 2023. The Company provides a full-line product offering in a traditional sporting goods store format that averages approximately 12,000 square feet. The Company’s product mix includes athletic shoes, apparel and accessories, as well as a broad selection of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, home recreation, tennis, golf, and winter and summer recreation. The Company is a holding company that operates as one reportable segment through Big 5 Corp., its 100%-owned subsidiary, and Big 5 Services Corp., which is a 100%-owned subsidiary of Big 5 Corp. Big 5 Services Corp. provides a centralized operation for the issuance and administration of gift cards and returned merchandise credits (collectively, “stored-value cards”).

The accompanying interim unaudited condensed consolidated financial statements (“Interim Financial Statements”) of the Company and its 100%-owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these Interim Financial Statements do not include all of the information and notes required by GAAP for complete financial statements. These Interim Financial Statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended January 1, 2023 included in the Company’s Annual Report on Form 10-K. In the opinion of management, the Interim Financial Statements included herein contain all adjustments, including normal recurring adjustments, considered necessary to present fairly the Company’s financial position, the results of operations and cash flows for the periods presented.

The operating results and cash flows of the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year.

(2)

Summary of Significant Accounting Policies

Consolidation

The accompanying Interim Financial Statements include the accounts of Big 5 Sporting Goods Corporation, Big 5 Corp. and Big 5 Services Corp. Intercompany balances and transactions have been eliminated in consolidation.

Reporting Period

The Company follows the concept of a 52-53 week fiscal year, which ends on the Sunday nearest December 31. Fiscal year 2023 is comprised of 52 weeks and ends on December 31, 2023. Fiscal year 2022 was comprised of 52 weeks and ended on January 1, 2023. The interim periods in fiscal 2023 and 2022 are each comprised of 13 weeks.

Recently Issued Accounting Updates

In May 2023, the Securities and Exchange Commission (“SEC”) adopted the final rule under SEC Release No. 34-97424, Share Repurchase Disclosure Modernization, requiring disclosures related to issuers’ share repurchases that will provide investors with enhanced information to assess the purposes and effects of the repurchases. Disclosure requirements under this rule will be effective in the fourth quarter of fiscal 2023. We do not expect the adoption of this final rule to have a material impact on our results of operations, liquidity or capital resources.

In June 2023, the SEC approved new listing standards that were proposed by the New York Stock Exchange and Nasdaq. The new listing standards require listed companies to adopt and comply with a written policy providing for the recovery, in the event of a required accounting restatement, of incentive-based compensation received by current or former executive officers where that compensation is based on erroneously reported financial information. The listing standards took effect on October 2, 2023 and registrants will have until December 1, 2023 (60 days after the effective date) to adopt a recovery policy. The recovery policy must, however, apply to erroneously awarded incentive-based compensation received (as defined in the listing standards) after the effective date. We do not expect the adoption of these new listing standards to have a material impact on our results of operations, liquidity or capital resources.

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BIG 5 SPORTING GOODS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

In July 2023, the SEC adopted the final rule under SEC Release Nos. 33-11216, Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure, requiring current disclosure about material cybersecurity incidents; periodic disclosures about a registrant’s processes to assess, identify, and manage material cybersecurity risks; a description of management’s role in assessing and managing material cybersecurity risks; and the board of directors’ oversight of cybersecurity risks. While the incident-reporting requirements under this rule will be effective in the second quarter of fiscal 2024 due to the Company’s status as a smaller-reporting company, the disclosure requirements under this rule will be effective in the fourth quarter of fiscal 2023. We do not expect the adoption of this final rule to have a material impact on our results of operations, liquidity or capital resources.

Other recently issued accounting updates are not expected to have a material impact on the Company’s Interim Financial Statements.

General Concentration of Risk

The Company purchases merchandise from nearly 700 suppliers, and the Company’s 20 largest suppliers accounted for 35.9% of total purchases in fiscal 2022.