Academy Sports and Outdoors, Inc. (Nasdaq: ASO) ("Academy" or the
"Company") today announced its financial results for the third
quarter ended October 29, 2022. Unless otherwise indicated,
comparisons are to the same period in the prior fiscal year.
Comparisons to 2019 are also provided, where appropriate, to
benchmark performance given the impact of the pandemic in 2020 and
2021.
Third Quarter 2022 Results"The
third quarter was challenging for Academy; however, we delivered a
good profit performance that, while below last year, was in line
with our expectations. Our team continues to execute at a high
level in an uncertain environment, delivering results well above
pre-pandemic levels on all measures," stated Ken Hicks, Chairman,
President and Chief Executive Officer. "Our focus is on our
long-term growth opportunities in stores and online through
consistent operational excellence, strong financial discipline, and
executing our store and omnichannel expansion plans."
Net sales were $1.49 billion, a decrease of
6.2%, compared to $1.59 billion. Comparable sales declined 7.2%.
The decline in sales was primarily due to fewer transactions
compared to last year, mainly from a decline in Hunting sales
within the Outdoors division. When compared to the third quarter of
2019, net sales increased 30.5%. Additionally, e-commerce sales
grew 10.5% year-over-year and 173% compared to 2019.
Gross margin was $522.5 million, or 35.0% of net
sales, compared to gross margin of $560.8 million, or 35.2% of net
sales in the prior year quarter. The 20 basis point decline was
driven primarily by an increase in inventory shrink and e-commerce
shipping costs, and was partially offset by an increase in
merchandise margins. When compared to 2019, the gross margin rate
expanded by 340 basis points.
Selling, general and administrative ("SG&A")
expenses were 23.0% of sales, a 140 basis point increase, primarily
due to fixed cost deleverage from the decline in sales and
additional pre-opening expenses driven by the increase in store
count.
Pre-tax income was $169.9 million compared to
$205.3 million. When compared to the third quarter of 2019, pre-tax
income increased by more than 480%.
GAAP net income decreased 18.3% to $131.7
million compared to $161.3 million. Diluted earnings per share were
$1.62, a 5.8% decrease compared to $1.72 per share based on a share
count of 81.4 million shares compared to 93.8 million at the end of
the third quarter of 2021.
Adjusted net income, which excludes the impact
of certain non-cash and extraordinary items, was $137.9 million.
Adjusted diluted earnings per share were $1.69 compared to $1.75
per share.
Year-to-date 2022 ResultsNet
sales decreased 6.4% to $4.65 billion, while comparable sales
decreased 6.9%. Year-to-date sales grew 34.4% compared to 2019.
Gross margin was $1.64 billion, or 35.3% of net
sales, compared to gross margin of $1.77 billion, or 35.6% of net
sales. When compared to year-to-date 2019, the gross margin rate
expanded by 460 basis points.
Pre-tax income was $612.2 million compared to
$671.1 million. When compared to year-to-date 2019 results, pre-tax
income increased by more than 485%.
GAAP net income decreased 11.2% to $470.3
million compared to $529.6 million. Diluted earnings per share were
$5.54 compared to $5.55 per share.
Adjusted net income, which excludes the impact
of certain non-cash and extraordinary items, decreased 14.9% to
$486.0 million. Adjusted diluted earnings per share were $5.72
compared to $5.98 per share.
Balance Sheet and Capital Allocation
UpdateAt the end of the third quarter, the Company’s cash
and cash equivalents totaled $318.2 million with no borrowings
under the $1.0 billion credit facility. During the quarter, net
cash provided by operating activities was $50.8 million.
Merchandise inventories were $1.5 billion, an
increase of 12.8% compared to the third quarter 2021. When compared
to the third quarter of 2019, inventories were 12.3% higher in
dollars, while units declined by 10.0%.
During the third quarter, Academy returned
$106.8 million to stockholders through a combination of share
repurchases and dividends. The Company repurchased 2.2 million
shares for $100.8 million and paid a quarterly cash dividend of
$0.075 per share, or $6.0 million.
Year-to-date, the Company has repurchased 10.0
million shares for $389.4 million and has approximately $400
million remaining under its share repurchase program.
Subsequent to the end of the third quarter, on
December 6, 2022, Academy announced that its Board of Directors
declared a quarterly cash dividend with respect to the quarter
ended October 29, 2022, of $0.075 per share of common stock. The
dividend is payable on January 13, 2023, to stockholders of record
as of the close of business on December 20, 2022.
New Store OpeningsDuring the
third quarter, Academy opened four new stores and has since opened
three new stores in the fourth quarter, bringing the total number
of stores opened in 2022 to nine, for a total of 268 stores. The
Company expects to open 80 to 100 stores over the next five
years.
2022 Outlook“Our year-to-date
operating income has now surpassed that of fiscal 2019 and 2020
combined. This is a clear indicator that the operational and
organizational improvements made over the past few years have
structurally changed the earnings power of the Company and
positioned us for future growth,” said Michael Mullican, Executive
Vice President and Chief Financial Officer. “As we close out the
year, we remain focused on providing our customers with excellent
service, broad assortments and value offerings."
Based on its year-to-date results and current
trends, Academy is updating its fiscal 2022 guidance as
follows:
|
Previous Guidance |
|
Updated Guidance |
|
(in
millions, except per share amounts) |
Low end |
High end |
|
Low end |
High end |
|
Net
Sales |
$ |
6,430.0 |
|
$ |
6,630.0 |
|
|
$ |
6,430.0 |
|
$ |
6,490.0 |
|
|
|
|
|
|
|
|
|
Comparable Sales |
|
-6.0 |
% |
|
-3.0 |
% |
|
|
-6.0 |
% |
|
-5.0 |
% |
|
|
|
|
|
|
|
|
Gross
Margin Rate |
|
33.0 |
% |
|
33.5 |
% |
|
|
34.0 |
% |
|
34.5 |
% |
|
|
|
|
|
|
|
|
GAAP
Income Before Taxes |
$ |
725.0 |
|
$ |
805.0 |
|
|
$ |
790.0 |
|
$ |
810.0 |
|
|
|
|
|
|
|
|
|
GAAP Net
Income |
$ |
550.0 |
|
$ |
615.0 |
|
|
$ |
610.0 |
|
$ |
620.0 |
|
|
|
|
|
|
|
|
|
GAAP
Earnings per Common Share, Diluted |
$ |
6.50 |
|
$ |
7.25 |
|
|
$ |
7.25 |
|
$ |
7.40 |
|
|
|
|
|
|
|
|
|
Adjusted
Earnings per Common Share, Diluted |
$ |
6.75 |
|
$ |
7.50 |
|
|
$ |
7.50 |
|
$ |
7.65 |
|
|
|
|
|
|
|
|
|
Diluted
Weighted Average Common Shares Outstanding |
|
85.0 |
|
|
85.0 |
|
|
|
84.0 |
|
|
84.0 |
|
|
|
|
|
|
|
|
|
The earnings per common share estimate reflects
a tax rate of approximately 23.0% and the year-to-date share
repurchase activity, but does not include any potential future
share repurchases.
Conference Call InfoAcademy
will host a conference call today at 10:00 a.m. Eastern Time to
discuss its financial results. Listeners may access the call by
dialing 1-877-407-3982 (U.S.) or 1-201-493-6780 (International).
The passcode is 13734402.A webcast of the call can be accessed at
investors.academy.com.
A telephonic replay of the conference call will
be available for approximately 30 days, by dialing 1-844-512-2921
(U.S.) or 1-412-317-6671 (International) and entering passcode
13734402. An archive of the webcast will be available at
investors.academy.com for 30 days.
About Academy Sports +
OutdoorsAcademy is a leading full-line sporting goods and
outdoor recreation retailer in the United States. Originally
founded in 1938 as a family business in Texas, Academy has grown to
268 stores across 18 states. Academy’s mission is to provide “Fun
for All” and Academy fulfills this mission with a localized
merchandising strategy and value proposition that strongly connects
with a broad range of consumers. Academy’s product assortment
focuses on key categories of outdoor, apparel, footwear and sports
& recreation through both leading national brands and a
portfolio of private label brands.
Non-GAAP MeasuresAdjusted
EBITDA, Adjusted EBIT, Adjusted Net Income, Adjusted Earnings per
Common Share, and Adjusted Free Cash Flow have been presented in
this press release as supplemental measures of financial
performance that are not required by, or presented in accordance
with, generally accepted accounting principles (“GAAP”). These
non-GAAP measures have limitations as analytical tools. For
information on these limitations, as well as information on why
management believes these non-GAAP measures are useful, please see
our Annual Report for the fiscal year ended January 29, 2022 (the
"Annual Report") and our Quarterly Report for the thirteen and
thirty-nine weeks ended October 29, 2022 (the “Quarterly Report”),
as such limitations and information may be updated from time to
time in our periodic filings with the Securities and Exchange
commission (the "SEC"), which are accessible on the SEC's website
at www.sec.gov.
We compensate for these limitations by primarily
relying on our GAAP results in addition to using these non-GAAP
measures supplementally.
See “Reconciliations of Non-GAAP to GAAP
Financial Measures” below for reconciliations of non-GAAP financial
measures used in this press release to their most directly
comparable GAAP financial measures.
Forward Looking StatementsThis
press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements are based on Academy's current
expectations and are not guarantees of future performance. You can
identify these forward-looking statements by the use of words such
as "outlook," "guidance," "believes," "expects," "potential,"
"continues," "may," "will," "should," "could," "seeks," "projects,"
"predicts," "intends," "plans," "estimates," "anticipates" or the
negative version of these words or other comparable words. The
forward-looking statements include, among other things, statements
regarding the payment of the dividend and declaration of future
dividends, including the timing and amount thereof, share
repurchases, the Company's expectations regarding its future
performance, and the Company's future financial condition to
support future dividend growth and are subject to various risks,
uncertainties, assumptions, or changes in circumstances that are
difficult to predict or quantify. Actual results may differ
materially from these expectations due to changes in global,
regional, or local economic, business, competitive, market,
regulatory and other factors, including ongoing inflation and
continued increases in interest rates, many of which are beyond
Academy's control. Important factors that could cause actual
results to differ materially from those in the forward-looking
statements are set forth in Academy's filings with the SEC,
including the Annual Report and the Quarterly Report, under the
caption "Risk Factors," as may be updated from time to time in our
periodic filings with the SEC. Any forward-looking statement in
this press release speaks only as of the date of this release.
Academy undertakes no obligation to publicly update or review any
forward-looking statement, whether as a result of new information,
future developments or otherwise, except as may be required by any
applicable securities laws.
Investor Contact |
|
Media
Contact |
Matt Hodges |
|
Elise Hasbrook |
VP, Investor Relations |
|
VP, Communications |
281-646-5362 |
|
281-944-6041 |
matt.hodges@academy.com |
|
elise.hasbrook@academy.com |
|
|
|
ACADEMY SPORTS AND OUTDOORS,
INC.CONSOLIDATED STATEMENTS OF
INCOME(Unaudited)(Amounts in
thousands, except per share data)
|
Thirteen Weeks Ended |
|
October 29, 2022 |
|
Percentage of Sales(1) |
|
October 30, 2021 |
|
Percentage of Sales(1) |
Net sales |
$ |
1,493,925 |
|
|
100.0 |
|
% |
|
$ |
1,592,795 |
|
|
100.0 |
|
% |
Cost of goods sold |
|
971,454 |
|
|
65.0 |
|
% |
|
|
1,031,957 |
|
|
64.8 |
|
% |
Gross margin |
|
522,471 |
|
|
35.0 |
|
% |
|
|
560,838 |
|
|
35.2 |
|
% |
Selling, general and
administrative expenses |
|
342,949 |
|
|
23.0 |
|
% |
|
|
344,725 |
|
|
21.6 |
|
% |
Operating income |
|
179,522 |
|
|
12.0 |
|
% |
|
|
216,113 |
|
|
13.6 |
|
% |
Interest expense, net |
|
12,163 |
|
|
0.8 |
|
% |
|
|
11,424 |
|
|
0.7 |
|
% |
Other (income), net |
|
(2,538 |
) |
|
(0.2 |
) |
% |
|
|
(614 |
) |
|
(0.0 |
) |
% |
Income before income taxes |
|
169,897 |
|
|
11.4 |
|
% |
|
|
205,303 |
|
|
12.9 |
|
% |
Income tax expense |
|
38,156 |
|
|
2.6 |
|
% |
|
|
43,998 |
|
|
2.8 |
|
% |
Net income |
$ |
131,741 |
|
|
8.8 |
|
% |
|
$ |
161,305 |
|
|
10.1 |
|
% |
|
|
|
|
|
|
|
|
Earnings Per Common
Share: |
|
|
|
|
|
|
|
Basic |
$ |
1.67 |
|
|
|
|
$ |
1.77 |
|
|
|
Diluted |
$ |
1.62 |
|
|
|
|
$ |
1.72 |
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares
Outstanding: |
|
|
|
|
|
|
|
Basic |
|
79,085 |
|
|
|
|
|
91,140 |
|
|
|
Diluted |
|
81,379 |
|
|
|
|
|
93,844 |
|
|
|
(1) Column may not add due to rounding
ACADEMY SPORTS AND OUTDOORS,
INC.CONSOLIDATED STATEMENTS OF
INCOME(Unaudited)(Amounts in
thousands, except per share data)
|
Thirty-Nine Weeks Ended |
|
October 29, 2022 |
|
Percentage of Sales(1) |
|
October 30, 2021 |
|
Percentage of Sales(1) |
Net sales |
$ |
4,648,570 |
|
|
100.0 |
|
% |
|
$ |
4,964,658 |
|
|
100.0 |
|
% |
Cost of goods sold |
|
3,008,612 |
|
|
64.7 |
|
% |
|
|
3,197,623 |
|
|
64.4 |
|
% |
Gross margin |
|
1,639,958 |
|
|
35.3 |
|
% |
|
|
1,767,035 |
|
|
35.6 |
|
% |
Selling, general and
administrative expenses |
|
998,209 |
|
|
21.5 |
|
% |
|
|
1,057,290 |
|
|
21.3 |
|
% |
Operating income |
|
641,749 |
|
|
13.8 |
|
% |
|
|
709,745 |
|
|
14.3 |
|
% |
Interest expense, net |
|
34,240 |
|
|
0.7 |
|
% |
|
|
38,130 |
|
|
0.8 |
|
% |
Loss on early retirement of
debt |
|
— |
|
|
— |
|
% |
|
|
2,239 |
|
|
0.0 |
|
% |
Other (income), net |
|
(4,676 |
) |
|
(0.1 |
) |
% |
|
|
(1,746 |
) |
|
(0.0 |
) |
% |
Income before income taxes |
|
612,185 |
|
|
13.2 |
|
% |
|
|
671,122 |
|
|
13.5 |
|
% |
Income tax expense |
|
141,837 |
|
|
3.1 |
|
% |
|
|
141,511 |
|
|
2.9 |
|
% |
Net income |
$ |
470,348 |
|
|
10.1 |
|
% |
|
$ |
529,611 |
|
|
10.7 |
|
% |
|
|
|
|
|
|
|
|
Earnings Per Common
Share: |
|
|
|
|
|
|
|
Basic |
$ |
5.67 |
|
|
|
|
$ |
5.76 |
|
|
|
Diluted |
$ |
5.54 |
|
|
|
|
$ |
5.55 |
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares
Outstanding: |
|
|
|
|
|
|
|
Basic |
|
82,901 |
|
|
|
|
|
91,951 |
|
|
|
Diluted |
|
84,910 |
|
|
|
|
|
95,504 |
|
|
|
(1) Column may not add due to rounding
ACADEMY SPORTS AND OUTDOORS,
INC.CONSOLIDATED BALANCE
SHEETS(Unaudited)(Dollar amounts
in thousands, except per share data)
|
|
October 29, 2022 |
|
January 29, 2022 |
|
October 30, 2021 |
ASSETS |
|
|
|
|
|
|
CURRENT
ASSETS: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
318,167 |
|
$ |
485,998 |
|
$ |
401,297 |
|
Accounts receivable - less allowance for doubtful accounts of
$1,449, $732 and $1,139, respectively |
|
|
15,998 |
|
|
19,718 |
|
|
12,368 |
|
Merchandise inventories, net |
|
|
1,495,464 |
|
|
1,171,808 |
|
|
1,325,979 |
|
Prepaid expenses and other current assets |
|
|
44,241 |
|
|
36,460 |
|
|
44,491 |
|
Assets held for sale |
|
|
1,763 |
|
|
1,763 |
|
|
1,763 |
|
Total current assets |
|
|
1,875,633 |
|
|
1,715,747 |
|
|
1,785,898 |
|
|
|
|
|
|
|
|
PROPERTY AND
EQUIPMENT, NET |
|
|
354,014 |
|
|
345,836 |
|
|
358,110 |
|
RIGHT-OF-USE
ASSETS |
|
|
1,100,522 |
|
|
1,079,546 |
|
|
1,087,407 |
|
TRADE
NAME |
|
|
577,571 |
|
|
577,215 |
|
|
577,144 |
|
GOODWILL |
|
|
861,920 |
|
|
861,920 |
|
|
861,920 |
|
OTHER NONCURRENT
ASSETS |
|
|
12,804 |
|
|
4,676 |
|
|
5,516 |
|
Total assets |
|
$ |
4,782,464 |
|
$ |
4,584,940 |
|
$ |
4,675,995 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
CURRENT
LIABILITIES: |
|
|
|
|
|
|
Accounts payable |
|
$ |
840,585 |
|
$ |
737,826 |
|
$ |
919,196 |
|
Accrued expenses and other current liabilities |
|
|
259,179 |
|
|
303,207 |
|
|
304,488 |
|
Current lease liabilities |
|
|
88,447 |
|
|
83,077 |
|
|
86,701 |
|
Current maturities of long-term debt |
|
|
3,000 |
|
|
3,000 |
|
|
3,000 |
|
Total current liabilities |
|
|
1,191,211 |
|
|
1,127,110 |
|
|
1,313,385 |
|
|
|
|
|
|
|
|
LONG-TERM DEBT,
NET |
|
|
682,803 |
|
|
683,585 |
|
|
683,845 |
|
LONG-TERM LEASE
LIABILITIES |
|
|
1,093,909 |
|
|
1,077,667 |
|
|
1,088,142 |
|
DEFERRED TAX
LIABILITIES, NET |
|
|
242,843 |
|
|
217,212 |
|
|
188,243 |
|
OTHER LONG-TERM
LIABILITIES |
|
|
12,779 |
|
|
12,420 |
|
|
26,386 |
|
Total liabilities |
|
|
3,223,545 |
|
|
3,117,994 |
|
|
3,300,001 |
|
|
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
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;
77,959,530; 87,079,394; and 88,164,878 issued and outstanding as of
October 29, 2022, January 29, 2022, and October 30, 2021,
respectively. |
|
|
779 |
|
|
870 |
|
|
882 |
|
Additional paid-in capital |
|
|
203,734 |
|
|
198,016 |
|
|
188,329 |
|
Retained earnings |
|
|
1,354,406 |
|
|
1,268,060 |
|
|
1,188,271 |
|
Accumulated other comprehensive loss |
|
|
— |
|
|
— |
|
|
(1,488 |
) |
Stockholders' equity |
|
|
1,558,919 |
|
|
1,466,946 |
|
|
1,375,994 |
|
Total liabilities and stockholders' equity |
|
$ |
4,782,464 |
|
$ |
4,584,940 |
|
$ |
4,675,995 |
|
|
ACADEMY SPORTS AND OUTDOORS,
INC.CONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited)(Amounts in
thousands)
|
|
Thirty-Nine Weeks Ended |
|
|
October 29, 2022 |
|
October 30, 2021 |
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
|
Net income |
|
$ |
470,348 |
|
|
$ |
529,611 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
|
|
78,852 |
|
|
|
77,767 |
|
Non-cash lease expense |
|
|
635 |
|
|
|
708 |
|
Equity compensation |
|
|
15,486 |
|
|
|
36,126 |
|
Amortization of terminated interest rate swaps, deferred loan and
other costs |
|
|
2,328 |
|
|
|
4,787 |
|
Deferred income taxes |
|
|
25,631 |
|
|
|
48,991 |
|
Non-cash loss on early retirement of debt |
|
|
— |
|
|
|
2,239 |
|
Changes in assets and liabilities: |
|
|
|
|
Accounts receivable, net |
|
|
3,720 |
|
|
|
4,938 |
|
Merchandise inventories, net |
|
|
(323,656 |
) |
|
|
(335,945 |
) |
Prepaid expenses and other current assets |
|
|
798 |
|
|
|
(16,177 |
) |
Other noncurrent assets |
|
|
(8,987 |
) |
|
|
2,207 |
|
Accounts payable |
|
|
95,183 |
|
|
|
128,743 |
|
Accrued expenses and other current liabilities |
|
|
(39,196 |
) |
|
|
34,683 |
|
Income taxes payable |
|
|
(12,332 |
) |
|
|
(1,830 |
) |
Other long-term liabilities |
|
|
359 |
|
|
|
(1,785 |
) |
Net cash provided by operating activities |
|
|
309,169 |
|
|
|
515,063 |
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
Capital expenditures |
|
|
(79,454 |
) |
|
|
(58,567 |
) |
Purchases of intangible assets |
|
|
(357 |
) |
|
|
(144 |
) |
Net cash used in investing activities |
|
|
(79,811 |
) |
|
|
(58,711 |
) |
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
Repayment of Term Loan |
|
|
(2,250 |
) |
|
|
(101,500 |
) |
Debt issuance fees |
|
|
— |
|
|
|
(927 |
) |
Share-Based Award Payments |
|
|
— |
|
|
|
(11,214 |
) |
Proceeds from exercise of stock options |
|
|
11,559 |
|
|
|
41,292 |
|
Proceeds from issuance of common stock under employee stock
purchase program |
|
|
2,797 |
|
|
|
945 |
|
Taxes paid related to net share settlement of equity awards |
|
|
(1,078 |
) |
|
|
(15,418 |
) |
Repurchase of common stock for retirement |
|
|
(389,436 |
) |
|
|
(345,837 |
) |
Dividends paid |
|
|
(18,781 |
) |
|
|
— |
|
Net cash used in financing activities |
|
|
(397,189 |
) |
|
|
(432,659 |
) |
|
|
|
|
|
NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
(167,831 |
) |
|
|
23,693 |
|
CASH AND CASH
EQUIVALENTS AT BEGINNING OF PERIOD |
|
|
485,998 |
|
|
|
377,604 |
|
CASH AND CASH
EQUIVALENTS AT END OF PERIOD |
|
$ |
318,167 |
|
|
$ |
401,297 |
|
|
ACADEMY SPORTS AND OUTDOORS,
INC.RECONCILIATIONS OF NON-GAAP TO GAAP FINANCIAL
MEASURES(Unaudited)(Dollar
amounts in thousands)
Adjusted EBITDA and Adjusted
EBITWe define “Adjusted EBITDA” as net income (loss)
before interest expense, net, income tax expense and depreciation,
amortization, and impairment, further adjusted to exclude costs
such as consulting fees, private equity sponsor monitoring fees,
equity compensation expense, (gain) loss on early retirement of
debt, net, severance and executive transition costs, costs related
to the COVID-19 pandemic, pre-opening expenses, payroll taxes
associated with a vesting event, as a result of a secondary
offering, of certain time and performance-based equity awards,
which occurred in May 2021 (the “2021 Vesting Event”) and other
adjustments. We define “Adjusted EBIT” as net income (loss) before
interest expense, net, and income tax expense, further adjusted to
exclude costs such as consulting fees, private equity sponsor
monitoring fees, equity compensation expense, (gain) loss on early
retirement of debt, net, severance and executive transition costs,
costs related to the COVID-19 pandemic, pre-opening expenses,
payroll taxes associated with the 2021 Vesting Event and other
adjustments. We describe these adjustments reconciling net income
(loss) to Adjusted EBITDA and Adjusted EBIT in the following
table.
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
October 29, 2022 |
|
October 30, 2021 |
|
October 29, 2022 |
|
October 30, 2021 |
Net income |
|
$ |
131,741 |
|
|
$ |
161,305 |
|
|
$ |
470,348 |
|
|
$ |
529,611 |
|
Interest expense, net |
|
|
12,163 |
|
|
|
11,424 |
|
|
|
34,240 |
|
|
|
38,130 |
|
Income tax expense |
|
|
38,156 |
|
|
|
43,998 |
|
|
|
141,837 |
|
|
|
141,511 |
|
Depreciation and
amortization |
|
|
27,000 |
|
|
|
26,459 |
|
|
|
78,852 |
|
|
|
77,767 |
|
Equity compensation (a) |
|
|
5,829 |
|
|
|
2,921 |
|
|
|
15,486 |
|
|
|
36,126 |
|
Loss on early retirement of
debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,239 |
|
Pre-opening expenses (b) |
|
|
2,115 |
|
|
|
— |
|
|
|
4,941 |
|
|
|
— |
|
Payroll taxes associated with
the 2021 Vesting Event (c) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,418 |
|
Other (d) |
|
|
— |
|
|
|
595 |
|
|
|
— |
|
|
|
1,309 |
|
Adjusted EBITDA |
|
$ |
217,004 |
|
|
$ |
246,702 |
|
|
$ |
745,704 |
|
|
$ |
842,111 |
|
Less: Depreciation and
amortization |
|
|
(27,000 |
) |
|
|
(26,459 |
) |
|
|
(78,852 |
) |
|
|
(77,767 |
) |
Adjusted EBIT |
|
$ |
190,004 |
|
|
$ |
220,243 |
|
|
$ |
666,852 |
|
|
$ |
764,344 |
|
(a) |
Represents non-cash charges related to equity-based compensation,
which vary from period to period depending on certain factors such
as the 2021 Vesting Event, timing and valuation of awards,
achievement of performance targets and equity award
forfeitures. |
(b) |
Represents pre-opening expenses, which are non-capital expenditures
associated with opening new stores and incurred prior to the store
opening and generating sales. These costs consist primarily
of occupancy costs, marketing, payroll and recruiting costs.
These costs are expensed as incurred. |
(c) |
Represents cash expenses related to taxes on equity-based
compensation resulting from the 2021 Vesting Event. |
(d) |
Other adjustments include (representing deductions or additions to
Adjusted EBITDA and Adjusted EBIT) amounts that management believes
are not representative of our operating performance, such as costs
associated with secondary offerings, installation costs for energy
savings associated with our profitability initiatives and other
costs associated with business optimization initiatives. |
|
|
Adjusted Net Income and Adjusted
Earnings Per Common Share
We define “Adjusted Net Income (Loss)” as net
income (loss), plus costs such as consulting fees, private equity
sponsor monitoring fees, equity compensation expense, (gain) loss
on early retirement of debt, net, severance and executive
transition costs, costs related to the COVID-19 pandemic,
pre-opening expenses, payroll taxes associated with the 2021
Vesting Event and other adjustments, less the tax effect of these
adjustments. We define “Adjusted Earnings per Common Share, Basic”
as Adjusted Net Income divided by the basic weighted average common
shares outstanding during the period and “Adjusted Earnings per
Common Share, Diluted” as Adjusted Net Income divided by the
diluted weighted average common shares outstanding during the
period. We describe these adjustments reconciling net income (loss)
to Adjusted Net Income, and Adjusted Earnings Per Common Share in
the following table.
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
October 29, 2022 |
|
October 30, 2021 |
|
October 29, 2022 |
|
October 30, 2021 |
Net income |
|
$ |
131,741 |
|
|
$ |
161,305 |
|
|
$ |
470,348 |
|
|
$ |
529,611 |
|
Equity compensation (a) |
|
|
5,829 |
|
|
|
2,921 |
|
|
|
15,486 |
|
|
|
36,126 |
|
Loss on early retirement of
debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,239 |
|
Pre-opening expenses (b) |
|
|
2,115 |
|
|
|
— |
|
|
|
4,941 |
|
|
|
— |
|
Payroll taxes associated with
the 2021 Vesting Event (c) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,418 |
|
Other (d) |
|
|
— |
|
|
|
595 |
|
|
|
— |
|
|
|
1,309 |
|
Tax effects of these
adjustments (e) |
|
|
(1,808 |
) |
|
|
(686 |
) |
|
|
(4,735 |
) |
|
|
(13,487 |
) |
Adjusted Net Income |
|
$ |
137,877 |
|
|
$ |
164,135 |
|
|
$ |
486,040 |
|
|
$ |
571,216 |
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings per Common
Share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.74 |
|
|
$ |
1.80 |
|
|
$ |
5.86 |
|
|
$ |
6.21 |
|
Diluted |
|
$ |
1.69 |
|
|
$ |
1.75 |
|
|
$ |
5.72 |
|
|
$ |
5.98 |
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
79,085 |
|
|
|
91,140 |
|
|
|
82,901 |
|
|
|
91,951 |
|
Diluted |
|
|
81,379 |
|
|
|
93,844 |
|
|
|
84,910 |
|
|
|
95,504 |
|
(a) |
Represents non-cash charges related to equity-based compensation,
which vary from period to period depending on certain factors such
as the 2021 Vesting Event, timing and valuation of awards,
achievement of performance targets and equity award
forfeitures. |
(b) |
Represents pre-opening expenses, which are non-capital expenditures
associated with opening new stores and incurred prior to the store
opening and generating sales. These costs consist primarily
of occupancy costs, marketing, payroll and recruiting costs.
These costs are expensed as incurred. |
(c) |
Represents cash expenses related to taxes on equity-based
compensation resulting from the 2021 Vesting Event. |
(d) |
Other
adjustments include (representing deductions or additions to
Adjusted Net Income) amounts that management believes are not
representative of our operating performance, such as costs
associated with secondary offerings, installation costs for energy
savings associated with our profitability initiatives and other
costs associated with business optimization initiatives. |
(e) |
For the
thirteen and thirty-nine weeks ended October 29, 2022 and October
30, 2021, this represents the tax effect (by using the projected
full year tax rates for the respective years) of the total
adjustments made to arrive at Adjusted Net Income. |
|
|
GAAP to Adjusted Earnings Per Common
Share, Diluted, Guidance Reconciliation
|
Low Range* |
|
High Range* |
(in millions, except per share
amounts) |
Fiscal Year EndingJanuary 28,
2023 |
|
Fiscal Year EndingJanuary 28,
2023 |
GAAP Net Income |
$ |
610.0 |
|
|
$ |
620.0 |
|
Equity compensation (a) |
|
21.0 |
|
|
|
21.0 |
|
Pre-opening expenses (a) |
|
5.0 |
|
|
|
5.0 |
|
Tax effects of these
adjustments (a) |
|
(6.0 |
) |
|
|
(6.0 |
) |
Adjusted Net Income |
$ |
630.0 |
|
|
$ |
640.0 |
|
|
|
|
|
GAAP Earnings Per Common
Share, Diluted |
$ |
7.25 |
|
|
$ |
7.40 |
|
Equity compensation (a) |
|
0.25 |
|
|
|
0.25 |
|
Pre-opening expenses (a) |
|
0.06 |
|
|
|
0.06 |
|
Tax effects of these
adjustments (a) |
|
(0.06 |
) |
|
|
(0.06 |
) |
Adjusted Earnings per Common Share, Diluted |
$ |
7.50 |
|
|
$ |
7.65 |
|
* |
Amounts presented have been rounded. |
(a) |
Adjustments include new store pre-opening costs (as defined above)
and non-cash charges related to equity-based compensation (as
defined above), which may vary from period to period. The tax
effect of these adjustments is determined by using the projected
full year tax rate for the fiscal year. |
|
|
Adjusted Free Cash Flow
We define “Adjusted Free Cash Flow” as net cash
provided by (used in) operating activities less net cash used in
investing activities. We describe these adjustments reconciling net
cash provided by operating activities to Adjusted Free Cash Flow in
the following table.
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
October 29, 2022 |
|
October 30, 2021 |
|
October 29, 2022 |
|
October 30, 2021 |
Net cash provided by operating activities |
|
$ |
50,763 |
|
|
$ |
109,389 |
|
|
$ |
309,169 |
|
|
$ |
515,063 |
|
Net cash used in investing
activities |
|
|
(31,677 |
) |
|
|
(24,944 |
) |
|
|
(79,811 |
) |
|
|
(58,711 |
) |
Adjusted Free Cash Flow |
|
$ |
19,086 |
|
|
$ |
84,445 |
|
|
$ |
229,358 |
|
|
$ |
456,352 |
|
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