What changed in this filing

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Item 1. Financial Statements

2021-06-08 compared with 2020-12-10 · 257 added, 408 removed, 368 unchanged (64% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands)

October 31, 2020 February 1, 2020 November 2, 2019

(Dollar amounts in thousands, except per share data)

May 1, 2021 January 30, 2021 May 2, 2020

CURRENT ASSETS:

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none issued and outstanding

Partners' equity, membership units authorized, issued and outstanding were 72,468,164 as of February 1, 2020 and November 2, 2019

— 996,285 976,538

Partners' equity, membership units authorized, issued and outstanding were 72,478,106 as of May 2, 2020

Common stock, $ 0.01 par value, authorized 300,000,000 shares;

88,103,975 issued and outstanding as of October 31, 2020

93,887,109 and 91,114,475 issued and outstanding as of May 1, 2021 and January 30, 2021 respectively.

Additional paid-in capital 150,370 127,228 —

6 unchanged sentences

ACADEMY SPORTS AND OUTDOORS, INC.

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Amounts in thousands, except per share data)

Thirteen Weeks Ended Thirty-Nine Weeks Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Thirteen Weeks Ended

May 1, 2021 May 2, 2020

NET SALES $ 1,580,333 $ 1,136,301

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INTEREST EXPENSE, NET 14,549 24,522

GAIN ON EARLY RETIREMENT OF DEBT, NET — — ( 7,831 ) ( 42,265 )

OTHER (INCOME) EXPENSE, NET 764 ( 467 ) ( 857 ) ( 1,921 )

INCOME BEFORE INCOME TAXES 58,393 29,058 217,567 104,219

INCOME TAX (BENEFIT) EXPENSE ( 1,193 ) 506 325 1,914

NET INCOME $ 59,586 $ 28,552 $ 217,242 $ 102,305

EARNINGS PER COMMON SHARE:

OTHER (INCOME), NET ( 397 ) ( 993 )

INCOME (LOSS) BEFORE INCOME TAXES 224,922 ( 9,507 )

INCOME TAX EXPENSE 47,126 513

NET INCOME (LOSS) $ 177,796 $ ( 10,020 )

EARNINGS (LOSS) PER COMMON SHARE:

$ 1.93 $ ( 0.14 )

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ACADEMY SPORTS AND OUTDOORS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in thousands)

Thirteen Weeks Ended Thirty-Nine Weeks Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

COMPREHENSIVE INCOME:

Net income $ 59,586 $ 28,552 $ 217,242 $ 102,305

Thirteen Weeks Ended

May 1, 2021 May 2, 2020

COMPREHENSIVE INCOME (LOSS):

Net income (loss) $ 177,796 $ ( 10,020 )

Unrealized loss on interest rate swaps — ( 4,434 )

Recognized interest (income) expense on interest rate swaps 2,811 146 7,578 ( 1,444 )

Loss on swaps from debt refinancing 1,330 — 1,330 —

Recognized interest expense on interest rate swaps 1,196 1,893

Tax expense ( 270 ) —

Total comprehensive income $ 62,898 $ 27,381 $ 220,281 $ 86,402

Total comprehensive income (loss) $ 178,722 $ ( 12,561 )

See Condensed Notes to Consolidated Financial Statements

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Partners' Equity Common Stock

Amount Units (1)

Amount Shares (1)

Amount Amount Amount Amount Amount Units / Shares (1)

Balances as of February 1, 2020 162 $ 2,818 72,306 $ 996,285 — $ — $ — $ — $ ( 8,066 ) $ 988,219 72,468

Net loss — — — ( 10,020 ) — — — — — ( 10,020 ) —

Equity compensation — — — 2,109 — — — — — 2,109 —

Adjustment to Redeemable Membership Units for settlement of vested Restricted Units 12 200 — ( 200 ) — — — — — ( 200 ) 12

Adjustment to Redeemable Membership Units for repurchase of units from Managers ( 2 ) ( 41 ) 2 41 — — — — — 41 —

Repurchase of Redeemable Membership Units — — ( 2 ) ( 37 ) — — — — — ( 37 ) ( 2 )

Unrealized loss on interest rate swaps — — — — — — — — ( 4,434 ) ( 4,434 ) —

Recognized interest expense on interest rate swaps — — — — — — — — 1,893 1,893 —

Balances as of May 2, 2020 172 $ 2,977 72,306 $ 988,178 — $ — $ — $ — $ ( 10,607 ) $ 977,571 72,478

Net income — — — 167,676 — — — — — 167,676 —

Equity compensation — — — 1,581 — — — — — 1,581 —

Unrealized loss on interest rate swaps — — — — — — — — ( 606 ) ( 606 ) —

Recognized interest expense on interest rate swaps — — — — — — — — 2,874 2,874 —

Balances as of August 1, 2020 172 $ 2,977 72,306 $ 1,157,435 — $ — $ — $ — $ ( 8,339 ) $ 1,149,096 72,478

Units Amount Units Amount Shares Amount Amount Amount Amount Amount Units / Shares

Balances as of January 30, 2021 — $ — — $ — 91,114 $ 911 $ 127,228 $ 987,168 $ ( 3,324 ) $ 1,111,983 91,114

Net income — — — — — — — 177,796 — 177,796 —

Distributions to holders of Membership Units — — — ( 257,000 ) — — — — — ( 257,000 ) —

Effect of the Reorganization Transactions ( 172 ) ( 2,977 ) ( 72,306 ) ( 900,435 ) 72,478 725 66,627 836,060 — 2,977 —

Equity compensation — — — — — — 5,874 — — 5,874 —

Issuance of common stock in IPO, net of Offering Costs — — — — 15,625 156 184,726 — — 184,882 15,625

Cumulative tax effect resulting from Reorganization Transactions — — — — — — ( 148,829 ) — — ( 148,829 ) —

Share-Based Award Payments — — — — — — ( 32,819 ) — — ( 32,819 ) —

Settlement of vested Restricted Stock Units — — — — 87 1 ( 1 ) — — — 87

Share-Based Award Payments adjustment for forfeitures — — — — — — 39 — — 39 —

Stock option exercises — — — — 2,686 27 17,230 — — 17,257 2,686

Unrealized loss on interest rate swaps (net of tax impact of $ 53 )

— — — — — — — — ( 278 ) ( 278 ) —

Recognized interest expense on interest rate swaps (net of tax impact of $ 270 )

— — — — — — — — 926 926 —

Loss on swaps from debt refinancing (net of tax impact of $ 330 )

— — — — — — — — 1,000 1,000 —

Balances as of October 31, 2020 — $ — — $ — 88,104 $ 881 $ 93,064 $ 895,646 $ ( 5,027 ) $ 984,564 88,104

(1) See Retrospective Presentation of Ownership Exchange in Note 2.

See Condensed Notes to Consolidated Financial Statements

ACADEMY SPORTS AND OUTDOORS, INC.

CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY

(Amounts in thousands)

Redeemable Membership Units Partners' Equity Total Membership Units

Accumulated Other Comprehensive Income (Loss) Total Partners' Equity

Partners' Equity

Balances as of May 1, 2021 — $ — — $ — 93,887 $ 939 $ 150,370 $ 1,164,964 $ ( 2,398 ) $ 1,313,875 93,887

Redeemable Membership Units Partners' Equity / Stockholders' Equity Total Membership Units / Common Stock

Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Partners' / Stockholders' Equity

Partners' Equity Common Stock

Amount Units (1)

Amount Amount Amount Units (1)

Amount Shares (1)

Amount Amount Amount Amount Amount Units / Shares (1)

Balances as of February 1, 2020 162 $ 2,818 72,306 $ 996,285 — $ — $ — $ — $ ( 8,066 ) $ 988,219 72,468

Net income — — — 25,406 — 25,406 —

Equity compensation — — — 2,022 — 2,022 —

Cumulative-effect adjustment related to the adoption of the New Lease Standard — — — 5,075 — 5,075 —

Unrealized loss on interest rate swaps — — — — ( 3,510 ) ( 3,510 ) —

Recognized interest income on interest rate swaps — — — — ( 882 ) ( 882 ) —

Balances as of May 4, 2019 1,362 $ 17,885 71,111 $ 881,094 $ 4,056 $ 885,150 72,473

Net income — — — 48,347 — 48,347 —

Equity compensation — — — 2,445 — 2,445 —

Adjustment to Redeemable Membership Units for settlement of vested Restricted Units 18 300 — ( 300 ) — ( 300 ) 18

Unrealized loss on interest rate swaps — — — — ( 9,632 ) ( 9,632 ) —

Recognized interest income on interest rate swaps — — — — ( 708 ) ( 708 ) —

Balances as of August 3, 2019 1,380 $ 18,185 71,111 $ 931,586 $ ( 6,284 ) $ 925,302 72,491

Net income — — — 28,552 — 28,552 —

Net loss — — — ( 10,020 ) — — — — — ( 10,020 ) —

Equity compensation — — — 2,109 — — — — — 2,109 —

Equity contributions from Managers 6 — — 100 — 100 6

Adjustment to Redeemable Membership Units for settlement of vested Restricted Units 12 200 — ( 200 ) — — — — — ( 200 ) 12

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Repurchase of Redeemable Membership Units — — ( 2 ) ( 37 ) — — — — — ( 37 ) ( 2 )

Reclassification of membership units with lapsed put rights (Note 2) ( 1,195 ) ( 14,930 ) 1,195 14,930 — 14,930 —

Unrealized loss on interest rate swaps — — — — — — — — ( 4,434 ) ( 4,434 ) —

Recognized interest expense on interest rate swaps — — — — — — — — 1,893 1,893 —

Balances as of November 2, 2019 162 $ 2,818 72,306 $ 976,538 $ ( 7,455 ) $ 969,083 72,468

Balances as of May 2, 2020 172 $ 2,977 72,306 $ 988,178 — $ — $ — $ — $ ( 10,607 ) $ 977,571 72,478

(1) See Retrospective Presentation of Ownership Exchange in Note 2.

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(Amounts in thousands)

Thirty-Nine Weeks Ended

October 31, 2020 November 2, 2019

Thirteen Weeks Ended

May 1, 2021 May 2, 2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 217,242 $ 102,305

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss) $ 177,796 $ ( 10,020 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 25,298 27,447

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Equity compensation 5,874 2,109

Amortization of deferred loan and other costs 2,734 2,796

Loss on swaps from debt refinancing 1,330 —

Amortization of terminated interest rate swaps, deferred loan and other costs 2,030 919

Deferred income taxes 25,064 ( 31 )

Non-cash gain on early retirement of debt, net ( 7,831 ) ( 42,265 )

Gain on disposal of property and equipment — ( 23 )

Casualty loss 114 499

Changes in assets and liabilities:

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Capital expenditures ( 16,808 ) ( 9,926 )

Proceeds from the sale of property and equipment — 23

Notes receivable from member 8,125 ( 3,988 )

Net cash used in investing activities ( 16,808 ) ( 9,926 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from revolving credit facility 500,000 401,100

Repayment of revolving credit facility ( 500,000 ) ( 356,800 )

Repayment of term loan facility ( 29,653 ) ( 118,257 )

Debt issuance fees ( 556 ) —

Proceeds from ABL Facility — 500,000

Repayment of Term Loan ( 1,000 ) ( 4,563 )

Share-Based Award Payments ( 2,993 ) —

Distribution ( 257,000 ) —

Equity contributions from Managers — 100

Proceeds from issuance of common stock, net of Offering Costs 184,882 —

Proceeds from exercise of stock options 17,257 —

Repurchase of Redeemable Membership Units — ( 37 )

Net cash used in financing activities ( 123,088 ) ( 74,330 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 720,340 ( 32,153 )

Net cash provided by financing activities 13,264 495,400

NET INCREASE IN CASH AND CASH EQUIVALENTS 215,684 576,230

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 377,604 149,385

CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 593,288 $ 725,615

See Condensed Notes to Consolidated Financial Statements

ACADEMY SPORTS AND OUTDOORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Amounts in thousands)

Thirty-Nine Weeks Ended

October 31, 2020 November 2, 2019

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

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NON-CASH INVESTING AND FINANCING ACTIVITIES:

Non-cash issuance of common stock $ 132 $ —

Non-cash issuance of common shares $ 501 $ —

Change in capital expenditures in accounts payable and accrued liabilities $ 3,765 $ 5,409

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(collectively, "KKR"), acquired a majority interest in the Company.

Upon completion of our initial public offering (the "IPO") detailed below, affiliates of KKR held a 69.9 % ownership interest in the Company (see IPO Over-Allotment Exercise in Note 15).

On October 6, 2020, we completed an initial public offering and as of May 1, 2021, KKR had a 44.6 % ownership interest in the Company (see Note 14).

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 October 31, 2020, we operated 259 "Academy Sports + Outdoors" retail locations in 16 states and three distribution centers located in Katy, Texas, Twiggs County, Georgia and Cookeville, Tennessee.

Our distribution centers receive, store and ship merchandise to our stores and customers.

As of May 1, 2021, we operated 259 "Academy Sports + Outdoors" retail locations in 16 states and three distribution centers located in Katy, Texas, Twiggs County, Georgia and Cookeville, Tennessee.

We also sell merchandise to customers across most of the United States via our academy.com website.

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On October 6, 2020, ASO, Inc.

completed an IPO in which we issued and sold 15,625,000 shares of common stock, $ 0.01 par value for cash consideration of $ 12.22 per share (representing an initial public offering price of $ 13.00 per share, net of underwriting discounts) to a syndicate of underwriters led by Credit Suisse Securities (USA) LLC and J.P.

completed an initial public offering (the "IPO") in which we issued and sold 15,625,000 shares of common stock, $ 0.01 par value for cash consideration of $ 12.22 per share (representing an initial public offering price of $ 13.00 per share, net of underwriting discounts) to a syndicate of underwriters led by Credit Suisse Securities (USA) LLC and J.P.

Morgan Securities LLC, as representatives, resulting in net proceeds of approximately $ 184.9 million after deducting underwriting discounts, which included approximately $ 2.7 million paid to KKR Capital Markets LLC ("KCM"), an affiliate of KKR, for underwriting services in connection with the IPO, and $ 6.1 million in costs directly associated with the IPO ("Offering Costs"), such as legal and accounting fees.

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issued to then-existing members of NAHC for every 3.15 membership units of NAHC contributed to ASO, Inc.

IPO Over-Allotment Exercise

On November 3, 2020, ASO, Inc.

issued and sold an additional 1,807,495 shares of the Company's common stock, par value $ 0.01 per share, for cash consideration of $ 12.22 per share (representing an initial public offering price of $ 13.00 per share, net of underwriting discounts) to the IPO underwriters, resulting in approximately $ 22.1 million in proceeds net of underwriting discounts, which included $ 0.3 million paid to KCM for underwriting services, pursuant to the partial exercise by the underwriters of their option to purchase up to 2,343,750 additional shares to cover over-allotments in connection with the IPO (the "IPO Over-Allotment Exercise").

The option expired with respect to the remaining shares.

Secondary Offering

On January 27, 2021, ASO, Inc.

entered into an Underwriting Agreement (the “Underwriting Agreement”), by and among ASO, Inc., Allstar LLC, Allstar Co-Invest Blocker L.P., KKR 2006 Allstar Blocker L.P., MSI 2011 LLC, MG Family Limited Partnership and the former management selling stockholder named therein (collectively, the “Selling Stockholders”), and Credit Suisse Securities (USA) LLC and J.P.

Morgan Securities LLC, as representatives of the several underwriters named therein (the “Underwriters”), relating to an underwritten offering of 12,000,000 shares of Common Stock (the “Secondary Offering”), pursuant to the Company’s Registration Statement on Form S-1 (File No.

333-252390), filed on January 25, 2021.

The Selling Stockholders granted the Underwriters the option to purchase, within 30 days from the date of the Underwriting Agreement, an additional 1,800,000 shares of Common Stock.

On January 29, 2021, the Underwriters exercised in full their option to purchase the additional shares.

The Secondary Offering was completed on February 1, 2021.

Pursuant to the Underwriting Agreement, the Underwriters purchased the shares from the Selling Stockholders at a price of $ 20.69375 per share.

The Company did no t receive any proceeds from the Secondary Offering.

On May 10, 2021, ASO, Inc.

completed a subsequent secondary offering and concurrent share repurchase of shares of its Common Stock (see Note 14).

Summary of Significant Accounting Policies

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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 for the fiscal year ended February 1, 2020 included in our final prospectus dated October 1, 2020 (the "Prospectus"), as filed with the

SEC on October 2, 2020 pursuant to Rule 424(b)(4) under the Securities Act.

These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 2021, as filed with the Securities and Exchange Commission on April 7, 2021 (the "Annual Report").

The information furnished herein reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented.

The results of operations for the thirteen and thirty-nine weeks ended October 31, 2020 are not necessarily indicative of the results that will be realized for the fiscal year ending January 30, 2021 or any other period.

The balance sheet as of February 1, 2020 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 for the year ended February 1, 2020.

The results of operations for the thirteen weeks ended May 1, 2021 are not necessarily indicative of the results that will be realized for the fiscal year ending January 29, 2022 or any other period.

The balance sheet as of January 30, 2021 has been derived from our audited financial statements as of that date.

For further information, refer to our audited financial statements and notes thereto included in the Annual Report.

Basis of Presentation and Principles of Consolidation

These unaudited condensed consolidated financial statements include the accounts of ASO, Inc.

and, its subsidiaries, ASO Co-Invest Blocker Sub, L.P., ASO Blocker Sub, L.P., NAHC, Academy Managing Co., LLC, Associated Investors, LLC, Academy, Ltd., the Company's operating company, and Academy International Limited.

ASO Co-Invest Blocker Sub, L.P., ASO Blocker Sub, L.P., NAHC, Academy Managing Co., LLC, and Associated Investors, LLC are intermediate holding companies.

and, its subsidiaries, NAHC, Academy Managing Co., LLC, Associated Investors, LLC, Academy, Ltd., the Company's operating company, and Academy International Limited.

NAHC, Academy Managing Co., LLC, and Associated Investors, LLC are intermediate holding companies.

All intercompany balances and transactions have been eliminated in consolidation.

ASO Co-Invest Blocker Sub, L.P.

and ASO Blocker Sub, L.P.

were dissolved effective January 31, 2021.

Use of Estimates in the Preparation of Financial Statements

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Our most significant estimates and assumptions that materially affect the financial statements involve difficult, subjective or complex judgments by management including the valuation of merchandise inventories, and performing goodwill, intangible and long-lived asset impairment analyses.

Given the global economic climate and additional unforeseen effects from the COVID-19 pandemic, these estimates are becoming more challenging, and actual results could differ materially from our estimates.

Given the global economic climate and additional unforeseen effects from the COVID-19 pandemic, these estimates remain more challenging, and actual results could differ materially from our estimates.

Reclassifications

Certain reclassifications have been made in the prior period consolidated financial statements to conform to the current period presentation.

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 thirty-nine weeks ended November 2, 2019 for comparability purposes.

As a result, we have reclassified sales between divisions in the thirteen weeks ended May 2, 2020 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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Equity and Share-Based Compensation, and Note 10.

Earnings per Share.

Earnings per Common Share.

Redeemable Membership Units

Prior to October 1, 2020, Allstar Managers LLC, a Delaware limited liability company ("Managers"), owned membership units in NAHC (each, a "NAHC Membership Unit").

Managers is 100% owned by certain current and former executives and directors of the Company and was formed to facilitate the purchase of indirect contingently redeemable ownership interests in NAHC.

Prior to October 1, 2020, certain executives and directors could acquire contingently redeemable membership units in Managers (the "Redeemable Membership Units"), either by (1) purchasing the Redeemable Membership Units with cash consideration, which was subsequently contributed to NAHC by Managers in exchange for a number of NAHC Membership Units equal to the number of Redeemable Membership Units purchased, or (2) by receiving

the Redeemable Membership Units in settlement of vested restricted units awarded to the executive or director under the Company's 2011 Unit Incentive Plan (see Note 10).

Managers was dissolved and its assets were distributed to its members on December 23, 2020.

Managers was 100% owned by certain current and former executives and directors of the Company and was formed to facilitate the purchase of indirect contingently redeemable ownership interests in NAHC.

Each outstanding Redeemable Membership Unit in Managers corresponded to an outstanding NAHC Membership Unit, on a unit-for-unit basis.

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common stock held by Managers on a 1:1 basis.

NAHC is the sole managing member of Managers with a controlling voting interest, but no economic interest, in Managers.

As the sole managing member of Managers, NAHC operates and controls all business affairs of Managers.

The terms and conditions of the agreements governing the Redeemable Membership Units include provisions by which the holder, or its heirs, have the right to require Managers or NAHC to purchase the holder's Redeemable Membership Units upon the holder’s termination of employment due to death or disability for cash at fair value.

The carrying value of the Redeemable Membership Units is classified as temporary equity, initially at fair value, as redemption was an event that was not solely within our control.

If redemption becomes probable, we are required to re-measure the Redeemable Membership Units to fair value.

NAHC was the sole managing member of Managers with a controlling voting interest, but no economic interest, in Managers.

As the sole managing member of Managers, NAHC operated and controlled all business affairs of Managers.

The terms and conditions of the agreements governing the Redeemable Membership Units included provisions by which the holder, or its heirs, had the right to require Managers or NAHC to purchase the holder's Redeemable Membership Units upon the holder’s termination of employment due to death or disability for cash at fair value.

The carrying value of the Redeemable Membership Units was classified as temporary equity, initially at fair value, as redemption was an event that was not solely within our control.

If redemption became probable, we were required to re-measure the Redeemable Membership Units to fair value.

Periodically, these rights lapsed due to contractual expiration or a holder's termination of employment for reasons other than death or disability.

Due to the lapse of this right for certain issuances, $ 14.9 million was reclassified from temporary equity to Partners' Equity during the 2019 third quarter.

The Company is subject to U.S.

federal, state and foreign income taxes.

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

Under this method, deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the temporary differences are expected to be realized or settled.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We recognize deferred tax assets to the extent we believe these assets are more-likely-than-not to be realized.

In making such a determination, we consider all available positive and negative evidence, including recent results of operations, future reversals of existing taxable temporary differences, projected future taxable income and tax planning strategies.

A valuation allowance is recorded to reduce the carrying amount of deferred tax assets if it is more-likely-than-not that all or a portion of the asset will not be realized.

The Company recognizes tax benefits from uncertain tax positions only if it is more-likely-than-not the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position.

The tax benefits recognized from such positions are measured based on the largest benefit having a greater than 50% likelihood of being ultimately sustained.

Interest and penalties from income tax matters are recognized in income tax expense.

Recent Accounting Pronouncements

ASU 2019-12 Income Taxes (Topic 740)

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes".

ASU 2019-12 is effective for fiscal years and interim periods beginning after December 15, 2020.

This update simplifies the accounting for income taxes by removing certain exceptions and amends existing guidance to improve consistent application.

The Company adopted ASU 2019-12 on January 31, 2021 and it did not have a material impact on our financial position, results of operations or cash flows.

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates.

The adoption of this guidance is effective for all entities as of March 12, 2020 through December 31, 2022.

The Company is currently evaluating the expedients and exceptions provided by this amendment as it relates to our transition from LIBOR to another reference rate to determine the impact.

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.

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The following table sets forth the approximate amount of sales by merchandise divisions for the periods presented (amounts in thousands):

Thirteen Weeks Ended Thirty-Nine Weeks Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Thirteen Weeks Ended

May 1, 2021 May 2, 2020

Merchandise division sales (1)

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Other sales (3)

6,812 5,643 21,549 14,360

Net Sales $ 1,580,333 $ 1,136,301

(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 thirty-nine weeks ended November 2, 2019 for comparability purposes.

As a result, we have reclassified sales between divisions in the thirteen weeks ended May 2, 2020 for comparability purposes.

This reclassification is in divisional presentation only and did not impact the overall net sales balances previously disclosed (see Note 2).

(2) E-commerce sales consisted of 7.5 % and 9.8 % of merchandise sales for the thirteen and thirty-nine weeks ended October 31, 2020, respectively, and 4.5 % and 3.8 % for the thirteen and thirty-nine weeks ended November 2, 2019, respectively.

(2) E-commerce sales consisted of 7.4 % and 13.1 % of merchandise sales for the thirteen weeks ended May 1, 2021 and May 2, 2020, respectively.

(3) Other sales consisted primarily of the sales return allowance, gift card breakage income, credit card bounties and royalties, shipping income, net hunting and fishing license income and other items.

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The following is a reconciliation of the gift card liability (amounts in thousands):

Thirteen Weeks Ended Thirty-Nine Weeks Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Thirteen Weeks Ended

May 1, 2021 May 2, 2020

Gift card liability, beginning balance $ 74,253 $ 67,993

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Our debt consisted of the following (amounts in thousands) as of:

October 31, 2020 February 1, 2020 November 2, 2019

Senior Secured Asset-Based Revolving Credit Facility $ — $ — $ 44,300

Senior Secured Term Loan Facility, due July 2022 net of discount of $ 1.8 million, $ 2.6 million and $ 2.9 million, respectively

1,429,667 1,466,402 1,470,695

May 1, 2021 January 30, 2021 May 2, 2020

ABL Facility, due November 2025 $ — $ — $ 500,000

Term Loan, due November 2027 399,000 400,000 1,464,432

Notes, due November 2027 400,000 400,000 —

Total debt 799,000 800,000 1,964,432

Less current maturities ( 4,000 ) ( 4,000 ) ( 34,116 )

Less unamortized discount on Term Loan ( 3,714 ) ( 3,861 ) ( 2,321 )

Less deferred loan costs (1)

( 10,251 ) ( 10,650 ) ( 3,354 )

Total long-term debt $ 1,408,885 $ 1,428,542 $ 1,492,609

(1) These costs are related to the 2015 Term Loan Facility.

On November 6, 2020, the Company refinanced its long-term debt (see Note 15).

2015 Term Loan Facility.

Long-term debt, net $ 781,035 $ 781,489 $ 1,924,641

(1) Deferred loan costs are related to the Term Loan and Notes.

As of May 1, 2021, January 30, 2021 and May 2, 2020, the balance in deferred loan costs related to the ABL Facility (as defined below) was approximately $ 5.2 million, $ 5.5 million and $ 3.2 million, respectively, and was included in other noncurrent assets on our consolidated balance sheets.

Total amortization of deferred loan costs was $ 0.7 million and $ 0.6 million for the thirteen weeks ended May 1, 2021 and May 2, 2020, respectively.

Total expenses related to accretion of original issuance discount were $ 0.1 million and $ 0.3 million for the thirteen weeks ended May 1, 2021 and May 2, 2020, respectively.

The expenses related to amortization of deferred loan costs and accretion of original issuance discount are included in interest expense, net on the consolidated statements of income (loss).

On November 6, 2020, the Company issued the Notes (as defined below), entered into the 2020 Term Loan (as defined below), and entered into the 2020 ABL Facility (the "Refinancing Transactions").

The Company used the net proceeds from the Notes and the net proceeds from the 2020 Term Loan, together with cash on hand, to repay in full outstanding borrowings under its then-existing term loan, in the amount of $ 1,431.4 million.

We refer to the 2015 Term Loan and the 2020 Term Loan collectively as the "Term Loan".

On July 2, 2015, Academy, Ltd.

entered into a seven-year $ 1.8 billion senior secured term loan facility (the "2015 Term Loan Facility").

The 2015 Term Loan Facility bears interest, at our election, at either (1) LIBOR rate with a floor of 1.00 %, plus a margin of 4.00 %, or (2) a base rate equal to the highest of (a) the federal funds rate plus 0.50 %, (b) Morgan Stanley Senior Funding, Inc.'s "prime rate," or (c) the one-month LIBOR rate plus 1.00 %, plus a margin of 3.00 %.

Quarterly principal payments of approximately $ 4.6 million are required through June 30, 2022, with the balance due in full on the maturity date of July 2, 2022.

As of October 31, 2020, the weighted average interest rate was 5.00 %, with interest payable monthly.

The terms and conditions of the 2015 Term Loan Facility also require that we prepay outstanding loans under the 2015 Term Loan Facility under certain circumstances.

As of October 31, 2020, no prepayments of outstanding loans have been triggered under the terms and conditions of the 2015 Term Loan Facility.

During the thirty-nine weeks ended October 31, 2020 and November 2, 2019, we repurchased a portion of our principal on the 2015 Term Loan Facility, which was trading at a discount, in open market transactions.

The following table provides further detail regarding these repurchases (amounts in millions):

Thirty-Nine Weeks Ended

October 31, 2020 November 2, 2019

Gross principal repurchased $ 23.9 $ 147.7

Reacquisition price of debt $ 16.0 $ 104.6

Net gain recognized $ 7.8 $ 42.3

2018 ABL Facility.

entered into a seven-year $ 1.8 billion senior secured term loan facility (the "2015 Term Loan") with Morgan Stanley Senior Funding, Inc., as the administrative and collateral agent, and other lenders, and a five-year $ 650 million secured asset-based revolving credit facility (the "2015 ABL Facility") with JPMorgan Chase Bank, N.A., as administrative agent, and other lenders.

Academy, Ltd.

received proceeds from the 2015 Term Loan of $ 1.8 billion, which was net of discount of $ 9.1 million.

The 2015 Term Loan bore interest at our election, at either (1) LIBOR rate with a floor of 1.00 %, plus a margin of 4.00 %, or (2) a base rate equal to the highest of (a) the federal funds rate plus 0.50 %, (b) Morgan Stanley Senior Funding, Inc.'s "prime rate," or (c) the one-month LIBOR rate plus 1.00 %, plus a margin of 3.00 %.

Quarterly principal payments of approximately $ 4.6 million were required through June 30, 2022, with the balance due in full on the maturity date of July 2, 2022.

On November 6, 2020, Academy, Ltd.

entered into a seven-year $ 400.0 million senior secured term loan (the "2020 Term Loan") with Credit Suisse AG, Cayman Island Branch ("Credit Suisse"), as the administrative agent and collateral agent and the several other lenders and parties.

The 2020 Term Loan will mature on November 6, 2027.

The 2020 Term Loan bears 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 are required through September 30, 2027, with the balance due in full on the maturity date of November 6, 2027.

As of May 1, 2021, the weighted average interest rate was 5.75 %, with interest payable monthly.

The terms and conditions of the 2020 Term Loan also require that the outstanding balance under the 2020 Term Loan is prepaid under certain circumstances.

In connection with the 2020 Term Loan, the Company capitalized related professional fees of $ 5.8 million as deferred loan costs.

As of May 1, 2021, no prepayment was due under the terms and conditions of the Term Loan.

On May 25, 2021, the Company refinanced its 2020 Term Loan and paid down approximately $ 99.0 million of the Term Loan (see Note 14).

On November 6, 2020, Academy, Ltd.

issued $ 400.0 million of 6.00 % senior secured notes which are due November 15, 2027 (the "Notes"), pursuant to an indenture, dated as of November 6, 2020 (the "Indenture") with The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent.

The Notes will pay interest semi-annually in arrears in cash on May 15 and November 15 of each year at a rate of 6.00 % per year, commencing on May 15, 2021.

In connection with issuance of the Notes, the Company capitalized related professional fees of $ 5.2 million as deferred loan costs.

On or after November 15, 2023, Academy, Ltd.

may, at its option and on one or more occasions, redeem all or a part of the Notes at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

At any time prior to November 15, 2023, Academy, Ltd.

may, at its option and on one or more occasions, redeem all or part of the Notes at a redemption price equal to 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date, plus a "make-whole" premium as described in the Indenture.

In addition, at any time prior to November 15, 2023, Academy, Ltd.

may, at its option and on one or more occasions, redeem up to 40 % of the aggregate principal amount of the Notes at a redemption price equal to 106.00 % of the aggregate principal amount thereof, with an amount equal to or less than the net cash proceeds from one or more equity offerings to the extent such net cash proceeds are received by or contributed to Academy, Ltd., plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

We refer to the 2015 ABL Facility and the 2020 ABL Facility collectively as the "ABL Facility".

On July 2, 2015, Academy, Ltd.

entered into a five-year $ 650 million secured asset-based revolving credit facility (the "2015 ABL Facility").

On May 22, 2018, the Company amended the agreement governing the 2015 ABL Facility (as amended, the "2018 ABL Facility"), to increase the commitment on the facility from $ 650 million to $ 1 billion.

The operative terms, conditions, covenants and pricing of the 2018 ABL Facility remain the same in all material respects to the 2015 ABL Facility and/or have been sized in approximate proportion to the relative increase in the facility where such operative terms are based upon the commitment level on the facility.

The 2018 ABL Facility matures on May 22, 2023, subject to a springing maturity clause which is triggered 91 days before the July 2, 2022 maturity of the 2015 Term Loan Facility should it not be paid off or extended at least 91 days beyond the May 22, 2023 maturity date of the 2018 ABL Facility.

Academy, Ltd.

has the option to increase the commitments under the 2018 ABL Facility by $ 250 million, subject to the satisfaction of certain conditions under the agreement.

On May 22, 2018, the Company amended the agreement governing the 2015 ABL Facility to increase the commitment on the facility from $ 650 million to $ 1 billion.

In connection with the amendment to the 2015 ABL Facility, the Company capitalized related professional fees of $ 2.8 million as deferred loan costs and wrote off $ 0.1 million in previously capitalized deferred loan costs.

The 2015 ABL Facility was scheduled to mature on May 22, 2023, subject to a springing maturity clause which could have been triggered 91 days before the July 2, 2022 maturity of the 2015 Term Loan.

On November 6, 2020, Academy, Ltd., as borrower, and the Guarantors, as guarantors, amended the 2015 ABL Facility by entering into an amendment to the First Amended and Restated ABL Credit Agreement, dated as of July 2, 2015, with JPMorgan Chase Bank, N.A.

as the administrative agent and collateral agent, letter of credit issuer and swingline lender (the "ABL Agent") and the several lenders party thereto, which ABL Amendment, among other things, extended the maturity of Academy, Ltd.’s asset-based revolving credit facility thereunder to November 6, 2025 (the "2020 ABL Facility").

In connection with the 2020 ABL Facility, the Company capitalized related professional fees of $ 3.1 million as deferred loan costs.

The ABL Facility is used to provide financing for working capital and other general corporate purposes, as well as to support certain letters of credit requirements, and availability is subject to customary borrowing base and availability provisions.

During the normal course of business, we periodically utilize letters of credit primarily for the purchase of import goods and in support of insurance contracts.

As of October 31, 2020, we had outstanding letters of credit of approximately $ 30.8 million, of which $ 21.1 million were issued under the 2018 ABL Facility, and we had no borrowings outstanding under the 2018 ABL Facility, leaving the available borrowing capacity under the 2018 ABL Facility of $ 844.7 million.

As of May 1, 2021, we had outstanding letters of credit of approximately $ 17.2 million, of which $ 13.6 million were issued under the ABL Facility, and we had no borrowings outstanding under the ABL Facility, leaving the available borrowing capacity under the ABL Facility of $ 819.4 million.

Borrowings under the ABL Facility bear interest, at our election, at either (1) LIBOR plus a margin of 1.25 % to 1.75 %, or (2) a base rate equal to the highest of (a) the federal funds rate plus 0.50 %, (b) JPMorgan Chase Bank, N.A.'s "prime rate", or (c) the one-month LIBOR rate plus 1.00 %, plus a margin of 0.25 % to 0.75 %.

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The terms and conditions of the ABL Facility also require that we prepay outstanding loans under the ABL Facility under certain circumstances.

As of October 31, 2020, no future prepayments of outstanding loans have been triggered under the terms and conditions of the 2018 ABL Facility.

The 2018 ABL Facility and the 2015 Term Loan Facility agreements contain covenants, including, among others, 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 2018 ABL Facility is subject to a certain minimum adjusted fixed charge coverage ratio.

As of May 1, 2021, no future prepayments of outstanding loans have been triggered under the terms and conditions of the ABL Facility.

The ABL Facility and Term Loan agreements and the Indenture 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 October 31, 2020.

We were in compliance with these covenants as of May 1, 2021.

Capitalized Interest.

We capitalized interest primarily related to construction of new stores and store renovations in the amount of $ 0.1 million and $ 0.4 million for the thirteen and thirty-nine weeks ended October 31, 2020, respectively, and $ 0.2 million and $ 0.5 million for the thirteen and thirty-nine weeks ended November 2, 2019, respectively.

We capitalized interest primarily related to construction of new stores and store renovations in the amount of $ 0.1 million and $ 0.1 million for the thirteen weeks ended May 1, 2021 and May 2, 2020, respectively.

Derivative Financial Instruments

We use 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 2015 Term Loan Facility.

On October 28, 2020, we determined that a portion of the underlying cash flows related to $ 100.0 million of swap notional principal amount was no longer probable of occurring over the remaining term of the interest rate swaps as a result of the Company's planned refinancing transactions (see Note 15).

As a result, we reclassified approximately $ 1.3 million of losses from accumulated other comprehensive loss ("AOCI") to other (income) expense, net in our statements of income for the thirteen and thirty-nine weeks ended October 31, 2020 related to the portion of the forecasted transaction no longer considered probable of occurring.

We also de-designated a portion of our interest rate swaps as cash flow hedges, leaving $ 250 million notional principal amount designated and $ 650 million undesignated.

The remaining $ 4.0 million loss in AOCI as of October 31, 2020 related to the de-designated hedges will be amortized as an increase to interest expense over the original maturity of the de-designated swaps.

The de-designated $ 650 million notional principal amount of fixed interest rate swaps will receive mark-to-market treatment prospectively, with changes in fair value recorded immediately to other (income) expense, net on the statements of income.

A summary of our interest rate swaps is as follows (dollar amounts in thousands):

Notional Amount Fixed Rate Effective Date Termination Date

$ 250,000 (1)

2.21 % September 7, 2016 September 3, 2021

$ 250,000 1.54 % November 1, 2016 November 1, 2021

$ 400,000 2.54 % March 1, 2018 March 1, 2021

(1) The initial $ 600,000 notional amount of the swap amortizes to $ 525,000 , $ 430,000 , $ 320,000 and $ 250,000 on September 3, 2017, 2018, 2019 and 2020, respectively.

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.

On January 19, 2021, we settled our three remaining outstanding interest rate swaps in full, which were scheduled to expire on various dates during 2021, for $ 4.1 million.

As of May 1, 2021, we do not have any derivative financial instruments outstanding.

The fair value of these interest rate swaps is as follows (amounts in thousands) as of:

October 31, 2020 February 1, 2020 November 2, 2019

May 1, 2021 January 30, 2021 May 2, 2020

Derivatives designated as hedging instruments

Amounts included in other current assets $ — $ — $ —

Amounts included in other noncurrent assets — — —

Amounts included in accrued expenses and other current liabilities — — 8,912

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Total derivatives designated as hedging instruments net liability $ — $ — $ ( 10,647 )

Derivatives not designated as hedging instruments

Amounts included in accrued expenses and other current liabilities $ 4,548 $ — $ —

Total derivatives not designated as hedging instruments ( 4,548 ) — —

Total derivatives net liability $ ( 5,882 ) $ ( 8,106 ) $ ( 7,495 )

For derivatives designated as hedging instruments, amounts included in AOCI are reclassified to interest expense in the same period during which the hedged transaction affects earnings, which is as interest expense is recorded on the underlying 2015 Term Loan Facility.

As of October 31, 2020, we estimate that approximately $ 4.6 million of the balance in AOCI will be reclassified as an increase in interest expense during the next 12 months.

The impact of gains and losses related to interest rate swaps that are deferred into AOCI and subsequently reclassified into interest expense or other (income) expense, net is as follows (amounts in thousands):

Thirteen Weeks Ended Thirty-Nine Weeks Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Accumulated Other Comprehensive Income (Loss), beginning $ ( 8,339 ) $ ( 6,284 ) $ ( 8,066 ) $ 8,448

Loss deferred into AOCI (net of tax impact of $ 53 )

( 278 ) ( 1,317 ) ( 5,318 ) ( 14,459 )

Increase (decrease) to interest expense (net of tax impact of $ 221 )

2,590 146 7,357 ( 1,444 )

Loss on swaps from debt refinancing in other (income) expense, net (net of tax impact of $ 330 )

1,000 — 1,000 —

Accumulated Other Comprehensive Income (Loss), ending $ ( 5,027 ) $ ( 7,455 ) $ ( 5,027 ) $ ( 7,455 )

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

Thirteen Weeks Ended

May 1, 2021 May 2, 2020

Accumulated Other Comprehensive Loss, beginning $ ( 3,324 ) $ ( 8,066 )

Loss deferred into AOCI — ( 4,434 )

Increase to interest expense (net of tax impact of $ 270 in the thirteen weeks ended May 1, 2021)

Accumulated Other Comprehensive Loss, ending $ ( 2,398 ) $ ( 10,607 )

Fair Value Measurements

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The following table provides the fair value hierarchy for our derivative financial instruments (amounts in thousands) as of:

Fair Value Hierarchy October 31, 2020 February 1, 2020 November 2, 2019

Fair Value Hierarchy May 1, 2021 January 30, 2021 May 2, 2020

Interest rate swap Level 2 $ — $ — $ —

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Government treasury bills and securities, which are classified as cash and redeemable on demand.

As of October 31, 2020 and February 1, 2020, we held $ 767.0 million and $ 113.3 million in money market funds, respectively.

We held no investments in money market funds as of November 2, 2019.

The fair value of the 2015 Term Loan Facility 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 October 31, 2020, February 1, 2020 and November 2, 2019, the estimated fair value of our 2015 Term Loan Facility was $ 1.4 billion, $ 1.2 billion and $ 1.0 billion, respectively.

As of May 1, 2021, January 30, 2021 and May 2, 2020, we held $ 476.0 million, $ 284.0 million and $ 662.0 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 May 1, 2021, the estimated fair value of the Term Loan and Notes was $ 0.8 billion.

As of January 30, 2021 and May 2, 2020, the estimated fair value of the Term Loan was $ 0.8 billion and $ 0.9 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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Property and equipment consists of the following (amounts in thousands) as of:

October 31, 2020 February 1, 2020 November 2, 2019

May 1, 2021 January 30, 2021 May 2, 2020

Leasehold improvements $ 443,513 $ 438,287 $ 433,981

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Property and equipment, net $ 366,005 $ 378,260 $ 418,476

Depreciation expense was $ 25.5 million and $ 79.7 million in the thirteen and thirty-nine weeks ended October 31, 2020, respectively, and $ 29.6 million and $ 88.7 million in the thirteen and thirty-nine weeks ended November 2, 2019, respectively.

In April 2020, the Financial Accounting Standards Board issued Staff Q&A - Topic 842 and Topic 840:

Accounting For Lease Concessions Related to the Effects of the COVID-19 Pandemic .

This guidance provides entities with the option to elect to account for certain lease concessions as though the enforceable rights and obligations had existed in the original lease.

As a result, an entity will not need to reassess each existing contract to determine whether enforceable rights and obligations for concessions exist and an entity can elect to apply or not to apply the lease modification guidance in Accounting Standards Codification Topic 842, Leases , to those contracts.

During the thirteen and thirty-nine weeks ended October 31, 2020, the Company received $ 0.4 million and $ 2.4 million, respectively, in lease expense credit related to landlord abated rent as a result of the elections made under this guidance.

Additionally, during the thirteen and thirty-nine weeks ended October 31, 2020, the Company signed six and 46 lease extensions, respectively, requiring lease modification accounting treatment.

The components of lease expense and sublease income included in selling, general and administrative ("SG&A") expenses on our statement of income is as follows (amounts in thousands):

Thirteen Weeks Ended Thirty-Nine Weeks Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Operating lease expense $ 49,272 $ 49,159 $ 147,528 $ 146,039

Short-term lease expense — — — —

Variable lease expense 1,709 1,956 3,527 5,805

Sublease income ( 115 ) ( 403 ) ( 641 ) ( 1,205 )

Net lease expense $ 50,866 $ 50,712 $ 150,414 $ 150,639

Information about our operating leases is as follows (dollar amounts in thousands):

Thirteen Weeks Ended Thirty-Nine Weeks Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Right-of-use assets obtained in exchange for new operating lease liabilities $ 13,477 $ 32,520 $ 84,595 $ 55,562

Cash paid for amounts included in the measurement of lease liabilities $ 48,092 $ 48,283 $ 130,274 $ 143,848

October 31, 2020 November 2, 2019

Weighted-average remaining lease term in years 11.2 10.9

Weighted-average incremental borrowing rate 9.09 % 8.88 %

As most of our leases do not provide an implicit rate of interest, we use our incremental borrowing rate, which is based on the market lending rates for companies with comparable credit ratings, to determine the present value of lease payments on lease commencement or remeasurement.

The remaining maturities of lease liabilities by fiscal year are as follows (amounts in thousands):

October 31, 2020

2020 $ 48,759

After 2025 1,051,915

Total payments (1)

Interest ( 778,599 )

Present value of lease liabilities $ 1,250,781

(1) Minimum lease payments have not been reduced by sublease rentals of $ 1.9 million as of October 31, 2020 due in the future under non-cancelable subleases.

Depreciation expense was $ 25.3 million and $ 27.4 million in the thirteen weeks ended May 1, 2021 and May 2, 2020, respectively and is included in selling, general and administrative expenses on the consolidated statements of income.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (amounts in thousands) as of:

October 31, 2020 February 1, 2020 November 2, 2019

May 1, 2021 January 30, 2021 May 2, 2020

Accrued interest $ 14,003 $ 7,684 $ 3,191

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Concurrent with the adoption of the 2020 Omnibus Incentive Plan, the NAHC 2011 Unit Incentive Plan (the "2011 Unit Incentive Plan") was frozen and no further issuances will be permitted as part of the 2011 Unit Incentive Plan.

As of October 31, 2020, there were 4,996,703 shares that were authorized and available for grant under the 2020 Share Incentive Plan.

As of May 1, 2021, there were 3,707,752 shares that were authorized and available for grant under the 2020 Omnibus Incentive Plan.

On September 29, 2020, the Academy Sports and Outdoors, Inc.

Board of Directors adopted the 2020 Employee Stock Purchase Plan (the "ESPP"), which became effective on October 1, 2020 upon the effectiveness of the Registration Statement.

As of May 1, 2021, we have reserved a total of 2,000,000 shares of common stock for issuance and no common shares were issued or outstanding pursuant to the ESPP.

Our initial offering period related to the ESPP commenced during the thirteen weeks ended May 1, 2021.

Equity compensation expense was $ 5.9 million and $ 2.1 million for the thirteen weeks ended May 1, 2021 and May 2, 2020, respectively and is included in selling, general and administrative expenses in the statements of income.

2011 Unit Incentive Plan

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Concurrent with the adoption of the 2020 Omnibus Incentive Plan on October 1, 2020, no further Awards are authorized to be granted under the 2011 Unit Incentive Plan.

Subsequent to May 1, 2021, the May 2021 Secondary Offering (as defined in Note 14) reduced KKR's ownership interest in the Company to 31.3 % and resulted in a 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 cash payments for equity-based compensation distributions will be accelerated (see Note 14).

2020 Omnibus Incentive Plan

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In each case, vesting of the Company’s outstanding and unvested Stock Options and Restricted Stock Units is contingent upon the holder’s continued service through the date of each applicable vesting event.

Equity compensation expense was $ 23.4 million and $ 27.0 million in the thirteen and thirty-nine weeks ended October 31, 2020, respectively, which includes approximately $ 19.9 million of stock compensation expense associated with the vesting of certain outstanding restricted stock units as a result of the liquidity condition being achieved upon completion of our IPO.

Equity compensation expense was $ 1.4 million and $ 5.9 million in the thirteen and thirty-nine weeks ended November 2, 2019, respectively.

These costs are included in selling, general and administrative expenses in the statements of income.

Our ESPP allows eligible employees to contribute up to 15 % of their eligible earnings toward the semi-annual purchase of the Company's shares of common stock at a discount of 15 % of the closing stock price on the first or last day of the six-month offering period, whichever is lower.

The number of shares reserved for issuance under the ESPP will be increased automatically on the first day of each fiscal year, beginning in fiscal year 2021, by a number equal to the lesser of (1) 1,000,000 shares of common stock, (2) 2.0 % of the total number of all classes of the company's common stock outstanding on the last day of the immediately preceding fiscal year, or (3) a lower number of shares determined by the ASO, Inc.

Board of Directors.

On August 28, 2020, NAHC paid a $ 257.0 million, or $ 1.1257 per unit (or $ 3.5460 as converted using the Contribution Ratio), distribution to its members of record as of August 25, 2020.

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• Additional Restricted Unit grants of 159,362 units (or 50,590 Liquidity Event Restricted Units, as converted);

• Cash payments for vested Unit Options and vested Restricted Units ("Share-Based Award Payments") of $ 20.7 million were paid through October 31, 2020.

Share-Based Award Payments payable as of October 31, 2020 for unvested awards is $ 12.1 million, which is reflected within accrued expenses and other current liabilities and other long-term liabilities on the Company's consolidated balance sheets.

• Cash payments for vested Unit Options and vested Restricted Units ("Share-Based Award Payments") of $ 24.0 million were paid through May 1, 2021.

Share-Based Award Payments payable as of May 1, 2021 for unvested awards is $ 8.2 million, which is reflected within accrued expenses and other current liabilities on the Company's consolidated balance sheets.

The May 2021 Secondary Offering resulted in the acceleration of cash payments for equity-based compensation distributions of approximately $8.2 million (see Note 14).

These exercise price adjustments did not increase the value of the Unit Options and no related additional equity compensation was or will be incurred.

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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 thirty-nine weeks ended October 31, 2020:

The following table presents the assumptions and grant date fair values for Service Options granted in the thirteen weeks ended May 1, 2021:

Expected life in years 6.18

Expected volatility 53 % to 54 %

Expected volatility 44 %

Weighted-average volatility 44 %

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Dividend yield —

The following table presents the Award grants during the thirty-nine weeks ended October 31, 2020:

Service Options Service Restricted Units Liquidity Event Restricted Units Performance Restricted Units

The following table presents the Award grants during the thirteen weeks ended May 1, 2021:

Service Options Service Restricted Units Performance Restricted Units

Number of shares 889,989 157,649 190,708

1,417,961 11,564 1,185,474 12,772

Weighted average grant date fair value per Award $ 11.74 $ 26.97 $ 26.99

Weighted average exercise price per Award $ 16.87 N/A N/A N/A

(1) See Retrospective Presentation of Ownership Exchange in Note 2.

The following table presents the unrecognized compensation cost as of October 31, 2020:

Weighted average exercise price per Award $ 26.99 N/A N/A

The following table presents the unrecognized compensation cost as of May 1, 2021:

Service Options Performance Unit Options Service Restricted Units Liquidity Event Restricted Units Performance Restricted Units

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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 (dollar and share amounts in thousands except per share amounts):

Thirteen Weeks Ended Thirty-Nine Weeks Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Net income $ 59,586 $ 28,552 $ 217,242 $ 102,305

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 Ended

May 1, 2021 May 2, 2020

Net income (loss) $ 177,796 $ ( 10,020 )

Weighted average common shares outstanding - basic (1)

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Dilutive effect of Service Restricted Units and Service Restricted Stock Units (1)

Dilutive effect of Performance Restricted Units, Liquidity Event Restricted Units and Performance Restricted Stock Units (1)

1,423 — 991 —

Dilutive effect of Performance Restricted Stock Units and Liquidity Event Restricted Units (1)

Dilutive effect of Service Options (1)

1,081 1,271 871 824

Dilutive effect of Performance Unit Options and Performance Stock Options (1)

1,433 1,440 1,392 1,453

Dilutive effect of ESPP shares — —

Weighted average common shares outstanding - diluted (1)

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Anti-dilutive stock-based awards excluded from diluted calculation (1)

4,460 4,153 1,648 578

(1) See Retrospective Presentation of Ownership Exchange in Note 2.

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Our tax rate prior to October 1, 2020 was almost entirely the result of state income taxes.

In connection with our IPO, as a result of the Reorganization Transactions (see Note 1) completed on October 1, 2020, as described further in the Prospectus, on and after October 1, 2020, the Company is treated as a U.S.

In connection with our IPO, as a result of the Reorganization Transactions completed on October 1, 2020, on and after October 1, 2020, the Company is treated as a U.S.

corporation for U.S.

federal, state, and local income tax purposes and accordingly, a provision for income taxes has been recorded for the anticipated tax consequences of our reported results of operations for federal, state and local income taxes since October 1, 2020.

As a result of the Reorganization Transactions, the Company recorded a net deferred tax liability position of $ 144.2 million, which consisted of the Company’s difference between the Company's financial statement carrying value and the outside tax basis in its NAHC membership units, immediately following the completion of the Reorganization Transactions, measured at the enacted federal and state income tax rates.

Additionally, $ 4.6 million in current tax liability was assumed by the Company as part of the Reorganization Transaction.

The combined entry was recorded as a cumulative adjustment to additional paid-in capital for the year equal to $ 148.8 million, as reflected in the statement of stockholders' equity.

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted in the U.S.

on March 27, 2020.

We do not anticipate that the enactment of this legislation will significantly impact our full year effective tax rate in fiscal 2020.

The components of the income tax expense (benefit) are as follows (amounts in thousands):

Thirteen Weeks Ended Thirty-Nine Weeks Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Current tax expense:

Federal $ 8,369 $ — $ 8,369 $ —

State 2,168 575 3,656 2,135

Foreign 9 13 39 25

Total current tax expense 10,546 588 12,064 2,160

Deferred tax expense:

Federal ( 10,024 ) — ( 10,024 ) —

State ( 1,715 ) ( 59 ) ( 1,715 ) ( 223 )

Foreign — ( 23 ) — ( 23 )

Total deferred tax benefit ( 11,739 ) ( 82 ) ( 11,739 ) ( 246 )

Total tax expense (benefit) $ ( 1,193 ) $ 506 $ 325 $ 1,914

A reconciliation of the statutory U.S.

federal income tax rate to our effective income tax rate is as follows:

Thirteen Weeks Ended Thirty-Nine Weeks Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Federal income tax at the statutory rate 21.0 % 21.0 % 21.0 % 21.0 %

State income tax, net of federal benefit 0.8 1.8 0.9 1.8

Effect of pre-IPO pass-through income allocated to our members ( 23.1 ) ( 21.0 ) ( 21.6 ) ( 21.0 )

Effect of permanent items ( 0.7 ) — ( 0.2 ) 0.0

Other, including foreign 0.0 — 0.0 0.0

Effective income tax rate ( 2.0 ) % 1.8 % 0.1 % 1.8 %

The effective tax rate for the periods reflected is less than the U.S.

federal tax rate on corporations primarily as a result of the Company’s status as a flow-through entity prior to October 1, 2020.

The thirteen weeks and thirty-nine weeks ended October 31, 2020 includes one month of activity subject to U.S.

federal and state income tax in addition to the historically reported Texas franchise tax as a result of the Reorganization Transactions.

For complete annual periods on and after October 1, 2020, no portion of the Company’s income remains flow-through to the prior members of NAHC and our estimated statutory federal and state income tax rates are between 24 % and 25 % before adjustments for permanent differences, valuation allowances and uncertain tax positions.

Components of deferred tax assets and liabilities consist of the following:

October 31, 2020 February 1, 2020 November 2, 2019

NAHC continued to operate as a tax partnership through January 30, 2021.

Effective January 31, 2021, NAHC discontinued partnership treatment for tax purposes.

As a result, our deferred tax liability was no longer measured by reference to membership units in NAHC and instead was measured by reference to the underlying assets and liabilities of our operations.

No change in the total reported deferred tax liability occurred as a result of the change in tax structure.

The table below reflects the allocation of the deferred tax liability previously reflected for “Investment in NAHC” to the underlying assets and liabilities of the business based on the estimated fair value as of January 31, 2021 (amounts in thousands):

January 30, 2021 Effect of Change January 31, 2021

Deferred tax assets:

Other $ 127 $ 220 $ 764

Accounts receivable $ — $ 274 $ 274

Accrued liabilities and reserves — 37,760 37,760

Equity compensation — 22,854 22,854

Total deferred tax assets — 60,888 60,888

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Investment in NAHC ( 138,358 ) 138,358 —

Inventory — ( 17,387 ) ( 17,387 )

Prepaid items — ( 4,124 ) ( 4,124 )

Property and equipment — ( 11,531 ) ( 11,531 )

Intangible assets — ( 166,204 ) ( 166,204 )

Other ( 345 ) — ( 345 )

Total deferred tax liabilities ( 138,703 ) ( 60,888 ) ( 199,591 )

Net deferred tax asset (liability) $ ( 132,701 ) $ 220 $ 764

The Reorganization Transactions (see Note 1) resulted in our ownership of 100% of NAHC which continues to operate as a tax partnership.

The deferred tax liability as of October 31, 2020 reflects the excess of financial statement carrying value over our tax basis in NAHC membership units measured using the federal income tax rate of 21% and our weighted average state income tax rate equal to approximately 3.8 % net of federal tax benefit.

For the periods ended February 1, 2020 and November 2, 2019, the net deferred tax asset is included in other noncurrent assets.

Management evaluates the realizability of deferred tax assets and the need for valuation allowances annually.

As of October 31, 2020, based on current facts and circumstances, management believes that it is more likely than not the Company will realize benefit for its gross deferred tax assets.

As of October 31, 2020, we had no unrecognized tax benefits and we do not anticipate that unrecognized tax benefits will significantly increase or decrease over the next twelve months.

The Company files a consolidated federal income tax return and files tax returns in various state and local jurisdictions.

The statute of limitations is open for federal and state tax audits for the tax fiscal years ending 2018 through 2020, and 2017 through 2020, respectively.

Total net deferred tax liabilities $ ( 138,703 ) $ — $ ( 138,703 )

The Company determines its income tax expense by applying an estimated annual effective tax rate to its income before income taxes for the interim period.

The current tax payable is based on the estimated federal and state income tax payments, while the remainder of income tax expense or benefit for the period is recorded to the net deferred tax asset or liability account.

For the three months ended May 1, 2021, ASO, Inc.

recorded $ 47.1 million of income tax expense, which included income taxes payable of $ 22.0 million and net deferred tax liabilities of $ 25.1 million.

Related Party Transactions

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On August 3, 2011 (the "Effective Date"), we entered into a monitoring agreement (the "Monitoring Agreement"), with Kohlberg Kravis Roberts & Co.

(the "Adviser") pursuant to which the Adviser provides advisory, consulting and financial services to us.

In accordance with the terms of the Monitoring Agreement, we pay an aggregate annual advisory fee which increases by 5.0 % annually on each anniversary of the Effective Date.

The Adviser may also charge us a customary fee for services rendered in connection with securing, structuring and negotiating equity and debt financings by us.

Additionally, we are required to reimburse the Adviser for any out-of-pocket expenses in connection with these services.

The Monitoring Agreement continues in effect from year-to-year, unless amended or terminated by the Adviser and us.

Upon the completion of the IPO, in the third quarter of 2020 the Monitoring Agreement terminated and we accrued the final termination fee of $ 12.3 million.

The termination fee is equal to the net present value of the advisory fees that would have been paid from the termination date through the twelfth anniversary of the Effective Date of the Monitoring Agreement.

We recognized advisory fees related to the Monitoring Agreement, including reimbursement of expenses and the termination fee, of approximately $ 13.0 million and $ 14.8 million in each of the thirteen and thirty-nine weeks ended October 31, 2020, respectively, and $ 0.9 million and $ 2.7 million in each of the thirteen and thirty-nine weeks ended November 2, 2019, respectively.

(the "Adviser") pursuant to which the Adviser provided advisory, consulting and financial services to us.

In accordance with the terms of the Monitoring Agreement, we paid an aggregate annual advisory fee which increased by 5.0 % annually on each anniversary of the Effective Date.

The Adviser also charged us a customary fee for services rendered in connection with securing, structuring and negotiating equity and debt financings by us.

Additionally, we were required to reimburse the Adviser for any out-of-pocket expenses in connection with these services.

The Monitoring Agreement continued in effect from year-to-year, unless amended or terminated by the Adviser and us.

Upon the completion of the IPO in the third quarter of 2020, the Monitoring Agreement terminated.

We recognized advisory fees related to the Monitoring Agreement, including reimbursement of expenses, of approximately $ 0.9 million in the thirteen weeks ended May 2, 2020.

These expenses are included in selling, general and administrative expenses in the statements of income.

Other Related Party Transactions

We paid $ 2.7 million to KCM for underwriting services in connection with the IPO.

KKR has ownership interests in a broad range of portfolio companies and we may enter into commercial transactions for goods or services in the ordinary course of business with these companies.

We do not believe such transactions are material to our business.

KKR has ownership interest in a broad range of portfolio companies and we may enter into commercial transactions for goods or services in the ordinary course of business with these companies.

We do not believe such transactions are material to our business (see Note 14).

Investments in Managers

There were no investments in Managers for the thirteen and thirty-nine weeks ended October 31, 2020.

During the thirteen and thirty-nine weeks ended November 2, 2019, an executive of the Company purchased Redeemable Membership Units in Managers for approximately $ 0.1 million in cash.

The cash consideration paid for the Redeemable Membership Units was concurrently contributed to NAHC by Managers in exchange for a number of NAHC Membership Units equal to the number of Redeemable Membership Units purchased.

There were no equity repurchases from Managers for the thirteen weeks ended October 31, 2020.

During the thirty-nine weeks ended October 31, 2020, Managers repurchased at fair market value approximately $ 37.0 thousand of Redeemable Membership Units from a director of the Company for cash.

During the thirteen and thirty-nine weeks ended November 2, 2019, Managers repurchased at fair market value approximately $ 0.5 million of Redeemable Membership Units from a director and an executive of the Company for cash.

During the thirteen weeks ended May 2, 2020, Managers repurchased at fair market value approximately $ 37.0 thousand of Redeemable Membership Units from a director of the Company for cash.

NAHC concurrently repurchased from Managers for cash, at fair market value, a number of NAHC membership units equal to the number of Redeemable Membership Units repurchased from the director and executive.

Notes Receivable from Member and Distribution

Under NAHC's LLC agreement, certain members may require the Company to provide a tax loan on their behalf under certain circumstances.

Note Receivable from Member and Distribution

Prior to October 1, 2020, under NAHC's LLC agreement, certain members could require the Company to provide a tax loan on their behalf under certain circumstances.

On April 10, 2019, the Company loaned $ 4.0 million with a note receivable issued to a member.

The note receivable bears semi-annual compounding interest at 2.5 % per annum with outstanding principal and interest due on April 10, 2022.

The note receivable bears semi-annual compounding interest at 2.5 % with outstanding principal and interest due on April 10, 2022.

This note receivable was recorded in other non-current assets on the balance sheet.

On April 5, 2018, the Company loaned $ 4.1 million with a note receivable issued to a member.

The note receivable bears semi-annual compounding interest at 2.1 %, with outstanding principal and interest due April 5, 2021.

This note receivable was recorded in prepaid expenses and other current assets on the balance sheet.

The note receivable bears semi-annual compounding interest at 2.1 %, with outstanding principal and interest due on April 5, 2021, and was recorded in prepaid expenses and other non-current assets on the balance sheet.

On August 28, 2020, the Company made a distribution to its members of record as of August 25, 2020, of $ 257.0 million (see Note 9).

2 unchanged sentences

Technology Related Commitments and Other

As of October 31, 2020, we have obligations under technology related contractual commitments as well as other commitments, such as construction commitments, in the amount of $ 15.2 million.

As of May 1, 2021, we have obligations under technology related and other contractual commitments in the amount of $ 21.2 million.

Of such commitments, approximately $ 9.4 million is payable in the next 12 months.

Commitments Related to Monitoring Agreement

As of October 31, 2020, we have obligations under the Monitoring Agreement, which include the termination fee upon completion of the IPO, in the amount of $ 13.3 million, of which $ 13.3 million is payable in the next 12 months (see Note 13).

Financial Guarantees

13 unchanged sentences

These agreements typically contain a one to three-year term and contractual payment amounts required to be paid by the Company.

As of October 31, 2020, we have $ 12.8 million in related commitments through 2027, of which $ 7.4 million is payable in the next 12 months.

As of May 1, 2021, we have $ 9.6 million in related commitments through 2027, of which $ 5.5 million is payable in the next 12 months.

Subsequent Events

Our management evaluated events or transactions that occurred after October 31, 2020, through December 10, 2020, the issuance date of the financial statements, and identified the following matters to report:

IPO Over-Allotment Exercise

On November 3, 2020, the Company issued and sold an additional 1,807,495 shares of the Company’s common stock, par value $ 0.01 per share, for cash consideration of $ 12.22 per share (representing an initial public offering price of $ 13.00 per share, net of underwriting discounts) to the IPO underwriters, resulting in approximately $ 22.1 million in proceeds net of underwriting discounts, which included $ 0.3 million paid to KCM for underwriting services, pursuant to the partial exercise by the underwriters of their option to purchase up to 2,343,750 additional shares to cover over-allotments in connection with the IPO.

The option has expired with respect to the remaining shares.

Upon completion of the over-allotment exercise, affiliates of KKR held a 68.5 % ownership interest in the Company.

Our management evaluated events or transactions that occurred after May 1, 2021, through June 8, 2021, the issuance date of the financial statements, and identified the following matters to report:

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 Secondary Offering also included the Company's repurchase and simultaneous retirement of 3,229,974 shares out of the 14,000,000 shares.

The May 2021 Selling Stockholders granted the May 2021 Underwriters the option to purchase, within 30 days from the date of the May 2021 Underwriting Agreement, an additional 2,100,000 shares of Common Stock.

On May 6, 2021, the May 2021 Underwriters exercised in full their option to purchase the additional shares.

The May 2021 Secondary Offering was completed on May 10, 2021.

The Company did no t receive any proceeds from the May 2021 Secondary Offering.

The May 2021 Secondary Offering reduced the KKR ownership interest in the Company to 31.3 %, resulting in a 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.

Additionally, approximately $ 8.2 million of cash payments for equity-based compensation distributions will be accelerated.

These expenses will be included in selling, general and administrative expenses in the statements of income.

Debt Refinancing

On November 6, 2020, the Company issued the 2020 Notes (as defined below), entered the 2020 Term Loan Facility (as defined below), and entered into the 2020 ABL Amendment (as defined below).

The Company used the net proceeds from the 2020 Notes and the net proceeds from the 2020 Term Loan Facility, together with cash on hand, to repay in full outstanding borrowings under its then-existing term loan, in the amount of $ 1,431.4 million.

We paid KCM approximately $ 2.5 million with respect to the debt refinancing transactions.

On November 6, 2020, Academy, Ltd.

issued $ 400.0 million of 6.00 % senior secured notes which are due November 15, 2027 (the "2020 Notes"), pursuant to an indenture, dated as of November 6, 2020 (the "Indenture"), by and among Academy, Ltd.

the Guarantors (as defined below) and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent (in such capacity, the "Notes Collateral Agent").

The 2020 Notes were sold in the United States to persons reasonably believed to be "qualified institutional buyers" pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and outside the United States to non-U.S.

persons pursuant to Regulation S under the Securities Act.

The 2020 Notes will be fully and unconditionally guaranteed on a senior secured basis by each of NAHC, Associated Investors L.L.C.

and Academy Managing Co., L.L.C., each a direct or indirect, wholly-owned subsidiary of the Company (collectively, the "Guarantors"), and each of Academy, Ltd.’s future wholly-owned domestic restricted subsidiaries, to the extent such subsidiary guarantees Academy, Ltd.’s senior secured credit facilities or certain capital markets debt.

In order to secure the 2020 Notes and the guarantees, Academy, Ltd.

and the Guarantors entered into certain security documents with the Notes Collateral Agent, including a security agreement and a pledge agreement, each dated as of November 6, 2020.

The 2020 Notes and the guarantees will be secured by (i) a first-priority lien on all of Academy, Ltd.’s and the Guarantors’ personal property that secure the 2020 Term Loan Facility on a first-priority basis and (ii) a second-priority lien on Academy, Ltd.’s and the Guarantors’ personal property consisting of accounts and all other rights to payment, inventory, tax refunds, cash, deposit accounts, securities and commodities accounts, and documents and supporting obligations, securing the 2020 ABL Facility (as defined below) on a first-priority basis and the 2020 Term Loan Facility on a second-priority basis (the "ABL Priority Collateral").

On November 6, 2020, (i) Academy Ltd.’s, the Guarantors party thereto, the Notes Collateral Agent, the Term Loan Agent (as defined below) and the several other parties named therein entered into a first lien intercreditor agreement as to the relative priorities of their respective security interests in the assets securing the 2020 Notes and the 2020 Term Loan Facility and certain other matters relating to the administration of security interests and (ii) the Notes Collateral Agent, the Term Loan Agent and the ABL Agent (as defined below) entered into a lien sharing and priority confirmation joinder to the ABL Intercreditor Agreement, dated as of July 2, 2015, as to the relative priorities of their respective security interests in the assets securing the 2020 Notes, the 2020 Term Loan Facility and the 2020 ABL Facility and certain other matters relating to the administration of security interests.

The 2020 Notes will mature on November 15, 2027.

The 2020 Notes will pay interest semi-annually in arrears in cash on May 15 and November 15 of each year at a rate of 6.00 % per year, commencing on May 15, 2021.

On or after November 15, 2023, Academy, Ltd.

may, at its option and on one or more occasions, redeem all or a part of the 2020 Notes at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

At any time prior to November 15, 2023, Academy, Ltd.

may, at its option and on one or more occasions, redeem all or part of the 2020 Notes at a redemption price equal to 100 % of the principal amount of the 2020 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date, plus a "make-whole" premium as described in the Indenture.

In addition, at any time prior to November 15, 2023, Academy, Ltd.

may, at its option and on one or more occasions, redeem up to 40 % of the aggregate principal amount of the 2020 Notes at a redemption price equal to 106.00 % of the aggregate principal amount thereof, with an amount equal to or less than the net cash proceeds from one or more equity offerings to the extent such net cash proceeds are received by or contributed to Academy, Ltd., plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

Upon the occurrence of certain events constituting a Change of Control (as defined in the Indenture), Academy, Ltd.

will be required to make an offer to repurchase all of the 2020 Notes at a price equal to 101 % of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.

The Indenture contains certain covenants that limit the ability of Academy, Ltd.

and its restricted subsidiaries to, among other things, (i) incur or guarantee additional indebtedness or issue disqualified stock and preferred stock;

(ii) incur liens on assets;

(iii) pay dividends or make other distributions in respect of, or repurchase or redeem, their capital stock;

(iv) prepay, redeem or repurchase certain debt;

(v) make certain loans, investments or other restricted payments;

(vi) engage in certain transactions with affiliates;

(vii) enter into agreements restricting certain subsidiaries’ ability to pay dividends;

and (viii) sell or transfer certain assets or merge or consolidate, in each case subject to certain exceptions and qualifications set forth in the Indenture.

The Indenture provides for events of default which include (subject in certain cases to customary grace and cure periods), among others, nonpayment of principal or interest, breach of other agreements in respect of the 2020 Notes, acceleration of certain other indebtedness, failure to pay certain final judgments, failure of certain guarantees to be enforceable, failure to perfect certain collateral securing the 2020 Notes and certain events of bankruptcy or insolvency, which events of default, if any occur, would permit or require the principal, premium, if any, interest and any other monetary obligations on all the then-outstanding 2020 Notes to be due and payable immediately.

2020 Term Loan Facility

On November 6, 2020, Academy, Ltd., as borrower, and the Guarantors, as guarantors, entered into the Second Amended and Restated Credit Agreement (the "2020 Term Loan Agreement"), with Credit Suisse AG, Cayman Island Branch ("Credit Suisse"), as the administrative agent and collateral agent (the "Term Loan Agent"), the several lenders from time to time parties thereto and the several other parties named therein, which established a new $ 400.0 million first lien term loan facility.

The 2020 Term Loan Facility will mature on November 6, 2027.

The 2020 Term Loan Facility bears 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 are required through September 30, 2027, with the balance due in full on the maturity date of November 6, 2027.

The terms and conditions of the 2020 Term Loan Facility also require that outstanding loans under the 2020 Term Loan Facility are prepaid under certain circumstances.

The 2020 Term Loan Facility will be guaranteed by the Guarantors on a senior secured basis.

All obligations under the 2020 Term Loan Facility and the guarantees of those obligations will be secured by (i) a second-priority security interest in the ABL Priority Collateral and (ii) a first-priority security interest in, and mortgages on, substantially all present and after acquired tangible and intangible assets of Academy, Ltd.

and the Guarantors and a first-priority pledge of 100 % of the capital stock of Academy, Ltd.

and its domestic subsidiaries and 66 % of the voting capital stock of each of Academy, Ltd.’s foreign subsidiaries, if any, that are directly owned by Academy, Ltd.

or a future U.S.

guarantor, if any.

The 2020 Term Loan Agreement contains certain covenants that limit the ability of Academy, Ltd.

and its restricted subsidiaries to, among other things, (i) incur or guarantee additional indebtedness or issue disqualified stock and preferred stock;

(ii) incur liens on assets;

(iii) pay dividends or make other distributions in respect of, or repurchase or redeem, their capital stock;

(iv) prepay, redeem or repurchase certain debt;

(v) make certain loans, investments or other restricted payments;

(vi) engage in certain transactions with affiliates;

(vii) enter into agreements restricting certain subsidiaries’ ability to pay dividends;

(viii) sell or transfer certain assets or merge or consolidate and (ix) amend material documents, in each case subject to certain exceptions and qualifications set forth in the 2020 Term Loan Agreement.

The 2020 Term Loan Agreement contains customary events of default including, but not limited to, failure to pay principal or interest, breaches of representations and warranties, violations of affirmative or negative covenants, cross-defaults to other material indebtedness, a bankruptcy or similar proceeding, rendering of certain monetary judgments, invalidity of collateral documents and changes of control.

2020 ABL Facility

On November 6, 2020, Academy, Ltd., as borrower, and the Guarantors, as guarantors, entered into an amendment (the "2020 ABL Amendment") to the First Amended and Restated ABL Credit Agreement, dated as of July 2, 2015, with JPMorgan Chase Bank, N.A.

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.

Borrowings under the Amended Credit Agreement will continue to mature on November 6, 2027, and all other material terms and provisions of the Existing Credit Agreement remain substantially the same as the terms and provisions in place immediately prior to the effectiveness of the Amendment.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements