What changed in this filing

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Item 9A. Controls and Procedures

2023-03-16 compared with 2022-03-29 · 177 added, 197 removed, 1180 unchanged (24% of the section changed)

18 unchanged sentences

This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation.

Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of January 29, 2022.

Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of the end of the period covered by this Annual Report.

Deloitte & Touche LLP, an independent registered public accounting firm, has issued an attestation report on the Company’s internal control over financial reporting which is set forth herein.

72 unchanged sentences

Consolidated Balance Sheets as of January 28, 2023 and January 29, 2022 68

Consolidated Statements of Income for the fiscal years ended January 29, 2022, January 30, 2021 and February 1, 2020 73

Consolidated Statements of Comprehensive Income for the fiscal years ended January 29, 2022, January 30, 2021 and February 1, 2020 74

Consolidated Statements of Stockholders'/Partners' Equity for the fiscal years ended January 29, 2022, January 30, 2021 and February 1, 2020 75

Consolidated Statements of Cash Flows for the fiscal years ended January 29, 2022, January 30, 2021 and February 1, 2020 76

Consolidated Statements of Income for the fiscal years ended January 28, 2023, January 29, 2022 and January 30, 2021 69

Consolidated Statements of Comprehensive Income for the fiscal years ended January 28, 2023, January 29, 2022 and January 30, 2021 70

Consolidated Statements of Stockholders'/Partners' Equity for the fiscal years ended January 28, 2023, January 29, 2022 and January 30, 2021 71

Consolidated Statements of Cash Flows for the fiscal years ended January 28, 2023, January 29, 2022 and January 30, 2021 72

Notes to the Consolidated Financial Statements 73

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Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

1 unchanged sentence

At January 28, 2023, the Company’s merchandise inventories balance was $1.3 billion.

Merchandise inventories are valued at the lower of weighted average cost or net realizable value using the last-in first-out ("LIFO") method and include the direct cost of merchandise and capitalized costs related to procurement, warehousing and distribution and are reflected net of shrinkage, vendor allowances and other valuation accounts.

Merchandise inventories are valued at the lower of weighted average cost or last-in first-out ("LIFO") method.

Merchandise inventories include the direct cost of merchandise and capitalized costs related to procurement, warehousing and distribution and are reflected net of shrinkage, vendor allowances and other valuation accounts.

We identified merchandise inventories as a critical audit matter because of the high volume of transactions and because the Company has multiple systems to process and record inventory movements which are highly automated.

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• Identified the significant systems used to process inventory transactions and tested the general IT controls over each of these systems, including testing of user access controls, change management controls, and IT operations controls.

• Performed testing of system interface controls and automated controls within the relevant inventory impacts, as well as the controls designed to ensure the accuracy and completeness of inventory.

• Performed testing of system interface controls and automated controls, as well as the controls designed to ensure the accuracy and completeness of inventory.

• Obtained an understanding, completed risk assessment procedures and evaluated the design and tested the operating effectiveness of business process controls over the Company’s significant inventory processes.

• Agreed weighted average cost calculations to source information including third party vendor invoices.

• Compared the recorded balance to an expectation we developed for inventory in transit and capitalized overhead.

• Performed store and distribution center physical inventory counts.

• We tested whether the underlying data used as key inputs in the Company’s LIFO calculation were consistent with gross inventory.

This included reconciling the inventory used for the LIFO calculation to the inventory subledger.

/s/ Deloitte & Touche LLP

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CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands)

(Dollar amounts in thousands, except per share data)

January 28, 2023 January 29, 2022

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COMMITMENTS AND CONTINGENCIES (NOTE 14)

REDEEMABLE MEMBERSHIP UNITS — —

STOCKHOLDERS' / PARTNERS' EQUITY:

5 unchanged sentences

Retained earnings 1,411,330 1,268,060

Accumulated other comprehensive loss — ( 3,324 )

Stockholders' / partners' equity 1,628,306 1,466,946

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Fiscal Year Ended

January 29, 2022 January 30, 2021 February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

NET SALES $ 6,395,073 $ 6,773,128 $ 5,689,233

21 unchanged sentences

Fiscal Year Ended

January 29, 2022 January 30, 2021 February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

COMPREHENSIVE INCOME:

1 unchanged sentence

Unrealized loss on interest rate swaps — — ( 6,653 )

Recognized interest (income) expense on interest rate swaps 2,344 11,045 ( 418 )

Recognized interest expense on interest rate swaps — 2,344 11,045

Loss on swaps from debt refinancing — — 1,330

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Equity compensation — — — 3,690 — — 27,927 — — 31,617 —

Equity contributions from Managers 6 — — 100 — — — — — 100 6

Adjustment to Redeemable Membership Units for contributions from Managers and settlement of vested Restricted Units 18 400 — ( 400 ) — — — — — ( 400 ) 18

Adjustment to Redeemable Membership Units for repurchase of units from Managers ( 29 ) ( 538 ) 29 538 — — — — — 538 —

Repurchase of Redeemable Membership Units — — ( 29 ) ( 473 ) — — — — — ( 473 ) ( 29 )

Reclassification of membership units with lapsed put rights (Note 2) ( 1,195 ) ( 14,929 ) 1,195 14,930 — — — — — 14,930 —

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

Unrealized loss on interest rate swaps — — — — — — — — ( 16,096 ) ( 16,096 ) —

Recognized interest income on interest rate swaps — — — — — — — — ( 418 ) ( 418 ) —

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

Net income — — — 157,656 — — — 151,108 — 308,764 —

Equity compensation — — — 3,690 — — 27,927 — — 31,617 —

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

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Balances as of January 29, 2022 — $ — — $ — 87,079 $ 870 $ 198,016 $ 1,268,060 $ — $ 1,466,946 87,079

Net income — — — — — — — 628,001 — 628,001 —

Equity compensation — — — — — — 21,175 — — 21,175 —

Repurchase of common stock for retirement — — — — ( 11,904 ) ( 119 ) ( 29,258 ) ( 460,098 ) — ( 489,475 ) ( 11,904 )

Settlement of vested Restricted Stock Units — — — — 100 1 ( 1 ) — — — 100

Issuance of common stock under employee stock purchase plan — — — — 168 2 5,041 — — 5,043 168

Stock option exercises — — — — 1,269 13 21,236 — — 21,249 1,269

Cash dividends declared, $ 0.075 per share

— — — — — — — ( 24,633 ) — ( 24,633 ) —

Balances as of January 28, 2023 — $ — — $ — 76,712 $ 767 $ 216,209 $ 1,411,330 $ — $ 1,628,306 76,712

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

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Fiscal Year Ended

January 29, 2022 January 30, 2021 February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

CASH FLOWS FROM OPERATING ACTIVITIES:

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Equity compensation 21,175 39,264 31,617

Amortization of terminated interest rate swaps, deferred loan and other costs 5,524 5,516 3,717

Amortization of deferred loan, terminated interest rate swaps and other costs 3,054 5,524 5,516

Loss on swaps from debt refinancing — — 1,330

1 unchanged sentence

Non-cash (gain) loss on early retirement of debt, net 1,963 2,239 ( 3,582 )

Gain on disposal of property and equipment — — ( 23 )

Casualty loss — — 194

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Purchases of intangible assets ( 502 ) ( 215 ) —

Proceeds from the sale of property and equipment — — 23

Note receivable from member — — 8,125

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Distribution — — ( 257,000 )

Equity contributions from Managers — — 100

Proceeds from exercise of stock options 21,249 48,587 22

4 unchanged sentences

Repurchase of Redeemable Membership Units — — ( 37 )

Dividends paid ( 24,633 ) — —

Net cash used in financing activities ( 592,052 ) ( 488,854 ) ( 750,234 )

NET INCREASE IN CASH AND CASH EQUIVALENTS 108,394 228,219 73,694

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ( 148,853 ) 108,394 228,219

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 485,998 377,604 149,385

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We conduct our operations primarily through our parent holding company's indirect subsidiary, Academy, Ltd., a Texas limited partnership doing business as "Academy Sports + Outdoors", or Academy, Ltd.

All of the Company’s sales and business operations occur at Academy, Ltd., and Academy, Ltd.

is also the borrower and/or issuer of the Company’s long-term debt and lessee of facilities.

On August 3, 2011, an investment entity owned by investment funds and other entities affiliated with Kohlberg Kravis Roberts & Co.

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Upon completion of the September 2021 Secondary Offering (as defined below), KKR no longer holds an ownership interest in the Company.

The Company is one of the leading full-line sporting goods and outdoor recreational products retailers in the United States in terms of net sales.

The Company is a leading full-line sporting goods and outdoor recreational products retailers in the United States in terms of net sales.

As of January 28, 2023, we operated 268 "Academy Sports + Outdoors" retail locations in 18 states and three distribution centers located in Katy, Texas, Twiggs County, Georgia and Cookeville, Tennessee.

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The Company’s fiscal year represents the 52 or 53 weeks ending on the Saturday closest to January 31 each year.

References herein to 2021, 2020 and 2019 relate to the 52-week fiscal years ended January 29, 2022, January 30, 2021, and February 1, 2020, respectively.

References herein to 2022, 2021 and 2020 relate to the 52-week fiscal years ended January 28, 2023, January 29, 2022, and January 30, 2021, respectively.

Initial Public Offering and Reorganization Transactions

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

Reclassifications

Within the merchandise division sales table presented in Note 3, certain products and categories were recategorized amongst various categories and divisions, respectively, during 2021 to better align with our current merchandising strategy and view of the business.

As a result, we have reclassified sales between divisions for 2020 and 2019 for comparability purposes.

This reclassification is in divisional presentation only and did not impact the overall net sales balances previously disclosed.

Retrospective Presentation of Ownership Exchange

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All membership units and redeemable membership units in the financial statements and notes have been retrospectively adjusted to give effect to the Contribution Ratio, as if such contributions and exchanges occurred as of all pre-IPO periods presented, including the periods presented on the Statements of Income, Statements of Stockholders’ / Partners’ Equity, Note 9.

Share-Based Compensation, Note 10.

Earnings per Common Share and Note 16.

Selected Quarterly Financial Data (Unaudited).

Share-Based Compensation, and Note 10.

Earnings per Common Share.

Redeemable Membership Units

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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.

Cash and Cash Equivalents

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No other vendor in any of the aforementioned years exceeded 10% of our purchases.

We typically do not enter into long-term inventory purchase commitments and there were none as of January 29, 2022 or January 30, 2021.

We typically do not enter into long-term inventory purchase commitments, and we did not have any such commitments as of January 28, 2023 or January 29, 2022.

A significant portion of our inventory purchases are manufactured outside of the United States, primarily in Asia.

While we are not dependent on any single manufacturer outside of the United States, we could be adversely affected by political, health (including pandemic), safety, security, economic, tariff, climate or other disruptions affecting the business or operations of third-party manufacturers located outside of the United States.

The Company’s geographic concentration in the southeastern United States subjects us to certain regional risks, such as the state of local economies, including downturns in the housing market, increased unemployment and gas prices.

Other regional risks include severe weather conditions or man-made disasters (such as an oil spill closing large areas of hunting or fishing), fires, heat waves, freezes, hurricanes, tornadoes, large storms and floods and other natural disasters specific to the states in which the Company operates.

Merchandise Inventories, net

Merchandise inventories are valued at the lower of weighted average cost or net realizable value using the last-in first-out ("LIFO") method.

Merchandise inventories are valued at the lower of weighted average cost or last-in first-out ("LIFO") method.

We record an inventory reserve for the estimated shrinkage between physical inventories on a store-by-store basis.

We record an inventory reserve for the estimated shrinkage between physical inventories on a by location basis.

We generally perform a full physical inventory count for each store at least once a year, throughout the year, after which our shrinkage accrual rate for each store is updated based on historical results.

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Depreciation and amortization is computed using the straight-line method over the asset’s useful life, which is generally determined by asset category as follows:

Leasehold improvements Lesser of asset useful life or lease term

Software and computer equipment 2 – 5 years

Other equipment 5 – 10 years

Furniture and fixtures 7 – 10 years

Leasehold improvements

Lesser of asset useful life or lease term

Software and computer equipment

Other equipment

Furniture and fixtures

When assets are retired or sold, the cost and accumulated depreciation are removed from our accounts, and the resulting gain or loss is reflected in the consolidated statements of income.

Repair and maintenance costs are charged to expense as incurred and significant improvements that substantially enhance the useful life or enhance the functionality of an asset are capitalized and amortized.

In the normal course of business, we may acquire land and construct new stores to be sold to and leased from third party landlords.

New stores completed but not yet sold to and leased from third parties are classified as assets held for sale and are expected to be sold within one year.

Our intent is to sell the stores and land for approximately the total land and construction costs incurred (which approximate the fair market value of the property, net of selling costs) and simultaneously enter into operating leases.

Capitalized Computer Software Costs

2 unchanged sentences

The amounts capitalized were $ 33.3 million, $ 36.7 million and $ 14.5 million in 2022, 2021 and 2020, respectively.

Implementation costs for cloud-based information technology systems are capitalized in other non-current assets.

Amortization of cloud-based software implementation costs is recognized in selling, general and administrative expenses and amortized over the contract terms.

The amounts capitalized were $ 12.3 million, $ 3.7 million and $ 1.8 million in 2022, 2021 and 2020, respectively.

Capitalized Interest

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We review the carrying value of long-lived assets, including store assets, for indicators of impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable.

Recoverability of long-lived assets is measured by a comparison of the carrying amount of the assets to the estimated undiscounted future cash flows expected to be generated by the use of the assets, which is generally based on historical results.

If such assets are considered to be impaired, the impairment loss recognized is the amount by which the carrying amount of the assets exceeds its estimated fair value, which is calculated using discounted expected future cash flows.

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We test for goodwill at the reporting unit level, which is the operating segment level.

We operate in one segment with one reporting unit.

We operate in one operating segment with one reporting unit.

The annual goodwill impairment test provides for the option of first performing a qualitative assessment to evaluate the existence of events and circumstances that would lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

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The income approach uses a discounted cash flow analysis of our projected long-term future company income, and the market value approach is based on earnings multiples for a comparable set of public companies.

In 2019, we performed a quantitative assessment for the determination of impairment.

No impairment of goodwill existed for 2022, 2021 or 2020.

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However, if the qualitative assessment leads to a determination that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then no further assessments are required.

In 2022, 2021 and 2020, we performed a qualitative assessment and determined a quantitative assessment was not necessary.

Impairment is calculated as the excess of the Trade Name’s carrying value over its fair value.

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This approach is dependent on a number of factors, including projections of long-term sales, royalty rates, discount rates and other variables.

No impairment of intangible assets existed for 2022, 2021 or 2020.

Deferred Loan Costs

Costs incurred to issue debt are deferred and recorded in the consolidated balance sheets.

Those costs related to the issuance of term loan facilities and senior notes are recorded in long-term debt, net of current maturities and amortized as a component of interest expense over the terms of the related debt agreement using the effective interest method.

The costs related to the issuance of our revolving credit facilities are recorded in other noncurrent assets on the consolidated balance sheets and amortized as a component of interest expense over the terms of the related debt agreements using the straight-line method.

Those costs related to the issuance of our term loan and senior notes are recorded in long-term debt, net of current maturities and amortized as a component of interest expense over the terms of the related debt agreement using the effective interest method.

The costs related to the issuance of our revolving credit facility is recorded in other noncurrent assets on the consolidated balance sheets and amortized as a component of interest expense over the terms of the related debt agreements using the straight-line method.

Derivative Instruments

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We believe the actuarial valuation provides the best estimate of the ultimate expected losses, and we have recorded the present value of the actuarially determined ultimate losses for the insurance related liabilities mentioned above.

Effective February 3, 2019, we adopted ASU 2016-02, "Leases (Topic 842)" and a series of related Accounting Standards Updates that followed (collectively referred to as the "New Lease Standard").

The New Lease Standard requires that lessees recognize assets and liabilities arising from operating leases on the balance sheet and disclose key information about leasing arrangements.

We elected the practical expedient available to us under ASU 2018-11, "Leases:

Targeted Improvements" , which allows us to apply the transition provision for the New Lease Standard at our adoption date instead of at the earliest comparative period presented in our financial statements.

Adoption of the New Lease Standard resulted in approximately $ 1.2 billion of additional lease obligation and approximately $ 1.2 billion of right-of-use assets, which are reflected in the short-term and long-term liabilities and long-term assets sections of the balance sheet, respectively, as well as an cumulative-effect adjustment increase to the opening balance of retained earnings of approximately $ 5.1 million.

We account for our leases in accordance with Accounting Standards Codification ("ASC") 842 which requires that lessees recognize assets and liabilities arising from operating leases on the balance sheet and disclose key information about leasing arrangements.

All of our stores, corporate office facilities, and warehouse and distribution centers are leased.

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We account for each lease and non-lease components for our building leases as a single lease component which allows certain costs such as common area maintenance associated with these leases to be included as rent expense.

We elected to exclude leases with contract terms of 12 months or less from the New Lease Standard accounting treatment, which results in straight-line recognition of the cost over the lease term with no associated balance sheet lease liability or right-of-use asset.

Substantially all of our leases contain landlord incentives and escalation clauses.

With the adoption of the New Lease Standard on February 3, 2019, the deferred rent balances were netted into the right-of-use assets on the balance sheet, which are amortized ratably over the remaining terms of the corresponding leases.

In certain store construction cases, we may be deemed the owner of the property during construction, after which we then sell the property to a landlord and concurrently enter into a lease of the property to operate the store (“sale-leaseback”).

We report the cash received for construction allowances as construction allowance receipts within the financing activities section of our consolidated statements of cash flows when such amounts are received prior to completion of a sale-leaseback transaction, and we report the cash received for construction allowances as proceeds from the sale of property and equipment within the investing activities section of our consolidated statements of cash flows when such amounts are received after the completion of a sale-leaseback transaction.

If we are deemed the owner of the property during the construction period and the sale-leaseback criteria is met, the losses and gains from sale-leaseback transactions are recognized immediately.

To date, the Company has not executed a sale-leaseback transaction under the New Lease Standard, which we adopted on February 3, 2019.

We exclude leases with contract terms of 12 months or less from ASC 842 accounting treatment, which results in straight-line recognition of the cost over the lease term with no associated balance sheet lease liability or right-of-use asset.

We sell merchandise under implicit contracts whereby the transaction price is the listed sales price less any discounts or coupons applied.

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Allowances for cooperative advertising and promotion programs and other expenses are recorded in selling, general and administrative expenses as a reduction of the related costs as the related expense is incurred.

Any allowance in excess of actual costs incurred that are included in selling, general and administrative expenses, or that do not require proof of performance, are recorded as a reduction of cost of sales.

Any such allowance in excess of actual costs incurred that are included in selling, general and administrative expenses, or that do not require proof of performance, are recorded as a reduction of cost of sales.

For volume purchase rebates, we record an estimate of vendor allowances earned based on the latest projected purchase volumes.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include store and corporate administrative payroll and payroll benefits, store and corporate headquarters occupancy costs, advertising, credit card processing, information technology, pre-opening costs and other store and administrative expenses.

Selling, general and administrative expenses include store and corporate administrative payroll and payroll benefits, store and corporate headquarters occupancy costs, depreciation, advertising, credit card processing, information technology, pre-opening costs and other store and administrative expenses.

Advertising Expenses

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Pre-Opening Expenses

Non-capital expenditures associated with opening new stores and distribution centers, which consist primarily of occupancy costs, marketing, payroll and recruiting costs, are expensed as incurred.

Non-capital expenditures associated with opening new stores and distribution centers prior to sales generation or start of operations, which consist primarily of occupancy costs, marketing, payroll and recruiting costs, are expensed as incurred.

Pre-opening expenses for our new stores were $ 5.5 million and $ 0.2 million in 2022 and 2021, respectively.

1 unchanged sentence

Equity Compensation

We account for equity compensation in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") topic 718, Compensation-Stock Compensation , which requires the measurement and recognition of compensation expense for all equity awards made to employees based on estimated fair values on the grant date.

We account for equity compensation in accordance with ASC 718, which requires the measurement and recognition of compensation expense for all equity awards made to employees based on estimated fair values on the grant date.

Option equity award fair values are estimated on the date of grant using an option-pricing model and restricted unit fair values are based on the estimated unit price on the date of the grant.

For awards with service-based vesting requirements only, the fair value of the award is recognized as expense over the requisite service period, and for awards with performance-based vesting requirements, the fair value of the award ultimately expected to meet the performance target is recognized as expense over the service period.

We have elected to recognize forfeitures as they occur.

We recognize forfeitures as they occur.

Share Repurchases

On September 2, 2021, the Board of Directors of the Company authorized a share repurchase program (the "2021 Share Repurchase Program") under which the Company may purchase up to $ 500 million of its outstanding shares during the three-year period ending September 2, 2024.

Under the Share Repurchase Program, repurchases can be made using a variety of methods, which may include open market purchases, block trades, privately negotiated transactions and/or a non-discretionary trading plan, all in compliance with the rules of the SEC and other applicable legal requirements.

On June 2, 2022, the Board of Directors of the Company authorized a new share repurchase program (the "2022 Share Repurchase Program") under which the Company may purchase up to $ 600 million of its outstanding shares during the three-year period ending June 2, 2025.

The 2022 Share Repurchase Program and the 2021 Share Repurchase Program are collectively referred to as the "Share Repurchase Programs".

Under the Share Repurchase Programs, repurchases can be made using a variety of methods, which may include open market purchases, block trades, privately negotiated transactions, accelerated share repurchase programs and/or a non-discretionary trading plan, all in compliance with the rules of the SEC and other applicable legal requirements.

The timing, manner, price and amount of any common share repurchases will be determined by the Company in its discretion and will depend on a variety of factors, including legal requirements, price and economic and market conditions.

Repurchase Program does not obligate the Company to acquire any particular number of common shares, and the program may be suspended, extended, modified or discontinued at any time.

In 2021, we repurchased and concurrently retired 10,566,796 shares of ASO, Inc.

common stock for an aggregate amount of $ 411.4 million, which includes purchases that were made pursuant to the Share Repurchase Program and those that were made prior to the Share Repurchase Program.

As of January 29, 2022, approximately $ 188.6 million remained available for share repurchases pursuant to our Share Repurchase Program.

The Share Repurchase Programs do not obligate the Company to acquire any particular number of common shares, and the programs may be suspended, extended, modified or discontinued at any time.

In 2022 and 2021, we repurchased and concurrently retired 11,903,636 and 10,566,796 shares of ASO, Inc.

common stock for an aggregate amount of $ 489.5 million and $ 411.4 million, respectively, which includes purchases that were made pursuant to the Share Repurchase Programs and those that were made prior to our Share Repurchase Programs.

As of January 28, 2023, we no longer had availability under the 2021 Share Repurchase Program, and we had $ 299.4 million available for share repurchases pursuant to the 2022 Share Repurchase Program.

The Company allocates the excess of the repurchase price over the par value of shares acquired to Retained Earnings and Additional Paid-in Capital.

11 unchanged sentences

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

Insurance Proceeds

During the fiscal year ended January 28, 2023, the Company received and recognized approximately $ 7.2 million in business interruption proceeds due to the suspension of normal operations at some of our Texas store locations, as well as our e-commerce platform, for several days in February of 2021 as a result of a winter storm which had a significant impact on the energy infrastructure in the state of Texas.

These proceeds are included in Other (income), net on the Consolidated Statements of Income.

Comprehensive Income

Comprehensive income represents the net income for the period plus the results of certain changes to stockholders' equity (other comprehensive income) that are not reflected in the consolidated statements of income.

Other comprehensive income consists of adjustments, net of tax, related to the Company’s interest rate swaps.

Other comprehensive income consists of adjustments, net of tax, related to the Company’s historical ownership of interest rate swaps.

Operating Segment

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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.

In March 2020, the FASB issued ASU 2020-04:

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.

In December 2022, the FASB issued ASU 2022-06 which extended the effectiveness of this guidance to December 31, 2024.

The Company intends to utilize certain expedients provided by this amendment upon our transition from LIBOR.

Supplier Finance Programs

In September 2022, the FASB issued ASU 2022-04:

Liabilities - Supplier Finance Programs Disclosure of Supplier Finance Program Obligations.

This pronouncement requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of the financial statements to understand the program's nature, activity during the period, changes from period to period and potential magnitude.

The adoption of these amendments is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except the amendment on roll-forward information, which is effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted.

The Company is currently evaluating the impact that the adoption of this accounting standard will have on its financial disclosures.

The following table sets forth the approximate amount of sales (all of which are based in the U.S.) by merchandise divisions for the periods presented (amounts in thousands):

Fiscal Year Ended

January 29, 2022 January 30, 2021 February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Merchandise division sales

8 unchanged sentences

Net sales $ 6,395,073 $ 6,773,128 $ 5,689,233

(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 for 2020 and 2019 for comparability purposes.

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

(1) E-commerce sales consisted of 10.7 %, 9.3 % and 10.4 % of merchandise sales for 2022, 2021 and 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.

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

We sell gift cards in stores, online and in third-party retail locations.

The gift cards we sell have no expiration dates.

A liability for gift cards, which is recorded in accrued expenses and other liabilities on our balance sheets, is established at the time of sale and revenues are recognized as the gift cards are redeemed in stores or on our website.

Based on historical gift card redemption patterns, we can reasonably estimate the amount of gift cards that have a remote likelihood of redemption.

A liability for gift cards, which is recorded in accrued expenses and other liabilities on our consolidated balance sheets, is established at the time of sale and revenues are recognized as the gift cards are redeemed in stores or on our website.

Based on historical gift card redemption patterns, we believe we can reasonably estimate the amount of gift cards that have a remote likelihood of redemption.

These identified amounts are recorded as net sales and recognized in proportion to historical redemption trends, which is referred to as "breakage".

1 unchanged sentence

Fiscal Year Ended

January 29, 2022 January 30, 2021 February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Gift card liability, beginning balance $ 86,568 $ 74,253 $ 67,993

22 unchanged sentences

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

On December 15, 2022, the Company utilized cash on hand to voluntarily prepay $ 100.0 million of outstanding borrowings of the Term Loan.

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

5 unchanged sentences

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.

Prior to the Refinancing Transactions, we repurchased $ 23.9 million of principal on our Term Loan for $ 16.0 million, resulting in a net gain of $ 7.8 million.

In connection to the Refinancing Transactions, the Company also recognized an offsetting non-cash loss on early retirement of debt of $ 4.2 million from the write-off of deferred loan costs associated with the early retirement of the 2015 Term Loan.

The net result of these transactions resulted in a $ 3.6 million gain on early retirement of debt in 2020.

On November 6, 2020, as a part of the Refinancing Transactions, 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.

12 unchanged sentences

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

In connection with the principal payment in the Amendment, the Company recognized a non-cash loss on early retirement of debt of $ 2.2 million in 2021 from the write-off of deferred loan costs and expense related to the original issuance discount associated with our 2020 Term Loan.

On December 15, 2022, the Company utilized cash on hand to voluntarily prepay $ 100.0 million of outstanding borrowings under the Term Loan.

In connection with this principal payment, the Company recognized a non-cash loss on early retirement of debt of $ 2.0 million from the write-off of deferred loan costs related to the original issuance discount associated with the Term Loan.

The Amended Credit Agreement contains customary events of default such as 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.

As of January 28, 2023, no prepayment was due under the terms and conditions of the Term Loan.

In connection with the Amendment, the Company recognized a non-cash loss on early retirement of debt of $ 2.2 million in 2021 from the write-off of deferred loan costs and expense related to the original issuance discount associated with our 2020 Term Loan.

Prior to the Refinancing Transactions in 2020, we repurchased principal on our Term Loan.

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

Fiscal Year Ended

January 30, 2021 February 1, 2020

Gross principal repurchased $ 23.9 $ 147.7

Reacquisition price of debt $ 16.0 $ 104.6

Net gain recognized $ 7.8 $ 42.3

In connection with the Refinancing Transactions in 2020, the Company recognized a non-cash loss on early retirement of debt of $ 4.2 million from the write-off of deferred loan costs and expense related to the original issuance discount associated with our 2015 Term Loan.

On November 6, 2020, Academy, Ltd.

On November 6, 2020, as a part of the Refinancing Transactions, 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 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 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.

The Notes 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.

16 unchanged sentences

The 2015 ABL Facility was scheduled to mature on May 22, 2023.

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.

On November 6, 2020, as a part of the Refinancing Transactions, 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 (the "2020 ABL Facility"), among other things, extended the maturity of Academy, Ltd.’s asset-based revolving credit facility thereunder to November 6, 2025.

2 unchanged sentences

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 January 29, 2022, we had outstanding letters of credit of approximately $ 21.4 million, of which $ 17.8 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 $ 874.8 million.

As of January 28, 2023, we had outstanding letters of credit of approximately $ 13.9 million, all of which were issued under the ABL Facility, and we had no borrowings outstanding under the ABL Facility, leaving the available borrowing capacity under the ABL Facility of $ 947.8 million.

Borrowings under the ABL Facility bear interest, at our election, at either of (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 %.

23 unchanged sentences

• 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 ABL Facility on a first-priority basis and the Term Loan on a second-priority basis (the "ABL Priority Collateral").

The ABL Facility, Term Loan and Notes agreements contain covenants, including, among other things, covenants that restrict Academy, Ltd.'s ability to incur certain additional indebtedness, create or permit liens on assets, engage in mergers or consolidations, pay dividends, make other restricted payments, make loans or advances, engage in transactions with affiliates or amend material documents.

The ABL Facility, Term Loan and Notes agreements contain covenants, including, among other things, covenants that may 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.

2 unchanged sentences

As of January 28, 2023, scheduled principal payments on our debt are as follows (amounts in thousands):

Thereafter 682,750

Total $ 594,750

5 unchanged sentences

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.

We do not have any derivative financial instruments outstanding as of January 29, 2022 and January 30, 2021, respectively .

As of January 28, 2023, we do not have any derivative financial instruments outstanding.

For derivatives previously designated as hedging instruments, amounts included in AOCI were reclassified to interest expense in the same period during which the hedged transaction affected earnings, which is as interest expense was recorded on the underlying Term Loan.

1 unchanged sentence

Fiscal Year Ended

January 29, 2022 January 30, 2021 February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

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

Loss deferred into AOCI (net of tax impact of $ 0 , $ 350 , and $ 0 for the years ended January 29, 2022, January 30, 2021 and February 1, 2020, respectively)

Loss deferred into AOCI (net of tax impact of $ 0 , $ 0 , and $ 350 for the years ended January 28, 2023, January 29, 2022, and January 30, 2021, respectively)

— — ( 6,303 )

Increase (decrease) to interest expense (net of tax benefit (expense) of $ 980 , $( 1,000 ), and $ 0 for the years ended January 29, 2022, January 30, 2021 and February 1, 2020, respectively)

Increase to interest expense (net of tax benefit (expense) of $ 0 , $ 980 and $( 1,000 ) for the years ended January 28, 2023, January 29, 2022, and January 30, 2021, respectively)

— 3,324 10,045

Loss on swaps from debt refinancing in other (income) expense, net (net of tax impact of $ 0 , $ 330 , and $ 0 for the years ended January 29, 2022, January 30, 2021 and February 1, 2020, respectively)

Loss on swaps from debt refinancing in other (income) expense, net (net of tax benefit of $ 0 , $ 0 , and $ 330 for the years ended January 28, 2023, January 29, 2022, and January 30, 2021, respectively)

Accumulated Other Comprehensive Loss, ending $ — $ — $ ( 3,324 )

27 unchanged sentences

Property and equipment, net $ 351,424 $ 345,836

Depreciation expense was $ 105.3 million, $ 105.5 million and $ 117.3 million in 2021, 2020 and 2019, respectively, and is included in selling, general and administrative expenses on the consolidated statements of income.

Depreciation expense was $ 106.8 million, $ 105.3 million and $ 105.5 million in 2022, 2021 and 2020, respectively.

Accrued Expenses and Other Current Liabilities

21 unchanged sentences

We have reserved a total of 2,000,000 shares and as of January 28, 2023, there were 1,717,411 shares authorized and available for future issuance under the ESPP.

Equity compensation expense was $ 39.3 million in 2021, which includes approximately $ 24.9 million in non-cash expenses related to the 2021 Vesting Event, which occurred during the 2021 second quarter.

Equity compensation expense was $ 31.6 million in 2020, including approximately $ 19.9 million of equity compensation expense associated with the expensing of certain outstanding restricted stock units as a result of the liquidity condition being achieved upon completion of our IPO.

Equity compensation expense was $ 7.9 million in 2019.

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

The following table provides total stock-based compensation recognized in the consolidated statements of income (amounts in thousands):

Fiscal Year Ended

January 28, 2023 January 29, 2022 January 30, 2021

Equity compensation expense (1)

$ 21,175 $ 39,264 (2)

Total related tax benefit $ 4,494 $ 9,075 $ 7,738

(1) These costs are included within selling, general and administrative expenses in the consolidated statements of income.

(2) These costs include approximately $ 24.9 million in non-cash expenses related to the 2021 Vesting Event, which occurred during the 2021 second quarter.

(3) These costs include approximately $ 19.9 million of equity compensation expense associated with the expensing of certain outstanding restricted stock units as a result of the liquidity condition being achieved upon completion of our IPO.

As of January 28, 2023, unrecognized compensation cost related to Unit Options and Restricted Units of $ 28.6 million is expected to be recognized over a weighted average life of 2.4 years.

13 unchanged sentences

Stock Options granted under the 2020 Omnibus Incentive Plan consist of Stock Options that vest upon the satisfaction of time-based requirements (each, a "Service Stock Option" and Service Unit Options and Service Stock Options together are "Service Options").

Restricted Stock Units granted under the 2020 Omnibus Incentive Plan consist of Restricted Stock Units that vest upon the satisfaction of time-based requirements (each, a "Service Restricted Stock Unit") and Restricted Stock Units that vest upon the satisfaction of a time-based requirement and performance-based requirement (each, a "Performance Restricted Stock Unit").

Restricted Stock Units granted under the 2020 Omnibus Incentive Plan consist of Restricted Stock Units that vest upon the satisfaction of time-based requirements (each, a "Service Restricted Stock Unit") and Restricted Stock Units that vest upon the satisfaction of a time-based requirement and performance-based and/or market-based requirements (each, a "Performance Restricted Stock Unit").

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.

13 unchanged sentences

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

Service Option and Performance Option Fair Value Assumptions

The fair value for Service Options and Performance Options granted was estimated using a Black-Scholes option-pricing model.

The expected lives of the Service Options and Performance Options granted were based on the "SEC simplified" method and a mid-point assumption, respectively.

Service Option Fair Value Assumptions

The fair value for Service Options granted was estimated using a Black-Scholes option-pricing model.

The expected lives of the Service Options granted were based on the "SEC simplified" method.

Expected price volatility was determined based on the implied volatilities of comparable companies over a historical period that matches the expected life of the Unit Options.

1 unchanged sentence

Treasury rate over the expected life.

The dividend yield was based on the expectation that no dividends will be paid.

In 2022, the dividend yield was based on the most recent annualized quarterly dividend and the valuation date closing stock price.

In 2021 and 2020, the dividend yield was based on the expectation that no dividends will be paid.

The assumptions used to calculate the fair value of Unit Options 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 and Performance Options granted in 2021, 2020 and 2019:

The following table presents the assumptions and grant date fair values for Service Options granted in 2022, 2021 and 2020:

Fiscal Year Ended

January 29, 2022 January 30, 2021 February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021 (1)

Expected life in years 6.2 6.2 6.2

6 unchanged sentences

Weighted-average grant date fair value - Service Options $ 16.36 $ 11.92 $ 8.49

$ 11.92 $ 8.49 $ 8.66

Weighted-average grant date fair value - Performance Options (1)

$ — $ — $ 8.63

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

Unit Option Activity

Option Activity

The Company’s outstanding and unvested Service Options typically vest ratably over a four-year period, on each anniversary of their grant date.

2 unchanged sentences

Prior to the 2021 Vesting Event, the Company’s outstanding Performance Options typically vested ratably over a four-year period, after the conclusion of each fiscal year and upon our board of managers’ determination that the Company had achieved certain pre-determined annual earnings before interest, taxes, depreciation and amortization ("EBITDA") targets for such fiscal year.

Unit Option activity is as follows:

Service-Based Unit Options (1)

Option activity is as follows:

Service Options (1)

Weighted Average Exercise Price (2)

6 unchanged sentences

Exercised ( 423,696 ) 5.03 $ 6,066

Outstanding as of February 1, 2020 5,790,308 $ 12.76 5.5 $ 28,855

Outstanding as of January 30, 2021 6,282,782 $ 13.53 5.5 $ 50,055

Granted or modified 915,017 27.41

10 unchanged sentences

Exercisable as of January 28, 2023 2,161,345 $ 18.68 6.4 $ 79,914

(1) The fair value of a membership unit (2) as of each period end was $ 18.62 , $ 17.61 , $ 21.50 and $ 37.66 for the fiscal years 2018, 2019, 2020 and 2021, respectively.

(1) The fair value of a membership unit (2) / share price as of each period end was $ 17.61 , $ 21.50 , $ 37.66 and $ 55.65 for the fiscal years 2019, 2020, 2021 and 2022, respectively.

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

1 unchanged sentence

Therefore, the number of awards vested and expected to vest is equal to the awards outstanding.

Performance-Based Unit Options (1)

Performance Unit Options (1)

Weighted Average Exercise Price (2)

6 unchanged sentences

Exercised ( 115,184 ) 4.65 $ 1,928

Outstanding as of February 1, 2020 3,246,849 $ 9.51 3.6 $ 26,838

Outstanding as of January 30, 2021 2,948,621 $ 8.81 2.5 $ 37,422

Granted or modified — —

10 unchanged sentences

Exercisable as of January 28, 2023 218,477 $ 16.59 5.5 $ 8,534

(1) The fair value of a membership unit (2) as of each period end was $ 18.62 , $ 17.61 , $ 21.50 and $ 37.66 for the fiscal years 2018, 2019, and 2020 and 2021, respectively.

(1) The fair value of a membership unit (2) / share price as of each period end was $ 17.61 , $ 21.50 , $ 37.66 and $ 55.65 for the fiscal years 2019, 2020, 2021 and 2022, respectively.

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

1 unchanged sentence

Therefore, the number of awards vested and expected to vest is equal to the awards outstanding.

The total income tax benefit recognized from the exercise of stock options was $ 4.2 million, $ 18.5 million and $ 0.5 million for the fiscal years ended January 28, 2023, January 29, 2022 and January 30, 2021, respectively.

Restricted Unit Activity

8 unchanged sentences

Forfeited — — ( 88,459 ) 17.37 — —

Non-vested as of February 1, 2020 12,071 $ 16.57 1,044,813 $ 17.36 — $ —

Non-vested as of January 30, 2021 32,049 $ 17.01 1,339,330 $ 17.74 16,328 $ 13.87

Granted 358,960 36.64 — — 196,056 27.41

18 unchanged sentences

Fiscal Year Ended

January 29, 2022 January 30, 2021 February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Net income $ 628,001 $ 671,381 $ 308,764

3 unchanged sentences

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

207 313 1,224

Dilutive effect of Service Options (1)

1,678 2,300 773

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

Dilutive effect of Performance Unit Options (1)

202 637 1,433

18 unchanged sentences

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

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

on March 27, 2020, the Consolidated Appropriations Act of 2021 was enacted on December 27, 2020 and the American Rescue Plan Act of 2021 was enacted on March 11, 2021.

These legislative actions did not significantly impact our full year effective tax rate in fiscal 2020 or 2021.

The income tax provision consists of the following (amounts in thousands) as of:

Fiscal Year Ended

January 29, 2022 January 30, 2021 February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Current expense:

12 unchanged sentences

Fiscal Year Ended

January 29, 2022 January 30, 2021 February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

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

5 unchanged sentences

Effective income tax rate 23.3 % 21.9 % 9.0 %

The effective tax rate for periods ending January 30, 2021 and February 1, 2020 is less than the U.S.

The effective tax rate for the period ending January 30, 2021, 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.

3 unchanged sentences

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.

Components of deferred tax assets and liabilities consist of the following (amounts in thousands) as of:

11 unchanged sentences

Other ( 539 ) ( 337 )

Investment in NAHC — ( 138,358 )

Total deferred tax liabilities ( 285,465 ) ( 250,561 )

19 unchanged sentences

Additionally, during the year ended January 30, 2021, the Company signed 46 lease extensions requiring lease modification accounting treatment.

There were no lease expense credits or extensions requiring lease modification accounting treatment related to COVID-19 during the year ended January 29, 2022.

There were no lease expense credits or extensions requiring lease modification accounting treatment related to COVID-19 during the fiscal years ended January 28, 2023 and January 29, 2022, respectively.

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):

Fiscal Year Ended

January 29, 2022 January 30, 2021

January 28, 2023 January 29, 2022 January 30, 2021

Operating lease expense $ 201,398 $ 197,321 $ 196,794

5 unchanged sentences

Fiscal Year Ended

January 29, 2022 January 30, 2021

January 28, 2023 January 29, 2022 January 30, 2021

Right-of-use assets obtained in exchange for new operating lease liabilities $ 116,652 $ 26,253 $ 86,782

21 unchanged sentences

The termination fee was 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, of approximately $ 14.8 million and $ 3.6 million in 2020 and 2019, respectively.

We recognized advisory fees related to the Monitoring Agreement, including reimbursement of expenses, of approximately $ 14.8 million in 2020.

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

8 unchanged sentences

The Company paid $ 2.5 million in fees to KCM in connection with the Refinancing Transactions.

These fees are recorded as deferred loan costs, net of amortization, within the long-term debt on the balance sheets.

These fees are recorded as deferred loan costs, net of amortization, within the long-term debt on the consolidated balance sheets.

Other Related Party Transactions

2 unchanged sentences

The Company did not pay KCM any fees in connection with these secondary offerings.

In connection with the September 2021 Secondary Offering and the May 2021 Secondary Offering, we repurchased from the underwriters (1) 4,500,000 shares of ASO, Inc.

common stock at approximately $ 43.52 for approximately $ 195.8 million and (2) 3,229,974 shares of ASO, Inc.

In connection with the May 2021 Secondary Offering, we repurchased from the underwriters 3,229,974 shares of ASO, Inc.

common stock at $ 30.96 per share for approximately $ 100.0 million.

The shares repurchased were immediately retired by the Company (see Note 1).

In connection with the September 2021 Secondary Offering, we repurchased from the underwriters 4,500,000 shares of ASO, Inc.

common stock at approximately $ 43.52 for approximately $ 195.8 million.

The shares repurchased in both the May 2021 Secondary Offering and the September 2021 Secondary Offering were immediately retired by the Company (see Note 1 and Note 2).

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

1 unchanged sentence

Upon completion of the September 2021 Secondary Offering, KKR no longer holds an ownership interest in the Company.

Fidelity Investments Institutional Operations Company, LLC ("Fidelity") provides the Company with plan administration services on its 401(k) Plan and stock compensation programs (including the Company's Employee Stock Purchase Program).

The Company incurred expenses of approximately $ 0.2 million from Fidelity during the fiscal year ended January 29, 2022, which are included in selling, general and administrative expenses in the consolidated statements of income.

Fidelity is an affiliate of FMR LLC, which reported beneficial ownership of shares representing approximately 12.9 % of the Company's common stock as of January 29, 2022.

Investments in Managers

For the fiscal year ended February 1, 2020, executives and directors of the Company made cash purchases of Redeemable Membership Units in Managers for approximately $ 0.1 million.

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 investments in Managers for the fiscal year ended January 30, 2021.

During the year ended January 30, 2021, Managers repurchased at fair market value approximately $ 37.0 thousand of Redeemable Membership Units from a director of the Company for cash.

During the year ended February 1, 2020 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.

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.

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.

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

9 unchanged sentences

Commitments and Contingencies

Technology Related Commitments and Other

As of January 29, 2022, we have obligations under technology-related, construction and other contractual commitments in the amount of $ 22.6 million.

Freight, Technology Related Commitments and Other

As of January 28, 2023, we have obligations under freight, technology-related, construction and other contractual commitments in the amount of $ 117.4 million.

Of such commitments, approximately $ 78.3 million is payable in the next 12 months.

30 unchanged sentences

Operating income 205,493 256,734 179,522 204,800

Loss on early retirement of debt, net — 2,239 — —

Net income $ 149,806 $ 188,801 $ 131,741 $ 157,653

Earnings (loss) per common share:

Earnings per common share:

Basic $ 1.73 $ 2.28 $ 1.67 $ 2.03

6 unchanged sentences

Operating income 239,074 254,558 216,113 198,202

(Gain) loss on early retirement of debt, net — ( 7,831 ) — 4,249

Net income (loss) $ ( 10,020 ) $ 167,676 $ 59,586 $ 91,522

Earnings (loss) per common share:

$ ( 0.14 ) $ 2.31 $ 0.78 $ 1.01

$ ( 0.14 ) $ 2.25 $ 0.74 $ 0.97

Loss on early retirement of debt — 2,239 — —

Net income $ 177,796 $ 190,510 $ 161,305 $ 141,770

Earnings per common share:

Basic $ 1.93 $ 2.06 $ 1.77 $ 1.61

Diluted $ 1.84 $ 1.99 $ 1.72 $ 1.57

Weighted average common shares outstanding:

72,474 72,478 76,771 90,253

72,474 74,439 80,714 94,377

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

Basic 92,088 92,627 91,140 87,970

Diluted 96,472 95,891 93,844 90,475

Subsequent Events

5 unchanged sentences

Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on October 6, 2020).

Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on October 6, 2020).

Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q filed on December 6, 2022).

Indenture, dated as of November 6, 2020, by and among Academy, Ltd., as issuer, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee and notes collateral agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on November 6, 2020).

Description of Securities Registered Under Section 12 of the Exchange Act.

(incorporated by reference to Exhibit 4.3 to the Registrant’s Annual Report on Form 10-K filed on April 7, 2021).

Second Amended and Restated Credit Agreement, dated as of November 6, 2020, among Academy, Ltd., as Borrower, New Academy Holding Company, LLC, as Holdings, Associated Investors L.L.C.

25 unchanged sentences

Amendment to the Registration Rights Agreement, dated as of October 6, 2020, by and among the Registrant, Allstar LLC and New Academy Holding Company, LLC (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on October 6, 2020).

Form of 2022 Non-Employee Director Time-Based Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on September 7, 2022).

Form of 2022 CEO Performance-Based Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on June 7, 2022).

Form of 2022 CEO Time-Based Option Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on June 7, 2022).

Form of 2022 Executive Performance-Based Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed on June 7, 2022).

Form of 2022 Executive Time-Based Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q filed on June 7, 2022).

Form of 2022 Executive Time-Based Option Agreement (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q filed on June 7, 2022).

Form of 2021 RSU Executive Retention Award Agreement (incorporated by reference to Exhibit 10.01 to the Registrant's Quarterly Report on From 10-Q filed on December 10, 2021).

Exhibit Number Description of Exhibit

2021 Form of Performance-Based Restricted Stock Unit Agreement under the 2020 Omnibus Incentive Plan.

Plan (incorporated by reference to Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K filed on April 7, 2021).

2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on December 10, 2020).

5 unchanged sentences

1 to the Registrant’s Registration Statement on Form S-1 filed on September 23, 2020).

2021 Form of Performance-Based Restricted Stock Unit Agreement under the 2020 Omnibus Incentive Plan.

Plan (incorporated by reference to Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K filed on April 7, 2021).

Exhibit Number Description of Exhibit

2011 Unit Incentive Plan (incorporated by reference to Exhibit 10.13 to the Registrant’s Registration Statement on Form S-1 filed on September 23, 2020).

13 unchanged sentences

Form of 2018 CEO Restricted Unit Agreement under 2011 Unit Incentive Plan (as amended) (incorporated by reference to Exhibit 10.26 to the Registrant’s Registration Statement on Form S-1 filed on September 23, 2020).

Exhibit Number Description of Exhibit

Form of Independent Non-Employee Director Restricted Unit Agreement under 2011 Unit Incentive Plan (incorporated by reference to Exhibit 10.27 to the Registrant’s Registration Statement on Form S-1 filed on September 23, 2020).

4 unchanged sentences

Lawrence Employment Agreement, dated January 29, 2019 (incorporated by reference to Exhibit 10.31 to the Registrant’s Registration Statement on Form S-1 filed on September 23, 2020).

Exhibit Number Description of Exhibit

Samuel (Sam) J.

1 unchanged sentence

Jamey Traywick Rutherford Employment Agreement, dated October 1, 2018 (incorporated by reference to Exhibit 10.41 to the Registrant’s Annual Report on Form 10-K filed on April 7, 2021).

Manish Maini Employment Agreement, dated May 25, 2017 (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed on September 7, 2022).

Form of 2020 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.34 to Amendment No.

5 unchanged sentences

1 to the Registrant’s Registration Statement on Form S-1 filed on September 23, 2020).

Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on September 7, 2022).

Subsidiaries of the Registrant.

14 unchanged sentences

* Filed herewith

Exhibit Number Description of Exhibit

** This certification accompanies each report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

20 unchanged sentences

NEALON Director March 16, 2023

QUESTROM Director March 29, 2022

/s/ THERESA E.

PALERMO Director March 16, 2023

RAFF Director March 16, 2023

TAYLOR Director March 29, 2022

TURNER Director March 16, 2023

16 unchanged sentences

Self-insurance reserves 22,065 72,313 ( 69,869 ) (4) 24,509

February 1, 2020:

January 30, 2021:

Allowance for doubtful accounts $ 3,275 $ ( 205 ) (5) $ ( 1,898 ) (1) $ 1,172

8 unchanged sentences

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-K

Item 9A. Controls and Procedures