UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2024

OR

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

For the transition period from _____________________ to ____________________

Commission file number: 000-49850

 

BIG 5 SPORTING GOODS CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware		95-4388794
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
2525 East El Segundo Boulevard El Segundo, California		90245
(Address of Principal Executive Offices)		(Zip Code)
Registrant’s telephone number, including area code: (310) 536-0611

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	BGFV	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐		Accelerated filer	☒
Non-accelerated filer	☐		Smaller reporting company	☒
			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 22,624,232 shares of common stock, with a par value of $0.01 per share, outstanding as of April 23, 2024.

 

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BIG 5 SPORTING GOODS CORPORATION

INDEX

		Page
PART I – FINANCIAL INFORMATION
Item 1	Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	3
	Unaudited Condensed Consolidated Statements of Operations for the Thirteen Weeks Ended March 31, 2024 and April 2, 2023	4
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Thirteen Weeks Ended March 31, 2024 and April 2, 2023	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the Thirteen Weeks Ended March 31, 2024 and April 2, 2023	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
	Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)	20
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4	Controls and Procedures	27
PART II – OTHER INFORMATION
Item 1	Legal Proceedings	28
Item 1A	Risk Factors	28
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3	Defaults Upon Senior Securities	29
Item 4	Mine Safety Disclosures	29
Item 5	Other Information	29
Item 6	Exhibits	29
SIGNATURES		30

 

 

 

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BIG 5 SPORTING GOODS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

		March 31, 2024				December 31, 2023
ASSETS
Current assets:
Cash		$	12,621			$	9,201
Accounts receivable, net of allowances of $63 and $48, respectively			8,778				9,163
Merchandise inventories, net			275,839				275,759
Prepaid expenses			12,631				16,052
Total current assets			309,869				310,175
Operating lease right-of-use assets, net			258,014				253,615
Property and equipment, net			56,653				58,595
Deferred income taxes			16,196				13,427
Other assets, net of accumulated amortization of $2,137 and $1,954, respectively			8,828				8,871
Total assets		$	649,560			$	644,683
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	69,818			$	55,201
Accrued expenses			57,306				61,283
Current portion of operating lease liabilities			67,805				70,372
Current portion of finance lease liabilities			3,984				3,843
Total current liabilities			198,913				190,699
Operating lease liabilities, less current portion			197,612				191,178
Finance lease liabilities, less current portion			11,293				11,856
Other long-term liabilities			6,305				6,536
Total liabilities			414,123				400,269
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value, authorized 50,000,000 shares; issued 26,932,297 and    26,747,617 shares, respectively; outstanding 22,625,042 and 22,440,362 shares, respectively			269				267
Additional paid-in capital			129,150				128,737
Retained earnings			160,275				169,667
Less: Treasury stock, at cost; 4,307,255 shares			(54,257	)			(54,257	)
Total stockholders' equity			235,437				244,414
Total liabilities and stockholders' equity		$	649,560			$	644,683

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

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BIG 5 SPORTING GOODS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

		13 Weeks Ended
		March 31, 2024				April 2, 2023
Net sales		$	193,427			$	224,939
Cost of sales			133,029				149,795
Gross profit			60,398				75,144
Selling and administrative expense			71,379				75,173
Operating loss			(10,981	)			(29	)
Interest expense (income)			123				(115	)
(Loss) income before income taxes			(11,104	)			86
Income tax benefit			(2,818	)			(107	)
Net (loss) income		$	(8,286	)		$	193
(Loss) earnings per share:
Basic		$	(0.38	)		$	0.01
Diluted		$	(0.38	)		$	0.01
Weighted-average shares of common stock    outstanding:
Basic			21,832				21,629
Diluted			21,832				21,949

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 

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BIG 5 SPORTING GOODS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

		13 Weeks Ended March 31, 2024
										Additional								Treasury
		Common Stock								Paid-In				Retained				Stock,
		Shares				Amount				Capital				Earnings				At Cost				Total
Balance as of December 31, 2023			22,440,362			$	267			$	128,737			$	169,667			$	(54,257	)		$	244,414
Net loss			—				—				—				(8,286	)			—				(8,286	)
Dividends on common stock ($0.05 per share)			—				—				—				(1,106	)			—				(1,106	)
Issuance of nonvested share awards			276,660				3				(3	)			—				—				—
Exercise of share option awards			2,425				—				5				—				—				5
Share-based compensation			—				—				718				—				—				718
Forfeiture of nonvested share awards			(8,400	)			—				—				—				—				—
Retirement of common stock for payment    of withholding tax			(86,005	)			(1	)			(307	)			—				—				(308	)
Balance as of March 31, 2024			22,625,042			$	269			$	129,150			$	160,275			$	(54,257	)		$	235,437
		13 Weeks Ended April 2, 2023
										Additional								Treasury
		Common Stock								Paid-In				Retained				Stock,
		Shares				Amount				Capital				Earnings				At Cost				Total
Balance as of January 1, 2023			22,184,495			$	264			$	126,512			$	196,265			$	(54,257	)		$	268,784
Net income			—				—				—				193				—				193
Dividends on common stock ($0.25 per share)			—				—				—				(5,540	)			—				(5,540	)
Issuance of nonvested share awards			273,160				3				(3	)			—				—				—
Exercise of share option awards			18,800				—				57				—				—				57
Share-based compensation			—				—				679				—				—				679
Forfeiture of nonvested share awards			(3,080	)			—				—				—				—				—
Retirement of common stock for payment    of withholding tax			(79,204	)			(1	)			(618	)			—				—				(619	)
Balance as of April 2, 2023			22,394,171			$	266			$	126,627			$	190,918			$	(54,257	)		$	263,554

See accompanying notes to unaudited condensed consolidated financial statements.

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BIG 5 SPORTING GOODS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

		13 Weeks Ended
		March 31, 2024				April 2, 2023
Cash flows from operating activities:
Net (loss) income		$	(8,286	)		$	193
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization			4,375				4,510
Share-based compensation			718				679
Amortization of other assets			183				115
Noncash lease expense			17,353				17,451
Deferred income taxes			(2,769	)			(107	)
Changes in operating assets and liabilities:
Accounts receivable, net			385				1,036
Merchandise inventories, net			(80	)			(11,922	)
Prepaid expenses and other assets			3,281				771
Accounts payable			14,612				25,364
Operating lease liabilities			(17,885	)			(17,970	)
Accrued expenses and other long-term liabilities			(3,674	)			(7,828	)
Net cash provided by operating activities			8,213				12,292
Cash flows from investing activities:
Purchases of property and equipment			(1,810	)			(2,529	)
Net cash used in investing activities			(1,810	)			(2,529	)
Cash flows from financing activities:
Changes in book overdraft			(86	)			(383	)
Principal payments under finance lease liabilities			(899	)			(818	)
Proceeds from exercise of share option awards			5				57
Tax withholding payments for share-based compensation			(308	)			(619	)
Dividends paid			(1,695	)			(6,106	)
Net cash used in financing activities			(2,983	)			(7,869	)
Net increase in cash and cash equivalents			3,420				1,894
Cash and cash equivalents at beginning of period			9,201				25,565
Cash and cash equivalents at end of period		$	12,621			$	27,459
Supplemental disclosures of non-cash investing and financing activities:
Property and equipment acquired under finance leases		$	477			$	30
Property and equipment additions unpaid		$	857			$	946
Supplemental disclosures of cash flow information:
Interest paid		$	303			$	154
Income taxes paid		$	—			$	12

 

See accompanying notes to unaudited condensed consolidated financial statements.

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BIG 5 SPORTING GOODS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of

Big 5 Sporting Goods Corporation

El Segundo, California

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of Big 5 Sporting Goods Corporation and subsidiaries (the “Company”) as of March 31, 2024, the related condensed consolidated statements of operations, stockholders’ equity, and cash flows for the fiscal 13-week periods ended March 31, 2024 and April 2, 2023, and the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2023, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the fiscal year then ended (not presented herein); and in our report dated February 28, 2024, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2023, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ Deloitte & Touche LLP

Los Angeles, California

May 1, 2024

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the Big 5 Sporting Goods Corporation (“we,” “our,” “us”) financial condition and results of operations includes information with respect to our plans and strategies for our business and should be read in conjunction with our interim unaudited condensed consolidated financial statements and related notes (“Interim Financial Statements”) included herein, the Risk Factors included herein and in our other filings with the Securities and Exchange Commission (“SEC”), and our consolidated financial statements, related notes, Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Our fiscal year ends on the Sunday nearest December 31. Fiscal 2024 is comprised of 52 weeks and ends on December 29, 2024. Fiscal 2023 was comprised of 52 weeks and ended on December 31, 2023. The interim periods in fiscal 2024 and 2023 are each comprised of 13 weeks.

Overview

We are a leading sporting goods retailer in the western United States, with 424 stores and an e-commerce platform under the name “Big 5 Sporting Goods” as of March 31, 2024. We provide a full-line product offering in a traditional sporting goods store format that averages approximately 12,000 square feet. Our product mix includes athletic shoes, apparel and accessories, as well as a broad selection of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, home recreation, tennis, golf, and winter and summer recreation.

In the first quarter of fiscal 2024 we closed six stores and in the first quarter of fiscal 2023 we closed two stores. For fiscal 2024, we anticipate opening approximately five new stores and closing approximately ten stores.

Executive Summary

Our net loss in the first quarter of fiscal 2024 compared with net income in the first quarter of fiscal 2023 primarily reflected the impact of reduced net sales, which was partially offset by the favorable effect of higher merchandise margins and lower selling and administrative expense year over year. The decrease in net sales in the first quarter of fiscal 2024 in part reflected significant and persistent inflationary pressures which continued to dampen consumer sentiment and reduce demand for discretionary products.

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Results of Operations

The results of the interim periods are not necessarily indicative of results for the entire fiscal year.

13 Weeks Ended March 31, 2024 Compared to 13 Weeks Ended April 2, 2023

The following table sets forth selected items from our interim unaudited condensed consolidated statements of operations by dollar and as a percentage of our net sales for the periods indicated:

		13 Weeks Ended
		March 31, 2024								April 2, 2023
		(Dollars in thousands)
Net sales		$	193,427				100.0	%		$	224,939				100.0	%
Cost of sales (1)			133,029				68.8				149,795				66.6
Gross profit			60,398				31.2				75,144				33.4
Selling and administrative expense (2)			71,379				36.9				75,173				33.4
Operating loss			(10,981	)			(5.7	)			(29	)			0.0
Interest expense (income)			123				0.1				(115	)			(0.1	)
(Loss) income before income taxes			(11,104	)			(5.8	)			86				0.1
Income tax benefit			(2,818	)			(1.5	)			(107	)			0.0
Net (loss) income		$	(8,286	)			(4.3	)%		$	193				0.1	%

 

Net Sales. Net sales decreased by $31.5 million, or 14.0%, to $193.4 million in the first quarter of fiscal 2024 from $224.9 million in the first quarter last year. The change in net sales reflected the following:

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Gross Profit. Gross profit decreased by $14.7 million to $60.4 million, or 31.2% of net sales, in the 13 weeks ended March 31, 2024, compared with $75.1 million, or 33.4% of net sales, in the 13 weeks ended April 2, 2023. The change in gross profit was primarily attributable to the following:

Selling and Administrative Expense. Selling and administrative expense decreased by $3.8 million to $71.4 million, or 36.9% of net sales, in the 13 weeks ended March 31, 2024, compared to $75.2 million, or 33.4% of net sales, in the first quarter of last year. The change in selling and administrative expense was primarily attributable to the following:

Interest Expense (Income). Interest expense increased by $0.2 million in the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023 as a result of generating interest income in the prior fiscal year that reflected higher interest earned on cash investments.

Income Tax Benefit. The provision for income taxes was a benefit of $2.8 million and a benefit of $0.1 million for the first quarter of fiscal 2024 and 2023, respectively, primarily reflecting a pre-tax loss in the current year and an increased tax benefit related to stock compensation in the prior year.

Liquidity and Capital Resources

Our principal liquidity requirements are for working capital, capital expenditures and cash dividends. We fund our liquidity requirements primarily through cash on hand, cash flows from operations and borrowings from our revolving credit facility.

As of March 31, 2024, we had $12.6 million of cash compared to $27.5 million of cash and cash equivalents as of April 2, 2023. Our cash flows from operating, investing and financing activities are summarized as follows:

 

		13 Weeks Ended
		March 31, 2024				April 2, 2023
		(In thousands)
Total cash provided by (used in):
Operating activities		$	8,213			$	12,292
Investing activities			(1,810	)			(2,529	)
Financing activities			(2,983	)			(7,869	)
Net increase in cash and cash equivalents		$	3,420			$	1,894

 

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Operating Activities. Operating cash flows for the first quarter of fiscal 2024 and 2023 were a positive $8.2 million and a positive $12.3 million, respectively. The decreased cash flow provided by operating activities for the first quarter of fiscal 2024 compared to the prior year primarily reflected lower net income, partially offset by a smaller decrease in accrued expenses mainly related to company performance-based incentive awards.

Investing Activities. Net cash used in investing activities for the first quarter of fiscal 2024 and 2023 was $1.8 million and $2.5 million, respectively. Capital expenditures, excluding non-cash acquisitions, represented all of the cash used in investing activities for each period. Capital expenditures for both periods primarily reflect store-related remodeling, distribution center investments and computer hardware and software purchases.

Financing Activities. Financing cash flows for the first quarter of fiscal 2024 and 2023 were a negative $3.0 million and a negative $7.9 million, respectively. For the first quarter of both periods, cash was used primarily to fund dividend payments and make principal payments on finance lease liabilities. Dividend payments in the current year were lower than the prior year, which reflected a reduction of dividends declared from $0.25 per share of outstanding common stock in the first quarter of fiscal 2023 to $0.05 per share of outstanding common stock in the first quarter of fiscal 2024, respectively.

As of March 31, 2024 and April 2, 2023, we had no revolving credit borrowings, and $2.0 million and $1.4 million, respectively, of letter of credit commitments outstanding.

In the first nine months of fiscal 2023, we paid quarterly cash dividends of $0.25 per share of outstanding common stock, and in the fourth quarter of fiscal 2023, we paid a quarterly cash dividend of $0.125 per share of outstanding common stock. In the first quarter of fiscal 2024, we paid a quarterly cash dividend of $0.05 per share of outstanding common stock, and in the second quarter of fiscal 2024, our Board of Directors declared a quarterly cash dividend of $0.05 per share of outstanding common stock, which will be paid on June 14, 2024 to stockholders of record as of May 31, 2024.

Periodically, we repurchase our common stock in the open market pursuant to programs approved by our Board of Directors. We may repurchase our common stock for a variety of reasons, including, among other things, our alternative cash requirements, existing business conditions and the current market price of our stock. Our current share repurchase program authorizes the purchase of up to $25.0 million of our common stock. Under this program, we may purchase shares from time to time in the open market or in privately negotiated transactions in compliance with the applicable rules and regulations of the SEC. However, the timing and amount of such purchases, if any, would be at the discretion of our management and Board of Directors, and would depend on market conditions and other considerations. We did not repurchase any shares of our common stock in fiscal 2023 or the first quarter of fiscal 2024. Since the inception of our initial share repurchase program in May 2006 through March 31, 2024, we have repurchased a total of 4,186,014 shares for $53.6 million.

Loan Agreement. We are party to a Loan, Guaranty and Security agreement with Bank of America, N.A. (“BofA”), as agent and lender, which was amended on November 22, 2021, October 19, 2022 and May 16, 2023 (as so amended, the “Loan Agreement”). The Loan Agreement has a maturity date of February 24, 2026 and provides for a revolving credit facility with an aggregate committed availability of up to $150.0 million. We may also request additional increases in aggregate availability, up to a maximum of $200.0 million, in which case the existing lender under the Loan Agreement will have the option to increase their commitment to accommodate the requested increase. If the lender does not exercise that option, we may (with the consent of BofA in its role as the administrative agent, not to be unreasonably withheld) seek other lenders willing to provide such commitments. The credit facility includes a $50.0 million sublimit for issuances of letters of credit.

We may borrow under the Loan Agreement from time to time, provided the amounts outstanding will not exceed the lesser of the then aggregate committed availability (as discussed above) and the Borrowing Base (such lesser amount being referred to as the “Line Cap”). As defined in the Loan Agreement, the “Borrowing Base” generally is comprised of the sum, at the time of calculation, of (a) 90.00% of eligible credit card receivables; plus (b) the cost of eligible inventory (other than eligible in-transit inventory), net of inventory reserves, multiplied by 90.00% of the appraised net orderly liquidation value of eligible inventory (expressed as a percentage of the cost of eligible inventory); plus (c) the cost of eligible in-transit inventory, net of inventory reserves, multiplied by 90.00% of the appraised net orderly liquidation value of eligible in-transit inventory (expressed as a percentage of the cost of eligible in-transit inventory), minus (d) certain agreed-upon reserves as well as other reserves established by BofA in its role as the administrative agent in its reasonable discretion.

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Generally, we may designate specific borrowings under the Loan Agreement as either base rate loans or Term SOFR rate loans. The applicable interest rate on our borrowings is a function of the daily average, over the preceding fiscal quarter, of the excess of the Line Cap over amounts borrowed (such amount being referred to as the “Average Daily Availability”). Those loans designated as Term SOFR rate loans bear interest at a rate equal to the then applicable secured overnight financing rate as administered by the Federal Reserve Bank of New York (“SOFR”) rate plus a 0.10% “SOFR adjustment” spread, plus an applicable margin as shown in the table below. Those loans designated as base rate loans bear interest at a rate equal to the applicable margin for base rate loans (as shown below) plus the highest of (a) the Federal funds rate, as in effect from time to time, plus one-half of one percent (0.50%), (b) the one-month SOFR rate, plus one percentage point (1.00%), or (c) the rate of interest in effect for such day as announced from time to time within BofA as its “prime rate.” The applicable margin for all loans will be a function of Average Daily Availability for the preceding fiscal quarter as set forth in the following table.

Level		Average Daily Availability		SOFR Rate Applicable Margin		Base Rate Applicable Margin
I		Greater than or equal to $70,000,000		1.375%		0.375%
II		Less than $70,000,000		1.500%		0.500%

The commitment fee assessed on the unused portion of the credit facility is 0.20% per annum.

Obligations under the Loan Agreement are secured by a general lien on and security interest in substantially all of our assets. The Loan Agreement contains covenants that require us to maintain a fixed charge coverage ratio of not less than 1.0:1.0 in certain circumstances, and limits the ability to, among other things, incur liens, incur additional indebtedness, transfer or dispose of assets, change the nature of the business, guarantee obligations, pay dividends or make other distributions or repurchase stock, and make advances, loans or investments. We may generally declare or pay cash dividends or repurchase stock only if, among other things, no default or event of default then exists or would arise from such dividend or repurchase of stock and, after giving effect to such dividend or repurchase, certain availability and/or fixed charge coverage ratio requirements are satisfied, although we are permitted to make up to $5.0 million of dividend payments or stock repurchases per year without satisfaction of the availability or fixed charge coverage ratio requirements, but dividends or stock repurchases made without satisfying the availability and/or fixed charge coverage ratio requirements will require the establishment of an additional reserve that will reduce borrowing availability under the Loan Agreement for 75 days. The Loan Agreement contains customary events of default, including, without limitation, failure to pay when due principal amounts with respect to the credit facility, failure to pay any interest or other amounts under the credit facility, failure to comply with certain agreements or covenants contained in the Loan Agreement, failure to satisfy certain judgments against us, failure to pay when due (or any other default which permits the acceleration of) certain other material indebtedness in principal amount in excess of $5.0 million, and certain insolvency and bankruptcy events.

Future Capital Requirements. We had cash of $12.6 million as of March 31, 2024. We expect capital expenditures for fiscal 2024, excluding non-cash acquisitions, to range from approximately $13.0 million to $18.0 million primarily to fund store-related remodeling, the opening of new stores, distribution center investments and computer hardware and software purchases. For fiscal 2024, we anticipate opening approximately five new stores and closing approximately ten stores.

Dividends are paid at the discretion of our Board of Directors. In the first quarter of fiscal 2024, we paid a quarterly cash dividend of $0.05 per share of outstanding common stock, and in the second quarter of fiscal 2024, our Board of Directors declared a quarterly cash dividend of $0.05 per share of outstanding common stock, which will be paid on June 14, 2024 to stockholders of record as of May 31, 2024.

As of March 31, 2024, a total of $20.9 million remained available for share repurchases under our new share repurchase program. We did not repurchase any shares of our common stock in the first quarter of fiscal 2024. We consider several factors in determining when and if we make share repurchases including, among other things, our alternative cash requirements, existing business conditions and the market price of our stock.

We believe we will be able to fund our cash requirements from cash and cash equivalents, operating cash flows and borrowings from our credit facility, for at least the next 12 months.

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Contractual Obligations. Our material contractual obligations include operating lease commitments associated with our leased properties and other occupancy expense, finance lease obligations, borrowings under the credit facility, if any, and other liabilities. Operating lease commitments consist principally of leases for our retail store facilities, distribution center and corporate offices. These leases frequently include options which permit us to extend the terms beyond the initial fixed lease term, and we intend to renegotiate most of these leases as they expire. Operating lease commitments also consist of information technology (“IT”) systems hardware, distribution center delivery tractors and equipment. Additional information regarding our operating and finance leases is available in Notes 2 and 6 to the Interim Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.

In the first quarter of fiscal 2024 and 2023, we had zero borrowings under our revolving credit facility.

In the ordinary course of business, we enter into arrangements with vendors to purchase merchandise in advance of expected delivery. Because most of these purchase orders do not contain any termination payments or other penalties if cancelled, they are not included as outstanding contractual obligations.

Critical Accounting Estimates

As discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, we consider our estimates on valuation of merchandise inventory and valuation of long-lived assets to be among the most critical in understanding the judgments that are involved in preparing our consolidated financial statements. There have been no significant changes to these estimates in the 13 weeks ended March 31, 2024.

Seasonality and Impact of Inflation

We experience seasonal fluctuations in our net sales and operating results, which can suffer when weather does not conform to seasonal norms. Seasonality in our net sales influences our buying patterns which directly impacts our merchandise and accounts payable levels and cash flows. We purchase merchandise for seasonal activities in advance of a season and supplement our merchandise assortment as necessary and when possible during the season. Our efforts to replenish products during a season are not always successful. In the fourth fiscal quarter, which includes the holiday selling season and the start of the winter selling season, we normally experience higher inventory purchase volumes and increased expense for staffing and advertising. If we miscalculate the consumer demand for our products generally or for our product mix in advance of a season, particularly the fourth quarter, our net sales can decline, which can harm our financial performance. A significant shortfall from expected net sales, particularly during the fourth quarter, can negatively impact our annual operating results.

Throughout most of fiscal 2023, we experienced greater inflation in the cost of products that we purchase for resale than in previous years, although product cost inflation moderated later in the year and into fiscal 2024. While our merchandise inventory costs have been impacted by inflationary pressures, we have generally been able to adjust our selling prices in response to these higher product purchase costs. However, if we are unable to adjust our selling prices for product purchase cost increases that might occur in the future, then our merchandise margins could decline, which would adversely impact our operating results. In fiscal 2023 and the first quarter of fiscal 2024, we also experienced increased wage rate pressure as a result of competition for labor in certain markets and we expect these dynamics to continue throughout fiscal 2024. Broad-based inflationary pressures adversely impacted many categories of costs and expenses during fiscal 2023 and the first quarter of fiscal 2024. This impact is expected to continue during the remainder of fiscal 2024.

Recently Issued Accounting Updates

See Note 2 to the Interim Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.

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Forward-Looking Statements

This document includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, among other things, our financial condition, our results of operations, our growth strategy and the business of our company generally. In some cases, you can identify such statements by terminology such as “may,” “could,” “project,” “estimate,” “potential,” “continue,” “should,” “expects,” “plans,” “anticipates,” “believes,” “intends” or other such terminology. These forward-looking statements involve known and unknown risks and uncertainties and other factors that may cause our actual results in current or future periods to change significantly and differ materially from forecasted results. These forward-looking statements involve known and unknown risks and uncertainties and other factors that may cause our actual results in current or future periods to change significantly and differ materially from forecasted results. These risks and uncertainties include, among other things, the impacts of COVID-19 on our business operations, global supply chain disruptions resulting from the ongoing conflicts in Ukraine and the Middle East, changes in the consumer spending environment, fluctuations in consumer holiday spending patterns, increased competition from e-commerce retailers, breach of data security or other unauthorized disclosure of sensitive personal or confidential information, the competitive environment in the sporting goods industry in general and in our specific market areas, inflation, product availability and growth opportunities, changes in the current market for (or regulation of) firearm-related products, a reduction or loss of product from a key supplier, disruption in product flow, seasonal fluctuations, weather conditions, changes in cost of goods, operating expense fluctuations, increases in labor and benefit-related expense, changes in laws or regulations, including those related to tariffs and duties as well as environmental, social and governance issues, public health issues (including those caused by COVID-19 or any potential variants), impacts from civil unrest or widespread vandalism, lower than expected profitability of our e-commerce platform or cannibalization of sales from our existing store base which could occur as a result of operating the e-commerce platform, litigation risks, stockholder campaigns and proxy contests, risks related to our historically leveraged financial condition, changes in interest rates, credit availability, higher expense associated with sources of credit resulting from uncertainty in financial markets and economic conditions in general. Those and other risks and uncertainties are more fully described in Part II, Item 1A, Risk Factors, in this report and in Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K and other filings with the SEC. We caution that the risk factors set forth in this report and the other reports that we file with the SEC are not exclusive. In addition, we conduct our business in a highly competitive and rapidly changing environment. Accordingly, new risk factors may arise. It is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. We undertake no obligation to revise or update any forward-looking statement that may be made from time to time by us or on our behalf.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Because we are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, we are not required to provide the information under this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our CEO and CFO have concluded that, as of the end of such period, our disclosure controls and procedures are effective, at a reasonable assurance level, in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act and are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

During the fiscal quarter ended March 31, 2024, no changes occurred with respect to our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On March 13, 2023, a complaint was filed in the Superior Court of the State of California, County of Santa Clara, entitled Zareyah Thompson v. Big 5 Corp., et. al., Case No. 23CV412334 (“Thompson Complaint”). The Thompson Complaint was brought as a purported California Private Attorneys General Act (“PAGA”) action on behalf of “current and former employees who worked for the Company or its operating subsidiary in California as a non-exempt, hourly paid employee and received at least one wage statement.” The Thompson Complaint alleges, among other things, that Big 5 failed to (i) provide minimum wages, (ii) provide compliant meal or rest periods, (iii) maintain and provide accurate itemized wage statements, (iv) properly compensate for all time worked, including overtime, premium, vacation and final wages, (v) properly maintain payroll records, and (vi) provide suitable seating. On March 21, 2023, a second complaint was filed in the Superior Court of the State of California, County of Santa Clara, entitled Christopher Puga v. Big 5 Corp., et. al., Case No. 23CV412953 (“Puga Complaint”). The Puga Complaint was brought as a purported PAGA action on behalf of “all current and former non-exempt employees that worked either directly or via a staffing agency for the Company or its operating subsidiary at any location in California” (“Putative Covered Employees”). The Puga Complaint alleges, among other things, that Big 5 (i) unlawfully required Putative Covered Employees to agree to unlawful criminal background checks, (ii) conducted unlawful financial and criminal background checks, and did not (iii) provide minimum wages, (iv) provide accurate itemized wage statements, (v) maintain accurate records pertaining to the Putative Covered Employees’ employment, (vi) produce or make available Putative Covered Employees’ personnel records and/or payroll records, (vii) provide compliant meal or rest periods, (viii) properly compensate for all time worked, including overtime, premium, vacation, and final wages, (ix) reimburse necessary business expenses; (x) provide suitable seating; (xi) provide sick leave pay to Putative Covered Employees, (xii) accurately calculate sick leave accrual and rate of pay, (xiii) put the Putative Covered Employees on notice of their paid sick leave rights, and (xiv) provide supplemental paid sick leave. The Thompson and Puga complaints have many overlapping causes of action. Accordingly, on or about April 12, 2023, a notice of related cases was filed with the Court regarding the Thompson Complaint and Puga Complaint. The Court subsequently conducted a case management conference on June 29, 2023 for both complaints, and jointly coordinated the complaints. The Company’s counsel held a mediation with opposing counsel on September 27, 2023. The Company has reached a tentative settlement in both cases and established a cumulative indemnity reserve of $1.5 million. Any settlement finalized will be subject to Court approval.

The Company is involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters is not expected to have a material adverse effect on the Company’s results of operations or financial condition.

Item 1A. Risk Factors

There have been no material changes to the risk factors identified in Part I, Item 1A, Risk Factors, of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

 

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following tabular summary reflects the Company’s share repurchase activity during the quarter ended March 31, 2024:

ISSUER PURCHASES OF EQUITY SECURITIES
Period		Total Number of Shares Purchased (1)				Average Price Paid per Share				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs				Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or    Programs (2)
January 1 – January 28			—			$	—				—			$	20,864,000
January 29 – February 25			—			$	—				—			$	20,864,000
February 26 – March 31			86,005			$	—				—			$	20,864,000
Total			86,005								—			$	20,864,000

 

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the fiscal quarter ended March 31, 2024, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

Item 6. Exhibits

Exhibit Number		Description of Document
15.1		Independent Auditors’ Awareness Letter Regarding Interim Financial Statements. (1)
31.1		Rule 13a-14(a) Certification of Chief Executive Officer. (1)
31.2		Rule 13a-14(a) Certification of Chief Financial Officer. (1)
32.1		Section 1350 Certification of Chief Executive Officer. (1)
32.2		Section 1350 Certification of Chief Financial Officer. (1)
101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. (1)
101.SCH		Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents. (1)
104		Cover Page Interactive Data File (embedded within the Inline XBRL document). (1)

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BIG 5 SPORTING GOODS CORPORATION,
	a Delaware corporation
Date: May 1, 2024	By:	/s/ Steven G. Miller
		Steven G. Miller
		Chairman of the Board of Directors, President and Chief Executive Officer
Date: May 1, 2024	By:	/s/ Barry D. Emerson
		Barry D. Emerson
		Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

 

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