Baltimore, MD (October 25, 2011) - Under Armour, Inc. (NYSE: UA) today announced financial results for the third quarter ended September 30, 2011. Net revenues increased 42% in the third quarter of 2011 to $466 million compared with net revenues of $329 million in the prior year's period. Net income increased 32% in the third quarter of 2011 to $46 million compared with $35 million in the prior year's period. Diluted earnings per share for the third quarter of 2011 were $0.88 on weighted average common shares outstanding of 52.5 million compared with $0.68 per share on weighted average common shares outstanding of 51.2 million in the prior year's period. Diluted EPS benefited approximately $0.04 as a result of our ongoing tax planning strategies.
Third quarter apparel net revenues increased 31% to $363 million compared with $277 million in the same period of the prior year, driven by continued strength across Men's, Women's, Youth, and new product offerings including Charged Cotton and Fleece. Direct-to-Consumer net revenues, which represented 22% of total net revenues for the third quarter, grew 73% year-over-year. Third quarter footwear net revenues doubled to $52 million from $26 million in the prior year's period, primarily reflecting the introduction of new running footwear and earlier year-over-year shipments of basketball product. Third quarter accessories net revenues increased 211% to $40 million from $13 million in the prior year's period, primarily driven by the in-house transition of the Company's previously licensed hats and bags business which commenced in January 2011.
Kevin Plank, Chairman, CEO, and President of Under Armour, Inc., stated, "We surpassed a billion dollars in net revenues last year, and the Brand has already topped that milestone this year through the first three quarters. Our product engines are as strong as ever, as demonstrated by consecutive quarters of 40% plus growth for the first time since 2007. We successfully launched Storm Fleece during the quarter, our cold weather Charged Cotton product. We also elevated our footwear message while continuing to enhance our global distribution network. Our strong results and the early acceptance of new products such as Storm Fleece and our Charge RC footwear give us confidence that the consumer continues to vote for our Brand."
Gross margin for the third quarter of 2011 was 48.4% compared with 50.9% in the prior year's quarter primarily due to less favorable apparel product margins and the ongoing impact of the hats and bags transition in 2011. Selling, general and administrative expenses as a percentage of net revenues were 32.3% in the third quarter of 2011 compared with 33.6% in the prior year's period, reflecting leverage of corporate services and marketing expenses. Marketing expenses for the third quarter of 2011 were 10.4% of net revenues compared with 10.9% in the prior year's quarter. Third quarter operating income grew 32% to $75 million compared with $57 million in the prior year's period.
For the first nine months of 2011, net revenues increased 40% to $1.07 billion compared with $763 million in the prior year. Net income for the first nine months of 2011 increased 41% to $64 million compared with $46 million in the same period of 2010. Diluted earnings per share for the first nine months of 2011 were $1.23 on weighted average common shares outstanding of 52.5 million compared with $0.89 per share on weighted average common shares outstanding of 51.0 million in the prior year.
Balance Sheet Highlights
The Company had cash and cash equivalents of $68 million with $30 million of borrowings outstanding under its $300 million revolving credit facility at September 30, 2011. Inventory at September 30, 2011 increased 63% to $319 million compared with $196 million at September 30, 2010. Long-term debt increased to $80 million from $19 million in the prior year's period, primarily driven by the Company's completion of the corporate headquarters acquisition in July.
Updated 2011 Outlook
The Company had previously anticipated 2011 net revenues in the range of $1.42 billion to $1.44 billion, representing growth of 33% to 35% over 2010, and 2011 operating income in the range of $155 million to $160 million, representing growth of 38% to 42% over 2010. Based on current visibility, the Company now expects 2011 net revenues of $1.46 billion to $1.47 billion, representing growth of 37% to 38% over 2010, and 2011 operating income in the range of $159 million to $162 million, representing growth of 42% to 44% over 2010. The Company now expects an effective tax rate of approximately 38.4% for the full year, compared to previously provided full year guidance of 40.0% and an effective tax rate of 37.1% for 2010. The Company anticipates fully diluted weighted average shares outstanding of approximately 52.5 million to 52.7 million for 2011.
Mr. Plank concluded, "Our Brand continues to evolve and reach a broader range of consumers, and we believe we are still just scratching the surface of the Brand's global potential. As we focus on that potential, we will measure our success with an equal focus on driving topline with areas that will drive enhanced profitability and returns through improved management of our overall gross margin and inventory. We will continue to invest in the talent and resources needed to ensure this balanced approach."
Conference Call and Webcast
The Company will provide additional commentary regarding its third quarter results as well as provide an update on its 2011 outlook during its earnings conference call today, October 25th, at 8:30 a.m. ET. The call will be webcast live at http://investor.underarmour.com/events.cfm and will be archived and available for replay approximately three hours after the live event. Additional supporting materials related to the call will also be available at http://investor.underarmour.com. The Company's financial results are also available online at http://investor.underarmour.com/results.cfm.
About Under Armour, Inc.
Under Armour;® (NYSE: UA) is a leading developer, marketer, and distributor of branded performance apparel, footwear, and accessories. The brand's moisture-wicking fabrications are engineered in many different designs and styles for wear in nearly every climate to provide a performance alternative to traditional products. The Company's products are sold worldwide and worn by athletes at all levels, from youth to professional, on playing fields around the globe. The Under Armour global headquarters is in Baltimore, Maryland, with European headquarters in Amsterdam's Olympic Stadium, and additional offices in Denver, Hong Kong, Toronto, and Guangzhou, China. For further information, please visit the Company's website at www.ua.com.
Forward Looking Statements
Some of the statements contained in this press release constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, the development and introduction of new products, and the implementation of our marketing and branding strategies. In many cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "outlook," "potential" or the negative of these terms or other comparable terminology. The forward-looking statements contained in this press release reflect our current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to: changes in general economic or market conditions that could affect consumer spending and the financial health of our retail customers; our ability to effectively manage our growth and a more complex business; our ability to effectively develop and launch new, innovative and updated products; our ability to accurately forecast consumer demand for our products and manage our inventory in response to changing demands; increased competition causing us to reduce the prices of our products or to increase significantly our marketing efforts in order to avoid losing market share; fluctuations in the costs of our products; loss of key suppliers or manufacturers or failure of our suppliers or manufacturers to produce or deliver our products in a timely or cost-effective manner; changes in consumer preferences or the reduction in demand for performance apparel, footwear and other products; our ability to accurately anticipate and respond to seasonal or quarterly fluctuations in our operating results; our ability to effectively market and maintain a positive brand image; the availability, integration and effective operation of management information systems and other technology; and our ability to attract and maintain the services of our senior management and key employees. The forward-looking statements contained in this press release reflect our views and assumptions only as of the date of this press release. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.