April 27, 2017

Under Armour Reports First Quarter Results

Revenues up 7 Percent; Company Reiterates Full Year 2017 Outlook

BALTIMORE, April 27, 2017 /PRNewswire/ -- Under Armour, Inc. (NYSE: UA, UAA) today announced financial results for the first quarter ended March 31, 2017. All per share amounts are on a diluted basis. This release refers to "currency neutral" revenue, which is a non-GAAP financial measure described below under the "Non-GAAP Financial Information" paragraph.

"Our first quarter results were in line with our expectations and we're off to a solid start in 2017," said Under Armour Chairman and CEO Kevin Plank. "By proactively managing our growth to deliver superior innovative product, continuing to strengthen our connection with consumers and increasing our focus on operational excellence - we have great confidence in our ability to drive toward our full year targets."

First Quarter Income Statement Highlights

  • Revenue was up 7 percent to $1.1 billion, driven by a 4 percent increase in wholesale revenue to $773 million and a 13 percent increase in direct-to-consumer revenue to $302 million. North American revenue declined 1 percent as new distribution was more than offset by the absence of business lost to bankruptcies in 2016. International revenue, which is comprised of our EMEA, Asia-Pacific, and Latin America regions, represented 20 percent of total revenue in the quarter, and was up 52 percent (up 57 percent currency neutral). By region, revenue was up 55 percent in EMEA, 60 percent in Asia-Pacific and 30 percent in Latin America. Apparel revenue increased 7 percent to $715 million including strength in training, golf, and team sports. Footwear revenue grew 2 percent to $270 million, against last year's same period which was up 64 percent due to significant strength in basketball sales and the timing of liquidations. Accessories revenue increased 12 percent to $89 million with strength in men's training, running, youth, and global football.
  • Gross margin was down 70 basis points to 45.2 percent as benefits from channel and product mix were offset by continued efforts to manage inventories appropriate to market demand.
  • Selling, general and administrative expenses increased 12 percent to $498 million, or 44.6 percent of revenue (up 210 basis points), due to continued investments in the direct-to-consumer, footwear and international businesses.
  • Operating income was $8 million. There was a net loss of $2 million in the first quarter and a $0.01 loss in diluted earnings per share.

First Quarter Balance Sheet Highlights

  • Cash and cash equivalents increased 10 percent to $172 million.
  • Inventory increased 8 percent to $902 million.
  • Total debt decreased 8 percent to $861 million.

Fiscal 2017 Outlook

There are no changes to the company's full year 2017 outlook provided on January 31, 2017:

  • Net revenues expected to grow 11 to 12 percent to reach nearly $5.4 billion, up 12 to 13 percent currency neutral;
  • Gross margin expected to be slightly down compared to 46.4% in 2016 with benefits in product costs being offset by changes in foreign currency and shifts in overall sales mix, as the footwear and international businesses continue to outpace the growth of the higher margin apparel and North American businesses;
  • Operating income expected to reach approximately $320 million;
  • Interest expense of approximately $40 million; and,
  • An effective tax rate of 32 to 34 percent.

Conference Call and Webcast

Under Armour will hold its first quarter 2017 conference call and webcast today at approximately 8:30 a.m. Eastern Time. The call will be webcast live at http://investor.underarmour.com and will be archived and available for replay approximately three hours after the live event.

Non-GAAP Financial Information

The company reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). However, this press release refers to certain "currency neutral" financial information, which is a non-GAAP financial measure. The company provides a reconciliation of this non-GAAP measure to the most directly comparable financial measure calculated in accordance with GAAP. See the end of this press release for this reconciliation.

Currency neutral financial information is calculated to exclude foreign exchange impact. Management believes this information is useful to investors to facilitate a comparison of the company's results of operations period-over-period. This non-GAAP financial measure should not be considered in isolation and should be viewed in addition to, and not as an alternative for, the company's reported results prepared in accordance with GAAP. In addition, the company's non-GAAP financial information may not be comparable to similarly titled measures reported by other companies.

About Under Armour, Inc.

Under Armour, Inc. (NYSE: UA, UAA), the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. The Under Armour Connected Fitness™ platform powers the world's largest digital health and fitness community through a suite of applications: UA Record, MapMyFitness, Endomondo and MyFitnessPal. The Under Armour global headquarters is in Baltimore, Maryland. For further information, please visit the Company's website at www.uabiz.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, the implementation of our marketing and branding strategies, and the future benefits and opportunities from acquisitions and other significant investments. In many cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "assumes," "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 overall consumer spending or our industry; changes to the financial health of our customers; our ability to effectively manage our growth and a more complex global business; our ability to effectively drive operational efficiency in our business; our ability to comply with existing trade and other regulations, and the potential impact of new trade and tax regulations on our profitability; our ability to successfully manage or realize expected results from acquisitions and other significant investments or capital expenditures; our ability to effectively develop and launch new, innovative and updated products; increased competition causing us to lose market share or reduce the prices of our products or to increase significantly our marketing efforts; our ability to accurately forecast consumer demand for our products and manage our inventory in response to changing demands; 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, including due to port disruptions; our ability to further expand our business globally and to drive brand awareness and consumer acceptance of our products in other countries; our ability to accurately anticipate and respond to seasonal or quarterly fluctuations in our operating results; risks related to foreign currency exchange rate fluctuations; our ability to effectively market and maintain a positive brand image; the availability, integration and effective operation of information systems and other technology, as well as any potential interruption in such systems or technology; risks related to data security or privacy breaches; our ability to raise additional capital required to grow our business on terms acceptable to us; our potential exposure to litigation and other proceedings; and our ability to attract key talent and retain 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.

 

 

Under Armour, Inc.

For the Quarter Ended March 31, 2017 and 2016

(Unaudited; in thousands, except per share amounts)

CONSOLIDATED STATEMENTS OF INCOME

 
   

Quarter Ended March 31,

   

2017

 

% of Net
Revenues

 

2016

 

% of Net
Revenues

Net revenues

 

$

1,117,331

   

100.0

%

 

$

1,047,702

   

100.0

%

Cost of goods sold

 

611,908

   

54.8

%

 

567,066

   

54.1

%

   Gross profit

 

505,423

   

45.2

%

 

480,636

   

45.9

%

Selling, general and administrative expenses

 

497,887

   

44.6

%

 

445,753

   

42.5

%

   Income from operations

 

7,536

   

0.7

%

 

34,883

   

3.4

%

Interest expense, net

 

(7,820)

   

(0.7)

%

 

(4,532)

   

(0.4)

%

Other expense, net

 

2,570

   

0.2

%

 

2,702

   

0.2

%

   Income before income taxes

 

2,286

   

0.2

%

 

33,053

   

3.2

%

Provision for income taxes

 

4,558

   

0.4

%

 

13,873

   

1.4

%

   Net income (loss)

 

$

(2,272)

   

(0.2)

%

 

$

19,180

   

1.8

%

                 

Basic net income (loss) per share of Class A, B and C common stock

 

$

(0.01)

       

$

0.04

     

Diluted net income (loss) per share of Class A, B and C common stock

 

$

(0.01)

       

$

0.04

     
                 

Weighted average common shares outstanding Class A, B and C common stock

Basic

 

439,360

       

433,626

     

Diluted

 

439,360

       

443,260

     

 

 

Under Armour, Inc.

For the Quarter Ended March 31, 2017 and 2016

(Unaudited; in thousands)

 

NET REVENUES BY PRODUCT CATEGORY

 
   

Quarter Ended March 31,

   

2017

 

2016

 

% Change

Apparel

 

$

715,437

   

$

666,571

   

7.3

%

Footwear

 

269,659

   

264,246

   

2.0

%

Accessories

 

89,097

   

79,701

   

11.8

%

Total net sales

 

1,074,193

   

1,010,518

   

6.3

%

Licensing revenues

 

24,205

   

19,433

   

24.6

%

Connected Fitness

 

18,933

   

18,501

   

2.3

%

Intersegment eliminations

 

   

(750)

   

(100.0)

%

Total net revenues

 

$

1,117,331

   

$

1,047,702

   

6.6

%

 

NET REVENUES BY SEGMENT

 
   

Quarter Ended March 31,

   

2017

 

2016

 

% Change

North America

 

$

871,271

   

$

880,595

   

(1.1)

%

EMEA

 

102,855

   

66,267

   

55.2

%

Asia-Pacific

 

85,818

   

53,622

   

60.0

%

Latin America

 

38,454

   

29,467

   

30.5

%

Connected Fitness

 

18,933

   

18,501

   

2.3

%

Intersegment eliminations

 

   

(750)

   

(100.0)

%

Total net revenues

 

$

1,117,331

   

$

1,047,702

   

6.6

%

 

OPERATING INCOME (LOSS) BY SEGMENT

 
   

Quarter Ended March 31,

   

2017

 

2016

 

% Change

North America

 

$

3,714

   

$

40,095

   

(90.7)

%

EMEA

 

1,629

   

2,921

   

(44.2)

%

Asia-Pacific

 

19,628

   

17,335

   

13.2

%

Latin America

 

(7,859)

   

(9,007)

   

12.7

%

Connected Fitness

 

(9,576)

   

(16,461)

   

41.8

%

Income from operations

 

$

7,536

   

$

34,883

   

(78.4)

%

 

 

 

Under Armour, Inc.

As of March 31, 2017, December 31, 2016 and March 31, 2016

(Unaudited; in thousands)

CONDENSED CONSOLIDATED BALANCE SHEETS

 
   

As of
3/31/2017

 

As of
12/31/2016

 

As of
3/31/2016

Assets

           

Current assets

           

Cash and cash equivalents

 

$

172,128

   

$

250,470

   

$

157,001

 

Accounts receivable, net

 

629,235

   

622,685

   

566,286

 

Inventories

 

901,613

   

917,491

   

834,287

 

Prepaid expenses and other current assets

 

203,052

   

174,507

   

211,209

 

Total current assets

 

1,906,028

   

1,965,153

   

1,768,783

 

Property and equipment, net

 

830,539

   

804,211

   

601,910

 

Goodwill

 

571,381

   

563,591

   

588,895

 

Intangible assets, net

 

61,986

   

64,310

   

73,217

 

Deferred income taxes

 

121,108

   

136,862

   

92,230

 

Other long term assets

 

86,118

   

110,204

   

93,089

 

Total assets

 

$

3,577,160

   

$

3,644,331

   

$

3,218,124

 

Liabilities and Stockholders' Equity

           

Revolving credit facility, current

 

$

50,000

   

$

   

$

140,000

 

Accounts payable

 

294,857

   

409,679

   

184,243

 

Accrued expenses

 

217,310

   

208,750

   

224,076

 

Current maturities of long term debt

 

27,000

   

27,000

   

27,000

 

Other current liabilities

 

38,372

   

40,387

   

30,581

 

Total current liabilities

 

627,539

   

685,816

   

605,900

 

Long term debt, net of current maturities

 

784,052

   

790,388

   

217,525

 

Revolving credit facility, long term

 

   

   

550,000

 

Other long term liabilities

 

145,536

   

137,227

   

103,382

 

Total liabilities

 

1,557,127

   

1,613,431

   

1,476,807

 

Total stockholders' equity

 

2,020,033

   

2,030,900

   

1,741,317

 

Total liabilities and stockholders' equity

 

$

3,577,160

   

$

3,644,331

   

$

3,218,124

 

 

 

Under Armour, Inc.

For the Quarter Ended March 31, 2017 and 2016

(Unaudited; in thousands)

CONSOLIDATED STATEMENTS OF CASH FLOWS

 
 

Quarter Ended March 31,

 

2017

 

2016

Cash flows from operating activities

     

Net income (loss)

$

(2,272)

   

$

19,180

 

Adjustments to reconcile net income (loss) to net cash used in operating
activities

     

Depreciation and amortization

41,013

   

32,021

 

Unrealized foreign currency exchange rate losses

(8,313)

   

(11,248)

 

Loss on disposal of property and equipment

556

   

384

 

Amortization of bond premium

63

   

 

Stock-based compensation

12,082

   

14,403

 

Excess tax benefit (deficiency) from stock-based compensation
arrangements

(1,258)

   

27,058

 

Deferred income taxes

15,905

   

2,724

 

Changes in reserves and allowances

(21,187)

   

12,657

 

Changes in operating assets and liabilities, net of effects of acquisitions:

     

Accounts receivable

21,261

   

(136,990)

 

Inventories

19,084

   

(45,958)

 

Prepaid expenses and other assets

(7,598)

   

(15,351)

 

Accounts payable

(90,982)

   

(976)

 

Accrued expenses and other liabilities

7,253

   

22,312

 

Income taxes payable and receivable

(19,169)

   

(47,748)

 

Net cash used in operating activities

(33,562)

   

(127,532)

 

Purchases of property and equipment

(91,790)

   

(104,573)

 

Purchases of available-for-sale securities

   

(19,997)

 

Sales of available-for-sale securities

   

21,414

 

Net cash used in investing activities

(91,790)

   

(103,156)

 

Cash flows from financing activities

     

Proceeds from long term debt and revolving credit facility

200,000

   

415,000

 

Payments on long term debt and revolving credit facility

(156,750)

   

(145,500)

 

Employee taxes paid for shares withheld for income taxes

(2,474)

   

(13,685)

 

Proceeds from exercise of stock options and other stock issuances

2,782

   

3,954

 

Payments of debt financing costs

   

(1,258)

 

Net cash provided by financing activities

43,558

   

258,511

 

Effect of exchange rate changes on cash and cash equivalents

3,452

   

(674)

 

Net increase (decrease) in cash and cash equivalents

(78,342)

   

27,149

 

Cash and cash equivalents

     

Beginning of period

250,470

   

129,852

 

End of period

$

172,128

   

$

157,001

 

 

 

Under Armour, Inc.

For the Quarter Ended March 31, 2017 and 2016

(Unaudited)

 

The tables below present the reconciliation of non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP. See "Non-GAAP Financial Information" above for further information regarding the Company's use of non-GAAP financial measures.

 

CURRENCY NEUTRAL NET REVENUE GROWTH RECONCILIATION

 
 

Quarter Ended
March 31, 2017

Total Net Revenue

 

Net revenue growth - GAAP

   

6.6 %

Foreign exchange impact

   

0.5 %

Currency neutral net revenue growth - Non-GAAP

   

7.1 %

   

North America

 

Net revenue growth - GAAP

   

(1.1) %

Foreign exchange impact

   

(0.2) %

Currency neutral net revenue growth - Non-GAAP

   

(1.3) %

   

International

 

Net revenue growth - GAAP

   

52.1 %

Foreign exchange impact

   

4.6 %

Currency neutral net revenue growth - Non-GAAP

   

56.7 %

   

Connected Fitness

 

Net revenue growth - GAAP

   

2.3 %

Foreign exchange impact

   

— %

Currency neutral net revenue growth - Non-GAAP

   

2.3 %

 
 

BRAND HOUSE AND FACTORY HOUSE DOOR COUNT

 
 

Quarter Ended March 31,

 

2017

 

2016

Factory House

150

 

144

Brand House

18

 

12

   North America total doors

168

 

156

       

Factory House

38

 

18

Brand House

39

 

24

   International total doors

77

 

42

       

Factory House

188

 

162

Brand House

57

 

36

   Total doors

245

 

198

 

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/under-armour-reports-first-quarter-results-300446868.html

SOURCE Under Armour, Inc.

 

 

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