Document


 
 
 
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ________________________________________________________________________________ 
FORM 8-K
 ________________________________________________________________________________ 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 26, 2018
________________________________________________________________________________  
UNDER ARMOUR, INC.
 ________________________________________________________________________________ 
Maryland
 
001-33202
 
52-1990078
(State or other jurisdiction of
incorporation or organization)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)
 
 
1020 Hull Street, Baltimore, Maryland
 
21230
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (410) 454-6428
(Former name or former address, if changed since last report)
 ________________________________________________ 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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.

¨
 
 
 
 
 





Item 2.02. Results of Operations and Financial Condition.
On July 26, 2018, Under Armour, Inc. (“Under Armour”, or the “Company”) issued a press release announcing its financial results for the second quarter ended June 30, 2018. A copy of Under Armour’s press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. Under Armour has scheduled a conference call for 8:30 a.m. ET on July 26, 2018 to discuss its financial results.
Item 2.05. Costs Associated With Exit or Disposal Activities.

The Company previously announced a 2018 restructuring plan pursuant to which the Company expected to incur approximately $110 million to $130 million of estimated pre-tax restructuring and related charges during 2018. After further review, the Company has identified further opportunities and on July 23, 2018, the Company’s Board of Directors approved additional restructuring initiatives, resulting in an increase to the 2018 restructuring plan to approximately $190 million to $210 million of total pre-tax restructuring and related charges during 2018.

Based on the updated 2018 restructuring plan, the Company anticipates that these restructuring and related charges for its full 2018 fiscal year will consist primarily of:

up to $155 million of cash restructuring charges, consisting of up to $75 million in facility and lease termination costs, and up to $80 million in contract termination and other restructuring costs; and

up to $55 million of non-cash charges comprised of up to $20 million of inventory related charges, and up to $35 million of asset related impairments.

Through the six months ended June 30, 2018, the Company has incurred approximately $96 million in cash restructuring related charges, and $34 million in non-cash restructuring related charges.

This disclosure contains forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements other than those that are purely historical are forward-looking statements, and include statements regarding anticipated charges and restructuring costs and the timing of these measures. These forward-looking statements are subject to risks, uncertainties, assumptions and changes in circumstances that may cause the estimated future impact of these charges and restructuring costs to differ materially from the forward-looking statements. These risks include the Company’s ability to successfully execute its restructuring plans, higher than anticipated costs in implementing the restructuring plan, management distraction from ongoing business activities and damage to the Company’s reputation and brand image. Additional information regarding other factors that could cause the Company’s results to differ can be found in the Company’s press release attached hereto as Exhibit 99.1, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, and the Company’s subsequent filings with the U.S. Securities and Exchange Commission, including its Quarterly Reports on Form 10-Q. The forward-looking statements contained in this disclosure reflects the Company’s views and assumptions only as of the date of this Current Report on Form 8-K. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which this disclosure is made or to reflect the occurrence of unanticipated events.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No.
 
Exhibit
 
Under Armour, Inc. press release announcing financial results for the second quarter ended June 30, 2018.







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 hereunto duly authorized.
 
 
UNDER ARMOUR, INC.
 
 
 
 
Date: July 26, 2018
 
By:
 
/s/ David E. Bergman
 
 
 
 
David E. Bergman
 
 
 
 
Chief Financial Officer



Exhibit
                                                
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UNDER ARMOUR REPORTS SECOND QUARTER RESULTS

Revenue up 8 Percent; Company Updates Full Year 2018 Outlook

BALTIMORE, July 26, 2018 – Under Armour, Inc. (NYSE: UA, UAA) today announced financial results for the second quarter ended June 30, 2018. The company reports its financial performance in accordance with accounting principles generally accepted in the United States of America ("GAAP”). This press release refers to “currency neutral” and “adjusted” amounts, which are non-GAAP financial measures described below under the “Non-GAAP Financial Information” paragraph. References to adjusted financial measures exclude the impact of the company’s restructuring plans and the related tax effects, as well as adjustments to our one-time impacts of the 2017 U.S. tax reform legislation, which we refer to as the U.S. Tax Act. Reconciliations of non-GAAP amounts to the most directly comparable financial measure calculated in accordance with GAAP are presented in supplemental financial information furnished with this release. All per share amounts are reported on a diluted basis.

“Through the first half of 2018, we are making progress toward our transformation of running a more operationally excellent company while amplifying the power of the Under Armour brand,” said Under Armour Chairman and CEO Kevin Plank. “The ongoing improvements in our structure, systems and go-to-market process across our global business better position us to drive a more consistent, predictable path to deliver for our consumers, customers and shareholders over the long-term.”

Second Quarter Review

Revenue was up 8 percent to $1.2 billion (up 7 percent currency neutral).
Revenue to wholesale customers increased 9 percent to $710 million and direct-to-consumer revenue was up 7 percent to $414 million. The direct-to-consumer business represented 35 percent of global revenue in the quarter.
North America revenue increased 2 percent to $843 million (up 1 percent currency neutral) and the international business continued to deliver strong growth with a 28 percent increase to $302 million (up 24 percent currency neutral), representing 26 percent of total revenue. Within the international business, revenue in EMEA was up 31 percent (up 25 percent currency neutral), up 34 percent in Asia-Pacific (up 28 percent currency neutral) and up 7 percent in Latin America (up 12 percent currency neutral).
Apparel revenue increased 10 percent to $747 million, driven by strength in training and running. Footwear revenue was up 15 percent to $271 million with strength in running and team sports. Accessories revenue decreased 14 percent to $106 million due to softer demand.
Gross margin decreased 110 basis points to 44.8 percent due to inventory management initiatives and a $6 million impact related to restructuring efforts. Adjusted gross margin, decreased 60 basis points to 45.3 percent driven predominantly by inventory management initiatives.
Selling, General & Administrative expenses increased 10 percent to $553 million, or 47.0 percent of revenue driven by continued investments in the direct-to-consumer, footwear and international businesses, along with a reserve related to a commercial dispute.
Restructuring and impairment charges were $79 million.
Operating loss was $105 million. Adjusted operating loss was $20 million.
Net loss was $96 million. Excluding the impact of the restructuring plan, adjusted net loss was $34 million.



                                                
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Diluted loss per share was $0.21. Adjusted diluted loss per share was $0.08.
Inventory increased 11 percent to $1.3 billion.
Cash and cash equivalents increased 19 percent to $197 million.

2018 Restructuring Plan

On February 13, the company announced a 2018 restructuring plan, which detailed expectations to incur total estimated pre-tax restructuring and related charges of approximately $110 million to $130 million. After further review, the company has identified approximately $80 million of additional restructuring initiatives and now expects to incur approximately $190 million to $210 million of pre-tax restructuring and related charges in 2018. In the second quarter, we recognized pre-tax costs totaling $85 million consisting of $64 million in cash related charges and $21 million in non-cash charges. Based on the updated restructuring plan, in 2018 the company expects to incur:

Up to $155 million in cash related charges, consisting of up to $75 million in facility and lease terminations and up to $80 million in contract termination and other restructuring charges; and,
Up to $55 million in non-cash charges comprised of up to $20 million of inventory related charges and up to $35 million of asset related impairments.

Plank concluded, “As we work through our multi-year transformation, we continue to proactively attack underperforming areas of our business including our SG&A cost structure and inventory. All of this will help create a better and stronger Under Armour through even greater operational efficiencies. We are unwavering in building our global brand and confident we’re on the right track.”

Updated Fiscal 2018 Outlook

Net revenue is now expected to increase approximately 3 percent to 4 percent reflecting a low to mid-single-digit decline in North America and international growth of greater than 25 percent. From a product perspective, apparel is expected to grow at a mid-single-digit rate, footwear at a low-single digit rate, and accessories is expected to decline at a low-single digit rate.
Gross margin is now expected to be flat to down slightly versus the prior year rate of 45.0 percent. Adjusted gross margin is now expected to improve slightly compared to 2017 as benefits from product costs and lower planned promotional activity are offset by the decision to increase inventory management actions.
Operating loss is now expected in the range of $50 million to $60 million. Excluding the impact of restructuring plan, adjusted operating income is expected to be $130 million to $160 million.
Interest and other expense net is expected to be approximately $45 million.
Excluding the impact of the restructuring efforts, adjusted diluted earnings per share is expected to be in the range of $0.14 to $0.19; and,
Capital expenditures are now planned at approximately $200 million.







                                                
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Conference Call and Webcast

Under Armour will hold its second quarter 2018 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.

U.S. Tax Act

The U.S. Tax Act was enacted into law on December 22, 2017. The legislation contained several key tax provisions that affect Under Armour and, as required, the company included reasonable estimates of the income tax effects of the changes in tax law and tax rate in the company's 2017 financial results. These changes included a one-time mandatory transition tax on accumulated foreign earnings and a re-measuring of deferred tax assets which impacted our fourth quarter and full year of 2017. During the second quarter of 2018, the company revised its reasonable estimate made in the company’s 2017 financial results for the re-measuring of deferred tax assets due to the U.S. Tax Act. Since the U.S. Tax Act was passed late in the fourth quarter of 2017, and ongoing guidance and additional accounting interpretations are expected over the next 12 months, the company considers the accounting of the transition tax, deferred tax re-measurements, and other items to be provisional. The company expects to finalize its one-time estimates related to the U.S. Tax Act within the one-year measurement period allowed by the SEC.

Non-GAAP Financial Information

This press release refers to “currency neutral” and “adjusted” results as well as “adjusted” forward looking estimates of the company’s fiscal 2018 outlook. Currency neutral financial information is calculated to exclude the impact of changes in foreign currency. Management believes this information is useful to investors to facilitate a comparison of the company's results of operations period-over-period. Adjusted gross margin, adjusted operating income (loss), adjusted net loss, adjusted diluted loss per share and adjusted effective tax rate exclude the impact of restructuring and other related charges and the impact of the U.S. Tax Act, as applicable. Management believes this information is useful to investors because it provides enhanced visibility into the company’s actual and expected underlying results excluding the impact of its restructuring plans and recent significant changes in U.S. tax laws. These non-GAAP financial measures 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. Additionally, 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., headquartered in Baltimore, Maryland is a leading inventor, marketer and distributor of branded performance athletic apparel, footwear and accessories. Designed to make all athletes better, the brand's innovative products are sold worldwide to consumers with active lifestyles. The company’s Connected Fitness™ platform powers the world’s largest digitally connected health and fitness community. For further information, please visit www.uabiz.com.





                                                
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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, our anticipated charges and restructuring costs and the timing of these measures, the impact of recent tax reform legislation on our results of operations, the development and introduction of new products, the implementation of our marketing and branding strategies, and the future benefits and opportunities from 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 successfully execute our long-term strategies; our ability to successfully execute any restructuring plans and realize expected benefits; our ability to effectively drive operational efficiency in our business; our ability to manage the increasingly complex operations of our global 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 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; any disruptions, delays or deficiencies in the design, implementation or application of our new global operating and financial reporting information technology system; increased competition causing us to lose market share or reduce the prices of our products or to increase significantly our marketing efforts; 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; our ability to successfully manage or realize expected results from acquisitions and other significant investments or capital expenditures; 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 of such systems or technology; risks related to data security or privacy breaches, including the 2018 data security issue related to our Connected Fitness business; 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



                                                
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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 Contacts:
 
Lance Allega
Kelley McCormick
VP, Investor Relations
SVP, Corporate Communications
(410) 246-6810
(410) 454-6624



                                                
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Under Armour, Inc.
For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited; in thousands, except per share amounts)
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
% of Net
Revenues
 
2017
 
% of Net
Revenues
 
2018
 
% of Net
Revenues
 
2017
 
% of Net
Revenues
Net revenues
 
$
1,174,859

 
100.0
 %
 
$
1,091,192

 
100.0
 %
 
$
2,360,229

 
100.0
 %
 
$
2,211,036

 
100.0
 %
Cost of goods sold
 
648,275

 
55.2
 %
 
589,999

 
54.1
 %
 
1,310,192

 
55.5
 %
 
1,201,907

 
54.4
 %
Gross profit
 
526,584

 
44.8
 %
 
501,193

 
45.9
 %
 
1,050,037

 
44.5
 %
 
1,009,129

 
45.6
 %
Selling, general and administrative expenses
 
552,619

 
47.0
 %
 
502,880

 
46.1
 %
 
1,067,253

 
45.2
 %
 
1,003,280

 
45.4
 %
Restructuring and impairment charges
 
78,840

 
6.7
 %
 
3,098

 
0.3
 %
 
116,320

 
4.9
 %
 
3,098

 
0.1
 %
Income (loss) from operations
 
(104,875
)
 
(8.9
)%
 
(4,785
)
 
(0.4
)%
 
(133,536
)
 
(5.7
)%
 
2,751

 
0.1
 %
Interest expense, net
 
(8,552
)
 
(0.7
)%
 
(7,841
)
 
(0.7
)%
 
(17,116
)
 
(0.7
)%
 
(15,662
)
 
(0.7
)%
Other expense, net
 
(8,069
)
 
(0.7
)%
 
(2,884
)
 
(0.3
)%
 
(5,181
)
 
(0.2
)%
 
(313
)
 
 %
Loss before income taxes
 
(121,496
)
 
(10.3
)%
 
(15,510
)
 
(1.4
)%
 
(155,833
)
 
(6.6
)%
 
(13,224
)
 
(0.6
)%
Income tax expense (benefit)
 
(26,090
)
 
(2.2
)%
 
(3,202
)
 
(0.3
)%
 
(30,183
)
 
(1.3
)%
 
1,357

 
0.1
 %
Loss from equity method investment
 
138

 
 %
 

 
 %
 
138

 
 %
 

 
 %
Net loss
 
(95,544
)
 
(8.1
)%
 
(12,308
)
 
(1.1
)%
 
(125,788
)
 
(5.3
)%
 
(14,581
)
 
(0.7
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic net loss per share of Class A, B and C common stock
 
$
(0.21
)
 
 
 
$
(0.03
)
 
 
 
$
(0.28
)
 
 
 
$
(0.03
)
 
 
Diluted net loss per share of Class A, B and C common stock
 
$
(0.21
)
 
 
 
$
(0.03
)
 
 
 
$
(0.28
)
 
 
 
$
(0.03
)
 
 
Weighted average common shares outstanding Class A, B and C common stock
Basic
 
444,626

 
 
 
440,423

 
 
 
443,844

 
 
 
439,894

 
 
Diluted
 
444,626

 
 
 
440,423

 
 
 
443,844

 
 
 
439,894

 
 



                                                
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Under Armour, Inc.
For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited; in thousands)
NET REVENUES BY PRODUCT CATEGORY
 
 
Three months ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
% Change
 
2018
 
2017
 
% Change
Apparel
 
$
747,294

 
$
680,653

 
9.8
 %
 
$
1,513,569

 
$
1,396,090

 
8.4
 %
Footwear
 
271,375

 
236,925

 
14.5
 %
 
543,145

 
506,583

 
7.2
 %
Accessories
 
105,906

 
122,588

 
(13.6
)%
 
198,064

 
211,686

 
(6.4
)%
Total net sales
 
1,124,575

 
1,040,166

 
8.1
 %
 
2,254,778

 
2,114,359

 
6.6
 %
Licensing revenues
 
21,172

 
25,110

 
(15.7
)%
 
47,513

 
49,315

 
(3.7
)%
Connected Fitness
 
29,112

 
25,916

 
12.3
 %
 
57,938

 
47,362

 
22.3
 %
Total net revenues
 
$
1,174,859

 
$
1,091,192

 
7.7
 %
 
$
2,360,229

 
$
2,211,036

 
6.7
 %
NET REVENUES BY SEGMENT
 
 
Three months ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
% Change
 
2018
 
2017
 
% Change
North America
 
$
843,383

 
$
829,805

 
1.6
%
 
$
1,710,928

 
$
1,701,076

 
0.6
%
EMEA
 
135,901

 
103,896

 
30.8
%
 
262,833

 
206,751

 
27.1
%
Asia-Pacific
 
125,706

 
93,574

 
34.3
%
 
241,259

 
179,392

 
34.5
%
Latin America
 
40,757

 
38,001

 
7.3
%
 
87,271

 
76,455

 
14.1
%
Connected Fitness
 
29,112

 
25,916

 
12.3
%
 
57,938

 
47,362

 
22.3
%
Total net revenues
 
$
1,174,859

 
$
1,091,192

 
7.7
%
 
$
2,360,229

 
$
2,211,036

 
6.7
%
INCOME (LOSS) FROM OPERATIONS
 
 
Three months ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
% Change
 
2018
 
2017
 
% Change
North America
 
$
(93,192
)
 
$
(5,417
)
 
(1,620.4
)%
 
$
(136,687
)
 
$
(2,150
)
 
(6,257.5
)%
EMEA
 
(10,155
)
 
(4,616
)
 
(120.0
)%
 
(13,782
)
 
(3,028
)
 
(355.2
)%
Asia-Pacific
 
18,657

 
15,249

 
22.3
 %
 
39,898

 
35,365

 
12.8
 %
Latin America
 
(21,791
)
 
(8,093
)
 
(169.3
)%
 
(27,661
)
 
(15,952
)
 
(73.4
)%
Connected Fitness
 
1,606

 
(1,908
)
 
184.2
 %
 
4,696

 
(11,484
)
 
140.9
 %
Income (loss) from operations
 
$
(104,875
)
 
$
(4,785
)
 
(2,091.7
)%
 
$
(133,536
)
 
$
2,751

 
(4,954.1
)%



                                                
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Under Armour, Inc.
As of June 30, 2018, December 31, 2017 and June 30, 2017
(Unaudited; in thousands)
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
June 30, 2018
 
December 31, 2017
 
June 30, 2017
Assets
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
Cash and cash equivalents
 
$
196,879

 
$
312,483

 
$
165,685

Accounts receivable, net
 
724,945

 
609,670

 
602,795

Inventories
 
1,299,332

 
1,158,548

 
1,168,786

Prepaid expenses and other current assets
 
340,359

 
256,978

 
229,204

Total current assets
 
2,561,515

 
2,337,679

 
2,166,470

Property and equipment, net
 
835,427

 
885,774

 
875,005

Goodwill
 
551,160

 
555,674

 
580,446

Intangible assets, net
 
45,880

 
46,995

 
59,866

Deferred income taxes
 
111,746

 
82,801

 
125,358

Other long term assets
 
135,424

 
97,444

 
87,099

Total assets
 
$
4,241,152

 
$
4,006,367

 
$
3,894,244

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
Revolving credit facility, current
 
$

 
$
125,000

 
$
150,000

Accounts payable
 
691,163

 
561,108

 
483,210

Accrued expenses
 
258,567

 
296,841

 
232,680

Customer refund liability
 
303,730

 

 

Current maturities of long term debt
 
27,000

 
27,000

 
27,000

Other current liabilities
 
57,939

 
50,426

 
43,649

Total current liabilities
 
1,338,399

 
1,060,375

 
936,539

Long term debt, net of current maturities
 
752,370

 
765,046

 
777,717

Other long term liabilities
 
226,471

 
162,304

 
156,217

Total liabilities
 
2,317,240

 
1,987,725

 
1,870,473

Total stockholders’ equity
 
1,923,912

 
2,018,642

 
2,023,771

Total liabilities and stockholders’ equity
 
$
4,241,152

 
$
4,006,367

 
$
3,894,244





                                                
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For the Six Months Ended June 30, 2018 and 2017
(Unaudited; in thousands)
CONSOLIDATED STATEMENT OF CASH FLOWS
 
Six Months Ended June 30,
 
2018

2017
Cash flows from operating activities



Net loss
$
(125,788
)

$
(14,581
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities



Depreciation and amortization
91,271


83,367

Unrealized foreign currency exchange rate (gains) losses
13,151


(29,393
)
Loss on disposal of property and equipment
(2,114
)

715

Impairment charges
14,270



Amortization of bond premium
127


127

Stock-based compensation
20,673


24,776

Excess tax deficiency from stock-based compensation arrangements


1,062

Deferred income taxes
(35,969
)

13,735

Changes in reserves and allowances
(238,005
)

(8,581
)
Changes in operating assets and liabilities:



Accounts receivable
116,896


33,787

Inventories
(158,430
)

(227,190
)
Prepaid expenses and other assets
(54,422
)

(12,541
)
Other non-current assets
768


451

Accounts payable
160,164


84,391

Accrued expenses and other liabilities
48,939


33,426

Customer refund liability
307,192



Income taxes payable and receivable
(12,716
)

(46,320
)
Net cash provided by (used in) operating activities
146,007


(62,769
)
Cash flows from investing activities



Purchases of property and equipment
(95,607
)

(167,273
)
Sale of property and equipment
11,285

 

Purchases of other assets
(2,536
)
 

Purchase of equity method investment
(39,207
)
 

Net cash used in investing activities
(126,065
)

(167,273
)
Cash flows from financing activities



Proceeds from long term debt and revolving credit facility
210,000


380,000

Payments on long term debt and revolving credit facility
(348,500
)

(243,500
)
Employee taxes paid for shares withheld for income taxes
(1,759
)

(2,474
)
Proceeds from exercise of stock options and other stock issuances
8,913


6,638

Payments of debt financing costs
(11
)


Other financing fees
87

 

Net cash provided by (used in) financing activities
(131,270
)

140,664

Effect of exchange rate changes on cash, cash equivalents and restricted cash
(2,487
)

4,593

Net decrease in cash, cash equivalents and restricted cash
(113,815
)

(84,785
)
Cash, cash equivalents and restricted cash



Beginning of period
318,135


250,470

End of period
$
204,320


$
165,685






                                                
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Under Armour, Inc.
For the Three months ended June 30, 2018
(Unaudited)

The table below presents the reconciliation of net revenue growth calculated in accordance with GAAP to currency neutral net revenue which is a non-GAAP measure. See "Non-GAAP Financial Information" above for further information regarding the Company's use of non-GAAP financial measures.
CURRENCY NEUTRAL NET REVENUE GROWTH (DECLINE) RECONCILIATION
 
 
Three months ended June 30,
Total Net Revenue
 
 
Net revenue growth - GAAP
 
7.7
 %
Foreign exchange impact
 
(1.2
)%
Currency neutral net revenue growth - Non-GAAP
 
6.5
 %
 
 

North America
 

Net revenue growth - GAAP
 
1.6
 %
Foreign exchange impact
 
(0.3
)%
Currency neutral net revenue growth - Non-GAAP
 
1.3
 %
 
 
 
EMEA
 
 
Net revenue growth - GAAP
 
30.8
 %
Foreign exchange impact
 
(5.6
)%
Currency neutral net revenue growth - Non-GAAP
 
25.2
 %
 
 
 
Asia-Pacific
 
 
Net revenue growth - GAAP
 
34.3
 %
Foreign exchange impact
 
(6.5
)%
Currency neutral net revenue growth - Non-GAAP
 
27.8
 %
 
 
 
Latin America
 
 
Net revenue growth - GAAP
 
7.3
 %
Foreign exchange impact
 
5.1
 %
Currency neutral net revenue growth - Non-GAAP
 
12.4
 %
 
 
 
Total International
 

Net revenue growth - GAAP
 
28.4
 %
Foreign exchange impact
 
(4.2
)%
Currency neutral net revenue growth - Non-GAAP
 
24.2
 %









                                                
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Under Armour, Inc.
For the Three months ended June 30, 2018
(Unaudited; in thousands)

The tables below present the reconciliation of the Company's consolidated statement of operations presented in accordance with GAAP to certain adjusted non-GAAP financial measures discussed in this press release. See "Non-GAAP Financial Information" above for further information regarding the Company's use of non-GAAP financial measures.
ADJUSTED GROSS MARGIN RECONCILIATION
 
 
Three months ended June 30,
Gross margin
 
44.8
%
Add: Impact of restructuring
 
0.5
%
Adjusted gross margin
 
45.3
%
ADJUSTED OPERATING LOSS RECONCILIATION
 
 
Three months ended June 30,
Loss from operations
 
$
(105
)
Add: Impact of restructuring
 
85

Adjusted operating loss
 
$
(20
)
ADJUSTED NET LOSS RECONCILIATION
 
 
Three months ended June 30,
Net loss
 
$
(96
)
Add: Impact of restructuring
 
62

Adjusted net loss
 
$
(34
)
ADJUSTED DILUTED LOSS PER SHARE RECONCILIATION
 
 
Three months ended June 30,
Diluted net loss per share
 
$
(0.21
)
Add: Impact of restructuring
 
0.13

Adjusted diluted loss per share
 
$
(0.08
)

ADJUSTED EFFECTIVE TAX RATE RECONCILIATION
 
 
Three months ended June 30,
Effective tax rate
 
21.5
 %
Less: Impact of US tax reform
 
(3.1
)%
Less: Impact of restructuring
 
(10.0
)%
Adjusted effective tax rate
 
8.4
 %



                                                
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Under Armour, Inc.
Outlook For the Year Ending December 31, 2018

The tables below present the reconciliation of the Company's fiscal 2018 outlook for income from operations calculated in accordance with GAAP to adjusted operating income. This adjusted amount is a non-GAAP financial measure. See "Non-GAAP Financial Information" above for further information regarding the Company's use of non-GAAP financial measures.
ADJUSTED OPERATING INCOME RECONCILIATION
 
 
Year Ending December 31, 2018
(in millions)
 
Low End
 
High End
Loss from operations
 
$
(60
)
 
$
(50
)
Add: Estimated impact of restructuring (1)
 
190

 
190

Adjusted operating income
 
$
130

 
$
140


(1) The estimated impact of restructuring plan presented above assumes the low end of the Company’s estimated range of 2018 restructuring and related charges.


The company is not able to provide a reconciliation of the non-GAAP adjusted effective tax rate or adjusted diluted earnings per share to the GAAP effective tax rate or diluted earnings per share for its 2018 outlook. As a result of the 2018 restructuring plan, the company’s GAAP net income for fiscal year 2018 is expected to be a net loss, and therefore the GAAP effective tax rate is subject to significant variability. Given this variability, the company cannot provide a meaningful outlook of the GAAP effective tax rate or diluted loss per share without unreasonable effort. These non-GAAP measures exclude the impact of the 2018 restructuring plan.
























                                                
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Under Armour, Inc.
As of June 30, 2018 and 2017
BRAND HOUSE AND FACTORY HOUSE DOOR COUNT
 
 
June 30,
 
 
2018
 
2017
Factory House
 
161
 
160
Brand House
 
15
 
19
   North America total doors
 
176
 
179
 
 
 
 
 
Factory House
 
61
 
45
Brand House
 
65
 
44
   International total doors
 
126
 
89
 
 
 
 
 
Factory House
 
222
 
205
Brand House
 
80
 
63
   Total doors
 
302
 
268