Baltimore, MD (July 24, 2012) - Under Armour, Inc. (NYSE: UA) today announced financial results for the second quarter ended June 30, 2012. Net revenues increased 27% in the second quarter of 2012 to $369 million compared with net revenues of $291 million in the prior year's period. Net income increased 7% in the second quarter of 2012 to $7 million compared with $6 million in the prior year's period. Net income growth trailed net revenues growth, primarily due to a planned shift of marketing expenses into the second quarter. Diluted earnings per share for the second quarter of 2012 were $0.06 on weighted average common shares outstanding of 106 million compared with $0.06 per share on weighted average common shares outstanding of 105 million in the prior year's period. Diluted earnings per share calculations for both periods reflect the Company's two-for-one stock split distributed on July 9, 2012.
Second quarter apparel net revenues increased 23% to $253 million compared with $205 million in the same period of the prior year, driven by strength across Men's, Women's, and Youth apparel businesses. Direct-to-Consumer net revenues, which represented 29% of total net revenues for the second quarter, grew 35% year-over-year. Second quarter Footwear net revenues increased 44% to $67 million from $47 million in the prior year's period, primarily driven by new 2012 running styles, including the debut of UA Spine. Second quarter accessories net revenues increased 21% to $39 million from $32 million in the prior year's period.
Kevin Plank, Chairman, CEO, and President of Under Armour, Inc., stated, "Our heightened attention to innovation across all of our product lines continues to resonate with consumers. Our broad-based success during the quarter reflects our ability to build upon platform technologies such as Charged Cotton, while introducing new ideas such as ColdBlack. In Women's, we are redefining how the female athlete looks at our Brand with the strong introductions of our Studio line and Armour Bra. We are also excited about gaining momentum in the footwear space with game-changing products such as our $130 Highlight football cleat and the just-launched UA Spine running shoe."
Gross margin for the second quarter of 2012 was 45.9% compared with 46.3% in the prior year's quarter, primarily reflecting less favorable North American apparel and accessories product margins, partially offset by less sales discounts and allowances. Selling, general and administrative expenses as a percentage of net revenues were 42.7% in the second quarter of 2012 compared with 42.4% in the prior year's period, reflecting the planned shift in marketing expenses. Marketing expenses for the second quarter of 2012 were 12.6% of net revenues compared with 11.7% in the prior year's quarter. Second quarter operating income grew 3% to $12 million compared with $11 million in the prior year's period.
Balance Sheet Highlights
Cash and cash equivalents increased 19% to $143 million at June 30, 2012 compared with $120 million at June 30, 2011. The Company had no borrowings outstanding under its $300 million revolving credit facility at June 30, 2012. Inventory at June 30, 2012 increased 22% to $381 million compared with $311 million at June 30, 2011. Long-term debt increased to $74 million at June 30, 2012 from $37 million at June 30, 2011, primarily driven by the acquisition of the Company's corporate headquarters in July 2011.
Updated 2012 Outlook
The Company had previously anticipated 2012 net revenues in the range of $1.78 billion to $1.80 billion, representing growth of 21% to 22% over 2011, and 2012 operating income in the range of $203 million to $205 million, representing growth of 25% to 26% over 2011. Based on current visibility, the Company now expects 2012 net revenues in the range of $1.80 billion to $1.82 billion, representing growth of 22% to 24% over 2011, and 2012 operating income in the range of $205 million to $207 million, representing growth of 26% to 27% over 2011. The Company now expects an effective tax rate at the lower end of previously provided full year guidance of 37.5% to 38.0%, compared to an effective tax rate of 38.2% for 2011. Adjusted for the two-for-one stock split, the Company anticipates fully diluted weighted average shares outstanding of approximately 106 million to 107 million for 2012.
Mr. Plank concluded, "As we head into the second half of the year, the opportunities for our Brand have never been greater. Sustaining our momentum in Footwear and Women's will be a priority and we are elevating the messaging behind these opportunities to help drive further awareness with our consumers. This month, we took the next step to introduce the Brand to the global stage with our sponsorship of Tottenham Hotspur Football Club of the Barclays Premier League. Finally, as we announced last month, we are excited to welcome two new members to our Board, Brenda Piper and Admiral Eric Olson (Ret.), and look forward to their contributions."
Conference Call and Webcast
The Company will provide additional commentary regarding its second quarter results as well as its updated 2012 outlook during its earnings conference call today, July 24th, 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, global 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; 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 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 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.