April 21, 2016

Under Armour Reports First Quarter Net Revenues Growth Of 30%; Raises Full Year Net Revenues Outlook To $5.0 Billion

-- First Quarter Net Revenues Increased 30% to $1.05 Billion
-- First Quarter Operating Income Increased 26% to $35 Million
-- First Quarter Diluted EPS Increased 62% to $0.04, Reflective of the Company's Class C Stock Dividend
-- Raises 2016 Net Revenues Outlook to Approximately $5.0 Billion (+26%)
-- Raises 2016 Operating Income Outlook to a Range of $503 Million to $507 Million (+23% to 24%)

BALTIMORE, April 21, 2016 /PRNewswire/ -- Under Armour, Inc. (NYSE: UA, UA.C) today announced financial results for the first quarter ended March 31, 2016.  Net revenues increased 30% in the first quarter of 2016 to $1.05 billion compared with net revenues of $805 million in the prior year's period.  On a currency neutral basis, net revenues increased 32% compared with the prior year's period.  Operating income increased 26% in the first quarter of 2016 to $35 million compared with $28 million in the prior year's period.  Net income increased 63% in the first quarter of 2016 to $19 million compared with $12 million in the prior year's period and diluted earnings per share for the first quarter of 2016 were $0.04 compared with $0.03 per share in the prior year's period.  Diluted earnings per share calculations for both periods reflect the Company's Class C Stock Dividend effective April 7, 2016, which has the same effect as a two-for-one stock split.

During the first quarter, wholesale net revenues grew 28% year-over-year to $744 million compared to $579 million in the prior year's period, while Direct-to-Consumer net revenues grew 33% year-over-year to $266 million compared to $200 million in the prior year's period.  North America net revenues for the first quarter grew 26% year-over-year, or 27% on a currency neutral basis.  International net revenues, which represented 14% of total net revenues for the first quarter, grew 56% year-over-year, or 65% on a currency neutral basis.

Within product categories, apparel net revenues increased 20% to $667 million compared with $555 million in the same period of the prior year, led by growth in training and golf.  Footwear net revenues increased 64% to $264 million from $161 million in the prior year's period, primarily reflecting the ongoing success of the Curry signature basketball line and expanded running offerings.  Accessories net revenues increased 26% to $80 million from $63 million in the prior year's period, driven primarily by growth in headwear and bags.

Kevin Plank, Chairman and CEO of Under Armour, Inc., stated, "For the past 24 consecutive quarters or six years, we have driven net revenue growth above 20% and we are incredibly proud of our start to 2016 with first quarter net revenue growth of 30%.  The strong results posted this quarter truly demonstrate the balanced growth of our brand across product categories, channels and geographies.  It also showcases our heightened focus on providing better service across our distribution channels, ensuring that our consumer consistently finds the newest, most premium product from us wherever they shop.  In footwear, this includes the remarkable success of the Stephen Curry signature basketball line, as well as the exciting launches of our first smart running shoe and our new line of Jordan Spieth inspired golf shoes.  Combined with the introductions of premium apparel technologies like Microthread and CoolSwitch, we will continue to drive elevated innovation and excitement to the athlete throughout the remainder of 2016."

Gross margin for the first quarter of 2016 was 45.9% compared with 46.9% in the prior year's period, primarily reflecting negative impacts of approximately 100 basis points from higher liquidations and approximately 70 basis points from foreign currency exchange rates, partially offset by approximately 60 basis points from improved product cost margins.  Selling, general and administrative expenses grew 27% to $446 million compared with $350 million in the prior year's period, primarily driven by investments in Direct-to-Consumer and overall headcount to support the Company's strategic initiatives. 

Balance Sheet Highlights
Cash and cash equivalents decreased 30% to $157 million at March 31, 2016 compared with $225 million at March 31, 2015.  Inventory at March 31, 2016 increased 44% to $834 million compared with $578 million at March 31, 2015, primarily driven by the Company's ongoing strategy to drive higher service levels to customers, resulting in meaningful improvements in fill rates.  Total debt increased 38% to $935 million at March 31, 2016 compared with $677 million at March 31, 2015.

Updated 2016 Outlook
Based on current visibility, the Company expects 2016 net revenues of approximately $5.0 billion, representing growth of 26% over 2015 and 2016 operating income in the range of $503 million to $507 million, representing growth of 23% to 24% over 2015.  Below the operating line, the Company expects interest expense of approximately $35 million, an effective full year tax rate of approximately 38.5%, and fully diluted weighted average shares outstanding of approximately 446 million for 2016 reflective of the Class C Stock Dividend.

Mr. Plank concluded, "This year marks our 20th year in business, which is a great milestone for our company.  Our robust growth this quarter demonstrates the power of our brand with growth coming from every part of our business.  Our ability to adapt in a rapidly changing environment has been a critical part of our success and fuels our inspiration to create game-changing products that solve problems and enrich consumers' lives.  With this unrelenting consumer focus and ongoing investment, we are setting the foundation for our growth story over the next 20 years."

Conference Call and Webcast
The Company will provide additional commentary regarding its first quarter as well as its updated 2016 outlook during its earnings conference call today, April 21, 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.

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 (NYSE: UA, UA.C), 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 product, the implementation of our marketing and branding strategies, and the future benefits and opportunities from acquisitions. 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; the financial health of our customers; our ability to effectively manage our growth and a more complex global business; 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; our ability to accurately forecast consumer demand for our products and manage our inventory in response to changing demands; 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; risks related to foreign currency exchange rate fluctuations; our ability to effectively market and maintain a positive brand image; our ability to comply with trade and other regulations; 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 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.

(Tables Follow)

 

Under Armour, Inc.

For the Quarter Ended March 31, 2016 and 2015

(Unaudited; in thousands, except per share amounts)

 

CONSOLIDATED STATEMENTS OF INCOME

 
   

Quarter Ended March 31,

   

2016

 

% of Net
Revenues

 

2015

 

% of Net
Revenues

Net revenues

 

$

1,047,702

   

100.0

%

 

$

804,941

   

100.0

%

Cost of goods sold

 

567,066

   

54.1

%

 

427,277

   

53.1

%

  Gross profit

 

480,636

   

45.9

%

 

377,664

   

46.9

%

Selling, general and administrative expenses

 

445,753

   

42.5

%

 

349,997

   

43.5

%

  Income from operations

 

34,883

   

3.4

%

 

27,667

   

3.4

%

Interest expense, net

 

(4,532)

   

(0.4)

%

 

(2,210)

   

(0.3)

%

Other income (expense), net

 

2,702

   

0.2

%

 

(1,840)

   

(0.2)

%

  Income before income taxes

 

33,053

   

3.2

%

 

23,617

   

2.9

%

Provision for income taxes

 

13,873

   

1.4

%

 

11,889

   

1.4

%

  Net income

 

$

19,180

   

1.8

%

 

$

11,728

   

1.5

%

Net income available per common share

       

Basic

 

$

0.04

       

$

0.03

     

Diluted

 

$

0.04

       

$

0.03

     

Weighted average common shares outstanding

                   

Basic

 

433,626

       

429,394

     

Diluted

 

443,260

       

439,232

     

 

 

 

Under Armour, Inc.

For the Quarter Ended March 31, 2016 and 2015

(Unaudited; in thousands)

 

NET REVENUES BY PRODUCT CATEGORY

                     
 
   

Quarter Ended March 31,

   

2016

 

2015

 

% Change

Apparel

 

$

666,571

   

$

555,455

   

20.0

%

Footwear

 

264,246

   

160,966

   

64.2

%

Accessories

 

79,701

   

63,151

   

26.2

%

Total net sales

 

1,010,518

   

779,572

   

29.6

%

Licensing revenues

 

19,433

   

16,938

   

14.7

%

Connected Fitness

 

18,501

   

8,431

   

119.4

%

Intersegment eliminations

 

(750)

   

   

(100.0)

%

Total net revenues

 

$

1,047,702

   

$

804,941

   

30.2

%

 

NET REVENUES BY SEGMENT

 
   

Quarter Ended March 31,

   

2016

 

2015

 

% Change

North America

 

$

880,595

   

$

700,512

   

25.7

%

International

 

149,356

   

95,998

   

55.6

%

Connected Fitness

 

18,501

   

8,431

   

119.4

%

Intersegment eliminations

 

(750)

   

   

(100.0)

%

Total net revenues

 

$

1,047,702

   

$

804,941

   

30.2

%

 

OPERATING INCOME (LOSS) BY SEGMENT

 
   

Quarter Ended March 31,

   

2016

 

2015

 

% Change

North America

 

$

40,095

   

$

38,369

   

4.5

%

International

 

11,249

   

4,334

   

159.6

%

Connected Fitness

 

(16,461)

   

(15,036)

   

(9.5)

%

Income from operations

 

$

34,883

   

$

27,667

   

26.1

%

 

 

Under Armour, Inc.

As of March 31, 2016, December 31, 2015 and March 31, 2015

(Unaudited; in thousands)

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 
   

As of
3/31/16

 

As of
12/31/15

 

As of
3/31/15

Assets

           

Cash and cash equivalents

 

$

157,001

   

$

129,852

   

$

224,927

 

Accounts receivable, net

 

566,286

   

433,638

   

395,917

 

Inventories

 

834,287

   

783,031

   

577,947

 

Prepaid expenses and other current assets

 

211,209

   

152,242

   

169,722

 

Deferred income taxes

 

   

   

65,966

 

Total current assets

 

1,768,783

   

1,498,763

   

1,434,479

 

Property and equipment, net

 

601,910

   

538,531

   

359,489

 

Goodwill

 

588,895

   

585,181

   

595,492

 

Intangible assets, net

 

73,217

   

75,686

   

87,075

 

Deferred income taxes

 

92,230

   

92,157

   

14,104

 

Other long term assets

 

93,089

   

78,582

   

57,415

 

Total assets

 

$

3,218,124

   

$

2,868,900

   

$

2,548,054

 

Liabilities and Stockholders' Equity

           

Revolving credit facility, current

 

$

140,000

   

$

   

$

 

Accounts payable

 

184,243

   

200,460

   

252,051

 

Accrued expenses

 

224,076

   

192,935

   

137,482

 

Current maturities of long term debt

 

27,000

   

42,000

   

43,347

 

Other current liabilities

 

30,581

   

43,415

   

15,339

 

Total current liabilities

 

605,900

   

478,810

   

448,219

 

Long term debt, net of current maturities

 

217,525

   

352,000

   

383,500

 

Revolving credit facility, long term

 

550,000

   

275,000

   

250,000

 

Other long term liabilities

 

103,382

   

94,868

   

81,809

 

Total liabilities

 

1,476,807

   

1,200,678

   

1,163,528

 

Total stockholders' equity

 

1,741,317

   

1,668,222

   

1,384,526

 

Total liabilities and stockholders' equity

 

$

3,218,124

   

$

2,868,900

   

$

2,548,054

 

 

 

Under Armour, Inc.

For the Quarter Ended March 31, 2016 and 2015

(Unaudited; in thousands)

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 
 

Quarter Ended March 31,

 

2016

 

2015

Cash flows from operating activities

     

Net income

$

19,180

   

$

11,728

 

Adjustments to reconcile net income to net cash used in operating activities

     

Depreciation and amortization

32,021

   

21,308

 

Unrealized foreign currency exchange rate (gains) losses

(11,009)

   

21,416

 

Loss on disposal of property and equipment

384

   

227

 

Stock-based compensation

14,403

   

9,043

 

Deferred income taxes

2,724

   

4,049

 

Changes in reserves and allowances

12,657

   

5,792

 

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

     

Accounts receivable

(136,990)

   

(127,439)

 

Inventories

(45,958)

   

(50,303)

 

Prepaid expenses and other assets

(15,351)

   

(39,899)

 

Accounts payable

(976)

   

40,066

 

Accrued expenses and other liabilities

8,627

   

(14,264)

 

Income taxes payable and receivable

(47,748)

   

(58,250)

 

Net cash used in operating activities

(168,036)

   

(176,526)

 

Cash flows from investing activities

     

Purchases of property and equipment

(104,573)

   

(68,619)

 

Purchase of businesses, net of cash acquired

   

(539,109)

 

Purchases of available-for-sale securities

(19,997)

   

(10,424)

 

Sales of available-for-sale securities

21,414

   

3,311

 

Purchases of other assets

   

(2,494)

 

Net cash used in investing activities

(103,156)

   

(617,335)

 

Cash flows from financing activities

     

Proceeds from revolving credit facility

415,000

   

250,000

 

Proceeds from term loan

   

150,000

 

Payments on term loan

(145,000)

   

 

Payments on long term debt

(500)

   

(7,355)

 

Excess tax benefits from stock-based compensation arrangements

27,058

   

34,613

 

Proceeds from exercise of stock options and other stock issuances

3,954

   

2,922

 

Payments of debt financing costs

(1,258)

   

(946)

 

Net cash provided by financing activities

299,254

   

429,234

 

Effect of exchange rate changes on cash and cash equivalents

(913)

   

(3,621)

 

Net increase (decrease) in cash and cash equivalents

27,149

   

(368,248)

 

Cash and cash equivalents

     

Beginning of period

129,852

   

593,175

 

End of period

$

157,001

   

$

224,927

 
       

Non-cash investing activities

     

Decrease in accrual for property and equipment

$

(13,814)

   

$

(195)

 

Property and equipment acquired under build-to-suit leases

   

5,631

 

 

 

 

Under Armour, Inc.

For the Quarter Ended March 31, 2016 and 2015

(Unaudited)

 

The table below presents 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,

Total Net Revenue

 

2016

Currency neutral net revenue growth - Non-GAAP

 

32.0 %

Foreign exchange impact

 

(1.8)%

Net revenue growth - GAAP

 

30.2 %

     

North America

   

Currency neutral net revenue growth - Non-GAAP

 

26.6 %

Foreign exchange impact

 

(0.9)%

Net revenue growth - GAAP

 

25.7 %

     

International

   

Currency neutral net revenue growth - Non-GAAP

 

64.6 %

Foreign exchange impact

 

(9.0)%

Net revenue growth - GAAP

 

55.6 %

 

 

BRAND HOUSE AND FACTORY HOUSE DOOR COUNT

           
 
 

 As of March 31,

 

2016

 

2015

Factory House

144

 

126

Brand House

12

 

7

   North America total doors

156

 

133

       

Factory House

18

 

8

Brand House

24

 

12

   International total doors

42

 

20

       

Factory House

162

 

134

Brand House

36

 

19

   Total doors

198

 

153

 

 

 

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SOURCE Under Armour, Inc.

 

 

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