BALTIMORE, May 2, 2019 /PRNewswire/ -- Under Armour,
Inc. (NYSE: UA, UAA) today announced financial results for the
first quarter ended March 31, 2019. 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 2018 restructuring plan and the related tax
effects. 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.
"Our first quarter results demonstrate our unwavering commitment
to protecting and growing our premium performance athletic brand
through a disciplined go-to-market process that delivers innovative
products and experiences to make athletes better," said Under
Armour Chairman and CEO Kevin Plank.
"As we execute against our long-term plan, Under Armour will emerge
from 2019 and our 'Protect This House' chapter as an even
stronger brand and company."
First Quarter 2019 Review
- Revenue was up 2 percent to $1.2
billion (up 3 percent currency neutral).
-
- Wholesale revenue increased 5 percent to $818 million and direct-to-consumer revenue was
down 6 percent to $331 million,
representing 27 percent of total revenue.
- North America revenue
decreased 3 percent to $843 million
and the international business increased 12 percent to $328 million (up 17 percent currency neutral),
representing 27 percent of total revenue. Within the international
business, revenue was up 3 percent in EMEA (up 9 percent currency
neutral), up 25 percent in Asia-Pacific (up 30 percent currency neutral),
and up 6 percent in Latin America
(up 10 percent currency neutral).
- Apparel revenue increased 1 percent to $775 million. Footwear revenue increased 8
percent to $293 million primarily
driven by strength in our run category. Accessories revenue
decreased 11 percent to $82 million
primarily driven by planned lower sales of backpacks and bags
related to a strategic relaunch of key product.
- Gross margin increased 100 basis points to 45.2 percent
compared to the prior year driven by product cost improvements,
regional mix and prior period restructuring charges, offset by
channel mix.
- Selling, general & administrative expenses decreased
1 percent to $510 million, or 42.3
percent of revenue.
- Operating income was $35
million.
- Net income was $22 million
or $0.05 earnings per share.
- Inventory decreased 24 percent to $875 million.
- Total debt was down 36 percent to $590 million.
- Cash and cash equivalents increased 2 percent to
$289 million.
Updated Fiscal 2019 Outlook
- Revenue is expected to be up approximately 3 to 4
percent reflecting relatively flat results for North America and a low double-digit
percentage rate increase in the international business.
- Gross margin is now expected to increase approximately
110 to 130 basis points compared to 2018. Excluding restructuring
charges from the comparable prior period, we now expect an increase
of approximately 70 to 90 basis points compared to the 2018
adjusted gross margin due to ongoing supply chain initiatives and
channel mix benefits. This compares to a previously expected range
of 60 to 80 basis points in improvement compared to the 2018
adjusted gross margin.
- Operating income is now expected to reach $220 million to $230
million versus the previously expected range of $210 million to $230
million.
- Interest and other expense net is now expected to
be approximately $35 million versus
the previous expectation of $40
million.
- Effective tax rate is now expected to be at the high end
of the 19 percent to 22 percent range.
- Earnings per share is now expected to be $0.33 to $0.34
versus the previously expected range of $0.31 to $0.33;
and,
- Capital expenditures are expected to be approximately
$210 million.
Change to Segment Presentation
As detailed on the company's February
12 earnings call, effective January
1, 2019, the company changed the way management
internally analyzes the business and now excludes certain
corporate costs from its segment profitability measures and reports
these costs within "Corporate Other".
These costs consist largely of general and administrative
expenses not allocated to an operating segment, including expenses
associated with centrally managed departments such as information
technology, supply chain, innovation and other corporate support
functions; costs related to the company's global assets and
marketing; costs related to the company's headquarters;
restructuring and restructuring related charges; and certain
foreign exchange hedging gains and losses. We believe this new
segment presentation provides improved visibility into the
underlying performance and results of our operating segments.
In conjunction with this change, certain prior year amounts have
been recast to conform to the 2019 presentation. These changes have
no impact on previously reported consolidated balance sheets,
statements of operations, comprehensive income (loss),
stockholder's equity, or cash flows. The recast of certain
unaudited historical financial information to reflect this segment
reporting change can be found at
https://about.underarmour.com/investor-relations.
Conference Call and Webcast
Under Armour will hold its first quarter 2019 conference
call and webcast today at approximately 8:30
a.m. Eastern Time. The call will be webcast live at
https://about.underarmour.com/investor-relations/financials and
will be archived and available for replay approximately three hours
after the live event.
Non-GAAP Financial Information
This press release refers to "currency neutral" and "adjusted"
amounts. 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. 2018 adjusted gross margin is referred to but
not presented and excludes the impact of restructuring and other
related charges. A reconciliation of 2018 adjusted gross
margin is available in the company's 2018 year-end earnings
release. Management believes this information is useful to
investors because it provides enhanced visibility into the
company's actual underlying results excluding the impact of its
2018 restructuring plans. 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 https://about.underarmour.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 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 realize expected benefits from our
restructuring plans; 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, tariff 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; 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 Three Months Ended March 31, 2019 and 2018
(Unaudited; in thousands, except per share
amounts)
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
Three Months Ended
March 31,
|
|
|
2019
|
|
% of Net
Revenues
|
|
2018
|
|
% of Net
Revenues
|
Net
revenues
|
|
$
|
1,204,722
|
|
100.0
|
%
|
|
$
|
1,185,370
|
|
100.0
|
%
|
Cost of goods
sold
|
|
659,935
|
|
54.8
|
%
|
|
661,917
|
|
55.8
|
%
|
Gross
profit
|
|
544,787
|
|
45.2
|
%
|
|
523,453
|
|
44.2
|
%
|
Selling, general and
administrative expenses
|
|
509,528
|
|
42.3
|
%
|
|
514,634
|
|
43.4
|
%
|
Restructuring and
impairment charges
|
|
—
|
|
—
|
%
|
|
37,480
|
|
3.2
|
%
|
Income (loss) from
operations
|
|
35,259
|
|
2.9
|
%
|
|
(28,661)
|
|
(2.4)
|
%
|
Interest expense,
net
|
|
(4,238)
|
|
(0.4)
|
%
|
|
(8,564)
|
|
(0.7)
|
%
|
Other income
(expense), net
|
|
(667)
|
|
(0.1)
|
%
|
|
2,888
|
|
0.2
|
%
|
Income (loss)
before income taxes
|
|
30,354
|
|
2.5
|
%
|
|
(34,337)
|
|
(2.9)
|
%
|
Income tax expense
(benefit)
|
|
8,131
|
|
0.7
|
%
|
|
(4,093)
|
|
(0.3)
|
%
|
Income from equity
method investment
|
|
254
|
|
—
|
%
|
|
—
|
|
—
|
%
|
Net income
(loss)
|
|
$
|
22,477
|
|
1.9
|
%
|
|
$
|
(30,244)
|
|
(2.6)
|
%
|
|
|
|
|
|
|
|
|
|
Basic net income
(loss) per share of Class A, B and C common stock
|
|
$
|
0.05
|
|
|
|
$
|
(0.07)
|
|
|
Diluted net income
(loss) per share of Class A, B and C common stock
|
|
$
|
0.05
|
|
|
|
$
|
(0.07)
|
|
|
Weighted average
common shares outstanding Class A, B and C common
stock
|
Basic
|
|
449,749
|
|
|
|
443,052
|
|
|
Diluted
|
|
453,230
|
|
|
|
443,052
|
|
|
Under Armour,
Inc.
For the Three Months Ended March 31, 2019 and 2018
(Unaudited; in thousands)
|
|
NET REVENUES BY
PRODUCT CATEGORY
|
|
|
|
Three Months Ended
March 31,
|
|
|
2019
|
|
2018
|
|
% Change
|
Apparel
|
|
$
|
774,630
|
|
$
|
768,931
|
|
0.7
|
%
|
Footwear
|
|
292,547
|
|
271,770
|
|
7.6
|
%
|
Accessories
|
|
81,992
|
|
92,158
|
|
(11.0)
|
%
|
Total net
sales
|
|
1,149,169
|
|
1,132,859
|
|
1.4
|
%
|
Licensing
revenues
|
|
21,657
|
|
26,341
|
|
(17.8)
|
%
|
Connected
Fitness
|
|
30,104
|
|
28,826
|
|
4.4
|
%
|
Corporate
Other
|
|
3,792
|
|
(2,656)
|
|
242.8
|
%
|
Total net
revenues
|
|
$
|
1,204,722
|
|
$
|
1,185,370
|
|
1.6
|
%
|
NET REVENUES BY
SEGMENT
|
|
|
|
Three Months Ended
March 31,
|
|
|
2019
|
|
2018
|
|
% Change
|
North
America
|
|
$
|
843,249
|
|
$
|
867,545
|
|
(2.8)
|
%
|
EMEA
|
|
134,104
|
|
129,588
|
|
3.5
|
%
|
Asia-Pacific
|
|
144,285
|
|
115,553
|
|
24.9
|
%
|
Latin
America
|
|
49,188
|
|
46,514
|
|
5.7
|
%
|
Connected
Fitness
|
|
30,104
|
|
28,826
|
|
4.4
|
%
|
Corporate
Other
|
|
3,792
|
|
(2,656)
|
|
242.8
|
%
|
Total net
revenues
|
|
$
|
1,204,722
|
|
$
|
1,185,370
|
|
1.6
|
%
|
INCOME (LOSS) FROM
OPERATIONS
|
|
|
|
Three Months Ended
March 31,
|
|
|
2019
|
% of Net
Revenues (1)
|
|
2018
|
% of Net
Revenues (1)
|
North
America
|
|
$
|
160,273
|
19.0
|
%
|
|
$
|
148,185
|
17.1
|
%
|
EMEA
|
|
12,218
|
9.1
|
%
|
|
7,154
|
5.5
|
%
|
Asia-Pacific
|
|
19,803
|
13.7
|
%
|
|
24,122
|
20.9
|
%
|
Latin
America
|
|
(359)
|
(0.7)
|
%
|
|
(1,878)
|
(4.0)
|
%
|
Connected
Fitness
|
|
1,069
|
3.6
|
%
|
|
3,411
|
11.8
|
%
|
Corporate
Other
|
|
(157,745)
|
NM
|
|
|
(209,655)
|
NM
|
|
Income (loss) from
operations
|
|
$
|
35,259
|
2.9
|
%
|
|
$
|
(28,661)
|
(2.4)
|
%
|
|
(1) The operating
income (loss) percentage is calculated based on total segment net
revenues. Additionally, the operating income (loss) percentage for
Corporate Other is not presented as it is not a meaningful
metric.(NM).
|
Under Armour,
Inc.
As of March 31, 2019, December 31, 2018 and
March 31, 2018
(Unaudited; in thousands)
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
March 31,
2019
|
|
December 31,
2018
|
|
March 31,
2018
|
Assets
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
288,726
|
|
$
|
557,403
|
|
$
|
283,644
|
Accounts receivable,
net
|
|
743,677
|
|
652,546
|
|
805,413
|
Inventories
|
|
875,252
|
|
1,019,496
|
|
1,148,493
|
Prepaid expenses and
other current assets
|
|
299,053
|
|
364,183
|
|
354,455
|
Total current
assets
|
|
2,206,708
|
|
2,593,628
|
|
2,592,005
|
Property and
equipment, net
|
|
810,470
|
|
826,868
|
|
870,120
|
Operating lease
right-of-use assets
|
|
590,984
|
|
—
|
|
—
|
Goodwill
|
|
548,735
|
|
546,494
|
|
565,201
|
Intangible assets,
net
|
|
40,109
|
|
41,793
|
|
45,931
|
Deferred income
taxes
|
|
114,705
|
|
112,420
|
|
92,607
|
Other long term
assets
|
|
124,361
|
|
123,819
|
|
98,455
|
Total
assets
|
|
$
|
4,436,072
|
|
$
|
4,245,022
|
|
$
|
4,264,319
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
Revolving credit
facility, current
|
|
$
|
—
|
|
$
|
—
|
|
$
|
135,000
|
Accounts
payable
|
|
377,401
|
|
560,884
|
|
470,378
|
Accrued
expenses
|
|
268,187
|
|
340,415
|
|
276,888
|
Customer refund
liabilities
|
|
270,612
|
|
301,421
|
|
353,020
|
Operating lease
liabilities
|
|
107,250
|
|
—
|
|
—
|
Current maturities of
long term debt
|
|
—
|
|
25,000
|
|
27,000
|
Other current
liabilities
|
|
70,562
|
|
88,257
|
|
54,771
|
Total current
liabilities
|
|
1,094,012
|
|
1,315,977
|
|
1,317,057
|
Long term debt, net
of current maturities
|
|
590,431
|
|
703,834
|
|
758,705
|
Operating lease
liabilities, non-current
|
|
594,613
|
|
—
|
|
—
|
Other long term
liabilities
|
|
107,209
|
|
208,340
|
|
170,825
|
Total
liabilities
|
|
2,386,265
|
|
2,228,151
|
|
2,246,587
|
Total stockholders'
equity
|
|
2,049,807
|
|
2,016,871
|
|
2,017,732
|
Total liabilities
and stockholders' equity
|
|
$
|
4,436,072
|
|
$
|
4,245,022
|
|
$
|
4,264,319
|
Under Armour,
Inc.
For the Three Months Ended March 31, 2019 and 2018
(Unaudited; in thousands)
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
Three Months Ended
March 31,
|
|
2019
|
|
2018
|
Cash flows from
operating activities
|
|
|
|
Net income
(loss)
|
$
|
22,477
|
|
$
|
(30,244)
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities
|
|
|
|
Depreciation and
amortization
|
46,464
|
|
46,098
|
Unrealized foreign
currency exchange rate gains
|
(1,725)
|
|
(5,030)
|
Loss on disposal of
property and equipment
|
1,008
|
|
159
|
Impairment
charges
|
—
|
|
2,248
|
Amortization of bond
premium
|
63
|
|
63
|
Stock-based
compensation
|
12,493
|
|
8,137
|
Deferred income
taxes
|
(1,514)
|
|
(10,645)
|
Changes in reserves
and allowances
|
(9,655)
|
|
(251,194)
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts
receivable
|
(87,042)
|
|
53,703
|
Inventories
|
156,880
|
|
16,697
|
Prepaid expenses and
other assets
|
54,198
|
|
(83,917)
|
Other non-current
assets
|
21,594
|
|
(731)
|
Accounts
payable
|
(178,428)
|
|
(66,894)
|
Accrued expenses and
other liabilities
|
(99,505)
|
|
(3,933)
|
Customer refund
liabilities
|
(32,168)
|
|
350,312
|
Income taxes payable
and receivable
|
5,071
|
|
(2,805)
|
Net cash provided by
(used in) operating activities
|
(89,789)
|
|
22,024
|
Cash flows from
investing activities
|
|
|
|
Purchases of property
and equipment
|
(35,911)
|
|
(55,930)
|
Net cash used in
investing activities
|
(35,911)
|
|
(55,930)
|
Cash flows from
financing activities
|
|
|
|
Proceeds from long
term debt and revolving credit facility
|
25,000
|
|
165,000
|
Payments on long term
debt and revolving credit facility
|
(161,250)
|
|
(161,750)
|
Cash paid for hedge
settlement
|
(1,566)
|
|
—
|
Employee taxes paid
for shares withheld for income taxes
|
(3,077)
|
|
(1,758)
|
Proceeds from
exercise of stock options and other stock issuances
|
2,232
|
|
2,318
|
Payments of debt
financing costs
|
(3,024)
|
|
(11)
|
Other financing
fees
|
50
|
|
—
|
Net cash provided by
(used in) financing activities
|
(141,635)
|
|
3,799
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
(569)
|
|
2,157
|
Net increase in cash,
cash equivalents and restricted cash
|
(267,904)
|
|
(27,950)
|
Cash, cash
equivalents and restricted cash
|
|
|
|
Beginning of
period
|
566,060
|
|
318,135
|
End of
period
|
$
|
298,156
|
|
$
|
290,185
|
Under Armour,
Inc.
For the Three Months Ended March 31, 2019
(Unaudited)
|
|
The table below
presents the reconciliation of net revenue growth (decline)
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
March 31, 2019
|
Total Net
Revenue
|
|
|
Net revenue growth -
GAAP
|
|
1.6
|
%
|
Foreign exchange
impact
|
|
1.5
|
%
|
Currency neutral net
revenue growth - Non-GAAP
|
|
3.1
|
%
|
|
|
|
North
America
|
|
|
Net revenue decline -
GAAP
|
|
(2.8)
|
%
|
Foreign exchange
impact
|
|
0.4
|
%
|
Currency neutral net
revenue decline - Non-GAAP
|
|
(2.4)
|
%
|
|
|
|
EMEA
|
|
|
Net revenue growth -
GAAP
|
|
3.5
|
%
|
Foreign exchange
impact
|
|
5.1
|
%
|
Currency neutral net
revenue growth - Non-GAAP
|
|
8.6
|
%
|
|
|
|
Asia-Pacific
|
|
|
Net revenue growth -
GAAP
|
|
24.9
|
%
|
Foreign exchange
impact
|
|
5.1
|
%
|
Currency neutral net
revenue growth - Non-GAAP
|
|
30.0
|
%
|
|
|
|
Latin
America
|
|
|
Net revenue growth -
GAAP
|
|
5.7
|
%
|
Foreign exchange
impact
|
|
3.8
|
%
|
Currency neutral net
revenue growth - Non-GAAP
|
|
9.5
|
%
|
|
|
|
Total
International
|
|
|
Net revenue growth -
GAAP
|
|
12.3
|
%
|
Foreign exchange
impact
|
|
4.9
|
%
|
Currency neutral net
revenue growth - Non-GAAP
|
|
17.2
|
%
|
Under Armour,
Inc.
As of March 31, 2019 and 2018
|
|
BRAND HOUSE AND
FACTORY HOUSE DOOR COUNT
|
|
|
|
March 31,
|
|
|
2019
|
|
2018
|
Factory
House
|
|
162
|
|
160
|
Brand
House
|
|
16
|
|
18
|
North
America total doors
|
|
178
|
|
178
|
|
|
|
|
|
Factory House
(1)
|
|
76
|
|
57
|
Brand
House
|
|
76
|
|
62
|
International total doors
|
|
152
|
|
119
|
|
|
|
|
|
Factory
House
|
|
238
|
|
217
|
Brand
House
|
|
92
|
|
80
|
Total
doors
|
|
330
|
|
297
|
|
(1) The table
above includes 9 international factory house stores that were
purchased from a partner on March 31, 2019.
|
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SOURCE Under Armour, Inc.