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Under Armour Reports Second Quarter Results; Updates 2019 Full Year Outlook

BALTIMORE, July 30, 2019 /PRNewswire/ -- Under Armour, Inc. (NYSE: UA, UAA) today announced financial results for the second quarter ended June 30, 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.

Under Armour, Inc. Logo. (PRNewsFoto/Under Armour, Inc.)

"Our second quarter results give us increasing conviction that our transformation continues to make solid progress across our business, unlocking efficiencies that are driving greater precision, consistency and repeatability," said Under Armour Chairman and CEO Kevin Plank. "By staying sharply focused on our long-term strategies – driving our premium athletic brand positioning through industry leading innovation, geographic expansion and creating deep connections with our consumers – we are on track to deliver against our expectations in 2019."

Second Quarter 2019 Review

  • Revenue was up 1 percent to $1.2 billion (up 3 percent currency neutral).
  • Gross margin increased 170 basis points to 46.5 percent compared to the prior year driven by supply chain initiatives, regional mix and restructuring charges in the prior period offset by foreign currency impacts.
  • Selling, general & administrative expenses increased 2 percent to $566 million, or 47.5 percent of revenue.
  • Operating loss was $11 million.
  • Net loss was $17 million or $0.04 loss per share, inclusive of a negative $0.01 impact from the company's minority interest in its Japanese licensee.
  • Inventory decreased 26 percent to $966 million.
  • Total debt was down 24 percent to $591 million.
  • Cash and cash equivalents increased 131 percent to $456 million.

Fiscal 2019 Outlook

  • Revenue is expected to be up approximately 3 to 4 percent reflecting a slight decline in North America and a low to mid-teen percentage rate increase in the international business.
  • Gross margin is expected to increase approximately 110 to 130 basis points compared to 2018. Excluding restructuring charges from the comparable prior period, we expect an increase of approximately 70 to 90 basis points compared to 2018 adjusted gross margin due to ongoing supply chain initiatives and channel mix benefits.
  • Operating income is now expected to reach approximately $230 million to $235 million versus the previously expected range of $220 million to $230 million.
  • Interest and other expense, net is now expected to be approximately $30 million versus the previous expectation of approximately $35 million.
  • Effective tax rate is now expected to be approximately 22 percent versus the previous expectation at the high end of a 19 percent to 22 percent range.
  • Earnings per share is expected to be $0.33 to $0.34 inclusive of a negative impact from the company's minority interest in its Japanese licensee.
  • Capital expenditures are expected to be approximately $210 million.

Conference Call and Webcast

Under Armour will hold its second 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 athletic performance apparel, footwear and accessories. Powered by one of the world's largest digitally connected fitness and wellness communities, Under Armour's innovative products and experiences are designed to help advance human performance, making all athletes better. 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, the impact of our investment in our licensee on our results of operations, 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; the impact of the performance of our equity method investment on our results of operations; 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 and Six Months Ended June 30, 2019 and 2018

(Unaudited; in thousands, except per share amounts)


CONSOLIDATED STATEMENTS OF OPERATIONS




Three Months Ended June 30,


Six Months Ended June 30,



2019


% of Net
Revenues


2018


% of Net
Revenues


2019


% of Net
Revenues


2018


% of Net
Revenues

Net revenues


$

1,191,729


100.0

%


$

1,174,859


100.0

%


$

2,396,451


100.0

%


$

2,360,229


100.0

%

Cost of goods sold


637,408


53.5

%


648,275


55.2

%


1,297,343


54.1

%


1,310,192


55.5

%

Gross profit


554,321


46.5

%


526,584


44.8

%


1,099,108


45.9

%


1,050,037


44.5

%

Selling, general and administrative expenses


565,803


47.5

%


552,619


47.0

%


1,075,331


44.9

%


1,067,253


45.2

%

Restructuring and impairment charges



%


78,840


6.7

%



%


116,320


4.9

%

Income (loss) from operations


(11,482)


(1.0)

%


(104,875)


(8.9)

%


23,777


1.0

%


(133,536)


(5.7)

%

Interest expense, net


(5,988)


(0.5)

%


(8,552)


(0.7)

%


(10,226)


(0.4)

%


(17,116)


(0.7)

%

Other expense, net


(1,128)


(0.1)

%


(8,069)


(0.7)

%


(1,795)


(0.1)

%


(5,181)


(0.2)

%

Income (loss) before income taxes


(18,598)


(1.6)

%


(121,496)


(10.3)

%


11,756


0.5

%


(155,833)


(6.6)

%

Income tax expense (benefit)


(5,740)


(0.5)

%


(26,090)


(2.2)

%


2,391


0.1

%


(30,183)


(1.3)

%

Loss from equity method investment


(4,491)


(0.4)

%


(138)


%


(4,237)


(0.2)

%


(138)


%

Net income (loss)


$

(17,349)


(1.5)

%


$

(95,544)


(8.1)

%


$

5,128


0.2

%


$

(125,788)


(5.3)

%


















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


$

(0.04)




$

(0.21)




$

0.01




$

(0.28)



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


$

(0.04)




$

(0.21)




$

0.01




$

(0.28)



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

Basic


451,066




444,626




450,411




443,844



Diluted


451,066




444,626




453,717




443,844



 

 

Under Armour, Inc.

For the Three and Six Months Ended June 30, 2019 and 2018

(Unaudited; in thousands)









NET REVENUES BY PRODUCT CATEGORY












Three Months Ended June 30,


Six Months Ended June 30,







2019


2018


% Change


2019


2018


% Change





Apparel


$

739,736


$

748,335


(1.1)

%


$

1,514,366


$

1,517,266


(0.2)

%





Footwear


284,080


271,375


4.7

%


576,627


543,145


6.2

%





Accessories


106,250


105,906


0.3

%


188,242


198,064


(5.0)

%





Total net sales


1,130,066


1,125,616


0.4

%


2,279,235


2,258,475


0.9

%





Licensing revenues


25,308


21,172


19.5

%


46,965


47,513


(1.2)

%





Connected Fitness


31,935


29,112


9.7

%


62,039


57,938


7.1

%





Corporate Other


4,420


(1,041)


524.6

%


$

8,212


$

(3,697)


322.1

%





Total net revenues


$

1,191,729


$

1,174,859


1.4

%


$

2,396,451


$

2,360,229


1.5

%







NET REVENUES BY SEGMENT







Three Months Ended June 30,


Six Months Ended June 30,






2019


2018


% Change


2019


2018


% Change





North America


$

816,220


$

843,383


(3.2)

%


$

1,659,469


$

1,710,928


(3.0)

%





EMEA


145,320


136,942


6.1

%


279,424


266,530


4.8

%





Asia-Pacific


154,113


125,706


22.6

%


298,398


241,259


23.7

%





Latin America


39,721


40,757


(2.5)

%


88,909


87,271


1.9

%





Connected Fitness


31,935


29,112


9.7

%


62,039


57,938


7.1

%





Corporate Other


4,420


(1,041)


524.6

%


8,212


$

(3,697)


322.1

%





Total net revenues


$

1,191,729


$

1,174,859


1.4

%


$

2,396,451


$

2,360,229


1.5

%







INCOME (LOSS) FROM OPERATIONS




Three Months Ended June 30,


Six Months Ended June 30,



2019

% of Net
Revenues (1)


2018

% of Net
Revenues (1)


2019

% of Net
Revenues (1)


2018


% of Net
Revenues (1)


North America


$

139,198

17.1

%


$

132,529

15.7

%


$

299,471

18.0

%


$

280,714


16.4

%


EMEA


10,493

7.2

%


(5,945)

(4.3)

%


22,711

8.1

%


1,209


0.5

%


Asia-Pacific


19,647

12.7

%


21,391

17.0

%


39,450

13.2

%


45,513


18.9

%


Latin America


(3,891)

(9.8)

%


(4,689)

(11.5)

%


(4,250)

(4.8)

%


(6,567)


(7.5)

%


Connected Fitness


11

%


1,711

5.9

%


1,080

1.7

%


5,122


8.8

%


Corporate Other


(176,940)

NM



(249,872)

NM



(334,685)

NM



(459,527)


NM



Income (loss) from operations


$

(11,482)

(1.0)

%


$

(104,875)

(8.9)

%


$

23,777

1.0

%


$

(133,536)


(5.7)

%



(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 June 30, 2019, December 31, 2018 and June 30, 2018

(Unaudited; in thousands)


CONDENSED CONSOLIDATED BALANCE SHEETS




June 30, 2019


December 31, 2018


June 30, 2018

Assets







Current assets







Cash and cash equivalents


$

455,726


$

557,403


$

196,879

Accounts receivable, net


735,181


652,546


724,945

Inventories


965,711


1,019,496


1,299,332

Prepaid expenses and other current assets


287,829


364,183


340,359

Total current assets


2,444,447


2,593,628


2,561,515

Property and equipment, net


795,499


826,868


835,427

Operating lease right-of-use assets


606,018



Goodwill


548,762


546,494


551,160

Intangible assets, net


39,527


41,793


45,880

Deferred income taxes


129,403


112,420


111,746

Other long-term assets


116,252


123,819


135,424

Total assets


$

4,679,908


$

4,245,022


$

4,241,152

Liabilities and Stockholders' Equity







Accounts payable


607,382


560,884


691,163

Accrued expenses


304,063


340,415


258,567

Customer refund liabilities


241,456


301,421


303,730

Operating lease liabilities


116,219



Current maturities of long-term debt



25,000


27,000

Other current liabilities


63,521


88,257


57,939

Total current liabilities


1,332,641


1,315,977


1,338,399

Long term debt, net of current maturities


591,396


703,834


752,370

Operating lease liabilities, non-current


601,665



Other long-term liabilities


105,932


208,340


226,471

Total liabilities


2,631,634


2,228,151


2,317,240

Total stockholders' equity


2,048,274


2,016,871


1,923,912

Total liabilities and stockholders' equity


$

4,679,908


$

4,245,022


$

4,241,152








 

 

Under Armour, Inc.

For the Six Months Ended June 30, 2019 and 2018

(Unaudited; in thousands)


CONSOLIDATED STATEMENTS OF CASH FLOWS



Six Months Ended June 30,


2019


2018

Cash flows from operating activities




Net income (loss)

$

5,128


$

(125,788)

Adjustments to reconcile net income (loss) to net cash provided by operating activities




Depreciation and amortization

93,721


91,271

Unrealized foreign currency exchange rate gain (loss)

(3,077)


13,151

Loss on disposal of property and equipment

2,447


2,496

Impairment charges


9,660

Amortization of bond premium

127


127

Stock-based compensation

25,635


20,673

Deferred income taxes

(13,890)


(35,969)

Changes in reserves and allowances

(10,196)


(238,005)

Changes in operating assets and liabilities:




Accounts receivable

(75,116)


116,896

Inventories

62,302


(158,430)

Prepaid expenses and other assets

64,533


(54,422)

Other non-current assets

12,812


768

Accounts payable

57,674


160,164

Accrued expenses and other liabilities

(48,094)


48,939

Customer refund liabilities

(60,089)


307,192

Income taxes payable and receivable

(1,210)


(12,716)

Net cash provided by operating activities

112,707


146,007

Cash flows from investing activities




Purchases of property and equipment

(77,046)


(95,607)

Sale of property and equipment


11,285

Purchase of equity method investment


(39,207)

Purchases of other assets

(997)


(2,536)

Net cash used in investing activities

(78,043)


(126,065)

Cash flows from financing activities




Proceeds from long term debt and revolving credit facility

25,000


210,000

Payments on long term debt and revolving credit facility

(162,817)


(348,500)

Employee taxes paid for shares withheld for income taxes

(3,077)


(1,759)

Proceeds from exercise of stock options and other stock issuances

4,238


8,913

Payments of debt financing costs

(2,661)


(11)

Other financing fees

76


87

Net cash used in financing activities

(139,241)


(131,270)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

4,463


(2,487)

Net increase in cash, cash equivalents and restricted cash

(100,114)


(113,815)

Cash, cash equivalents and restricted cash




Beginning of period

566,060


318,135

End of period

$

465,946


$

204,320

 

 

Under Armour, Inc.

For the Three and Six Months Ended June 30, 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
June 30, 2019

Six Months Ended
June 30, 2019

Total Net Revenue




Net revenue growth - GAAP


1.4

%

1.5

%

Foreign exchange impact


1.6

%

1.6

%

Currency neutral net revenue growth - Non-GAAP


3.0

%

3.1

%





North America




Net revenue decline - GAAP


(3.2)

%

(3.0)

%

Foreign exchange impact


0.3

%

0.4

%

Currency neutral net revenue decline - Non-GAAP


(2.9)

%

(2.6)

%





EMEA




Net revenue growth - GAAP


6.1

%

4.8

%

Foreign exchange impact


4.6

%

4.9

%

Currency neutral net revenue growth - Non-GAAP


10.7

%

9.7

%





Asia-Pacific




Net revenue growth - GAAP


22.6

%

23.7

%

Foreign exchange impact


6.6

%

5.9

%

Currency neutral net revenue growth - Non-GAAP


29.2

%

29.6

%





Latin America




Net revenue growth (decline) - GAAP


(2.5)

%

1.9

%

Foreign exchange impact


4.0

%

3.8

%

Currency neutral net revenue growth - Non-GAAP


1.5

%

5.7

%





Total International




Net revenue growth - GAAP


11.8

%

12.0

%

Foreign exchange impact


5.3

%

5.2

%

Currency neutral net revenue growth - Non-GAAP


17.1

%

17.2

%

 

 

Under Armour, Inc.

As of June 30, 2019 and 2018


BRAND HOUSE AND FACTORY HOUSE DOOR COUNT




June 30,



2019


2018

Factory House


165


161

Brand House


16


15

   North America total doors


181


176






Factory House


86


61

Brand House


79


65

   International total doors


165


126






Factory House


251


222

Brand House


95


80

   Total doors


346


302

 

 

Cision

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