8-K

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 24, 2014

________________________________________________________________________________  

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))

Item 2.02. Results of Operations and Financial Condition.

On July 24, 2014, Under Armour, Inc. issued a press release announcing its financial results for the second quarter ended June 30, 2014. 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 24, 2014 to discuss its financial results, and a portion of the script for that call is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit 99.1: Under Armour, Inc. press release announcing financial results for the second quarter ended June 30, 2014.

Exhibit 99.2: Portion of conference call script for July 24, 2014 conference call.

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 24, 2014	By:	/s/ BRAD DICKERSON
		Brad Dickerson
		Chief Financial Officer

EX-99.1

Exhibit 99.1

Under Armour, Inc.
1020 Hull Street
Baltimore, MD 21230
CONTACTS
Investors:
Tom Shaw, CFA
Under Armour, Inc.
Tel: 410.843.7676
Media:
Laurin Wolf
Under Armour, Inc.
Tel: 410.468.2512 x5262

FOR IMMEDIATE RELEASE

UNDER ARMOUR REPORTS SECOND QUARTER NET REVENUES GROWTH OF 34%; RAISES FULL YEAR 2014 NET REVENUES AND OPERATING INCOME OUTLOOK

• Second Quarter Net Revenues Increased 34% to $610 Million

• Company Raises 2014 Net Revenues Outlook to a Range of $2.98 Billion to $3.0 Billion (+28% to +29%) from $2.88 Billion to $2.91 Billion (+24% to +25%)

• Company Raises 2014 Operating Income Outlook to a Range of $343 Million to $345 Million (+29% to +30%) from $331 Million to $334 Million (+25% to +26%)

Baltimore, MD (July 24, 2014) - Under Armour, Inc. (NYSE: UA) today announced financial results for the second quarter ended June 30, 2014. Net revenues increased 34% in the second quarter of 2014 to $610 million compared with net revenues of $455 million in the prior year's period. Net income in the second quarter of 2014 of $18 million was unchanged compared with the prior year's period, largely reflecting the planned timing of marketing and innovation expenses. Diluted earnings per share for the second quarter of 2014 were $0.08, unchanged from the prior year's period.

Second quarter apparel net revenues increased 35% to $420 million compared with $310 million in the same period of the prior year, driven by expanded offerings in categories such as golf, outdoor, running, training, and women's studio. Second quarter footwear net revenues increased 34% to $110 million from $82 million in the prior year's period, led by new introductions in running. Second quarter accessories net revenues increased 18% to $60 million from $51 million in the prior year's period, primarily driven by headwear. Direct-to-Consumer net revenues, which represented 31% of total net revenues for the second quarter, grew 38% year-over-year. International net revenues, which represented 8% of total net revenues for the second quarter, grew 80% year-over-year.

Kevin Plank, Chairman and CEO of Under Armour, Inc., stated, "The broad-based momentum that we have been experiencing recently showed no signs of stopping during the second quarter. While we continued to add more dimension to our largest growth driver in Apparel, we were particularly encouraged by the brand response we are seeing in both our Footwear and International businesses. From our latest pinnacle football cleat, the Highlight ClutchFit, to the successful SpeedForm running initiative, our footwear is clearly resonating with consumers and we are well positioned to expand these platforms in the seasons ahead. In International, we are executing in all regions and are proud of key second quarter milestones such as our initial product launch in Brasil and partnering with key distributors to open the first Brand House stores in Panama, the Philippines and Singapore."

Gross margin for the second quarter of 2014 was 49.2% compared with 48.3% in the prior year's quarter, primarily driven by favorable year-over-year sales mix and product margins. Selling, general and administrative expenses as a percentage of net revenues were 43.5% in the second quarter of 2014 compared with 41.2% in the prior year's period,

primarily driven by the timing of marketing expenses and investments in product innovation. Second quarter operating income increased 7% to $35 million compared with $32 million in the prior year's period.

Balance Sheet Highlights

Cash and cash equivalents increased 34% to $300 million at June 30, 2014 compared with $224 million at June 30, 2013. Long-term debt including current maturities increased to $197 million at June 30, 2014 compared with $55 million at June 30, 2013. In May 2014 the Company closed on a $150 million term loan and paid off $100 million drawn on the Company's revolving credit facility. Inventory at June 30, 2014 increased 35% to $662 million compared with $491 million at June 30, 2013.

Updated 2014 Outlook

The Company had previously anticipated 2014 net revenues in the range of $2.88 billion to $2.91 billion, representing growth of 24% to 25% over 2013, and 2014 operating income in the range of $331 million to $334 million, representing growth of 25% to 26% over 2013. Based on current visibility, the Company expects 2014 net revenues in the range of $2.98 billion to $3.0 billion, representing growth of 28% to 29% over 2013, and 2014 operating income in the range of $343 million to $345 million, representing growth of 29% to 30% over 2013. The Company currently anticipates an effective tax rate of approximately 40.5% for the full year, compared to 37.8% for 2013, and fully diluted weighted average shares outstanding of approximately 218 million for 2014.

Mr. Plank concluded, "The enhanced visibility and execution of both our Footwear and International growth engines during the first half of 2014 gives us greater conviction in achieving our full year financial targets. At the same time, we are better positioned to broaden our consumer reach this quarter as we launch new relationships with the U.S. Naval Academy, the University of Notre Dame, as well as the Cruz Azul Fútbol Club in Mexico. In addition, this month we are launching our second Brand Holiday of 2014, our first global campaign dedicated to women and one that will reinforce our commitment to build out this important growth driver. We are also extremely excited with our progress in Connected Fitness, where we just surpassed 27 million users and are adding nearly one million new users each month, as well as forging relationships that will empower this community in the years ahead."

Conference Call and Webcast

The Company will provide additional commentary regarding its second quarter results as well as its updated 2014 outlook during its earnings conference call today, July 24, 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), the originator of performance footwear, apparel and accessories, 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. Under Armour's wholly owned subsidiary, MapMyFitness, powers one of the world's largest Connected Fitness communities. 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 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 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; 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; our ability to comply with trade and other regulations; the availability, integration and effective operation of management information systems and other technology; our ability to effectively integrate new businesses and investments into our company; 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 and Six Months Ended June 30, 2014 and 2013

(Unaudited; in thousands, except per share amounts)

CONSOLIDATED STATEMENTS OF INCOME

	Quarter Ended June 30,										Six Months Ended June 30,
	2014			% of Net Revenues		2013			% of Net Revenues		2014			% of Net Revenues		2013			% of Net Revenues
Net revenues	$	609,654		100.0	%	$	454,541		100.0	%	$	1,251,261		100.0	%	$	926,149		100.0	%
Cost of goods sold	309,702			50.8	%	234,910			51.7	%	650,619			52.0	%	489,967			52.9	%
Gross profit	299,952			49.2	%	219,631			48.3	%	600,642			48.0	%	436,182			47.1	%
Selling, general and administrative expenses	265,258			43.5	%	187,321			41.2	%	539,092			43.1	%	390,380			42.2	%
Income from operations	34,694			5.7	%	32,310			7.1	%	61,550			4.9	%	45,802			4.9	%
Interest expense, net	(1,227		)	(0.2	)%	(711		)	(0.1	)%	(2,073		)	(0.2	)%	(1,436		)	(0.1	)%
Other income (expense), net	247			—	%	(797		)	(0.2	)%	(627		)	—	%	(557		)	(0.1	)%
Income before income taxes	33,714			5.5	%	30,802			6.8	%	58,850			4.7	%	43,809			4.7	%
Provision for income taxes	16,024			2.6	%	13,236			2.9	%	27,622			2.2	%	18,429			2.0	%
Net income	$	17,690		2.9	%	$	17,566		3.9	%	$	31,228		2.5	%	$	25,380		2.7	%
Net income available per common share
Basic	$	0.08				$	0.08				$	0.15				$	0.12
Diluted	$	0.08				$	0.08				$	0.14				$	0.12
Weighted average common shares outstanding
Basic	213,188					210,530					212,788					210,162
Diluted	217,294					214,834					217,134					214,512

NET REVENUES BY PRODUCT CATEGORY

	Quarter Ended June 30,						Six Months Ended June 30,
	2014		2013		% Change		2014		2013		% Change
Apparel	$	420,028	$	310,221	35.4	%	$	879,277	$	655,747	34.1	%
Footwear	109,536		81,651		34.2	%	223,580		162,434		37.6	%
Accessories	59,932		51,024		17.5	%	111,485		87,106		28.0	%
Total net sales	589,496		442,896		33.1	%	1,214,342		905,287		34.1	%
Licensing and other revenues	20,158		11,645		73.1	%	36,919		20,862		77.0	%
Total net revenues	$	609,654	$	454,541	34.1	%	$	1,251,261	$	926,149	35.1	%

NET REVENUES BY SEGMENT

	Quarter Ended June 30,						Six Months Ended June 30,
	2014		2013		% Change		2014		2013		% Change
North America	$	558,041	$	428,859	30.1	%	$	1,140,593	$	869,727	31.1	%
Other foreign countries and businesses	51,613		25,682		101.0	%	110,668		56,422		96.1	%
Total net revenues	$	609,654	$	454,541	34.1	%	$	1,251,261	$	926,149	35.1	%

Under Armour, Inc.

As of June 30, 2014, December 31, 2013 and June 30, 2013

(Unaudited; in thousands)

CONDENSED CONSOLIDATED BALANCE SHEETS

	As of 6/30/14		As of 12/31/13		As of 6/30/13
Assets
Cash and cash equivalents	$	300,434	$	347,489	$	223,842
Accounts receivable, net	269,133		209,952		212,836
Inventories	662,388		469,006		490,943
Prepaid expenses and other current assets	97,190		63,987		52,291
Deferred income taxes	39,174		38,377		32,043
Total current assets	1,368,319		1,128,811		1,011,955
Property and equipment, net	255,018		223,952		190,924
Goodwill	123,395		122,244		—
Intangible assets, net	30,776		24,097		3,798
Deferred income taxes	37,706		31,094		26,642
Other long term assets	48,731		47,543		42,069
Total assets	$	1,863,945	$	1,577,741	$	1,275,388
Liabilities and Stockholders’ Equity
Revolving credit facility	$	—	$	100,000	$	—
Accounts payable	334,001		165,456		217,925
Accrued expenses	110,649		133,729		77,935
Current maturities of long term debt	19,650		4,972		5,112
Other current liabilities	15,945		22,473		2,923
Total current liabilities	480,245		426,630		303,895
Long term debt, net of current maturities	176,987		47,951		50,387
Other long term liabilities	65,954		49,806		44,099
Total liabilities	723,186		524,387		398,381
Total stockholders’ equity	1,140,759		1,053,354		877,007
Total liabilities and stockholders’ equity	$	1,863,945	$	1,577,741	$	1,275,388

Under Armour, Inc.

For the Six Months Ended June 30, 2014 and 2013

(Unaudited; in thousands)

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,
	2014			2013
Cash flows from operating activities
Net income	$	31,228		$	25,380
Adjustments to reconcile net income to net cash used in operating activities
Depreciation and amortization	34,347			23,618
Unrealized foreign currency exchange rate (gains) losses	(100		)	1,617
Loss on disposal of property and equipment	73			466
Stock-based compensation	23,860			18,878
Deferred income taxes	(7,388		)	(13,228		)
Changes in reserves and allowances	1			932
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	(53,090		)	(37,594		)
Inventories	(195,406		)	(175,549		)
Prepaid expenses and other assets	(16,514		)	(4,066		)
Accounts payable	175,674			77,644
Accrued expenses and other liabilities	(14,286		)	2,812
Income taxes payable and receivable	(24,065		)	(11,386		)
Net cash used in operating activities	(45,666		)	(90,476		)
Cash flows from investing activities
Purchases of property and equipment	(68,901		)	(39,696		)
Purchase of business	(10,924		)	—
Purchases of other assets	(260		)	(475		)
Change in loans receivable	—			(1,700		)
Net cash used in investing activities	(80,085		)	(41,871		)
Cash flows from financing activities
Payments on revolving credit facility	(100,000		)	—
Proceeds from term loan	150,000			—
Payments on long term debt	(6,286		)	(2,895		)
Excess tax benefits from stock-based compensation arrangements	26,301			9,455
Proceeds from exercise of stock options and other stock issuances	10,196			9,738
Payments of debt financing costs	(1,714		)	—
Net cash provided by financing activities	78,497			16,298
Effect of exchange rate changes on cash and cash equivalents	199			(1,950		)
Net decrease in cash and cash equivalents	(47,055		)	(117,999		)
Cash and cash equivalents
Beginning of period	347,489			341,841
End of period	$	300,434		$	223,842
Non-cash investing and financing activities
Decrease in accrual for property and equipment	$	(9,100	)	$	(7,200	)

EX-99.2

Exhibit 99.2

Under Armour: Second Quarter 2014 Earnings Call, July 24, 2014 (Brad Dickerson)

Thanks, Kevin. I would now like to spend some time discussing our second quarter 2014 financial results followed by our updated outlook for 2014.

Our net revenues for the second quarter of 2014 increased 34% to $610 million. Growth again was balanced across many parts of our business including the North America wholesale, Direct-to-Consumer, and International channels, as well as across our Apparel and Footwear categories. Areas that contributed to upside from our original plan during the quarter included positive trends in our International and Footwear businesses, a desire from our wholesale partners for earlier delivery of back-to-school product, and outperformance in both our Factory House and E-Commerce channels.

Taking a look at Apparel, we grew this category 35% during the quarter to $420 million compared to $310 million in the prior year. In general, we continue to see success where we drive newness and excitement for the consumer, including innovation stories like ArmourVent as well as enhanced design elements through product such as Alter Ego, UA Tech, and graphic tees.

• Specifically in Men's, the first quarter momentum we experienced in Golf and Outdoor continued to drive results during the second quarter.

• In Women's, we saw strong growth in both the Running and Studio categories.

• And in Youth, Training and Golf were the big stories.

Building on our first quarter success, second quarter Footwear net revenues increased 34% to $110 million from $82 million in the prior year, representing approximately 18% of net revenues for the period. We continue to offer more balanced running price points across our sporting goods distribution and remain encouraged by the early success of our SpeedForm platform. Our momentum is also continuing in our cleated business where we are increasing market share in both baseball and football this year.

Following on the re-launch of our bags business in the prior year period, our Accessories net revenues during the second quarter increased 18% to $60 million from $51 million last year. Growth during the quarter was primarily driven by headwear.

Our Direct-to-Consumer net revenues increased 38% for the quarter, representing approximately 31% of net revenues. While Kevin walked you through some of the early progress we are making in International

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markets, it is important to note the vast majority of our current Direct-to-Consumer revenues are concentrated in North America. In our North American Retail business, square footage in our Factory House channel grew 22% year-over-year. This growth reflects a total of 118 Factory House stores at the end of the quarter, up 12% from the second quarter of 2013, as well as the upsizing of some existing doors. On the full-price side, we now have five Brand House stores in North America following the April opening of our Soho location in New York City.

In E-Commerce, strong traffic gains continued to drive our business during the quarter and we remain focused on key second half initiatives including responsive design for mobile, consumer marketing segmentation, and Connected Fitness engagement.

Continuing the success from the first quarter, International net revenues increased 80% to $46 million in the second quarter and represented 8% of total net revenues.

• In Europe, strong results continue to be driven by higher brand awareness and a more focused in-country strategy around our three key markets of the UK, Germany, and France.

• In Asia, we are in the process of accelerating our partner store model in China, while also building both wholesale and distributor relationships across the region.

• Finally in Latin America, our business benefited from the conversion of our Mexico distributor to an Under Armour subsidiary at the beginning of 2014 as well as our market entry into Brazil.

Moving on to margins, second quarter gross margins expanded approximately 90 basis points to 49.2% compared with 48.3% in the prior year's quarter. Two factors were the primary contributors to the improvement this quarter.

• First, we had a favorable year-over-year sales mix. As part of our inventory management process, there can be quarterly shifts in the timing of our excess inventory liquidation sales. Some Footwear liquidations from the second quarter shifted into the third quarter positively impacting the second quarter gross margins by approximately 40 basis points.

• Secondly, we experienced favorable product margins primarily in our in-line Footwear business, contributing approximately 30 basis points for the quarter.

Selling, general and administrative expenses as a percentage of net revenues deleveraged 230 basis points to 43.5% in the second quarter of 2014 from 41.2% in the prior year's period. Details around our four SG&A buckets are as follows:

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• First, Marketing costs increased to 11.6% of net revenues for the quarter from 10.7% in the prior year period, primarily driven by higher year-over-year sports marketing sponsorships in both our North American and International businesses.

• Second, Selling costs increased to 11.5% of net revenues for the quarter from 11.3% in the prior year period, primarily driven by the overall growth of our Direct-to-Consumer business including increased investments to support our Factory House and Brand House store strategies.

• Third, Product Innovation and Supply Chain costs increased to 11.4% of net revenues for the quarter from 10.2% in the prior year period, primarily driven by higher product innovation costs including our Connected Fitness efforts.

• Finally, Corporate Services remained unchanged at 9.0% of net revenues for the quarter.

Operating income for the second quarter increased 7% to $35 million compared with $32 million in the prior year period. Operating margin contracted 140 basis points during the quarter to 5.7% compared to 7.1% in the prior year period, largely driven by the timing of planned investments in Product Innovation and Marketing.

Our second quarter tax rate of 47.5% was unfavorable to the 43.0% rate last year primarily driven by increased investment in our Latin American business.

Our second quarter net income and earnings per share were unchanged year-over-year at $18 million and $0.08, respectively.

On the balance sheet, total cash and cash equivalents for the quarter increased 34% to $300 million compared with $224 million at June 30, 2013. Long-term debt increased to $197 million from $55 million at June 30, 2013. In May 2014 we closed on a $150 million term loan and paid off $100 million drawn on our line of credit in connection with the funding of our December 2013 purchase of MapMyFitness. Switching over to inventory, as planned we delivered inventory growth roughly in line with net revenue growth. Inventory at quarter-end increased 35% to $662 million compared to $491 million at June 30, 2013.

Our investment in capital expenditures was approximately $29 million for the second quarter compared with $22 million in the prior year period. We continue to plan 2014 capital expenditures of approximately $150 million, primarily driven by incremental investments to support our Direct-to-Consumer and International businesses, further develop and expand our global office footprint, and increase capacity at out our distribution centers.

3

Now moving onto our updated outlook for 2014. Based on current visibility, we expect 2014 net revenues of $2.98 billion to $3.0 billion, representing growth of 28% to 29%, and 2014 operating income of $343 million to $345 million, representing growth of 29% to 30%. Both expected growth rates are outpacing the long-term growth rates laid out at our Investor Day in June 2013.

Below operating results, we continue to anticipate moderately higher interest expense in 2014, primarily reflecting the new $150 million term loan. We expect a full year effective tax rate of approximately 40.5%, ahead of last year's 37.8% rate given investments to support our international expansion.

Given these updated full year parameters, we would like to provide a few more details on how we currently see the second half of the year playing out.

First on net revenues, we are increasing the top end of our full year guidance by $90 million driven in large part by our increased confidence in both our International and Footwear businesses, where we have seen strong execution and consumer response during the front half of 2014.

As far as cadence, our story is consisent with prior guidance with a somewhat higher growth rate expected during the third quarter relative to the fourth quarter. We continue to take a more balanced approach in planning the business around weather expectations for the fourth quarter as compared to last year, especially in our Direct-to-Consumer business which represented approximately 40% of our total business during the fourth quarter last year.

Next on gross margins where we continue to expect a modest overall gain for the full year following the 48.7% level achieved in 2013. From a cadence standpoint, we continue to expect year-over-year rates to be up during the third quarter and down in the fourth quarter.

• During the third quarter, the primary consideration is higher U.S. import duties, which negatively impacted the year ago period by 90 basis points. A shift in Footwear liquidations from the second quarter to the third quarter discussed earlier will partially offset some of the year-over-year gains from the import duty comparison.

• For the fourth quarter, our forecast for lower year-over-year gross margins reflects a higher mix impact of our International business, which is more weighted toward lower-margin distributor businesses during the period, as well as our previously mentioned approach to planning our fourth quarter business.

4

Moving on to SG&A, we continue to plan for modest deleverage for the full year. During the third quarter, we expect overall SG&A spending will remain elevated with overall deleverage planned near the same levels as the 230 basis points experienced during the second quarter. Specific areas of investment include increased marketing around our Brand Holiday campaign, higher selling costs tied to our Brand House and E-Commerce initiatives, and overall innovation spending in areas like Connected Fitness. In addition, we expect deleverage due to higher incentive compensation expense during the period. During the fourth quarter, we continue to see significant leverage of SG&A, particularly in Corporate Services, primarily given elevated spending in the prior year around higher incentive compensation expenses and MapMyFitness deal-related costs.

Finally on the balance sheet, we expect inventory growth will remain relatively in line with net revenue growth during both the third and fourth quarters.

Forward Looking Statements

Some of the statements contained in this script 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 script 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 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; 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; our ability to comply with trade and other regulations; the availability, integration and effective operation of management information systems and other technology; our ability to effectively integrate new businesses and investments into our company; 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 script reflect our views and assumptions only as of the date of this script. 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.

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