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): October 23, 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 October 23, 2014, Under Armour, Inc. issued a press release announcing its financial results for the third quarter ended September 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 October 23, 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 third quarter ended September 30, 2014.

Exhibit 99.2: Portion of conference call script for October 23, 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: October 23, 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:
Diane Pelkey
Under Armour, Inc.
Tel: 410.246.5927

FOR IMMEDIATE RELEASE

UNDER ARMOUR REPORTS THIRD QUARTER NET REVENUES GROWTH OF 30%; RAISES FULL YEAR 2014 NET REVENUES AND OPERATING INCOME OUTLOOK

• Third Quarter Net Revenues Increased 30% to $938 Million

• Third Quarter Footwear Net Revenues Increased 50%; Third Quarter International Net Revenues Increased 94%

• Raises 2014 Net Revenues Outlook to Approximately $3.03 Billion (+30%)

• Raises 2014 Operating Income Outlook to Approximately $348 Million (+31%)

Baltimore, MD (October 23, 2014) - Under Armour, Inc. (NYSE: UA) today announced financial results for the third quarter ended September 30, 2014. Net revenues increased 30% in the third quarter of 2014 to $938 million compared with net revenues of $723 million in the prior year's period. Net income increased 22% in the third quarter of 2014 to $89 million compared with $73 million in the prior year's period. Diluted earnings per share for the third quarter of 2014 were $0.41 compared with $0.34 per share in the prior year's period.

Third quarter apparel net revenues increased 26% to $705 million compared with $561 million in the same period of the prior year, driven primarily by expanded offerings and platform innovations across training, golf, and outdoor. Third quarter footwear net revenues increased 50% to $122 million from $81 million in the prior year's period, led by new introductions in running and basketball. Third quarter accessories net revenues increased 32% to $85 million from $64 million in the prior year's period, primarily driven by expanded offerings in headwear, bags, and gloves. Direct-to-Consumer net revenues, which represented 26% of total net revenues for the third quarter, grew 35% year-over-year. International net revenues, which represented 9% of total net revenues for the third quarter, grew 94% year-over-year.

Kevin Plank, Chairman and CEO of Under Armour, Inc., stated, "Our strong third quarter results demonstrate the power of the UA brand. The momentum and growing confidence we outlined last quarter in Footwear and International were on full display in the third quarter with growth rates accelerating to 50% and 94%, respectively. Our Direct-to-Consumer business continues to drive our vision to Empower Athletes Everywhere with the debut of local E-Commerce sites in the United Kingdom, Germany, and France, as well as optimizing all global sites for mobile to stay ahead of where our consumers are going. And we were particularly excited about our I WILL WHAT I WANT^TM global women's campaign, featuring Misty Copeland and Gisele Bündchen, which ignited a powerful new dialogue with our female consumer as we begin to bridge the gap between female athletes and athletic females."

Gross margin for the third quarter of 2014 was 49.6% compared with 48.4% in the prior year's quarter, primarily driven by higher import duties in the prior year's period and favorable year-over-year sales mix. Selling, general and administrative expenses as a percentage of net revenues were 34.0% in the third quarter of 2014 compared with 31.7% in the prior year's period, reflecting broad-based investments to support global growth initiatives as well as higher

incentive compensation expenses. Third quarter operating income increased 21% to $146 million compared with $121 million in the prior year's period.

Balance Sheet Highlights

Cash and cash equivalents increased 34% to $249 million at September 30, 2014 compared with $186 million at September 30, 2013. Long-term debt including current maturities increased to $192 million at September 30, 2014 compared with $54 million at September 30, 2013. Inventory at September 30, 2014 increased 28% to $637 million compared with $497 million at September 30, 2013.

Updated 2014 Outlook

The Company had previously anticipated 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. Based on current visibility, the Company expects 2014 net revenues of approximately $3.03 billion, representing growth of 30% over 2013, and 2014 operating income of approximately $348 million, representing growth of 31% over 2013. The Company anticipates an effective tax rate of approximately 40.0% 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, "Our plans of crossing $3 billion in net revenues and achieving 30% growth this year represent significant milestones for the Brand, but we believe we are just getting started. We are delivering consistent top line results while making the right investments to support both the near- and long-term opportunities of the Brand. This includes investments to build world-class design and innovation capabilities for all of our products, accelerate our international footprint, and expand our 30 million users under our Connected Fitness platform. We believe this balanced approach will continue to drive our global ambitions and long-term value for our shareholders. We are proud of what we have built and continue to see ourselves as a much larger brand than the $3 billion in revenues we are projecting for 2014."

Conference Call and Webcast

The Company will provide additional commentary regarding its third quarter results as well as its updated 2014 outlook during its earnings conference call today, October 23, 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, as well as any potential interruption or security lapse in such systems or 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 Nine Months Ended September 30, 2014 and 2013

(Unaudited; in thousands, except per share amounts)

CONSOLIDATED STATEMENTS OF INCOME

	Quarter Ended September 30,										Nine Months Ended September 30,
	2014			% of Net Revenues		2013			% of Net Revenues		2014			% of Net Revenues		2013			% of Net Revenues
Net revenues	$	937,908		100.0	%	$	723,146		100.0	%	$	2,189,169		100.0	%	$	1,649,295		100.0	%
Cost of goods sold	472,608			50.4	%	373,011			51.6	%	1,123,227			51.3	%	862,978			52.3	%
Gross profit	465,300			49.6	%	350,135			48.4	%	1,065,942			48.7	%	786,317			47.7	%
Selling, general and administrative expenses	319,194			34.0	%	229,306			31.7	%	858,286			39.2	%	619,686			37.6	%
Income from operations	146,106			15.6	%	120,829			16.7	%	207,656			9.5	%	166,631			10.1	%
Interest expense, net	(1,535		)	(0.2	)%	(691		)	(0.1	)%	(3,608		)	(0.2	)%	(2,127		)	(0.2	)%
Other expense, net	(3,355		)	(0.3	)%	(113		)	—	%	(3,982		)	(0.2	)%	(670		)	—	%
Income before income taxes	141,216			15.1	%	120,025			16.6	%	200,066			9.1	%	163,834			9.9	%
Provision for income taxes	52,111			5.6	%	47,241			6.5	%	79,733			3.6	%	65,670			3.9	%
Net income	$	89,105		9.5	%	$	72,784		10.1	%	$	120,333		5.5	%	$	98,164		6.0	%
Net income available per common share
Basic	$	0.42				$	0.34				$	0.56				$	0.47
Diluted	$	0.41				$	0.34				$	0.55				$	0.46
Weighted average common shares outstanding
Basic	213,522					211,054					213,035					210,458
Diluted	217,982					215,536					217,601					214,852

NET REVENUES BY PRODUCT CATEGORY

	Quarter Ended September 30,						Nine Months Ended September 30,
	2014		2013		% Change		2014		2013		% Change
Apparel	$	704,557	$	560,899	25.6	%	$	1,583,834	$	1,216,645	30.2	%
Footwear	121,597		81,024		50.1	%	345,177		243,458		41.8	%
Accessories	84,949		64,373		32.0	%	196,434		151,480		29.7	%
Total net sales	911,103		706,296		29.0	%	2,125,445		1,611,583		31.9	%
Licensing and other revenues	26,805		16,850		59.1	%	63,724		37,712		69.0	%
Total net revenues	$	937,908	$	723,146	29.7	%	$	2,189,169	$	1,649,295	32.7	%

NET REVENUES BY SEGMENT

	Quarter Ended September 30,						Nine Months Ended September 30,
	2014		2013		% Change		2014		2013		% Change
North America	$	847,563	$	678,894	24.8	%	$	1,988,156	$	1,548,621	28.4	%
Other foreign countries and businesses	90,345		44,252		104.2	%	201,013		100,674		99.7	%
Total net revenues	$	937,908	$	723,146	29.7	%	$	2,189,169	$	1,649,295	32.7	%

Under Armour, Inc.

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

(Unaudited; in thousands)

CONDENSED CONSOLIDATED BALANCE SHEETS

	As of 9/30/14		As of 12/31/13		As of 9/30/13
Assets
Cash and cash equivalents	$	249,469	$	347,489	$	186,377
Accounts receivable, net	449,221		209,952		353,257
Inventories	637,459		469,006		497,406
Prepaid expenses and other current assets	86,914		63,987		56,064
Deferred income taxes	40,840		38,377		29,811
Total current assets	1,463,903		1,128,811		1,122,915
Property and equipment, net	264,629		223,952		201,603
Goodwill	123,356		122,244		—
Intangible assets, net	28,850		24,097		3,721
Deferred income taxes	47,602		31,094		26,766
Other long term assets	49,770		47,543		41,985
Total assets	$	1,978,110	$	1,577,741	$	1,396,990
Liabilities and Stockholders’ Equity
Revolving credit facility	$	—	$	100,000	$	—
Accounts payable	273,687		165,456		184,405
Accrued expenses	143,299		133,729		109,344
Current maturities of long term debt	19,524		4,972		5,034
Other current liabilities	53,969		22,473		34,201
Total current liabilities	490,479		426,630		332,984
Long term debt, net of current maturities	172,124		47,951		49,148
Other long term liabilities	61,366		49,806		48,403
Total liabilities	723,969		524,387		430,535
Total stockholders’ equity	1,254,141		1,053,354		966,455
Total liabilities and stockholders’ equity	$	1,978,110	$	1,577,741	$	1,396,990

Under Armour, Inc.

For the Nine Months Ended September 30, 2014 and 2013

(Unaudited; in thousands)

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended September 30,
	2014			2013
Cash flows from operating activities
Net income	$	120,333		$	98,164
Adjustments to reconcile net income to net cash used in operating activities
Depreciation and amortization	52,391			36,052
Unrealized foreign currency exchange rate losses	4,881			1,021
Loss on disposal of property and equipment	78			598
Stock-based compensation	38,965			25,586
Deferred income taxes	(19,783		)	(10,691		)
Changes in reserves and allowances	10,794			12,007
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	(248,256		)	(181,100		)
Inventories	(176,770		)	(186,276		)
Prepaid expenses and other assets	(20,282		)	(7,027		)
Accounts payable	118,236			42,344
Accrued expenses and other liabilities	20,180			37,404
Income taxes payable and receivable	26,737			19,577
Net cash used in operating activities	(72,496		)	(112,341		)
Cash flows from investing activities
Purchases of property and equipment	(96,596		)	(62,058		)
Purchase of business	(10,924		)	—
Purchases of other assets	(724		)	(475		)
Change in loans receivable	—			(1,700		)
Net cash used in investing activities	(108,244		)	(64,233		)
Cash flows from financing activities
Payments on revolving credit facility	(100,000		)	—
Proceeds from term loan	150,000			—
Payments on long term debt	(11,275		)	(4,212		)
Excess tax benefits from stock-based compensation arrangements	33,056			13,770
Proceeds from exercise of stock options and other stock issuances	14,060			12,727
Payments of debt financing costs	(1,714		)	—
Net cash provided by financing activities	84,127			22,285
Effect of exchange rate changes on cash and cash equivalents	(1,407		)	(1,175		)
Net decrease in cash and cash equivalents	(98,020		)	(155,464		)
Cash and cash equivalents
Beginning of period	347,489			341,841
End of period	$	249,469		$	186,377
Non-cash investing and financing activities
Decrease in accrual for property and equipment	$	(10,601	)	$	(6,289	)

EX-99.2

Exhibit 99.2

Under Armour: Third Quarter 2014 Earnings Call, October 23, 2014 (Brad Dickerson)

Thanks, Kevin. I would now like to spend some time discussing our third quarter 2014 financial results followed by our updated outlook for 2014 and our preliminary thoughts on 2015.

Our net revenues for the third quarter of 2014 increased 30% to $938 million. Similar to last quarter, we saw tremendous traction during the third quarter in areas such as Direct-to-Consumer, International, and Footwear.

Looking at the details for the third quarter, we grew the Apparel category 26% to $705 million compared to $561 million in the prior year's quarter. This marks the 20th consecutive quarter of at least 20% year-over-year growth for our largest product category. One of the keys to our Apparel growth in recent quarters comes from our ability to develop platform innovations and expand the reach of these innovations across product categories. This has driven sustained growth in our two large platforms launched in 2011 - Charged Cotton and Storm - and it is evident in ColdGear Infrared which was launched just last year and has expanded within apparel to areas like Golf and Running in 2014. Within Apparel,

• Our Men's business was led by continued strength in Golf and Outdoor.

• In Women's, we saw solid gains in Studio, Sports Bras, and Outdoor.

• And in Youth, we experienced broad-based strength across both Training and sports-specific categories.

Third quarter Footwear net revenues increased 50% to $122 million from $81 million in the prior year, representing approximately 13% of net revenues for the period. Expanded running silhouettes were the primary growth driver as we continued our focus on more balanced price points across our sporting goods distribution, while also beginning to broaden offerings across our SpeedForm platform. While off a small base, we also experienced strong growth in our basketball business during the quarter, led by the new ClutchFit Drive.

Our Accessories net revenues during the third quarter increased 32% to $85 million from $64 million last year. Growth during the quarter was primarily driven by headwear offerings and gloves.

Our Direct-to-Consumer net revenues increased 35% for the quarter, representing approximately 26% of net revenues. Square footage in our North America Factory House channel grew 18% year-over-year. This

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growth reflects a total of 122 Factory House stores at the end of the quarter, up 9% from the third quarter of 2013, as well as the upsizing of some existing locations. On the full-price side, we remained at five Brand House stores in North America.

We continue to see strong momentum in our E-Commerce channel, where we are driving strong traffic gains through efforts such as our I WILL WHAT I WANT Women's campaign. During the quarter, we also updated our domestic UA.com platform to better optimize the mobile experience, while also launching new local sites in the UK, Germany, and France.

International net revenues increased 94% to $86 million in the third quarter and represented 9% of total net revenues.

• In Europe, our strong results throughout the year have been driven by a combination of higher brand awareness and a more focused in-country strategy around our three key markets of the UK, Germany, and France.

• In Asia-Pacific, we continue to build both wholesale and distributor relationships, including accelerated partner store openings throughout Greater China and Southeast Asia.

• 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 recent market entries into Brasil and Chile.

Moving on to margins, third quarter gross margins expanded approximately 120 basis points to 49.6% compared with 48.4% in the prior year's quarter. Three primary factors contributed to this performance during the quarter.

• First, we lapped higher U.S. import duties from the year ago period, contributing approximately 90 basis points for the quarter.

• Second, we experienced a favorable sales mix during the period, primarily driven by a more profitable product mix across our Factory House channel, contributing approximately 70 basis points for the quarter.

• Finally, liquidations negatively impacted gross margins by approximately 40 basis points, driven by the shift in footwear liquidations into the third quarter that we highlighted on our last call.

Selling, general and administrative expenses as a percentage of net revenues deleveraged 230 basis points to 34.0% in the third quarter of 2014 from 31.7% in the prior year's period. Specific details around our four SG&A buckets are as follows:

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• First, Marketing costs increased to 10.6% of net revenues for the quarter from 10.3% in the prior year period, primarily driven by higher year-over-year sports marketing sponsorships across our International businesses.

• Second, Selling costs increased to 8.9% of net revenues for the quarter from 8.1% in the prior year period, primarily driven by higher variable costs tied to the growth in our North America Direct-to-Consumer business, as well as increased investments to support our global retail store strategies.

• Third, Product Innovation and Supply Chain costs increased to 8.5% of net revenues for the quarter from 7.3% in the prior year period, primarily driven by higher product innovation costs, including our Connected Fitness efforts, as well as higher personnel costs in Footwear and International.

• Finally, Corporate Services held steady year-over-year at 6.0% of net revenues.

Operating income for the third quarter increased 21% to $146 million compared with $121 million in the prior year period. Operating margin contracted 110 basis points during the quarter to 15.6% compared to 16.7% in the prior year period.

Interest and other expense for the third quarter increased to $5 million compared with $1 million in the prior year period, primarily reflecting the negative impact of foreign currency.

Our third quarter tax rate of 36.9% was favorable to the 39.4% rate last year primarily driven by lower year-over-year losses across international markets in aggregate.

Our third quarter net income increased 22% to $89 million compared to $73 million in the prior year period. Diluted earnings per share increased 21% to $0.41 compared to $0.34 in the prior year period.

On the balance sheet, total cash and cash equivalents for the quarter increased 34% to $249 million compared with $186 million at September 30, 2013. Long-term debt increased to $192 million from $54 million at September 30, 2013. Inventory increased 28% year-over-year to $637 million compared to $497 million at September 30, 2013, below our net revenue growth rate for the period.

Our investment in capital expenditures was approximately $26 million for the third quarter compared with $23 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 our distribution centers.

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Now moving onto our updated outlook for 2014. Based on current visibility, we expect 2014 net revenues of approximately $3.03 billion, representing growth of 30%, and 2014 operating income of approximately $348 million, representing growth of 31%. 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 $150 million term loan closed in May. We expect a full year effective tax rate of approximately 40.0%, ahead of last year's 37.8% rate given investments to support our international expansion and the inclusion of a state tax credit in 2013.

Given these updated full year parameters, there are several factors to consider for the fourth quarter.

First on net revenues, 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.

Our gross margin rate is expected to decline approximately 100 basis points year-over-year given a higher mix impact of our International business, which is more weighted toward lower-margin distributor businesses during the period and also reflecting some currency headwinds given the strength in the U.S. dollar. As we have mentioned, our approach to planning our fourth quarter business also factors into the gross margin outlook for the period.

In SG&A, we continue to expect significant leverage during the fourth quarter, particularly in Corporate Services given prior year higher incentive compensation expenses and MapMyFitness deal-related costs. As we have previously indicated, we will remain opportunistic in investing incremental dollars during the fourth quarter in the event of more favorable than planned net revenues or gross margin rate.

Finally on the balance sheet, we continue to expect inventory growth will remain relatively in line with net revenue growth during the fourth quarter.

Before we turn it over for Q&A, we would also like to provide you with our preliminary outlook for 2015. Based on our current visibility, we are planning 2015 net revenues and operating income to each grow approximately 22%, in the range of our long-term growth rates established at our 2013 Investor Day.

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Based on these numbers, we wanted to outline several preliminary factors to consider for 2015.

• First, similar to 2014, the net revenue growth rate for each of our International, Direct-to-Consumer, and Footwear businesses is planned to outpace the growth rate of our overall business.

• Second, within the operating income line, we are planning for gross margin gains relatively consistent with 2014, balanced with SG&A investments to support both near- and long-term global growth opportunities, including International, Retail, and Connected Fitness.

• Finally, we expect elevated capital expenditures during the year. On top of a normalized capital expenditures growth rate, we plan to invest approximately $90 million more in two key projects to support our future growth: a new Southeast distribution center in North America and the expansion of our corporate headquarters in Baltimore.

We will provide further color on 2015 during our earnings call in January.

We would now like to open the call for your questions. We ask that you limit your questions to two per person, so we can get to as many of you as possible. Operator?

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

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and other technology, as well as any potential interruption or security lapse in such systems or 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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