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) |
¨ | 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)) |
UNDER ARMOUR, INC. | ||||
Date: January 31, 2017 | By: | /s/ Lawrence P. Molloy | ||
Lawrence P. Molloy | ||||
Chief Financial Officer |
• | 2016 revenues increased 22 percent to $4.8 billion (up 23 percent currency neutral). |
• | 2016 footwear and women's businesses both hit $1 billion mark. |
• | 2016 operating income up 3 percent to $420 million. |
• | 2017 revenue expected to increase 11 to 12 percent to nearly $5.4 billion. |
• | Revenues were up 12 percent to $1.3 billion, driven by a 5 percent increase in wholesale revenues to $742 million and a 23 percent increase in direct-to-consumer revenues to $518 million. North American revenues grew 6 percent. International revenues, which represented 16 percent of total revenues in the quarter, were up 55 percent (up 60 percent currency neutral) driven by significant growth in the U.K., Germany, China and Australia. Apparel revenues increased 7 percent to $929 million including strength in golf and basketball. Footwear revenues increased 36 percent to $228 million driven by accelerated growth in running and basketball. Accessories revenues increased 7 percent to $104 million with strength in bags and headwear. |
• | Gross margin was 44.8 percent compared with 48 percent in the prior year's period, as benefits from more favorable product costs were offset by aggressive efforts to manage inventory, changes in foreign currency and the outperformance of footwear and international businesses in the overall mix, which carry lower margins than our apparel and North American businesses. |
• | Selling, general and administrative expenses grew 9 percent to $420 million, or 32.1 percent of sales (down 70 basis points), due to continued investments in the company’s highest growth businesses: footwear, international, and direct-to-consumer. |
• | Operating income declined 6 percent to $167 million. Net income decreased 1 percent to $105 million and diluted earnings per share for the fourth quarter of 2016 were $0.23 compared with $0.24 in the prior year's period. |
• | Revenues increased 22 percent to $4.8 billion (up 23 percent currency neutral) including a 19 percent increase in wholesale revenues to $3.1 billion and a 27 percent increase in direct-to-consumer revenues which reached $1.5 billion. Direct-to-consumer revenues reached 31 |
• | Gross margin was 46.5 percent compared with 48.1 percent as benefits from more favorable product costs were offset by efforts to manage inventory, changes in foreign currency and the outperformance of the footwear and international businesses in the overall mix, which carry lower margins than the apparel and North American businesses. |
• | In line with revenue growth, full year selling, general and administrative expenses grew 22 percent and reached $1.8 billion, or 37.8 percent of revenues. |
• | Operating income increased 3 percent to $420 million and net income grew 11 percent to $259 million. Diluted earnings per share for full year 2016 were $0.45 per share for Class A and B shares and $0.71 per share for Class C shares, reflecting the impact of a $59 million stock dividend paid to Class C shareholders during the second quarter. If the Class C stock dividend had not been paid, non-GAAP diluted earnings per share for all classes for 2016 would have been $0.58 per share. This compares with diluted earnings per share of $0.53 for all classes in 2015. |
• | Cash and cash equivalents increased 93 percent to $250 million. |
• | Inventory increased 17 percent to $917 million. |
• | Total debt increased 22 percent to $817 million. |
• | Net revenues are expected to grow 11 to 12 percent to reach nearly $5.4 billion, up 12 to 13 percent currency neutral. |
• | Gross margin is expected to be slightly down compared to the prior year with benefits in product costs being offset by continued pressure from changes in foreign currency and sales mix, as the footwear and international businesses continue to outpace the growth of the higher margin apparel and North American businesses. |
• | Tempered top line results coupled with strategic investments in the company’s fastest growing businesses are expected to cause a decline in operating income to approximately $320 million. |
• | Other full year assumptions include interest expense of approximately $40 million and an effective tax rate of 32 to 34 percent. |
Under Armour Contacts: | |
Lance Allega | Diane Pelkey |
VP, Investor Relations | SVP, Global Communications |
(410) 454-6810 | (410) 246-5927 |
Quarter Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||
2016 | % of Net Revenues | 2015 | % of Net Revenues | 2016 | % of Net Revenues | 2015 | % of Net Revenues | |||||||||||||||||||||
Net revenues | $ | 1,308,128 | 100.0 | % | $ | 1,170,686 | 100.0 | % | $ | 4,828,186 | 100.0 | % | $ | 3,963,313 | 100.0 | % | ||||||||||||
Cost of goods sold | 721,574 | 55.2 | % | 609,016 | 52.0 | % | 2,584,724 | 53.5 | % | 2,057,766 | 51.9 | % | ||||||||||||||||
Gross profit | 586,554 | 44.8 | % | 561,670 | 48.0 | % | 2,243,462 | 46.5 | % | 1,905,547 | 48.1 | % | ||||||||||||||||
Selling, general and administrative expenses | 419,804 | 32.1 | % | 384,088 | 32.8 | % | 1,823,140 | 37.8 | % | 1,497,000 | 37.8 | % | ||||||||||||||||
Income from operations | 166,750 | 12.7 | % | 177,582 | 15.2 | % | 420,322 | 8.7 | % | 408,547 | 10.3 | % | ||||||||||||||||
Interest expense, net | (7,958 | ) | (0.6 | )% | (4,056 | ) | (0.4 | )% | (26,434 | ) | (0.5 | )% | (14,628 | ) | (0.4 | )% | ||||||||||||
Other expense, net | (1,731 | ) | (0.1 | )% | (2,196 | ) | (0.2 | )% | (2,755 | ) | (0.1 | )% | (7,234 | ) | (0.2 | )% | ||||||||||||
Income before income taxes | 157,061 | 12.0 | % | 171,330 | 14.6 | % | 391,133 | 8.1 | % | 386,685 | 9.7 | % | ||||||||||||||||
Provision for income taxes | 52,151 | 4.0 | % | 65,727 | 5.6 | % | 132,473 | 2.7 | % | 154,112 | 3.8 | % | ||||||||||||||||
Net income | $ | 104,910 | 8.0 | % | $ | 105,603 | 9.0 | % | $ | 258,660 | 5.4 | % | $ | 232,573 | 5.9 | % | ||||||||||||
Adjustment payment to Class C capital stockholders | — | — | 59,000 | — | ||||||||||||||||||||||||
Net income available to all stockholders | 104,910 | 105,603 | 199,660 | 232,573 | ||||||||||||||||||||||||
Basic net income per share of Class A and B common stock | $ | 0.24 | $ | 0.24 | $ | 0.46 | $ | 0.54 | ||||||||||||||||||||
Basic net income per share of Class C common stock | $ | 0.24 | $ | 0.24 | $ | 0.73 | $ | 0.54 | ||||||||||||||||||||
Diluted net income per share of Class A and B common stock | $ | 0.23 | $ | 0.24 | $ | 0.45 | $ | 0.53 | ||||||||||||||||||||
Diluted net income per share of Class C common stock | $ | 0.23 | $ | 0.24 | $ | 0.71 | $ | 0.53 | ||||||||||||||||||||
Weighted average common shares outstanding Class A and B common stock | ||||||||||||||||||||||||||||
Basic | 218,220 | 215,948 | 217,707 | 215,498 | ||||||||||||||||||||||||
Diluted | 222,802 | 221,307 | 221,983 | 220,868 | ||||||||||||||||||||||||
Weighted average common shares outstanding Class C common stock | ||||||||||||||||||||||||||||
Basic | 220,040 | 215,948 | 218,623 | 215,498 | ||||||||||||||||||||||||
Diluted | 224,777 | 221,307 | 222,922 | 220,868 |
Quarter Ended December 31, | Year Ended December 31, | |||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | |||||||||||||||||
Apparel | $ | 928,546 | $ | 864,841 | 7.4 | % | $ | 3,229,142 | $ | 2,801,062 | 15.3 | % | ||||||||||
Footwear | 227,701 | 166,880 | 36.4 | % | 1,013,544 | 677,744 | 49.5 | % | ||||||||||||||
Accessories | 104,348 | 97,130 | 7.4 | % | 406,614 | 346,885 | 17.2 | % | ||||||||||||||
Total net sales | 1,260,595 | 1,128,851 | 11.7 | % | 4,649,300 | 3,825,691 | 21.5 | % | ||||||||||||||
Licensing revenues | 29,926 | 24,852 | 20.4 | % | 99,849 | 84,207 | 18.6 | % | ||||||||||||||
Connected Fitness | 18,267 | 16,983 | 7.6 | % | 80,447 | 53,415 | 50.6 | % | ||||||||||||||
Intersegment eliminations | (660 | ) | — | (100.0 | )% | (1,410 | ) | — | (100.0 | )% | ||||||||||||
Total net revenues | $ | 1,308,128 | $ | 1,170,686 | 11.7 | % | $ | 4,828,186 | $ | 3,963,313 | 21.8 | % |
Quarter Ended December 31, | Year Ended December 31, | |||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | |||||||||||||||||
North America | $ | 1,075,251 | $ | 1,015,009 | 5.9 | % | $ | 4,008,165 | $ | 3,455,737 | 16.0 | % | ||||||||||
International | 215,270 | 138,694 | 55.2 | % | 740,984 | 454,161 | 63.2 | % | ||||||||||||||
Connected Fitness | 18,267 | 16,983 | 7.6 | % | 80,447 | 53,415 | 50.6 | % | ||||||||||||||
Intersegment eliminations | (660 | ) | — | (100.0 | )% | (1,410 | ) | — | (100.0 | )% | ||||||||||||
Total net revenues | $ | 1,308,128 | $ | 1,170,686 | 11.7 | % | $ | 4,828,186 | $ | 3,963,313 | 21.8 | % |
Quarter Ended December 31, | Year Ended December 31, | |||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | |||||||||||||||||
North America | $ | 160,191 | $ | 188,418 | (15.0 | )% | $ | 411,275 | $ | 460,961 | (10.8 | )% | ||||||||||
International | 10,870 | 2,761 | 293.7 | % | 45,867 | 8,887 | 416.1 | % | ||||||||||||||
Connected Fitness | $ | (4,311 | ) | $ | (13,597 | ) | 68.3 | % | $ | (36,820 | ) | $ | (61,301 | ) | 39.9 | % | ||||||
Income from operations | $ | 166,750 | $ | 177,582 | (6.1 | )% | $ | 420,322 | $ | 408,547 | 2.9 | % |
As of 12/31/16 | As of 12/31/15 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 250,470 | $ | 129,852 | ||||
Accounts receivable, net | 625,536 | 433,638 | ||||||
Inventories | 917,491 | 783,031 | ||||||
Prepaid expenses and other current assets | 183,393 | 152,242 | ||||||
Total current assets | 1,976,890 | 1,498,763 | ||||||
Property and equipment, net | 804,211 | 538,531 | ||||||
Goodwill | 563,591 | 585,181 | ||||||
Intangible assets, net | 64,310 | 75,686 | ||||||
Deferred income taxes | 135,692 | 92,157 | ||||||
Other long term assets | 110,204 | 78,582 | ||||||
Total assets | $ | 3,654,898 | $ | 2,868,900 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Accounts payable | 418,565 | 200,460 | ||||||
Accrued expenses | 208,750 | 192,935 | ||||||
Current maturities of long term debt | 27,000 | 42,000 | ||||||
Other current liabilities | 40,387 | 43,415 | ||||||
Total current liabilities | 694,702 | 478,810 | ||||||
Long term debt, net of current maturities | 790,388 | 627,000 | ||||||
Other long term liabilities | 137,227 | 94,868 | ||||||
Total liabilities | 1,622,317 | 1,200,678 | ||||||
Total stockholders’ equity | 2,032,581 | 1,668,222 | ||||||
Total liabilities and stockholders’ equity | $ | 3,654,898 | $ | 2,868,900 |
Year Ended December 31, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 258,660 | $ | 232,573 | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities | |||||||
Depreciation and amortization | 144,770 | 100,940 | |||||
Unrealized foreign currency exchange rate losses | 12,627 | 33,359 | |||||
Loss on disposal of property and equipment | 1,580 | 549 | |||||
Stock-based compensation | 46,149 | 60,376 | |||||
Deferred income taxes | (41,834 | ) | (4,426 | ) | |||
Changes in reserves and allowances | 67,337 | 40,391 | |||||
Changes in operating assets and liabilities, net of effects of acquisitions: | |||||||
Accounts receivable | (249,853 | ) | (191,876 | ) | |||
Inventories | (148,055 | ) | (278,524 | ) | |||
Prepaid expenses and other assets | (34,170 | ) | (76,476 | ) | |||
Accounts payable | 211,332 | (22,583 | ) | ||||
Accrued expenses and other liabilities | 52,656 | 64,126 | |||||
Income taxes payable and receivable | (16,712 | ) | (2,533 | ) | |||
Net cash provided by (used in) operating activities | 304,487 | (44,104 | ) | ||||
Cash flows from investing activities | |||||||
Purchases of property and equipment | (316,458 | ) | (298,928 | ) | |||
Purchases of property and equipment from related parties | (70,288 | ) | — | ||||
Purchase of businesses, net of cash acquired | — | (539,460 | ) | ||||
Purchases of available-for-sale securities | (24,230 | ) | (103,144 | ) | |||
Sales of available-for-sale securities | 30,712 | 96,610 | |||||
Purchases of other assets | (875 | ) | (2,553 | ) | |||
Net cash used in investing activities | (381,139 | ) | (847,475 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from long term debt and revolving credit facility | 1,327,601 | 650,000 | |||||
Payments on long term debt and revolving credit facility | (1,170,750 | ) | (265,202 | ) | |||
Excess tax benefits from stock-based compensation arrangements | 44,783 | 45,917 | |||||
Proceeds from exercise of stock options and other stock issuances | 15,485 | 10,310 | |||||
Payments of debt financing costs | (6,692 | ) | (947 | ) | |||
Cash dividends paid | (2,927 | ) | — | ||||
Contingent consideration payments for acquisitions | (1,505 | ) | — | ||||
Net cash provided by financing activities | 205,995 | 440,078 | |||||
Effect of exchange rate changes on cash and cash equivalents | (8,725 | ) | (11,822 | ) | |||
Net increase (decrease) in cash and cash equivalents | 120,618 | (463,323 | ) | ||||
Cash and cash equivalents | |||||||
Beginning of period | 129,852 | 593,175 | |||||
End of period | $ | 250,470 | $ | 129,852 |
Quarter Ended December 31, | Year Ended December 31, | |||||
Total Net Revenue | 2016 | 2016 | ||||
Net revenue growth - GAAP | 11.7 | % | 21.8 | % | ||
Foreign exchange impact | 0.6 | % | 1.2 | % | ||
Currency neutral net revenue growth - Non-GAAP | 12.3 | % | 23.0 | % | ||
North America | ||||||
Net revenue growth - GAAP | 5.9 | % | 16.0 | % | ||
Foreign exchange impact | 0.1 | % | — | % | ||
Currency neutral net revenue growth - Non-GAAP | 6.0 | % | 16.0 | % | ||
International | ||||||
Net revenue growth - GAAP | 55.2 | % | 63.2 | % | ||
Foreign exchange impact | 4.8 | % | 5.8 | % | ||
Currency neutral net revenue growth - Non-GAAP | 60.0 | % | 69.0 | % | ||
Connected Fitness | ||||||
Net revenue growth - GAAP | 7.6 | % | 50.6 | % | ||
Foreign exchange impact | (3.6 | )% | (1.6 | )% | ||
Currency neutral net revenue growth - Non-GAAP | 4.0 | % | 49.0 | % |
Year ended December 31, 2016 | |||||||||||
GAAP | Adjustment | Non-GAAP | |||||||||
Net income | $ | 258,660 | $ | — | $ | 258,660 | |||||
Adjustment payment to Class C capital stockholders | (59,000 | ) | 59,000 | (a) | — | ||||||
Net income Attributable to Common Shareholders | $ | 199,660 | $ | 59,000 | $ | 258,660 | |||||
Weighted average common shares outstanding Class A and B common stock - Diluted | 221,983 | — | 221,983 | ||||||||
Weighted average common shares outstanding Class C common stock - Diluted | 222,922 | (750 | ) | (a) | 222,172 | ||||||
Diluted net income per share of Class A and B common stock | $ | 0.45 | $ | 0.58 | |||||||
Diluted net income per share of Class C common stock | $ | 0.71 | $ | 0.58 |
As of December 31 | ||||
2016 | 2015 | |||
Factory House | 151 | 140 | ||
Brand House | 18 | 10 | ||
North America total doors | 169 | 150 | ||
Factory House | 37 | 18 | ||
Brand House | 35 | 22 | ||
International total doors | 72 | 40 | ||
Factory House | 188 | 158 | ||
Brand House | 53 | 32 | ||
Total doors | 241 | 190 |
• | Clicking down into revenue by product type...for reasons Kevin detailed, Apparel revenue came in lighter than we had originally anticipated with an increase of 7% to $929 million yet we did see strong results from our sport categories including golf and basketball. |
• | Footwear revenues increased 36% to $228 million as both running and basketball delivered strong growth driven by more premium product offerings. |
• | And, revenues for Accessories increased 7% to $104 million in the quarter with solid results in our bags and headwear businesses. |
• | Sales to our wholesale customers were up 5% to $742 million, a result moderated by the challenges in our North American business that we've spoken to today. |
• | Our Direct-to-Consumer revenues grew 23% to $518 million, representing approximately 40% of total revenues for the quarter. We finished the quarter with 241 owned stores globally consisting of 188 Factory House and 53 Brand House locations. |
• | Revenues for our licensing business grew 20% to $30 million |
• | And, Connected Fitness revenues grew 8% to $18 million. |
• | North American revenues, which are 82% of global total, increased 6% to $1.1 billion. It's important to note that North American Apparel is still our largest and most profitable business by far. Accordingly, less than expected growth in this area disproportionately pressures our overall growth rate which we saw in the fourth quarter. |
• | Our International businesses continues to deliver strong top-line results at we elevate and expand our brand reach around the world. With a 55% increase to $215 million, our international business |
Quarter Ended December 31, | Year Ended December 31, | |||||
Total Net Revenue | 2016 | 2016 | ||||
Net revenue growth - GAAP | 11.7 | % | 21.8 | % | ||
Foreign exchange impact | 0.6 | % | 1.2 | % | ||
Currency neutral net revenue growth - Non-GAAP | 12.3 | % | 23.0 | % | ||
North America | ||||||
Net revenue growth - GAAP | 5.9 | % | 16.0 | % | ||
Foreign exchange impact | 0.1 | % | — | % | ||
Currency neutral net revenue growth - Non-GAAP | 6.0 | % | 16.0 | % | ||
International | ||||||
Net revenue growth - GAAP | 55.2 | % | 63.2 | % | ||
Foreign exchange impact | 4.8 | % | 5.8 | % | ||
Currency neutral net revenue growth - Non-GAAP | 60.0 | % | 69.0 | % | ||
Connected Fitness | ||||||
Net revenue growth - GAAP | 7.6 | % | 50.6 | % | ||
Foreign exchange impact | (3.6 | )% | (1.6 | )% | ||
Currency neutral net revenue growth - Non-GAAP | 4.0 | % | 49.0 | % |
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