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)) |
Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ¨ |
• | up to $70 million of cash restructuring charges, comprised primarily of up to: $25 million in facility and lease termination costs, $15 million in employee severance and benefit costs, and $30 million in contract termination and other restructuring costs; and |
• | up to $60 million of non-cash charges comprised of approximately $20 million of inventory related charges, and approximately $40 million of intangibles and other asset related impairments. |
UNDER ARMOUR, INC. | ||||
Date: August 1, 2017 | By: | /s/ David E. Bergman | ||
David E. Bergman | ||||
Chief Financial Officer |
• | Up to $70 million in cash related charges, consisting of up to: $25 million in facility and lease terminations, $15 million in employee severance and benefits costs, and $30 million in contract termination and other restructuring charges; and, |
• | Up to $60 million in non-cash charges comprised of approximately $20 million of inventory related charges and approximately $40 million of intangibles and other asset related impairments. |
• | Revenue was up 9 percent to $1.1 billion, up 8 percent currency neutral. |
– | Revenue to wholesale customers rose 3 percent to $655 million and direct-to-consumer revenue was up 20 percent to $386 million. |
– | A dynamic and promotional retail environment in North America continued to temper results with revenue in line with last year's same period. Outside North America, the strong |
– | Apparel revenue increased 11 percent to $681 million including strength in men's and women's training, and golf. Footwear revenue was down 2 percent to $237 million, against last year’s same period which was up 58 percent due to significant strength in basketball sales. Accessories revenue increased 22 percent to $123 million with strength in men's and women's training, and youth performance. |
• | Gross margin declined 190 basis points to 45.8 percent as benefits from channel and product mix were offset by inventory management initiatives, changes in foreign currency rates, and higher air freight in connection with our enterprise resource planning (ERP) system implementation, which impacted the timing of shipments to certain key customers. |
• | Selling, general and administrative expenses increased 10 percent to $503 million, or 46.2 percent of revenue (up 40 basis points), due to continued investments in the direct-to-consumer, footwear and international businesses. |
• | Operating loss was $5 million. Including other interest and expense, there was a net loss of $12 million in the second quarter and a $0.03 loss in diluted earnings per share. |
• | Inventory increased 8 percent to $1.2 billion. |
• | Cash and cash equivalents increased 37 percent to $166 million. |
• | Net revenues expected to grow 9 to 11 percent versus the previous expectation of 11 to 12 percent growth, reflecting moderation in the company's North American business. |
• | Gross margin, on a reported basis, is expected to be down approximately 160 basis points compared to 46.4% in 2016 as benefits from product costs and sales mix are offset by impacts from the restructuring plan, changes in foreign currency and increased efforts to manage inventory. Excluding the impact of the restructuring, adjusted gross margin is expected to be down at least 120 basis points compared to 46.4% in 2016. |
• | On a reported basis, operating income, is expected to reach approximately $160-180 million. Excluding the impact of the restructuring plan, adjusted operating income is expected to be approximately $280 million to $300 million. |
• | Interest and other expense net of approximately $40 million; |
• | An effective tax rate of 31 to 32 percent. |
• | On a reported basis, full year diluted earnings per share is expected to be $0.18 to $0.21. Excluding the impact of the restructuring plan, full year adjusted diluted earnings per share is expected to reach $0.37-$0.40; and, |
• | Other full year assumptions include capital expenditures of approximately $350 million. |
Under Armour Contacts: | |
Lance Allega | Diane Pelkey |
VP, Investor Relations | SVP, Global Communications |
(410) 246-6810 | (410) 246-5927 |
Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||
2017 | % of Net Revenues | 2016 | % of Net Revenues | 2017 | % of Net Revenues | 2016 | % of Net Revenues | |||||||||||||||||||||
Net revenues | $ | 1,088,245 | 100.0 | % | $ | 1,000,783 | 100.0 | % | $ | 2,205,576 | 100.0 | % | $ | 2,048,485 | 100.0 | % | ||||||||||||
Cost of goods sold | 589,999 | 54.2 | % | 523,136 | 52.3 | % | 1,201,907 | 54.5 | % | 1,090,202 | 53.2 | % | ||||||||||||||||
Gross profit | 498,246 | 45.8 | % | 477,647 | 47.7 | % | 1,003,669 | 45.5 | % | 958,283 | 46.8 | % | ||||||||||||||||
Selling, general and administrative expenses | 503,031 | 46.2 | % | 458,269 | 45.8 | % | 1,000,918 | 45.4 | % | 904,022 | 44.2 | % | ||||||||||||||||
Income (loss) from operations | (4,785 | ) | (0.4 | )% | 19,378 | 1.9 | % | 2,751 | 0.1 | % | 54,261 | 2.6 | % | |||||||||||||||
Interest expense, net | (7,841 | ) | (0.7 | )% | (5,754 | ) | (0.5 | )% | (15,662 | ) | (0.7 | )% | (10,286 | ) | (0.5 | )% | ||||||||||||
Other expense, net | (2,884 | ) | (0.3 | )% | (2,955 | ) | (0.3 | )% | (313 | ) | — | % | (253 | ) | — | % | ||||||||||||
Income (loss) before income taxes | (15,510 | ) | (1.4 | )% | 10,669 | 1.1 | % | (13,224 | ) | (0.6 | )% | 43,722 | 2.1 | % | ||||||||||||||
Income tax expense (benefit) | (3,202 | ) | (0.3 | )% | 4,325 | 0.5 | % | 1,357 | 0.1 | % | 18,198 | 0.9 | % | |||||||||||||||
Net income (loss) | (12,308 | ) | (1.1 | )% | 6,344 | 0.6 | % | (14,581 | ) | (0.7 | )% | 25,524 | 1.2 | % | ||||||||||||||
Adjustment payment to Class C capital stockholders | — | — | % | 59,000 | 5.9 | % | — | — | % | 59,000 | 2.9 | % | ||||||||||||||||
Net loss available to all stockholders | $ | (12,308 | ) | (1.1 | )% | $ | (52,656 | ) | (5.3 | )% | $ | (14,581 | ) | (0.7 | )% | $ | (33,476 | ) | (1.6 | )% | ||||||||
Basic net loss per share of Class A and B common stock | $ | (0.03 | ) | $ | (0.12 | ) | $ | (0.03 | ) | $ | (0.08 | ) | ||||||||||||||||
Basic net income (loss) per share of Class C common stock | $ | (0.03 | ) | $ | 0.15 | $ | (0.03 | ) | $ | 0.19 | ||||||||||||||||||
Diluted net loss per share of Class A and B common stock | $ | (0.03 | ) | $ | (0.12 | ) | $ | (0.03 | ) | $ | (0.08 | ) | ||||||||||||||||
Diluted net income (loss) per share of Class C common stock | $ | (0.03 | ) | $ | 0.15 | $ | (0.03 | ) | $ | 0.19 | ||||||||||||||||||
Weighted average common shares outstanding Class A and B common stock | ||||||||||||||||||||||||||||
Basic | 219,168 | 217,711 | 218,938 | 217,262 | ||||||||||||||||||||||||
Diluted | 219,168 | 221,376 | 218,938 | 221,503 | ||||||||||||||||||||||||
Weighted average common shares outstanding Class C common stock | ||||||||||||||||||||||||||||
Basic | 221,255 | 217,832 | 220,956 | 217,323 | ||||||||||||||||||||||||
Diluted | 221,255 | 221,496 | 220,956 | 221,563 |
Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2017 | 2016 | % Change | 2017 | 2016 | % Change | |||||||||||||||||
Apparel | $ | 680,653 | $ | 612,840 | 11.1 | % | $ | 1,396,090 | $ | 1,279,411 | 9.1 | % | ||||||||||
Footwear | 236,925 | 242,706 | (2.4 | )% | 506,583 | 506,952 | (0.1 | )% | ||||||||||||||
Accessories | 122,588 | 100,734 | 21.7 | % | 211,686 | 180,435 | 17.3 | % | ||||||||||||||
Total net sales | 1,040,166 | 956,280 | 8.8 | % | 2,114,359 | 1,966,798 | 7.5 | % | ||||||||||||||
Licensing revenues | 25,110 | 21,006 | 19.5 | % | 49,315 | 40,439 | 21.9 | % | ||||||||||||||
Connected Fitness | 22,969 | 23,497 | (2.2 | )% | 41,902 | 41,998 | (0.2 | )% | ||||||||||||||
Intersegment eliminations | — | — | — | % | — | (750 | ) | (100.0 | )% | |||||||||||||
Total net revenues | $ | 1,088,245 | $ | 1,000,783 | 8.7 | % | $ | 2,205,576 | $ | 2,048,485 | 7.7 | % |
Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2017 | 2016 | % Change | 2017 | 2016 | % Change | |||||||||||||||||
North America | $ | 829,805 | $ | 827,132 | 0.3 | % | $ | 1,701,076 | $ | 1,707,727 | (0.4 | )% | ||||||||||
EMEA | 103,896 | 66,193 | 57.0 | % | 206,751 | 132,460 | 56.1 | % | ||||||||||||||
Asia-Pacific | 93,574 | 49,553 | 88.8 | % | 179,392 | 103,175 | 73.9 | % | ||||||||||||||
Latin America | 38,001 | 34,408 | 10.4 | % | 76,455 | 63,875 | 19.7 | % | ||||||||||||||
Connected Fitness | 22,969 | 23,497 | (2.2 | )% | 41,902 | 41,998 | (0.2 | )% | ||||||||||||||
Intersegment eliminations | — | — | — | % | — | (750 | ) | (100.0 | )% | |||||||||||||
Total net revenues | $ | 1,088,245 | $ | 1,000,783 | 8.7 | % | $ | 2,205,576 | $ | 2,048,485 | 7.7 | % |
Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2017 | 2016 | % Change | 2017 | 2016 | % Change | |||||||||||||||||
North America | $ | (5,417 | ) | $ | 28,149 | (119.2 | )% | $ | (1,703 | ) | $ | 68,244 | (102.5 | )% | ||||||||
EMEA | (4,616 | ) | (2,956 | ) | (56.2 | )% | (2,987 | ) | (35 | ) | (8,434.3 | )% | ||||||||||
Asia-Pacific | 15,249 | 9,913 | 53.8 | % | 34,877 | 27,247 | 28.0 | % | ||||||||||||||
Latin America | (8,093 | ) | (8,194 | ) | 1.2 | % | (15,952 | ) | (17,200 | ) | 7.3 | % | ||||||||||
Connected Fitness | (1,908 | ) | (7,534 | ) | 74.7 | % | (11,484 | ) | (23,995 | ) | 52.1 | % | ||||||||||
Income (loss) from operations | $ | (4,785 | ) | $ | 19,378 | (124.7 | )% | $ | 2,751 | $ | 54,261 | (94.9 | )% |
June 30, 2017 | December 31, 2016 | June 30, 2016 | ||||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 165,685 | $ | 250,470 | $ | 121,216 | ||||||
Accounts receivable, net | 602,795 | 622,685 | 460,955 | |||||||||
Inventories | 1,168,786 | 917,491 | 1,086,749 | |||||||||
Prepaid expenses and other current assets | 229,204 | 174,507 | 180,265 | |||||||||
Total current assets | 2,166,470 | 1,965,153 | 1,849,185 | |||||||||
Property and equipment, net | 875,005 | 804,211 | 712,873 | |||||||||
Goodwill | 580,446 | 563,591 | 580,301 | |||||||||
Intangible assets, net | 59,866 | 64,310 | 70,689 | |||||||||
Deferred income taxes | 125,358 | 136,862 | 118,053 | |||||||||
Other long term assets | 87,099 | 110,204 | 95,823 | |||||||||
Total assets | $ | 3,894,244 | $ | 3,644,331 | $ | 3,426,924 | ||||||
Liabilities and Stockholders’ Equity | ||||||||||||
Revolving credit facility, current | $ | 150,000 | $ | — | $ | 150,000 | ||||||
Accounts payable | 483,210 | 409,679 | 332,060 | |||||||||
Accrued expenses | 232,680 | 208,750 | 170,226 | |||||||||
Current maturities of long term debt | 27,000 | 27,000 | 27,000 | |||||||||
Other current liabilities | 43,649 | 40,387 | 30,068 | |||||||||
Total current liabilities | 936,539 | 685,816 | 709,354 | |||||||||
Long term debt, net of current maturities | 777,717 | 790,388 | 838,116 | |||||||||
Other long term liabilities | 156,217 | 137,227 | 108,106 | |||||||||
Total liabilities | 1,870,473 | 1,613,431 | 1,655,576 | |||||||||
Total stockholders’ equity | 2,023,771 | 2,030,900 | 1,771,348 | |||||||||
Total liabilities and stockholders’ equity | $ | 3,894,244 | $ | 3,644,331 | $ | 3,426,924 |
Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities | |||||||
Net income (loss) | $ | (14,581 | ) | $ | 25,524 | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities | |||||||
Depreciation and amortization | 83,367 | 67,737 | |||||
Unrealized foreign currency exchange rate gains | (29,393 | ) | (3,861 | ) | |||
Loss on disposal of property and equipment | 715 | 463 | |||||
Amortization of bond premium | 127 | — | |||||
Stock-based compensation | 24,776 | 28,623 | |||||
Excess tax benefit from stock-based compensation arrangements | 1,062 | 37,138 | |||||
Deferred income taxes | 13,735 | (23,739 | ) | ||||
Changes in reserves and allowances | (8,581 | ) | 53,551 | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 33,787 | (74,566 | ) | ||||
Inventories | (227,190 | ) | (296,654 | ) | |||
Prepaid expenses and other assets | (12,541 | ) | 3,786 | ||||
Other non-current assets | 451 | — | |||||
Accounts payable | 84,391 | 145,896 | |||||
Accrued expenses and other liabilities | 33,426 | (18,833 | ) | ||||
Income taxes payable and receivable | (46,320 | ) | (42,980 | ) | |||
Net cash used in operating activities | (62,769 | ) | (97,915 | ) | |||
Cash flows from investing activities | |||||||
Purchases of property and equipment | (167,273 | ) | (184,018 | ) | |||
Purchases of property and equipment from related parties | — | (70,288 | ) | ||||
Purchases of available-for-sale securities | — | (24,230 | ) | ||||
Sales of available-for-sale securities | — | 30,712 | |||||
Purchases of other assets | — | (715 | ) | ||||
Net cash used in investing activities | (167,273 | ) | (248,539 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from long term debt and revolving credit facility | 380,000 | 1,162,474 | |||||
Payments on long term debt and revolving credit facility | (243,500 | ) | (807,250 | ) | |||
Employee taxes paid for shares withheld for income taxes | (2,474 | ) | (13,685 | ) | |||
Proceeds from exercise of stock options and other stock issuances | 6,638 | 7,600 | |||||
Cash dividends paid | — | (2,927 | ) | ||||
Payments of debt financing costs | — | (5,250 | ) | ||||
Contingent consideration payments for acquisitions | — | (2,424 | ) | ||||
Net cash provided by financing activities | 140,664 | 338,538 | |||||
Effect of exchange rate changes on cash and cash equivalents | 4,593 | (720 | ) | ||||
Net decrease in cash and cash equivalents | (84,785 | ) | (8,636 | ) | |||
Cash and cash equivalents | |||||||
Beginning of period | 250,470 | 129,852 | |||||
End of period | $ | 165,685 | $ | 121,216 |
Quarter Ended June 30, 2017 | |||
Total Net Revenue | |||
Net revenue growth - GAAP | 8.7 | % | |
Foreign exchange impact | (0.4 | )% | |
Currency neutral net revenue growth - Non-GAAP | 8.3 | % | |
North America | |||
Net revenue growth - GAAP | 0.3 | % | |
Foreign exchange impact | — | % | |
Currency neutral net revenue growth - Non-GAAP | 0.3 | % | |
EMEA | |||
Net revenue growth - GAAP | 57.0 | % | |
Foreign exchange impact | (4.3 | )% | |
Currency neutral net revenue growth - Non-GAAP | 52.7 | % | |
Asia-Pacific | |||
Net revenue growth - GAAP | 88.8 | % | |
Foreign exchange impact | (1.8 | )% | |
Currency neutral net revenue growth - Non-GAAP | 87.0 | % | |
Latin America | |||
Net revenue growth - GAAP | 10.4 | % | |
Foreign exchange impact | (1.7 | )% | |
Currency neutral net revenue growth - Non-GAAP | 8.7 | % | |
Total International | |||
Net revenue growth - GAAP | 56.8 | % | |
Foreign exchange impact | (2.9 | )% | |
Currency neutral net revenue growth - Non-GAAP | 53.9 | % | |
Connected Fitness | |||
Net revenue growth - GAAP | (2.2 | )% | |
Foreign exchange impact | — | % | |
Currency neutral net revenue growth - Non-GAAP | (2.2 | )% |
Year Ended December 31, 2017 | |||
Gross margin | 44.8 | % | |
Add: Estimated impact of restructuring(1) | 0.40 | % | |
Adjusted gross margin | 45.2 | % |
Year Ended December 31, 2017 | ||||||||
(in millions) | Low End | High End | ||||||
Income from operations | $ | 160 | $ | 180 | ||||
Add: Estimated impact of restructuring(2) | 120 | 120 | ||||||
Adjusted operating income | $ | 280 | $ | 300 |
Year Ended December 31, 2017 | ||||||||
Low End | High End | |||||||
Diluted net income per share | $ | 0.18 | $ | 0.21 | ||||
Add: Estimated impact of restructuring(2) | 0.19 | 0.19 | ||||||
Adjusted diluted earnings per share | $ | 0.37 | $ | 0.40 |
As of June 30, | ||||
2017 | 2016 | |||
Factory House | 160 | 146 | ||
Brand House | 19 | 14 | ||
North America total doors | 179 | 160 | ||
Factory House | 45 | 26 | ||
Brand House | 44 | 26 | ||
International total doors | 89 | 52 | ||
Factory House | 205 | 172 | ||
Brand House | 63 | 40 | ||
Total doors | 268 | 212 |
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