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 $155 million of cash restructuring charges, consisting of up to $75 million in facility and lease termination costs, and up to $80 million in contract termination and other restructuring costs; and |
• | up to $55 million of non-cash charges comprised of up to $20 million of inventory related charges, and up to $35 million of asset related impairments. |
Exhibit No. | Exhibit | ||
Under Armour, Inc. press release announcing financial results for the second quarter ended June 30, 2018. |
UNDER ARMOUR, INC. | ||||
Date: July 26, 2018 | By: | /s/ David E. Bergman | ||
David E. Bergman | ||||
Chief Financial Officer |
• | Revenue was up 8 percent to $1.2 billion (up 7 percent currency neutral). |
– | Revenue to wholesale customers increased 9 percent to $710 million and direct-to-consumer revenue was up 7 percent to $414 million. The direct-to-consumer business represented 35 percent of global revenue in the quarter. |
– | North America revenue increased 2 percent to $843 million (up 1 percent currency neutral) and the international business continued to deliver strong growth with a 28 percent increase to $302 million (up 24 percent currency neutral), representing 26 percent of total revenue. Within the international business, revenue in EMEA was up 31 percent (up 25 percent currency neutral), up 34 percent in Asia-Pacific (up 28 percent currency neutral) and up 7 percent in Latin America (up 12 percent currency neutral). |
– | Apparel revenue increased 10 percent to $747 million, driven by strength in training and running. Footwear revenue was up 15 percent to $271 million with strength in running and team sports. Accessories revenue decreased 14 percent to $106 million due to softer demand. |
• | Gross margin decreased 110 basis points to 44.8 percent due to inventory management initiatives and a $6 million impact related to restructuring efforts. Adjusted gross margin, decreased 60 basis points to 45.3 percent driven predominantly by inventory management initiatives. |
• | Selling, General & Administrative expenses increased 10 percent to $553 million, or 47.0 percent of revenue driven by continued investments in the direct-to-consumer, footwear and international businesses, along with a reserve related to a commercial dispute. |
• | Restructuring and impairment charges were $79 million. |
• | Operating loss was $105 million. Adjusted operating loss was $20 million. |
• | Net loss was $96 million. Excluding the impact of the restructuring plan, adjusted net loss was $34 million. |
• | Diluted loss per share was $0.21. Adjusted diluted loss per share was $0.08. |
• | Inventory increased 11 percent to $1.3 billion. |
• | Cash and cash equivalents increased 19 percent to $197 million. |
• | Up to $155 million in cash related charges, consisting of up to $75 million in facility and lease terminations and up to $80 million in contract termination and other restructuring charges; and, |
• | Up to $55 million in non-cash charges comprised of up to $20 million of inventory related charges and up to $35 million of asset related impairments. |
• | Net revenue is now expected to increase approximately 3 percent to 4 percent reflecting a low to mid-single-digit decline in North America and international growth of greater than 25 percent. From a product perspective, apparel is expected to grow at a mid-single-digit rate, footwear at a low-single digit rate, and accessories is expected to decline at a low-single digit rate. |
• | Gross margin is now expected to be flat to down slightly versus the prior year rate of 45.0 percent. Adjusted gross margin is now expected to improve slightly compared to 2017 as benefits from product costs and lower planned promotional activity are offset by the decision to increase inventory management actions. |
• | Operating loss is now expected in the range of $50 million to $60 million. Excluding the impact of restructuring plan, adjusted operating income is expected to be $130 million to $160 million. |
• | Interest and other expense net is expected to be approximately $45 million. |
• | Excluding the impact of the restructuring efforts, adjusted diluted earnings per share is expected to be in the range of $0.14 to $0.19; and, |
• | Capital expenditures are now planned at approximately $200 million. |
Under Armour Contacts: | |
Lance Allega | Kelley McCormick |
VP, Investor Relations | SVP, Corporate Communications |
(410) 246-6810 | (410) 454-6624 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||
2018 | % of Net Revenues | 2017 | % of Net Revenues | 2018 | % of Net Revenues | 2017 | % of Net Revenues | |||||||||||||||||||||
Net revenues | $ | 1,174,859 | 100.0 | % | $ | 1,091,192 | 100.0 | % | $ | 2,360,229 | 100.0 | % | $ | 2,211,036 | 100.0 | % | ||||||||||||
Cost of goods sold | 648,275 | 55.2 | % | 589,999 | 54.1 | % | 1,310,192 | 55.5 | % | 1,201,907 | 54.4 | % | ||||||||||||||||
Gross profit | 526,584 | 44.8 | % | 501,193 | 45.9 | % | 1,050,037 | 44.5 | % | 1,009,129 | 45.6 | % | ||||||||||||||||
Selling, general and administrative expenses | 552,619 | 47.0 | % | 502,880 | 46.1 | % | 1,067,253 | 45.2 | % | 1,003,280 | 45.4 | % | ||||||||||||||||
Restructuring and impairment charges | 78,840 | 6.7 | % | 3,098 | 0.3 | % | 116,320 | 4.9 | % | 3,098 | 0.1 | % | ||||||||||||||||
Income (loss) from operations | (104,875 | ) | (8.9 | )% | (4,785 | ) | (0.4 | )% | (133,536 | ) | (5.7 | )% | 2,751 | 0.1 | % | |||||||||||||
Interest expense, net | (8,552 | ) | (0.7 | )% | (7,841 | ) | (0.7 | )% | (17,116 | ) | (0.7 | )% | (15,662 | ) | (0.7 | )% | ||||||||||||
Other expense, net | (8,069 | ) | (0.7 | )% | (2,884 | ) | (0.3 | )% | (5,181 | ) | (0.2 | )% | (313 | ) | — | % | ||||||||||||
Loss before income taxes | (121,496 | ) | (10.3 | )% | (15,510 | ) | (1.4 | )% | (155,833 | ) | (6.6 | )% | (13,224 | ) | (0.6 | )% | ||||||||||||
Income tax expense (benefit) | (26,090 | ) | (2.2 | )% | (3,202 | ) | (0.3 | )% | (30,183 | ) | (1.3 | )% | 1,357 | 0.1 | % | |||||||||||||
Loss from equity method investment | 138 | — | % | — | — | % | 138 | — | % | — | — | % | ||||||||||||||||
Net loss | (95,544 | ) | (8.1 | )% | (12,308 | ) | (1.1 | )% | (125,788 | ) | (5.3 | )% | (14,581 | ) | (0.7 | )% | ||||||||||||
Basic net loss per share of Class A, B and C common stock | $ | (0.21 | ) | $ | (0.03 | ) | $ | (0.28 | ) | $ | (0.03 | ) | ||||||||||||||||
Diluted net loss per share of Class A, B and C common stock | $ | (0.21 | ) | $ | (0.03 | ) | $ | (0.28 | ) | $ | (0.03 | ) | ||||||||||||||||
Weighted average common shares outstanding Class A, B and C common stock | ||||||||||||||||||||||||||||
Basic | 444,626 | 440,423 | 443,844 | 439,894 | ||||||||||||||||||||||||
Diluted | 444,626 | 440,423 | 443,844 | 439,894 |
Three months ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
Apparel | $ | 747,294 | $ | 680,653 | 9.8 | % | $ | 1,513,569 | $ | 1,396,090 | 8.4 | % | ||||||||||
Footwear | 271,375 | 236,925 | 14.5 | % | 543,145 | 506,583 | 7.2 | % | ||||||||||||||
Accessories | 105,906 | 122,588 | (13.6 | )% | 198,064 | 211,686 | (6.4 | )% | ||||||||||||||
Total net sales | 1,124,575 | 1,040,166 | 8.1 | % | 2,254,778 | 2,114,359 | 6.6 | % | ||||||||||||||
Licensing revenues | 21,172 | 25,110 | (15.7 | )% | 47,513 | 49,315 | (3.7 | )% | ||||||||||||||
Connected Fitness | 29,112 | 25,916 | 12.3 | % | 57,938 | 47,362 | 22.3 | % | ||||||||||||||
Total net revenues | $ | 1,174,859 | $ | 1,091,192 | 7.7 | % | $ | 2,360,229 | $ | 2,211,036 | 6.7 | % |
Three months ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
North America | $ | 843,383 | $ | 829,805 | 1.6 | % | $ | 1,710,928 | $ | 1,701,076 | 0.6 | % | ||||||||||
EMEA | 135,901 | 103,896 | 30.8 | % | 262,833 | 206,751 | 27.1 | % | ||||||||||||||
Asia-Pacific | 125,706 | 93,574 | 34.3 | % | 241,259 | 179,392 | 34.5 | % | ||||||||||||||
Latin America | 40,757 | 38,001 | 7.3 | % | 87,271 | 76,455 | 14.1 | % | ||||||||||||||
Connected Fitness | 29,112 | 25,916 | 12.3 | % | 57,938 | 47,362 | 22.3 | % | ||||||||||||||
Total net revenues | $ | 1,174,859 | $ | 1,091,192 | 7.7 | % | $ | 2,360,229 | $ | 2,211,036 | 6.7 | % |
Three months ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
North America | $ | (93,192 | ) | $ | (5,417 | ) | (1,620.4 | )% | $ | (136,687 | ) | $ | (2,150 | ) | (6,257.5 | )% | ||||||
EMEA | (10,155 | ) | (4,616 | ) | (120.0 | )% | (13,782 | ) | (3,028 | ) | (355.2 | )% | ||||||||||
Asia-Pacific | 18,657 | 15,249 | 22.3 | % | 39,898 | 35,365 | 12.8 | % | ||||||||||||||
Latin America | (21,791 | ) | (8,093 | ) | (169.3 | )% | (27,661 | ) | (15,952 | ) | (73.4 | )% | ||||||||||
Connected Fitness | 1,606 | (1,908 | ) | 184.2 | % | 4,696 | (11,484 | ) | 140.9 | % | ||||||||||||
Income (loss) from operations | $ | (104,875 | ) | $ | (4,785 | ) | (2,091.7 | )% | $ | (133,536 | ) | $ | 2,751 | (4,954.1 | )% |
June 30, 2018 | December 31, 2017 | June 30, 2017 | ||||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 196,879 | $ | 312,483 | $ | 165,685 | ||||||
Accounts receivable, net | 724,945 | 609,670 | 602,795 | |||||||||
Inventories | 1,299,332 | 1,158,548 | 1,168,786 | |||||||||
Prepaid expenses and other current assets | 340,359 | 256,978 | 229,204 | |||||||||
Total current assets | 2,561,515 | 2,337,679 | 2,166,470 | |||||||||
Property and equipment, net | 835,427 | 885,774 | 875,005 | |||||||||
Goodwill | 551,160 | 555,674 | 580,446 | |||||||||
Intangible assets, net | 45,880 | 46,995 | 59,866 | |||||||||
Deferred income taxes | 111,746 | 82,801 | 125,358 | |||||||||
Other long term assets | 135,424 | 97,444 | 87,099 | |||||||||
Total assets | $ | 4,241,152 | $ | 4,006,367 | $ | 3,894,244 | ||||||
Liabilities and Stockholders’ Equity | ||||||||||||
Revolving credit facility, current | $ | — | $ | 125,000 | $ | 150,000 | ||||||
Accounts payable | 691,163 | 561,108 | 483,210 | |||||||||
Accrued expenses | 258,567 | 296,841 | 232,680 | |||||||||
Customer refund liability | 303,730 | — | — | |||||||||
Current maturities of long term debt | 27,000 | 27,000 | 27,000 | |||||||||
Other current liabilities | 57,939 | 50,426 | 43,649 | |||||||||
Total current liabilities | 1,338,399 | 1,060,375 | 936,539 | |||||||||
Long term debt, net of current maturities | 752,370 | 765,046 | 777,717 | |||||||||
Other long term liabilities | 226,471 | 162,304 | 156,217 | |||||||||
Total liabilities | 2,317,240 | 1,987,725 | 1,870,473 | |||||||||
Total stockholders’ equity | 1,923,912 | 2,018,642 | 2,023,771 | |||||||||
Total liabilities and stockholders’ equity | $ | 4,241,152 | $ | 4,006,367 | $ | 3,894,244 |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities | |||||||
Net loss | $ | (125,788 | ) | $ | (14,581 | ) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities | |||||||
Depreciation and amortization | 91,271 | 83,367 | |||||
Unrealized foreign currency exchange rate (gains) losses | 13,151 | (29,393 | ) | ||||
Loss on disposal of property and equipment | (2,114 | ) | 715 | ||||
Impairment charges | 14,270 | — | |||||
Amortization of bond premium | 127 | 127 | |||||
Stock-based compensation | 20,673 | 24,776 | |||||
Excess tax deficiency from stock-based compensation arrangements | — | 1,062 | |||||
Deferred income taxes | (35,969 | ) | 13,735 | ||||
Changes in reserves and allowances | (238,005 | ) | (8,581 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 116,896 | 33,787 | |||||
Inventories | (158,430 | ) | (227,190 | ) | |||
Prepaid expenses and other assets | (54,422 | ) | (12,541 | ) | |||
Other non-current assets | 768 | 451 | |||||
Accounts payable | 160,164 | 84,391 | |||||
Accrued expenses and other liabilities | 48,939 | 33,426 | |||||
Customer refund liability | 307,192 | — | |||||
Income taxes payable and receivable | (12,716 | ) | (46,320 | ) | |||
Net cash provided by (used in) operating activities | 146,007 | (62,769 | ) | ||||
Cash flows from investing activities | |||||||
Purchases of property and equipment | (95,607 | ) | (167,273 | ) | |||
Sale of property and equipment | 11,285 | — | |||||
Purchases of other assets | (2,536 | ) | — | ||||
Purchase of equity method investment | (39,207 | ) | — | ||||
Net cash used in investing activities | (126,065 | ) | (167,273 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from long term debt and revolving credit facility | 210,000 | 380,000 | |||||
Payments on long term debt and revolving credit facility | (348,500 | ) | (243,500 | ) | |||
Employee taxes paid for shares withheld for income taxes | (1,759 | ) | (2,474 | ) | |||
Proceeds from exercise of stock options and other stock issuances | 8,913 | 6,638 | |||||
Payments of debt financing costs | (11 | ) | — | ||||
Other financing fees | 87 | — | |||||
Net cash provided by (used in) financing activities | (131,270 | ) | 140,664 | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (2,487 | ) | 4,593 | ||||
Net decrease in cash, cash equivalents and restricted cash | (113,815 | ) | (84,785 | ) | |||
Cash, cash equivalents and restricted cash | |||||||
Beginning of period | 318,135 | 250,470 | |||||
End of period | $ | 204,320 | $ | 165,685 |
Three months ended June 30, | |||
Total Net Revenue | |||
Net revenue growth - GAAP | 7.7 | % | |
Foreign exchange impact | (1.2 | )% | |
Currency neutral net revenue growth - Non-GAAP | 6.5 | % | |
North America | |||
Net revenue growth - GAAP | 1.6 | % | |
Foreign exchange impact | (0.3 | )% | |
Currency neutral net revenue growth - Non-GAAP | 1.3 | % | |
EMEA | |||
Net revenue growth - GAAP | 30.8 | % | |
Foreign exchange impact | (5.6 | )% | |
Currency neutral net revenue growth - Non-GAAP | 25.2 | % | |
Asia-Pacific | |||
Net revenue growth - GAAP | 34.3 | % | |
Foreign exchange impact | (6.5 | )% | |
Currency neutral net revenue growth - Non-GAAP | 27.8 | % | |
Latin America | |||
Net revenue growth - GAAP | 7.3 | % | |
Foreign exchange impact | 5.1 | % | |
Currency neutral net revenue growth - Non-GAAP | 12.4 | % | |
Total International | |||
Net revenue growth - GAAP | 28.4 | % | |
Foreign exchange impact | (4.2 | )% | |
Currency neutral net revenue growth - Non-GAAP | 24.2 | % |
Three months ended June 30, | |||
Gross margin | 44.8 | % | |
Add: Impact of restructuring | 0.5 | % | |
Adjusted gross margin | 45.3 | % |
Three months ended June 30, | ||||
Loss from operations | $ | (105 | ) | |
Add: Impact of restructuring | 85 | |||
Adjusted operating loss | $ | (20 | ) |
Three months ended June 30, | ||||
Net loss | $ | (96 | ) | |
Add: Impact of restructuring | 62 | |||
Adjusted net loss | $ | (34 | ) |
Three months ended June 30, | ||||
Diluted net loss per share | $ | (0.21 | ) | |
Add: Impact of restructuring | 0.13 | |||
Adjusted diluted loss per share | $ | (0.08 | ) |
Three months ended June 30, | |||
Effective tax rate | 21.5 | % | |
Less: Impact of US tax reform | (3.1 | )% | |
Less: Impact of restructuring | (10.0 | )% | |
Adjusted effective tax rate | 8.4 | % |
Year Ending December 31, 2018 | ||||||||
(in millions) | Low End | High End | ||||||
Loss from operations | $ | (60 | ) | $ | (50 | ) | ||
Add: Estimated impact of restructuring (1) | 190 | 190 | ||||||
Adjusted operating income | $ | 130 | $ | 140 |
June 30, | ||||
2018 | 2017 | |||
Factory House | 161 | 160 | ||
Brand House | 15 | 19 | ||
North America total doors | 176 | 179 | ||
Factory House | 61 | 45 | ||
Brand House | 65 | 44 | ||
International total doors | 126 | 89 | ||
Factory House | 222 | 205 | ||
Brand House | 80 | 63 | ||
Total doors | 302 | 268 |
D!
M\@'Z @,"# (4 AT")@(O C@"00)+ E0"70)G G$">@*$ HX"F *B JP"M@+!
M LL"U0+@ NL"]0, PL#%@,A RT#. -# T\#6@-F W(#?@.* Y8#H@.N [H#
MQP/3 ^ #[ /Y! 8$$P0@!"T$.P1(!%4$8P1Q!'X$C 2:!*@$M@3$!-,$X03P
M!/X%#044%]@8&!A8&)P8W!D@&
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M',P<]1T>'4<=:AZ4'KX>Z1\3'SX?:1^4'[\?ZB 5($$@
M;""8(,0@\"$<(4@A=2&A( &YXS'DJ>8EYYWI&
M>J5[!'MC>\)\(7R!?.%]07VA?@%^8G["?R-_A'_E@$> J($*@6N!S8(P@I*"
M](-7@[J$'82 A..%1X6KA@Z&