UNDER ARMOUR, INC. BALTIMORE, July 24, 2014 /PRNewswire/ -- 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.
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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 Six Months Ended
June 30, June 30,
-------- --------
2014 % of Net 2013 % of Net 2014 % of Net 2013 % of Net
Revenues Revenues Revenues 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 Six Months Ended
June 30, 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 Six Months Ended
June 30, 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 As of As of
6/30/14 12/31/13 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)
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SOURCE Under Armour, Inc.
