Under Armour Reports Second Quarter Net Revenues Growth Of 28%; Reiterates Full Year Net Revenues Outlook Of $4.925 Billion

BALTIMORE, July 26, 2016 /PRNewswire/ -- Under Armour, Inc. (NYSE: UA, UA.C) today announced financial results for the second quarter ended June 30, 2016.  Net revenues increased 28% in the second quarter of 2016 to $1.0 billion compared with net revenues of $784 million in the prior year's period.  Operating income decreased 39% in the second quarter of 2016 to $19 million, inclusive of a $23 million impairment related to the liquidation of Sports Authority, compared with $32 million in the prior year's period.  Net income decreased 58% in the second quarter of 2016 to $6 million compared with $15 million in the prior year's period.  For the second quarter of 2016 the company realized diluted loss per share of $0.12 for Class A and B shares and diluted earnings per share of $0.15 for Class C shares, reflecting the impact of a $59 million stock dividend paid to Class C shareholders during the quarter. If the Class C stock dividend had not been paid, non-GAAP diluted earnings per share for all classes for the second quarter would have been $0.01 per share, inclusive of $0.03 impact from the impairment related to the Sports Authority liquidation. This compares with diluted earnings per share of $0.03 for all classes in the prior year's period.

During the second quarter, wholesale net revenues grew 27% year-over-year to $635 million compared to $501 million in the prior year's period, while Direct-to-Consumer net revenues grew 28% year-over-year to $321 million compared to $251 million in the prior year's period.  North America net revenues for the second quarter grew 22% year-over-year.  International net revenues, which represented 15% of total net revenues for the second quarter, grew 68% year-over-year, or 72% on a currency neutral basis.

Within product categories, apparel net revenues increased 19% to $613 million compared with $515 million in the same period of the prior year, led by growth in men's training, women's training and golf.  Footwear net revenues increased 58% to $243 million from $154 million in the prior year's period, primarily reflecting the continued success of the basketball category led by the Curry signature basketball line as well as growth in running and cleated categories.  Accessories net revenues increased 21% to $101 million from $83 million in the prior year's period, driven primarily by growth in bags and headwear.

Kevin Plank, Chairman and CEO of Under Armour, Inc., stated, "The strong broad-based results posted this quarter highlight the continued demand for the Under Armour brand around the world. It also underscores the importance of diversifying our business and driving a sharper point of view with our consumers wherever they shop. In our largest category of apparel we continue to add more dimension with a sport category focus and we remain incredibly proud of the success of our international and footwear growth drivers.  With the opening of 60 new international Under Armour stores so far this year, including doors on two new continents this quarter, our international business continues to expand and to resonate with the global athlete.  The Stephen Curry signature line has continued to drive strong momentum for the brand and our pinnacle football product, the Highlight Cleat, continues to lead the market."

Gross margin for the second quarter of 2016 was 47.7% compared with 48.4% in the prior year's period, primarily reflecting negative impacts of approximately 130 basis points from sales mix driven by strong growth in  footwear and international, partially offset by approximately 50 basis points from improved product cost margins. Selling, general and administrative expenses grew 32% to $458 million compared with $347 million in the prior year's period. This increase includes the impact of the one-time impairment related to the Sports Authority liquidation and continued investments in Direct-to-Consumer and overall headcount to support the Company's strategic initiatives.

Balance Sheet Highlights
Cash and cash equivalents was $121 million at June 30, 2016 compared with $149 million at June 30, 2015.  The prior year amount was previously reported as $171 million before giving effect to the reclassification of investments classified as cash. Inventory at June 30, 2016 increased 30% to $1.1 billion compared with $837 million at June 30, 2015. Total debt increased 42% to $1.0 billion at June 30, 2016 compared with $712 million at June 30, 2015.

Class C Stock Dividend
In June 2016, the Company paid a $59 million stock dividend to the holders of Class C common stock in the form of approximately 1.47 million shares of Class C common stock and $2.9 million of cash in lieu of fractional shares in connection with the shareholder litigation regarding the creation of Class C common stock.  This dividend was allocated to the numerator for calculating net income per share of Class C common stock with the remaining undistributed earnings allocated on a pro rata basis to Class A, Class B and Class C common stock based on the number of shares used in the per share computation for each class of stock. The weighted-average share impact of the dividend is included in the denominator of both basic and diluted net income per share computations for the three and six months ended June 30, 2016.

Current 2016 Outlook
Based on current visibility, the Company expects 2016 net revenues of approximately $4.925 billion, representing growth of 24% over 2015, and 2016 operating income in the range of $440 million to $445 million, representing growth of 8% to 9% over 2015.  Below the operating line, the Company expects interest expense of approximately $32 million, an effective full year tax rate of approximately 36.5%, and fully diluted weighted average shares outstanding of approximately 448 million.

Mr. Plank concluded, "In 2016, our ability to position the brand to capture the changing expectations of the consumer requires Under Armour to extend and grow in new and different ways. The authenticity we have gained with the athlete over the past 20 years has positioned Under Armour to widen our access through categories, channels, and geographies. Starting with our launch this fall of Under Armour Sportswear, which we are calling UAS, we will continue to find new opportunities to bring more consumers into the Under Armour Brand, whether that is through compelling flagship retail, new partners in wholesale, or on a digital platform. We remain focused on making all athletes better and driving consistent revenue growth quarter after quarter. I am proud of what the team has accomplished so far this year and am incredibly excited about the future of Under Armour for the rest of 2016 and beyond."

Conference Call and Webcast
The Company will provide additional commentary regarding its second quarter as well as its updated 2016 outlook during its earnings conference call today, July 26, 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.

Non-GAAP Financial Information
The Company reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). However, this press release refers to "non-GAAP diluted earnings per share" and to certain "currency neutral" financial information, which are non-GAAP financial measures. The Company provides a reconciliation of these non-GAAP measure to the most directly comparable financial measure calculated in accordance with GAAP. See the end of this press release for this reconciliation.

Non-GAAP diluted earnings per share is calculated to exclude the one-time dividend to our Class C stockholders discussed above under "Class C Stock Dividend".  Management believes this presentation provides a useful metric to investors because it excludes the effect of this one-time event allowing investors to compare the Company's results over multiple periods. Currency neutral financial information is calculated to exclude foreign exchange impact. Management uses this information internally to assess sales performance and believes this information is useful both internally and to investors to facilitate a comparison of the Company's results of operations period-over-period. These non-GAAP financial measure should not be considered in isolation and should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP. In addition, the Company's non-GAAP financial information may not be comparable to similarly titled measures reported by other companies.

About Under Armour, Inc.
Under Armour (NYSE: UA, UA.C), the originator of performance footwear, apparel and equipment, 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.  The Under Armour Connected Fitness™ platform powers the world's largest digital health and fitness community through a suite of applications:  UA Record, MapMyFitness, Endomondo and MyFitnessPal.  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, the implementation of our marketing and branding strategies, and the future benefits and opportunities from acquisitions. 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; the financial health of our customers; our ability to effectively manage our growth and a more complex global business; our ability to successfully manage or realize expected results from acquisitions and other significant investments or capital expenditures; 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, including due to port disruptions; 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; risks related to foreign currency exchange rate fluctuations; 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 information systems and other technology, as well as any potential interruption in such systems or technology; risks related to data security or privacy breaches; our ability to raise additional capital required to grow our business on terms acceptable to us; 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.

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SOURCE Under Armour, Inc.