BALTIMORE, July 31, 2020 /PRNewswire/ — Under Armour, Inc. (NYSE: UA, UAA) today announced financial results for the second quarter ended June 30, 2020. The company reports its financial performance in accordance with accounting principles generally accepted in the United States of America («GAAP»). This press release refers to «currency neutral» and «adjusted» amounts, which are non-GAAP financial measures described below under the «Non-GAAP Financial Information» paragraph. References to adjusted financial measures exclude the impact of the company’s 2020 restructuring plan and related impairment charges, impairments associated with certain long-lived assets and goodwill and related tax effects, and with respect to certain measure, the non-cash amortization of debt discount on the company’s convertible debt and related tax effects. Reconciliations of non-GAAP amounts to the most directly comparable financial measure calculated in accordance with GAAP are presented in supplemental financial information furnished with this release. All per share amounts are reported on a diluted basis.

«With the majority of our own stores and wholesale locations closed for most of the second quarter due to the COVID-19 pandemic, while we performed better than expected, we still experienced a significant decline in revenue across all markets,» said Under Armour President and CEO Patrik Frisk. «In navigating this environment, our team continues to respond strategically and methodically – amplifying Under Armour’s connection with our consumers through innovative digital activations, proactively managing our cost structure and working to harness our brand strength amid shifts in consumer behavior to emerge as a stronger company.»

Frisk continued, «Now, with most of these doors reopened, we are encouraged by some of the momentum we’ve experienced in June and July. However, we remain appropriately cautious with respect to the balance of 2020 due to continued uncertainty related to consumer shopping dynamics, the potential for a highly promotional environment and proactive decisions to reduce inventory purchases to be more aligned with anticipated demand related to ongoing COVID-19 impacts.»

Second Quarter 2020 Review

  • Revenue was down 41 percent to $708 million (down 40 percent currency neutral) predominantly related to the COVID-19 pandemic impacts in the quarter.
    • Wholesale revenue decreased 58 percent to $299 million and direct-to-consumer revenue was down 13 percent to $368 million.
    • North America revenue decreased 45 percent to $450 million and revenue from our international business decreased 34 percent to $224 million (down 32 percent currency neutral). Within the international business, revenue decreased 39 percent in EMEA (down 37 percent currency neutral), decreased 20 percent in Asia-Pacific (down 17 percent currency neutral), and decreased 72 percent in Latin America (down 68 percent currency neutral).
    • Apparel revenue decreased 42 percent to $426 million. Footwear revenue decreased 35 percent to $185 million. Accessories revenue decreased 47 percent to $56 million.
  • Gross margin increased 280 basis points to 49.3 percent compared to the prior year driven by channel mix which benefitted from significantly lower sales to the off-price channel, as well as a higher mix of direct-to-consumer sales, partially offset by the negative impacts from COVID-19 related discounting.
  • Selling, general & administrative expenses decreased 15 percent to $480 million driven primarily by reduced marketing spend in addition to other cost cutting initiatives to mitigate top line impacts from COVID-19 including lower incentive compensation and reduced variable expenses tied to revenue.
  • Restructuring and impairment charges were $39 million consisting of $28 million in non-cash and $11 million in cash related charges. For the full year, the company has recognized $475 million of restructuring and impairment charges consisting of $340 million in restructuring and related impairment charges ($326 million in non-cash and $14 million in cash related charges) and $135 million from impairments of long-lived assets and goodwill.
  • Operating loss was $170 million. Excluding the impact of restructuring and impairment charges, adjusted operating loss was $131 million.
  • Net loss was $183 million. Adjusted net loss was $141 million.
  • Diluted loss per share was $0.40. Adjusted diluted loss per share was $0.31.
  • Inventory was up 24 percent to $1.2 billion.

COVID-19 Update

Due to ongoing uncertainty related to COVID-19 and its potential effect on global markets, the company continues to anticipate material impacts on its business results for the remainder of 2020. The following provides additional information on channels and the company’s cash and liquidity position.

  • Channel Status and Trends
    • Through mid-May, the company estimated that approximately 80 percent of locations where the brand could be purchased globally were closed. As of today, with most of these doors having reopened, traffic trends continue to be considerably lower than the prior year period, however, the overall rate of conversion is higher. The company expects traffic trends to remain lower for the remainder of 2020.
    • Additionally, the company experienced significant eCommerce growth around the world during the quarter.
  • Cash and Liquidity
    • The company ended the second quarter with Cash and Cash Equivalents of $1.1 billion.
    • During the quarter, the company amended its credit agreement, in order to provide improved access to liquidity during this period. Under the amended $1.1 billion revolving credit facility, there was $250 million outstanding at the end of the second quarter.
    • Additionally, the company issued $500 million of convertible senior notes, utilizing $440 million of the net proceeds to reduce the amount outstanding under its revolving credit facility.

Conference Call and Webcast

Under Armour will hold its second quarter 2020 conference call and webcast today at approximately 8:30 a.m. Eastern Time. The call will be webcast live at https://about.underarmour.com/investor-relations/financials and will be archived and available for replay approximately three hours after the live event.

Non-GAAP Financial Information

This press release refers to «currency neutral» and «adjusted» amounts. Currency neutral financial information is calculated to exclude the impact of changes in foreign currency exchange rates. Management believes this information is useful to investors to facilitate a comparison of the company’s results of operations period-over-period. Adjusted financial measures exclude the impact of the company’s 2020 restructuring plan and related impairment charges, impairments associated with certain long-lived assets and goodwill, and related tax effects. Management believes this information is useful to investors because it enhances visibility into the company’s actual underlying results excluding these impacts. Adjusted net loss and adjusted diluted loss per share also exclude the non-cash amortization of debt discount on the company’s convertible senior notes and related tax effects. Management believes the non-cash portion of the interest expense, which represents the accretion of the bifurcated equity component of the conversion option of the convertible senior notes, is not core to the company’s operations given the intent and ability to settle in shares of the company’s Class C common stock. These supplemental non-GAAP financial measures 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. Additionally, 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, Inc., headquartered in Baltimore, Maryland, is a leading inventor, marketer and distributor of branded athletic performance apparel, footwear and accessories. Powered by one of the world’s largest digitally connected fitness and wellness communities, Under Armour’s innovative products and experiences are designed to help advance human performance, making all athletes better. For further information, please visit https://about.underarmour.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, the impact of the COVID-19 pandemic on our business, our plans to reduce our 2020 operating expenses, anticipated charges and restructuring costs, the timing of these measures and projected savings related to our restructuring plans. In many cases, you can identify forward-looking statements by terms such as «may,» «will,» «should,» «expects,» «plans,» «assumes,» «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: the impact of the COVID-19 pandemic on our industry and our business, financial condition and results of operations; changes in general economic or market conditions that could affect overall consumer spending or our industry; changes to the financial health of our customers; 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 access capital and financing required to manage our business on terms acceptable to us; our ability to successfully execute our long-term strategies; our ability to successfully execute any potential restructuring plans and realize their expected benefits; our ability to effectively drive operational efficiency in our business; our ability to manage the increasingly complex operations of our global business; our ability to comply with existing trade and other regulations, and the potential impact of new trade, tariff and tax regulations on our profitability; 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; any disruptions, delays or deficiencies in the design, implementation or application of our new global operating and financial reporting information technology system; 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; 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 successfully manage or realize expected results from acquisitions and other significant investments or capital expenditures; risks related to foreign currency exchange rate fluctuations; our ability to effectively market and maintain a positive brand image; the availability, integration and effective operation of information systems and other technology, as well as any potential interruption of such systems or technology; risks related to data security or privacy breaches; our potential exposure to litigation and other proceedings; and our ability to attract key talent 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.

 

Under Armour, Inc.

For the Three and Six Months Ended June 30, 2020 and 2019

(Unaudited; in thousands, except per share amounts)

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

2020

% of Net

Revenues

2019

% of Net

Revenues

2020

% of Net

Revenues

2019

% of Net

Revenues

Net revenues

$

707,640

100.0

%

$

1,191,729

100.0

%

$

1,637,880

100.0

%

$

2,396,451

100.0

%

Cost of goods sold

358,471

50.7

%

637,408

53.5

%

857,727

52.4

%

1,297,343

54.1

%

Gross profit

349,169

49.3

%

554,321

46.5

%

780,153

47.6

%

1,099,108

45.9

%

Selling, general and administrative expenses

479,906

67.8

%

565,803

47.5

%

1,032,607

63.0

%

1,075,331

44.9

%

Restructuring and impairment charges

38,937

5.5

%

%

475,400

29.0

%

%

Income (loss) from operations

(169,674)

(24.0)

%

(11,482)

(1.0)

%

(727,854)

(44.4)

%

23,777

1.0

%

Interest expense, net

(11,336)

(1.6)

%

(5,988)

(0.5)

%

(17,296)

(1.1)

%

(10,226)

(0.4)

%

Other expense, net

(4,843)

(0.7)

%

(1,128)

(0.1)

%

(3,309)

(0.2)

%

(1,795)

(0.1)

%

Income (loss) before income taxes

(185,853)

(26.3)

%

(18,598)

(1.6)

%

(748,459)

(45.7)

%

11,756

0.5

%

Income tax expense (benefit)

(3,137)

(0.4)

%

(5,740)

(0.5)

%

18,410

1.1

%

2,391

0.1

%

Loss from equity method investments

(179)

%

(4,491)

(0.4)

%

(5,707)

(0.3)

%

(4,237)

(0.2)

%

Net income (loss)

$

(182,895)

(25.8)

%

$

(17,349)

(1.5)

%

$

(772,576)

(47.2)

%

$

5,128

0.2

%

Basic net income (loss) per share of Class A,
B and C common stock

$

(0.40)

$

(0.04)

$

(1.70)

$

0.01

Diluted net income (loss) per share of Class
A, B and C common stock

$

(0.40)

$

(0.04)

$

(1.70)

$

0.01

Weighted average common shares outstanding Class A, B and C common stock

Basic

454,121

451,066

453,496

450,411

Diluted

454,121

451,066

453,496

453,717

 

Under Armour, Inc.

For the Three and Six Months Ended June 30, 2020 and 2019

(Unaudited; in thousands)

NET REVENUES BY PRODUCT CATEGORY

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

% Change

2020

2019

% Change

Apparel

$

425,858

$

739,736

(42.4)

%

$

1,024,145

$

1,514,366

(32.4)

%

Footwear

185,089

284,080

(34.8)

%

394,777

576,627

(31.5)

%

Accessories

56,104

106,250

(47.2)

%

123,852

188,242

(34.2)

%

Total net sales

667,051

1,130,066

(41.0)

%

1,542,774

2,279,235

(32.3)

%

Licensing revenues

6,188

25,308

(75.5)

%

26,123

46,965

(44.4)

%

Connected Fitness

32,912

31,935

3.1

%

65,706

62,039

5.9

%

Corporate Other

1,489

4,420

(66.3)

%

$

3,277

$

8,212

(60.1)

%

Total net revenues

$

707,640

$

1,191,729

(40.6)

%

$

1,637,880

$

2,396,451

(31.7)

%

NET REVENUES BY SEGMENT

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

% Change

2020

2019

% Change

North America

$

449,702

$

816,220

(44.9)

%

$

1,058,682

$

1,659,469

(36.2)

%

EMEA

89,125

145,320

(38.7)

%

227,029

279,424

(18.8)

%

Asia-Pacific

123,265

154,113

(20.0)

%

218,951

298,398

(26.6)

%

Latin America

11,147

39,721

(71.9)

%

64,235

88,909

(27.8)

%

Connected Fitness

32,912

31,935

3.1

%

65,706

62,039

5.9

%

Corporate Other

1,489

4,420

(66.3)

%

3,277

$

8,212

(60.1)

%

Total net revenues

$

707,640

$

1,191,729

(40.6)

%

$

1,637,880

$

2,396,451

(31.7)

%

INCOME (LOSS) FROM OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

2020

% of Net
Revenues (1)

2019

% of Net
Revenues (1)

2020

% of Net
Revenues (1)

2019

% of Net
Revenues (1)

North America

$

30,759

6.8

%

$

139,198

17.1

%

$

26,986

2.5

%

$

299,471

18.0

%

EMEA

(698)

(0.8)

%

10,493

7.2

%

3,006

1.3

%

22,711

8.1

%

Asia-Pacific

(12,447)

(10.1)

%

19,647

12.7

%

(49,288)

(22.5)

%

39,450

13.2

%

Latin America

(4,374)

(39.2)

%

(3,891)

(9.8)

%

(52,558)

(81.8)

%

(4,250)

(4.8)

%

Connected Fitness

3,691

11.2

%

11

%

7,391

11.2

%

1,080

1.7

%

Corporate Other

(186,605)

NM

(176,940)

NM

(663,391)

NM

(334,685)

NM

Income (loss) from
operations

$

(169,674)

(24.0)

%

$

(11,482)

(1.0)

%

$

(727,854)

(44.4)

%

$

23,777

1.0

%

(1) The operating income (loss) percentage is calculated based on total segment net revenues. Additionally, the operating income (loss) percentage for Corporate Other is not presented as it is not a meaningful metric (NM).

 

Under Armour, Inc.

As of June 30, 2020, December 31, 2019 and June 30, 2019

(Unaudited; in thousands)

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2020

December 31, 2019

June 30, 2019

Assets

Current assets

Cash and cash equivalents

$

1,079,409

$

788,072

$

455,726

Accounts receivable, net

568,430

708,714

735,181

Inventories

1,198,509

892,258

965,711

Prepaid expenses and other current assets

242,661

313,165

287,829

Total current assets

3,089,009

2,702,209

2,444,447

Property and equipment, net

702,885

792,148

795,499

Operating lease right-of-use assets

568,010

591,931

606,018

Goodwill

486,868

550,178

548,762

Intangible assets, net

38,748

36,345

39,527

Deferred income taxes

42,589

82,379

129,403

Other long term assets

75,232

88,341

116,252

Total assets

$

5,003,341

$

4,843,531

$

4,679,908

Liabilities and Stockholders’ Equity

Revolving credit facility, current

$

250,000

$

$

Accounts payable

664,288

618,194

607,382

Accrued expenses

266,399

374,694

304,063

Customer refund liabilities

199,016

219,424

241,456

Operating lease liabilities

148,408

125,900

116,219

Other current liabilities

90,503

83,797

63,521

Total current liabilities

1,618,614

1,422,009

1,332,641

Long term debt, net of current maturities

987,949

592,687

591,396

Operating lease liabilities, non-current

892,465

580,635

601,665

Other long term liabilities

80,899

98,113

105,932

Total liabilities

3,579,927

2,693,444

2,631,634

Total stockholders’ equity

1,423,414

2,150,087

2,048,274

Total liabilities and stockholders’ equity

$

5,003,341

$

4,843,531

$

4,679,908

 

Under Armour, Inc.

For the Six Months Ended June 30, 2020 and 2019

(Unaudited; in thousands)

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

2020

2019

Cash flows from operating activities

Net income (loss)

$

(772,576)

$

5,128

Adjustments to reconcile net income (loss) to net cash used in operating activities

Depreciation and amortization

86,919

93,721

Unrealized foreign currency exchange rate gain (loss)

(1,134)

(3,077)

Loss on disposal of property and equipment

825

2,447

Impairment charges

449,090

Amortization of bond premium

1,867

127

Stock-based compensation

23,258

25,635

Deferred income taxes

22,296

(13,890)

Changes in reserves and allowances

19,772

(10,196)

Changes in operating assets and liabilities:

Accounts receivable

126,059

(75,116)

Inventories

(307,430)

62,302

Prepaid expenses and other assets

77,368

64,533

Other non-current assets

(301,523)

12,812

Accounts payable

46,449

57,674

Accrued expenses and other liabilities

230,670

(48,094)

Customer refund liabilities

(18,630)

(60,089)

Income taxes payable and receivable

7,310

(1,210)

Net cash provided by (used in) operating activities

(309,410)

112,707

Cash flows from investing activities

Purchases of property and equipment

(50,862)

(77,046)

Purchases of other assets

(997)

Purchase of businesses

(38,190)

Net cash used in investing activities

(89,052)

(78,043)

Cash flows from financing activities

Proceeds from long term debt and revolving credit facility

1,288,753

25,000

Payments on long term debt and revolving credit facility

(550,000)

(162,817)

Purchase of capped call

(47,850)

Employee taxes paid for shares withheld for income taxes

(2,732)

(3,077)

Proceeds from exercise of stock options and other stock issuances

2,859

4,238

Payments of debt financing costs

(4,823)

(2,661)

Other financing fees

76

Net cash provided by (used in) financing activities

686,207

(139,241)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

4,351

4,463

Net increase in (decrease in) cash, cash equivalents and restricted cash

292,096

(100,114)

Cash, cash equivalents and restricted cash

Beginning of period

796,008

566,060

End of period

$

1,088,104

$

465,946

 

Under Armour, Inc.

For the Three and Six Months Ended June 30, 2020

(Unaudited)

The table below presents the reconciliation of net revenue growth (decline) calculated in accordance with GAAP to currency neutral net revenue which is a non-GAAP measure. See «Non-GAAP Financial Information» above for further information regarding the Company’s use of non-GAAP financial measures.

CURRENCY NEUTRAL NET REVENUE GROWTH (DECLINE) RECONCILIATION

Three months ended
June 30, 2020

Total Net Revenue

Net revenue decline – GAAP

(40.6)

%

Foreign exchange impact

0.8

%

Currency neutral net revenue decline – Non-GAAP

(39.8)

%

North America

Net revenue decline – GAAP

(44.9)

%

Foreign exchange impact

0.1

%

Currency neutral net revenue decline – Non-GAAP

(44.8)

%

EMEA

Net revenue growth – GAAP

(38.7)

%

Foreign exchange impact

1.5

%

Currency neutral net revenue growth – Non-GAAP

(37.2)

%

Asia-Pacific

Net revenue decline – GAAP

(20.0)

%

Foreign exchange impact

3.2

%

Currency neutral net revenue decline – Non-GAAP

(16.8)

%

Latin America

Net revenue growth – GAAP

(71.9)

%

Foreign exchange impact

3.5

%

Currency neutral net revenue growth – Non-GAAP

(68.4)

%

Total International

Net revenue decline – GAAP

(34.1)

%

Foreign exchange impact

2.5

%

Currency neutral net revenue decline – Non-GAAP

(31.6)

%

 

Under Armour, Inc.

For the Three and Six Months Ended June 30, 2020

(Unaudited)

The tables below present the reconciliation of the Company’s consolidated statement of operations presented in accordance with GAAP to certain adjusted non-GAAP financial measures discussed in this press release. See «Non-GAAP Financial Information» above for further information regarding the Company’s use of non-GAAP financial measures.

ADJUSTED OPERATING LOSS RECONCILIATION

Three months ended
June 30, 2020

Loss from operations

$

(169,674)

Add: Impact of restructuring and related impairment

38,937

Adjusted loss from operations

$

(130,737)

ADJUSTED NET LOSS RECONCILIATION

Three months ended
June 30, 2020

Net loss

$

(182,895)

Add: Impact of restructuring and related impairment

40,201

Add: Impact of amortization of debt discount

1,797

Adjusted net loss

$

(140,897)

ADJUSTED DILUTED LOSS PER SHARE RECONCILIATION

Three months ended
June 30, 2020

Diluted net loss per share

$

(0.40)

Add: Impact of restructuring and related impairment

0.09

Add: Impact of amortization of debt discount

Adjusted diluted loss per share

$

(0.31)

 

Under Armour, Inc.

As of June 30, 2020 and 2019

BRAND HOUSE AND FACTORY HOUSE DOOR COUNT

June 30,

2020

2019

Factory House

170

165

Brand House

18

16

 North America total doors

188

181

Factory House

116

86

Brand House

123

79

 International total doors

239

165

Factory House

286

251

Brand House

141

95

 Total doors

427

346

 

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SOURCE Under Armour, Inc.