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Form 8-K Under Armour, Inc. For: Apr 21

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April 21, 2016 8:17 AM EDT


 
 
 
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ________________________________________________________________________________ 
FORM 8-K
 ________________________________________________________________________________ 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 21, 2016
________________________________________________________________________________  
UNDER ARMOUR, INC.
 ________________________________________________________________________________ 
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)
Registrant’s telephone number, including area code: (410) 454-6428
(Former name or former address, if changed since last report)
 ________________________________________________ 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
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))

 
 
 
 
 




Item 2.02. Results of Operations and Financial Condition.
On April 21, 2016, Under Armour, Inc. issued a press release announcing its financial results for the first quarter ended March 31, 2016. A copy of Under Armour’s press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. Under Armour has scheduled a conference call for 8:30 a.m. ET on April 21, 2016 to discuss its financial results, and a portion of the script for that call is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit 99.1: Under Armour, Inc. press release announcing financial results for the first quarter ended March 31, 2016.
Exhibit 99.2: Portion of conference call script for April 21, 2016 conference call.




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
UNDER ARMOUR, INC.
 
 
 
 
Date: April 21, 2016
 
By:
 
/s/ Lawrence P. Molloy
 
 
 
 
Lawrence P. Molloy
 
 
 
 
Chief Financial Officer




Exhibit 99.1
Under Armour, Inc.
 
1020 Hull Street
 
Baltimore, MD 21230
 
 
CONTACTS
 
Investors:
 
Tom Shaw, CFA
 
Under Armour, Inc.
 
Tel: 410.843.7676
 
 
Media:
 
Diane Pelkey
 
Under Armour, Inc.
 
Tel: 410.246.5927
 
FOR IMMEDIATE RELEASE
 
 
 
UNDER ARMOUR REPORTS FIRST QUARTER NET REVENUES GROWTH OF 30%;
RAISES FULL YEAR NET REVENUES OUTLOOK TO $5.0 BILLION

•
First Quarter Net Revenues Increased 30% to $1.05 Billion
•
First Quarter Operating Income Increased 26% to $35 Million
•
First Quarter Diluted EPS Increased 62% to $0.04, Reflective of the Company's Class C Stock Dividend
•
Raises 2016 Net Revenues Outlook to Approximately $5.0 Billion (+26%)
•
Raises 2016 Operating Income Outlook to a Range of $503 Million to $507 Million (+23% to 24%)

Baltimore, MD (April 21, 2016) - Under Armour, Inc. (NYSE: UA, UA.C) today announced financial results for the first quarter ended March 31, 2016. Net revenues increased 30% in the first quarter of 2016 to $1.05 billion compared with net revenues of $805 million in the prior year's period. On a currency neutral basis, net revenues increased 32% compared with the prior year's period. Operating income increased 26% in the first quarter of 2016 to $35 million compared with $28 million in the prior year's period. Net income increased 63% in the first quarter of 2016 to $19 million compared with $12 million in the prior year's period and diluted earnings per share for the first quarter of 2016 were $0.04 compared with $0.03 per share in the prior year's period. Diluted earnings per share calculations for both periods reflect the Company's Class C Stock Dividend effective April 7, 2016, which has the same effect as a two-for-one stock split.

During the first quarter, wholesale net revenues grew 28% year-over-year to $744 million compared to $579 million in the prior year's period, while Direct-to-Consumer net revenues grew 33% year-over-year to $266 million compared to $200 million in the prior year's period. North America net revenues for the first quarter grew 26% year-over-year, or 27% on a currency neutral basis. International net revenues, which represented 14% of total net revenues for the first quarter, grew 56% year-over-year, or 65% on a currency neutral basis.
    
Within product categories, apparel net revenues increased 20% to $667 million compared with $555 million in the same period of the prior year, led by growth in training and golf. Footwear net revenues increased 64% to $264 million from $161 million in the prior year's period, primarily reflecting the ongoing success of the Curry signature basketball line and expanded running offerings. Accessories net revenues increased 26% to $80 million from $63 million in the prior year's period, driven primarily by growth in headwear and bags.

Kevin Plank, Chairman and CEO of Under Armour, Inc., stated, "For the past 24 consecutive quarters or six years, we have driven net revenue growth above 20% and we are incredibly proud of our start to 2016 with first quarter net revenue growth of 30%. The strong results posted this quarter truly demonstrate the balanced growth of our brand across product categories, channels and geographies. It also showcases our heightened focus on providing better service across our distribution channels, ensuring that our consumer consistently finds the newest, most premium product from




us wherever they shop. In footwear, this includes the remarkable success of the Stephen Curry signature basketball line, as well as the exciting launches of our first smart running shoe and our new line of Jordan Spieth inspired golf shoes. Combined with the introductions of premium apparel technologies like Microthread and CoolSwitch, we will continue to drive elevated innovation and excitement to the athlete throughout the remainder of 2016."

Gross margin for the first quarter of 2016 was 45.9% compared with 46.9% in the prior year's period, primarily reflecting negative impacts of approximately 100 basis points from higher liquidations and approximately 70 basis points from foreign currency exchange rates, partially offset by approximately 60 basis points from improved product cost margins. Selling, general and administrative expenses grew 27% to $446 million compared with $350 million in the prior year's period, primarily driven by investments in Direct-to-Consumer and overall headcount to support the Company's strategic initiatives.

Balance Sheet Highlights
Cash and cash equivalents decreased 30% to $157 million at March 31, 2016 compared with $225 million at March 31, 2015. Inventory at March 31, 2016 increased 44% to $834 million compared with $578 million at March 31, 2015, primarily driven by the Company's ongoing strategy to drive higher service levels to customers, resulting in meaningful improvements in fill rates. Total debt increased 38% to $935 million at March 31, 2016 compared with $677 million at March 31, 2015.

Updated 2016 Outlook
Based on current visibility, the Company expects 2016 net revenues of approximately $5.0 billion, representing growth of 26% over 2015 and 2016 operating income in the range of $503 million to $507 million, representing growth of 23% to 24% over 2015. Below the operating line, the Company expects interest expense of approximately $35 million, an effective full year tax rate of approximately 38.5%, and fully diluted weighted average shares outstanding of approximately 446 million for 2016 reflective of the Class C Stock Dividend.

Mr. Plank concluded, "This year marks our 20th year in business, which is a great milestone for our company. Our robust growth this quarter demonstrates the power of our brand with growth coming from every part of our business. Our ability to adapt in a rapidly changing environment has been a critical part of our success and fuels our inspiration to create game-changing products that solve problems and enrich consumers' lives. With this unrelenting consumer focus and ongoing investment, we are setting the foundation for our growth story over the next 20 years."

 
Conference Call and Webcast
The Company will provide additional commentary regarding its first quarter as well as its updated 2016 outlook during its earnings conference call today, April 21, 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 certain “currency neutral” financial information, which is a non-GAAP financial measure.  The Company provides a reconciliation of this 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.

Currency neutral financial information is calculated to exclude foreign exchange impact.  Management believes this information is useful to investors to facilitate a comparison of the Company's results of operations period-over-period.  This 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 product, 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.

(Tables Follow)




Under Armour, Inc.
For the Quarter Ended March 31, 2016 and 2015
(Unaudited; in thousands, except per share amounts)
CONSOLIDATED STATEMENTS OF INCOME
 

Quarter Ended March 31,
 

2016

% of Net
Revenues

2015

% of Net
Revenues
Net revenues

$
1,047,702


100.0
 %

$
804,941


100.0
 %
Cost of goods sold

567,066


54.1
 %

427,277


53.1
 %
Gross profit

480,636


45.9
 %

377,664


46.9
 %
Selling, general and administrative expenses

445,753


42.5
 %

349,997


43.5
 %
Income from operations

34,883


3.4
 %

27,667


3.4
 %
Interest expense, net

(4,532
)

(0.4
)%

(2,210
)

(0.3
)%
Other income (expense), net

2,702


0.2
 %

(1,840
)

(0.2
)%
Income before income taxes

33,053


3.2
 %

23,617


2.9
 %
Provision for income taxes

13,873


1.4
 %

11,889


1.4
 %
Net income

$
19,180


1.8
 %

$
11,728


1.5
 %
Net income available per common share




Basic

$
0.04




$
0.03



Diluted

$
0.04




$
0.03



Weighted average common shares outstanding




Basic

433,626




429,394



Diluted

443,260




439,232







Under Armour, Inc.
For the Quarter Ended March 31, 2016 and 2015
(Unaudited; in thousands)
NET REVENUES BY PRODUCT CATEGORY
 
 
Quarter Ended March 31,
 
 
2016
 
2015
 
% Change
Apparel
 
$
666,571

 
$
555,455

 
20.0
 %
Footwear
 
264,246

 
160,966

 
64.2
 %
Accessories
 
79,701

 
63,151

 
26.2
 %
Total net sales
 
1,010,518

 
779,572

 
29.6
 %
Licensing revenues
 
19,433

 
16,938

 
14.7
 %
Connected Fitness
 
18,501

 
8,431

 
119.4
 %
Intersegment eliminations
 
(750
)
 
—

 
(100.0
)%
Total net revenues
 
$
1,047,702

 
$
804,941

 
30.2
 %
NET REVENUES BY SEGMENT
 
 
Quarter Ended March 31,
 
 
2016
 
2015
 
% Change
North America
 
$
880,595

 
$
700,512

 
25.7
 %
International
 
149,356

 
95,998

 
55.6
 %
Connected Fitness
 
18,501

 
8,431

 
119.4
 %
Intersegment eliminations
 
(750
)
 
—

 
(100.0
)%
Total net revenues
 
$
1,047,702

 
$
804,941

 
30.2
 %
OPERATING INCOME (LOSS) BY SEGMENT
 
 
Quarter Ended March 31,
 
 
2016
 
2015
 
% Change
North America
 
$
40,095

 
$
38,369

 
4.5
 %
International
 
11,249

 
4,334

 
159.6
 %
Connected Fitness
 
(16,461
)
 
(15,036
)
 
(9.5
)%
Income from operations
 
$
34,883

 
$
27,667

 
26.1
 %




Under Armour, Inc.
As of March 31, 2016, December 31, 2015 and March 31, 2015
(Unaudited; in thousands)
CONDENSED CONSOLIDATED BALANCE SHEETS



As of
3/31/16

As of
12/31/15

As of
3/31/15
Assets






Cash and cash equivalents

$
157,001


$
129,852


$
224,927

Accounts receivable, net

566,286


433,638


395,917

Inventories

834,287


783,031


577,947

Prepaid expenses and other current assets

211,209


152,242


169,722

Deferred income taxes

—


—


65,966

Total current assets

1,768,783


1,498,763


1,434,479

Property and equipment, net

601,910


538,531


359,489

Goodwill
 
588,895

 
585,181

 
595,492

Intangible assets, net
 
73,217

 
75,686

 
87,075

Deferred income taxes

92,230


92,157


14,104

Other long term assets

93,089


78,582


57,415

Total assets

$
3,218,124


$
2,868,900


$
2,548,054

Liabilities and Stockholders’ Equity

 




Revolving credit facility, current
 
$
140,000

 
$
—

 
$
—

Accounts payable

184,243


200,460


252,051

Accrued expenses

224,076


192,935


137,482

Current maturities of long term debt

27,000


42,000


43,347

Other current liabilities

30,581


43,415


15,339

Total current liabilities

605,900


478,810


448,219

Long term debt, net of current maturities

217,525


352,000


383,500

Revolving credit facility, long term
 
550,000

 
275,000

 
250,000

Other long term liabilities

103,382


94,868


81,809

Total liabilities

1,476,807


1,200,678


1,163,528

Total stockholders’ equity

1,741,317


1,668,222


1,384,526

Total liabilities and stockholders’ equity

$
3,218,124


$
2,868,900


$
2,548,054





Under Armour, Inc.
For the Quarter Ended March 31, 2016 and 2015
(Unaudited; in thousands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Quarter Ended March 31,

2016

2015
Cash flows from operating activities



Net income
$
19,180


$
11,728

Adjustments to reconcile net income to net cash used in operating activities



Depreciation and amortization
32,021


21,308

Unrealized foreign currency exchange rate (gains) losses
(11,009
)

21,416

Loss on disposal of property and equipment
384


227

Stock-based compensation
14,403


9,043

Deferred income taxes
2,724


4,049

Changes in reserves and allowances
12,657


5,792

Changes in operating assets and liabilities, net of effects of acquisitions:



Accounts receivable
(136,990
)

(127,439
)
Inventories
(45,958
)

(50,303
)
Prepaid expenses and other assets
(15,351
)

(39,899
)
Accounts payable
(976
)

40,066

Accrued expenses and other liabilities
8,627


(14,264
)
Income taxes payable and receivable
(47,748
)

(58,250
)
Net cash used in operating activities
(168,036
)
 
(176,526
)
Cash flows from investing activities



Purchases of property and equipment
(104,573
)

(68,619
)
Purchase of businesses, net of cash acquired
—

 
(539,109
)
Purchases of available-for-sale securities
(19,997
)
 
(10,424
)
Sales of available-for-sale securities
21,414

 
3,311

Purchases of other assets
—


(2,494
)
Net cash used in investing activities
(103,156
)

(617,335
)
Cash flows from financing activities



Proceeds from revolving credit facility
415,000


250,000

Proceeds from term loan
—


150,000

Payments on term loan
(145,000
)
 
—

Payments on long term debt
(500
)

(7,355
)
Excess tax benefits from stock-based compensation arrangements
27,058


34,613

Proceeds from exercise of stock options and other stock issuances
3,954


2,922

Payments of debt financing costs
(1,258
)
 
(946
)
Net cash provided by financing activities
299,254


429,234

Effect of exchange rate changes on cash and cash equivalents
(913
)

(3,621
)
Net increase (decrease) in cash and cash equivalents
27,149


(368,248
)
Cash and cash equivalents



Beginning of period
129,852


593,175

End of period
$
157,001


$
224,927





Non-cash investing activities



Decrease in accrual for property and equipment
$
(13,814
)

$
(195
)
Property and equipment acquired under build-to-suit leases
—

 
5,631





Under Armour, Inc.
For the Quarter Ended March 31, 2016 and 2015
(Unaudited)
The table below presents the reconciliation of non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP. See "Non-GAAP Financial Information" above for further information regarding the Company's use of non-GAAP financial measures.
CURRENCY NEUTRAL NET REVENUE GROWTH RECONCILIATION
 
 
Quarter Ended March 31,
Total Net Revenue
 
2016
Currency neutral net revenue growth - Non-GAAP
 
32.0
 %
Foreign exchange impact
 
(1.8
)%
Net revenue growth - GAAP
 
30.2
 %
 
 
 
North America
 
 
Currency neutral net revenue growth - Non-GAAP
 
26.6
 %
Foreign exchange impact
 
(0.9
)%
Net revenue growth - GAAP
 
25.7
 %
 
 
 
International
 
 
Currency neutral net revenue growth - Non-GAAP
 
64.6
 %
Foreign exchange impact
 
(9.0
)%
Net revenue growth - GAAP
 
55.6
 %
BRAND HOUSE AND FACTORY HOUSE DOOR COUNT
 
 
As of March 31,
 
 
2016
 
2015
Factory House
 
144
 
126
Brand House
 
12
 
7
   North America total doors
 
156
 
133
 
 
 
 
 
Factory House
 
18
 
8
Brand House
 
24
 
12
   International total doors
 
42
 
20
 
 
 
 
 
Factory House
 
162
 
134
Brand House
 
36
 
19
   Total doors
 
198
 
153


Exhibit 99.2
Under Armour: 1Q16 Earnings Call, April 21, 2016 (Chip Molloy)

Thanks, Kevin. Before I begin, I want to quickly express my gratitude to the entire Under Armour team for this opportunity to be part of such a powerful growth story. Approaching 100 days in the role, I have been extremely impressed by the unwavering drive of this culture and the strength and depth of the team across the board.

Now I would like to turn our focus to the details of our first quarter 2016 financial results followed by our updated outlook for the remainder of the year.

Our revenues for the first quarter of 2016 increased 30% to $1.05 billion. On a currency neutral basis, first quarter revenues increased 32%. While we are experiencing some changing dynamics among our domestic wholesale partner base, the increased diversity of our global channels and product lines continues to drive strong results.

During the first quarter, our wholesale revenues grew 28% to $744 million. Our Direct-to-Consumer revenues grew 33% to $266 million, holding steady year-over-year at approximately 25% of revenues in what has been our lowest quarter from a mix perspective the past two years. In Direct-to-Consumer, our store count at the end of the quarter included 198 company owned stores globally, comprised of 162 Factory House stores and 36 Brand House stores. We also increased our total number of in-country websites to 26 with the opening of our site in Mexico. During the quarter, licensing revenues grew 15% to $19 million and Connected Fitness revenues grew 119% to $19 million.

On the product category front, Apparel revenues increased 20% to $667 million compared to $555 million in the prior year's quarter led by growth in Training, Golf, and new innovation platforms such as Microthread and CoolSwitch.

First quarter Footwear revenues increased 64% to $264 million from $161 million in the prior year's quarter. The Curry 2 signature basketball shoe continues to be a clear leader in the category and we are also excited about the reaction to some of our new pinnacle running styles including our updated SpeedForm Gemini 2 as well as our first smart shoe, the SpeedForm Gemini 2 Record Equipped.


1

Our Accessories revenues during the first quarter increased 26% to $80 million from $63 million in the prior year's quarter, primarily driven by our new lines of headwear and bags.

On a regional basis, North American revenues in the first quarter increased 26% to $881 million compared to $701 million during the same period last year. On a currency neutral basis, North America revenues increased 27%. One of our key stories domestically continues to be the strategic initiatives we embarked upon early last year to improve service levels for our wholesale customers. Although these initiatives carried an associated investment in inventory beginning in the second quarter last year, we have seen significant improvement in our customer fulfillment rates supporting growth in North American sales.

International revenues increased 56% to $149 million in the first quarter to reach 14% of total revenues, representing a 200 basis point increase from the year ago period and on pace to reach our Investor Day target of 18% of revenues by 2018. On a currency neutral basis, International revenues increased 65%.

•
Starting with Asia-Pacific, China emerged as our largest international country, nearly tripling the year ago revenue base. Our positioning as the premium performance brand in the market is resonating with consumers and we are particularly encouraged by the relatively higher mix of Footwear and Women's.
•
In the EMEA region, as Kevin mentioned, we are strengthening our partnerships with key sporting goods accounts and continuing to invest in controlled retail space to elevate our positioning and brand awareness. We are also extending our brand reach by building some of our newer distributor relationships in areas such as the Middle East, Turkey, and North and South Africa.
•
And in Latin America, we remain in the early stages of our growth story as we build our distribution and product mix in our primary markets of Mexico, Chile, and Brazil.

Moving on to margins, first quarter gross margins decreased 100 basis points to 45.9% compared to 46.9% in the prior year's period. As we forecasted on our last quarterly call, higher liquidations to clear through excess inventory and foreign currency exchange rates negatively impacted gross margin by approximately 100 basis points and 70 basis points, respectively. These negative impacts were partially offset by favorable product margins, led primarily by cost improvements, benefiting gross margin by approximately 60 basis points.

Selling, general and administrative expenses grew 27% to $446 million compared to $350 million during the first quarter of last year. Growth was predominantly driven by investments in our Direct-to-Consumer

2

businesses, both retail and E-Commerce, and overall headcount to support our growth and strategic initiatives such as Connected Fitness and sport category management. Marketing expenses grew 14% for the quarter.

Operating income for the first quarter increased 26% to $35 million compared with $28 million in the prior year period.

Interest expense increased approximately $2 million compared to the prior year period driven by higher debt levels from our Connected Fitness acquisitions in 2015 and other working capital needs. Within our other income and expense line, we recorded a gain of $3 million versus a $2 million loss in the prior year period. The gain was driven by an improvement in foreign currency exchange rates towards the end of the quarter which favorably impacted our required period end balance sheet adjustments. In addition, the company tax rate in the first quarter was 42.0% compared to 50.3% in the prior year, primarily driven by international losses decreasing as a percentage of our overall pre-tax income.

Our first quarter net income increased 63% to $19 million compared to $12 million in the prior year period, while our diluted earnings per share increased 62% to $0.04. As a reminder, diluted earnings per share calculations for both periods reflect the Company's Class C Stock Dividend effective April 7, 2016, which has the same effect as a two-for-one stock split. On a pre-split basis, EPS would have been $0.09 for the first quarter this year compared to $0.05 in the prior year period.

On the balance sheet, total cash and cash equivalents for the quarter decreased to $157 million compared with $225 million at March 31, 2015. Inventory for the quarter increased 44% to $834 million compared to $578 million at March 31, 2015. As previously mentioned, the strategy to improve wholesale customer service levels resulted in elevated inventory investments beginning in the second quarter of last year. We expect the growth in inventory will be more in line with sales as we begin to anniversary this strategy during the second quarter of this year. Accounts receivable grew 43% to $566 million compared to $396 million at the end of the first quarter of last year. Total debt increased to $935 million as compared to $669 million at March 31, 2015.

Looking at our cash flows, our investment in capital expenditures was $91 million for the first quarter compared to $68 million in the prior year's period. We continue to expect to spend between $450 and $475 million for the full year, including investments in our global headquarters in Baltimore, our SAP platform, and global Direct-to-Consumer.


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Now moving onto our guidance for the remainder of 2016. Based on our current visibility, we are slightly raising both our revenue expectations to approximately $5.0 billion, representing growth of 26%, and our operating income expectations to a range of approximately $503 million to $507 million, representing growth of 23% to 24%. Gross margins for the full year are expected to be relatively flat when compared to last year and based on our outlook of $5.0 billion in revenues, SG&A is expected to grow approximately 27%. The anticipated deleverage in expenses is a result of our continued focus on making the right investments to drive our long-term global success.

Below the operating line, we expect interest expense to increase to approximately $35 million in 2016 from the higher debt levels to support our business. In addition, we continue to expect a full year tax rate of approximately 38.5% and fully diluted weighted average shares outstanding of approximately 446 million adjusted for the Class C Stock Dividend.

For the second quarter, we expect revenues to grow at a rate in the high 20s led by many of the same factors from our first quarter, including strength in Footwear and International and continued strategies to better service our customers. In addition, we expect our gross margin percentage to be relatively flat and operating income of $40 to $42 million, representing 25% to 32% growth.

Before we turn it over to Q&A, I wanted to reiterate how excited I am to be working with Kevin and the entire Under Armour team. This is an incredible brand and I look forward to promoting and protecting our growth ahead. One of the key members of this team, Dave Bergman, our SVP of Corporate Finance, will be joining us this morning to provide assistance with your questions. Dave brings nearly 12 years of finance and accounting leadership at Under Armour to the table and he will continue to assist me as I seek to understand all aspects of our global business. Finally, I look forward to beginning a dialogue with many of you on this call in the upcoming months.

Forward Looking Statements
Some of the statements contained in this script 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 script 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

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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 script reflect our views and assumptions only as of the date of this script. 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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Non-GAAP Financial Information
The Company reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”).  However, this script refers to certain “currency neutral” financial information and pre-Class C dividend earnings per share, each of which are non-GAAP financial measures.  The Company provides a reconciliation of these non-GAAP measures to the most directly comparable financial measure calculated in accordance with GAAP. 

Currency neutral financial information is calculated to exclude foreign exchange impact.  Management believes this information is useful to investors to facilitate a comparison of the Company's results of operations period-over-period.  Pre-Class C dividend earnings per share refers to the Company’s net income available per common share, diluted, prior to giving effect to the Company’s issuance of its Class C non-voting common stock on April 7, 2016. The Company’s financial statements for the quarterly period ended March 31, 2016 reflect the dividend of the Class C non-voting common stock.

These 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.  In addition, the Company's non-GAAP financial information may not be comparable to similarly titled measures reported by other companies.

Currency Neutral Net Revenue Growth Reconciliation
 
 
Quarter Ended March 31,
Total Net Revenue
 
2016
Currency neutral net revenue growth - Non-GAAP
 
32.0
 %
Foreign exchange impact
 
(1.8
)%
Net revenue growth - GAAP
 
30.2
 %
 
 
 
North America
 
 
Currency neutral net revenue growth - Non-GAAP
 
26.6
 %
Foreign exchange impact
 
(0.9
)%
Net revenue growth - GAAP
 
25.7
 %
 
 
 
International
 
 
Currency neutral net revenue growth - Non-GAAP
 
64.6
 %
Foreign exchange impact
 
(9.0
)%
Net revenue growth - GAAP
 
55.6
 %

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Non-GAAP Net Income Available Per Share Reconciliation
The following table provides a reconciliation of pre-Class C dividend earnings per share to the most directly comparable financial measure calculated in accordance with GAAP. 

In thousands, except per share amounts
 
Quarter Ended March 31, 2016
 
 
GAAP Actual
Adjustments
Non-GAAP Results
Numerator
 
 
 
 
Net income
 
$
19,180

 
$
19,180

Denominator
 
 
 
 
Weighted average common shares outstanding - diluted
 
443,260

(221,630
)
221,630

Net income available per common share - diluted
 
$
0.04

 
$
0.09


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