UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________

Form 10-Q

______________________________________

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File No. 001-33202

______________________________________

UNDER ARMOUR, INC.

(Exact name of registrant as specified in its charter)

______________________________________

Maryland	52-1990078
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1020 Hull Street Baltimore, Maryland 21230	(410) 454-6428
(Address of principal executive offices) (Zip Code)	(Registrant’s telephone number, including area code)

 ______________________________________

Securities registered pursuant to Section 12(b) of the Act:

Class A Common Stock	UAA	New York Stock Exchange
Class C Common Stock	UA	New York Stock Exchange
(Title of each class)	(Trading Symbols)	(Name of each exchange on which registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☑    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☑    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☑

As of July 31, 2020 there were 188,532,100 shares of Class A Common Stock, 34,450,000 shares of Class B Convertible Common Stock and 231,505,055 Class C Common Stock outstanding.

UNDER ARMOUR, INC.

June 30, 2020

INDEX TO FORM 10-Q

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Unaudited Consolidated Balance Sheets as of June 30, 2020, December 31, 2019 and June 30, 2019	1
	Unaudited Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019	2
	Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2020 and 2019	3
	Unaudited Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended June 30, 2020 and 2019	4
	Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019	6
	Notes to the Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	51
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 6.	Exhibits	53
SIGNATURES		55

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Under Armour, Inc. and Subsidiaries

Unaudited Consolidated Balance Sheets

(In thousands, except share data)

	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
Current liabilities
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
Commitments and contingencies (See Note 8)
Stockholders’ equity
Class A Common Stock, $0.0003 1/3 par value; 400,000,000 shares authorized as of June 30, 2020, December 31, 2019 and June 30, 2019; 188,460,784 shares issued and outstanding as of June 30, 2020, 188,289,680 shares issued and outstanding as of December 31, 2019, and 188,144,137 shares issued and outstanding as of June 30, 2019.	62		62		62
Class B Convertible Common Stock, $0.0003 1/3 par value; 34,450,000 shares authorized, issued and outstanding as of June 30, 2020, December 31, 2019 and June 30, 2019.	11		11		11
Class C Common Stock, $0.0003 1/3 par value; 400,000,000 shares authorized as of June 30, 2020, December 31, 2019 and June 30, 2019; 231,353,704 shares issued and outstanding as of June 30, 2020, 229,027,730 shares issued and outstanding as of December 31, 2019, and 228,652,955 shares issued and outstanding as of June 30, 2019.	77		76		76
Additional paid-in capital	1,044,055		973,717		946,488
Retained earnings	450,750		1,226,986		1,141,129
Accumulated other comprehensive loss	(71,541)		(50,765)		(39,492)
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

See accompanying notes.

1

Under Armour, Inc. and Subsidiaries

Unaudited Consolidated Statements of Operations

(In thousands, except per share amounts)

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Net revenues	$	707,640	$	1,191,729	$	1,637,880	$	2,396,451
Cost of goods sold	358,471		637,408		857,727		1,297,343
Gross profit	349,169		554,321		780,153		1,099,108
Selling, general and administrative expenses	479,906		565,803		1,032,607		1,075,331
Restructuring and impairment charges	38,937		—		475,400		—
Income (loss) from operations	(169,674)		(11,482)		(727,854)		23,777
Interest expense, net	(11,336)		(5,988)		(17,296)		(10,226)
Other expense, net	(4,843)		(1,128)		(3,309)		(1,795)
Income (loss) before income taxes	(185,853)		(18,598)		(748,459)		11,756
Income tax expense (benefit)	(3,137)		(5,740)		18,410		2,391
Loss from equity method investments	(179)		(4,491)		(5,707)		(4,237)
Net income (loss)	$	(182,895)	$	(17,349)	$	(772,576)	$	5,128
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

See accompanying notes.

2

Under Armour, Inc. and Subsidiaries

Unaudited Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Net income (loss)	$	(182,895)	$	(17,349)	$	(772,576)	$	5,128
Other comprehensive income (loss):
Foreign currency translation adjustment	6,636		1,408		(41,042)		7,398
Unrealized gain (loss) on cash flow hedge, net of tax benefit (expense) of $2,958 and $552 for the three months ended June 30, 2020 and 2019, respectively, and ($8,477) and $3,152 for the six months ended June 30, 2020 and 2019, respectively.	(8,798)		391		23,746		(8,710)
Gain (loss) on intra-entity foreign currency transactions	874		(1,115)		(3,480)		807
Total other comprehensive income (loss)	(1,288)		684		(20,776)		(505)
Comprehensive income (loss)	$	(184,183)	$	(16,665)	$	(793,352)	$	4,623

See accompanying notes.

3

Under Armour, Inc. and Subsidiaries

Unaudited Consolidated Statements of Stockholders' Equity

(In thousands)

	Class A Common Stock		Class B Convertible Common Stock		Class C Common Stock		Additional Paid-in-Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Total Equity
	Shares	Amount	Shares	Amount	Shares	Amount
Balance as of March 31, 2019	187,980	62	34,450	11	228,489	76	931,352	1,158,482	(40,176)	$	2,049,807
Exercise of stock options	161	—	—	—	59	—	529	—	—	$	529
Shares withheld in consideration of employee tax obligations relative to stock-based compensation arrangements	(5)	—	—	—	(6)	—	—	(4)	—	$	(4)
Issuance of Class A Common Stock, net of forfeitures	8	—	—	—	—	—	—	—	—	$	—
Issuance of Class C Common Stock, net of forfeitures	—	—	—	—	111	—	1,473	—	—	$	1,473
Stock-based compensation expense	—	—	—	—	—	—	13,134	—	—	$	13,134
Comprehensive income (loss)	—	—	—	—	—	—	—	(17,349)	684	$	(16,665)
Balance as of June 30, 2019	188,144	62	34,450	11	228,653	76	946,488	1,141,129	(39,492)	$	2,048,274
Balance as of December 31, 2018	187,710	62	34,450	11	226,422	75	916,628	1,139,082	(38,987)	$	2,016,871
Exercise of stock options	315	—	—	—	237	—	1,376	—	—	$	1,376
Shares withheld in consideration of employee tax obligations relative to stock-based compensation arrangements	(15)	—	—	—	(158)	—	—	(3,081)	—	$	(3,081)
Issuance of Class A Common Stock, net of forfeitures	134	—	—	—	—	—	—	—	—	$	—
Issuance of Class C Common Stock, net of forfeitures	—	—	—	—	2,152	1	2,859	—	—	$	2,860
Stock-based compensation expense	—	—	—	—	—	—	25,625	—	—	$	25,625
Comprehensive income (loss)	—	—	—	—	—	—	—	5,128	(505)	4,623
Balance as of June 30, 2019	188,144	62	34,450	11	228,653	76	946,488	1,141,129	(39,492)	$	2,048,274

See accompanying notes.

4

Under Armour, Inc. and Subsidiaries

Unaudited Consolidated Statements of Stockholders' Equity (continued)

(In thousands)

	Class A Common Stock		Class B Convertible Common Stock		Class C Common Stock		Additional Paid-in-Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Total Equity
	Shares	Amount	Shares	Amount	Shares	Amount
Balance as of March 31, 2020	188,451	62	34,450	11	231,150	77	985,831	634,452	(70,253)	$	1,550,180
Exercise of stock options	2	—	—	—	2	—	14	—	—	$	14
Shares withheld in consideration of employee tax obligations relative to stock-based compensation arrangements	—	—	—	—	—	—	—	(807)	—	$	(807)
Issuance of Class A Common Stock, net of forfeitures	8	—	—	—	—	—	—	—	—	$	—
Issuance of Class C Common Stock, net of forfeitures	—	—	—	—	202	—	1,195	—	—	$	1,195
Stock-based compensation expense	—	—	—	—	—	—	12,792	—	—	$	12,792
Equity Component value of convertible note issuance, net	—	—	—	—	—	—	44,223	—	—	$	44,223
Comprehensive loss	—	—	—	—	—	—	—	(182,895)	(1,288)	(184,183)
Balance as of June 30, 2020	188,461	62	34,450	11	231,354	77	1,044,055	450,750	(71,541)	$	1,423,414
Balance as of December 31, 2019	188,290	62	34,450	11	229,028	76	973,717	1,226,986	(50,765)	$	2,150,087
Exercise of stock options	145	—	—	—	133	—	499	—	—	$	499
Shares withheld in consideration of employee tax obligations relative to stock-based compensation arrangements	(1)	—	—	—	(176)	—	—	(3,660)	—	$	(3,660)
Issuance of Class A Common Stock, net of forfeitures	27	—	—	—	—	—	—	—	—	$	—
Issuance of Class C Common Stock, net of forfeitures	—	—	—	—	2,369	1	2,359	—	—	$	2,360
Stock-based compensation expense	—	—	—	—	—	—	23,257	—	—	$	23,257
Equity Component value of convertible note issuance, net	—	—	—	—	—	—	44,223	—	—	$	44,223
Comprehensive loss	—	—	—	—	—	—	—	(772,576)	(20,776)	(793,352)
Balance as of June 30, 2020	188,461	62	34,450	11	231,354	77	1,044,055	450,750	(71,541)	$	1,423,414

See accompanying notes.

5

Under Armour, Inc. and Subsidiaries`

Unaudited Consolidated Statements of Cash Flows

(In thousands)

	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 liability	(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)		(