þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
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)
|
Large accelerated filer
|
þ
|
|
Accelerated filer
|
¨
|
Non-accelerated filer
|
¨
|
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
¨
|
|
|
|
Emerging growth company
|
¨
|
|
|
|
PART I.
|
|
|
Item 1.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Item 2.
|
||
Item 3.
|
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Item 4.
|
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PART II.
|
|
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Item 1.
|
||
Item 1A.
|
||
Item 6.
|
||
|
March 31,
2018 |
|
December 31,
2017 |
|
March 31,
2017 |
||||||
Assets
|
|
|
|
|
|
||||||
Current assets
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
283,644
|
|
|
$
|
312,483
|
|
|
$
|
172,128
|
|
Accounts receivable, net
|
805,413
|
|
|
609,670
|
|
|
629,235
|
|
|||
Inventories
|
1,148,493
|
|
|
1,158,548
|
|
|
901,613
|
|
|||
Prepaid expenses and other current assets
|
354,455
|
|
|
256,978
|
|
|
203,052
|
|
|||
Total current assets
|
2,592,005
|
|
|
2,337,679
|
|
|
1,906,028
|
|
|||
Property and equipment, net
|
870,120
|
|
|
885,774
|
|
|
830,539
|
|
|||
Goodwill
|
565,201
|
|
|
555,674
|
|
|
571,381
|
|
|||
Intangible assets, net
|
45,931
|
|
|
46,995
|
|
|
61,986
|
|
|||
Deferred income taxes
|
92,607
|
|
|
82,801
|
|
|
121,108
|
|
|||
Other long term assets
|
98,455
|
|
|
97,444
|
|
|
86,118
|
|
|||
Total assets
|
$
|
4,264,319
|
|
|
$
|
4,006,367
|
|
|
$
|
3,577,160
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
||||||
Current liabilities
|
|
|
|
|
|
||||||
Revolving credit facility, current
|
$
|
135,000
|
|
|
$
|
125,000
|
|
|
$
|
50,000
|
|
Accounts payable
|
470,378
|
|
|
561,108
|
|
|
294,857
|
|
|||
Accrued expenses
|
276,888
|
|
|
296,841
|
|
|
217,310
|
|
|||
Customer refund liability
|
353,020
|
|
|
—
|
|
|
—
|
|
|||
Current maturities of long term debt
|
27,000
|
|
|
27,000
|
|
|
27,000
|
|
|||
Other current liabilities
|
54,771
|
|
|
50,426
|
|
|
38,372
|
|
|||
Total current liabilities
|
1,317,057
|
|
|
1,060,375
|
|
|
627,539
|
|
|||
Long term debt, net of current maturities
|
758,705
|
|
|
765,046
|
|
|
784,052
|
|
|||
Other long term liabilities
|
170,825
|
|
|
162,304
|
|
|
145,536
|
|
|||
Total liabilities
|
2,246,587
|
|
|
1,987,725
|
|
|
1,557,127
|
|
|||
Commitments and contingencies (See Note 5)
|
|
|
|
|
|
||||||
Stockholders’ equity
|
|
|
|
|
|
||||||
Class A Common Stock, $0.0003 1/3 par value; 400,000,000 shares authorized as of March 31, 2018, December 31, 2017 and March 31, 2017; 185,685,853 shares issued and outstanding as of March 31, 2018, 185,257,423 shares issued and outstanding as of December 31, 2017, and 184,667,304 shares issued and outstanding as of March 31, 2017.
|
62
|
|
|
61
|
|
|
62
|
|
|||
Class B Convertible Common Stock, $0.0003 1/3 par value; 34,450,000 shares authorized, issued and outstanding as of March 31, 2018, December 31, 2017 and March 31, 2017.
|
11
|
|
|
11
|
|
|
11
|
|
|||
Class C Common Stock, $0.0003 1/3 par value; 400,000,000 shares authorized as of March 31, 2018, December 31, 2017 and March 31, 2017; 223,905,097 shares issued and outstanding as of March 31, 2018, 222,375,079 shares issued and outstanding as of December 31, 2017, and 221,148,991 shares issued and outstanding as of March 31, 2017.
|
75
|
|
|
74
|
|
|
74
|
|
|||
Additional paid-in capital
|
882,721
|
|
|
872,266
|
|
|
835,681
|
|
|||
Retained earnings
|
1,155,946
|
|
|
1,184,441
|
|
|
1,232,416
|
|
|||
Accumulated other comprehensive loss
|
(21,083
|
)
|
|
(38,211
|
)
|
|
(48,211
|
)
|
|||
Total stockholders’ equity
|
2,017,732
|
|
|
2,018,642
|
|
|
2,020,033
|
|
|||
Total liabilities and stockholders’ equity
|
$
|
4,264,319
|
|
|
$
|
4,006,367
|
|
|
$
|
3,577,160
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Net revenues
|
$
|
1,185,370
|
|
|
$
|
1,119,844
|
|
Cost of goods sold
|
661,917
|
|
|
611,908
|
|
||
Gross Profit
|
523,453
|
|
|
507,936
|
|
||
Selling, general and administrative expenses
|
514,634
|
|
|
500,400
|
|
||
Restructuring and impairment charges
|
37,480
|
|
|
—
|
|
||
Income (loss) from operations
|
(28,661
|
)
|
|
7,536
|
|
||
Interest expense, net
|
(8,564
|
)
|
|
(7,820
|
)
|
||
Other income, net
|
2,888
|
|
|
2,570
|
|
||
Income (loss) before income taxes
|
(34,337
|
)
|
|
2,286
|
|
||
Income tax expense (benefit)
|
(4,093
|
)
|
|
4,558
|
|
||
Net loss
|
(30,244
|
)
|
|
(2,272
|
)
|
||
|
|
|
|
||||
Basic net loss per share of Class A, B and C common stock
|
$
|
(0.07
|
)
|
|
$
|
(0.01
|
)
|
Diluted net loss per share of Class A, B and C common stock
|
$
|
(0.07
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
||||
Weighted average common shares outstanding Class A, B and C common stock
|
|
|
|
||||
Basic
|
443,052
|
|
|
439,360
|
|
||
Diluted
|
443,052
|
|
|
439,360
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Net loss
|
$
|
(30,244
|
)
|
|
$
|
(2,272
|
)
|
Other comprehensive income:
|
|
|
|
||||
Foreign currency translation adjustment
|
12,847
|
|
|
9,819
|
|
||
Unrealized gain (loss) on cash flow hedge, net of tax of $(348) and $(2,399) for the three months ended March 31, 2018 and 2017, respectively.
|
1,032
|
|
|
(6,894
|
)
|
||
Gain on intra-entity foreign currency transactions
|
3,249
|
|
|
1,007
|
|
||
Total other comprehensive income
|
17,128
|
|
|
3,932
|
|
||
Comprehensive income (loss)
|
$
|
(13,116
|
)
|
|
$
|
1,660
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Cash flows from operating activities
|
|
|
|
||||
Net loss
|
$
|
(30,244
|
)
|
|
$
|
(2,272
|
)
|
Adjustments to reconcile net loss to net cash provided by (used) in operating activities
|
|
|
|
||||
Depreciation and amortization
|
46,098
|
|
|
41,013
|
|
||
Unrealized foreign currency exchange rate gains
|
(5,030
|
)
|
|
(8,313
|
)
|
||
Loss on disposal of property and equipment
|
159
|
|
|
556
|
|
||
Impairment charges
|
2,248
|
|
|
—
|
|
||
Amortization of bond premium
|
63
|
|
|
63
|
|
||
Stock-based compensation
|
8,137
|
|
|
12,082
|
|
||
Excess tax deficiency from stock-based compensation arrangements
|
—
|
|
|
(1,258
|
)
|
||
Deferred income taxes
|
(10,645
|
)
|
|
15,905
|
|
||
Changes in reserves and allowances
|
(251,194
|
)
|
|
(21,187
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
53,703
|
|
|
21,261
|
|
||
Inventories
|
16,697
|
|
|
19,084
|
|
||
Prepaid expenses and other assets
|
(83,917
|
)
|
|
(6,588
|
)
|
||
Other non-current assets
|
(731
|
)
|
|
—
|
|
||
Accounts payable
|
(66,894
|
)
|
|
(90,982
|
)
|
||
Accrued expenses and other liabilities
|
(3,933
|
)
|
|
7,253
|
|
||
Customer refund liability
|
350,312
|
|
|
—
|
|
||
Income taxes payable and receivable
|
(2,805
|
)
|
|
(19,169
|
)
|
||
Net cash provided by (used in) operating activities
|
22,024
|
|
|
(32,552
|
)
|
||
Cash flows from investing activities
|
|
|
|
||||
Purchases of property and equipment
|
(55,930
|
)
|
|
(91,790
|
)
|
||
Net cash used in investing activities
|
(55,930
|
)
|
|
(91,790
|
)
|
||
Cash flows from financing activities
|
|
|
|
||||
Proceeds from long term debt and revolving credit facility
|
165,000
|
|
|
200,000
|
|
||
Payments on long term debt and revolving credit facility
|
(161,750
|
)
|
|
(156,750
|
)
|
||
Employee taxes paid for shares withheld for income taxes
|
(1,759
|
)
|
|
(2,474
|
)
|
||
Proceeds from exercise of stock options and other stock issuances
|
2,319
|
|
|
2,782
|
|
||
Payments of debt financing costs
|
(11
|
)
|
|
—
|
|
||
Net cash provided by financing activities
|
3,799
|
|
|
43,558
|
|
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
2,157
|
|
|
3,452
|
|
||
Net decrease in cash, cash equivalents and restricted cash
|
(27,950
|
)
|
|
(77,332
|
)
|
||
Cash, cash equivalents and restricted cash
|
|
|
|
||||
Beginning of period
|
318,135
|
|
|
252,725
|
|
||
End of period
|
$
|
290,185
|
|
|
$
|
175,393
|
|
|
|
|
|
||||
Non-cash investing and financing activities
|
|
|
|
||||
Change in accrual for property and equipment
|
(27,641
|
)
|
|
(25,567
|
)
|
|
March 31, 2018
|
|
December 31, 2017
|
|
March 31, 2017
|
||||||
Cash and cash equivalents
|
$
|
283,644
|
|
|
$
|
312,483
|
|
|
$
|
172,128
|
|
Restricted cash
|
6,541
|
|
|
5,652
|
|
|
3,265
|
|
|||
Total Cash, cash equivalents and restricted cash
|
$
|
290,185
|
|
|
$
|
318,135
|
|
|
$
|
175,393
|
|
|
March 31, 2018
(As Presented)
|
|
ASC 606 Adjustments
|
|
March 31, 2018
(As Adjusted)
|
||||||
Assets
|
|
|
|
|
|
||||||
Current assets
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
283,644
|
|
|
$
|
—
|
|
|
$
|
283,644
|
|
Accounts receivable, net
|
805,413
|
|
|
(260,061
|
)
|
|
545,352
|
|
|||
Inventories
|
1,148,493
|
|
|
3,492
|
|
|
1,151,985
|
|
|||
Prepaid expenses and other current assets
|
354,455
|
|
|
(96,766
|
)
|
|
257,689
|
|
|||
Total current assets
|
2,592,005
|
|
|
(353,335
|
)
|
|
2,238,670
|
|
|||
Non-current assets
|
1,672,314
|
|
|
1,703
|
|
|
1,674,017
|
|
|||
Total assets
|
$
|
4,264,319
|
|
|
$
|
(351,632
|
)
|
|
$
|
3,912,687
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
||||||
Current liabilities
|
|
|
|
|
|
||||||
Revolving credit facility, current
|
$
|
135,000
|
|
|
$
|
—
|
|
|
$
|
135,000
|
|
Accounts payable
|
470,378
|
|
|
—
|
|
|
470,378
|
|
|||
Accrued expenses
|
276,888
|
|
|
—
|
|
|
276,888
|
|
|||
Customer refund liability
|
353,020
|
|
|
(353,020
|
)
|
|
—
|
|
|||
Current maturities of long term debt
|
27,000
|
|
|
—
|
|
|
27,000
|
|
|||
Other current liabilities
|
54,771
|
|
|
5,688
|
|
|
60,459
|
|
|||
Total current liabilities
|
1,317,057
|
|
|
(347,332
|
)
|
|
969,725
|
|
|||
Non-current liabilities
|
929,530
|
|
|
—
|
|
|
929,530
|
|
|||
Total liabilities
|
2,246,587
|
|
|
(347,332
|
)
|
|
1,899,255
|
|
|||
Stockholders’ equity
|
2,017,732
|
|
|
(4,300
|
)
|
|
2,013,432
|
|
|||
Total liabilities and stockholders’ equity
|
$
|
4,264,319
|
|
|
$
|
(351,632
|
)
|
|
$
|
3,912,687
|
|
|
March 31, 2018
(As Presented)
|
|
ASC 606 Adjustments
|
|
March 31, 2018
(As Adjusted)
|
||||||
Net revenues
|
$
|
1,185,370
|
|
|
$
|
(1,853
|
)
|
|
$
|
1,183,517
|
|
Cost of goods sold
|
661,917
|
|
|
(2,202
|
)
|
|
659,715
|
|
|||
Gross Profit
|
523,453
|
|
|
349
|
|
|
523,802
|
|
|||
Selling, general and administrative expenses
|
514,634
|
|
|
1,456
|
|
|
516,090
|
|
|||
Restructuring and impairment charges
|
37,480
|
|
|
—
|
|
|
37,480
|
|
|||
Income (loss) from operations
|
(28,661
|
)
|
|
(1,107
|
)
|
|
(29,768
|
)
|
|||
Interest expense, net
|
(8,564
|
)
|
|
—
|
|
|
(8,564
|
)
|
|||
Other income, net
|
2,888
|
|
|
—
|
|
|
2,888
|
|
|||
Income (loss) before income taxes
|
(34,337
|
)
|
|
(1,107
|
)
|
|
(35,444
|
)
|
|||
Income tax expense (benefit)
|
(4,093
|
)
|
|
(314
|
)
|
|
(4,407
|
)
|
|||
Net loss
|
$
|
(30,244
|
)
|
|
$
|
(793
|
)
|
|
$
|
(31,037
|
)
|
|
|
|
|
|
|
|
|||||
Basic net loss per share of Class A, B and C common stock
|
$
|
(0.07
|
)
|
|
$
|
—
|
|
|
$
|
(0.07
|
)
|
Diluted net loss per share of Class A, B and C common stock
|
$
|
(0.07
|
)
|
|
$
|
—
|
|
|
$
|
(0.07
|
)
|
|
March 31, 2018
(As Presented)
|
|
ASC 606 Adjustments
|
|
March 31, 2018
(As Adjusted)
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net loss
|
$
|
(30,244
|
)
|
|
$
|
(793
|
)
|
|
$
|
(31,037
|
)
|
Adjustments to reconcile net loss to net cash provided by (used) in operating activities
|
|
|
|
|
—
|
|
|||||
Depreciation and amortization
|
46,098
|
|
|
—
|
|
|
46,098
|
|
|||
Unrealized foreign currency exchange rate gains
|
(5,030
|
)
|
|
—
|
|
|
(5,030
|
)
|
|||
Loss on disposal of property and equipment
|
159
|
|
|
—
|
|
|
159
|
|
|||
Impairment charges
|
2,248
|
|
|
—
|
|
|
2,248
|
|
|||
Amortization of bond premium
|
63
|
|
|
—
|
|
|
63
|
|
|||
Stock-based compensation
|
8,137
|
|
|
—
|
|
|
8,137
|
|
|||
Excess tax deficiency from stock-based compensation arrangements
|
—
|
|
|
—
|
|
|
—
|
|
|||
Deferred income taxes
|
(10,645
|
)
|
|
(314
|
)
|
|
(10,959
|
)
|
|||
Changes in reserves and allowances
|
(251,194
|
)
|
|
255,746
|
|
|
4,552
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable
|
53,703
|
|
|
—
|
|
|
53,703
|
|
|||
Inventories
|
16,697
|
|
|
—
|
|
|
16,697
|
|
|||
Prepaid expenses and other assets
|
(83,917
|
)
|
|
95,206
|
|
|
11,289
|
|
|||
Other non-current assets
|
(731
|
)
|
|
—
|
|
|
(731
|
)
|
|||
Accounts payable
|
(66,894
|
)
|
|
—
|
|
|
(66,894
|
)
|
|||
Accrued expenses and other liabilities
|
(3,933
|
)
|
|
467
|
|
|
(3,466
|
)
|
|||
Customer refund liability
|
350,312
|
|
|
(350,312
|
)
|
|
—
|
|
|||
Income taxes payable and receivable
|
(2,805
|
)
|
|
—
|
|
|
(2,805
|
)
|
|||
Net cash provided by operating activities
|
22,024
|
|
|
—
|
|
|
22,024
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Net cash used in investing activities
|
(55,930
|
)
|
|
—
|
|
|
(55,930
|
)
|
|||
Cash flows from financing activities
|
|
|
|
|
|
||||||
Net cash provided by financing activities
|
3,799
|
|
|
—
|
|
|
3,799
|
|
|||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
2,157
|
|
|
—
|
|
|
2,157
|
|
|||
Net decrease in cash, cash equivalents and restricted cash
|
(27,950
|
)
|
|
—
|
|
|
(27,950
|
)
|
|||
Cash, cash equivalents and restricted cash
|
|
|
|
|
|
||||||
Beginning of period
|
318,135
|
|
|
—
|
|
|
318,135
|
|
|||
End of period
|
$
|
290,185
|
|
|
$
|
—
|
|
|
$
|
290,185
|
|
•
|
Up to
$105.0 million
in cash charges, consisting of up to:
$55.0 million
in facility and lease terminations and
$50.0 million
in contract termination and other restructuring charges; and,
|
•
|
Up to
$25.0 million
in non-cash charges comprised of approximately
$10.0 million
of inventory related charges and approximately
$15.0 million
of intangibles and other asset related impairments.
|
|
Restructuring and Impairment Charges Incurred
|
Estimated Restructuring and Impairment Charges to be Incurred
|
|||||||||
(In thousands)
|
Three Months Ended March 31, 2018
|
Nine Months Ending December 31, 2018 (1)
|
|
Year Ending December 31, 2018 (1)
|
|
||||||
Costs recorded in cost of goods sold:
|
|
|
|
|
|
||||||
Inventory write-offs
|
$
|
7,474
|
|
$
|
2,500
|
|
|
$
|
9,974
|
|
|
Total costs recorded in cost of goods sold
|
7,474
|
|
2,500
|
|
|
9,974
|
|
|
|||
|
|
|
|
|
|
||||||
Costs recorded in restructuring and impairment charges:
|
|
|
|
|
|
||||||
Property and equipment impairment
|
2,248
|
|
13,000
|
|
|
15,248
|
|
|
|||
Other restructuring related costs
|
9,882
|
|
12,000
|
|
|
21,882
|
|
|
|||
Contract exit costs
|
25,350
|
|
55,000
|
|
|
80,350
|
|
|
|||
Total costs recorded in restructuring and impairment charges
|
37,480
|
|
80,000
|
|
|
117,480
|
|
|
|||
Total restructuring, impairment and restructuring related costs
|
$
|
44,954
|
|
$
|
82,500
|
|
|
$
|
127,454
|
|
|
|
Employee Related Costs
|
|
Contract Exit Costs
|
|
Other Restructuring Related Costs
|
||||||
Balance at January 1, 2018
|
$
|
4,555
|
|
|
$
|
2,848
|
|
|
$
|
3,000
|
|
Additions charged to expense
|
—
|
|
|
19,843
|
|
|
6,757
|
|
|||
Cash payments charged against reserve
|
(709
|
)
|
|
(3,296
|
)
|
|
(3,000
|
)
|
|||
Changes in reserve estimate
|
$
|
(239
|
)
|
|
$
|
(293
|
)
|
|
$
|
—
|
|
Balance at March 31, 2018
|
$
|
3,607
|
|
|
$
|
19,102
|
|
|
$
|
6,757
|
|
Level 1:
|
Observable inputs such as quoted prices in active markets;
|
|
|
Level 2:
|
Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
|
|
|
Level 3:
|
Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
|
|
March 31, 2018
|
|
December 31, 2017
|
|
March 31, 2017
|
|||||||||||||||||||||
(In thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||
Derivative foreign currency contracts (see Note 8)
|
|
|
|
|
(7,293
|
)
|
|
|
|
|
—
|
|
|
(6,818
|
)
|
|
—
|
|
|
—
|
|
|
5,801
|
|
|
—
|
|
Interest rate swap contracts (see Note 8)
|
|
—
|
|
|
2,103
|
|
|
—
|
|
|
—
|
|
|
1,088
|
|
|
—
|
|
|
—
|
|
|
162
|
|
|
—
|
|
TOLI policies held by the Rabbi Trust
|
|
—
|
|
|
5,692
|
|
|
—
|
|
|
—
|
|
|
5,756
|
|
|
—
|
|
|
—
|
|
|
5,106
|
|
|
—
|
|
Deferred Compensation Plan obligations
|
|
—
|
|
|
(8,123
|
)
|
|
—
|
|
|
—
|
|
|
(7,971
|
)
|
|
—
|
|
|
—
|
|
|
(8,152
|
)
|
|
—
|
|
|
Three Months Ended March 31,
|
||||||
(In thousands)
|
2018
|
|
2017
|
||||
Unrealized foreign currency exchange rate gains (losses)
|
$
|
(5,030
|
)
|
|
$
|
8,313
|
|
Realized foreign currency exchange rate gains (losses)
|
(2,374
|
)
|
|
(272
|
)
|
||
Unrealized derivative gains (losses)
|
35
|
|
|
(704
|
)
|
||
Realized derivative gains (losses)
|
4,226
|
|
|
(6,366
|
)
|
|
Three Months Ended
March 31,
|
||||||
(In thousands, except per share amounts)
|
2018
|
|
2017
|
||||
Numerator
|
|
|
|
||||
Net loss
|
$
|
(30,244
|
)
|
|
$
|
(2,272
|
)
|
Denominator
|
|
|
|
||||
Weighted average common shares outstanding Class A, B and C
|
443,052
|
|
|
439,360
|
|
||
|
|
|
|
||||
Basic net loss per share of Class A, B and C common stock
|
$
|
(0.07
|
)
|
|
$
|
(0.01
|
)
|
Diluted net loss per share of Class A, B and C common stock
|
$
|
(0.07
|
)
|
|
$
|
(0.01
|
)
|
|
Three Months Ended March 31,
|
||||||
(In thousands)
|
2018
|
|
2017
|
||||
Operating income (loss)
|
|
|
|
||||
North America
|
$
|
(43,495
|
)
|
|
$
|
3,714
|
|
EMEA
|
(3,627
|
)
|
|
1,629
|
|
||
Asia-Pacific
|
21,241
|
|
|
19,628
|
|
||
Latin America
|
(5,870
|
)
|
|
(7,859
|
)
|
||
Connected Fitness
|
3,090
|
|
|
(9,576
|
)
|
||
Total operating income (loss)
|
(28,661
|
)
|
|
7,536
|
|
||
Interest expense, net
|
(8,564
|
)
|
|
(7,820
|
)
|
||
Other income, net
|
2,888
|
|
|
2,570
|
|
||
Income (loss) before income taxes
|
$
|
(34,337
|
)
|
|
$
|
2,286
|
|
|
Costs Incurred
|
Estimated Costs to be Incurred
|
||||||||||
(In thousands)
|
Three Months Ended March 31, 2018
|
|
Nine Months Ending December 31, 2018 (1)
|
|
Year Ending December 31, 2018 (1)
|
|
||||||
Costs recorded in restructuring and impairment charges:
|
|
|
|
|
|
|
||||||
North America
|
$
|
31,036
|
|
|
$
|
64,000
|
|
|
$
|
95,036
|
|
|
EMEA
|
5,418
|
|
|
—
|
|
|
5,418
|
|
|
|||
Asia-Pacific
|
—
|
|
|
—
|
|
|
—
|
|
|
|||
Latin America
|
1,026
|
|
|
16,000
|
|
|
17,026
|
|
|
|||
Connected Fitness
|
—
|
|
|
—
|
|
|
—
|
|
|
|||
Total costs recorded in restructuring and impairment charges
|
$
|
37,480
|
|
|
$
|
80,000
|
|
|
$
|
117,480
|
|
|
|
Three Months Ended March 31,
|
||||||
(In thousands)
|
2018
|
|
2017
|
||||
Net Revenues
|
|
|
|
||||
Apparel
|
$
|
766,275
|
|
|
$
|
715,437
|
|
Footwear
|
271,770
|
|
|
269,659
|
|
||
Accessories
|
92,158
|
|
|
89,097
|
|
||
Total net sales
|
1,130,203
|
|
|
1,074,193
|
|
||
License revenues
|
26,341
|
|
|
24,205
|
|
||
Connected Fitness
|
28,826
|
|
|
21,446
|
|
||
Total net revenues
|
$
|
1,185,370
|
|
|
$
|
1,119,844
|
|
|
Three Months Ended March 31,
|
||||||
(In thousands)
|
2018
|
|
2017
|
||||
Net Revenues
|
|
|
|
||||
Wholesale
|
$
|
778,592
|
|
|
$
|
772,620
|
|
Direct to Consumer
|
351,611
|
|
|
301,573
|
|
||
Net Sales
|
1,130,203
|
|
|
1,074,193
|
|
||
Licensing
|
26,341
|
|
|
24,205
|
|
||
Connected Fitness
|
28,826
|
|
|
21,446
|
|
||
Total net revenues
|
$
|
1,185,370
|
|
|
$
|
1,119,844
|
|
•
|
changes in general economic or market conditions that could affect overall consumer spending or our industry;
|
•
|
changes to the financial health of our customers;
|
•
|
our ability to successfully execute our long-term strategies;
|
•
|
our ability to successfully execute any restructuring plans and realize 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 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;
|
•
|
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;
|
•
|
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, including the 2018 data security issue related to our Connected Fitness business;
|
•
|
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 key talent and retain the services of our senior management and key employees.
|
•
|
Net revenues
increased
5.9%
.
|
•
|
Wholesale revenue
increased
0.8%
and Direct to Consumer revenue increased
16.6%
.
|
•
|
Apparel, footwear and accessories revenue
increased
7.1%
,
0.8%
and
3.4%
, respectively.
|
•
|
Revenue in our North America segment
decreased
0.4%
. Revenue in our Asia-Pacific, EMEA and Latin America segments
grew
34.6%
,
23.4%
and
21.0%
, respectively.
|
•
|
Selling, general and administrative expense
increased
2.8%
.
|
•
|
Gross margin
decreased
120
basis points.
|
•
|
Up to $105.0 million in cash charges, consisting of up to: $55.0 million in facility and lease terminations and $50.0 million in contract termination and other restructuring charges; and
|
•
|
Up to $25.0 million in non-cash charges comprised of approximately $10.0 million of inventory related charges and approximately $15.0 million of intangibles and other asset related impairments.
|
|
Three Months Ended March 31,
|
||||||
(in thousands)
|
2018
|
|
2017
|
||||
Net revenues
|
$
|
1,185,370
|
|
|
$
|
1,119,844
|
|
Cost of goods sold
|
661,917
|
|
|
611,908
|
|
||
Gross Profit
|
523,453
|
|
|
507,936
|
|
||
Selling, general and administrative expenses
|
514,634
|
|
|
500,400
|
|
||
Restructuring and impairment charges
|
37,480
|
|
|
—
|
|
||
Income (loss) from operations
|
(28,661
|
)
|
|
7,536
|
|
||
Interest expense, net
|
(8,564
|
)
|
|
(7,820
|
)
|
||
Other income, net
|
2,888
|
|
|
2,570
|
|
||
Income (loss) before income taxes
|
(34,337
|
)
|
|
2,286
|
|
||
Income tax expense (benefit)
|
(4,093
|
)
|
|
4,558
|
|
||
Net loss
|
$
|
(30,244
|
)
|
|
$
|
(2,272
|
)
|
|
Three Months Ended March 31,
|
||||
(As a percentage of net revenues)
|
2018
|
|
2017
|
||
Net revenues
|
100.0
|
%
|
|
100.0
|
%
|
Cost of goods sold
|
55.8
|
%
|
|
54.6
|
%
|
Gross profit
|
44.2
|
%
|
|
45.4
|
%
|
Selling, general and administrative expenses
|
43.4
|
%
|
|
44.7
|
%
|
Restructuring and impairment charges
|
3.2
|
%
|
|
—
|
%
|
Income (loss) from operations
|
(2.4
|
)%
|
|
0.7
|
%
|
Interest expense, net
|
(0.7
|
)%
|
|
(0.7
|
)%
|
Other income, net
|
0.2
|
%
|
|
0.2
|
%
|
Income (loss) before income taxes
|
(2.9
|
)%
|
|
0.2
|
%
|
Income tax expense (benefit)
|
(0.3
|
)%
|
|
0.4
|
%
|
Net loss
|
(2.6
|
)%
|
|
(0.2
|
)%
|
|
Three Months Ended March 31,
|
||||||
(In thousands)
|
2018
|
|
2017
|
||||
Apparel
|
$
|
766,275
|
|
|
$
|
715,437
|
|
Footwear
|
271,770
|
|
|
269,659
|
|
||
Accessories
|
92,158
|
|
|
89,097
|
|
||
Total net sales
|
1,130,203
|
|
|
1,074,193
|
|
||
License revenues
|
26,341
|
|
|
24,205
|
|
||
Connected Fitness
|
28,826
|
|
|
21,446
|
|
||
Total net revenues
|
$
|
1,185,370
|
|
|
$
|
1,119,844
|
|
•
|
Apparel unit sales growth in multiple categories led by men's training.
|
•
|
Footwear unit sales growth in multiple categories led by running, slightly offset by unit sales decreases in team sports and global football.
|
•
|
Accessories unit sales growth in multiple categories led by men's training.
|
•
|
approximate 130 basis point decrease due to a higher composition of off-price sales this quarter; and
|
•
|
approximate 60 basis point decrease driven by a disposition of inventory related to our 2018 restructuring plan.
|
•
|
approximate 70 basis point increase driven by the weakening of the U.S. dollar positively impacting our gross margin within our businesses outside of the United States.
|
•
|
Marketing costs
decreased
$1.3 million
to
$127.0 million
for the
three months ended March 31, 2018
from
$128.3 million
for the same period in
2017
. As a percentage of net revenues, marketing costs
decreased
to
10.7%
for the
three months ended March 31, 2018
from
11.5%
for the same period in
2017
.
|
•
|
Other costs
increased
$15.5 million
to
$387.6 million
for the
three months ended March 31, 2018
from
$372.1 million
for the same period in
2017
. This
increase
was driven primarily by higher costs related to the continued expansion of our direct-to-consumer distribution channel and our international business. As a percentage of net revenues, other costs
decreased
to
32.7%
for the
three months ended March 31, 2018
from
33.2%
for the same period in
2017
.
|
|
Three Months Ended March 31,
|
|||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
$ Change
|
|
% Change
|
|||||||
North America
|
$
|
867,545
|
|
|
$
|
871,271
|
|
|
$
|
(3,726
|
)
|
|
(0.4
|
)%
|
EMEA
|
126,932
|
|
|
102,855
|
|
|
24,077
|
|
|
23.4
|
%
|
|||
Asia-Pacific
|
115,553
|
|
|
85,818
|
|
|
29,735
|
|
|
34.6
|
%
|
|||
Latin America
|
46,514
|
|
|
38,454
|
|
|
8,060
|
|
|
21.0
|
%
|
|||
Connected Fitness
|
28,826
|
|
|
21,446
|
|
|
7,380
|
|
|
34.4
|
%
|
|||
Total net revenues
|
$
|
1,185,370
|
|
|
$
|
1,119,844
|
|
|
$
|
65,526
|
|
|
5.9
|
%
|
•
|
Net revenues in our North America operating segment
decreased
$3.7 million
to
$867.5 million
for the
three months ended March 31, 2018
from
$871.3 million
for the same period in
2017
primarily due to lower sales in our wholesale channel driven by lower demand.
|
•
|
Net revenues in our EMEA operating segment
increased
$24.1 million
to
$126.9 million
for the
three months ended March 31, 2018
from
$102.9 million
for the same period in
2017
primarily due to unit sales growth to wholesale partners in the United Kingdom.
|
•
|
Net revenues in our Asia-Pacific operating segment
increased
$29.7 million
to
$115.6 million
for the
three months ended March 31, 2018
from
$85.8 million
for the same period in
2017
primarily due to store growth in our wholesale and direct-to-consumer channels.
|
•
|
Net revenues in our Latin America operating segment
increased
$8.1 million
to
$46.5 million
for the
three months ended March 31, 2018
from
$38.5 million
for the same period in
2017
primarily due to unit sales growth in our wholesale channel and store growth in our direct-to-consumer channel in Mexico.
|
•
|
Net revenues in our Connected Fitness operating segment
increased
$7.4 million
to
$28.8 million
from
$21.4 million
for the same period in
2017
primarily driven by increases in subscription and advertising revenue.
|
|
Three Months Ended March 31,
|
|||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
$ Change
|
|
% Change
|
|||||||
North America
|
$
|
(43,495
|
)
|
|
$
|
3,714
|
|
|
$
|
(47,209
|
)
|
|
(1,271.1
|
)%
|
EMEA
|
(3,627
|
)
|
|
1,629
|
|
|
(5,256
|
)
|
|
(322.7
|
)%
|
|||
Asia-Pacific
|
21,241
|
|
|
19,628
|
|
|
1,613
|
|
|
8.2
|
%
|
|||
Latin America
|
(5,870
|
)
|
|
(7,859
|
)
|
|
1,989
|
|
|
25.3
|
%
|
|||
Connected Fitness
|
3,090
|
|
|
(9,576
|
)
|
|
12,666
|
|
|
132.3
|
%
|
|||
Total operating income (loss)
|
$
|
(28,661
|
)
|
|
$
|
7,536
|
|
|
$
|
(36,197
|
)
|
|
(480.3
|
)%
|
•
|
Operating income in our North America operating segment
decreased
$47.2 million
to a
$43.5 million
operating loss for the
three months ended March 31, 2018
from
$3.7 million
of operating income for the same period in
2017
primarily due to the decreases in net sales and gross margin discussed above and $34.0 million in restructuring and impairment charges.
|
•
|
Operating income in our EMEA operating segment
decreased
$5.3 million
to a
$3.6 million
operating loss for the
three months ended March 31, 2018
from
$1.6 million
of operating income for the same period in
2017
primarily due to $8.3 million in restructuring and impairment charges, offset by the increases in net sales discussed above.
|
•
|
Operating income in our Asia-Pacific operating segment
increased
$1.6 million
to
$21.2 million
for the
three months ended March 31, 2018
from
$19.6 million
for the same period in
2017
primarily due to the sales growth discussed above. This increase was partially offset by investments in our direct to consumer business.
|
•
|
Operating loss in our Latin America operating segment
decreased
$2.0 million
to
$5.9 million
for the
three months ended March 31, 2018
from
$7.9 million
for the same period in
2017
primarily due to the increases in net sales discussed above, partially offset by $2.7 million in restructuring and impairment charges.
|
•
|
Operating income in our Connected Fitness segment
decreased
$12.7 million
to income of
$3.1 million
for the
three months ended March 31, 2018
from a loss
$9.6 million
for the same period in
2017
primarily due to lower depreciation and amortization costs from assets that were impaired as a part of the 2017 restructuring plan and the increase in revenue discussed above.
|
|
Three Months Ended March 31,
|
||||||
(In thousands)
|
2018
|
|
2017
|
||||
Net cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
22,024
|
|
|
$
|
(32,552
|
)
|
Investing activities
|
(55,930
|
)
|
|
(91,790
|
)
|
||
Financing activities
|
3,799
|
|
|
43,558
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
2,157
|
|
|
3,452
|
|
||
Net decrease in cash and cash equivalents
|
$
|
(27,950
|
)
|
|
$
|
(77,332
|
)
|
|
UNDER ARMOUR, INC.
|
|
|
|
|
|
By:
|
/s/ D
AVID
E. B
ERGMAN
|
|
|
David E. Bergman
|
|
|
Chief Financial Officer
|
|
/s/ K
EVIN
A. P
LANK
|
|
Kevin A. Plank
|
|
Chairman of the Board of Directors and
Chief Executive Officer
|
|
/s/ D
AVID
E. B
ERGMAN
|
|
David E. Bergman
|
|
Chief Financial Officer
|
|
/s/ K
EVIN
A. P
LANK
|
|
Kevin A. Plank
|
|
Chairman of the Board of Directors and
Chief Executive Officer
|
|
/s/ D
AVID
E. B
ERGMAN
|
|
David E. Bergman
|
|
Chief Financial Officer
|