Jacob Pifer
February 20, 2011
LDR 640-AC
Final Paper
Under Armour is a company that has taken the sports industry by storm. The products
made and sold by this company have revolutionized the industry. Since Under Armour began,
other companies have been scrambling to make similar products in an effort to keep up with the
consumer demand. Under Armour continues to grow and obtain new business ventures in a very
competitive industry.
HISTORY
It started with a simple plan to make a superior T-shirt; a shirt that provided compression
and wicked perspiration off your skin rather than absorb it. They wanted a shirt that worked with
your body to regulate temperature and enhance performance. From that first T-shirt nearly a
decade ago, Under Armour developed its unique line of microfiber gear and subsequently
launched the performance product industry (UA.com).
Under Amour was created by a former football player from the University of Maryland.
Kevin Plank, whom is still the CEO and President, was a special teams captain for the University
of Maryland football team. He became interested in sports apparel during this time in his life.
He grew tired of the amount of sweat that his cotton T-shirt would absorb during practice. “"I
was short and slow -- I was looking for every second I could spare," he says.”Even if it was
raining outside, [the sweat-soaked cottons] gave me that slowed-down lethargic feeling."”
(SI.com, 1.)
Plank began trying out different fabrics in an attempt to find an alternative to the cotton tshirt. He browsed several synthetic types of material and found some he liked. Plank invested
$500 of his own money creating seven prototypes of his new invention. He decided on the one
he liked the best, and approached his teammates to test them out. Several of them were very
hesitant at first, but he told them it was for a job he had, and he wanted their advice.
"It was all about making yourself bigger than you were. My first goal was getting
athletes to believe in the fact that they needed an alternative to a basic cotton T-shirt. The
way you do that is with a great product, but you also do it with influencers." (SI.com, 2)
Several of these players enjoyed their new shirts. So much so they took them along when
they entered the NFL. Plank began receiving phone calls from other professional and collegiate
athletes, asking to try out these new shirts. Planks big break came when he landed a contract
with Georgia Tech. The equipment manager at Georgia Tech, who was familiar with the shirts,
contacted Plank and requested 350 shirts. Plank could only afford to send 60 of the shirts
because that was all he had at the time. This deal with Georgia Tech opened the gates for a
contract with North Carolina State. Several other Division I Colleges came calling, and the
business was well on its way.
Plank first broke into the NFL market after a Florida State football game. The equipment
manager for the Atlanta Falcons, whom was a Florida State Alumnus, entered the locker room
after the game and saw all the players wearing Under Armour gear (SI.com).
"I'm sitting in grandma's basement in Georgetown, and the phone rings," Plank says.
"The guy says, 'I'm the head equipment manager for the Atlanta Falcons and we want to
buy your shirts.' Then the Falcons played the Giants. There, the equipment guy for the
Falcons was a mentor to the equipment guy at the Giants and he liked our stuff." (SI.com,
2)
After nearly a decade of Marketing and Networking, Under Armour has become a very
profitable company and continues to grow. They are still developing new products and testing
them out for various markets.
COMPANY OVERVIEW:
Kevin Plank is still the CEO and President of the company. They have offices all over
the world to include, Toronto, Japan, China, and Amsterdam. They also have an office in
Denver Colorado, with their headquarters in Baltimore Maryland. They employ over 2,000
workers throughout their company. Their Board of Directors is as follows:
Plank, Kevin
Chairman of the Board, President, Chief Executive Officer
Dickerson, Brad
Chief Financial Officer
Marino, Wayne
Chief Operating Officer
Plank, J. Scott
Executive Vice President - Business Development
Fulks, Kip
Executive Vice President - Product
Dowley, Mark
Executive Vice President - Global Brand and President - International
McCarthy, Eugene
Senior Vice President - Footwear
Stafford, Henry
Senior Vice President - Apparel
Rogers, John
Vice President, General Manager - Global E-Commerce
Sawall, Daniel
Vice President - Retail
Krongard, A.
Lead Independent Director
Adams, Byron
Director
Coltharp, Douglas
Director
McDermott, William
Director
Sanders, Harvey
Director
Sippel, Thomas
Director
Deering, Anthony
Director
(Reuters.com)
COMPETITION:
Under Amour’s largest competitor is NIKE. Nike is a Giant in the sports apparel world.
They are a very tough company to compete with. Other companies considered to be competitors
are Adidas, and Columbia Sportswear. Both of these companies have a very small share of the
market. In the case of Columbia, they concentrate mostly on cold weather apparel, reducing
their market share even further.
One of the markets that Under Armour has been able to penetrate is that of Military and
Law Enforcement. Performance wear for these professions have mostly relied on cotton based
clothing for under their uniforms. Most Law Enforcement uniforms are made of polyester and
are very hot, uncomfortable, and do not breathe well. 5.11 Tactical is a company that has
introduced shirts, pants, and other products for these professions. They have been very successful
at catching the eyes of the consumers. If Under Armour continues to promote to this market,
they could expand their lines even further. Although many do not consider 5.11 tactical to be a
competitor, I am using them as such for this assignment.
FINANCIALS:
INCOME STATEMENT:
Horizontal Analysis
2009
2008
2007
2009
2008
2007
Revenues
$856,411
$725,244
$606,561
118%
119%
100%
Cost of goods sold
$443,386
$370,296
$301,217
119%
123%
100%
Gross Profit
$413,025
$354,948
$305,044
116%
116%
100%
Selling Expense
$327,752
$278,023
218,779
118%
127%
100%
Income Operations
$85,273
$76,925
$86,265
111%
89%
100%
Interest inc (exp)
($2,344)
$(850)
$749
-275%
-113%
100%
Other Inc (Exp)
($511)
($6,175)
$2029
1235%
-304%
100%
Income before tax
$82,418
$69,900
$89,043
118%
78%
100%
Taxes
$35,633
$31,671
$36,485
Net Income
$46,785
$38,229
$52,558
122%
72%
100%
By looking at the Income Statement we can see an increase in almost all areas between
the years. Even though the net income dropped from 2007 to 2008, it still showed an
improvement in 2009.
BALANCE SHEET:
Assets
2009
2008
2007
Current Assets
Cash and cash equivalents
$187,297
$102,042
$40,588
Accounts Receivables
$79,356
$81,302
$93,515
Inventories
$148,488
$182,232
$166,082
Prepaid expenses and other Current Assets
$19,989
$18,023
$11,642
Deferred income taxes
$12,870
$12,824
$10,418
$448,000
$396,423
$322,245
Property and Equipment
$72,926
$73,548
$52,332
Other long term assets
$10,754
$8,897
$7,863
Deferred income taxes
$13,908
$8,687
$8,173
$545,588
$487,555
$390,613
2009
2008
2007
Revolving Credit
----
$25,000
---
Accounts Payable
$68,710
$72,435
$55,012
Accrued Expenses
$40,885
$25,905
$36,111
Current Maturities
$9275
$7431
$4,576
Total Current Assets
Total Assets
Current Liabilities
Other Current Liabilities
$1292
$2337
---
$120,162
$133,110
$95,699
Long Term Debt
$10,948
$13,061
$9,298
Capital Lease Obligations
----
$97
$458
Other Long Term Liabilities
$14,481
$10,190
$4,673
Total Liabilities
$145,591
$156,458
$110,128
Total Stockholder’s Equity
$399,997
$331,097
$280,485
Total Liabilities and Equity
$545,588
$487,555
$390,613
Total Current Liabilities
FINANCIAL RATIOS
Industry Average:
LIQUIDITY
Current Ratio:
3.7x
3.5x
Quick Ratio:
2.2x
1.1x
ASSET MANAGEMENT:
Days Sales Outstanding:
34.2
43
Total Asset Turnover
1.66x
1.7x
DEBT MANAGEMENT:
Debt Ratio:
27%
TIE Ratio:
36.1
PROFITIBILITY:
Profit Margin:
5.4%
ROA:
9%
ROE:
12.8%
Book Value per Share
$7.96
Unfortunately I was unable to find much of the industry average for these ratios. I know
the information is out there, but in all my efforts I was unsuccessful in finding a numeric value to
these ratios. While doing my research though; I found that Business Week had a small bar below
the ratios signifying where they stood as far as the industry average was. In almost every
category, Under Armour was better than the industry average.
CONCLUSION:
Under Armour has become a very profitable company. They seem to have a good hold
on their corner of the market and are even expanding to other markets. If Under Armour
continues to branch out and develop products outside of their comfort zone, they will continue to
thrive in this weakened economy. The downside to this information is that most of Under
Armour’s products are very expensive. With consumers continually tightening their belts, retail
prices have to come down, or this will be one of the areas they decide not to spend their money.
REFERENCES:
Business Week.
http://investing.businessweek.com/research/stocks/financials/ratios.asp?ticker=UA:US
Sports Illustrated online.
http://sportsillustrated.cnn.com/2009/more/04/09/under.armour/index.html
Under Armour INC online.
http://investor.underarmour.com/company/about.cfm
Reuters online.
http://www.reuters.com/finance/stocks/companyOfficers?symbol=UA&WTmodLOC=C4Officers-5