Caleb Ostrander

Corporate Analysis Project

Managerial Accounting
Professor James Krimmel
October 27, 2016

Section 1
General Company Information: Under Armour, Inc.
In 1996, a 23-year-old former football player at the University of Maryland named
Kevin Plank came up with a small idea that turned into a new industry that changed the
way athletes dress forever (Underarmour.com). After years of constantly washing cotton tshirts soaked with sweat after practices, Plank knew there had to be something better and
set out to create a solution. From this came the first Under Armour synergetic fabric t-shirt
that was designed to keep athletes cool and dry under the hottest conditions. What started
as Plank selling these shirts out of the back of his car in 1996 with $17,000 in sales turned
into a corporation with huge partners that ended its 10th year of existence in 2005 with $281
million of revenue. Since that time, Under Armour has grown to be a company approaching
$2 billion in revenue and has become a household name in the athletic wear industry.
Under Armours product line during that time has expanded greatly from cleats to
sneakers to bodysuits to just about any kind of athletic product. The company has come up
with many inventive and innovative products and is now considered a major player in the
sports world.
Under Armour has been a rapidly growing company since its founding in 1996, and
with that, its share of the market has been on the rise during that time. According to
csimarket.com, Under Armours market share can be divided into three main categories:
footwear, apparel, and accessories. The companys footwear market share sits at 1.3%, its
apparel market share at 5.47%, and its accessories at 1.4%. In comparison, the market
giant Nikes market shares for the same categories are 33.88%, 14.79%, and 5.53%,
respectively. Clearly, Under Armour must experience a lot of growth before it catches up

with a company as large as Nike, but being such a young company, these figures for Under
Armour are extremely impressive and are sure to increase with time.
Under Armours mission statement, as listed on their website states that the
company looks To make all athletes better through passion, design and the relentless
pursuit of innovation. The core values of the company are listed as Innovation,
Inspiration, Reliability and Integrity. The company looks to increase their market share in
the athletic apparel industry over the coming years and surely looks to compete with
industry giants like Nike and Adidas.
Some of the companys current biggest names in terms of athletes sponsored are
NBA player Stephen Curry, NFL players Cam Newton and Tom Brady, MLB player Bryce
Harper, Golfer Jordan Spieth, Swimmer Michael Phelps, and Skiier Lindsey Vonn. Under
Armour has formed partnerships with the MLB, NFL, Baltimore Marathon, various
Collegiate teams across the nation, and even with English Premier League Soccer Club
Tottenham Hotspur. They have launched several successful marketing campaigns in recent
years and have been featured in various large events all over the world.
Overall, Kevin Plank hit the jackpot with his small idea in 1996 and has created a
widely successful, multinational corporation. Under Armour has exponentially grown as a
company since its founding and figures to do the same for years to come.

Sections 3+4

COMPANY, YEAR

Current Ratio

Under Armour, Dec. 2015

3.13

Under Armour, Dec. 2014

3.67

Nike, May 2016

2.80

Nike, May 2015

2.46

Industry Avg., 2015

1.90

+/- Change

-0.54

+0.34

Current Ratio: Current Assets/Current Liabilities

It is a measure of short-term debt paying ability, or liquidity. A high current ratio
suggests a strong liquidity position and an ability to meet current obligations. 1 is
considered to be the breakeven point, so a company would definitely want to shoot
to have a ratio higher than 1. You dont want too high of a current ratio either,
which may suggest too much investment in current assets.
Company Analysis: Under Armour is doing well here, as we can see their current
ratio is well above the breakeven point of 1, sitting well above 3 in 2014 and at a
slightly lower but still substantial value of 3.13 in 2015. While the decline from
last year to this year may look like a concern, Under Armours ratio is still high
enough that there is no real reason to be concerned, especially with all the
property/businesses that they paid for this year.
Competitor/Industry Analysis: Compared to the competition, Under Armour is
doing very, very well in this category. As you can see, Nikes current ratio is
substantially lower then Under Armours, although their ratio this year is higher
than the previous year, unlike Under Armours which declined. It is also important
to note that Nike is a much older company, so they are more established while
Under Armours ratio could be inflated from being such a young company.
Compared to the industry, Under Armour looks even better, as the average doesnt
even reach 2 in this ratio, while Under Armour is well over 3. As mentioned
before, Under Armours ratio should decrease with time as they mature as a
company, but regardless, they are in a good position now where they are at.

COMPANY, YEAR

A/R Turnover

Under Armour, Dec. 2015

11.1

Under Armour, Dec. 2014

12.6

Nike, May 2016

9.99

Nike, May 2015

9.11

Industry Avg., 2015

9.40

+/- Change

-1.5

+0.88

Accounts Receivable Turnover: Net sales/Average accounts receivable

It is a measure of the efficiency of collection. A high turnover rate shows a
company that quickly collects their cash from receivables, which is good. Can be
too high though, when credit terms are so restrictive that they restrict sales.
Company Analysis: This is another category that Under Armour seems to be
doing well in, although it also declined in the past year. Once again, I dont see this
as reason to panic as the company incurred more expenses than the previous year.
Also, sitting at a rate over 10 is great, so Under Armour does not really need to be
as high as it was in 2014. I expect this ratio to also continue to decrease a little bit
as Under Armour matures more as a company and establishes the most efficient
level for their credit terms.
Competitor/Industry Analysis: Very similarly to the previous ratio, Under
Armour is at a figure that stacks up well to Nike. Also once again though, Nikes
value increased this year while Under Armours value decreased. If this pattern
continues year after year, there will be some valid reason for concern, but as of
now, Under Armour is in very good position. In terms of the industry, Under
Armour is right where they want to be. Once again, their ratio is a good bit higher
than the industry average, which is a positive sign. Even if their ratio is to continue
to decrease, they still would have a lot of room before they would be considered
below average in this category.

COMPANY, YEAR

Inv. Turnover

Under Armour, Dec. 2015

3.12

Under Armour, Dec. 2014

3.13

Nike, May 2016

3.60

Nike, May 2015

3.81

Industry Avg., 2015

4.00

+/- Change

-0.01

-0.21

Inventory Turnover: Cost of goods sold/Average inventory

It is a measure of efficiency of inventory management. High turnover rate suggests
lower investment in inventory is needed to match sales volume, but too high of a
rate can suggest that inventory kept is too small and restricts sales volume.
Company Analysis: Under Armour does definitely have some room to grow in
this category. Their inventory turnover is probably slightly lower than they would
like it, although it is not a terribly low figure. It is also important to note that they
have remained incredibly consistent from last year to this year, which is a sign that
they probably will not experience any rapid growth or decline in this area soon.
Being a newer company, it does make sense that Under Armour still has to invest a
great deal into their inventory in order to match their sales volume, because they
are still trying to establish themselves and their market share.
Competitor/Industry Analysis: As you can see, Nike has a better inventory
turnover rate than Under Armour. It is not incredibly higher, but still enough to be
noticeable. Nikes turnover ratio did decrease by a good bit this year though, which
may be a sign that Under Armour can catch up in the future. Compared to the
industry, Under Armour does have some room to grow. As I just mentioned, this
makes sense because of how new they are. The industry average of 4 is something
that Under Armour can hope to shoot for over the next 5-10 years possibly, but
after their slight decrease in 2015, it is hard to tell whether they will catch up.

COMPANY, YEAR

Debt Ratio

Under Armour, Dec. 2015

41.9%

Under Armour, Dec. 2014

35.5%

Nike, May 2016

42.7%

Nike, May 2015

41.2%

Industry Avg., 2015

79.1%

+/- Change

+6.4%

+1.5%

Debt Ratio: Total liabilities/total assets

It is a measure of creditor financing and leverage. A higher debt ratio indicates a
company that is more leveraged, which is a higher financial risk. A rate over 100
means the company has more debt than assets. Companies definitely want to
remain a good bit under this percentage.
Company Analysis: Under Armour is doing great in this category, as they are well
below 100%, which is definitely not a good place to be. Although they did
experience a pretty large increase in their debt ratio in 2015, it was not for a bad
cause. As the financial statements reveal, Under Armour purchased quite a bit of
new assets such as businesses and equipment, which would of course temporarily
raise their debt ratio. As long as their sales continue to increase, their ratio should
start to decrease again as they pay off their debts.
Competitor/Industry Analysis: Under Armour is right on par with Nike in terms
of debt ratio for the current year. This is definitely a good thing for Under Armour,
as both them and Nike are much, much better in this area than the industry which
has an average debt ratio of almost 80 percent! As long as Under Armour doesnt
keep increasing at a rate like they did this past year, they will stay eons ahead of
the competition in this category.

COMPANY, YEAR

Equity Ratio

+/- Change

Under Armour, Dec. 2015

58.1%

Under Armour, Dec. 2014

64.5%

Nike, May 2016

57.3%

Nike, May 2015

58.8%

Industry Avg., 2015

20.9%

-6.4%

-1.5%

Equity Ratio: Total equity/Total assets

It is a measure of the amount of assets that are financed by owner investments. A
higher ratio is viewed as more favorable for a couple reasons: shows potential
shareholders that company is worth investing in since company is so heavily
invested in and shows company is more sustainable.
Company Analysis: Under Armours equity ratio is at a pretty good level right
now, although it is another category that experienced a pretty major drop in 2015.
Again, this is not a major concern for a couple reasons: their original ratio was
already at a high percentage and also, as mentioned before, the company purchases
a lot of new assets in the 2015 financial year. As long as this figure doesnt
continue to drop, they should be fine.
Competitor/Industry Analysis: Under Armour once again stacks up very well to
Nike in this category. The ratios are almost identical for the two companies, which
is definitely a positive thing for Under Armour. Under Armours equity ratio
compares very well to the industry as a whole, even with the major drop that they
experienced in the last year. The industry average is actually considerably low, so it
is good that Under Armour well surpasses this.

COMPANY, YEAR

Profit Margin Ratio

+/- Change

Under Armour, Dec. 2015

5.9%

Under Armour, Dec. 2014

6.7%

Nike, May 2016

11.6%

Nike, May 2015

10.7%

Industry Avg., 2015

2.6%

-0.8%

+0.9%

Profit Margin Ratio: Net income/Net sales

It is a measure of a companys ability to earn net income from sales. A higher ratio
indicates a higher operating efficiency of a company and can be viewed as a big
positive. Profit is the ultimate goal for owners when running a business, so it is
very important to measure the capability of a company for making profit.
Company Analysis: Under Armour has a good profit margin ratio, although like
many of the other categories, it experienced a decrease in 2015. Obviously, no
owner likes to see a decrease in profit margin, but as long as Under Armour
bounces back in the coming years, they are still at a very good level. Plus, the
decrease was not very drastic, so there is no huge reason to be concerned.
Competitor/Industry Analysis: This is definitely one area where Nike really
stands out above the competition. Under Armour has a lot of work to do in order to
catch up to Nike in terms of profitability, because Nikes profit margin ratio is
really, really good. This might be too tall of an order for Under Armour, but
anything can happen. Both companies stack up very well against the industry
average of 2.6%, so that is definitely a win for Under Armour. As long as they
continue to innovate at the rate they currently are, they should stay well ahead of
the industry.

COMPANY, YEAR
Under Armour, Dec. 2015

Ret. On Stock. Equity

15.41%

+/- Change

Under Armour, Dec. 2014

17.31%

Nike, May 2016

30.12%

Nike, May 2015

27.82%

Industry Avg., 2015

26.4%

-1.9%

+2.3%

Return on Stockholders Equity: Net income-Preferred dividends/Avg.

Common Stockholders Equity
It is a measure of a companys success in earning net income for its owners. A
higher percentage indicates a greater return on investment by owners, which is a
main goal of running a company. Like the profit margin ratio, this is incredibly
important because it ensures that a company is achieving the goal that the owners
originally started the company for.
Company Analysis: This is one area where Under Armour definitely has a good
amount of room for improvement. Their current percentage of 15.31% is not an
extremely high one, and it is down almost 2% from 2014. Stockholders are
definitely more incentivized to invest when they see that they will get a return, and
Under Armour is not providing that to the level which some may hope. This may
be attributed to them being such a new company, but it will be something that they
will want to improve upon.
Competitor/Industry Analysis: As mentioned, Nike and the industry average
both have returns on stockholders equity that are well above that of Under
Armour. Under Armour will have to continue to build stockholder loyalty in the
coming years to even begin to get to a level that is considered good in the industry
that they are in.

COMPANY, YEAR

Book Value/Share

Under Armour, Dec. 2015

$3.86

Under Armour, Dec. 2014

$3.16

+/- Change

+0.7

Nike, May 2016

$7.29

Nike, May 2015

$7.41

Industry Avg., 2015

N/A

-0.12

Book Value Per Common Share: Shareholders equity applicable to common

shares/Number of common shares outstanding
It is a measure of the amount of money that holders of common shares would get if
the company were to liquidate. It is mainly used by investors to evaluate whether
the companys stock is under or overvalued.
Company Analysis: Similarly to the last ratio, Under Armours book value per
share is fairly low. Being such a young company though, Under Armour does have
some time to try and raise the value of their stock. A good sign of this is that their
book value per share is up 70 cents from 2014. Growth like this is a very good sign
that their value will increase in the coming years and hopefully raise the companys
actual market value as well.
Competitor/Industry Analysis: Once again, Nike has a very high value in this
area that will probably be tough to compete with for Under Armour. One good sign
is that Under Armours increased in the last year while Nikes decreased. Under
Armour will have to do very well in the coming years to reach Nikes level though.

COMPANY, YEAR

Earnings/Share

Under Armour, Dec. 2015

0.53

Under Armour, Dec. 2014

0.48

Nike, May 2016

2.16

+/- Change

+0.05

Nike, May 2015

1.85

Industry Avg., 2015

N/A

+0.31

Basic Earnings Per Share: Net income-Preferred dividends/Weighted-average

common shares outstanding
It is a measure of net income per common share. Also a commonly used measure
by investors to see how well they will do if they invest. This is important because it
helps to determine if people will invest in the company or not.
Company Analysis: Since this is a measure of how well investors do, it is very
important to have a nice, high ratio in this category. I think that Under Armour has
quite a bit of work to do in terms of their earnings per share ratio, as it is sitting
around 0.5. The good news for them is that it is up 0.05 from last year, and
hopefully will continue to grow as more people invest in them and the company
earns more revenues.
Competitor/Industry Analysis: This is yet another case where Under Armour
cant quite compete with the likes of industry giants like Nike just yet. Nikes
earnings per share were already high and got even higher in the last year by going
up by a very large margin. Under Armour may take a very long time to be able to
compete with Nike in this category.

COMPANY, YEAR

Price-Earnings Ratio

Under Armour, Dec. 2015

77.52

Under Armour, Dec. 2014

71.47

Nike, May 2016

25.56

Nike, May 2015

27.41

+/- Change

+6.05

-1.85

Industry Avg., 2015

N/A

Price to Earnings Ratio: Market price per common share/Earnings per share
It is a measure of market value relative to its earnings. This ratio is used as an
indicator of future growth and risk associated with a companys earnings as
perceived by investors. A very high ratio suggests that investors believe that the
company will experience a good amount of growth in the future.
Company Analysis: Just as the definition of the ratio states, Under Armour has a
very, very high price-earnings ratio. This suggests that investors believe that the
company has tremendous growth potential for the future. This is great news for
Under Armour, and should be expected for a company doing so well after existing
for such a short amount of time. Even better for the company is that the ratio is up
by 6.05 from last year, so expectations are high and still rising.
Competitor/Industry Analysis: Under Armour ranks especially high in this
category compared to companies like Nike because of the room for growth that the
company has. Nike, on the other hand is already a huge, established industry giant,
so investors probably do not see tons and tons of room for improvement. But, with
Under Armour, there is still lots of room for growth since they are so young.

Section 5

CAPITAL STOCK REVIEW:

UNDER ARMOUR, INC.
Types of Stock Authorized/Issued
-Class A Common Stock

-Class B Convertible Common Stock

-Class C Common Stock
-No Preferred Stock
Dividends Paid in Current Year
-June 29, 2016: $59 million dividend paid to Class C Common
Stockholders in form of stock and cash
Stock Splits
-July 9, 2012: 2-for-1 stock split of outstanding stock
-April 14, 2014: 2-for-1 stock split of outstanding stock
Treasury Stock
-No Treasury Stock

Section 6

REVIEW OF STATEMENT OF CASH FLOWS:

UNDER ARMOUR, INC.

The statement of cash flows for this company shows us the years of 2013, 2014, and
2015. We see a slight net increase in overall cash in 2013, a large increase in cash in 2014, and a
substantial decrease in cash in 2015. Along with this, both 2013 and 2014 saw substantial
positive amounts of cash provided from operating activities, while 2015 saw a sizable decrease.
All three years saw a decrease in cash from investing activities, but 2015 saw by far the largest
decrease nearing almost a million dollars. This came largely from the purchase of businesses
section. For financing activities, all 3 years saw a large positive number, and 2015 saw by far the
largest amount in this category as well.
At first glance, there is room for concern seeing that the latest year, 2015 saw substantial
loss of overall cash and a negative number in the operating activities section. Looking more
closely though, we can see a very large increase in both the accounts receivable and inventory
asset accounts. This means that Under Armour has plenty of money coming their way in the near
future as well as plenty of new products to sell, so the concern here is not as large as it would
appear. The large loss in the investing activities section in 2015 section can be attributed to
purchases of property, equipment, and businesses, all of which should lead to more money made
back in the future for a fast growing company such as Under Armour. One minor area of concern
for 2014-2015 is that the company has taken out substantial loans in both of these years. That
being said, Under Armour does still have a significant amount of cash on hand, and should have
little trouble paying these off with all of the revenue they will generate in coming years.

Section 7
UNDER ARMOUR, INC.
Common-Size Comparative Income Statements

For Years Ended December 31, 2015 and December 31, 2014

(In thousands)
Net revenues
Cost of goods sold
Gross profit
Selling, general and
administrative expenses
Income from operations
Interest expense, net
Other expense, net
Income before income taxes
Provision for income taxes
Net income

2015
$3,963,
313
2,057,7
66
1,905,5
47
1,497,0
00
408,547
-14,628
-7,234
386,685
154,112
232,573

2014
$3,084,
370
1,572,1
64
1,512,2
06
1,158,2
51
353,955
-5,335
-6,410
342,210
134,168
208,042

(Common-Size
Percents)
2015
2014
100%

100%

51.9

51

48.1

49

37.8
10.3
0.4
0.2
9.8
3.9
5.90%

37.6
11.4
0.2
0.2
11.1
4.3
6.80%

In terms of the companys common size comparison income statements, the

percentages of net sales have remained fairly consistent from 2014 to 2015 with a
slight decrease in net incomes percentage of net sales in 2015. The cost of goods
sold for 2015 was a slightly higher percentage in 2015 as well, which probably
contributed to net income being slightly lower than it could have been. Overall, the
companys figures have remained consistent.

TREND ANALYSIS
UNDER ARMOUR, INC.

(in thousands)

2015

2014

2013

2012

2011

Net Sales

$3,963,3
13

$3,084,3
70

$2,332,0
51

$1,834,9
21

$1,470,0
00

Cost of goods
sold

$2,057,7
66

$1,572,1
64

$1,195,3
81

$955,62
4

$762,75
0

Income from
Operations

$408,54
7

$353,95
5

$265,09
8

$208,69
5

$162,76
7

Net Income

$232,57
3

$208,04
2

$162,33
0

$128,77
8

$96,920

Under Armour is a very young company that has been rapidly growing since its
birth in 1995. Because of its success, it has seen growth almost every year in just
about every major financial category. This trend analysis of the past five years
confirms this as all four categories have experienced moderate to large increases
with every new year. This is a great sign for Under Armour, and it figures to
continue in the coming years as the company continues to expand its market share
and global reach.

Section 8
Conclusion

After carefully reviewing the financial vitals and ratios of Under

Armour, Inc., I have noticed some common overall trends and directions that
the company is going in. Overall, I am very impressed by the fact that the
company has started to establish itself so well in an already very competitive
industry and made that industry all the more competitive. Something that
started so small as an idea for t-shirts that absorb sweat, Under Armour is
setting its sights on being one of the top 2 or 3 players in the athletic apparel
industry. That being said, the financial ratios and statements for Under
Armour reveal that they are not quite at that level yet, but looking at the
figures from ratios such as the Price-Earnings Ratio, it is clear that Under
Armour has tremendous growth potential. So taking what the investors
believe about the company, and mix that with the innovations and
partnerships Under Armour has already made and formed, and you are
looking at a company that is going to be making more and more noise in the
coming years. Will they reach the level of the king of this industry, Nike?
Maybe not. But if any company is going to give them a run for their money,
its going to be Under Armour. Only time will tell.

Section 9
Information Sources

 "BRING INSPIRATION ANDINNOVATION TO EVERYATHLETE

IN THE WORLD." About Nike. N.p., n.d. Web. 26 Oct. 2016.
Karram, By Danya. "Investopedia - Sharper Insight. Smarter Investing."
Investopedia. N.p., n.d. Web. 26 Oct. 2016.
Maslow, By Jacob. "2017 GuruFocus Value Conference, Omaha." Value
Investing. N.p., n.d. Web. 26 Oct. 2016.
"NASDAQ's Homepage for Retail Investors." NASDAQ.com. N.p., n.d.
Web. 26 Oct. 2016.
"Under Armour, Inc." Under Armour, Inc. N.p., n.d. Web. 26 Oct. 2016.
Wild, John J., Ken W. Shaw, and Barbara Chiappetta. Fundamental
Accounting Principles. 22nd ed. New York, NY: McGraw-Hill/Irwin, 2015.
Print.
Wilson, Philip. 2016 Almanac of Business and Industrial Financial Ratios.
Chicago, IL: Walters Kluwer, 2015. Print.