| UNITED STATES OF AMERICA |
| Before the |
| SECURITIES AND EXCHANGE COMMISSION |
| |
| SECURITIES ACT OF 1933 |
| Release No. 10940 / May 3, 2021 |
| |
| SECURITIES EXCHANGE ACT OF 1934 |
| Release No. 91741 / May 3, 2021 |
| |
| ACCOUNTING AND AUDITING ENFORCEMENT |
| Release No. 4220 / May 3, 2021 |
| |
| ADMINISTRATIVE PROCEEDING |
| File No. 3-20278 |
| |
| |
| In the Matter of |
| |
| UNDER ARMOUR, INC., |
| |
| Respondent. |
| |
| |
| |
| ORDER INSTITUTING CEASE-AND- |
| DESIST PROCEEDINGS PURSUANT TO |
| SECTION 8A OF THE SECURITIES ACT |
| OF 1933 AND SECTION 21C OF THE |
| SECURITIES EXCHANGE ACT OF 1934, |
| MAKING FINDINGS, AND IMPOSING A |
| CEASE-AND-DESIST ORDER |
| |
| I. |
| The Securities and Exchange Commission (“Commission”) deems it appropriate that cease- |
| and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act of |
| 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of 1934 (“Exchange Act”) |
| against Under Armour, Inc. (“Under Armour” or “Respondent”). |
| II. |
| In anticipation of the institution of these proceedings, Respondent has submitted an Offer |
| of Settlement (the “Offer”), which the Commission has determined to accept. Solely for the |
| purpose of these proceedings and any other proceedings brought by or on behalf of the |
| Commission, or to which the Commission is a party, and without admitting or denying the |
| findings herein, except as to the Commission’s jurisdiction over it and the subject matter of these |
| proceedings, which is admitted, Respondent consents to the entry of this Order Instituting Cease- |
| and-Desist Proceedings Pursuant to Section 8A of the Securities Exchange Act of 1933 and |
| Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease- |
| and-Desist Order (“Order”), as set forth below. |
| |
| 2 |
| III. |
| On the basis of this Order and Respondent’s Offer, the Commission finds1 that: |
| Summary |
| 1. This matter concerns Under Armour’s failure to disclose material information |
| about its revenue management practices that rendered statements it made misleading. Since |
| becoming a publicly traded company, Under Armour has emphasized its consistent revenue |
| growth, and regularly reported revenue and revenue growth that exceeded analysts’ consensus |
| estimates (“analysts’ revenue estimates”). For 26 consecutive quarters, beginning in the second |
| quarter of 2010, Under Armour’s reported year-over-year revenue growth exceeded 20%, and |
| Under Armour repeatedly highlighted this growth streak in earnings calls and earnings releases. |
| 2. By the second half of 2015, Under Armour’s internal revenue and revenue growth |
| forecasts for the third and fourth quarters of 2015 began to indicate shortfalls from analysts’ |
| revenue estimates. Concerned about the possible negative impact on the company’s stock price |
| that could result from missing these estimates, Under Armour sought to accelerate, or “pull |
| forward,” existing orders that customers had requested be shipped in future quarters that could be |
| completed in the current quarter to close the gap between its internal forecasts and analysts’ |
| revenue estimates. To effectuate this, Under Armour typically asked customers to accept |
| shipment of certain products in the current quarter that they had already ordered for delivery in |
| the next quarter. |
| 3. For six consecutive quarters from the third quarter of 2015 through the fourth |
| quarter of 2016 (the “Relevant Period”), Under Armour used pull forwards to help it meet |
| analysts’ revenue estimates. During the Relevant Period, Under Armour pulled forward |
| approximately $408 million in orders. Under Armour’s failure to disclose to investors the impact |
| of its pull forward practices was misleading.2 Without these pull forwards each quarter, Under |
| Armour would have missed analysts’ revenue estimates throughout the Relevant Period, and |
| would have missed its better than 20% revenue growth streak in the fourth quarter of 2015 and |
| the third quarter of 2016. On January 31, 2017, the day Under Armour announced that it missed |
| analysts’ revenue estimates for the fourth quarter and full-year 2016, the company’s stock price |
| dropped by approximately 23%. Under Armour’s year-over-year growth rate for each quarter has |
| remained in the single digits or negative since that time. |
| 4. As a result of Under Armour’s failure to disclose the impact of its pull forward |
| practice on revenue growth, Under Armour’s public statements were materially misleading. In |
| particular, throughout the Relevant Period, Under Armour made positive statements regarding its |
| revenue growth rate and the factors contributing to the revenue growth rate, without disclosing |
| the significant impact on revenue from its use of pull forwards. Under Armour also failed to |
| |
| 1 The findings herein are made pursuant to Respondent’s Offer and are not binding on any other |
| person or entity in this or any other proceeding. |
| 2 This Offer does not make any findings that revenue from these sales was not recorded in |
| accordance with generally accepted accounting principles (“GAAP”). |
| 3 |
| disclose that the sales that had been pulled forward were no longer available in the future quarter. |
| This practice raised significant uncertainty that Under Armour would meet its revenue guidance |
| in future quarters. |
| 5. As a result of such conduct, and as described in more detail below, Under Armour |
| violated Sections 17(a)(2) and 17(a)(3) of the Securities Act and Section 13(a) of the Exchange |
| Act and Rules 13a-1, 13a-11, 13a-13, and 12b-20 thereunder. |
| Respondent |
| 6. Under Armour, Inc., a Maryland corporation headquartered in Baltimore, is |
| primarily engaged in the development, marketing, and wholesale and retail distribution of |
| branded performance apparel, footwear, and accessories. Under Armour is a reporting company |
| with two classes of common stock registered with the Commission under Section 12(b) of the |
| Exchange Act. Both classes of common stock are listed on the New York Stock Exchange under |
| the current ticker symbols “UA” and “UAA.” |
| Under Armour Used Pull Forwards to Meet Analysts’ Revenue Estimates |
| |
| 7. For 26 consecutive quarters, beginning in the second quarter of 2010 through the |
| third quarter of 2016, Under Armour reported year-over-year revenue growth in excess of 20%. |
| |
| 8. However, by mid-2015, Under Armour’s Financial Planning & Analysis group |
| (“FP&A group”) identified that the revenue growth rate in the company’s largest market, North |
| America, was not as strong as in previous years. For example, in April and May 2015, the FP&A |
| group alerted senior management that sales projections for the year in wholesale apparel, which |
| was Under Armour’s largest product category in North America, had declined by $120 million |
| compared to the internal projections generated in late 2014. By the third quarter of 2015, Under |
| Armour’s senior management also understood that warmer weather was negatively impacting |
| sales of higher priced cold weather apparel within North America. |
| |
| 9. Starting in the third quarter of 2015, Under Armour’s internally projected |
| company-wide revenue began to fall short of analysts’ revenue estimates. To close the emerging |
| revenue gap, Under Armour’s senior management directed the FP&A group and senior sales |
| personnel, among other things, to identify existing orders that customers had requested be |
| shipped in the next quarter that could instead be shipped in the current quarter. |
| |
| 10. For each quarter during the Relevant Period, Under Armour’s projected revenue |
| growth from sales for which shipment was originally requested in the quarter continued to miss |
| analysts’ revenue estimates, and senior management reacted by directing the FP&A group and |
| sales personnel to execute additional pull forward sales to meet analysts’ revenue estimates. This |
| resulted in, among other things, Under Armour’s periodic use of sales incentives, such as |
| extended payment terms and discounts, to convince customers to agree to take Under Armour |
| product the quarter before the customer had requested shipment. |
| |
| 4 |
| 11. During each quarter of the Relevant Period, Under Armour would have missed |
| analysts’ revenue estimates without its use of pull forwards. In addition, without the use of pull |
| forwards, Under Armour’s year-over-year revenue growth would not have exceeded 20% in the |
| fourth quarter of 2015, the first time this would have occurred since 2010, and the third quarter |
| of 2016. |
| |
| 12. Under Armour used pull forwards in the following quarters, and in the following |
| ways: |
| |
| Third Quarter 2015 |
| 13. By the third quarter of 2015, Under Armour knew that its full-year internal |
| projections for company-wide revenue had declined from its late 2014 forecast, including a $120 |
| million decline in sales projections for its largest market category, North American wholesale |
| apparel. In September 2015, senior management and the FP&A group decided to close the gap |
| between internally forecasted revenue and analysts’ revenue estimates, in part, by using pull |
| forwards, so the FP&A group directed sales personnel to reach out to customers to request that |
| they take delivery of product earlier than originally scheduled. |
| 14. Ultimately, Under Armour pulled forward approximately $45 million in orders |
| from the fourth quarter of 2015 into the third quarter of 2015. On October 22, 2015, Under |
| Armour announced revenue of $1.204 billion for the third quarter of 2015, beating analyst |
| consensus by $29 million. |
| 15. In its third quarter 2015 earnings call, earnings release (included in the Form 8-K |
| Under Armour filed with the Commission on October 22, 2015), and Form 10-Q, Under Armour |
| highlighted its reported 28% revenue growth that beat analysts’ revenue estimates, attributing the |
| growth primarily to innovative new product offerings, “a growing interest in performance |
| products and the strength of the Under Armour brand in the marketplace,” and increased sales in |
| footwear and apparel. |
| 16. Under Armour did not disclose that it used pull forwards, despite the fact that |
| nearly 4% of its total revenue for the third quarter of 2015 (approximately $45 million) resulted |
| from the practice. Without the pull forwards from the fourth quarter of 2015, Under Armour’s |
| growth rate for the third quarter of 2015 would have been below analysts’ revenue estimates and |
| the lowest quarterly growth rate in more than two years. |
| Fourth Quarter 2015 |
| 17. During the fourth quarter of 2015, Under Armour’s internal projections for |
| quarterly and full-year company-wide revenue continued to decline. Senior management knew |
| that this decline in projected revenue meant the company could fall below analysts’ revenue |
| estimates, and directed sales personnel to pull forward 2016 orders into 2015. |
| 18. Ultimately, Under Armour pulled forward approximately $99 million in orders |
| from the first quarter of 2016 into the fourth quarter of 2015, again representing the largest |
| 5 |
| amount Under Armour had pulled forward in one quarter to date. On January 28, 2016, Under |
| Armour announced revenue of $1.171 billion for the fourth quarter of 2015, beating consensus |
| estimates by $53 million. |
| 19. In its fourth quarter 2015 earnings call and earnings release, and 2015 Form 10-K, |
| Under Armour highlighted its 31% revenue growth that beat consensus estimates, attributing it |
| primarily to “growth in training, running, golf and basketball,” and increased sales and new |
| offerings in footwear and apparel, but did not mention the significant impact of pull forwards. In |
| its earnings call, Under Armour highlighted its streak of quarters with 20%-plus revenue growth, |
| stated that its growth drivers had not changed since it went public ten years prior, and denied that |
| warmer weather was materially impacting its revenue. Downplaying the revenue impact of |
| warmer weather in the earnings call, a senior Under Armour executive stated that weather had |
| only impacted the company’s business by a couple percentage points, while another senior |
| executive stated: “Did [weather] affect our business in the way some thought it would? No, it did |
| not. . . . Our business is more diversified than it has ever been, we do not let weather play a |
| decisive role in dictating our success.” These statements and omissions were misleading. In |
| December 2015, Under Armour senior management discussed internally that the company was |
| going to finish with lower-than-expected revenue for the year, and that warmer weather had |
| negatively impacted revenue. |
| 20. Under Armour did not disclose the fact that it used pull forwards, despite the fact |
| that pull forwards accounted for nearly 8.5% of its total fourth quarter 2015 revenue |
| (approximately $99 million) and approximately 35% of its fourth quarter of 2015 revenue |
| growth. Without the pull forwards from the first quarter of 2016, Under Armour’s growth rate in |
| the fourth quarter of 2015 would have been less than 20% for the first time in more than five |
| years. |
| First Quarter 2016 |
| 21. In January 2016, the FP&A group advised Under Armour senior management that |
| the company’s internal revenue forecast for the first quarter of 2016 was lower than analysts’ |
| revenue estimates due, in part, to the pull forwards into 2015. By February 2016, the gap |
| between internal forecasts and external revenue guidance was so significant that Under Armour |
| considered revising its public revenue guidance for the quarter – something the company had |
| never done before. An Under Armour senior executive acknowledged the challenges caused by |
| the 2015 pull forwards by stating in an email: “Let’s see how of [sic] this goes and if we can get |
| enough pull-forwards or extra business to close the Q1 gap. The issue is that we pulled forward a |
| lot in Q4 and there is not as much room in Q2 but we will see.” |
| 22. Ultimately, Under Armour pulled forward $17.5 million in orders from the second |
| quarter of 2016 into the first quarter of 2016. On April 21, 2016, Under Armour announced |
| revenue of $1.048 billion for the first quarter of 2016, beating analyst consensus by $12 million. |
| Under Armour did not disclose that $17.5 million of its total first quarter 2016 revenue was |
| comprised of pull forwards. Without these pull forwards, Under Armour’s revenue and growth |
| rate would have been below analysts’ revenue estimates. |
| 6 |
| Second Quarter 2016 |
| 23. Under Armour also pulled forward revenue into the second quarter of 2016 to |
| meet analysts’ revenue estimates. Under Armour senior management was aware as early as May |
| 2016 that the forecasted revenue for the quarter had declined by $11 million, and that Under |
| Armour would likely need to use pull forwards to close the gap. |
| 24. Under Armour pulled forward $10 million in orders from the third quarter of 2016 |
| into the second quarter 2016. On July 26, 2016, Under Armour announced revenue of $1.001 |
| billion for the second quarter of 2016 that met analysts’ revenue estimates. Under Armour did |
| not disclose that $10 million of its total second quarter 2016 revenue was comprised of pull |
| forwards. Without these pull forwards from the third quarter of 2016, Under Armour’s second |
| quarter 2016 revenue would have been below analysts’ revenue estimates. |
| |
| Third Quarter 2016 |
| 25. Throughout the third quarter of 2016, Under Armour senior management directed |
| the FP&A group and sales personnel to use pull forwards to close an increasing gap between |
| internal revenue forecasts and analysts’ revenue estimates. In July 2016, the FP&A group |
| forecast that Under Armour would need to pull forward approximately $65 million in orders to |
| meet analysts’ revenue estimates and achieve a revenue growth rate of greater than 20%. At that |
| point, senior management emphasized that a growth rate of less than 20% “would be an |
| extremely difficult story,” and urged the FP&A group and sales personnel to continue to press |
| customers to accept shipment of product earlier than originally requested. |
| 26. Under Armour’s increasing reliance on pull forwards often resulted in it making |
| multiple requests each quarter to its largest wholesale customers, and periodically offering sales |
| incentives such as price discounts and extended payment terms. For example, in September |
| 2016, Under Armour requested additional pull forwards from a key customer, after already |
| having asked to move more than $30 million in sales from the fourth quarter of 2016 to the third |
| quarter of 2016. The customer responded by saying: “We just brought a bunch of your goods in |
| early to help out your quarter. . . Now you want more. . . More..More..more..30% [price |
| discount] please.” Under Armour ultimately agreed to a 25% price discount and an extra 30 days |
| to pay to secure an additional $6.7 million of pull forwards. |
| 27. Under Armour pulled forward approximately $65 million in orders from the |
| fourth quarter of 2016 into third the quarter of 2016. On October 25, 2016, Under Armour |
| announced revenue of $1.472 billion for the third quarter of 2016, beating analysts’ revenue |
| estimates by $18 million. Under Armour did not disclose that $65 million of its total third quarter |
| 2016 revenue was comprised of pull forwards. |
| 28. In its third quarter 2016 earnings call, earnings release, and Form 10-Q, Under |
| Armour highlighted its reported 22% revenue growth that beat analysts’ revenue estimates, |
| attributing the growth primarily to “growth in men’s training, women’s training, golf and team |
| sports,” “strong growth in running and basketball,” “growing interest in performance products |
| and the strength of the Under Armour brand in the marketplace,” and increased sales in footwear |
| 7 |
| and apparel. In its earnings call, Under Armour highlighted its streak of 26 consecutive quarter |
| of 20%-plus revenue growth, and a senior Under Armour executive stated: “I want to be clear . . . |
| that the growth remains intact.” |
| 29. Under Armour did not disclose the fact that it engaged in pull forwards, despite |
| the fact that nearly 4.5% of its total third quarter of 2016 revenue ($65 million) or approximately |
| 25% of its third quarter of 2016 revenue growth was attributable to pull forwards. Without these |
| pull forwards from the fourth quarter of 2016, Under Armour’s growth rate in the third quarter of |
| 2016 would have been less than 20%, and the company would not have reported revenue and |
| revenue growth that beat analysts’ revenue estimates. |
| Fourth Quarter 2016 |
| 30. Anticipating a revenue shortfall in the fourth quarter 2016, in September 2016 |
| Under Armour senior management discussed a plan to ship a large dollar amount (ultimately |
| over $50 million) of orders to a new customer in December 2016, rather than in 2017 as the |
| customer had initially contemplated. An Under Armour senior executive acknowledged that the |
| desire to ship the product early was being driven by pressure to meet analysts’ revenue estimates, |
| saying that the customer “isn’t setting [Under Armour product in its stores] until February, so |
| whether we thought it was $20 or $53 [million] or whatever, really [the customer] doesn’t want |
| any of that product in December but we are shipping it and they are absolutely taking it from us |
| as a favor. If we were a privately held company, we would not ship that product to them in |
| December.” |
| 31. By mid-October 2016, Under Armour’s senior management knew that a |
| significant and increasing revenue shortfall for both the fourth quarter and full-year of 2016 was |
| being met with an increasing amount of pull forwards. The FP&A group estimated to senior |
| management that the company would have to pull forward over $160 million of orders to close |
| this gap, and that the pull forwards would negatively impact first quarter 2017 revenue. |
| 32. During the remainder of the fourth quarter, Under Armour’s sales increasingly |
| lagged prior forecasts. By mid-December 2016, despite having already pulled forward |
| approximately $170 million in sales, senior management realized the company would not be able |
| to meet analysts’ revenue estimates for the fourth quarter of 2016, or meet its full year revenue |
| guidance of $4.925 billion. Under Armour’s senior management also was becoming more |
| concerned about the negative impact additional pull forwards would have on revenue for the first |
| quarter of 2017. |
| 33. Because Under Armour could not meet analysts’ revenue estimates even with the |
| $170 million in pull forward sales, a senior Under Armour executive made the decision to limit |
| additional pull forwards from 2017 into 2016. Notes from a December 15, 2016 meeting of the |
| company’s top executives reflect that, while discussing his decision, the senior executive stated |
| that the company had “been living in this bubble for a while,” that pulling forward revenue in |
| each quarter was not healthy, and that the company was “not going to compromise 2017 . . . |
| we’re not going to take from next year.” |
| 8 |
| 34. After additional internal discussions, Under Armour senior management reversed |
| some planned pull forwards, (e.g., by pushing some apparel sales back to the first quarter of |
| 2017), but moved ahead with pull forwards of footwear orders because it was a high visibility |
| product segment where the company sought to demonstrate strong revenue growth. This fine- |
| tuning of pull forwards was reflected in a December 2016 internal email between senior |
| management which noted that footwear, along with international sales, “are the big growth |
| drivers we have talked about over and over and are the only areas giving people confidence in |
| our future.” |
| 35. Although Under Armour did not pull forward enough sales to meet analysts’ |
| revenue estimates and sustain its better than 20% year-over-year revenue growth streak, it still |
| pulled forward approximately $172 million (approximately 13% of its quarterly revenue) in |
| orders from the first quarter of 2017 into the fourth quarter of 2016. |
| 36. On January 31, 2017, Under Armour announced revenue of $1.308 billion for the |
| fourth quarter of 2016, which reflected year-over-year revenue growth of 12%. Under Armour |
| did not meet analysts’ revenue estimates for the fourth quarter of 2016, and it did not report year- |
| over-year revenue growth of over 20%. That day, the company’s stock price dropped by |
| approximately 23%. |
| 37. In its fourth quarter 2016 earnings call and earnings release, and 2016 Form 10-K, |
| Under Armour highlighted its 12% revenue growth, attributing it primarily to “growth in |
| training, running, golf and basketball,” growing interest in performance products, the strength of |
| the Under Armour brand in the marketplace, and increased sales and new offerings in footwear |
| and apparel. In its fourth quarter 2016 earnings call, a senior Under Armour executive stated: “I |
| want to be clear. Our growth story is intact. Our brand is truly stronger than it’s ever been.” |
| 38. Under Armour did not disclose the fact that it engaged in pull forwards, despite |
| the fact that approximately 13% of its total fourth quarter of 2016 revenue ($172 million) was |
| derived from pull forwards. Moreover, Under Armour’s statements about its “growth story” |
| being intact and its brand being “stronger than it’s ever been” were made misleading by omitting |
| disclosure of pull forwards because without its aggressive use of pull forwards there would have |
| been no reportable growth in the fourth quarter of 2016. |
| Under Armour’s Use of Pull-Forwards Was Having or Was Reasonably Expected to Have |
| an Adverse Impact on Under Armour’s Future Revenue |
| 39. Under Armour’s reliance on pull forwards to meet financial targets was |
| compromising the company’s future revenue and revenue growth rate. When Under Armour |
| convinced customers to accept shipment of product earlier than forecasted, Under Armour could |
| record the sale as occurring in the earlier quarter but, all things being equal, would lose that |
| particular sale in the later quarter when it had been originally scheduled. |
| 40. The impact of these shifting sales was especially pronounced for Under Armour |
| because prior reported revenue, particularly in the third and fourth quarters of 2015, included a |
| significant amount of pull forwards. Therefore, to meet analysts’ revenue estimates for 2016, |
| 9 |
| Under Armour had to replace the sales it had previously taken from 2016 through additional |
| customer demand and new products, but also demonstrate the same percentage revenue growth |
| when compared to the 2015 revenue totals (which in turn had been enhanced with pull forwards). |
| In internal emails, Under Armour acknowledged this “double impact on the growth rate” |
| resulting from pull forwards because they “take the base up” in the earlier year and down in the |
| later year. Compared to the same quarters in 2015, Under Armour greatly increased pull |
| forwards during the third and fourth quarters of 2016 in an attempt to continue to meet analysts’ |
| revenue estimates. |
| 41. Under Armour knew or should have known that its use of pull forwards concealed |
| its failure to meet analysts’ revenue estimates without such pull forward sales. Under Armour |
| also knew that its increasing reliance on pull forwards to meet analysts’ revenue estimates was |
| having, or was reasonably likely to have, a material negative impact on future revenue. Under |
| Armour’s reported financial results during the Relevant Period did not reflect its natural revenue |
| and revenue growth, and were not indicative of its future financial results. |
| Investors Were Misled by Under Armour |
| 42. Under Armour reported its financial results for the Relevant Period in earnings |
| calls and in reports filed with the Commission, identifying various factors as responsible for its |
| sustained and consistent revenue growth, but without disclosing that a significant portion of its |
| revenue and revenue growth had resulted from the use of pull forwards. |
| 43. By failing to disclose this information during the Relevant Period, investors were |
| left with a misleading impression of how Under Armour was meeting or beating analysts’ |
| revenue estimates. Internally, Under Armour knew that the company relied heavily on pull |
| forwards to meet analysts’ revenue estimates, and the company’s senior management implicitly |
| admitted the unsustainability of this practice by describing pull forward revenue as “bad,” |
| “unnatural,” and “unhealthy.” Without the same information, investors did not have the ability to |
| fully evaluate Under Armour’s financial results in context and compare results across periods. |
| 44. Under Armour’s misleading statements and omissions were material. Investors |
| were unaware that Under Armour’s use of pull forwards was compromising its future revenue by |
| shifting revenue from future quarters to the current quarter, and causing the company to report |
| strong revenue growth results that Under Armour knew were increasingly difficult to replicate in |
| the future. Without this information, investors also lacked the ability to evaluate Under Armour’s |
| future revenue and ability to meet future guidance and analysts’ revenue expectations. Investors |
| also were unaware of the reasonable likely negative impact Under Armour’s pull forward |
| practices would have on future periods. |
| Under Armour Offered and Sold Securities During the Relevant Period |
| 45. During the Relevant Period, Under Armour offered and sold securities, including |
| selling discounted stock under the company’s employee stock purchase plan and issuing shares |
| as compensation to certain employees under its employee incentive plan. |
| 10 |
| Violations |
| 46. As a result of the conduct described above, Under Armour violated Section |
| 17(a)(2) and (3) of the Securities Act, which prohibit any person from directly or indirectly |
| obtaining money or property by means of any untrue statement of a material fact or any omission |
| to state a material fact necessary in order to make the statements made, in light of the |
| circumstances under which they were made, not misleading, or engaging in any transaction, |
| practice, or course of business which operates or would operate as a fraud or deceit upon the |
| purchaser, in the offer or sale of securities. A violation of these provisions does not require |
| scienter and may rest on a finding of negligence. See Aaron v. SEC, 446 U.S. 680, 685, 701-02 |
| (1980). |
| 47. Also as a result of the conduct described above, Under Armour violated Section |
| 13(a) of the Exchange Act and Rules 13a-1, 13a-11, and 13a-13 thereunder, which require |
| reporting companies to file with the Commission complete and accurate annual, current, and |
| quarterly reports. Under Armour also violated Rule 12b-20 of the Exchange Act, which requires |
| an issuer to include in a statement or report filed with the Commission any information necessary |
| to make the required statements in the filing not materially misleading. |
| 48. In addition, Section 13(a) of the Exchange Act requires issuers such as Under |
| Armour to file periodic reports with the Commission containing such information as the |
| Commission prescribes by rule. Form 10-K and Form 10-Q requires registrants to comply with |
| Regulation S-K Item 303. Item 303(a)(3)(ii) of Regulation S-K requires that reports describe, |
| among other things, “any known trends or uncertainties that have had or that the registrant |
| reasonably expects will have a material favorable or unfavorable impact on net sales or revenues |
| or income from continuing operations” in its annual report on Form 10-K. In addition, this Item |
| requires that reports describe “any other significant components of revenues or expenses that, in |
| the registrant’s judgment, should be described in order to understand the registrant’s results of |
| operations.” Instruction 3 to Item 303(a) of Regulation S-K requires that the “discussion and |
| analysis shall focus specifically on material events and uncertainties known to management that |
| would cause reported financial information not to be necessarily indicative of future operating |
| results or of future financial condition.” Item 303(b) of Regulation S-K requires discussion of |
| material changes in such known trends or uncertainties in quarterly reports on Form 10-Q. Under |
| Armour’s use of pull forwards created an uncertainty or event that was known to Under |
| Armour’s senior management and was reasonably expected to have a material effect on the |
| registrant’s future revenues. Under Armour’s failure to attribute growth in revenue to the use of |
| pull forwards did not provide investors with material information about its revenue necessary for |
| an understanding of its results of operations. As a consequence, Under Armour violated Section |
| 13(a) of the Exchange Act and Rules 13a-1, 13a-13, and 12b-20 thereunder. |
| IV. |
| In view of the foregoing, the Commission deems it appropriate to impose the sanctions |
| agreed to in Respondent’s Offer. |
| Accordingly, it is hereby ORDERED that: |
| 11 |
| A. Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, |
| Respondent shall cease and desist from committing or causing any violations and any future |
| violations of Section 17(a)(2) and (a)(3) of the Securities Act and Section 13(a) of the Exchange |
| Act and Rules 13a-1, 13a-11, 13a-13, and 12b-20 thereunder. |
| B. Respondent shall, within 10 days of the entry of this Order, pay a civil penalty of |
| $9,000,000.00 to the Securities and Exchange Commission for transfer to the general fund of the |
| United States Treasury, subject to Exchange Act Section 21F(g)(3). If timely payment is not made, |
| interest shall accrue pursuant to 31 U.S.C. § 3717. |
| |
| Payments must be made in one of the following ways: |
| |
| (1) Respondent may transmit payment electronically to the Commission, which |
| will provide detailed ACH transfer/Fedwire instructions upon request; |
| |
| (2) Respondent may make direct payment from a bank account via Pay.gov |
| through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or |
| |
| (3) Respondent may pay by certified check, bank cashier’s check, or United |
| States postal money order, made payable to the Securities and Exchange |
| Commission and hand-delivered or mailed to: |
| |
| Enterprise Service Center |
| Accounts Receivable Branch |
| HQ Bldg., Room 181, AMZ-341 |
| 6500 South MacArthur Boulevard |
| Oklahoma City, OK 73169 |
| Payments by check or money order must be accompanied by a cover letter identifying |
| Under Armour, Inc. as a Respondent in these proceedings, and the file number of these proceedings. |
| A copy of the cover letter and check or money order must be sent to Associate Director Jason Burt, |
| Division of Enforcement, Denver Regional Office, Securities and Exchange Commission, 1961 |
| Stout Street, 17th Floor, Denver, CO 80294. |
| C. Amounts ordered to be paid as civil money penalties in this Order shall be treated as |
| penalties paid to the government for all purposes, including all tax purposes. To preserve the |
| deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it shall |
| not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of |
| compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in this |
| action (“Penalty Offset”). If the court in any Related Investor Action grants such a Penalty Offset, |
| Respondent agrees that it shall, within 30 days after entry of a final order granting the Penalty |
| Offset, notify the Commission’s counsel in this action and pay the amount of the Penalty Offset to |
| the Commission. Such a payment shall not be deemed an additional civil penalty and shall not be |
| deemed to change the amount of the civil penalty imposed in this proceeding. For purposes of this |
| paragraph, a “Related Investor Action” means a private damages action brought against Respondent |
| 12 |
| by or on behalf of one or more investors based on substantially the same facts as alleged in the |
| Order instituted by the Commission in this proceeding. |
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| By the Commission. |
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| Vanessa A. Countryman |
| Secretary |
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