1. Under Armour
The Future of Performance Sportswear?
An Evaluation
FIN 553
June 4th 20091

2. INDUSTRY BACKDROP

3. IN
THE
BEGINNING…
3

5. WE’VE COME A LONG WAY,
BABY

6. WE’VE
COME A
LONG
WAY.

7. MATERIALS

8. TECHNOLOGY

9. HIGH END

10. • “In the six-year period to 2012,
just-style forecasts performance
apparel will outperform all
sportswear by a factor of two,
raising the US$ money value of
performance sportswear to
US$7.20bn .”
• (Source: Taking the lead in performance apparel: just-style.com, 21 September 2006 |
INDUSTRY OVERVIEW
10

11. UA OVERVIEW

12. “The core strength of our brand
is its connection to athletes who
understand the benefits of
performance products.”
( (Source: Letter to Shareholders, UA 2008 Annual Report )

13. COMPANY SCOREBOARD
$205,181
$281,053
$430,689
$606,561
$725,244
2004 2005 2006 2007 2008
5 YEAR ANNUAL COMPOUND GROWTH RATE - 44.4%
NET REVENUES
IN THOUSANDS; YEAR 2004-2008
$25,153
$35,810
$56,918
$86,265
$76,295
2004 2005 2006 2007 2008
5 YEAR ANNUAL COMPOUND GROWTH RATE - 50.5%
NET REVENUES
IN THOUSANDS; YEAR 2004-2008
NET REVENUES
IN THOUSANDS; YEAR 2004-2008
INCOME FROM OPERATIONS
IN THOUSANDS; YEAR 2004-2008
NET REVENUES
IN THOUSANDS; YEAR 2004-2008
INCOME FROM OPERATIONS
IN THOUSANDS; YEAR 2004-2008
80%
12%
4%
4%
NET REVENUES BY PRODUCT CATEGORY
YEAR 2008
APPAREL
FOOTWEAR
ACESSORIES
LICENSE REVENUES

14. COMPETITIVE LANDSCAPE
14

15. CORPORATE GOVERNANCE
Name Title Age Total cash compensations
Kevin A Plank CEO and Chairman of the Board 35 $528,656 USD
Brad Dickerson CFO 43 Unavailable
Wayne E. Marino Executive VP/COO 47 $308,369 USD
Matthew C. Mirchin DVP 48 $394,935 USD
James E. Calo Other Executive Officer 45 $789,026 USD
Melissa A. Wallace VP, Divisional 49 $722,225 USD
Name Title Age Affiliation
Thomas J. Sippel Director 61 Partner of the law firm Gill, Sippel & Gallagher
Harvey L. Sanders Director 58 Former Chairman of the Board of Directors of Nautica
Enterprises, Inc
William R. McDermott Director 47 Former CEO of SAP Global Field Operations
Anthony W. Deering Director 63 Chairman of Exeter Capital, LLC
A.B. Krongard Director 71 Executive Director of the Central Intelligence Agency
Byron K. Adams, Jr. Director 54 Managing Director, Rosewood Capital, LLC
15

16. CURRENT CONSIDERATIONS
Share performance vs. S&P 500
(source FT.com)
Under Armour Inc. (UA) Key financials
(Source: Yahoo Finance)
Current Price $25.23
52-Week range $12-$44
Market Capital $1.25 billion
P/E ratio 32.06
Recent returns
(Source: Woolframalpha.com)
Day 2.81%
Month 5.13%
YTD 5.83%
Year -27.44%
Annual Volatility
(Source: Woolframalpha.com)
UA 84.40%
S&P 500 45.68%
Bonds 5.71%
T-Bills 0.00%
16

17. VALUATION

18. INTRINSIC VALUATION ASSUMPTIONS
rf 3.65%
rd 1.78%
rm 3.90%
β 1.15
g 3.00%
D/V 0.03
E/V 0.97
CAPM 8.25%
WACC 8.04%
18

19. NIKE INTERNATIONAL GROWTH COMPARISON
Nike ($ in millions) UA
Year 1981 1982 1983 1984 1985 2008 2015E
Actual sales
Domestic 432 651 774 761 730 692 2159
International 26 43 93 158 216 33 540
Total 458 694 867 920 946 725 2699
% Splits
Domestic 94.32% 93.80% 89.27% 82.72% 77.17% 95.45% 79.99%
International 5.68% 6.20% 10.73% 17.28% 22.83% 4.55% 20.01%
Total 100% 100% 100% 100% 100% 100% 100%
Average Nike International Growth 1982-1991
32% 19

20. NET INCOME CALCULATIONS
($ in millions) Historical Projected
Year 2007 2008 2009 2010 2011 2012 2013 2014 2015
Domestic Sales 562 661 720 785 903 1038 1194 1373 1579
International Sales 44 65 77 92 121 160 211 278 367
Total Net Revenues 607 725 797 877 1024 1198 1405 1651 1946
Gross Profit 305 355 383 421 491 575 674 793 934
Total Operating Expense 219 278 327 360 420 491 576 677 798
Operating Income 86 77 56 61 72 84 98 116 136
Depreciation 15 21 21 21 21 21 21 21 21
EBITDA 101 98 77 83 93 105 120 137 158
Total Other Income/(Expense) 3 (7) 16 18 20 24 28 33 39
EBIT 89 69 72 79 92 108 126 149 175
Provision for Income Taxes 36 32 26 28 33 39 46 54 63
Net Income 53 38 46 50 59 69 81 95 112
20

21. DCF CALCULATIONS
($ in millions) Historical Projected
Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 TV
EBIT 89 70 72 79 92 109 126 148 175
Taxes 36 32 26 28 33 39 46 54 63
Net Income 53 38 46 51 59 69 81 95 112
Depreciation 15 21 22 23 23 24 25 25 26
CapEx (22) (21 (16) (18) (20) (24) (28) (33) (39)
ΔNWC (53) (37) (39) (41) (43) (45) (46) (49) (52)
FCF (8) 2 13 15 19 24 30 38 48 974
Discounted FCF and TV 12 13 15 18 21 24 28 567
21

22. PEER ANALYSIS
Name Country P/E
Ratio
EV/EBITDA
Under Armour 12.15
Perry Ellis International Inc 9.7 7.37
Oxford Industries Inc 12.9 9.88
Columbia Sportswear Co. 13.27 8.04
Hanesbrands Inc 22.23 8.34
Mean N/A 14.53 8.41
Median N/A 13.09 8.19
Stock performance (Source: Yahoo.com/Ifinancilas.com)
22

23. INTRINSIC VALUE
DCF Calculation
DCF $131m
Continuing Value $567m
Total Value $697m
Shares O/S 50.4m
Target share
price
$13.85
P/E Valuation Calculation
Net Income (2009) $45,915,181
No of shares 50,400,400
EPS $0.91
Multiple (Comparables) 14.53
Equity Value $666,918,005
Target Price per share $13.23
EV/EBITDA Valuation Calculation
EBITDA (2009) $77,146,699
No of shares 50,400,400
Multiple 8.41
Enterprise Value $648,610,874
Net Debt $13,158,000
Equity Value $635,452,874
Target price per share $12.61
23

24. RISKS TO VALUATION

25. WHAT-IF? SCENARIO (INT GROWTH AT 15%)
DCF Calculation
DCF $115m
Continuing Value $455m
Total Value $570m
Shares O/S 50.4m
Target share
price
$11.32
P/E Valuation Calculation
Net Income (2009) $45,915,181
No of shares 50,400,400
EPS $0.91
Multiple (Comparables) 14.53
Equity Value $666,918,005
Target Price per share $13.23
EV/EBITDA Valuation Calculation
EBITDA (2009) $77,146,699
No of shares 50,400,400
Multiple 8.41
Enterprise Value $648,610,874
Net Debt $13,158,000
Equity Value $635,452,874
Target price per share $12.61
25

26. REAL OPTIONS

27. OPTION 1:CHINA

28. OPTION 2: DIRECT TO CUSTOMER

29. CONCLUSION

30. CONCLUSION
At $25 Under Armour is overpriced.
We recommend
a target price of $13 a share
Reasons
• Investors regard Under Armour as the next Nike, hence the 25x P/E multiple.
•However the days of double digit growth are over
•Could be undercut by cheaper, private label merchandise
30

31. 31

32. CRAIG JOHNSTON
KEVAN O’CONNOR
KEVIN LEWIS
DAVID CLARK
VISUAL PRESENTATION
BY
DISCLAIMER: THE VIEWS CONTAINED IN THIS DOCUMENT ARE FOR INTERNAL PURPOSES ONLY AND DO NOT REFLECT THE VIEWS OF DEPAUL UNIVERSITY OR ITS EMPLOYEES
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