BALTIMORE - Under Armour, Inc. (NYSE: NYSE:UA, UAA), the athletic apparel giant, has agreed to a $434 million settlement to resolve a class action lawsuit alleging securities fraud, the company announced today. This settlement is aimed at putting to rest the litigation that has been ongoing since 2017, concerning claims related to the period from September 16, 2015, to November 1, 2019.
The Baltimore-based company, known for its sports performance products, has agreed to the settlement without admitting any fault or wrongdoing, after weighing the costs and risks of protracted litigation. In addition to the financial settlement, Under Armour will implement two governance changes for a specified time, as detailed in their recent 8-K filing with the Securities and Exchange Commission (SEC).
Under Armour's Chief Legal Officer, Mehri Shadman, stated, "We firmly believe that our sales practices, accounting practices, and disclosures were appropriate, and deny any wrongdoing in this case." Shadman emphasized that the agreement allows the company to avoid ongoing litigation distractions and provides certainty to the business during a critical phase of executing strategic priorities.
The settlement, still subject to final court approval and definitive documentation, is expected to resolve all claims against Under Armour and other defendants. The company plans to fund the settlement through cash on hand and potentially drawing on its $1.1 billion revolving credit facility.
As of March 31, 2024, Under Armour reported having $859 million in cash and equivalents, with a previously recorded $100 million accrual for litigation reserves. The settlement is expected to bring the total accrual to $434 million in the first quarter of fiscal year 2025.
Following the settlement, Under Armour anticipates ending fiscal 2025 with around $500 million in cash and cash equivalents, with no outstanding borrowings under its revolving credit facility.
This announcement is based on a press release statement from Under Armour, Inc. and reflects the company's position as of today. The information provided is subject to change pending court decisions and final documentation related to the settlement.
In other recent news, Under Armour announced the departure of its Chief People and Administrative Officer, Tchernavia Rocker, effective June 1, 2024. Rocker, who has been with the company since 2019, is leaving due to personal reasons as outlined in a recent SEC filing. During her tenure, Rocker significantly contributed to Under Armour's culture, focusing on inclusion, diversity, and team development.
CEO Kevin Plank praised Rocker's leadership and her role in fostering the company's core values. The company has not yet announced Rocker's successor or further details on the transition plan. As Under Armour navigates this change in leadership, the emphasis remains on maintaining a strong company culture and continued growth. These developments are part of the company's recent unfolding events.
InvestingPro Insights
The recent settlement announcement from Under Armour, Inc. (NYSE: UA, UAA) comes at a time when the company's financial data and analyst outlooks show a mixed picture. According to real-time data from InvestingPro, Under Armour's market capitalization stands at $3 billion, with a Price/Earnings (P/E) ratio of 13.24, which adjusts slightly lower to 12.94 when considering the last twelve months as of Q4 2024.
Despite a challenging period reflected in a revenue decline of -3.41% over the last twelve months as of Q4 2024, Under Armour's liquid assets have been reported to exceed short-term obligations, providing the company with a cushion to manage its financial commitments. This is particularly relevant as the company navigates the settlement's financial implications.
InvestingPro Tips further reveal that analysts have recently revised their earnings expectations downwards for the upcoming period, suggesting caution among market observers. However, it is worth noting that analysts also predict Under Armour will be profitable this year, echoing the company's own statements of denying any wrongdoing and focusing on strategic priorities. Moreover, the company has been profitable over the last twelve months and operates with a moderate level of debt, indicating a degree of financial resilience.
For investors and stakeholders interested in a deeper analysis, there are additional InvestingPro Tips available, which can provide more nuanced insights into Under Armour's financial health and future prospects. To explore these further, visit https://www.investing.com/pro/UA and remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With these insights, stakeholders can better assess Under Armour's position as it seeks to move beyond the lawsuit and focus on its core business operations.
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