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what would Projected Financial Statements (Income Statement,…
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Projected Financial Statements (Income Statement, Balance Sheet and Statement of Cash Flows) for 3 years into the future. This must be broken down by year into two (2) columns: 1 column without your strategy and 1 column with your strategy. The without column should serve as the basis for your with strategy column and only those financial statement accounts that will be changed, based on your strategy, should be impacted.
Include Projected ratios for the without and with strategy by year. Discuss how these ratios compare and contrast with the historical findings.
Cost Analysis completed on an Excel tab that outlines the cost that will be incurred to implement the strategy. This information should correspond with the With Strategy on the Projected Financial Statements, linking of cells to the financial statements is encouraged.
Net Present Value analysis of proposed strategy’s new cash flow – you may also use Excel to solve for this. From the income statement the change in operating income between your with and without strategy should serve as your cash inflow for each year.
NOTE: To construct the first cash flow (cf1) the new revenue from your strategy(s) must be discounted back to the present value by calculating EBIT (Operating Income on the Income Statement) and that figure will be your cfn for each year. cf0 (initial cost of your strategy), cf1 (discounted cash flow first year), r (opportunity cost of capital, the rate of the next best alternative use of cash/debt/equity resources).
Image transcription text
of1 cf2 cfa cfn NPV = -cfo + + (1+7)1 (1+r)2 (1+r) = (1+r)
Implementation strategy – how and when will the strategy be implemented, this should outline the who, how, what, and when of the implementation process.
Specific recommended strategy and long term objectives
Explain why you chose the strategy, discuss the advantages/benefits to organizational success and sustainability. Incude a discussion of the challenges or disadvantages that may arise as a result of the strategic choice.
Sources
Income Statement Under Armour
Consolidated Statements of Operations – USD ($) shares in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2021
Dec. 31, 2020
Dec. 31, 2019
Income Statement [Abstract]
Net revenues
$ 5,683,466
$ 4,474,667
$ 5,267,132
Cost of goods sold
2,821,967
2,314,572
2,796,599
Gross profit
2,861,499
2,160,095
2,470,533
Selling, general and administrative expenses
2,334,691
2,171,934
2,233,763
Restructuring and impairment charges
40,518
601,599
0
Income (loss) from operations
486,290
(613,438)
236,770
Interest income (expense), net
(44,300)
(47,259)
(21,240)
Other income (expense), net
(51,113)
168,153
(5,688)
Income (loss) before income taxes
390,877
(492,544)
209,842
Income tax expense (benefit)
32,072
49,387
70,024
Income (loss) from equity method investments
1,255
(7,246)
(47,679)
Net income (loss)
$ 360,060
$ (549,177)
$ 92,139
Basic net income (loss) per share of Class A, B, and C common stock (in dollars per share)
$ 0.77
$ (1.21)
$ 0.20
Diluted net income (loss) per share of Class A, B, and C common stock (in dollars per share)
$ 0.77
$ (1.21)
$ 0.20
Weighted average common shares outstanding Class A, B, and C common stock
Basic (in shares)
465,504
454,089
450,964
Diluted (in shares)
468,644
454,089
454,274
Under Armour Balance Sheet
Consolidated Balance Sheets – USD ($) $ in Thousands
Dec. 31, 2021
Dec. 31, 2020
Current assets
Cash and cash equivalents
$ 1,669,453
$ 1,517,361
Accounts receivable, net
569,014
527,340
Inventories
811,410
895,974
Prepaid expenses and other current assets, net
286,422
282,300
Total current assets
3,336,299
3,222,975
Property and equipment, net
607,226
658,678
Operating lease right-of-use assets
448,364
536,660
Goodwill
495,215
502,214
Intangible assets, net
11,010
13,295
Deferred income taxes
17,812
23,930
Other long-term assets
75,470
72,876
Total assets
4,991,396
5,030,628
Current liabilities
Accounts payable
613,307
575,954
Accrued expenses
460,165
378,859
Customer refund liabilities
164,294
203,399
Operating lease liabilities
138,664
162,561
Other current liabilities
73,746
92,503
Total current liabilities
1,450,176
1,413,276
Long-term debt, net of current maturities
662,531
1,003,556
Operating lease liabilities, non-current
703,111
839,414
Other long-term liabilities
86,584
98,389
Total liabilities
2,902,402
3,354,635
Stockholders’ equity
Additional paid-in capital
1,108,613
1,061,173
Retained earnings
1,027,833
673,855
Accumulated other comprehensive (income) loss
(47,610)
(59,185)
Total stockholders’ equity
2,088,994
1,675,993
Total liabilities and stockholders’ equity
4,991,396
5,030,628
Class A Common Stock
Stockholders’ equity
Common Stock
63
62
Class B Convertible Common Stock
Stockholders’ equity
Common Stock
11
11
Class C Common Stock
Stockholders’ equity
Common Stock
$ 84
$ 77
Statement of Cash Flows Under Armour
Consolidated Statements of Cash Flows – USD ($) $ in Thousands
12 Months Ended
Dec. 31, 2021
Dec. 31, 2020
Dec. 31, 2019
Cash flows from operating activities
Net income (loss)
$ 360,060
$ (549,177)
$ 92,139
Adjustments to reconcile net income (loss) to net cash used in operating activities
Depreciation and amortization
141,144
164,984
186,425
Unrealized foreign currency exchange rate gain (loss)
18,877
(9,295)
(2,073)
Loss on extinguishment of senior convertible notes
58,526
0
0
Loss on disposal of property and equipment
4,468
3,740
4,640
Gain on sale of the MyFitnessPal platform
0
(179,318)
0
Non-cash restructuring and impairment charges
26,938
470,543
39,000
Amortization of bond premium
16,891
12,070
254
Stock-based compensation
43,794
42,070
49,618
Deferred income taxes
(2,642)
43,992
38,132
Changes in reserves and allowances
(25,766)
10,347
(26,096)
Changes in operating assets and liabilities:
Accounts receivable
(31,153)
167,614
(45,450)
Inventories
93,287
15,306
149,519
Prepaid expenses and other assets
10,224
18,603
24,334
Other non-current assets
79,782
(259,735)
19,966
Accounts payable
26,027
(40,673)
59,458
Accrued expenses and other liabilities
(114,794)
318,532
(18,987)
Customer refund liability
(38,861)
(19,250)
(80,710)
Income taxes payable and receivable
(1,973)
2,511
18,862
Net cash provided by (used in) operating activities
664,829
212,864
509,031
Cash flows from investing activities
Purchases of property and equipment
(69,759)
(92,291)
(145,802)
Sale of property and equipment
1,413
0
0
Sale of the MyFitnessPal platform
0
198,916
0
Purchase of businesses
0
(40,280)
0
Purchases of other assets
0
0
(1,311)
Net cash provided by (used in) investing activities
(68,346)
66,345
(147,113)
Cash flows from financing activities
Proceeds from long-term debt and revolving credit facility
0
1,288,753
25,000
Payments on long-term debt and revolving credit facility
(506,280)
(800,000)
(162,817)
Proceeds from capped call
91,722
0
0
Purchase of capped call
0
(47,850)
0
Employee taxes paid for shares withheld for income taxes
(5,983)
(3,675)
(4,235)
Proceeds from the exercise of stock options and other stock issuances
3,688
4,744
7,472
Payments of debt financing costs
(1,884)
(5,219)
(2,553)
Other financing fees
0
100
63
Net cash provided by (used in) financing activities
(418,737)
436,853
(137,070)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(23,391)
16,445
5,100
Net increase (decrease) in cash, cash equivalents, and restricted cash
154,355
732,507
229,948
Cash, cash equivalents, and restricted cash
Beginning of period
1,528,515
796,008
566,060
End of period
1,682,870
1,528,515
796,008
Non-cash investing and financing activities
Change in accrual for property and equipment
19,214
(13,875)
(8,084)
Other supplemental information
Cash paid (received) for income taxes, net of refunds
42,623
24,443
23,352
Cash paid for interest, net of capitalized interest
25,226
28,626
18,031
Reconciliation of cash, cash equivalents, and restricted cash
Cash and cash equivalents
1,669,453
1,517,361
788,072
Restricted cash
13,417
11,154
7,936
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Total
$ 1,682,870
$ 1,528,515
$ 796,008
Horizontal and vertical analysis of Under Armour
Horizontal Analysis of the Income Statement
Dec. 31, 2021
Dec. 31, 2020
Dec. 31, 2019
Net income
165.5%
-695.9%
153.7%
Other comprehensive income (loss) 237.3% -28.6% – 68.9%
Comprehensive income (loss) 166.8% -713.7% 150.6%
Vertical Analysis of Income Statement
Dec. 31, 2021
Dec. 31, 2020
Dec. 31, 2019
Net Revenue
100.0%
100.0%
100.0%
Cost of Revenue
33.3%
32.5%
28.3%
Gross profit
66.7%
67.5%
71.7%
Operating Expenses
50.9%
49.5%
49.1%
Operating Income (Loss)
15.8%
18.0%
22.5%
Net Income (Loss)
4.4%
-9.9%
2.4%
Comprehensive Income (Loss)
4.7%
-11.6%
1.6%
Balance Sheet:
Horizontal analysis:
Dec. 31, 2021
Dec. 31, 2020
Current liabilities
2.5%
-7.0%
Long-term debt
-34.1%
51.2%
Operating lease liabilities
-17.0%
47.8%
Other long-term liabilities
-11.9%
-12.1%
Total liabilities
-13.5%
16.9%
Stockholders’ equity
24.6%
-0.9%
Total liabilities and equity
-0.8%
-0.8%
Balance Sheet:
Vertical analysis:
Dec. 31, 2021
Dec. 31, 2020
Assets
Current assets 29.1% 34.6%
Property and equipment, net
19.4%
19.2%
Goodwill and intangible assets, net
32.4%
31.4%
Other assets
19.1%
14.8%
Total assets
100.0%
100.0%
Liabilities and stockholders’ equity
Current liabilities 29.0% 28.1%
Long-term debt
13.3%
19.9%
Operating lease liabilities 14.1% 16.7%
Ratio analysis for Under Armour
Profitability ratios
Gross profit margin = Gross profit / Net revenues
2021: 2,861,499 / 5,683,466 = 0.5034 or 50.34%
2020: 2,160,095 / 4,474,667 = 0.4830 or 48.30%
2019: 2,470,533 / 5,267,132 = 0.4686 or 46.86%
Operating profit margin = Income (loss) from operations / Net revenues
2021: 486,290 / 5,683,466 = 0.0855 or 8.55%
2020: (613,438) / 4,474,667 = -0.1372 or -13.72%
2019: 236,770 / 5,267,132 = 0.0449 or 4.49%
Net profit margin = Net income (loss) / Net revenues
2021: 360,060 / 5,683,466 = 0.0634 or 6.34%
2020: (549,177) / 4,474,667 = -0.1226 or -12.26%
2019: 92,139 / 5,267,132 = 0.0175 or 1.75%
Liquidity ratios
Current ratio = Current assets / Current liabilities
2021: 3,539,220 / 1,450,176 = 2.4393 or 2.44
2020: 3,416,649 / 1,413,276 = 2.4176 or 2.42
Leverage ratios
Debt-to-equity ratio = Total liabilities / Total stockholders’ equity
2021: 2,902,402 / 2,088,994 = 1.3907 or 1.39
2020: 3,354,635 / 1,675,993 = 1.9995 or 2.00
Activity ratios
Inventory turnover = Cost of goods sold / Average inventory
2021: 2,821,967 / ((735,100 + 784,232) / 2) = 3.61
2020: 2,314,572 / ((692,380 + 735,100) / 2) = 3.36
Days inventory outstanding = (Average inventory / Cost of goods sold) x 365
2021: (759,666 / 2,821,967) x 365 = 98.18 days
2020: (713,740 / 2,314,572) x 365 = 112.84 days
Price-to-earnings ratio
P/E ratio = Market price per share / Earnings per share
Since the market price per share is not disclosed, the price-to-earnings ratio is unavailable.
Compared Ratio analysis for Under Armour and Nike
Profitability Ratios
Gross Profit Margin
Under Armour
Nike
2021
50.34%
30.48%
2020
48.30%
29.02%
2019
46.86%
25.77%
Operating Profit Margin
Under Armour
Nike
2021
8.55%
-0.66%
2020
-13.72%
-4.47%
2019
4.49%
-5.81%
Net Profit Margin
Under Armour
Nike
2021
6.34%
-2.56%
2020
-12.26%
-13.14%
2019
1.75%
-2.32%
Compared ratio continued
Liquidity Ratios
Current Ratio
Under Armour
Nike
2021
2.44
1.18
2020
2.42
1.21
Leverage Ratios
Debt-to-Equity Ratio
Under Armour
Nike
2021
1.39
1.82
2020
2
2.28
Activity Ratios
Inventory Turnover
Under Armour
Nike
2021
3.61
3.57
2020
3.36
3.85
Days Inventory Outstanding
Under Armour
Nike
2021
98.18
104.97
2020
112.84
120.19
Since the market price per share is not disclosed, neither firm’s price-to-earnings ratio is unavailable.
Financial analysis
When analyzing Under Armour’s financial position and comparing it to Nike and the industry, it is evident that Under Armour lags Nike in terms of gross profit margin, operating profit margin, net profit margin, and leverage ratios. Under Armour also needs to improve compared to the industry in most proportions. It is important to note that the ratios should be calculated using the same accounting standards and methods to ensure accuracy in the comparison. The data should cover at least two years to allow for year-over-year comparisons.
One area where Under Armour is performing well is its inventory turnover, which is on par with Nike’s. However, Under Armour takes longer to convert its inventory into sales, as evidenced by its higher days of outstanding stock than Nike.
Under Armour’s low gross and operating profit margins can be attributed to its high operating expenses, driven mainly by marketing and selling expenses. In contrast, Nike has maintained high profitability due to its operational efficiency, economies of scale, and strong brand recognition. Under Armour’s high debt-to-equity ratio indicates that the company relies heavily on debt financing, which exposes it to a higher risk of default, significantly if interest rates rise.
The low liquidity ratios of Under Armour indicate a lack of financial flexibility, which limits the company’s ability to take advantage of growth opportunities or weather economic shocks. Under Armour may need to consider strategies to improve its liquidity, such as reducing its debt levels, increasing its cash reserves, or enhancing its inventory management.
Overall, Under Armour’s financial position has implications for the company’s strategic direction. Under Armour may need to prioritize operational efficiency and cost control measures to improve profitability and reduce its reliance on debt financing. The company may also need to consider investing more in research and development to differentiate itself from its competitors and improve its brand image. Additionally, Under Armour may need to optimize its inventory management to reduce its day’s outstanding inventory and improve its working capital position.
References
Nike (2023). Www.sec.gov. Retrieved May 7, 2023, from https://www.sec.gov/cgi-bin/viewer?action=view&cik=320187&accession_number=0000320187-22-000038&xbrl_type=v
Under Armour (2023). Www.sec.gov. Retrieved May 7, 2023, from https://www.sec.gov/cgi-bin/viewer?action=view&cik=1336917&accession_number=0001336917-22-000010&xbrl_type=v#
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