Sportswear manufacturer Under Armour Inc. has agreed to pay $9 million to settle a May 3 charge from the Securities and Exchange Commission that it misled investors regarding the bases of its revenue growth and failed to disclose known uncertainties about its future revenue prospects.
Under Armour breached the antifraud provisions of Section 17(a)(2) and (3) of the Securities Act of 1933, as well as certain reporting requirements of the federal securities laws, according to the SEC’s order.
Without admitting or denying the findings, Under Armour agreed to prevent further violations and to pay a $9 million penalty, the SEC said.
By mid-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, according to the SEC.
The order also said that for six consecutive quarters beginning in the third quarter of 2015, Under Armour “pulled forward” $408 million in existing orders that customers had requested be shipped in future quarters to falsely meet analysts’ revenue estimates. Under Armour failed to disclose that its increasing reliance on pull forwards raised considerable uncertainty as to whether the company would meet its revenue guidance in future quarters, the SEC said.
“When public companies describe how they achieved financial results, they must not misstate any information that is material to investors,” said Kurt Gottschall, Director of the SEC’s Denver Regional Office. “By using pull forwards for several consecutive quarters to meet analysts’ revenue targets while attributing its revenue growth to other factors, Under Armour created a misleading picture of the drivers of its financial results and concealed known uncertainties concerning its business.”
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