The SEC’s inquiry had homed in on how the sportswear brand had reported certain earnings around 2016, and its alleged actions to move revenues from one quarter to another, which the company referred to as “the impact of certain ‘pull forward’ sales for the third quarter of 2015 through the fourth quarter of 2016.”
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In light of the settlement, the SEC won’t pursue enforcement actions against individual Under Armour executives, but a parallel Justice Department investigation is ongoing.
“This settlement relates to the company’s disclosures and does not include any allegations from the SEC that sales during these periods did not comply with generally accepted accounting principles,” the company said in a statement Monday. “The company neither admitted nor denied the SEC’s charges. The settlement resolves all outstanding SEC claims.”
The SEC had charged Under Armour with violating certain Securities Act provisions, accusing the retailer of “misleading investors as to the bases of its revenue growth and failing to disclose known uncertainties concerning its future revenue prospects,” according to the agency’s own statement Monday.
The regulator alleged that Under Armour had reacted to misses in sales projects in 2015 by “pulling forward” some $408 million in orders that were meant to be shipped later.
“As stated in the order, Under Armour misleadingly attributed its revenue growth during this period to various factors without disclosing to investors material information about the impacts of its pull forward practices,” the SEC said in its statement, referring to its cease and desist order filed Monday. “The order finds that Under Armour failed to disclose that its increasing reliance on pull forwards raised significant uncertainty as to whether the company would meet its revenue guidance in future quarters.”
“When public companies describe how they achieved financial results, they must not misstate any information that is material to investors,” Kurt Gottschall, director of the SEC’s Denver regional office, said in a statement Monday.
“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,” he said.