- The Securities and Exchange Commission charged sports apparel manufacturer Under Armour with accelerating revenue to meet analysts' expectations without fully disclosing what it was doing.
- The company also failed to disclose known uncertainties about its future revenue prospects, the SEC said.
- Under Armour agreed to pay $9 million to settle the action.
In its May 3 order, the SEC said Under Armour's internal revenue and revenue growth forecasts for the third and fourth quarters of 2015 showed signs of shortfalls from analysts' revenue estimates. For example, the company was not meeting internal sales projections for North America, and warm winter weather was negatively impacting sales of the company's higher-priced cold weather apparel.
In response, the company pulled forward $408 million in existing orders that customers had asked to be shipped in future quarters and attributed the revenue growth to factors without disclosing material information about its pull forward practices.
"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," 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."
The company was charged with violating federal securities antifraud and reporting laws and agreed to settle for the $9 million penalty.