1. What is(are) Under Armour, Inc.’s, main source(s) of cash? Is this good news or bad news to its managers, stockholders, and creditors? What is Under Armour, Inc.’s, main use of cash? Is this good news or bad news? Discuss your reasoning.
Operating activities which produced $219,033,000 in cash in 2014 is Under Armour’s primary source of cash.
Under Armour generates ample cash from basic operations to finance current operations and to reinvest in the business.
It would appear that Under Armour’s primary use for cash is reinvestment which we see as negative cash flow from investment activities for the acquisition of new assets.
Under Armour’s cash flows have experienced 183% growth from 2013 to 2014. Under Armour’s cash flow position (liquidity) is indicative of a healthy organization and provides Under Armour with flexibility. All of this adds up to good news for managers, stockholders, and creditors.
2. Explain briefly the three most significant differences between net cash provided by operating activities and net income.
Change in Accounts receivable = ($101,057,000)
Change in inventories = ($84,658,000)
Depreciation and amortization = $72,093,000
3. Did Under Armour, Inc., buy or sell more plant assets during 2014 than in the previous two years? How can you tell?
Yes, Under Armour purchased more plant assets during 2014 than in the previous two years.
2014 Purchases of property and equipment = $140,528,000
2013 Purchases of property and equipment = $87,830,000
2012 Purchases of property and equipment = $50,650,000
4. Identify the largest item in the financing activities section of the Consolidated Statement of Cash Flows. Explain the company’s probable reasoning behind this activity.
Proceeds from term loan = $250,000,000
It would appear that Under Armour is taking on long-term debt to fund expansion, possibly through acquisition.
5. Evaluate Under Armour, Inc.’s, overall performance for 2014 in terms of cash flows. Be as specific as you can. What other information would be helpful to you in making your evaluation?
Under Armour’s net cash flows from operations showed positive growth from 2012 to 2014.
Under Armour’s strong net cash flows allowed them to invest in the business by acquiring assets and strengthen their balance sheet by paying down long-term debt without taking on new debt.