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`Under Armour's (UA) CEO Kevin Plank on Q4 2014 Results Earnings Call Transcript l Seeking Alpha
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`Seeking Alpha 0‘
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`Under Armour's (UA) CEO Kevin Plank on Q4 2014
`Results Earnings Call Transcript
`
`Under Armour lnc. (NYSE:LJA)
`
`Q4 2014 Earnings Conference Call
`
`February 4, 2015 5:00 PM ET
`
`Executives
`
`Tom Shaw — Director Investor Relations
`
`Kevin Plank — Chairman and Chief Executive Officer
`
`Brad Dickerson — Chief Financial Officer
`
`Analysts
`
`Omar Saad—Evercore ISI
`Camilo Lyon — Canaccord Genuity
`
`Jim Duffy - Stifel
`
`Michael Binetti — UBS
`
`Eric Tracy — Janney Capital Markets
`
`Operator
`
`EXHIBIT
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`- 0
`‘ ‘U5
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`1,‘ ‘
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`Good day ladies and gentlemen and welcome to the Under Armour, Inc. Fourth Quarter Earnings Webcast and
`Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer
`session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being
`recorded.
`
`I’d like to introduce your host for today’s conference Mr. Tom Shaw, Director of Investor Relations. Sir, you may begin.
`
`Tom Shaw
`
`Thanks. Good afternoon to everyone joining us today's fourth quarter conference call. During the course of this call,
`we'll be making projections or other forward looking statements regarding future events or the future financial
`performance of the company. We wish to caution that such statements are subject to risks and uncertainties that could
`cause actual events or results to differ materially. These risks and uncertainties are described in our press release and
`in the Risk Factors section of our filings with the SEC. The company assumes no obligation to update fonivard looking
`statements to reflect events or circumstances afterthe date on which the statement is made orto reflect the
`occurrence of unanticipated events.
`
`Joining us on today's call will be Kevin Plank, Chairman and CEO, who will provide an overview of our business
`including today’s acquisitions of Endomondo and MyFitnessPa|, followed by Brad Dickerson, our Chief Financial
`Officer, who will discuss the company's financial performance for the fourth quarter and full year 2014, followed by an
`update to our 2015 outlook. Afterthe prepared remarks, Kevin and Brad will be available for a Q&A session. Finally, a
`replay of this teleconference will be available at our website at approximately 8:00 p.m. Eastern Time today.
`And with that l’ll turn it over to Kevin Plank.
`
`Kevin Plank
`
`Thanks, Tom and good afternoon everyone. Today, we reported outstanding financial results for 2014.
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`year in almost every aspect of our business, enabling us to continue our streak and out 19 consecutive quarters of
`revenue growth over 20% and five consecutive quarters of 30 plus percent growth.
`
`Heading into 2015, the confidence we have in our apparel and footwear business has never been higher. Our execution
`never better, and our ambition never stronger. We also announced the formation of the world’s largest Digital Health
`and Fitness Community with the acquisitions of Endomando and MyFitnessPa|, to supplement our existing
`lVlapMyFitness and Under Armour record platforms to create Under Armour Connected Fitness.
`
`We believe this positioned Under Armour to meaningfully benefit as the world of technology and health and fitness
`intersect, creating new ways of connecting with athletes, building equity for our brand and additional levels of trust with
`our consumers.
`
`I want to spend a few moments, covering how our performance this past year will inform how we will grow our
`So first,
`business in 2015 and beyond. And then spend some time on the future state of Under Armour, and how the
`acquisitions we announced earlier this afternoon will help ensure two things. That we reach our consumer in a manner
`they expect now and in the future and that we continue to grow our business in the manner our shareholders expect as
`well.
`
`Crossing the $3 billion revenue mark in 2014 was an important milestone for our brand, and we did so with the most
`balanced growth in our history. And while a lot of today’s conversation will be about new growth drivers. We had a
`tremendous year in our core apparel business, growing total apparel revenues by more than half a billion dollars. The
`growth was across all categories and genders across ourwholesale and direct businesses, and new categories and
`established ones, and also across geographies.
`
`We brought a new dimension to our brand in 2014 and laid the foundation for continued growth in women’s with our,
`WILL WHAT I WANT campaign. We continue to drive innovation in premium pricing throughout our North American
`Apparel business with large platforms like Co|dGear Infrared, Charged Cotton and Storm, and in key categories like
`training, outdoor, golf, and women’s studio. We are focused on gaining additional floors base in these categories with
`our key wholesale sporting goods partners through improved merchandising and key initiatives,
`like reinvigorating our
`core performance training apparel with the introduction of Armour. Our reengineered base layer featuring enhanced
`ventilation.
`
`I
`
`In addition, we see growth with our partners in department store channel as we build out broader businesses there in
`women’s and kids. There are multiple parts to our apparel growth story for 2015, but they are consistent with what
`we've been and planning and executing against for the past 21 quarters and in each of them we’ve driven 20 plus
`percent growth in our core Apparel business.
`
`We will continue to built out large platforms, charge better assortments and strategically broaden our wholesale
`distribution in the right businesses. Accompanying that growth with our wholesale partners and our continued focus on
`a direct consumer business where we grew 32% coming in at just under $1 billion for the full year. We saw strong
`growth in our Factory House stores as we increased our assortment of Footwear and benefited from our new Brand
`House stores in Tysons Corner and SoHo in New York.
`
`In Q1, we are opening our largest Brand House yet Michigan Avenue in Chicago, where we will highlight the
`innovation, localization and specialization of product that we can only do in a 30,000 square foot Brand House
`environment. And you also see our Connected Fitness initiatives integrated into the stores, as well. We know from our
`experience in the existing Brand House stores especially in SoHo that we are better positioned to tell great footwear
`stories and we'll expand on that as we build out new doors in 2015 and beyond.
`
`Our footwear business help accelerate our overall growth in 2014 with revenues up 44% for the year to $431 million. As
`we've been discussing on these calis, we are most proud of the foundation and the team we are building in our
`footwear category, as we continue to gain share and drive innovation in large categories like running and basketball.
`We significant invested in footwear leadership in 2014 and the strength of the Under Armour brand continues to bring
`consumers to our Footwear, while our focus on cushioning and fit is helping drive market share gains.
`
`This past weekend Tom Brady won his fourth Super Bowl and third MVP award wearing red and white run n gun Under
`Armour cleats. And next week the biggest star in Under Armours basketball universe and leading vote getter for the
`NBA All Star Game. Stephen Curry will be in New York City to debut his first signature shoe, the Curry One. We’ll be
`telling the basketball world about it and we introduce our holiday one commercial next week starring Stephen and a
`very special surprise guest. This will be the largest campaign in our company's history, so big in fact that there will be a
`second part with for the campaign to support the introduction of the SpeedForm Gemini running shoe.
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`With the Curry One retailing at a $120 and the SpeedForm Gemini at $130, we are creating a sustainable platform for
`growth in footwear by focusing our premium innovative product for the best athletes in the world and will look back on
`2014 as a pivotal year in the development of what may become our biggest engine for growth.
`
`The last piece of 2014 that I'll discuss also happens to be the part of our business where we saw the greatest increase
`in growth, international. Revenues grew 96% to $260 million in 2014 as we open new markets around the globe.
`Expanded our wholesale account base and continue to build out our international brand house based with 68 brand
`house stores open outside the United States enrolling out underarmour.com in multiple new markets and languages.
`
`As we head into another strong year of growth in our global business, we'll continue to invest in both local and global
`assets like our recent signing of Andy Murray, the number four rank tennis player in the world and Australian open
`finalist. We will strategically grow with our wholesale partners around the world, continue to build out the international
`brand house stores, going from 18 stores at the end of 2013 to 68 stores in 2014 and adding more than 100 doors this
`year. This growing global presence enables us to bring the full Under Armour story to our consumers outside the United
`States and illustrate the true breadth of our product innovations.
`
`So summing up the year, 2014 was a period of great accomplishments for the Under Armour team and great an
`example of what's possible we're successfully anticipating the needs of our consumer. Our focus in 2015, as it has
`been since Under Armours inception, is on making alt athletes better and going well beyond their expectations. That
`philosophy enables us to focus on what is written on the white board in my office about everything else. Do not forget
`to sell shirts and shoes. That is job one for our team in 2015 and will always be the foundation on which we grow the
`Under Armour brand's global footprint.
`
`I want to transition now and provide some color on how the acquisitions we announced earlier today
`That being said,
`accomplish two very important things. First, the immediate scale we gain by adding Endomondo and MyFitnessPal to
`the MapNlyFitness in UA Record platform, positioning UnderArmour as the world's largest digital health and fitness
`community.
`
`And second, how this investment would enable us to better anticipate our consumers‘ needs, drive more inform
`purchase decisions and authentically build brand loyalty by helping our consumers lead a healthy life, So first the facts.
`Early last month we purchased Endomondo the Copenhagen based company that is still one of the largest global
`connected fitness communities, with approximately 20 million registered users, most of whom live in Europe.
`Endomondo provides the perfect strategic oomplement to the activity and work out tracking we currently have in our
`existing digital platform of MapMyFitness in UA Record.
`
`And with today's announcement to acquire MyFitnessPal, we have fim1ly established our Connected Fitness platform
`as the leading provider of everything in athlete needs to live a healthier lifestyle. Based in San Francisco,
`MyFitnessPal is the leading resource for healthy living and nutrition with over 8 million registered users and world class
`nutritional resources. By bringing this established leader into our Connected Fitness platform, we can offer the full suite
`of infonnation activity and workout tracking as well as nutritional expertise to truly make all athletes better. So what do
`we brought and more importantly why?
`
`For starters with MyFitnessPal and Endomondo added to our existing platform, we now have the world's largest digital
`health and fitness community with a combined audience among all our platforms of over 120 million unique people.
`For perspective, there are approximately 20 digital communities in the world with more than a 100 million members to
`the first thing to note is the sheer scale that we now bring to bear.
`
`I give you a sense of that scale, one out of every five people in the United States has downloaded one of the apps in
`our platfonn. Collectively, the three sites grew 46% last year, adding 40 million members and we continue to add over
`100,000 registered users everyday. We have great geographic balance with 57% of our 120 million registered users in
`North America and the balance outside the United States. We also have 72 million women registered on our platform,
`providing another great opportunity for us to grow our brand presence with both female athletes and athletic females.
`
`Second, owning the world's largest digital health and fitness platform provides an incredibly unique opportunity for
`Under Armour to build a different type of relationships with our consumer over the long term. Health and fitness is a
`part of your life from childhood onwards. And our goal in aggregating these three platfonns is to make you better by
`making your health and fitness really easy to understand.
`
`The truth is that you know more about how your car is performing than your own body. And we see the potential to
`inform and inspire our consumer through these assets and its impact on our ability to sell shirts and shoes as
`unparalleled in our industry. We build a $3 billion business by making great product and telling great stories, but there
`is nothing that says we must follow our competitors’ playbook especially when the way consumers digest media and
`
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`make their purchase decisions is undergoing such dramatic shifts.
`
`The net result of the shift is that our consumer is demanding more from athletic brands and just making shirts and
`suits. We embraced those higher expectations and believe these investments position us better than anyone in our
`industry to truly make all athletes better.
`
`At the end of the day, the math is pretty simple. The more active someone is the more likely they are to buy athletic
`apparel and footwear. And for the month of January, the four sites in our Connected Fitness platform, MapMyFitness,
`Endomondo, MyFitnessPal and UA Record recorded more than 100 million workouts and added 4.2 million new unique
`users. So how do we oorne to this decision to invest in these communities and strategically add another tool and how
`we interact with our consumer’?
`
`This chapter in the Under Armour story started at the NFL Combine in 2011, where we debut the Armour39, the first
`perfonnance apparel that incorporated biometric measurements and was used to track the performance of top NFL
`prospects. We saw the potential and measuring performance and how our consumers could benefit from it. At the
`same time, a lot of different trackers are wearable technologies started to hit the market. And we were quick to realize
`that our core competencies lied in making shins and shoes and understanding how to best incorporate technology to
`improve athletes’ lives.
`
`it wasn't as much about the hardware as there would always be someone else
`We also realize that for Under Armour,
`working in a lab or garage, someone who might crack the code on the next great device. And that we can create the
`most value by working closely with partners, who understood the power of the Under Annour brand and our knowledge
`of the athletes. At the same time, we started to understand that the true value for an athletic brand was actually in the
`community. And that crystallize for us when we started the conversation with Robin Thurston that led us to acquiring
`MapMyFitness in December of 2013.
`
`As we started working with Bob and his team in Austin, Texas, it only reinforced our belief that the value is in the
`community, especially one where the user is not just looking at their friends pictures, which providing you with data
`that empowers you to come back to them with an informed point of view to help improve their health and fitness. We
`understood that there was tremendous value in becoming that trusted brand as a setout to assemble all the elements
`that would enable Under Amiour to be the one place to access all of that information.
`
`From a geographic view, Endomondo was the obvious choice to complement MapMyFitness. Their community of 20
`million users most of whom are based in Europe provides a great opportunity for us to learn from and expand our
`ability to interact with the consumers who are still relatively new to us. With MyFitnessPal, their expertise and the
`nutritional space positions us to have a complete picture of our athletes and rounds out the data from which we will be
`able to provide the most informed and personalized input on our users health and fitness.
`
`So how will all this come together’? All the three existing platforms MapMyFitness, Endomondo and MyFitnessPal will
`leave distinct platforms under the Under Armour Connected Fitness banner, but we have a longer term point of view in
`vision and it's found in UA record, the community we iaunched last month at the Consumer Electronic Show in Las
`Vegas. Over time, we believe UA record will eventually become the daily destination dashboard, aggregating all you
`want to know about your general fitness. sleep, steps, activity level and yes nutrition.
`
`We know that we are on the verge of a marketable developments and wearable technology, some of which are being
`worked on across the street and in our own innovation lab right now. And our recently announced partnership with HTC
`will enable us to help develop statement level products that demonstrates the full capabilities of UA record, but by
`focusing on an open platform and being device diagnostic, we believe we are the best positioned among all athletic
`brands to benefit from the evolution of wearables.
`
`So let me sum up with this investment we will do for Under Armour and why we believe it’s critical to our ability to sell
`the shirts and shoes going fonvard. Everything about our consumer is rapidly evolving. The way they digest media,
`what influences their purchase decision, how and where they buy things. We see that everyday in our business, for
`example this past December, we did 77% more e commerce business on a mobile device than we did in December of
`just the year prior in 2013. Brands that do not evolve
`that do not offer their consumers nothing more than product will
`be hard for us to complete in 2015 and beyond.
`
`We fully understand a massive shift and how consumer will intersect with that favorite brands. And these acquisition
`firmly position us on the leading edge of that new paradigm with the world’s largest digital health and fitness
`community, we now have a unique opportunities to build equity and consumer loyalty over the long term. We will be
`able to provide the most complete measure of a persons health and fitness and become the trusted brand that will
`help to drive not only e commerce, but also long term value for our shareholders.
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`Are we ready for this next step? Two years ago,
`I would have had the answer no. But since that time, we have
`assembled an incredible pool of talent, led by three entrepreneurs who had literally helped to create the entire category
`of Connected Fitness, Robin Thurston and the founder of MapMyFitness; Mette Lykke, the founder and CEO of
`Endomondo; and Mike Lee, the founder and CEO of MyFitnessPal.
`
`Prior to the MapMyFitness acquisition, we had four engineers working in our digital team. With the two acquisitions
`announced today that number is now over 300, more important in the sheer numbers. We now have three of the best
`minds in the space, all adept [ph] that navigating in a rapidly shifting market and all with extensive experience,
`understanding the needs of their communities.
`
`Robin is going to run our overall Connected Fitness Business and reporting to him will be [indiscernible], who’|| drive
`our international business and initiatives; and Mike Lee will be running our North American business. This breadth of
`experience will enable our core product leadership to focus on the business of selling shirts and shoes, as we build out
`these new growth platform that will position Under Armour at the center of the world's health and fitness activities for
`years and years to come.
`
`And with that,
`
`l’ll hand it overto Brad.
`
`Brad Dickerson
`
`l’ll now spend sometime discussing our fourth quarter and full year 2014 financial results, followed by
`Thanks, Kevin.
`updated outlook for 2015. Our net revenues for the fourth quarter of 2014 increased 31% to $895 million. For the full
`year net revenues increased 32% to $3.08 billion, which compared to our most recent full year guidance of $3.03
`billion.
`
`As Kevin outlined, this $3 billion milestone was comprised of strong results across all of our growth drivers with Apparel
`up 30%, Direct to Consumer up 32%, Footwear up 44%, and International up 96%.
`
`Focusing on the fourth quarter, we grew Apparel category 30% to $708 million compared to $546 million in the prior
`year’s quarter. Similar to the third quarter, our platform innovations of Storm, Co|dGear Infrared and Charged Cotton
`were key volume drivers across the category, while new innovation like this year’s Magzip showcased our ongoing
`ability to bring value to the consumer. Areas of particular strength in Apparel include training, golf, outdoor, and studio.
`
`Fourth quarter Footwear net revenues increased 55% to $86 million from $55 million the prior year, representing
`approximately 10% of net revenues for the period. We continue to see success in running footwear across a broader
`price spectrum, including the $100 Speedform Apollo, traveling markets share gains has been our core sporting
`distribution. Basketball also continued to gain momentum, most notably around the $125 ClutchFit Drive. These
`categories along with our ongoing strength in areas such as cleated and slide position Under Armour as the number
`two overall footwear brand in some of our top wholesale accounts in 2014.
`
`Our accessories net revenues during the fourth quarter increased 22% to $79 million from $65 million last year. Growth
`during the quarterwas primarily driven by headwear offerings, and gloves.
`
`Our global Direct to Consumer net revenues increased 27% for the quarter, representing approximately 38% of net
`revenues. Vlfithin North America, our Factory House store footage grew 17% year over year. This growth reflects the
`total of 125 Factory House stores at the end of the year, up 7% from the end of 2013, as well as the upsizing of 14
`existing locations during the year. On the full price side, we remained at 5 Brand House stores in North America.
`
`In our e commerce channel, where we continue to see the migration of traffic from desktop to mobile devices, we were
`encouraged by the conversion improvements from our new responsive site launched at the end of September. We also
`followed up our third quarter launches of global e commerce sites in the UK, Germany and France with the fourth
`quarter debut of our site in Singapore, which is our first site in Southeast Asia. International net revenues increased
`123% to $82 rniliion in the fourth quarter and represented 9% of total net revenues. In EMEA region, we saw
`continued strength in our three key markets in Europe: The UK, Gennany, and France and commenced our new
`distributor agreement covering the Middle East.
`
`In Asia Pacific, we remain focused on accelerating growth at both wholesale accounts and distributor including partner
`store opening throughout Greater China and Southeast Asia. Finally in Latin America, our business benefited from the
`early 2014 conversion of our Mexico distributor to an Under Armour subsidiary and our market expansions into Brazil
`and Chiie. This included our first South American brand house storage opened in Santiago, Chile during the fourth
`quaden
`
`Moving on to margins. Fourth quarter gross margins contracted a 140 basis points to 49.9% compared with 51.3% in
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`the prior year’s quarter. Three primary factors contributed to this performance during the quarter. First as discussed in
`our prior call, our sales mix adversely impacted gross margins by approximately 90 basis points for the period, primarily
`reflecting a higher mix of international net revenues including the introduction of new lower margin distributor
`businesses during the fourth quarter.
`
`Second, the strengthening of the U.S. dollar negatively impacted gross margins by approximately 20 basis points for
`the period and finally higher freight costs to better meet consumer demand, negatively impacted gross margins by
`approximately 20 basis points in the period. Selling, general and administrative expenses as a percentage of net
`revenues levers 330 basis points, 33.6% in the fourth quarter of 2014 from 36.9% in the prior years period. As a
`reminder, we incurred a higher incentive compensation expenses in the last year’s fourth quarter which was a primary
`contributor of leverage in each of ourfour SG&A buckets.
`
`Additional SG&A details are as follows. First, marketing cost decreased to 8.4% of net revenues forthe quarter from
`8.9% in the prior period. Second, selling cost decreased to 11% of net revenues for the quarter from 11.6% in the prior
`period. Third, product innovation and supply chain cost decreased to 8.4% of net revenues forthe quarter from 9% in
`the prior year period. And finally, corporate services decreased to 5.8% of net revenues for the quarter from 7.4% in
`the prior period, inclusive of clothing costs for the MapMyFitness acquisition in the prior year period.
`
`Operating income for the fourth quarter increased 49% to $146 million, compared with $98 million in the prior year
`period. For the full year operating income increased 34% to $354 million, compared to our most recent guidance of
`$348 million. Operating margin expanded 190 basis points during the quarter to 16.3%, compared to 14.4% in the prior
`year period. For the full year, operating margin expanded 10 basis points to 11.5%, compared to 11.4% in 2013.
`
`Interest and other expense for the fourth quarter increased to $4 million, compared with $1 million in the prior year
`period, primarily reflecting the negative impacts of foreign currency along with increased interest expense from our
`additional tenrr debt. Our fourth quarter tax rate of 38.3% was unfavorable to the 34% rate last year, primarily driven by
`the timing of a state tax credit received in the fourth quarter of 2013. Our full year effective tax rate of 39.2% was
`higher than the 37.8% rates in 2013, primarily due to increased international investments and the lacking of the state
`tax credit.
`
`Our fourth quarter, net income increased 37% to $88 million, compared to $64 million in the prior year period. Diluted
`earnings per share increased 35% to $0.40 compared to $0.30 in the prior year period. Full year diluted earnings per
`share increased 27% to $0.95, compared to $0.75 in 2013.
`
`On the balance sheet, total cash and cash equivalents at year end increased 71% to $593 million, compared with $347
`million at December 31, 2013. Total debt increased to $284 million from $153 million at December 31, 2013. Both, our
`cash and debt positions reflecting additional $100 million term loan drawn during the fourth quarter used primarily for
`the closing on the $85 million Endomondo acquisition in early January. inventory at year end increased 14% to $537
`million, compared to $469 million at December 31, 2013.
`
`Looking at our cash flow our investment and capital expenditures was approximately $59 million forthe fourth quarter
`and approximately $145 million for 2014. Now moving onto 2015. We have three factors driving our updated outlook.
`First, the impact of the two new Connected Fitness businesses we are acquiring; second, the negative impact of the
`strengthening dollar on our international results; and third, the continued strength of our existing business.
`
`Starting with revenues; we are maintaining our prior guidance of approximately 22% net revenue growth. It should be
`noted this is upper by higher number compared to three months ago as we exceeded our most recent 2014 target by
`nearly $55 million. This growth rate takes into account the strengthening of the U.S. dollar over the past 90 days,
`which has negatively impacted our 2015 net revenues forecast by approximately 1 percentage point from our prior
`guidance. However, revenues from the Connected Fitness acquisitions are expected to largely offset this currency
`impact.
`
`As stated in our previous guidance, we expect solid growth across all of our growth drivers led by continued
`outperformance in our footwear and international businesses. We expect the year over year growth rate across each of
`the quarters in 2015 to be relatively consistent except for the fourth quarter were we will be lasting strong international
`growth including new market entries.
`
`Now moving on to operating income, we are now planning 2015 operating income in the range of $397 million to $407
`million, representing growth of 12% to 15%. This change from our prior guidance of operating income growth of 22% is
`largely due to the impact of ourtwo Connected Fitness acquisitions. We estimate a 90 basis point of operating margin
`dilution from these acquisitions mostly within SG&A offset with a slight gross margin benefit. There are three
`components of this.
`
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`First, one time deal closing cost recorded in the first quarter are expected to impact the full year by approximately 20
`basis points. Second, operating losses from the operations of the two businesses we are acquiring are expected to
`impact the full year by approximately 40 basis points. And third, the intangible assets generated from the acquisitions
`will result in non cash amortization charges, which are expected to impact the full year by approximately 30 basis
`points.
`
`The recent strengthening of the US. dollar also has had a negative impact on our 2015 operating income guidance.
`Specifically in our gross margin line as we purchased the majority of our inventory for our international businesses in
`U.S. dollars. This just created an incremental 50 basis points impact operating margins just in the time of our prior
`guidance. We anticipate to offset this currency impact through targeted improvements in gross margin and SG&A.
`
`Our current guidance assumes no further significant strengthening of the U.S. dollar compared to current exchange
`rates. From a gross margin standpoint, we believe we can still generate a modest improvement from last years 49%
`level, despite foreign currency headwinds, even ongoing supply chain opportunities as the year progresses. Relative to
`timing we expect this improvement to be generally consistent throughout the year.
`
`On SG&A we expect expense deleverage mainly driven by the Connected Fitness acquisitions. The rate of SG&A
`expense deleveraged is expected to gradually ease throughout the year from approximately 200 basis point
`deleveraged during the first quarter.
`
`Factors weighing on expenses during the first quarter include higher year over year marketing expenses to support our
`first Brand Holiday of 2015, as well as the one time deal closing cost for the Connected Fitness acquisitions. Below the
`operating line we expect higher year over year interest expense for the funding of