Under Armour 2005 Annual Report Download - page 32

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
Net revenues increased $75.9 million, or 37.0%, to $281.1 million in 2005 from $205.2 million in 2004.
This increase was the result of increases in both our net sales and license revenues as noted in the product
category table below.
Year Ended December 31,
(In thousands) 2005 2004 $ Change % Change
Mens .................................................. $189,596 $151,962 $37,634 24.8%
Womens ............................................... 53,500 28,659 24,841 86.7%
Youth ................................................. 18,784 12,705 6,079 47.8%
Accessories ............................................ 9,409 7,548 1,861 24.7%
Total net sales ...................................... 271,289 200,874 70,415 35.1%
License revenues ........................................ 9,764 4,307 5,457 126.7%
Total net revenues ................................... $281,053 $205,181 $75,872 37.0%
Net sales increased $70.4 million, or 35.1%, to $271.3 million in 2005 from $200.9 million in 2004 as noted
in the table above. The increases in the mens, womens and youth product categories noted above primarily
reflect:
• continued unit volume growth of our existing products sold to retail customers, while pricing of existing
products remained relatively unchanged; and
• new products introduced in 2005 accounted for $29.0 million of the increase in net sales which included
the Metal series, Under Armour Tech-T line and our performance hooded sweatshirt for mens, womens
and youth, and our new women’s Duplicity sports bra.
License revenues increased $5.5 million to $9.8 million in 2005 from $4.3 million in 2004. This increase in
license revenues was a result of increased sales by our licensees due to increased distribution, continued unit
volume growth and new product offerings.
Gross profit increased $40.5 million to $135.9 million in 2005 from $95.4 million in 2004. Gross profit as a
percentage of net revenues, or gross margin, increased 180 basis points to 48.3% in 2005 from 46.5% in 2004.
This net increase in gross margin was primarily driven by the following:
• a 70 basis point increase due to the $5.5 million increase in license revenues;
• a 240 basis point increase due to lower product costs as a result of greater supplier discounts for
increased volume and lower cost sourcing arrangements;
• a 50 basis point decrease driven by larger customer incentives, partially offset by more accurate demand
forecasting and better inventory management; and
• a 70 basis point decrease due to higher handling costs to make products to customer specifications for
immediate display in their stores and higher overhead costs associated with our quick-turn, Special
Make-Up Shop, which was instituted in June 2004.
Selling, general and administrative expenses increased $29.9 million, or 42.7%, to $100.0 million in 2005
from $70.1 million in 2004. As a percentage of net revenues, selling, general and administrative expenses
increased to 35.6% in 2005 from 34.1% in 2004. This net increase was primarily driven by the following:
• Marketing costs increased $8.7 million to $30.5 million in 2005 from $21.8 million in 2004. The
increase in these costs was due to increased advertising costs from our women’s media campaign,
marketing salaries, and depreciation expense related to our in-store fixture program. As a percentage of
net revenues, marketing costs increased slightly to 10.9% in 2005 from 10.6% in 2004 due to the
increased costs described above.
26