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An End Zone Spelled IPO
Apparel Firm Under Armour Poised to Break for Goal Line

By Terence O'Hara
Washington Post Staff Writer
Saturday, August 27, 2005

University of Maryland football alum Kevin A. Plank's sweat equity is about to be turned into real money.

Under Armour Inc., which began in 1995 as Plank's quest to develop the perfect shirt for perspiring athletes and became an unlikely upstart in the $35 billion-a-year sports apparel industry, registered to become a public company yesterday. The Baltimore-based firm plans to sell up to $100 million in stock in a deal that will make Plank, his brother and several close business associates multimillionaires.

Given the success of several initial public offerings of specialty apparel makers and retailers in the past year, industry analysts said there should be ample investor appetite for Under Armour. It also helps that the company has developed a widely known brand in professional sports circles, built around high-tech fabrics designed to wick sweat away from the skin.

While major sports apparel makers such as Nike Inc. and Reebok International Ltd. have developed their own, similar products, Under Armour's rocket-like growth since 2000 has established it as a leader in the sector, said Richard D. Hastings, a senior retail analyst at Bernard Sands LLC.

"Under Armour has become a brand unto itself," Hastings said. "There's not a lot of natural competition in the high-tech sports apparel business that Under Armour helped build. Under Armour has been a glamour story in this business for a few years."

Under Armour revenue grew from $5.3 million in 2000 to $242.2 million in the 12 months ended June 30, a compounded annual growth rate of 133 percent. And unlike many fast-growing, young companies that sought to go public in the past decade, Under Armour has been profitable since at least 2002. It earned $4.3 million in the first six months of the year.

Company officials, through a spokesman, declined to comment, citing Securities and Exchange Commission rules.

The timing of Under Armour's IPO is fortuitous. Hastings said that worries about inflation and interest rates haven't dampened investor appetite for new stocks, and the number and size of IPOs so far this year have held relatively steady from 2004. While the growth of sports retailing, with athletic shoes as its dominant element, has slowed this year, demand for Under Armour's brand of clothing has accelerated, Hastings said. From its original, tight-fitting jersey, it has branched out into all manner of clothing, from outerwear to socks and hats, each bearing its distinctive X-like logo.

Further, some of the best-performing IPOs this year involved three mid-size specialty apparel makers, including Citi Trends Inc., which sells the popular Phat Farm line of clothing.

Unlike many of the IPOs that have come to market this year, Under Armour is a relatively straightforward company, not only in terms of its product but also on balance sheet. Under Armour doesn't have a large outside equity partner, such as a venture capital firm or private equity fund. Its growth has been financed largely the old fashioned way: beginning with Plank's credit card, then small-business loans, and in recent years by bank loans.

A walk-on to the Maryland football squad -- he eventually became special teams captain by the time he graduated in 1996 -- Plank sweat a lot and chafed at the cotton T-shirts he wore under his pads during late-summer practices.

"Like everyone else on the team, I'd have to change it after warm-ups, at halftime and sometimes on the sidelines," Plank told The Washington Post's Sunday Source section in February. "I thought there should be something better, so I set out to develop it."

He found an existing lightweight fabric that carried moisture away from the skin so it could evaporate more freely. After graduating, he made 500 shirts out of the material and sold them out of the back of his car.

He racked up $40,000 in credit card bills before he got his first break: selling 200 shirts to the Georgia Tech football team for $12 a piece. He worked his contacts in professional sports and by 1997, both the Green Bay Packers and New England Patriots were wearing his gear in the Super Bowl. The logo got flashed to the biggest television audience in America.

"The buzz about Under Armour spread through the locker rooms," Plank said.

That buzz built steadily, helped by appearances on the arms and necks of professional baseball and football players. It even appeared on Jamie Foxx's skullcap and jock strap in the 1999 movie "Any Given Sunday."

Plank boasted earlier this year that in 2004, Under Amour had an 80 percent market share in the "performance apparel" segment of the sportswear industry.

Plank and his brother, Scott, control more than 50 percent of the company's stock, and various insiders control about 30 percent more. The only outside equity player in Under Armour is Rosewood Capital, a San Francisco venture capital firm that owns just under 10 percent.

Plank's tight control over the company won't end after the IPO. Following the IPO, the company will have Class A and Class B stock. Class A shareholders, which are being offered to the IPO investors, will have one vote. Class B shareholders will have 10 votes. And all the Class B stock will be owned by Kevin Plank.

The number of shares sold and their price hasn't been determined, nor has the company revealed if any insiders will be selling their shares in the IPO.

Other insiders include A.B. "Buzzy" Krongard, the former number-three person at the CIA. Krongard, a Baltimore native, was chief executive of the Alex. Brown & Sons investment bank, before its sale to Bankers Trust Corp. in 1997.

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