Under Armour Inc. in an 8K filing Monday said Kevin Plank, founder, executive chairman and brand chief, and David Bergman, CFO, have received a “Wells Notice” from the Securities and Exchange Commission (SEC) regarding the company’s questionable accounting practices covering Q315 to Q416.
Under Armour said in the 8K, “The Wells Notices relate to the Company’s disclosures covering the third quarter of 2015 through the period ending December 31, 2016, regarding the use of “pull forward” sales in connection with revenue during those quarters. A pull forward generally includes a customer sale that is executed earlier than originally planned. Specifically, the SEC Staff is focused on the Company’s disclosures regarding the use of pull forward sales to meet sales objectives. The SEC Staff has not alleged any revenue recognition or other violations of generally accepted accounting principles relating to that or any other period.
“A Wells Notice is neither a formal charge of wrongdoing nor a final determination that the recipient has violated any law. The Wells Notice informed the Company and the Executives that the SEC Staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Company and each of the Executives that would allege certain violations of the federal securities laws.
“The Company and the Executives maintain that their actions were appropriate and intend to pursue the Wells Notice process, which will include the opportunity to respond to the SEC Staff’s position, and also expect to engage in a dialogue with the SEC Staff to work toward a resolution of this matter.”
In November 2019, The Wall Street Journal reported that federal authorities were investigating Under Armour Inc.’s accounting practices that allegedly involved shifting sales from quarter to quarter to make them appear healthier. One source said Justice Department prosecutors were conducting a criminal inquiry into the matter in coordination with civil investigators at the Securities and Exchange Commission.
Under Armour, at the time, said it is cooperating with the Justice Department and SEC investigations. “The company began responding in July 2017 to requests for documents and information relating primarily to its accounting practices and related disclosures,” Under Armour said after The Wall Street Journal published the article. “The company firmly believes that its accounting practices and disclosures were appropriate.”
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