Section 1: Companies Selection
1. Name of Companies chosen
A : Nike INC
Beaverton,
Oregon,
United States
B : Under Armour INC
1020 HULL STREET
3RD FLOOR
BALTIMORE, MD 21230
Selection Criteria:
• We analysed these companies as a result of our interest in Sports apparel industry
• They are both well positioned against one another.
• Investment in one’s health via sports and physical activites have become the norm in the current scenario rather than seek medical help later. We wanted to see how much it is reflecting on the related companies’ fiscal reports
• Under Armour is the lesser known of the two when compared on a global scale. We wished to see how well they are positioning themselves against the global giant.

Section 2: Introduction
1.Information in detail
A: NIKE INC
• Industry : Apparel – Athletic / Gear maker
• Nature of business: Development, marketing and distribution of branded performance apparels, footwear and related accessories for men, women and youth.
• Products’ Key categories: Running Shoes, NIKE basketball, JORDAN brand, Football(Soccer), Men’s training, Women’s Training, Action sports, Sportswear, Golf
• Website(relating to Annual reports):
• Apart from the US, Nike’s revenue flow from foreign countries account for 53% of its fiscal revenue. Over its conventional network it also sell through e-commerce websites of 40 countries outside of US.
• Chairman: Mr. Mark G. Parker
• Current CEO: Mr.Mark G. Parker

B: UNDER ARMOUR INC
• Industry : Apparel – Athletic / Gear maker
• Nature of business: Development, marketing and distribution of branded performance apparels, footwear and related accessories for men, women and youth.
• Products’ Key categories:
o Apparel : HEATGEAR, COOLGEAR & ALLSEASONGEAR
o Footwear: Offerings for Running, Basketball, Performance training and outdoor wear
o Accessories: Athletic performance gloves, bags and headwear
• Website(relating to Annual reports):
http://investor.underarmour.com/annuals.cfm
• Apart from the US, Under Armour’s revenue flow from foreign countries accounted for 15.4% of its fiscal revenue. It has its presence in North America including Canada; EMEA – Europe, Middle east and Africa; Asia-Pacific and Latin America.
• Chairman: Mr. Kevin A.Plank
• Current CEO: Mr.Kevin A.Plank
Market Scenario:
A: Nike Inc
• Stock Exchanges Traded: NYSE, NASDAQ
• Ticker symbol: NKE
• Current Stock Price: $55.61 as on 28 Apr 2017, 7:56PM, GMT-4
• 52 Week - High: $60.33 Low: $49.01
B: Under Armour Inc
• Stock Exchanges Traded: NYSE, Class A
• Ticker symbol: UAA
• Current Stock Price: $21.49 as on 28 Apr 2017, 7:56PM, GMT-4
• 52 Week - High: $43.08 Low: $17.05

Section 3
OVERVIEW OF ANNUAL REPORT
A: NIKE INC
Chairman’s address :-
Nike Inc decided not to issue a separate Chairman’s address to shareholders but instead to include the report in FORM 10K issued to SEC. Excerpts from the report show the following
Nike Inc demonstrated the power of its portfolio to deliver continued growth and expanding profitability. At the end of last fiscal, Nov 2015, Nike had announced a stock split of both its CLASS A and CLASS B stock in the form of 100 per cent stock dividend payable on Dec 23, 2015. Nike’s revenues grew by 6% to $32.4 billion in fiscal 2016, gross margin expanding by 20 basis points, Net income increased by 15% and diluted earnings per common income share also grew 17% to $2.16. EBIT grew by 10% driven by revenue growth and gross margin expansions while the expenses were kept flat as a percent of revenues. This growth can be primarily attributed to
• Innovative performance and sportswear products with the incorporation of proprietary technology across products like NIKE Air, Flyknit, Dri-fit, Flywire, Zoom and Lunarwire.
• Deeper branded connections with endorsements by high profile brand ambassadors
• Stronger retail representation categorywise both online as well as NIKE owned and retail partners
While foreign currency markets continue to show volatility, our commitment to effective management of business towards achievement of financial growth over the long term shall continue by execution of operational strategies outlined above.
a) Who is responsible for the preparation and integrity of the financial statements?
Management of NIKE INC is responsible for the preparation and integrity of the financial statements.

b) Does the company maintain a system of internal controls? Why?
NIKE Inc Management has setup and maintains a system of Internal controls to provide reasonable assurance about the reliability of the financial statements in accordance with US GAAP. Apart from maintenance of proper transaction records, it controls unauthorized acquisitions or dispositions of company’s assets as well as detect fraud/manipulation by the collusion of company personnel including the management.

c) Does the company have an audit committee? What is its purpose?
Nike has a audit committee which serves the purposes of appointing independent audit firm and reviewing the scope and results of the annual audit, the effectivessness of the accounting system as well as other matters relating to NIKE’s financial affairs

d) What is the name of the independent public accountant (auditor)?
PriceWaterhouse Coopers LLP is the independent public accountant.

e) According to the auditor’s report on the financial statements, what is the auditor’s responsibility?
The auditor’s responsibility as stated under the auditor’s report includes expressing opinions in these financial statements, the financial schedules and on the company’s internal controls over the financial reporting based on their audit

f) According to the audit report, what is an audit?
As per the report, An audit is to plan and perform audits to obtain reasonable assurance that the financial statements are free of material misstatements and whether internal controls were maintained in all material aspects.

g) Summarize the auditor’s opinion.
In the independent auditor’s opinion, the financial statement listed under the report presented fairly well, in all material aspects, NIKE INC’s and its subsidiaries’ financial positions and the result of their operations were in conformity with generally accepted accounting principles of US.
B: Under Armour Inc:
Chairman’s address – UNDER ARMOUR INC :
Under Armour Inc decided to include a management’s statement under Form 10K than a chairman’s address to shareholder. Excerpts from the statement
We are a leading developer, marketer and distributor of branded performance apparel. Our products provide an alternative to traditional products as we continue to engineer moisture wicking fabrications designed to provide apparel for every climate.
Our net revenues have grown from $1834.9 million in 2012 to $4825 million in 2016. Financial highlights for fiscal 2016 include
• Increase in net revenues by 22% over 2015
• Wholesale and direct consumer sales rose by 19% and 27%
• Gross margin decreased by 170 basis points as compared to fiscal 2015
• Selling, general and administrative expenses grew by 22% as compared to 2015
We continue to expand our scope of business but are evaluating our cost structures and strategic resource allocation and prioritizations decisions to provide for a better structure for the growing potential of the business of performance apparel.

a) Who is responsible for the preparation and integrity of the financial statements?
Under Armour’s Management is responsible for the preparation and integrity of the financial statements.

b) Does the company maintain a system of internal controls? Why?
Under Armour Inc Management setup a system of Internal controls over financial accounting based on the framework in internal control – Integrated framework issued by COSO in 2013. It provided a basis for an evaluation of the documentation of controls, evaluation of design effectiveness of the controls, operating effectiveness of controls and a conclusion of this evaluation.

c) Does the company have an audit committee? What is its purpose?
Under Armour has an audit committee. The committee is responsible for much of the risk oversight management. Apart from that it has to oversee the legal and regulatory compliance program and the internal audit function.

d) What is the name of the independent public accountant (auditor)?
PriceWaterhouse Coopers LLP is the independent public accountant.

e) According to the auditor’s report on the financial statements, what is the auditor’s responsibility?
The auditor’s responsibility as stated under the auditor’s report includes expressing opinions in these financial statements, the financial schedules and on the company’s internal controls over the financial reporting based on their audit

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