Under Armour and UCLA

6,456 Views | 89 Replies | Last: 7 days ago by Bearly Clad
wifeisafurd
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Sebastabear said:

71Bear said:

wifeisafurd said:

is it just Cal and UCLA? If so, wonder why? The contract with UCLA is substantial. Cal's is not. You wonder why Cal even would be on the radar given the size of other UA contracts. Again, I wonder if this reflects on the possibility of no football for the California schools, when everyone else is playing. The money for sponsors is in football. Otherwise, why would Cal be so unprofitable? It is not like UA is paying Cal the big bucks.
Did UA sue Cal? If so, why hasn't that information been made public?

Otherwise, this is "sound and fury, signifying nothing" other than the schadenfreude re: UCLA's problem (just one of many at this particular time). Heck, earlier this year, the AD had to borrow (with interest) $18.9 from the UCLA General Fund to cover the Athletic Dept. deficit.
Not sure I get your point here '71. UA isn't suing Cal - They don't need to. They've just told Cal they aren't going to follow through on their contractual obligations. And yes, I know for a fact that has happened. If anyone is suing anyone (and we are) it's going to be Cal suing UA.

UA's legal position is indefensible. There is zero chance that Cal and UCLA have different force majeure clauses than Notre Dame, etc. These things are boilerplate. They can't pick which contracts they want to terminate because of an act of God affecting the entire world.

To WIAF's speculation that UA is terminating the California schools only because we won't be playing football and everyone else will, I'd note they kept Utah and there is zero chance some Pac-12 schools are going to have a season and others aren't - the conference has already agreed it's all for one in this. If California (the state) goes completely bonkers there are plans to work around that including playing games elsewhere.

But even if that were the case, this decision is premature by several weeks. No one (including Cal and UCLA themselves) know what is happening with football this season yet. UA certainly doesn't have some inside scoop they are using to buttress their position.

This is just a renegotiating ploy. They made a bad deal and don't like it. Let the games begin.
I think your are right it is not football related unless is a threat.

After reading their 1st quarter report, which I encourage you to review, I bet they are threatening those with bad contracts with either restructure the contracts or be terminated in bankruptcy court. Why

Annual revenue was down 23 percent.
Wholesale revenue decreased 28 percent
North America revenue decreased 28 percent
Restructuring and impairment charges were $436 million consisting of $301 million in restructuring and related impairment charges ($298 million in non-cash and $3 million in cash related charges) and $135 million from impairments of long-lived assets and goodwill. (Look out they have a restructure plan already in place).
The quarterly loss was $$590 million and operating loss was $558 million (which should be adjusted for
restructuring losses).
THEY HAVE OVER ONE YEAR OF PRESENT SALES IN INVENTORY.
oskidunker
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Do you mean they have sold a million dollars of Cal -gear or they have not?
Big C
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wifeisafurd said:

Sebastabear said:

71Bear said:

wifeisafurd said:

is it just Cal and UCLA? If so, wonder why? The contract with UCLA is substantial. Cal's is not. You wonder why Cal even would be on the radar given the size of other UA contracts. Again, I wonder if this reflects on the possibility of no football for the California schools, when everyone else is playing. The money for sponsors is in football. Otherwise, why would Cal be so unprofitable? It is not like UA is paying Cal the big bucks.
Did UA sue Cal? If so, why hasn't that information been made public?

Otherwise, this is "sound and fury, signifying nothing" other than the schadenfreude re: UCLA's problem (just one of many at this particular time). Heck, earlier this year, the AD had to borrow (with interest) $18.9 from the UCLA General Fund to cover the Athletic Dept. deficit.
Not sure I get your point here '71. UA isn't suing Cal - They don't need to. They've just told Cal they aren't going to follow through on their contractual obligations. And yes, I know for a fact that has happened. If anyone is suing anyone (and we are) it's going to be Cal suing UA.

UA's legal position is indefensible. There is zero chance that Cal and UCLA have different force majeure clauses than Notre Dame, etc. These things are boilerplate. They can't pick which contracts they want to terminate because of an act of God affecting the entire world.

To WIAF's speculation that UA is terminating the California schools only because we won't be playing football and everyone else will, I'd note they kept Utah and there is zero chance some Pac-12 schools are going to have a season and others aren't - the conference has already agreed it's all for one in this. If California (the state) goes completely bonkers there are plans to work around that including playing games elsewhere.

But even if that were the case, this decision is premature by several weeks. No one (including Cal and UCLA themselves) know what is happening with football this season yet. UA certainly doesn't have some inside scoop they are using to buttress their position.

This is just a renegotiating ploy. They made a bad deal and don't like it. Let the games begin.
I think your are right it is not football related unless is a threat.

After reading their 1st quarter report, which I encourage you to review, I bet they are threatening those with bad contracts with either restructure the contracts or be terminated in bankruptcy court. Why

Annual revenue was down 23 percent.
Wholesale revenue decreased 28 percent
North America revenue decreased 28 percent
Restructuring and impairment charges were $436 million consisting of $301 million in restructuring and related impairment charges ($298 million in non-cash and $3 million in cash related charges) and $135 million from impairments of long-lived assets and goodwill. (Look out they have a restructure plan already in place).
The quarterly loss was $$590 million and operating loss was $558 million (which should be adjusted for
restructuring losses).
THEY HAVE OVER ONE YEAR OF PRESENT SALES IN INVENTORY.

A backlog of inventory? Have they considered lowering their prices on some of their stuff? They could start with the stuff in ASUC. I looked at their Cal jerseys for my son: They were really nice, but the price was ridiculous for a kids' item. I wouldn't pay that amount just on principle.
Cal84
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Under Armor has dramatically underperformed the other athletic clothing companies (Nike, Addidas, Puma, etc.) because they failed to understand that most of that product is now sold as leisure wear. Under Armor instead has focused on performance motivated buyers of said clothing. By not understanding the customer, UAA has seen falling sales and in all probability will be restructuring via bankruptcy. By abrogating its licensing agreements, it saves money and it would expect any lawsuits resulting from said actions to be substantially shielded in bankruptcy.
ColoradoBear
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Big C said:

wifeisafurd said:

Sebastabear said:

71Bear said:

wifeisafurd said:

is it just Cal and UCLA? If so, wonder why? The contract with UCLA is substantial. Cal's is not. You wonder why Cal even would be on the radar given the size of other UA contracts. Again, I wonder if this reflects on the possibility of no football for the California schools, when everyone else is playing. The money for sponsors is in football. Otherwise, why would Cal be so unprofitable? It is not like UA is paying Cal the big bucks.
Did UA sue Cal? If so, why hasn't that information been made public?

Otherwise, this is "sound and fury, signifying nothing" other than the schadenfreude re: UCLA's problem (just one of many at this particular time). Heck, earlier this year, the AD had to borrow (with interest) $18.9 from the UCLA General Fund to cover the Athletic Dept. deficit.
Not sure I get your point here '71. UA isn't suing Cal - They don't need to. They've just told Cal they aren't going to follow through on their contractual obligations. And yes, I know for a fact that has happened. If anyone is suing anyone (and we are) it's going to be Cal suing UA.

UA's legal position is indefensible. There is zero chance that Cal and UCLA have different force majeure clauses than Notre Dame, etc. These things are boilerplate. They can't pick which contracts they want to terminate because of an act of God affecting the entire world.

To WIAF's speculation that UA is terminating the California schools only because we won't be playing football and everyone else will, I'd note they kept Utah and there is zero chance some Pac-12 schools are going to have a season and others aren't - the conference has already agreed it's all for one in this. If California (the state) goes completely bonkers there are plans to work around that including playing games elsewhere.

But even if that were the case, this decision is premature by several weeks. No one (including Cal and UCLA themselves) know what is happening with football this season yet. UA certainly doesn't have some inside scoop they are using to buttress their position.

This is just a renegotiating ploy. They made a bad deal and don't like it. Let the games begin.
I think your are right it is not football related unless is a threat.

After reading their 1st quarter report, which I encourage you to review, I bet they are threatening those with bad contracts with either restructure the contracts or be terminated in bankruptcy court. Why

Annual revenue was down 23 percent.
Wholesale revenue decreased 28 percent
North America revenue decreased 28 percent
Restructuring and impairment charges were $436 million consisting of $301 million in restructuring and related impairment charges ($298 million in non-cash and $3 million in cash related charges) and $135 million from impairments of long-lived assets and goodwill. (Look out they have a restructure plan already in place).
The quarterly loss was $$590 million and operating loss was $558 million (which should be adjusted for
restructuring losses).
THEY HAVE OVER ONE YEAR OF PRESENT SALES IN INVENTORY.

A backlog of inventory? Have they considered lowering their prices on some of their stuff? They could start with the stuff in ASUC. I looked at their Cal jerseys for my son: They were really nice, but the price was ridiculous for a kids' item. I wouldn't pay that amount just on principle.


UA gear is very discounted through national sellers like Amazon, Kohl's, etc. Has been even before covid.

You usually don't find discounts for specialty sports team gear 'onsite'.
wifeisafurd
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Cal84 said:

Under Armor has dramatically underperformed the other athletic clothing companies (Nike, Addidas, Puma, etc.) because they failed to understand that most of that product is now sold as leisure wear. Under Armor instead has focused on performance motivated buyers of said clothing. By not understanding the customer, UAA has seen falling sales and in all probability will be restructuring via bankruptcy. By abrogating its licensing agreements, it saves money and it would expect any lawsuits resulting from said actions to be substantially shielded in bankruptcy.
Well said. Looks like you have written some securities disclosures.
BearSD
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Cal84 said:

Under Armor has dramatically underperformed the other athletic clothing companies (Nike, Addidas, Puma, etc.) because they failed to understand that most of that product is now sold as leisure wear. Under Armor instead has focused on performance motivated buyers of said clothing. By not understanding the customer, UAA has seen falling sales and in all probability will be restructuring via bankruptcy. By abrogating its licensing agreements, it saves money and it would expect any lawsuits resulting from said actions to be substantially shielded in bankruptcy.
Yes.

And by refusing to pay (thus forcing schools to sue) instead of filing for BK right away, they buy themselves some time before the BK filing. Some other companies going down the drain have used that time while stalling the BK filing to let founders/executives siphon off some valuable assets (possibly including huge bonuses for themselves), so that those assets don't get tied up in BK.
Sebastabear
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I think we are a little quick to write UA's obit here. I'm not saying it's impossible this is a bankruptcy play to push off a Chapter 11 filing and allow some payments to be made outside the preference period. But the market is still valuing the equity of UA at $4bn and before Cal and UCLA are taking losses here as general unsecured creditors all of that equity would go to zero. Not what the market currently expects.

I think it's as likely that UA just realized they made a bad deal with UCLA and is terminating their agreement with Cal (sister school, in the same state and same conference) to strengthen their argument that a force majeure had been triggered. It's still a terrible argument mind you but I guess they decided it improves their legal position and saves them a few bucks.

I think the most likely outcome is this is UA's way of renegotiating the contracts because (as was rightly noted) their business in sucking wind and if they can't cut some of their costs they will definitely wind up in bankruptcy eventually.

Guessing we stay a UA school with some restructuring of the contract. That's a pure guess on my part mind you, but I think it's the most likely outcome, Occam's Razor and all that.

Of course that's the rationale part of my brain. The fan part wants to take all my UA gear and burn it in front of their headquarters. May have to look up where that is . . .
dimitrig
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Sebastabear said:

I think we are a little quick to write UA's obit here. I'm not saying it's impossible this is a bankruptcy play to push off a Chapter 11 filing and allow some payments to be made outside the preference period. But the market is still valuing the equity of UA at $4bn and before Cal and UCLA are taking losses here as general unsecured creditors all of that equity would go to zero. Not what the market currently expects.

I think it's as likely that UA just realized they made a bad deal with UCLA and is terminating their agreement with Cal (sister school, in the same state and same conference) to strengthen their argument that a force majeure had been triggered. It's still a terrible argument mind you but I guess they decided it improves their legal position and saves them a few bucks.

I think the most likely outcome is this is UA's way of renegotiating the contracts because (as was rightly noted) their business in sucking wind and if they can't cut some of their costs they will definitely wind up in bankruptcy eventually.

Guessing we stay a UA school with some restructuring of the contract. That's a pure guess on my part mind you, but I think it's the most likely outcome, Occam's Razor and all that.

Of course that's the rationale part of my brain. The fan part wants to take all my UA gear and burn it in front of their headquarters. May have to look up where that is . . .

Baltimore, Maryland. There may be a fire burning there already just because... Baltimore.
philbert
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Wilner says Learfield is also in trouble.

https://www.mercurynews.com/2020/06/29/ucla-cal-attempt-to-stare-down-under-armour-as-reckoning-looms-for-their-wobbly-budgets/
ColoradoBear
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philbert said:

Wilner says Learfield is also in trouble.

https://www.mercurynews.com/2020/06/29/ucla-cal-attempt-to-stare-down-under-armour-as-reckoning-looms-for-their-wobbly-budgets/





Not only does Wilner bring up the Learfield issues, but he has this about the UA contract:


"If a Force Majeure event continues for more than (100) days, either Party may terminate this Agreement with immediate effect by written notice."

Under Amour informed UCLA of its intent to terminate the partnership on June 22 the first business day after the 100th day of the coronavirus shutdown.
Cal84
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Sebastabear said:

>I think we are a little quick to write UA's obit here. I'm not saying it's impossible this is a bankruptcy play to push off a Chapter 11 filing and allow some payments to be made outside the preference period. But the market is still valuing the equity of UA at $4bn and before Cal and UCLA are taking losses here as general unsecured creditors all of that equity would go to zero. Not what the market currently expects.
It would be unusual for a firm with relatively low debt like Under Armor to have its equity zeroed out in a bankruptcy restructuring. But there is an unresolved issue with Under Armor. Their accounting practices are under investigation by the SEC. Probably involving income recognition of shipped but unsold product. Which shouldn't be an existential issue given their inventory levels. But keep in mind this is a company that basically hasn't made money in the last five years (cumulatively) under their own, questioned accounting methods and faces bigger, better positioned competitors.
Sebastabear
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This from Wilner's article today. He says UA is not claiming force majeure but rather "unrealized marketing opportunities" which seems like legal gobblygook for "we made a bad deal". But if you look at the timing as Wilner notes UA is clearly setting up the force majeure argument as well. Force majeure is a stone cold loser and unless they can point to something specific the schools did or didn't do on the "unrealized marketing opportunities" argument seems even worse. Negotiating ploy, plain and simple.

Quote:

The company did not cite Force Majeure a common contractual term meaning 'Act of God' as the reason for its decision to terminate the deal but, rather, unrealized marketing opportunities.

Whether coronavirus becomes part of the legal maneuverings remains to be seen, but it's worth noting the terms of the contract and the timing of the development:

"If a Force Majeure event continues for more than (100) days, either Party may terminate this Agreement with immediate effect by written notice."

Under Amour informed UCLA of its intent to terminate the partnership on June 22 the first business day after the 100th day of the coronavirus shutdown.

(The Pac-12 suspended all sports competitions on March 12.)
StrawberryCanyon
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I'm a stock analyst and Under Armour is one of the companies that I cover. Following up on some earlier posts, UA is going to suffer a huge loss this year, but it is in no danger of bankruptcy. UA had over $900 million in cash on its balance sheet at the end of March, no near-term maturities, and excess borrowing capacity. UA's business has been in decline since 2016 but it was still generating free cash flow before this year. As others have mentioned, UA backed out of its deal to supply MLB uniforms and, also, it cancelled plans for a big flagship store in Manhattan. UA has a new CEO since founder Kevin Plank (who has had some personal issues) stepped aside.I think this termination is just a blatant attempt by UA to get out of deals that may have been too generous. I think Cal and UCLA have strong grounds to sue - and I said the same thing to a financial reporter who called me this morning!

The wildcard is the SEC investigation. UA's management has downplayed this, but I'm not so sure. The allegations go back to '15-'16 when UA's business started to slow down, in part because of the bankruptcy of the Sports Authority chain, which was once a major customer. Basically, UA is accused of having aggressively booked sales to conceal the downturn in the business. We'll see how it plays out.
Sebastabear
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StrawberryCanyon said:

I'm a stock analyst and Under Armour is one of the companies that I cover. Following up on some earlier posts, UA is going to suffer a huge loss this year, but it is in no danger of bankruptcy. UA had over $900 million in cash on its balance sheet at the end of March, no near-term maturities, and excess borrowing capacity. UA's business has been in decline since 2016 but it was still generating free cash flow before this year. As others have mentioned, UA backed out of its deal to supply MLB uniforms and, also, it cancelled plans for a big flagship store in Manhattan. UA has a new CEO since founder Kevin Plank (who has had some personal issues) stepped aside.I think this termination is just a blatant attempt by UA to get out of deals that may have been too generous. I think Cal and UCLA have strong grounds to sue - and I said the same thing to a financial reporter who called me this morning!

The wildcard is the SEC investigation. UA's management has downplayed this, but I'm not so sure. The allegations go back to '15-'16 when UA's business started to slow down, in part because of the bankruptcy of the Sports Authority chain, which was once a major customer. Basically, UA is accused of having aggressively booked sales to conceal the downturn in the business. We'll see how it plays out.
Good stuff. Lines up with how I see this. Thanks.
wifeisafurd
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Sebastabear said:

I think we are a little quick to write UA's obit here. I'm not saying it's impossible this is a bankruptcy play to push off a Chapter 11 filing and allow some payments to be made outside the preference period. But the market is still valuing the equity of UA at $4bn and before Cal and UCLA are taking losses here as general unsecured creditors all of that equity would go to zero. Not what the market currently expects.

I think it's as likely that UA just realized they made a bad deal with UCLA and is terminating their agreement with Cal (sister school, in the same state and same conference) to strengthen their argument that a force majeure had been triggered. It's still a terrible argument mind you but I guess they decided it improves their legal position and saves them a few bucks.

I think the most likely outcome is this is UA's way of renegotiating the contracts because (as was rightly noted) their business in sucking wind and if they can't cut some of their costs they will definitely wind up in bankruptcy eventually.

Guessing we stay a UA school with some restructuring of the contract. That's a pure guess on my part mind you, but I think it's the most likely outcome, Occam's Razor and all that.

Of course that's the rationale part of my brain. The fan part wants to take all my UA gear and burn it in front of their headquarters. May have to look up where that is . . .
You could be right, but this is a very old fashioned view of bankruptcy. Bankruptcy strategy is not usually about retained earnings and valuation these days. When you sales are hemorrhaging and you have huge inventory levels, your banker starts talking to you about solvency and reorganization, to shed bad obligations or losing business areas. Again, I would encourage you to look at the first quarter 10Q where a plan of reorganization is disclosed as started, as is a plan to bring in new working capital.

Upon filing of a reorganization case, pre-petition, unsecured debt may not be paid prior to approval of a reorganization plan. This relief from trade payables may allow a reorganizing business a period of time within which to accumulate capital needed for operations. Most successful reorganizations require the injection of new capital pursuant to a plan WHICH IS DISCUSSED IN THE 10Q, through a refinancing. However, a business beset by a paucity of working capital like UA can, in the initial stages of a bankruptcy proceeding, enjoy a respite from the demands of servicing trade debt and accumulate cash.

Then there is the opportunity for a debtor to extricate itself from leases or continuing contractual obligations like with UCLA and Cal. More often than not the rejection of contracts or leases is an ancillary benefit to a corporate reorganization, rather than the raison d'etre for the filing, which is UA needs to refi given its inventory levels. . Many reorganizing businesses use the opportunity to reject leases and contracts as the leverage needed to renegotiate the terms of the lease or contract, where the non-debtor party would prefer to maintain the lease or contract. Moreover, rejection or a threat to reject is a key component to the law's purpose of reorganizing businesses.

This seems like an obvious set-up for a reorg. But maybe they UA doesn't need it. Time will tell. But a worse case scenario is for the contracts to be terminated, Cal and UCLA (and others?) become unsecured creditors, and get a cram down, and they have trouble picking up a new sponsor for decent money in this COVID environment. As a commercial landlord it is definitely a threat you see regularly now from apparel companies or retailers. They are in trouble.

Lomiton
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dimitrig said:

Sebastabear said:

I think we are a little quick to write UA's obit here. I'm not saying it's impossible this is a bankruptcy play to push off a Chapter 11 filing and allow some payments to be made outside the preference period. But the market is still valuing the equity of UA at $4bn and before Cal and UCLA are taking losses here as general unsecured creditors all of that equity would go to zero. Not what the market currently expects.

I think it's as likely that UA just realized they made a bad deal with UCLA and is terminating their agreement with Cal (sister school, in the same state and same conference) to strengthen their argument that a force majeure had been triggered. It's still a terrible argument mind you but I guess they decided it improves their legal position and saves them a few bucks.

I think the most likely outcome is this is UA's way of renegotiating the contracts because (as was rightly noted) their business in sucking wind and if they can't cut some of their costs they will definitely wind up in bankruptcy eventually.

Guessing we stay a UA school with some restructuring of the contract. That's a pure guess on my part mind you, but I think it's the most likely outcome, Occam's Razor and all that.

Of course that's the rationale part of my brain. The fan part wants to take all my UA gear and burn it in front of their headquarters. May have to look up where that is . . .

Baltimore, Maryland. There may be a fire burning there already just because... Baltimore.
You can also bring your gear to Portland where their design center is located...

https://www.bizjournals.com/portland/news/2017/09/14/exclusive-a-first-look-inside-under-armours-new.html

The office is stocked with modern amenities popular with employees, like kombucha on tap and large windows to show off surrounding forestry.
Lomiton
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Just based upon some lunch time reading I'm not sure that BK is in the cards for UA either - at least at this time. That said, when the bottom is falling out of the boat (and no one has any idea when the free fall ends) heavy stuff goes overboard first.

I think if this was a Cal only issue it might not have broke this way but the UCLA deal is a is a heavy boat anchor and even as the less-expensive sister, it is guilt by association. I agree that on the surface that UA does not seem to have much of a case but the devil will be in the details.

However, this really puts the bind on Cal (UCLA too) - of course you go after UA but there are lots of costs (real and opportunity) that will have to be accounted for. Time seems the most critical one to me - it's not a good look for a Power 5 school not to have a deal with a major shoe company that one has to recruit around - and have to scramble/beg for another one, not a great time for counted on cash inflow to be terminated and the increased leverage that UA will receive to actually follow through on a BK/reorg down the road.

I think that if suits are filed by the UC schools the relationship will effectively be over the moment they are filed. No way will Cal trot out UA uniforms for any sport if that happens. There will be a mad scramble to get gear from either Adidas or Nike in time for football season and the other fall sports. I foresee a very plain and under supported uniform palette for the foreseeable future.
okaydo
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Bearly Clad
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What would that even mean, replacing an apparel deal with a webcam deal? The bruins head out onto the field in G-strings and lingerie and do a striptease for a warmup?
ColoradoBear
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okaydo said:


That's an opportunistic move right there.

I bet half the UCLA AD is researching the company right now. As well as many fans...
philbert
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Bearly Clad said:

What would that even mean, replacing an apparel deal with a webcam deal? The bruins head out onto the field in G-strings and lingerie and do a striptease for a warmup?
I don't know, but I really really really really want to see this happen.
Golden One
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They could have porn stars do their routines on the field for halftime entertainment. Could also name the field "Porn Field"".
Bearly Clad
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throw out 'rally condoms' at games and rebrand the spirit squad as the 'turf munchers'?
BearGoggles
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Does anyone have a link to the actual UA contract with UCLA or Cal? I'd be curious to see how force majeure is defined.

People seem to be assuming pandemic is a FM event, which may or may not be the case depending on the contract verbiage.

ColoradoBear
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BearGoggles said:

Does anyone have a link to the actual UA contract with UCLA or Cal? I'd be curious to see how force majeure is defined.

People seem to be assuming pandemic is a FM event, which may or may not be the case depending on the contract verbiage.




Would it have to be defined? Undfined, would it not fall on state law to determine if applicable?

Wilner appears to have the actual contract, so maybe he will clarify soon - you'd think he'd find a lawyer to quote regarding standard CA laws for force majeure - they might apply to Learfield, and the P12Networks deals with Comcast and such.

It's a pretty big deal and a ton of money.

Obviously I'm not a lawyer because I'm about to cite Wikipedia, but it does appear the general principle of force majeure allows for suspension of a agreent for the duration of such and event, not termination:

"In practice, most force majeure clauses do not excuse a party's non-performance entirely, but only suspend it for the duration of the force majeure."

Which then references this article:


https://www.trans-lex.org/944000/_/force-majeure/

Sebastabear
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BearGoggles said:

Does anyone have a link to the actual UA contract with UCLA or Cal? I'd be curious to see how force majeure is defined.

People seem to be assuming pandemic is a FM event, which may or may not be the case depending on the contract verbiage.


I've read a lot of these over the years and they all kind of say the same thing. Something like "acts of God or governmental authority, war, terrorist attacks, strikes, accidents, explosions, floods, fires or any other cause that is beyond the reasonable control of that party so long as that party has used its best efforts to perform despite such force majeure." But agree with Colorado that it's usually a suspension even, not a termination event.

But most importantly, once again, it almost doesn't matter what it says if they are using the exact same provision in all their college contracts and they are only terminating some of them. Force majeure provisions aren't a free option. It either applies to everyone or it doesn't. Last time I checked, Covid-19 wasn't a California only disease.
StrawberryCanyon
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Lomiton said:

This is not a situation in which the company is run by professional managers who don't have skin in the game. Founder Kevin Plank is still the chairman of the board and has super-voting stock, so he effectively still controls the company even though he is no longer CEO. Plank's annual salary is $26,000 and he receives no cash bonus. He has always taken virtually all of his compensation in stock. Plank, who's only about 47 years old, owns hundreds of millions of dollars of UA stock and would not risk a bankruptcy. UA still has a market cap of $4 billion and has been able to borrow at interest rates under 4% recently. I've seen companies in far worse shape than UA issue bonds in the last three months. Money is ridiculously cheap right now.

Plank, as most people probably know, played football at Maryland. He's a frat boy-type, and his style has caused problems. He stepped down as CEO in place of Patrik Frisk, who's an experience apparel company exec. I think Plank is giving Frisk the freedom to run the company differently than he did. That said, I think it's stupid for UA to pull away from college sports since high school/youth/college is its key market. Time and time again, UA has told Wall St. that it wants to be a performance sports brand, not a casual brand like Champion, for example. It's not clear to me how UA improves its position by backing away from taking on Nike and Adidas for sponsorships, especially in college football, which is UA's most visible sport.

BearGoggles
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Sebastabear said:

BearGoggles said:

Does anyone have a link to the actual UA contract with UCLA or Cal? I'd be curious to see how force majeure is defined.

People seem to be assuming pandemic is a FM event, which may or may not be the case depending on the contract verbiage.


I've read a lot of these over the years and they all kind of say the same thing. Something like "acts of God or governmental authority, war, terrorist attacks, strikes, accidents, explosions, floods, fires or any other cause that is beyond the reasonable control of that party so long as that party has used its best efforts to perform despite such force majeure." But agree with Colorado that it's usually a suspension even, not a termination event.

But most importantly, once again, it almost doesn't matter what it says if they are using the exact same provision in all their college contracts and they are only terminating some of them. Force majeure provisions aren't a free option. It either applies to everyone or it doesn't. Last time I checked, Covid-19 wasn't a California only disease.

I've read many FM provisions too - particularly in the last 3+ months. In my experience, they are not necessarily identical - some are broad (e.g., anything beyond a party's control) and some are more limited (acts of god, war, government delay). And they don't always provide for termination (as opposed to excused or delayed performance). In other words, these are negotiated like most other contract provisions which is why its important to see the actual contract.

I also think you're hanging your hat on the bolded provision above is not as clear a case as you think it is. Each contract involves different facts (at least arguably). It seems UA's argument is that Cal/UCLA have failed to perform an obligation due to FM - It really depends on what that obligation is. For example, if Cal and Notre Dame both had the same obligation to provide marketing support for apparel sales, its possible that ND did more than Cal did. I'm making that up (because I have no idea what the contract obligations are), but the larger point is that UA is not just pointing to Covid. They're saying that Covid prevented Cal from performing an obligation. There may be a basis for distinguishing between schools

I do agree it seems pretty clear that UA is looking for a way out. But without the contract, you really can't say if they have an argument - but it wouldn't be the first time Cal botched a contract. To be honest, I'm surprised that the FM provision provided for termination - that is not usually the case because as you point out, it is not supposed to be a free option.
BearGoggles
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ColoradoBear said:

BearGoggles said:

Does anyone have a link to the actual UA contract with UCLA or Cal? I'd be curious to see how force majeure is defined.

People seem to be assuming pandemic is a FM event, which may or may not be the case depending on the contract verbiage.




Would it have to be defined? Undfined, would it not fall on state law to determine if applicable?

Wilner appears to have the actual contract, so maybe he will clarify soon - you'd think he'd find a lawyer to quote regarding standard CA laws for force majeure - they might apply to Learfield, and the P12Networks deals with Comcast and such.

It's a pretty big deal and a ton of money.

Obviously I'm not a lawyer because I'm about to cite Wikipedia, but it does appear the general principle of force majeure allows for suspension of a agreent for the duration of such and event, not termination:

"In practice, most force majeure clauses do not excuse a party's non-performance entirely, but only suspend it for the duration of the force majeure."

Which then references this article:


https://www.trans-lex.org/944000/_/force-majeure/


force majeure is a somewhat a term of art that would have a common law/judicially interpreted meaning in most states. In California there is also a general statute - Civil Code 3526.

However, most sophisticated contracts have a definition of FM that would then be applicable in lieu of the "general definition." Also, contracts have choice of law provisions - so it is not clear if Maryland, CA, or some other state's law applies in this particular case.

Bottom line - gotta see the contract.
ColoradoBear
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BearGoggles said:

ColoradoBear said:

BearGoggles said:

Does anyone have a link to the actual UA contract with UCLA or Cal? I'd be curious to see how force majeure is defined.

People seem to be assuming pandemic is a FM event, which may or may not be the case depending on the contract verbiage.




Would it have to be defined? Undfined, would it not fall on state law to determine if applicable?

Wilner appears to have the actual contract, so maybe he will clarify soon - you'd think he'd find a lawyer to quote regarding standard CA laws for force majeure - they might apply to Learfield, and the P12Networks deals with Comcast and such.

It's a pretty big deal and a ton of money.

Obviously I'm not a lawyer because I'm about to cite Wikipedia, but it does appear the general principle of force majeure allows for suspension of a agreent for the duration of such and event, not termination:

"In practice, most force majeure clauses do not excuse a party's non-performance entirely, but only suspend it for the duration of the force majeure."

Which then references this article:


https://www.trans-lex.org/944000/_/force-majeure/


force majeure is a somewhat a term of art that would have a common law/judicially interpreted meaning in most states. In California there is also a general statute - Civil Code 3526.

However, most sophisticated contracts have a definition of FM that would then be applicable in lieu of the "general definition." Also, contracts have choice of law provisions - so it is not clear if Maryland, CA, or some other state's law applies in this particular case.

Bottom line - gotta see the contract.


UCLA's contract is linked here (it does say CA law applies):

https://www.bruinsnation.com/2016/6/9/11895740/full-details-of-ucla-apparel-contract-with-under-armour

Wisconsin's (not cancelled) contract:

https://www.google.com/url?sa=t&source=web&rct=j&url=http://bloximages.chicago2.vip.townnews.com/host.madison.com/content/tncms/assets/v3/editorial/a/6e/a6e8e0eb-2965-53a9-a2dc-7837031a0a13/5908b09d785a5.pdf.pdf&ved=2ahUKEwj2ofDG6qjqAhWEKs0KHdtGD_4QFjAAegQIAhAB&usg=AOvVaw0CH4inJ6eLNr3h4M0aQGpA&cshid=1593495857100

No mention of force majeure anywhere in the UW-UA contract.

Utah's UA contract (I also don't see a single mention of force majeure) :

https://www.google.com/url?sa=t&source=web&rct=j&url=https://collegead.com/wp-content/uploads/2020/02/Utah-Under-Armour-deal-2017-2027.pdf&ved=2ahUKEwiuzZW-8KjqAhUFbc0KHYENBDgQFjADegQIARAB&usg=AOvVaw2QUMOxSuuq3pL55sUwpV5N&cshid=1593497453390
GMP
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BearGoggles said:

Does anyone have a link to the actual UA contract with UCLA or Cal? I'd be curious to see how force majeure is defined.

People seem to be assuming pandemic is a FM event, which may or may not be the case depending on the contract verbiage.






BearGoggles
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GMP and ColoradoBear - thank you for hunting down the contract.

"Force Majeure Event" means any cause or event which is beyond the commercially reasonable control of Company (or the reasonable control of UCLA) and which renders the performance of this Agreement by the affected Party either impossible or impracticable, including, without limitation, flood, earthquake, fire, labor actions or work stoppages, natural calamities, national emergencies, declarations of war, riot, civil disturbance, sabotage, explosions, acts of God, acts of any regulatory, governmental body and/or agency, having jurisdiction over the affected Party, including without limitation any Laws, orders, ordinances, acts, or mandates which prohibit, restrict, or regulate the affected Party's performance of its obligations under
this Agreement.

So assuming pandemic and related government orders are beyond the [commercially] reasonable control of both parties, UA still needs to prove that the event(s) rendered performance "impossible or impracticable." Impossible seems like a real stretch. "Impracticable" is a term of art referring to economic loss that, as you might imagine, has been litigated extensively in California. For example, if the pandemic made it very expensive (e.g., a shortage of materials) for UA to make or deliver the apparel, then there might be a FM Event.

UA will need to show that it was the pandemic that made the contract impracticable (i.e., causation). It is not enough that it was a bad deal made worse. I think the long term nature of the contract and the fact that it has not really become more expensive for either party to perform (at least in the long run) makes this a harder claim for UA. I doubt UCLA has been pounding the table saying "were is our free stuff." UA better argument is that UCLA has been unable to perform (e.g., field teams) due to covid, but after a quick read, the contract provisions on those issues are pretty limited (i.e., UCLA does not have a lot of obligations).

As you might imagine, lawyers are thinking and writing about these things. Decent summaries of CA law here:

https://www.stimmel-law.com/en/articles/impossibility-performance-defense-breach-contract

https://donahue.com/resources/publications/does-covid-19-excuse-performance-under-your-contract/

BearGoggles
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ColoradoBear said:

BearGoggles said:

ColoradoBear said:

BearGoggles said:

Does anyone have a link to the actual UA contract with UCLA or Cal? I'd be curious to see how force majeure is defined.

People seem to be assuming pandemic is a FM event, which may or may not be the case depending on the contract verbiage.




Would it have to be defined? Undfined, would it not fall on state law to determine if applicable?

Wilner appears to have the actual contract, so maybe he will clarify soon - you'd think he'd find a lawyer to quote regarding standard CA laws for force majeure - they might apply to Learfield, and the P12Networks deals with Comcast and such.

It's a pretty big deal and a ton of money.

Obviously I'm not a lawyer because I'm about to cite Wikipedia, but it does appear the general principle of force majeure allows for suspension of a agreent for the duration of such and event, not termination:

"In practice, most force majeure clauses do not excuse a party's non-performance entirely, but only suspend it for the duration of the force majeure."

Which then references this article:


https://www.trans-lex.org/944000/_/force-majeure/


force majeure is a somewhat a term of art that would have a common law/judicially interpreted meaning in most states. In California there is also a general statute - Civil Code 3526.

However, most sophisticated contracts have a definition of FM that would then be applicable in lieu of the "general definition." Also, contracts have choice of law provisions - so it is not clear if Maryland, CA, or some other state's law applies in this particular case.

Bottom line - gotta see the contract.


UCLA's contract is linked here (it does say CA law applies):

https://www.bruinsnation.com/2016/6/9/11895740/full-details-of-ucla-apparel-contract-with-under-armour

Wisconsin's (not cancelled) contract:

https://www.google.com/url?sa=t&source=web&rct=j&url=http://bloximages.chicago2.vip.townnews.com/host.madison.com/content/tncms/assets/v3/editorial/a/6e/a6e8e0eb-2965-53a9-a2dc-7837031a0a13/5908b09d785a5.pdf.pdf&ved=2ahUKEwj2ofDG6qjqAhWEKs0KHdtGD_4QFjAAegQIAhAB&usg=AOvVaw0CH4inJ6eLNr3h4M0aQGpA&cshid=1593495857100

No mention of force majeure anywhere in the UW-UA contract.

Utah's UA contract (I also don't see a single mention of force majeure) :

https://www.google.com/url?sa=t&source=web&rct=j&url=https://collegead.com/wp-content/uploads/2020/02/Utah-Under-Armour-deal-2017-2027.pdf&ved=2ahUKEwiuzZW-8KjqAhUFbc0KHYENBDgQFjADegQIARAB&usg=AOvVaw2QUMOxSuuq3pL55sUwpV5N&cshid=1593497453390

Wisconsin's contract does not have a FM provision, though it might be implied under state law. Also, note that Section 8.2(c) gives UA the right to terminate if a Core Team (including football) does not participate in a "complete" season.

Utah's agreement has similar concepts in 8.3 - but no express FM (again state law might apply).
YamhillBear
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Lomiton said:

dimitrig said:

Sebastabear said:

I think we are a little quick to write UA's obit here. I'm not saying it's impossible this is a bankruptcy play to push off a Chapter 11 filing and allow some payments to be made outside the preference period. But the market is still valuing the equity of UA at $4bn and before Cal and UCLA are taking losses here as general unsecured creditors all of that equity would go to zero. Not what the market currently expects.

I think it's as likely that UA just realized they made a bad deal with UCLA and is terminating their agreement with Cal (sister school, in the same state and same conference) to strengthen their argument that a force majeure had been triggered. It's still a terrible argument mind you but I guess they decided it improves their legal position and saves them a few bucks.

I think the most likely outcome is this is UA's way of renegotiating the contracts because (as was rightly noted) their business in sucking wind and if they can't cut some of their costs they will definitely wind up in bankruptcy eventually.

Guessing we stay a UA school with some restructuring of the contract. That's a pure guess on my part mind you, but I think it's the most likely outcome, Occam's Razor and all that.

Of course that's the rationale part of my brain. The fan part wants to take all my UA gear and burn it in front of their headquarters. May have to look up where that is . . .

Baltimore, Maryland. There may be a fire burning there already just because... Baltimore.
You can also bring your gear to Portland where their design center is located...

https://www.bizjournals.com/portland/news/2017/09/14/exclusive-a-first-look-inside-under-armours-new.html

The office is stocked with modern amenities popular with employees, like kombucha on tap and large windows to show off surrounding forestry.
The closing quote from that article (albeit talking about that office's engagement with community parks)
"Once we start a relationship, we're in it forever," said Stacey Ullrich, senior director of global giving. "We rarely walk away from something."
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