2 0 1 6 A N N U A L R E P O R T S T E P H E N C U R R Y wearing the Curry 2.5 in the “Dub Nation” colorway NBA MVP 2015, 2016 (unanimous) T S E B E H T F O T S E B E H T | | T O M B R A D Y 5-Time Super Bowl Champion, 4-Time Super Bowl MVP A N T H O N Y J O S H U A IBF Heavyweight Champion M I S T Y C O P E L A N D American Ballet Theatre’s First-Ever African American Principal Dancer A N D Y M U R R AY 2016 Olympic Gold Medalist 2016 Wimbledon Champion C A M N E W T O N 2015 NFL MVP M I C H A E L P H E L P S Most Decorated Olympian Of All-Time C A N E L O Á L V A R E Z WBO Light Middleweight Champion L I N D S E Y V O N N Most Decorated Downhill Female Skier Of All-Time J O R D A N S P I E T H 2-Time Major Champion 2 0 1 6 O LY M P I C S G O L D M E D A L G Y M N A S T I C S T E A M Olympic Team All-Around Gold Medalists U N D E R A R M O U R A T H L E T E S C O N T I N U E T O R I S E T O T H E T O P Cam Newton rang in the new year earning NFL MVP honors. Misty Copeland contin- (cid:241)(cid:225)(cid:224)(cid:3)(cid:228)(cid:225)(cid:238)(cid:3)(cid:228)(cid:229)(cid:239)(cid:240)(cid:235)(cid:238)(cid:229)(cid:223)(cid:3)(cid:238)(cid:241)(cid:234)(cid:3)(cid:221)(cid:239)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:287)(cid:238)(cid:239)(cid:240)(cid:153)(cid:225)(cid:242)(cid:225)(cid:238)(cid:3)(cid:195)(cid:226)(cid:238)(cid:229)(cid:223)(cid:221)(cid:234)(cid:3) (cid:195)(cid:233)(cid:225)(cid:238)(cid:229)(cid:223)(cid:221)(cid:234)(cid:3)(cid:236)(cid:238)(cid:229)(cid:234)(cid:223)(cid:229)(cid:236)(cid:221)(cid:232)(cid:3)(cid:224)(cid:221)(cid:234)(cid:223)(cid:225)(cid:238)(cid:3)(cid:229)(cid:234)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:195)(cid:233)(cid:225)(cid:238)(cid:229)(cid:223)(cid:221)(cid:234) (cid:196)(cid:221)(cid:232)(cid:232)(cid:225)(cid:240)(cid:3)(cid:214)(cid:228)(cid:225)(cid:221)(cid:240)(cid:238)(cid:225)(cid:4) Anthony Joshua and Canelo Alvarez(cid:3)(cid:228)(cid:235)(cid:229)(cid:239)(cid:240)(cid:225)(cid:224)(cid:3)(cid:223)(cid:228)(cid:221)(cid:233)(cid:236)(cid:229)(cid:235)(cid:234)(cid:239)(cid:228)(cid:229)(cid:236)(cid:3) (cid:222)(cid:235)(cid:244)(cid:229)(cid:234)(cid:227)(cid:3)(cid:222)(cid:225)(cid:232)(cid:240)(cid:239)(cid:3)(cid:229)(cid:234)(cid:3)(cid:240)(cid:228)(cid:225)(cid:229)(cid:238)(cid:3)(cid:238)(cid:225)(cid:239)(cid:236)(cid:225)(cid:223)(cid:240)(cid:229)(cid:242)(cid:225)(cid:3)(cid:243)(cid:225)(cid:229)(cid:227)(cid:228)(cid:240) (cid:223)(cid:232)(cid:221)(cid:239)(cid:239)(cid:225)(cid:239)(cid:4)(cid:3)(cid:208)(cid:235)(cid:3)(cid:235)(cid:234)(cid:225)(cid:3)(cid:243)(cid:221)(cid:239)(cid:3)(cid:239)(cid:241)(cid:238)(cid:236)(cid:238)(cid:229)(cid:239)(cid:225)(cid:224)(cid:3)(cid:222)(cid:245)(cid:3)Stephen Curry(cid:3)(cid:240)(cid:221)(cid:231)(cid:229)(cid:234)(cid:227)(cid:3)(cid:228)(cid:235)(cid:233)(cid:225)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:208)(cid:196)(cid:195)(cid:266)(cid:239)(cid:3)(cid:207)(cid:216)(cid:210)(cid:3)(cid:228)(cid:235)(cid:234)(cid:235)(cid:238)(cid:239) (cid:226)(cid:235)(cid:238)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:239)(cid:225)(cid:223)(cid:235)(cid:234)(cid:224)(cid:3)(cid:245)(cid:225)(cid:221)(cid:238)(cid:3)(cid:229)(cid:234)(cid:3)(cid:221)(cid:3)(cid:238)(cid:235)(cid:243)(cid:155)(cid:240)(cid:228)(cid:229)(cid:239)(cid:3)(cid:240)(cid:229)(cid:233)(cid:225)(cid:3)(cid:222)(cid:245) (cid:221)(cid:3)(cid:241)(cid:234)(cid:221)(cid:234)(cid:229)(cid:233)(cid:235)(cid:241)(cid:239)(cid:3)(cid:242)(cid:235)(cid:240)(cid:225)(cid:4)(cid:3)(cid:207)(cid:225)(cid:221)(cid:234)(cid:243)(cid:228)(cid:229)(cid:232)(cid:225)(cid:6)(cid:3)(cid:235)(cid:234)(cid:3)(cid:221)(cid:234)(cid:235)(cid:240)(cid:228)(cid:225)(cid:238) 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(cid:238)(cid:225)(cid:242)(cid:225)(cid:234)(cid:241)(cid:225)(cid:3)(cid:227)(cid:238)(cid:235)(cid:243)(cid:240)(cid:228)(cid:3)(cid:240)(cid:235)(cid:3)(cid:223)(cid:238)(cid:235)(cid:239)(cid:239)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:118)(cid:29)(cid:3)(cid:222)(cid:229)(cid:232)(cid:232)(cid:229)(cid:235)(cid:234)(cid:3)(cid:233)(cid:221)(cid:238)(cid:231)(cid:3)(cid:229)(cid:234)(cid:3)(cid:30)(cid:28)(cid:29)(cid:34)(cid:4)(cid:3)(cid:210)(cid:238)(cid:225)(cid:233)(cid:229)(cid:241)(cid:233)(cid:3)(cid:238)(cid:241)(cid:234)(cid:234)(cid:229)(cid:234)(cid:227)(cid:3)(cid:226)(cid:238)(cid:221)(cid:234)(cid:223)(cid:228)(cid:229)(cid:239)(cid:225)(cid:239)(cid:3)(cid:229)(cid:234)(cid:223)(cid:232)(cid:241)(cid:224)(cid:229)(cid:234)(cid:227)(cid:3)(cid:213)(cid:236)(cid:225)(cid:225)(cid:224)(cid:200)(cid:235)(cid:238)(cid:233)(cid:3)(cid:201)(cid:225)(cid:233)(cid:229)(cid:234)(cid:229)(cid:3) 67% 21% 8% 2% 2% Y R O G E T A C T C U D O R P Y B S E U N E V E R T E N (cid:3) (cid:34) APPAREL (cid:29) (cid:28) (cid:30) (cid:212) (cid:195) (cid:199) (cid:219) FOOTWEAR R ACCESSORIESS LICENSING CONNECTED FITNESSS U.S. Rep. Elij ah E . Cum m ing s (M D) spea ks a t t he opening of the UA HO U S E , a 30, 000 sq u a re - foo t commu nit y center for yout h in Ea st B a lt im o re. U nde r Armour S por tswear (UAS) l aunc h fashi on sh ow at NY Fashi on Week . Foot we ar Wa ll, Under Armour Brand House, Boston, MA . 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(cid:236)(cid:238)(cid:235)(cid:287)(cid:240)(cid:221)(cid:222)(cid:232)(cid:225)(cid:3)(cid:227)(cid:238)(cid:235)(cid:243)(cid:240)(cid:228)(cid:3)(cid:221)(cid:234)(cid:224)(cid:3)(cid:223)(cid:238)(cid:225)(cid:221)(cid:240)(cid:229)(cid:234)(cid:227)(cid:3)(cid:242)(cid:221)(cid:232)(cid:241)(cid:225)(cid:3)(cid:226)(cid:235)(cid:238)(cid:3)(cid:235)(cid:241)(cid:238)(cid:3)(cid:239)(cid:228)(cid:221)(cid:238)(cid:225)(cid:228)(cid:235)(cid:232)(cid:224)(cid:225)(cid:238)(cid:239)(cid:4) (cid:205)(cid:225)(cid:242)(cid:229)(cid:234)(cid:3)(cid:195)(cid:4)(cid:3)(cid:210)(cid:232)(cid:221)(cid:234)(cid:231) (cid:197)(cid:228)(cid:221)(cid:229)(cid:238)(cid:233)(cid:221)(cid:234)(cid:3)(cid:235)(cid:226)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:196)(cid:235)(cid:221)(cid:238)(cid:224)(cid:3)(cid:235)(cid:226)(cid:3)(cid:198)(cid:229)(cid:238)(cid:225)(cid:223)(cid:240)(cid:235)(cid:238)(cid:239)(cid:3)(cid:151)(cid:3)(cid:197)(cid:228)(cid:229)(cid:225)(cid:226)(cid:3)(cid:199)(cid:244)(cid:225)(cid:223)(cid:241)(cid:240)(cid:229)(cid:242)(cid:225)(cid:3)(cid:209)(cid:289)(cid:223)(cid:225)(cid:238) (cid:34) (cid:29) (cid:28) (cid:30) (cid:171) (cid:30) (cid:29) (cid:28) (cid:30) (cid:212) (cid:195) (cid:199) (cid:219) (cid:3) (cid:3) (cid:7) (cid:213) (cid:198) (cid:208) (cid:195) (cid:213) (cid:215) (cid:209) (cid:202) (cid:214) (cid:208) (cid:3) (cid:203) (cid:3) (cid:118) S N O I T A R E P O M O R F E M O C N I N O I T U B I R T S I D Y B S E U N E V E R T E N (cid:3) (cid:34) (cid:29) (cid:28) (cid:30) (cid:212) (cid:195) (cid:199) (cid:219) % 2 , 1 7 4 7 1 4 $ % 5 1 , 7 4 5 8 0 4 $ % 4 3 , 5 5 9 3 5 3 $ % 7 2 , 8 9 0 5 6 2 $ % 8 2 , 5 9 6 8 0 2 $ (cid:30)(cid:29)(cid:89)(cid:3)(cid:197)(cid:209)(cid:207)(cid:210)(cid:209)(cid:215)(cid:208)(cid:198)(cid:3)(cid:195)(cid:208)(cid:208)(cid:215)(cid:195)(cid:206)(cid:3)(cid:201)(cid:212)(cid:209)(cid:217)(cid:214)(cid:202)(cid:3)(cid:212)(cid:195)(cid:214)(cid:199)(cid:3)(cid:174)(cid:33)(cid:171)(cid:219)(cid:199)(cid:195)(cid:212)(cid:175) 2016 R E T S O R E H T O T W E N | | D WAY N E “ T H E R O C K ” J O H N S O N B U I L D I N G P A R T N E R S H I P S F O R T H E F U T U R E (cid:215)(cid:234)(cid:224)(cid:225)(cid:238)(cid:3)(cid:195)(cid:238)(cid:233)(cid:235)(cid:241)(cid:238)(cid:3)(cid:231)(cid:229)(cid:223)(cid:231)(cid:225)(cid:224)(cid:3)(cid:235)(cid:286)(cid:3)(cid:221)(cid:3)(cid:287)(cid:238)(cid:239)(cid:240)(cid:153)(cid:235)(cid:226)(cid:153)(cid:229)(cid:240)(cid:239)(cid:153) (cid:231)(cid:229)(cid:234)(cid:224)(cid:3)(cid:236)(cid:221)(cid:238)(cid:240)(cid:234)(cid:225)(cid:238)(cid:239)(cid:228)(cid:229)(cid:236)(cid:3)(cid:243)(cid:229)(cid:240)(cid:228)(cid:3)Dwayne “The Rock” Johnson(cid:3)(cid:229)(cid:234)(cid:3)(cid:30)(cid:28)(cid:29)(cid:34)(cid:3)(cid:221)(cid:226)(cid:240)(cid:225)(cid:238)(cid:3)(cid:245)(cid:225)(cid:221)(cid:238)(cid:239)(cid:3)(cid:235)(cid:226)(cid:3)(cid:239)(cid:241)(cid:236)(cid:236)(cid:232)(cid:245)(cid:229)(cid:234)(cid:227)(cid:3) (cid:240)(cid:228)(cid:225)(cid:3)(cid:222)(cid:225)(cid:239)(cid:240)(cid:3)(cid:236)(cid:225)(cid:238)(cid:226)(cid:235)(cid:238)(cid:233)(cid:221)(cid:234)(cid:223)(cid:225)(cid:3)(cid:221)(cid:236)(cid:236)(cid:221)(cid:238)(cid:225)(cid:232)(cid:3)(cid:221)(cid:234)(cid:224)(cid:3)(cid:226)(cid:235)(cid:235)(cid:240)(cid:243)(cid:225)(cid:221)(cid:238) (cid:240)(cid:235)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:243)(cid:235)(cid:238)(cid:232)(cid:224)(cid:266)(cid:239)(cid:3)(cid:228)(cid:229)(cid:227)(cid:228)(cid:225)(cid:239)(cid:240)(cid:153)(cid:227)(cid:238)(cid:235)(cid:239)(cid:239)(cid:229)(cid:234)(cid:227)(cid:3)(cid:233)(cid:235)(cid:242)(cid:229)(cid:225)(cid:3)(cid:239)(cid:240)(cid:221)(cid:238)(cid:4)(cid:3) (cid:197)(cid:235)(cid:234)(cid:240)(cid:229)(cid:234)(cid:241)(cid:229)(cid:234)(cid:227)(cid:3)(cid:235)(cid:234)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:227)(cid:232)(cid:235)(cid:222)(cid:221)(cid:232)(cid:3)(cid:221)(cid:234)(cid:227)(cid:232)(cid:225)(cid:6) (cid:215)(cid:234)(cid:224)(cid:225)(cid:238)(cid:3)(cid:195)(cid:238)(cid:233)(cid:235)(cid:241)(cid:238)(cid:3)(cid:221)(cid:234)(cid:234)(cid:235)(cid:241)(cid:234)(cid:223)(cid:225)(cid:224)(cid:3)(cid:224)(cid:225)(cid:221)(cid:232)(cid:239)(cid:3)(cid:243)(cid:229)(cid:240)(cid:228)(cid:3) the Southampton and Aston Villa Football Clubs. (cid:202)(cid:225)(cid:238)(cid:225)(cid:3)(cid:229)(cid:234)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:213)(cid:240)(cid:221)(cid:240)(cid:225)(cid:239)(cid:6)(cid:3)(cid:215)(cid:234)(cid:224)(cid:225)(cid:238)(cid:3)(cid:195)(cid:238)(cid:233)(cid:235)(cid:241)(cid:238)(cid:3)(cid:229)(cid:234)(cid:231)(cid:225)(cid:224) (cid:221)(cid:3)(cid:224)(cid:225)(cid:221)(cid:232)(cid:3)(cid:240)(cid:235)(cid:3)(cid:222)(cid:225)(cid:223)(cid:235)(cid:233)(cid:225)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:235)(cid:241)(cid:240)(cid:287)(cid:240)(cid:240)(cid:225)(cid:238)(cid:3)(cid:235)(cid:226)(cid:3)Major League Baseball starting in 2020(cid:6)(cid:3)(cid:221)(cid:3) (cid:232)(cid:221)(cid:234)(cid:224)(cid:233)(cid:221)(cid:238)(cid:231)(cid:3)(cid:236)(cid:221)(cid:238)(cid:240)(cid:234)(cid:225)(cid:238)(cid:239)(cid:228)(cid:229)(cid:236)(cid:3)(cid:240)(cid:228)(cid:221)(cid:240)(cid:3)(cid:243)(cid:229)(cid:232)(cid:232)(cid:3)(cid:228)(cid:221)(cid:242)(cid:225)(cid:3)(cid:221)(cid:232)(cid:232)(cid:3) (cid:207)(cid:221)(cid:230)(cid:235)(cid:238)(cid:3)(cid:206)(cid:225)(cid:221)(cid:227)(cid:241)(cid:225)(cid:3)(cid:236)(cid:232)(cid:221)(cid:245)(cid:225)(cid:238)(cid:239)(cid:6)(cid:3)(cid:221)(cid:223)(cid:238)(cid:235)(cid:239)(cid:239)(cid:3)(cid:221)(cid:232)(cid:232)(cid:3)(cid:240)(cid:225)(cid:221)(cid:233)(cid:239) (cid:243)(cid:225)(cid:221)(cid:238)(cid:229)(cid:234)(cid:227)(cid:3)(cid:215)(cid:234)(cid:224)(cid:225)(cid:238)(cid:3)(cid:195)(cid:238)(cid:233)(cid:235)(cid:241)(cid:238)(cid:3)(cid:222)(cid:238)(cid:221)(cid:234)(cid:224)(cid:225)(cid:224)(cid:3)(cid:241)(cid:234)(cid:229)(cid:226)(cid:235)(cid:238)(cid:233)(cid:239)(cid:4) (cid:206)(cid:221)(cid:239)(cid:240)(cid:232)(cid:245)(cid:6)(cid:3)(cid:215)(cid:234)(cid:224)(cid:225)(cid:238)(cid:3)(cid:195)(cid:238)(cid:233)(cid:235)(cid:241)(cid:238)(cid:3)(cid:236)(cid:232)(cid:221)(cid:234)(cid:240)(cid:225)(cid:224)(cid:3)(cid:221)(cid:3)(cid:288)(cid:221)(cid:227)(cid:3)(cid:229)(cid:234)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3) (cid:227)(cid:238)(cid:235)(cid:241)(cid:234)(cid:224)(cid:3)(cid:229)(cid:234)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:239)(cid:240)(cid:221)(cid:240)(cid:225)(cid:3)(cid:235)(cid:226)(cid:3)(cid:197)(cid:221)(cid:232)(cid:229)(cid:226)(cid:235)(cid:238)(cid:234)(cid:229)(cid:221)(cid:3)(cid:226)(cid:235)(cid:238)(cid:3)(cid:229)(cid:240)(cid:239) (cid:223)(cid:235)(cid:232)(cid:232)(cid:225)(cid:227)(cid:229)(cid:221)(cid:240)(cid:225)(cid:3)(cid:236)(cid:221)(cid:238)(cid:240)(cid:234)(cid:225)(cid:238)(cid:239)(cid:228)(cid:229)(cid:236)(cid:239)(cid:3)(cid:243)(cid:229)(cid:240)(cid:228)(cid:3)(cid:240)(cid:243)(cid:235)(cid:3)(cid:233)(cid:221)(cid:230)(cid:235)(cid:238)(cid:3) (cid:235)(cid:241)(cid:240)(cid:287)(cid:240)(cid:240)(cid:229)(cid:234)(cid:227)(cid:3)(cid:224)(cid:225)(cid:221)(cid:232)(cid:239)(cid:5) UCLA and the University of California Berkeley. A S T O N V I L L A FOOTBALL CLUB SOUTHAMPTON FOOTBALL CLU B (cid:207) (cid:195) (cid:204) (cid:209) (cid:212) (cid:3) (cid:206) (cid:199) (cid:195) (cid:201) (cid:215) (cid:199) (cid:3) (cid:196) (cid:195) (cid:213) (cid:199) (cid:196) (cid:195) (cid:206) (cid:206) (cid:173) (cid:30) (cid:28) (cid:30) (cid:28) Kevi n Plank and UC L A Di recto r of Athl eti cs, Dan Guer re ro UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) Í ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2016 or ‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-33202 UNDER ARMOUR, INC. (Exact name of registrant as specified in its charter) Maryland (State or other jurisdiction of incorporation or organization) 52-1990078 (I.R.S. Employer Identification No.) 1020 Hull Street Baltimore, Maryland 21230 (Address of principal executive offices) (Zip Code) (410) 454-6428 (Registrant’s Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: Class A Common Stock Class C Common Stock (Title of each class) New York Stock Exchange New York Stock Exchange (Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Í No ‘ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No Í Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes Í No ‘ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes Í No ‘ Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 or Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Í Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Í Non-accelerated filer ‘ (Do not check if a smaller reporting company) ‘ Accelerated filer Smaller reporting company ‘ the is a shell company (as defined in Rule 12b-2 of Indicate by check mark whether the registrant Act). Yes ‘ No Í As of June 30, 2016, the last business day of our most recently completed second fiscal quarter, the aggregate market value of the registrant’s Class A Common Stock and Class C Common Stock held by non- affiliates was $7,311,048,606 and $6,916,196,221, respectively. As of January 31, 2017, there were 183,837,686 shares of Class A Common Stock, 34,450,000 shares of Class B Convertible Common Stock and 220,242,776 shares of Class C Common Stock outstanding. Portions of Under Armour, Inc.’s Proxy Statement for the Annual Meeting of Stockholders to be held on May 31, 2017 are incorporated by reference in Part III of this Form 10-K. DOCUMENTS INCORPORATED BY REFERENCE UNDER ARMOUR, INC. ANNUAL REPORT ON FORM 10-K TABLE OF CONTENTS PART I. Item 1. Business General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Marketing and Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sales and Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seasonality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Product Design and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sourcing, Manufacturing and Quality Assurance . . . . . . . . . . . . . . . . . . . . . . . . . Inventory Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1A Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1B Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 2 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Executive Officers of the Registrant Item 4 Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART II. Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 6 Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 7A Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . Item 8 Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 9A Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 9B Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART III. Item 10 Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . Item 11 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 13 Certain Relationships and Related Transactions, and Director Independence . . . . . Item 14 Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 3 4 6 6 7 7 8 8 9 9 10 24 25 25 26 28 29 32 34 52 55 88 88 88 89 89 89 89 89 PART IV. Item 15 Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Item 16 Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 94 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [THIS PAGE INTENTIONALLY LEFT BLANK] ITEM 1. BUSINESS General PART I Our principal business activities are the development, marketing and distribution of branded performance apparel, footwear and accessories for men, women and youth. The brand’s performance apparel and footwear are engineered in many designs and styles for wear in nearly every climate to provide a performance alternative to traditional products. Our products are sold worldwide and are worn by athletes at all levels, from youth to professional, on playing fields around the globe, as well as by consumers with active lifestyles. Our Connected Fitness strategy is focused on connecting with our consumers and increasing awareness and sales of our existing product offerings through our global wholesale and direct to consumer channels. We plan to engage and grow this community by developing innovative applications, services and other digital solutions to impact how athletes and fitness-minded individuals train, perform and live. Our net revenues are generated primarily from the wholesale sales of our products to national, regional, independent and specialty retailers. We also generate net revenue from the sale of our products through our direct to consumer sales channel, which includes our brand and factory house stores and websites, from product licensing and from digital platform licensing and subscriptions and digital advertising through our Connected Fitness business. A large majority of our products are sold in North America; however we believe that our products appeal to athletes and consumers with active lifestyles around the globe. Internationally, our net revenues are generated from a mix of wholesale sales to retailers and distributors and sales through our direct to consumer sales channels, and license revenue from sales by our third party licensees. We plan to continue to grow our business over the long term through increased sales of our apparel, footwear and accessories, expansion of our wholesale distribution, growth in our direct to consumer sales channel and expansion in international markets. Virtually all of our products are manufactured by our unaffiliated primary manufacturers operating in 18 countries outside of the United States. We were incorporated as a Maryland corporation in 1996. As used in this report, the terms “we,” “our,” “us,” “Under Armour” and the “Company” refer to Under Armour, Inc. and its subsidiaries unless the context indicates otherwise. We have registered trademarks around the globe, including UNDER ARMOUR®, HEATGEAR®, COLDGEAR®, ALLSEASONGEAR® and the Under Armour UA Logo, and we have applied to register many other trademarks. This Annual Report on Form 10-K also contains additional trademarks and tradenames of our Company and our subsidiaries. All trademarks and tradenames appearing in this Annual Report on Form 10-K are the property of their respective holders. Products Our product offerings consist of apparel, footwear and accessories for men, women and youth. We market our products at multiple price levels and provide consumers with products that we believe are a superior alternative to traditional athletic products. In 2016, sales of apparel, footwear and accessories represented 67%, 21% and 8% of net revenues, respectively. We introduced a new limited line of apparel and footwear product under the UAS™, or Under Armour sportswear label in 2016, and expect to continue to broaden our sportswear and lifestyle product offerings. Licensing arrangements, primarily for the sale of our products, and revenue from our Connected Fitness business represented the remaining 4% of net revenues. Refer to Note 15 to the Consolidated Financial Statements for net revenues by product. 1 Apparel Our apparel is offered in a variety of styles and fits intended to enhance comfort and mobility, regulate body temperature and improve performance regardless of weather conditions. Our apparel is engineered to replace traditional non-performance fabrics in the world of athletics and fitness with three gearlines are performance alternatives designed and merchandised along gearlines. Our marketed to tell a very simple story about our highly technical products and extend across the sporting goods, outdoor and active lifestyle markets. We market our apparel for consumers to choose HEATGEAR® when it is hot, COLDGEAR® when it is cold and ALLSEASONGEAR® between the extremes. Within each gearline our apparel comes in three primary fit types: compression (tight fit), fitted (athletic fit) and loose (relaxed). HEATGEAR® is designed to be worn in warm to hot temperatures under equipment or as a single layer. While a sweat-soaked traditional non-performance T-shirt can weigh two to three pounds, HEATGEAR® is engineered with a microfiber blend designed to wick moisture from the body which helps the body stay cool, dry and light. We offer HEATGEAR® in a variety of tops and bottoms in a broad array of colors and styles for wear in the gym or outside in warm weather. COLDGEAR® is designed to wick moisture from the body while circulating body heat from hot spots to help maintain core body temperature. Our COLDGEAR® apparel provides both dryness and warmth in a single light layer that can be worn beneath a jersey, uniform, protective gear or ski-vest, and our COLDGEAR® outerwear products protect the athlete, as well as the coach and the fan from the outside in. Our COLDGEAR® products generally sell at higher prices than our other gearlines. ALLSEASONGEAR® is designed to be worn in between extreme temperatures and uses technical in cooler fabrics to keep the wearer cool and dry in warmer temperatures while preventing a chill temperatures. Footwear Our footwear offerings include running, basketball, cleated, slides and performance training, and outdoor footwear. Our footwear is light, breathable and built with performance attributes for athletes. Our footwear is designed with innovative technologies including Anafoam™, UA Clutch Fit® and Charged Cushioning®, which provide stabilization, directional cushioning and moisture management engineered to maximize the athlete’s comfort and control. Accessories Accessories primarily includes the sale of athletic performance gloves, bags and headwear. Our accessories include HEATGEAR® and COLDGEAR® technologies and are designed with advanced fabrications to provide the same level of performance as our other products. Connected Fitness We offer digital fitness platform licenses and subscriptions, along with digital advertising through our MapMyFitness, MyFitnessPal, Endomondo and UA Record applications. License We have agreements with our licensees to develop Under Armour apparel, accessories and equipment. Our product, marketing and sales teams are involved in substantially all steps of the design and go to market process in order to maintain brand standards and consistency. During 2016, our 2 licensees offered collegiate, National Football League (“NFL) and Major League Baseball (“MLB”) apparel and accessories, baby and kids’ apparel, team uniforms, socks, water bottles, eyewear and other specific hard goods equipment that feature performance advantages and functionality similar to our other product offerings. Marketing and Promotion We currently focus on marketing and selling our products to consumers primarily for use in athletics, fitness, training and outdoor activities. We seek to drive consumer demand by building brand equity and awareness that our products deliver advantages that help athletes perform better. Sports Marketing Our marketing and promotion strategy begins with providing and selling our products to high- performing athletes and teams on the high school, collegiate and professional levels. We execute this strategy through outfitting agreements, professional and collegiate sponsorships, individual athlete agreements and by providing and selling our products directly to team equipment managers and to individual athletes. As a result, our products are seen on the field, giving them exposure to various consumer audiences through the internet, television, magazines and live at sporting events. This exposure to consumers helps us establish on-field authenticity as consumers can see our products being worn by high-performing athletes. We are the official outfitter of athletic teams in several high-profile collegiate conferences. We are an official supplier of footwear and gloves to the NFL. We are the Official Performance Footwear Supplier of MLB and a partner with the National Basketball Association (“NBA”) which allows us to market our NBA athletes in game uniforms in connection with our basketball footwear. We are the official headwear and performance apparel provider for the NFL Scouting Combine and the official partner and title sponsor of the NBA Draft Combine, in each case with the right to sell licensed combine training apparel and headwear. In 2016, we entered into an agreement to be the Official On- Field Uniform Supplier, Official Authentic Performance Apparel Partner, and Official Connected Fitness Partner of MLB, beginning with the 2020 season, which will allow us to provide on-field uniforms, apparel, and accessories to all together with our manufacturing partner sell a broad range of MLB licensed merchandise. Internationally, we sponsor and sell our products to several European and Latin American soccer and rugby teams, which helps drive brand awareness in various countries and regions around the world. thirty MLB clubs on an exclusive basis, and, We also seek to sponsor events to drive awareness and brand authenticity from a grassroots level. We host combines, camps and clinics for athletes in many sports at regional sites across the country. These events, along with the products we make, are designed to help young athletes improve their training methods and their overall performance. We are also the title sponsor of a collection of high school All-America Games that create significant on-field product and brand exposure that contributes to our on-field authenticity. Media We feature our products in a variety of national digital, broadcast, and print media outlets. We also utilize social and mobile media to engage consumers and promote conversation around our brand and our products. Retail Presentation The primary component of our retail marketing strategy is to increase brand floor space dedicated to our products within our major retail accounts. The design and funding of Under Armour concept 3 shops within our major retail accounts has been a key initiative for securing prime floor space, educating the consumer and creating an exciting environment for the consumer to experience our brand. Under Armour concept shops enhance our brand’s presentation within our major retail accounts with a shop-in-shop approach, using dedicated floor space exclusively for our products, including flooring, lighting, walls, displays and images. Sales and Distribution The majority of our sales are generated through wholesale channels, which include national and independent and specialty retailers, department store chains, regional sporting goods chains, institutional athletic departments and leagues and teams. In addition, we sell our products to independent distributors in various countries where we generally do not have direct sales operations and through licensees. We also sell our products directly to consumers through our own network of brand and factory house stores in our North America, Europe, the Middle East and Africa (“EMEA”), Latin America and Asia-Pacific operating segments, and through websites globally. Factory house stores serve an inventory management by allowing us to sell a significant portion of important role in our overall excess, discontinued and out-of-season products while maintaining the pricing integrity of our brand in our other distribution channels. Through our brand house stores, consumers experience our brand first-hand and have broader access to our performance products. In 2016, sales through our wholesale, direct to consumer, licensing and Connected Fitness channels represented 65%, 31%, 2% and 2% of net revenues, respectively. We believe the trend toward performance products is global and plan to continue to introduce our products and simple merchandising story to athletes throughout the world. We are introducing our performance apparel, footwear and accessories outside of North America in a manner consistent with our past brand-building strategy, including selling our products directly to teams and individual athletes in these markets, thereby providing us with product exposure to broad audiences of potential consumers. Our primary business operates in four geographic segments: (1) North America, comprising the United States and Canada, (2) EMEA, (3) Asia-Pacific, and (4) Latin America. Each of these geographic segments operate predominantly in one industry: the design, development, marketing and distribution of performance apparel, footwear and accessories. We also operate our Connected Fitness business as a separate segment. Due to the individual materiality of our Asia-Pacific segment, we have separately presented our Asia-Pacific, EMEA and Latin America segments, as of December 31, 2016, and will no longer combine these segments for presentation purposes. Net revenues by segment presented for prior periods has been conformed to the current presentation. The following table presents net revenues by segment for each of the years ending December 31, 2016, 2015 and 2014: 2016 % of Year ended December 31, 2015 % of Net Revenues Net Revenues Net Revenues Net Revenues Net Revenues $4,005,314 330,584 268,607 141,793 83.0% $3,455,737 203,109 144,877 106,175 6.9 5.6 2.9 87.2% $2,796,390 134,118 70,419 64,234 5.1 3.7 2.7 80,447 (1,410) 1.6 — 53,415 — 1.3 — 19,209 — 2014 % of Net Revenues 90.7% 4.3 2.3 2.1 0.6 — (In thousands) North America EMEA Asia-Pacific Latin America Connected Fitness Intersegment Eliminations Total net revenues $4,825,335 100.0% $3,963,313 100.0% $3,084,370 100.0% 4 North America Our North America segment accounted for approximately 83% of our net revenues for 2016. We sell our branded apparel, footwear and accessories in North America through our wholesale and direct to consumer channels. Net revenues generated from the sales of our products in the United States were $3.8 billion, $3.3 billion and $2.6 billion for the years ended December 31, 2016, 2015 and 2014 respectively and, with the exception of goodwill and intangible assets disclosed in Note 4 to the Consolidated Financial Statements, long-lived assets were located in the United States. Our largest customer, Dick’s Sporting Goods, accounted for approximately 10% of our net revenues in 2016. No other customers accounted for 10% or more of our net revenues. the majority of our Our direct to consumer sales are generated through our brand and factory house stores, along with internet websites. As of December 31, 2016, we had 151 factory house stores in North America primarily located in outlet centers throughout the United States. As of December 31, 2016, we had 18 brand house stores in North America. Consumers can purchase our products directly from our e-commerce website, www.underarmour.com. In addition, we earn licensing revenue in North America based on our licensees’ collegiate and MLB apparel and accessories, baby and kids’ apparel, team uniforms, socks, water bottles, eyewear and inflatable footballs and basketballs and other specific hard goods equipment. In order to maintain consistent quality and performance, we pre-approve all products manufactured and sold by our licensees, and our quality assurance team strives to ensure that the products meet the same quality and compliance standards as the products that we sell directly. We distribute the majority of our products sold to our North American wholesale customers and our brand and factory house stores from distribution facilities we lease and operate in California, Maryland and Tennessee. In addition, we distribute our products in North America through third-party logistics providers with primary locations in Canada, New Jersey and Florida. In some instances, we arrange to have products shipped from the factories that manufacture our products directly to customer-designated facilities. International Approximately 15.4% of our net revenues were generated from our international segments in 2016. We plan to continue to grow our business over the long term in part through expansion in international markets. EMEA We sell our apparel, footwear and accessories primarily through wholesale customers, website operations, independent distributors and a limited number of stores we operate in certain European countries. We also sell our branded products to various sports clubs and teams in Europe. We generally distribute our products to our retail customers and e-commerce consumers in Europe through footwear and accessories primarily through a third-party logistics provider. We sell our apparel, independent distributors in the Middle East and Africa. Asia-Pacific We sell our apparel, footwear and accessories products in China, South Korea, and Australia through stores operated by our distribution and wholesale partners, along with website operations and stores we operate. Prior to late 2016, our products were sold through a license in South Korea. We also sell our products to distributors in New Zealand, Taiwan, Hong Kong and other countries in Southeast Asia where we do not have direct sales operations. We distribute our products in Asia- Pacific primarily through a third-party logistics provider based out of Hong Kong. 5 We have a license agreement with Dome Corporation, which produces, markets and sells our branded apparel, footwear and accessories in Japan. Our branded products are sold in Japan to large sporting goods retailers, independent specialty stores and professional sports teams, and through licensee-owned retail stores. We hold a cost-based minority investment in Dome. Latin America We sell our products in Mexico, Chile and Brazil through wholesale customers, website operations and brand and factory house stores. In these countries we operate through third-party distribution facilities. In other Latin American countries we distribute our products through independent distributors which are sourced through our international distribution hubs in Hong Kong, Jordan and the United States. Connected Fitness In 2013, we began offering digital fitness subscriptions and licenses, along with digital advertising through our MapMyFitness platform. In 2014, we introduced the UA Record platform and in 2015, we acquired the Endomondo and MyFitnessPal platforms to create our Connected Fitness business. Approximately 1.6% of our net revenues were generated from our Connected Fitness business in 2016. We plan to engage and grow this community by developing innovative applications, services and other digital solutions to impact how athletes and fitness-minded individuals train, perform and live. Seasonality Historically, we have recognized a majority of our net revenues and a significant portion of our income from operations in the last two quarters of the year, driven primarily by increased sales volume of our products during the fall selling season, including our higher priced cold weather products, along with a larger proportion of higher margin direct to consumer sales. The level of our working capital generally reflects the seasonality and growth in our business. We generally expect inventory, accounts payable and certain accrued expenses to be higher in the second and third quarters in preparation for the fall selling season. Product Design and Development Our products are manufactured with technical fabrications produced by third parties and developed in collaboration with our product development teams. This approach enables us to select and create superior, technically advanced fabrics, produced to our specifications, while focusing our product development efforts on design, fit, climate and product end use. We seek to regularly upgrade and improve our products with the latest in innovative technology while broadening our product offerings. Our goal, to deliver superior performance in all our products, provides our developers and licensees with a clear, overarching direction for the brand and helps them identify new opportunities to create performance products that meet the changing needs of athletes. We design products with “visible technology,” utilizing color, texture and fabrication to enhance our customers’ perception and understanding of product use and benefits. Our product development team works closely with our sports marketing and sales teams as well as professional and collegiate athletes to identify product trends and determine market needs. For example, these teams worked closely to identify the opportunity and market for our ColdGear® Infrared product, which is a ceramic print technology on the inside of our garments that provides athletes with lightweight warmth, and Speedform®, a proprietary 3-dimensional molding technology for footwear which delivers superior fit and feel. In 2016, we introduced UA CoolSwitch, a fabric treatment with sweat-activated cooling technology and Threadborne, a soft micro-engineered fabric that provides lightweight directional strength and support at the yarn level. 6 Sourcing, Manufacturing and Quality Assurance Many of the specialty fabrics and other raw materials used in our apparel products are technically advanced products developed by third parties and may be available, in the short term, from a limited number of sources. The fabric and other raw materials used to manufacture our apparel products are sourced by our contracted manufacturers from a limited number of suppliers pre-approved by us. In 2016, approximately 52% of the fabric used in our apparel products came from five suppliers. These fabric suppliers have primary locations in Taiwan, Malaysia and Mexico. The fabrics used by our suppliers and manufacturers are primarily synthetic fabrics and involve raw materials, including petroleum based products that may be subject to price fluctuations and shortages. We also use cotton in our apparel products, as blended fabric and also in our CHARGED COTTON® line. Cotton is a commodity that is subject to price fluctuations and supply shortages. Additionally, our footwear uses raw materials that are sourced from a diverse base of third party suppliers. This includes chemicals and petroleum-based components such as rubber that are also subject to price fluctuations and supply shortages. Substantially all of our products are manufactured by unaffiliated manufacturers. In 2016, our apparel and accessories products were manufactured by 39 primary contract manufacturers, operating in 18 countries, with approximately 60% of our apparel and accessories products manufactured in Jordan, Vietnam, China and Malaysia. Of our 39 primary contract manufacturers, 10 produced approximately 57% of our apparel and accessories products. In 2016, our footwear products were manufactured by seven primary contract manufacturers, operating primarily in China, Vietnam and Indonesia. Of our seven primary contract manufacturers, three produced approximately 70% of our footwear products. All manufacturers are evaluated for quality systems, social compliance and financial strength by our internal teams prior to being selected and on an ongoing basis. Where appropriate, we strive to qualify multiple manufacturers for particular product types and fabrications. We also seek out vendors that can perform multiple manufacturing stages, such as procuring raw materials and providing finished products, which helps us to control our cost of goods sold. We enter into a variety of agreements with our contract manufacturers, including non-disclosure and confidentiality agreements, and we require that all of our manufacturers adhere to a code of conduct regarding quality of manufacturing and working conditions and other social concerns. We do not, however, have any long term agreements requiring us to utilize any manufacturer, and no manufacturer is required to produce our products in the long term. We have subsidiaries in Hong Kong, Panama, Vietnam, Indonesia, China and Taiwan to support our manufacturing, quality assurance and sourcing efforts for our products. We also manufacture a limited number of products primarily for high-profile athletes and teams, on-premises in our quick turn, Special Make-Up Shop located at one of our facilities in Maryland. Inventory Management is important Inventory management to the financial condition and operating results of our business. We manage our inventory levels based on existing orders, anticipated sales and the rapid- delivery requirements of our customers. Our inventory strategy is focused on continuing to meet consumer demand while improving our inventory efficiency over the long term by putting systems and processes in place to improve our inventory management. These systems and processes are designed to improve our forecasting and supply planning capabilities. In addition to systems and processes, key areas of focus that we believe will enhance inventory performance are added discipline around the purchasing of product, production lead time reduction, and better planning and execution in selling of excess inventory through our factory house stores and other liquidation channels. Our practice, and the general practice in the apparel, footwear and accessory industries, is to offer retail customers the right to return defective or improperly shipped merchandise. As it relates to new 7 product introductions, which can often require large initial launch shipments, we commence production before receiving orders for those products from time to time. This can affect our inventory levels as we build pre-launch quantities. Intellectual Property We believe we own the material trademarks used in connection with the marketing, distribution and sale of our products, both domestically and internationally, where our products are currently sold or manufactured. Our major trademarks include the UA Logo and UNDER ARMOUR®, both of which are registered in the United States, Canada, Mexico, the European Union, Japan, China and numerous other countries. We also own trademark registrations for other trademarks including, among others, UA®, ARMOUR®, HEATGEAR®, COLDGEAR®, ALLSEASONGEAR®, PROTECT THIS HOUSE®, incorporate the term ARMOUR such as ARMOURBITE®, I WILL®, and many trademarks that ARMOURSTORM®, ARMOUR® FLEECE, and ARMOUR BRA®. We also own applications to protect new connected fitness branding such as UA RECORD™, UA HEALTHBOX™ and UNDER ARMOUR CONNECTED FITNESS™. We own domain names for our primary trademarks (most notably underarmour.com and ua.com) and hold copyright registrations for several commercials, as well as for certain artwork. We intend to continue to strategically register, both domestically and internationally, trademarks and copyrights we utilize today and those we develop in the future. We will continue to aggressively police our trademarks and pursue those who infringe, both domestically and internationally. We believe the distinctive trademarks we use in connection with our products are important in building our brand image and distinguishing our products from those of others. These trademarks are among our most valuable assets. In addition to our distinctive trademarks, we also place significant value on our trade dress, which is the overall image and appearance of our products, and we believe our trade dress helps to distinguish our products in the marketplace. We traditionally have had limited patent protection on much of the technology, materials and processes used in the manufacture of our products. In addition, patents are increasingly important with respect to our innovative products and new businesses and investments, particularly in our Connected Fitness business. As we continue to expand and drive innovation in our products, we expect to seek patent protection on products, features and concepts we believe to be strategic and important to our business. We will continue to file patent applications where we deem appropriate to protect our new products, innovations and designs. We expect the number of applications to increase as our business grows and as we continue to expand our products and innovate. Competition The market for performance apparel, footwear and accessories is highly competitive and includes many new competitors as well as increased competition from established companies expanding their production and marketing of performance products. Many of the fabrics and technology used in manufacturing our products are not unique to us, and we own a limited number of fabric or process patents. Many of our competitors are large apparel and footwear companies with strong worldwide brand recognition and significantly greater resources than us, such as Nike and Adidas. We also compete with other manufacturers, including those specializing in outdoor apparel, and private label offerings of certain retailers, including some of our retail customers. In addition, we must compete with others for purchasing decisions, as well as limited floor space at retailers. We believe we have been successful in this area because of the relationships we have developed and as a result of the strong sales of our products. However, if retailers earn higher margins from our competitors’ products, they may favor the display and sale of those products. 8 We believe we have been able to compete successfully because of our brand image and recognition, the performance and quality of our products and our selective distribution policies. We also believe our focused gearline merchandising story differentiates us from our competition. In the future we expect to compete for consumer preferences and expect that we may face greater competition on pricing. This may favor larger competitors with lower production costs per unit that can spread the effect of price discounts across a larger array of products and across a larger customer base than ours. The purchasing decisions of consumers for our products often reflect highly subjective preferences that can be influenced by many factors, including advertising, media, product sponsorships, product improvements and changing styles. Employees As of December 31, 2016, we had approximately 15,200 employees, including approximately 9,400 in our brand and factory house stores and approximately 2,000 at our distribution facilities. Approximately 6,500 of our employees were full-time. Most of our employees are located in the United States. None of our employees in the United States are currently covered by a collective bargaining agreement and there are no material collective bargaining agreements in effect in any of our international locations. We have had no labor-related work stoppages, and we believe our relations with our employees are good. Available Information We will make available free of charge on or through our website at www.underarmour.com our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we file these materials with the Securities and Exchange Commission. We also post on this website our key corporate governance documents, including our board committee charters, our corporate governance guidelines and our code of conduct and ethics. 9 ITEM 1A. RISK FACTORS Forward-Looking Statements Some of the statements contained in this Form 10-K and the documents incorporated herein by reference constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, the development and introduction of new products, the implementation of our marketing and branding strategies and future benefits and opportunities from acquisitions and other significant investments. In many cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “outlook,” “potential” or the negative of these terms or other comparable terminology. The forward-looking statements contained in this Form 10-K and the documents incorporated herein by reference reflect our current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated by these forward-looking statements, including, but not those factors described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These factors include without limitation: limited to, • • • • • • • • • • • • • changes in general economic or market conditions that could affect overall consumer spending or our industry; changes to the financial health of our customers; our ability to effectively manage our growth and a more complex global business; our ability to comply with existing trade and other regulations, and the potential impact of new trade and tax regulations on our profitability; our ability to successfully manage or realize expected results from acquisitions and other significant investments or capital expenditures; our ability to effectively develop and launch new, innovative and updated products; our ability to accurately forecast consumer demand for our products and manage our inventory in response to changing demands; increased competition causing us to lose market share or reduce the prices of our products or to increase significantly our marketing efforts; fluctuations in the costs of our products; loss of key suppliers or manufacturers or failure of our suppliers or manufacturers to produce or deliver our products in a timely or cost-effective manner, including due to port disruptions; our ability to further expand our business globally and to drive brand awareness and consumer acceptance of our products in other countries; our ability to accurately anticipate and respond to seasonal or quarterly fluctuations in our operating results; risks related to foreign currency exchange rate fluctuations; 10 • • • • • • our ability to effectively market and maintain a positive brand image; the availability, technology, as well as any potential interruption of such systems or technology; integration and effective operation of information systems and other risks related to data security or privacy breaches; our ability to raise additional capital required to grow our business on terms acceptable to us; our potential exposure to litigation and other proceedings; and our ability to attract key talent and retain the services of our senior management and key employees. The forward-looking statements contained in this Form 10-K reflect our views and assumptions only as of the date of this Form 10-K. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. Our results of operations and financial condition could be adversely affected by numerous risks. You should carefully consider the risk factors detailed below in conjunction with the other information contained in this Form 10-K. Should any of these risks actually materialize, our business, financial condition and future prospects could be negatively impacted. During a downturn in the economy, consumer purchases of discretionary items are affected, which could materially harm our sales, profitability and financial condition. Many of our products may be considered discretionary items for consumers. Factors affecting the level of consumer spending for such discretionary items include general economic conditions, the availability of consumer credit and consumer confidence in future economic conditions. Uncertainty in global economic conditions continues, and trends in consumer discretionary spending remain unpredictable. However, consumer purchases of discretionary items tend to decline during recessionary periods when disposable income is lower or during other periods of economic instability or uncertainty, which may slow our growth more than we anticipate. A downturn in the economies in markets in which we sell our products, particularly in North America, may materially harm our sales, profitability and financial condition. We derive a substantial portion of our sales from large wholesale customers. If the financial condition of our customers declines, our financial condition and results of operations could be adversely impacted. In 2016, sales through our wholesale channel represented approximately 65% of our net revenues. We extend credit to our wholesale customers based on an assessment of a customer’s financial condition, generally without requiring collateral. We face increased risk of order reduction or cancellation when dealing with financially ailing customers or customers struggling with economic uncertainty. During weak economic conditions, customers may be more cautious with orders or may slow investments necessary to maintain a high quality in-store experience for consumers, which may result in lower sales of our products. In addition, a slowing economy in our key markets or a continued decline in consumer purchases of sporting goods generally could have an adverse effect on the financial health of our customers. From time to time certain of our customers have experienced financial difficulties. To the extent one or more of our customers experience significant financial difficulty, bankruptcy, insolvency or cease operations, this could have a material adverse effect on our sales, our ability to collect on receivables and our financial condition. 11 A decline in sales to, or the loss of, one or more of our key customers could result in a material loss of net revenues and negatively impact our prospects for growth. In 2016, approximately 10% of our net revenues were generated from sales to our largest customer. We currently do not enter into long term sales contracts with this customer or our other key customers, relying instead on our relationships with these customers and on our position in the marketplace. As a result, we face the risk that these key customers may not increase their business with us as we expect, or may significantly decrease their business with us or terminate their relationship with us. The failure to increase our sales to these customers as much as we anticipate would have a negative impact on our growth prospects and any decrease or loss of these key customers’ business could result in a material decrease in our net revenues and net income. In addition, our customers continue to experience ongoing industry consolidation. As this consolidation continues, it increases the risk that if any one customer significantly reduces their purchases of our products, we may be unable to find sufficient alternative customers to sustain similar net revenue growth. We must continue to effectively manage our growth and the increased complexity of a global business or we may not achieve our long-term growth targets and our brand image, net revenues and profitability may decline. We have expanded our business and operations rapidly since our inception and our net revenues have increased to $4,825.3 million in 2016 from $1,834.9 million in 2012. Our long-term growth strategy depends on our ability to not only maintain strong growth throughout our business, but to also successfully execute on strategic growth initiatives in key areas, such as our international business, footwear and our global direct to consumer sales channel. Our growth in these areas depends on our ability to continue to successfully expand our global network of brand and factory house stores, grow our e-commerce and mobile application offerings throughout the world and continue to successfully increase our product offerings and market share in footwear. Our ability to invest in these growth initiatives in the near-term also depends on our ability to maintain net revenue growth in North America (our largest market), which represented 83% of our total net revenues in 2016. If we cannot effectively execute our long-term growth strategies while managing costs effectively, our business and results of operations could be negatively impacted. In addition to successfully executing on our long-term growth strategies, we must also continue to successfully manage the operational difficulties associated with expanding our business to meet the world. We may experience difficulties in obtaining increased consumer demand throughout sufficient raw materials and manufacturing capacity to produce our products, as well as delays in production and shipments, as our products are subject to risks associated with overseas sourcing and manufacturing. We must also continually evaluate the need to expand critical functions in our business, including sales and marketing, product development and distribution functions, our management information systems and other processes and technology. To support these functions, we must hire, train and manage an increasing number of employees, and obtain more space to support our expanding workforce. We may not be successful initiatives cost effectively or at all, and could experience serious operating difficulties if we fail to do so. These growth efforts could also increase the strain on our existing resources. If we experience difficulties in supporting the growth of our business, we could experience an erosion of our brand image and a decrease in net revenues and net income. in undertaking these types of If we fail to successfully manage or realize expected results from acquisitions and other significant investments, it may have a material adverse effect on our results of operations and financial position. From time to time we may engage in acquisition opportunities we believe are complementary to our business and brand. For example, as part of our ongoing business strategy we have engaged in 12 acquisitions to grow and enhance our Connected Fitness business. In order to successfully execute this strategy, we must manage the integration of acquired companies and employees successfully. Because our Connected Fitness business is a relatively new line of business for us, these challenges may be more pronounced. Integrating acquisitions can also require significant efforts and resources, which could divert management attention from more profitable business operations. Failing to successfully integrate acquired entities and businesses or to produce results consistent with financial models used in the analysis of our acquisitions could potentially result in an impairment of goodwill and intangible assets, which could have a material adverse effect on our results of operations and financial position. In addition, we may not be successful in our efforts to continue to grow the number of users, maintain or increase user engagement or ultimately realize expected revenues from our Connected Fitness community. For example, we may not successfully increase sales of our apparel, footwear and accessory products to these users. Any of these developments could have a material adverse effect on our results of operations and financial position. If we are unable to anticipate consumer preferences and successfully develop and introduce new, innovative and updated products, our net revenues and profitability may be negatively impacted. Our success depends on our ability to identify and originate product trends as well as to anticipate and react to changing consumer demands in a timely manner. All of our products are subject to changing consumer preferences that cannot be predicted with certainty. In addition, long lead times for certain of our products may make it hard for us to quickly respond to changes in consumer demands. Our new products may not receive consumer acceptance as consumer preferences could shift rapidly to different types of performance or other sports products or away from these types of products altogether, and our future success depends in part on our ability to anticipate and respond to these changes. Even if we are successful in anticipating consumer preferences, our ability to adequately react to and address those preferences will in part depend upon our continued ability to develop and introduce innovative, high-quality products. If we fail to introduce technical innovation in our products, consumer demand for our products could decline. In addition, if we experience problems with the quality of our products, we may incur substantial expense to remedy the problems. Our failure to anticipate and respond timely to changing consumer preferences or to effectively introduce new products and enter into new product categories that are accepted by consumers could result in a decrease in net revenues and excess inventory levels, which could have a material adverse effect on our financial condition. Our results of operations could be materially harmed if we are unable to accurately forecast demand for our products. To ensure adequate inventory supply, we must forecast inventory needs and place orders with our manufacturers before firm orders are placed by our customers. In addition, a significant portion of our net revenues are generated by at-once orders for immediate delivery to customers, particularly during our historical peak season, during the last two quarters of the year. If we fail to accurately forecast customer demand we may experience excess inventory levels or a shortage of product to deliver to our customers. Factors that could affect our ability to accurately forecast demand for our products include: • • • an increase or decrease in consumer demand for our products; our failure to accurately forecast consumer acceptance for our new products; product introductions by competitors; 13 • • unanticipated changes in general market conditions or other factors, which may result in cancellations of advance orders or a reduction or increase in the rate of reorders or at-once orders placed by retailers; the impact on consumer demand due to unseasonable weather conditions; • weakening of economic conditions or consumer confidence in future economic conditions, which could reduce demand for discretionary items, such as our products; and • terrorism or acts of war, or the threat thereof, or political or labor instability or unrest which interrupt production and could adversely affect consumer confidence and spending or distribution of product and raw materials. Inventory levels in excess of customer demand may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which could impair our brand image and have an adverse effect on gross margin. In addition, if we underestimate the demand for our products, our manufacturers may not be able to produce products to meet our customer requirements, and this could result in delays in the shipment of our products and our ability to recognize revenue, as well as damage to our reputation and retailer and distributor relationships. The difficulty in forecasting demand also makes it difficult to estimate our future results of operations and financial condition from period to period. A failure to accurately predict the level of demand for our products could adversely impact our profitability. Sales of performance products may not continue to grow and this could adversely impact our ability to grow our business. We believe continued growth in industry-wide sales of performance apparel, footwear and accessories will be largely dependent on consumers continuing to transition from traditional alternatives to performance products. If consumers are not convinced these products are a better choice than traditional alternatives, growth in the industry and our business could be adversely affected. In addition, because performance products are often more expensive than traditional alternatives, consumers who are convinced these products provide a better alternative may still not be convinced they are worth the extra cost. If industry-wide sales of performance products do not continue to grow, our ability to continue to grow our business in line with our expectations could be adversely impacted. We operate in highly competitive markets and the size and resources of some of our competitors may allow them to compete more effectively than we can, resulting in a loss of our market share and a decrease in our net revenues and gross profit. The market for performance apparel, footwear and accessories is highly competitive and includes many new competitors as well as increased competition from established companies expanding their production and marketing of performance products. Because we own a limited number of fabric or process patents, our current and future competitors are able to manufacture and sell products with performance characteristics and fabrications similar to certain of our products. Many of our competitors are large apparel and footwear companies with strong worldwide brand recognition. Due to the including those fragmented nature of specializing in outdoor apparel and private label offerings of certain retailers, including some of our retail customers. Many of our competitors have significant competitive advantages, including greater financial, distribution, marketing and other longer operating histories, better brand recognition among consumers, more experience in global markets and greater economies of scale. In addition, our competitors have long term relationships with our key retail customers that are potentially the industry, we also compete with other manufacturers, resources, 14 more important to those customers because of the significantly larger volume and product mix that our competitors sell to them. As a result, these competitors may be better equipped than we are to influence consumer preferences or otherwise increase their market share by: • • • • • • quickly adapting to changes in customer requirements; readily taking advantage of acquisition and other opportunities; discounting excess inventory that has been written down or written off; devoting resources to the marketing and sale of advertising, media placement, partnerships and product endorsement; their products, including significant adopting aggressive pricing policies; and engaging in lengthy and costly intellectual property and other disputes. In addition, while one of our growth strategies is to increase floor space for our products in retail stores and generally expand our distribution to other retailers, retailers have limited resources and floor space, and we must compete with others to develop relationships with them. Increased competition by existing and future competitors could result in reductions in floor space in retail locations, reductions in sales or reductions in the prices of our products, and if retailers earn greater margins from our competitors’ products, they may favor the display and sale of those products. Our inability to compete successfully against our competitors and maintain our gross margin could have a material adverse effect on our business, financial condition and results of operations. Our profitability may decline as a result of increasing pressure on pricing. Our industry is subject to significant pricing pressure caused by many factors, including intense competition, consolidation in the retail industry, pressure from retailers to reduce the costs of products and changes in consumer demand. These factors may cause us to reduce our prices to retailers and consumers, which could negatively impact our margins and cause our profitability to decline if we are unable to offset price reductions with comparable reductions in our operating costs. This could have a material adverse effect on our results of operations and financial condition. Fluctuations in the cost of products could negatively affect our operating results. The fabrics used by our suppliers and manufacturers are made of raw materials including petroleum-based products and cotton. Significant price fluctuations or shortages in petroleum or other raw materials can materially adversely affect our cost of goods sold. In addition, certain of our manufacturers are subject to government regulations related to wage rates, and therefore the labor costs to produce our products may fluctuate. The cost of transporting our products for distribution and sale is also subject to fluctuation due in large part to the price of oil. Because most of our products are manufactured abroad, our products must be transported by third parties over large geographical distances and an increase in the price of oil can significantly increase costs. Manufacturing delays or unexpected transportation delays can also cause us to rely more heavily on airfreight to achieve timely delivery to our customers, which significantly increases freight costs. Any of these fluctuations may increase our cost of products and have an adverse effect on our profit margins, results of operations and financial condition. We rely on third-party suppliers and manufacturers to provide fabrics for and to produce our products, and we have limited control over these suppliers and manufacturers and may not be able to obtain quality products on a timely basis or in sufficient quantity. Many of the specialty fabrics used in our products are technically advanced textile products developed by third parties and may be available, in the short-term, from a very limited number of 15 sources. Substantially all of our products are manufactured by unaffiliated manufacturers, and, in 2016, 10 manufacturers produced approximately 57% of our apparel and accessories products, and three manufacturers produced approximately 70% of our footwear products. We have no long term contracts with our suppliers or manufacturing sources, and we compete with other companies for fabrics, raw materials, production and import quota capacity. We may experience a significant disruption in the supply of fabrics or raw materials from current sources or, in the event of a disruption, we may be unable to locate alternative materials suppliers of comparable quality at an acceptable price, or at all. In addition, our unaffiliated manufacturers may not be able to fill our orders in a timely manner. If we experience significant increased demand, or we lose or need to replace an existing manufacturer or supplier as a result of adverse economic conditions or other reasons, additional supplies of fabrics or raw materials or additional manufacturing capacity may not be available when required on terms that are acceptable to us, or at all, or suppliers or manufacturers may not be able to allocate sufficient capacity to us in order to meet our requirements. In addition, even if we are able to expand existing or find new manufacturing or fabric sources, we may encounter delays in production and added costs as a result of the time it takes to train our suppliers and manufacturers on our methods, products and quality control standards. Any delays, interruption or increased costs in the supply of fabric or manufacture of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in lower net revenues and net income both in the short and long term. We have occasionally received, and may in the future continue to receive, shipments of product that fail to conform to our quality control standards. In that event, unless we are able to obtain replacement products in a timely manner, we risk the loss of net revenues resulting from the inability to sell those products and related increased administrative and shipping costs. In addition, because we do not control our manufacturers, products that fail to meet our standards or other unauthorized products could end up in the marketplace without our knowledge, which could harm our brand and our reputation in the marketplace. Labor disruptions at ports or our suppliers or manufacturers may adversely affect our business. Our business depends on our ability to source and distribute products in a timely manner. As a result, we rely on the free flow of goods through open and operational ports worldwide and on a consistent basis from our suppliers and manufacturers. Labor disputes at various ports or at our suppliers or manufacturers create significant risks for our business, particularly if these disputes result in work slowdowns, lockouts, strikes or other disruptions during our peak importing or manufacturing seasons, and could have an adverse effect on our business, potentially resulting in canceled orders by customers, unanticipated inventory accumulation or shortages and reduced net revenues and net income. Our limited operating experience and limited brand recognition in new markets may limit our expansion strategy and cause our business and growth to suffer. Our future growth depends in part on our expansion efforts outside of North America. During the year ended December 31, 2016, 83% of our net revenues were earned in our North America segment. We have limited experience with regulatory environments and market practices outside of North America, and may face difficulties in expanding to and successfully operating in markets outside of North America. International expansion may place increased demands on our operational, managerial and administrative resources. in connection with expansion efforts outside of North America, we may face cultural and linguistic differences, differences in regulatory environments, labor practices and market practices and difficulties in keeping abreast of market, business and technical In addition, 16 developments and customers’ tastes and preferences. We may also encounter difficulty expanding into new markets because of limited brand recognition leading to delayed acceptance of our products. Failure to develop new markets outside of North America will limit our opportunities for growth. The operations of many of our manufacturers are subject to additional risks that are beyond our control and that could harm our business. In 2016, our products were manufactured by 39 primary manufacturers, operating in 18 countries, with 10 manufacturers accounting for approximately 57% of our apparel and accessories products, and three manufacturers accounting for approximately 70% of our footwear products. Approximately 60% of our apparel and accessories products were manufactured in Jordan, Vietnam, China and Malaysia. As a result of our international manufacturing, we are subject to risks associated with doing business abroad, including: • • • • • • political or labor unrest, terrorism and economic instability resulting in the disruption of trade from foreign countries in which our products are manufactured; currency exchange fluctuations; the imposition of new laws and regulations, including those relating to labor conditions, quality and safety standards, imports, trade restrictions and restrictions on the transfer of funds, as well as rules and regulations regarding climate change; reduced protection for intellectual property rights in some countries; disruptions or delays in shipments; and changes in local economic conditions in countries where our manufacturers and suppliers are located. These risks could negatively affect the ability of our manufacturers to produce or deliver our products or procure materials, hamper our ability to sell products in international markets and increase our cost of doing business generally. In the event that one or more of these factors make it undesirable or impractical for us to conduct business in a particular country, our business could be adversely affected. In addition, many of our imported products are subject to duties, tariffs or other import limitations that affect the cost and quantity of various types of goods imported into the United States and other markets. Any country in which our products are produced or sold may eliminate, adjust or impose new import limitations, duties, anti-dumping penalties or other charges or restrictions, any of which could have an adverse effect on our results of operations, cash flows and financial condition. Our credit facility contains financial covenants and other restrictions on our actions, and it could therefore limit our operational flexibility or otherwise adversely affect our financial condition. We have, from time to time, financed our liquidity needs in part from borrowings made under our credit facility. The credit agreement contains negative covenants that, subject to significant exceptions limit our ability, among other things to incur additional indebtedness, make restricted payments, pledge loans, advances, guarantees and acquisitions, undergo assets as security, make investments, fundamental changes and enter into transactions with affiliates. In addition, we must maintain a certain leverage ratio and interest coverage ratio as defined in the credit agreement. Failure to comply with these operating or financial covenants could result from, among other things, changes in our results of operations or general economic conditions. These covenants may restrict our ability to engage in transactions that would otherwise be in our best interests. Failure to comply with any of the covenants 17 under the credit agreement could result in a default. In addition, the credit agreement includes a cross default provision whereby an event of default under certain other debt obligations will be considered an event of default under the credit agreement. If an event of default occurs, the commitments of the lenders under the credit agreement may be terminated and the maturity of amounts owed may be accelerated. We may need to raise additional capital required to grow our business, and we may not be able to raise capital on terms acceptable to us or at all. Growing and operating our business will require significant cash outlays and capital expenditures and commitments. We have utilized cash on hand and cash generated from operations, accessed our credit facility and issued debt securities as sources of liquidity. If cash on hand and cash generated from operations are not sufficient to meet our cash requirements, we will need to seek additional capital, potentially through debt or equity financing, to fund our growth. Our ability to access the credit and capital markets in the future as a source of liquidity, and the borrowing costs associated with such financing, are dependent upon market conditions and our credit rating and outlook. In addition, equity financing may be on terms that are dilutive or potentially dilutive to our stockholders, and the prices at which new investors would be willing to purchase our securities may be lower than the current price per share of our common stock. The holders of new securities may also have rights, preferences or privileges which are senior to those of existing holders of common stock. If new sources of financing are required, but are insufficient or unavailable, we will be required to modify our growth and operating plans based on available funding, if any, which would harm our ability to grow our business. Our operating results are subject to seasonal and quarterly variations in our net revenues and income from operations, which could adversely affect the price of our publicly traded common stock. We have experienced, and expect to continue to experience, seasonal and quarterly variations in our net revenues and income from operations. These variations are primarily related to increased sales volume of our products during the fall selling season, including our higher price cold weather products, along with a larger proportion of higher margin direct to consumer sales. The majority of our net revenues were generated during the last two quarters in each of 2016, 2015 and 2014, respectively. Our quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including, among other things, the timing of marketing expenses and changes in our product mix. Variations in weather conditions may also have an adverse effect on our quarterly results of operations. For example, warmer than normal weather conditions throughout the fall or winter may reduce sales of our COLDGEAR® line, leaving us with excess inventory and operating results below our expectations. As a result of these seasonal and quarterly fluctuations, we believe that comparisons of our operating results between different quarters within a single year are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of our future performance. Any seasonal or quarterly fluctuations that we report in the future may not match the expectations of market analysts and investors. This could cause the price of our publicly traded stock to fluctuate significantly. Our financial results could be adversely impacted by currency exchange rate fluctuations. Although we currently generate 80% of our consolidated net revenues in the United States, as our international business grows, our results of operations could be adversely impacted by changes in foreign currency exchange rates. Revenues and certain expenses in markets outside of the United States are recognized in local foreign currencies, and we are exposed to potential gains or losses from 18 the translation of those amounts into U.S. dollars for consolidation into our financial statements. Similarly, we are exposed to gains and losses resulting from currency exchange rate fluctuations on transactions generated by our foreign subsidiaries in currencies other than their local currencies. In addition, the business of our independent manufacturers may also be disrupted by currency exchange rate fluctuations by making their purchases of raw materials more expensive and more difficult to finance. As a result, foreign currency exchange rate fluctuations may adversely impact our results of operations. The value of our brand and sales of our products could be diminished if we are associated with negative publicity. Our ability to achieve our growth targets could be impacted if negative publicity diminishes the appeal of our brand to consumers. For example, we require our suppliers, manufacturers and licensees of our products to operate their businesses in compliance with the laws and regulations that apply to them as well as the social and other standards and policies we impose on them, including our code of conduct. We do not control these suppliers, manufacturers or licensees or their labor practices. A violation, or alleged violation of our policies, labor laws or other laws by our suppliers, manufacturers or licensees could interrupt or otherwise disrupt our sourcing or damage our brand image. Negative publicity regarding production methods, alleged practices or workplace or related conditions of any of our suppliers, manufacturers or licensees could adversely affect our reputation and sales and force us to locate alternative suppliers, manufacturers or licensees. In addition, we have sponsorship contracts with a variety of athletes and feature those athletes in our advertising and marketing efforts, and many athletes and teams use our products, including those teams or leagues for which we are an official supplier. Actions taken by athletes, teams or leagues associated with our products could harm the reputations of those athletes, teams or leagues. As a result, our brand image, net revenues and profitability could be adversely affected. Sponsorships and designations as an official supplier may become more expensive and this could impact the value of our brand image. the collegiate and professional A key element of our marketing strategy has been to create a link in the consumer market between our products and professional and collegiate athletes. We have developed licensing agreements to be the official supplier of performance apparel and footwear to a variety of sports teams and leagues at level and sponsorship agreements with athletes. However, as competition in the performance apparel and footwear industry has increased, the costs associated with athlete sponsorships and official supplier licensing agreements have increased, including the costs associated with obtaining and retaining these sponsorships and agreements. If we are unable to maintain our current association with professional and collegiate athletes, teams and leagues, or to do so at a reasonable cost, we could lose the on-field authenticity associated with our products, and we may be required to modify and substantially increase our marketing investments. As a result, our brand image, net revenues, expenses and profitability could be materially adversely affected. Our failure to comply with trade and other regulations could lead to investigations or actions by government regulators and negative publicity. The labeling, distribution, importation, marketing and sale of our products are subject to extensive regulation by various federal agencies, including the Federal Trade Commission, Consumer Product Safety Commission and state attorneys general in the U.S., as well as by various other federal, state, provincial, local and international regulatory authorities in the locations in which our products are distributed or sold. If we fail to comply with those regulations, we could become subject to significant 19 penalties or claims or be required to recall products, which could harm our brand as well as our results of operations or our ability to conduct our business. In addition, the adoption of new regulations or changes in the interpretation of existing regulations may result in significant compliance costs or discontinuation of product sales and may impair the marketing of our products, resulting in significant loss of net revenues. Our international operations are also subject to compliance with the U.S. Foreign Corrupt Practices Act, or FCPA, and other anti-bribery laws applicable to our operations. Although we have policies and procedures to address compliance with the FCPA and similar laws, there can be no assurance that all of our employees, agents and other partners will not take actions in violations of our policies. Any such violation could subject us to sanctions or other penalties that could negatively affect our reputation, business and operating results. If we encounter problems with our distribution system, our ability to deliver our products to the market could be adversely affected. We rely on a limited number of distribution facilities for our product distribution. Our distribution facilities utilize computer controlled and automated equipment, which means the operations are complicated and may be subject to a number of risks related to security or computer viruses, the proper operation of software and hardware, power interruptions or other system failures. In addition, because many of our products are distributed from a limited number of locations, our operations could also be interrupted by floods, fires or other natural disasters in these locations, as well as labor or other operational difficulties or interruptions. We maintain business interruption insurance, but it may not adequately protect us from the adverse effects that could be caused by significant disruptions in our distribution facilities, such as the long term loss of customers or an erosion of our brand image. In addition, our distribution capacity is dependent on the timely performance of services by third parties, including the shipping of product to and from our distribution facilities. If we encounter problems with our distribution facilities, our ability to meet customer expectations, manage inventory, complete sales and achieve objectives for operating efficiencies could be materially adversely affected. We rely significantly on information technology and any failure, inadequacy or interruption of that technology could harm our ability to effectively operate our business. Our business relies on information technology. Our ability to effectively manage and maintain our inventory and internal reports, and to ship products to customers and invoice them on a timely basis depends significantly on our enterprise resource planning, warehouse management, and other information systems. We also heavily rely on information systems to process financial and accounting information for financial reporting purposes. Any of these information systems could fail or experience including computer viruses, programming errors, a service interruption for a number of reasons, hacking or other unlawful activities, disasters or our failure to properly maintain system redundancy or protect, repair, maintain or upgrade our systems. The failure of our information systems to operate effectively or to integrate with other systems, or a breach in security of these systems could cause delays in product fulfillment and reduced efficiency of our operations, which could negatively impact our financial results. If we experienced any significant disruption to our financial information systems that we are unable to mitigate, our ability to timely report our financial results could be impacted, which could negatively impact our stock price. We also communicate electronically throughout the world with our employees and with third parties, such as customers, suppliers, vendors and consumers. A service interruption or shutdown could negatively impact our operating activities. Remediation and repair of any failure, problem or breach of our key information systems could require significant capital investments. In addition, we interact with many of our consumers through both our e-commerce website and our mobile applications. Consumers increasingly utilize these services to purchase our products and to 20 engage with our Connected Fitness community. If we are unable to continue to provide consumers a user-friendly experience and evolve our platform to satisfy consumer preferences, the growth of our e- commerce business and our net revenues may be negatively impacted. The performance of our Connected Fitness business is dependent on reliable performance of its products, applications and this services and the underlying technical software contains errors, bugs or other vulnerabilities which impede or halt service, this could result in damage to our reputation and brand, loss of users or loss of revenue. infrastructure, which incorporate complex software. If Data security or privacy breaches could damage our reputation, cause us to incur additional expense, expose us to litigation and adversely affect our business. We collect sensitive and proprietary business information as well as personally identifiable information in connection with digital marketing, digital commerce, our in-store payment processing systems and our Connected Fitness business. In particular, in our Connected Fitness business we collect and store a variety of information regarding our users, and allow users to share their personal information with each other and with third parties. Hackers and data thieves are increasingly sophisticated and operate large scale and complex automated attacks. Any breach of our data security in an unauthorized release or transfer of customer, consumer, user or employee could result information, or the loss of valuable business data or cause a disruption in our business. These events could give rise to unwanted media attention, damage our reputation, damage our customer, consumer or user relationships and result in lost sales, fines or lawsuits. We may also be required to expend significant capital and other resources to protect against or respond to or alleviate problems caused by a security breach. We must also comply with increasingly complex regulatory standards throughout the world information and other data, particularly with respect to our Connected enacted to protect personal Fitness business. Compliance with existing and proposed laws and regulations can be costly and could negatively impact our profitability. In addition, an inability to maintain compliance with these regulatory standards could subject us to litigation or other regulatory proceedings or cause the size of our Connected Fitness community to decline. We are in the process of implementing a new operating and information system, which involves risks and uncertainties that could adversely affect our business. We are in the process of implementing a global operating and financial reporting information technology system as part of a multi-year plan to integrate and upgrade our systems and processes, which began in 2015 and will continue in phases over the next several years. We plan to substantially complete the migration of our North America, EMEA and Connected Fitness operations to this system during 2017, and are in the process of developing an implementation strategy and roll-out plan for our Asia-Pacific and Latin American regions. Implementation of new information systems involves risks and uncertainties. Any disruptions, delays, or deficiencies in the design or implementation of these systems could result in increased costs, disruptions in our ability to effectively source, sell or ship our products, delays in the collection of payment from our customers or adversely affect our ability to timely report our financial results, all of which could materially adversely affect our business, results of operations, and financial condition. Changes in tax laws and unanticipated tax liabilities could adversely affect our effective income tax rate and profitability. We are subject to income taxes in the United States and numerous foreign jurisdictions. Our effective income tax rate could be adversely affected in the future by a number of factors, including changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of 21 deferred tax assets and liabilities, changes in tax laws, the outcome of income tax audits in various jurisdictions around the world, and any repatriation of non-US earnings for which we have not previously provided for U.S. taxes. Many of the countries in which we do business have or are expected to adopt changes to tax laws as result of the Base Erosion and Profit Shifting final proposals from the Organization for Economic Co-operation and Development and specific country anti- avoidance initiatives. We regularly assess all of these matters to determine the adequacy of our tax provision, which is subject to significant judgment. In addition, significant tax law changes are being evaluated by the Federal Government of the United States, our most significant country of operation. Such tax law changes, if enacted, could materially increase our tax obligations, which would have a material adverse effect on our results of operations. Our financial results may be adversely affected if substantial investments in businesses and operations fail to produce expected returns. From time to time, we may invest in business infrastructure, new businesses, and expansion of existing businesses, such as the ongoing expansion of our network of brand and factory house stores and our distribution facilities, the expansion of our corporate headquarters, investments to implement our global operating and financial reporting information technology system, or investments in our Connected Fitness business. These investments require substantial cash investments and management attention. We believe cost effective investments are essential to business growth and profitability. The failure of any significant investment to provide the returns or synergies we expect could adversely affect our financial results. Infrastructure investments may also divert funds from other potential business opportunities. Our future success is substantially dependent on the continued service of our senior management and other key employees. Our future success is substantially dependent on the continued service of our senior management and other key employees, particularly Kevin A. Plank, our founder, Chairman and Chief Executive Officer. The loss of the services of our senior management or other key employees could make it more difficult to successfully operate our business and achieve our business goals. We also may be unable to retain existing management, product creation, innovation, sales, marketing, operational and other support personnel that are critical to our success, which could result loss of key information, expertise or know-how and relationships, in harm to key customer unanticipated recruitment and training costs. If we are unable to attract and retain new team members, including senior management, we may not be able to achieve our business objectives. Our growth has largely been the result of significant contributions by our current senior management, product design teams and other key employees. However, to be successful in continuing to grow our business, we will need to continue to attract, retain and motivate highly talented management and other employees with a range of skills and experience. Competition for employees in our industry is intense and we have experienced difficulty from time to time in attracting the personnel necessary to support the growth of our business, and we may experience similar difficulties in the future. If we are unable to attract, assimilate and retain management and other employees with the necessary skills, we may not be able to grow or successfully operate our business. A number of our fabrics and manufacturing technology are not patented and can be imitated by our competitors. The intellectual property rights in the technology, fabrics and processes used to manufacture our products are generally owned or controlled by our suppliers and are generally not unique to us. Our 22 ability to obtain patent protection for our products is limited and we currently own a limited number of fabric or process patents. As a result, our current and future competitors are able to manufacture and sell products with performance characteristics and fabrications similar to certain of our products. Because many of our competitors have significantly greater financial, distribution, marketing and other resources than we do, they may be able to manufacture and sell products based on certain of our fabrics and manufacturing technology at lower prices than we can. If our competitors do sell similar products to ours at lower prices, our net revenues and profitability could be materially adversely affected. Our intellectual property rights could potentially conflict with the rights of others and we may be prevented from selling or providing some of our products. Our success depends in large part on our brand image. We believe our registered and common law trademarks have significant value and are important to identifying and differentiating our products from those of our competitors and creating and sustaining demand for our products. In addition, patents are increasingly important with respect to our innovative products and new businesses and investments, particularly in our Connected Fitness business. From time to time, we have received or brought claims relating to intellectual property rights of others, and we expect such claims will continue or increase, particularly as we expand our business and the number of products we offer. Any such claim, regardless of its merit, could be expensive and time consuming to defend or prosecute. Successful infringement claims against us could result in significant monetary liability or prevent us from selling or providing some of our products. In addition, resolution of claims may require us to redesign our products, license rights belonging to third parties or cease using those rights altogether. Any of these events could harm our business and have a material adverse effect on our results of operations and financial condition. Our failure to protect our intellectual property rights could diminish the value of our brand, weaken our competitive position and reduce our net revenues. We currently rely on a combination of copyright, trademark and trade dress laws, patent laws, unfair competition laws, confidentiality procedures and licensing arrangements to establish and protect our intellectual property rights. The steps taken by us to protect our proprietary rights may not be adequate to prevent infringement of our trademarks and proprietary rights by others, including imitation of our products and misappropriation of our brand. In addition, intellectual property protection may be unavailable or limited in some foreign countries where laws or law enforcement practices may not protect our proprietary rights as fully as in the United States, and it may be more difficult for us to successfully challenge the use of our proprietary rights by other parties in these countries. If we fail to protect and maintain our intellectual property rights, the value of our brand could be diminished and our competitive position may suffer. From time to time, we discover unauthorized products in the marketplace that are either counterfeit reproductions of our products or unauthorized irregulars that do not meet our quality control standards. If we are unsuccessful in challenging a third party’s products on the basis of trademark infringement, continued sales of their products could adversely impact our brand, result in the shift of consumer preferences away from our products and adversely affect our business. We have licensed in the past, and expect to license in the future, certain of our proprietary rights, such as trademarks or copyrighted material, to third parties. These licensees may take actions that diminish the value of our proprietary rights or harm our reputation. We are subject to periodic claims and litigation that could result in unexpected expenses and could ultimately be resolved against us. From time to time, we are involved in litigation and other proceedings, including matters related to commercial disputes and intellectual property, as well as trade, regulatory and other claims related to 23 our business. Any of these proceedings could result in damages, fines or other penalties, divert financial and management resources and result in significant legal fees. Although we cannot predict the outcome of any particular proceeding, an unfavorable outcome may have an adverse impact on our business, financial condition and results of operations. In addition, any proceeding could negatively impact our reputation among our customers and our brand image. The trading prices for our Class A and Class C common stock may differ and fluctuate from time to time. The trading prices of our Class A and Class C common stock may differ and fluctuate from time to time in response to various factors, some of which are beyond our control. These factors may include, among others, overall performance of the equity markets and the economy as a whole, variations in our quarterly results of operations or those of our competitors, our ability to meet our published guidance and securities analyst expectations, or recommendations by securities analysts. In addition, our Class C common stock has traded at a discount to and with less liquidity than our Class A common stock, and there can be no assurance that this will not continue. Kevin Plank, our Chairman and Chief Executive Officer controls the majority of the voting power of our common stock. Our Class A common stock has one vote per share, our Class B common stock has 10 votes per share and our Class C common stock has no voting rights (except in limited circumstances). Our Chairman and Chief Executive Officer, Kevin A. Plank, beneficially owns all outstanding shares of Class B common stock. As a result, Mr. Plank has the majority voting control and is able to direct the election of all of the members of our Board of Directors and other matters we submit to a vote of our stockholders. The Class B common stock automatically converts to Class A common stock when Mr. Plank beneficially owns less than 15.0% of the total number of shares of Class A and Class B common stock outstanding and in other limited circumstances. This concentration of voting control may have various effects including, but not limited to, delaying or preventing a change of control or allowing us to take action that the majority of our shareholders do not otherwise support. In addition, we utilize shares of our Class C common stock to fund employee equity incentive programs and may do so in connection with future stock-based acquisition transactions, which could prolong the duration of Mr. Plank’s voting control. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. 24 ITEM 2. PROPERTIES The following includes a summary of the principal properties that we own or lease as of December 31, 2016. Our principal executive and administrative offices are located at an office complex in Baltimore, Maryland, which includes 400 thousand square feet of office space that we own and 126 thousand square feet that we are leasing. In 2016, we purchased buildings and parcels of land, including approximately 58 acres of land and 130 thousand square feet of office space, to be utilized to expand our corporate headquarters to accommodate our growth needs. For our European headquarters, we lease an office in Amsterdam, the Netherlands, and we maintain an international management office in Panama. Additionally, we lease space in Austin, Texas, Denver, Colorado, San Francisco, California and Copenhagen, Denmark for our Connected Fitness businesses. We lease our primary distribution facilities, which are located in Glen Burnie, Maryland, Mount Juliet, Tennessee and Rialto, California. Our Glen Burnie facilities include a total of 830 thousand square feet, with options to renew various portions of the facilities through September 2021. Our Mount Juliet facility is a 1.0 million square foot facility, with options to renew the lease term through December 2041. Our Rialto facility is a 1.2 million square foot facility with a lease term through May 2023. In 2016 we entered into a lease for a new 1.3 million square foot distribution facility being developed for us in Baltimore, Maryland, which we expect to utilize beginning in 2018. The lease for this property includes options to renew through 2053. We believe our distribution facilities and space available through our third-party logistics providers will be adequate to meet our short term needs. In addition, as of December 31, 2016, we leased 241 brand and factory house stores located primarily in the United States, Brazil, Canada, China, Chile and Mexico with lease end dates in 2017 through 2033. We also lease additional office space for sales, quality assurance and sourcing, marketing, and administrative functions. We anticipate that we will be able to extend these leases that expire in the near future on satisfactory terms or relocate to other locations. ITEM 3. LEGAL PROCEEDINGS From time to time, we have been involved in litigation and other proceedings, including matters related to commercial disputes and intellectual property, as well as trade, regulatory and other claims related to our business. See Note 6 to our Consolidated Financial Statements for information on certain legal proceedings, which is incorporated by reference herein. 25 Executive Officers of the Registrant Our executive officers are: Name Age Position Kevin A. Plank . . . . . . . . . . . . . . . . 44 Chief Executive Officer and Chairman of the Board David E. Bergman . . . . . . . . . . . . . 44 Chief Financial Officer Colin Browne . . . . . . . . . . . . . . . . . 53 President of Global Sourcing Kerry D. Chandler . . . . . . . . . . . . . 52 Chief Human Resources Officer Paul Fipps . . . . . . . . . . . . . . . . . . . 44 Chief Information Officer and Executive Vice President, Global Operations Kip J. Fulks . . . . . . . . . . . . . . . . . . 44 Chief Product Officer Jason LaRose . . . . . . . . . . . . . . . . 43 President of North America Michael Lee . . . . . . . . . . . . . . . . . . 46 Chief Digital Officer Karl-Heinz Maurath . . . . . . . . . . . . 55 Chief Revenue Officer John Stanton . . . . . . . . . . . . . . . . . 56 Senior Vice President General Counsel and Corporate Secretary Kevin A. Plank has served as our Chief Executive Officer and Chairman of the Board of Directors since 1996. Mr. Plank also serves on the Board of Directors of the National Football Foundation and College Hall of Fame, Inc. and is a member of the Board of Trustees of the University of Maryland College Park Foundation. David E. Bergman was appointed as the acting Chief Financial Officer in February 2017. Mr. Bergman joined the Company in 2005 and has served in various Finance and Accounting leadership roles for the Company, including Corporate Controller from early 2006 to October 2014, Vice President of Finance and Corporate Controller from November 2014 to January 2016, Senior Vice President, Corporate Finance from February 2016 to January 2017. Prior to joining the Company, Mr. Bergman worked as a C.P.A. within the audit and assurance practices at Ernst & Young LLP and Arthur Andersen LLP. Colin Browne has been President of Global Sourcing since September 2016. Prior to joining our Company, he served as Vice President and Managing Director for VF Corporation, leading its sourcing and product supply organization in Asia and Africa from November 2013 to August 2016 and as Vice President of Footwear Sourcing from November 2011 to October 2013. Prior thereto, Mr. Browne served as Executive Vice President of Footwear and Accessories for Li and Fung Group LTD from September 2010 to November 2011 and Chief Executive Officer, Asia for Pentland Brands PLC from April 2006 to January 2010. Mr. Browne has over 25 years of experience leading sourcing efforts for large brands. Kerry D. Chandler has been Chief Human Resources Officer since January 2015. Prior to joining our Company, she served as Global Head of Human Resources for Christie’s International from February 2014 to November 2014. Prior thereto, Ms. Chandler served as the Executive Vice President of Human Resources for the National Basketball Association from January 2011 to January 2014 and Senior Vice President of Human Resources from October 2007 to December 2010. Ms. Chandler also held executive positions in human resources for the Walt Disney Company, including Senior Vice President of Human Resources for ESPN. Prior to that, Ms. Chandler also held various senior management positions in Human Resources for IBM, and Motorola, Inc. and she began her career at the McDonnell Douglas Corporation. 26 Paul Fipps has been Chief Information Officer since March 2015 and Executive Vice President of Global Operations since September 2016. Prior to that, he served as Senior Vice President of Global Operations from January 2014 to February 2015. Prior to joining our Company, he served as Chief Information Officer and Corporate Vice President of Business Services at The Charmer Sunbelt Group (CSG), a leading distributor of fine wines, spirits, beer, bottled water and other beverages from May 2009 to December 2013, as Vice President of Business Services from January 2007 to April 2009 and in other leadership positions for CSG from 1998 to 2007. Kip J. Fulks has been Chief Product Officer since August 2016 with oversight of category management, marketing, product, design, merchandising, innovation and sourcing . Prior to that, he served as Chief Marketing Officer from November 2015 to July 2016, President of Footwear and Innovation from March 2015 to October 2015, Chief Operating Officer from September 2011 to February 2015 and as President of Product from October 2013 to November 2014. Prior thereto, Mr. Fulks served in various senior management positions in Product, Outdoor, Sourcing, Quality Assurance and Product Development from 1997 to 2011. Jason LaRose has been President of North America since October 2016. Prior to that, he served as Senior Vice President of Digital Revenue from April 2015 to September 2016 and Senior Vice President of Global E-Commerce from October 2013 to March 2015. Prior to joining our Company, he served as Senior Vice President of E-Commerce for Express, Inc. from September 2011 to September 2013. Prior thereto, Mr. LaRose served as Vice President of Multi-Channel and International Business for Sears Holding Corporation from January 2007 to September 2011. Mr. LaRose also spent five years at McKinsey & Company where he was an Associate Principal in both the Retail and Consumer Goods practices. Michael Lee has been Chief Digital Officer since July 2016, with primary responsibility for the overall strategic direction of Under Armour’s Connected Fitness business and prior to that served as Senior Vice President of Digital from March 2015 to June 2016. Mr. Lee joined our Company in March 2015 when Under Armour acquired MyFitnessPal. Mr. Lee co-founded MyFitnessPal in September 2005 and built it to the world’s largest health and nutrition community. Prior to founding MyFitnessPal and throughout his 20-year tenure in the technology industry, Mr. Lee has held leadership positions at several other top start-ups in Silicon Valley, including Palm, Handspring, Beyond.com and Regis McKenna. Karl-Heinz (Charlie) Maurath has been Chief Revenue Officer since November 2015. Prior thereto he served as President of International from September 2012 to October 2015. Prior to joining our Company, he served for 22 years in various leadership positions with Adidas, including Senior Vice President, Adidas Group Latin America, from 2003 to 2012 with overall responsibility for Latin America including the Reebok and Taylor Made businesses and Vice President, Adidas Nordic, from 2000 to 2003 responsible for its business in the Nordic region and the Baltic states. Prior thereto, Mr. Maurath served in other management positions for Adidas, including Managing Director of its business in Sweden and Thailand and Area Manger of sales and marketing for its distributor and licensee businesses in Scandinavia and Latin America. Mr. Maurath, in his capacity a former director of a subsidiary of Adidas, is currently named as a defendant in a criminal tax investigation by regulatory authorities in Argentina related to certain tax matters of the Adidas subsidiary in 2006. In November 2013, the trial court ruled that there were currently no grounds upon which to indict Mr. Maurath, and in December 2016, the case was dismissed. The dismissal has been appealed. The Company believes this in no way impacts Mr. Maurath’s integrity or ability to serve as an executive officer. John Stanton has been Senior Vice President, General Counsel since March 2013, and Corporate Secretary since February 2008. Prior thereto, he served as Vice President, Corporate Governance and Compliance from October 2007 to February 2013 and Deputy General Counsel from February 2006 to 27 September 2007. Prior to joining our Company, he served in various legal roles at MBNA Corporation from 1993 to 2005, including as Senior Executive Vice President, Corporate Governance and Assistant Secretary. He began his legal career at the law firm Venable, LLP. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 28 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Under Armour’s Class A Common Stock and Class C Common Stock are traded on the New York Stock Exchange (“NYSE”) under the symbols “UAA” and “UA”, respectively. As of January 31, 2017, there were 1,408 record holders of our Class A Common Stock, 4 record holders of Class B Convertible Common Stock which are beneficially owned by our Chief Executive Officer and Chairman of the Board Kevin A. Plank, and 1,208 record holders of our Class C Common Stock. Our Class A Common Stock was listed on the NYSE under the symbol “UA” until December 6, 2016 and under the symbol “UAA” since December 7, 2016. Prior to November 18, 2005, there was no public market for our Class A Common Stock. The following table sets forth by quarter the high and low sale prices of our Class A Common Stock on the NYSE during 2016 and 2015. 2016 First Quarter (January 1 – March 31) Second Quarter (April 1 – June 30) Third Quarter (July 1 – September 30) Fourth Quarter (October 1 – December 31) 2015 First Quarter (January 1 – March 31) Second Quarter (April 1 – June 30) Third Quarter (July 1 – September 30) Fourth Quarter (October 1 – December 31) High Low $43.42 47.95 44.68 39.20 $31.62 35.35 37.23 29.00 $41.33 44.08 52.94 52.37 $31.89 38.08 40.06 38.89 Our Class C Common Stock was listed on the NYSE under the symbol “UA.C” since its initial issuance on April 8, 2016 and until December 6, 2016 and under the symbol “UA” since December 7, 2016. The following table sets forth by quarter the high and low sale prices of our Class C Common Stock on the NYSE during 2016. 2016 First Quarter (January 1 – March 31) Second Quarter (April 1 – June 30) Third Quarter (July 1 – September 30) Fourth Quarter (October 1 – December 31) High Low $ — $ — 46.20 42.94 34.29 31.31 33.16 23.51 Stock Split On March 16, 2016, the Board of Directors approved the issuance of the Company’s new Class C non-voting common stock, referred to as the Class C stock. The Class C stock was issued through a stock dividend on a one-for-one basis to all existing holders of the Company’s Class A and Class B common stock. The shares of Class C stock were distributed on April 7, 2016, to stockholders of record of Class A and Class B common stock as of March 28, 2016. Stockholders’ equity and all references to share and per share amounts in the accompanying consolidated financial statements have been retroactively adjusted to reflect this one-for-one stock dividend. Unregistered Sales of Equity Securities From October 1, 2016 through December 31, 2016, we entered into contractual arrangements to issue 300,211 deferred stock units automatically exchangeable for shares of Class C Common Stock 29 on a one-for-one basis to one or more of our marketing partners in connection with their entering into endorsement and other marketing services agreements with us. These offers of our securities were made in reliance upon Section 4(2) under the Securities Act and did not involve any public offering. We did not receive any cash consideration in connection with these arrangements. Dividends No cash dividends were declared or paid during 2016 or 2015 on any class of our common stock. We currently anticipate we will retain any future earnings for use in our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future. In addition, we may be limited in our ability to pay dividends to our stockholders under our credit facility. Refer to “Financial Position, Capital Resources and Liquidity” within Management’s Discussion and Analysis and Note 5 to the Consolidated Financial Statements for further discussion of our credit facility. Stock Compensation Plans The following table contains certain information regarding our equity compensation plans. Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of outstanding options, warrants and rights (b) Class of Common Stock Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) Class A 5,385,553 $4.92 9,930,954 Class C 6,546,531 $4.71 23,703,858 Class A 2,103,365 Class C 2,418,503 $4.66 $4.59 — — Plan Category Equity compensation plans approved by security holders Equity compensation plans approved by security holders Equity compensation plans not approved by security holders Equity compensation plans not approved by security holders The number of securities to be issued upon exercise of outstanding options, warrants and rights issued under equity compensation plans approved by security holders includes 3.3 million Class A and 5.0 million Class C restricted stock units and deferred stock units issued to employees, non-employees and directors of Under Armour; these restricted stock units and deferred stock units are not included in the weighted average exercise price calculation above. The number of securities remaining available for future issuance includes 7.2 million shares of our Class A Common Stock and 22.0 million shares of our Class C Common Stock under our Second Amended and Restated 2005 Omnibus Long-Term Incentive Plan (“2005 Stock Plan”). The number of securities remaining available for future issuance under our Employee Stock Purchase Plan includes 2.7 million of our Class A Common Stock and 1.7 million shares of our Class C Common Stock. In addition to securities issued upon the exercise of stock options, warrants and rights, the 2005 Stock Plan authorizes the issuance of restricted and unrestricted shares of our Class A and C Common Stock and other equity awards. Refer to Note 11 to the Consolidated Financial Statements for information required by this Item regarding the material features of each plan. The number of securities issued upon exercise of outstanding options, warrants and rights issued under equity compensation plans not approved by security holders includes 1.92 million Class A and 1.93 million Class C fully vested and non-forfeitable warrants granted in 2006 to NFL Properties LLC 30 as partial consideration for footwear promotional rights, and 183.4 thousand shares of our Class A Common Stock and 484.9 thousand shares of our Class C Common Stock issued in connection with the delivery of shares pursuant to deferred stock units granted to certain of our marketing partners. These deferred stock units are not included in the weighted average exercise price calculation above. Refer to Note 11 to the Consolidated Financial Statements for a further discussion on the warrants. The deferred stock units are issued to certain of our marketing partners in connection with their entering into endorsement and other marketing services agreements with us. The terms of each agreement set forth the number of deferred stock units to be granted and the delivery dates for the shares, which range from a 1 to 10 year period, depending on the contract. The deferred stock units are non-forfeitable. Stock Performance Graph The stock performance graph below compares cumulative total return on Under Armour, Inc. Class A Common Stock to the cumulative total return of the S&P 500 Index and S&P 500 Apparel, Accessories and Luxury Goods Index from December 31, 2011 through December 31, 2016. The graph assumes an initial investment of $100 in Under Armour and each index as of December 31, 2011 and reinvestment of any dividends. The performance shown on the graph below is not intended to forecast or be indicative of possible future performance of our common stock. Comparison of 5 Year Cumulative Total Return Assumes Initial Investment of $100 December 2016 S R A L L O D 500.00 400.00 300.00 200.00 100.00 0.00 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 UNDER ARMOUR, INC. CLASS A S&P 500 INDEX S&P 500 APPAREL, ACCESSORIES & LUXURY GOODS Under Armour, Inc. S&P 500 S&P 500 Apparel, Accessories & Luxury Goods 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 $100.00 $135.17 $243.26 $378.43 $449.19 $313.38 $100.00 $116.00 $153.57 $174.60 $177.01 $198.18 $100.00 $102.58 $128.15 $129.42 $ 98.65 $ 87.51 31 ITEM 6. SELECTED FINANCIAL DATA the Consolidated Financial Statements, The following selected financial data is qualified by reference to, and should be read in conjunction with, including the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-K. (In thousands, except per share amounts) 2016 2015 2014 2013 2012 Year Ended December 31, Net revenues Cost of goods sold Gross profit Selling, general and administrative $4,825,335 $3,963,313 $3,084,370 $2,332,051 $1,834,921 955,624 2,584,724 2,057,766 1,572,164 1,195,381 2,240,611 1,905,547 1,512,206 1,136,670 879,297 expenses 1,823,140 1,497,000 1,158,251 871,572 670,602 Income from operations Interest expense, net Other expense, net Income before income taxes Provision for income taxes 417,471 (26,434) (2,755) 388,282 131,303 408,547 (14,628) (7,234) 386,685 154,112 353,955 (5,335) (6,410) 342,210 134,168 265,098 (2,933) (1,172) 260,993 98,663 208,695 (5,183) (73) 203,439 74,661 Net income 256,979 232,573 208,042 162,330 128,778 Adjustment payment to Class C 59,000 — — — — Net income available to all stockholders $ 197,979 $ 232,573 $ 208,042 $ 162,330 $ 128,778 Net income available per common share Basic net income per share of Class A and B common stock Basic net income per share of Class C common stock Diluted net income per share of Class A and B common stock Diluted net income per share of Class C common stock $ $ $ $ Weighted average common shares outstanding Class A and B common stock 0.45 $ 0.54 $ 0.49 $ 0.39 $ 0.31 0.72 $ 0.54 $ 0.49 $ 0.39 $ 0.31 0.45 $ 0.53 $ 0.47 $ 0.38 $ 0.30 0.71 $ 0.53 $ 0.47 $ 0.38 $ 0.30 Basic Diluted 217,707 221,944 215,498 220,868 213,227 219,380 210,696 215,958 208,686 212,760 Weighted average common shares outstanding Class C common stock Basic Diluted Dividends declared 218,623 222,904 215,498 220,868 213,227 219,380 210,696 215,958 208,686 212,760 $ 59,000 $ — $ — $ — $ — Our net revenues for the full year 2016 were $4,825.3 million, which reflects a revision from the $4,828.2 million reported in our earnings release, filed January 31, 2017, on Form 8-K. This revision reflects a $2.9 million adjustment related to a return credit for footwear that was identified in connection with the closing of our January 2017 books and records, following the earnings release. As a result, 32 other items on our Consolidated Financial Statements have been appropriately adjusted from the amounts provided in the earnings release, including a reduction of our full year 2016 gross profit and income from operations by $2.9 million, and a reduction of net income by $1.7 million. (In thousands) 2016 2015 2014 2013 2012 At December 31, Cash and cash equivalents Working capital (1) Inventories Total assets Total debt, including current maturities Total stockholders’ equity $ 250,470 $ 129,852 $ 593,175 $ 347,489 $ 341,841 651,370 1,127,772 319,286 536,714 1,155,052 2,092,428 1,279,337 917,491 3,644,331 1,019,953 783,031 2,865,970 702,181 469,006 1,576,369 817,388 59,858 $2,030,900 $1,668,222 $1,350,300 $1,053,354 $ 816,922 666,070 281,546 151,551 (1) Working capital is defined as current assets minus current liabilities. 33 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information contained in this section should be read in conjunction with our Consolidated Financial Statements and related notes and the information contained elsewhere in this Form 10-K under the captions “Risk Factors,” “Selected Financial Data,” and “Business.” Overview We are a leading developer, marketer and distributor of branded performance apparel, footwear and accessories. The brand’s moisture-wicking fabrications are engineered in many different designs and styles for wear in nearly every climate to provide a performance alternative to traditional products. Our products are sold worldwide and worn by athletes at all levels, from youth to professional, on playing fields around the globe, as well as by consumers with active lifestyles. The Under Armour Connected Fitness platform powers the world’s largest digital health and fitness community and our strategy is focused on engaging with these consumers and increasing awareness and sales of our products. We plan to grow this community by developing innovative applications, services and other digital solutions to impact how athletes and fitness-minded individuals train, perform and live. Our net revenues grew to $4,825.3 million in 2016 from $1,834.9 million in 2012. We believe that our growth in net revenues has been driven by a growing interest in performance products and the strength of the Under Armour brand in the marketplace. We plan to continue to increase our net revenues over the long term by increased sales of our apparel, footwear and accessories, expansion of our wholesale distribution sales channel, growth in our direct to consumer sales channel and expansion in international markets and engaging with consumers through our Connected Fitness business. Financial highlights for full year 2016 include: • Net revenues increased 22% compared to 2015. • Wholesale and Direct-to-Consumer revenues increased 19% and 27%, respectively. • Apparel revenue increased 15% compared to the prior year, with footwear and accessories revenue increasing 49% and 17%, respectively. • Revenue in our North America segment grew 16%. Revenue in our Asia-Pacific, EMEA and Latin America segments grew 85%, 63% and 34%, respectively, with 51% growth in our Connected Fitness segment. • Selling, general and administrative expense increased 22% when compared to 2015. • Gross margin decreased 170 basis points when compared to 2015. A large majority of our products are sold in North America; however, we believe our products appeal to athletes and consumers with active lifestyles around the globe. Internationally, our net revenues are generated from a mix of wholesale sales to retailers, sales to distributors and sales through our direct to consumer sales channels in Europe, Latin America, and Asia-Pacific. In addition, a third party licensee sells our products in Japan. We believe there is an increasing recognition of the health benefits of an active lifestyle. We believe this trend provides us with an expanding consumer base for our products. We also believe there is a continuing shift in consumer demand from traditional non-performance products to performance products, which are intended to provide better performance by wicking perspiration away from the skin, helping to regulate body temperature and enhancing comfort. We believe that these 34 shifts in consumer preferences and lifestyles are not unique to the United States, but are occurring in a number of markets globally, thereby increasing our opportunities to introduce our performance products to new consumers. We plan to continue to grow our business over the long term through increased sales of our apparel, footwear and accessories, expansion of our wholesale distribution, growth in our direct to consumer sales channel and expansion in international markets. Although we believe these trends will facilitate our growth, we also face potential challenges that could limit our ability to take advantage of these opportunities, including, among others, the risk of general economic or market conditions that could affect consumer spending and the financial health of our retail customers. In the fourth quarter of 2016, our growth was challenged due to the disruption of the North American retail environment. In addition, we expect our operating income in 2017 to decline compared to 2016. As such, we are in the process of evaluating our cost structure, and are making strategic resource allocation and prioritization decisions during 2017. These initiatives could impact our results of operations. In addition, we may not be able to effectively manage our growth and a more complex global business. We may not consistently be able to anticipate consumer preferences and develop new and innovative products that meet changing preferences in a timely manner. Furthermore, our industry is very competitive, and competition pressures could cause us to reduce the prices of our products or otherwise affect our profitability. We also rely on third-party suppliers and manufacturers outside the U.S. to provide fabrics and to produce our products, and disruptions to our supply chain could harm our business. For a more complete discussion of the risks facing our business, refer to the “Risk Factors” section included in Item 1A. General Net revenues comprise net sales, license revenues and Connected Fitness revenues. Net sales comprise sales from our primary product categories, which are apparel, footwear and accessories. Our license revenues primarily consist of fees paid to us by our licensees in exchange for the use of our trademarks on their products. Our Connected Fitness revenues consist of digital advertising, digital fitness platform licenses and subscriptions from our Connected Fitness business. Cost of goods sold consists primarily of product costs, inbound freight and duty costs, outbound freight costs, handling costs to make products floor-ready to customer specifications, royalty payments to endorsers based on a predetermined percentage of sales of selected products and write downs for inventory obsolescence. The fabrics in many of our products are made primarily of petroleum-based synthetic materials. Therefore our product costs, as well as our inbound and outbound freight costs, could be affected by long term pricing trends of oil. In general, as a percentage of net revenues, we expect cost of goods sold associated with our apparel and accessories to be lower than that of our footwear. A limited portion of cost of goods sold is associated with license and Connected Fitness revenues, primarily website hosting costs. We include outbound freight costs associated with shipping goods to customers as cost of goods sold; however, we include the majority of outbound handling costs as a component of selling, general and administrative expenses. As a result, our gross profit may not be comparable to that of other companies that include outbound handling costs in their cost of goods sold. Outbound handling costs include costs associated with preparing goods to ship to customers and certain costs to operate our distribution facilities. These costs were $89.9 million, $63.7 million and $55.3 million for the years ended December 31, 2016, 2015 and 2014, respectively. Our selling, general and administrative expenses consist of costs related to marketing, selling, product innovation and supply chain and corporate services. Beginning in 2015, we consolidated our selling, general and administrative expenses into two primary categories: marketing and other. The other category is the sum of our previously outlined selling, product innovation and supply chain and 35 function. Personnel costs include salaries, benefits, corporate services categories. Personnel costs are included in these categories based on the employees’ incentives and stock-based compensation related to our employees. Our marketing costs are an important driver of our growth. Marketing costs consist primarily of commercials, print ads, team, player and event sponsorships and depreciation expense specific to our in-store fixture program. league, Other expense, net consists of unrealized and realized gains and losses on our foreign currency derivative financial instruments and unrealized and realized gains and losses on adjustments that arise from fluctuations in foreign currency exchange rates relating to transactions generated by our international subsidiaries. Results of Operations The following table sets forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of net revenues: (In thousands) Net revenues Cost of goods sold Gross profit Selling, general and administrative expenses Income from operations Interest expense, net Other expense, net Income before income taxes Provision for income taxes Net income Adjustment payment to Class C capital Year Ended December 31, 2016 2015 2014 $4,825,335 2,584,724 $3,963,313 2,057,766 $3,084,370 1,572,164 2,240,611 1,823,140 1,905,547 1,497,000 1,512,206 1,158,251 417,471 (26,434) (2,755) 388,282 131,303 408,547 (14,628) (7,234) 386,685 154,112 353,955 (5,335) (6,410) 342,210 134,168 $ 256,979 $ 232,573 $ 208,042 stockholders $ 59,000 $ — $ — Net income available to all stockholders $ 197,979 $ 232,573 $ 208,042 (As a percentage of net revenues) Net revenues Cost of goods sold Gross profit Selling, general and administrative expenses Income from operations Interest expense, net Other expense, net Income before income taxes Provision for income taxes Net income Adjustment payment to Class C capital stockholders Net income available to all stockholders 36 Year Ended December 31, 2016 2015 2014 100.0% 53.6 100.0% 51.9 100.0% 51.0 46.4 37.8 8.6 (0.5) (0.1) 8.0 2.7 5.3% 1.2% 4.1% 48.1 37.8 10.3 (0.4) (0.2) 9.7 3.8 5.9% — % 5.9% 49.0 37.5 11.5 (0.2) (0.2) 11.1 4.4 6.7% — % 6.7% Our net revenues for the full year 2016 were $4,825.3 million, which reflects a revision from the $4,828.2 million reported in our earnings release, filed January 31, 2017, on Form 8-K. This revision reflects a $2.9 million adjustment related to a return credit for footwear that was identified in connection with the closing of our January 2017 books and records, following the earnings release. As a result, other items on our Consolidated Financial Statements have been appropriately adjusted from the amounts provided in the earnings release, including a reduction of our full year 2016 gross profit and income from operations by $2.9 million, and a reduction of net income by $1.7 million. Consolidated Results of Operations Year Ended December 31, 2016 Compared to Year Ended December 31, 2015 Net revenues increased $862.0 million, or 21.8%, to $4,825.3 million in 2016 from $3,963.3 million in 2015. Net revenues by product category are summarized below: (In thousands) Apparel Footwear Accessories Total net sales License Connected Fitness Intersegment Eliminations Year Ended December 31, 2016 2015 $ Change % Change $3,229,142 1,010,693 406,614 $2,801,062 677,744 346,885 $428,080 332,949 59,729 15.3% 49.1 17.2 4,646,449 99,849 80,447 (1,410) 3,825,691 84,207 53,415 — 820,758 15,642 27,032 (1,410) 21.5 18.6 50.6 (100.0) Total net revenues $4,825,335 $3,963,313 $862,022 21.8% The increase in net sales was driven primarily by: • Apparel unit sales growth and new offerings in multiple lines led by training, golf and basketball; and • Footwear unit sales growth, led by running and basketball and the expansion of our footwear offerings internationally. License revenues increased $15.6 million, or 18.6%, to $99.8 million in 2016 from $84.2 million in 2015. This increase in license revenues was driven primarily by increased distribution of our licensed products in North America and Japan. Connected Fitness revenue increased $27.0 million, or 50.6%, to $80.4 million in 2016 from $53.4 million in 2015 primarily driven by increased advertising and subscribers on our fitness applications and higher sales of our licensed products. Gross profit increased $335.1 million to $2,240.6 million in 2016 from $1,905.5 million in 2015. Gross profit as a percentage of net revenues, or gross margin, decreased 170 basis points to 46.4% in 2016 compared to 48.1% in 2015. The decrease in gross margin percentage was primarily driven by the following: • • approximate 120 basis point decrease due to increased liquidation and discounting, which we expect to continue through 2017 on a more limited basis; approximate 70 basis point decrease driven by negative sales mix primarily driven by the continued strength of our accelerated footwear growth, which we expect to continue through 2017 on a more limited basis; and 37 • the U.S. dollar negatively approximate 40 basis point decrease due to strengthening of impacting our gross margins within our business outside the United States, which we expect to continue through 2017 on a more limited basis. The above decreases were partially offset by: • • approximate 30 basis point increase driven primarily by favorable product input costs in our North America and international businesses, which we expect to continue through 2017; and approximate 40 basis point increase driven primarily by lower air freight costs, which we do not expect to continue through 2017. Selling, general and administrative expenses increased $326.1 million to $1,823.1 million in 2016 from $1,497.0 million in 2015. As a percentage of net revenues, selling, general and administrative expenses remained consistent at 37.8% in 2016 and in 2015. Selling, general and administrative expense was impacted by the following: • Marketing costs increased $59.7 million to $477.5 million in 2016 from $417.8 million in 2015. This increase was primarily due to key North American retail marketing campaigns, our investments in sponsorships and increased marketing in connection with the growth of our international business. This increase was offset by lower incentive compensation expense for marketing employees. As a percentage of net revenues, marketing costs decreased to 9.9% in 2016 from 10.5% in 2015. • Other costs increased $266.4 million to $1,345.6 million in 2016 from $1,079.2 million in 2015. This increase was primarily due to $17.0 million in expenses primarily related to the liquidation of The Sports Authority, comprised of $15.2 million in bad debt expense and $1.8 million of in- store fixture impairment. In addition, this increase was driven by higher personnel and other costs incurred for the continued expansion of our direct to consumer distribution channel, including increased investment for our factory house and brand house stores. This increase was offset by lower incentive compensation expense. As a percentage of net revenues, other costs increased to 27.9% in 2016 from 27.2% in 2015. Income from operations increased $8.9 million, or 2.2%, to $417.5 million in 2016 from $408.5 million in 2015. Income from operations as a percentage of net revenues decreased to 8.6% in 2016 from 10.3% in 2015. Interest expense, net increased $11.8 million to $26.4 million in 2016 from $14.6 million in 2015. increase of $284.2 million in total debt This increase was primarily due to interest on the net outstanding. Other expense, net decreased $4.4 million to $2.8 million in 2016 from $7.2 million in 2015. This decrease was due to higher net gains on the combined foreign currency exchange rate changes on transactions denominated in foreign currencies and our derivative financial instruments as compared to the prior period. Provision for income taxes decreased $22.8 million to $131.3 million in 2016 from $154.1 million in 2015. Our effective tax rate was 33.8% in 2016 compared to 39.9% in 2015. Our effective tax rate for 2016 was lower than the effective tax rate for 2015 primarily due to increased international profitability and a tax benefit related to our prior period acquisitions. We expect a full year 2017 effective tax rate of approximately 32% to 34%. Due to the magnitude of discrete items, we expect a negative effective tax rate of approximately (6.0)% to (8.0)% in the first half of 2017, before normalizing in the third and fourth quarters. In addition, due to our required adoption of Accounting Standards Update (“ASU”) 2016-09, our interim and full year tax rates may be impacted by significant employee stock option exercises, 38 which we are unable to predict. See Note 2 to our Consolidated Financial Statements for a discussion of ASU 2016-09. Year Ended December 31, 2015 Compared to Year Ended December 31, 2014 Net revenues increased $878.9 million, or 28.5%, to $3,963.3 million in 2015 from $3,084.4 million in 2014. Net revenues by product category are summarized below: (In thousands) Apparel Footwear Accessories Total net sales License revenues Connected Fitness Year Ended December 31, 2015 2014 $ Change % Change $2,801,062 677,744 346,885 3,825,691 84,207 53,415 $2,291,520 430,987 275,409 2,997,916 67,229 19,225 $509,542 246,757 71,476 827,775 16,978 34,190 22.2% 57.3 26.0 27.6 25.3 177.8 Total net revenues $3,963,313 $3,084,370 $878,943 28.5% The increase in net sales was driven primarily by: • Apparel unit sales growth and new offerings in multiple lines led by training, golf and running; and • Footwear unit sales growth, led by running and basketball and the expansion of our footwear offerings internationally. License revenues increased $17.0 million, or 25.3%, to $84.2 million in 2015 from $67.2 million in 2014. This increase in license revenues was driven primarily by increased distribution of our licensed products in North America and Japan. Connected Fitness revenue increased $34.2 million, or 177.8%, to $53.4 million in 2015 from $19.2 million in 2014 primarily driven by our Connected Fitness acquisitions in the first quarter of 2015 and revenue growth in our existing Connected Fitness business. Gross profit increased $393.3 million to $1,905.5 million in 2015 from $1,512.2 million in 2014. Gross profit as a percentage of net revenues, or gross margin, decreased 90 basis points to 48.1% in 2015 compared to 49.0% in 2014. The decrease in gross margin percentage was primarily driven by the following: • • • • approximate 70 basis point decrease due to strengthening of impacting our gross margins within our businesses outside the United States; the U.S. dollar negatively approximate 30 basis point decrease driven by higher inbound airfreight costs necessary to service our customers; approximate 30 basis point decrease driven by sales mix in North America; and approximate 20 basis point decrease driven by higher liquidation in both footwear and apparel. The above increases were partially offset by: • approximate 60 basis point increase driven primarily by favorable product input costs in our North America and international businesses. 39 Selling, general and administrative expenses increased $338.7 million to $1,497.0 million in 2015 from $1,158.3 million in 2014. As a percentage of net revenues, selling, general and administrative expenses increased to 37.8% in 2015 from 37.5% in 2014. These changes were primarily attributable to the following: • Marketing costs increased $84.8 million to $417.8 million in 2015 from $333.0 million in 2014. This increase was primarily due to key marketing campaigns and investments in sponsorships. As a percentage of net revenues, marketing costs decreased to 10.5% in 2015 from 10.8% in 2014. • Other costs increased $253.9 million to $1,079.2 million in 2015 from $825.3 million in 2014. This increase was primarily due to higher personnel and other costs incurred for the continued expansion of our direct to consumer distribution channel, including increased investments for our brand house stores. This increase is also due to additional investments in our Connected Fitness business. As a percentage of net revenues, other costs increased to 27.2% in 2015 from 26.8% in 2014. Income from operations increased $54.5 million, or 15.4%, to $408.5 million in 2015 from $354.0 million in 2014. Income from operations as a percentage of net revenues decreased to 10.3% in 2015 from 11.5% in 2014. Interest expense, net increased $9.3 million to $14.6 million in 2015 from $5.3 million in 2014. This increase was primarily due to higher term loan and revolving credit facility borrowings during 2015 primarily used to finance our two Connected Fitness acquisitions. Other expense, net increased $0.8 million to $7.2 million in 2015 from $6.4 million in 2014. This increase was due to higher net losses on the combined foreign currency exchange rate changes on transactions denominated in foreign currencies and our foreign currency derivative financial instruments in 2015. Provision for income taxes increased $19.9 million to $154.1 million in 2015 from $134.2 million in 2014. Our effective tax rate was 39.9% in 2015 compared to 39.2% in 2014. Our effective tax rate for 2015 was higher than the effective tax rate for 2014 primarily due to increased non-deductible costs incurred in connection with our Connected Fitness acquisitions in 2015. Segment Results of Operations Intersegment The net revenues and operating income (loss) associated with our segments are summarized in the following tables. The majority of corporate expenses within North America have not been allocated to our other segments. revenue is generated by Connected Fitness which runs advertising campaigns for other segments. Due to the individual materiality of our Asia-Pacific segment, we have separately presented our Asia-Pacific, EMEA and Latin America segments, as of December 31, 2016, and will no longer combine these segments for presentation purposes. Net revenues and operating income by segment presented for prior periods has been conformed to the current presentation. During 2017, we plan to separately disclose our unallocated corporate costs. We believe this presentation will provide the users of our financial statements with increased transparency and comparability of our operating results. 40 Year Ended December 31, 2016 Compared to Year Ended December 31, 2015 Net revenues by segment are summarized below: (In thousands) North America EMEA Asia-Pacific Latin America Connected Fitness Intersegment Eliminations Year Ended December 31, 2016 2015 $ Change % Change $4,005,314 330,584 268,607 141,793 80,447 (1,410) $3,455,737 203,109 144,877 106,175 53,415 — $549,577 127,475 123,730 35,618 27,032 (1,410) 15.9% 62.8 85.4 33.5 50.6 (100.0) Total net revenues $4,825,335 $3,963,313 $862,022 21.8% The increase in total net revenues was driven by the following: • Net revenues in our North America operating segment increased $549.6 million to $4,005.3 million in 2016 from $3,455.7 million in 2015 primarily due to the items discussed above in the Consolidated Results of Operations. • Net revenues in our EMEA operating segment increased $127.5 million to $330.6 million in 2016 from $203.1 million in 2015 primarily due to unit sales growth to wholesale partners in Germany and the United Kingdom. • Net revenues in our Asia-Pacific operating segment increased $123.7 million to $268.6 million in 2016 from $144.9 million in 2015 primarily due to an our first e-commerce site in our direct to consumer channel and an increase in mono-branded partner stores which are included in our wholesale channel. • Net revenues in our Latin America operating segment increased $35.6 million to $141.8 million in 2016 from $106.2 million in 2015 primarily due an increase in company operated stores in our direct to consumer channel. • Net revenues in our Connected Fitness operating segment increased $27.0 million to $80.4 million in 2016 from $53.4 million in 2015 primarily driven by increased advertising and subscribers on our fitness applications and higher sales of our licensed products. Operating income (loss) by segment is summarized below: (In thousands) North America EMEA Asia-Pacific Latin America Connected Fitness Year Ended December 31, 2016 2015 $ Change % Change $408,424 11,420 68,338 (33,891) (36,820) $460,961 3,122 36,358 (30,593) (61,301) $(52,537) 8,298 31,980 (3,298) 24,481 (11.4)% 265.8 88.0 10.8 39.9 Total operating income $417,471 $408,547 $ 8,924 2.2% The increase in total operating income was driven by the following: • Operating income in our North America operating segment decreased $52.5 million to $408.4 million in 2016 from $461.0 million in 2015 primarily due to decreases in gross margin discussed above in the Consolidated Results of Operations and $17.0 million in expenses related to the liquidation of The Sports Authority, comprised of $15.2 million in bad debt 41 expense and $1.8 million of in-store fixture impairment. In addition, this decrease reflects the movement of $11.1 million in expenses resulting from a strategic shift in headcount supporting our global business from our Connected Fitness operating segment to North America. This decrease is partially offset by the increases in revenue discussed above in the Consolidated Results of Operations. • Operating income in our EMEA operating segment increased $8.3 million to $11.4 million in 2016 from $3.1 million in 2015 primarily due to sales growth discussed above and reductions in incentive compensation. This increase was offset by investments in sports marketing and infrastructure for future growth. • Operating income in our Asia-Pacific operating segment increased $31.9 million to $68.3 million in 2016 from $36.4 million in 2015 primarily due to sales growth discussed above and reductions in incentive compensation. This increase was offset by investments in our direct-to-consumer business and entry into new territories. • Operating loss in our Latin America operating segment increased $3.3 million to $33.9 million in 2016 from $30.6 million in 2015 primarily due to increased investments to support growth in the region and the economic challenges in Brazil during the period. This increase in operating loss was offset by sales growth discussed above and reductions in incentive compensation. • Operating loss in our Connected Fitness segment decreased $24.5 million to $36.8 million in 2016 from $61.3 million in 2015 primarily driven by sales growth discussed above. Year Ended December 31, 2015 Compared to Year Ended December 31, 2014 Net revenues by segment are summarized below: (In thousands) North America EMEA Asia-Pacific Latin America Year Ended December 31, 2015 2014 $ Change % Change $3,455,737 203,109 144,877 106,175 $2,796,390 134,118 70,419 64,234 $659,347 68,991 74,458 41,941 23.6% 51.4 105.7 65.3 Connected Fitness 53,415 19,209 34,206 178.1 Total net revenues $3,963,313 $3,084,370 $878,943 28.5% The increase in total net revenues was driven by the following: • Net revenues in our North America operating segment increased $659.3 million to $3,455.7 million in 2015 from $2,796.4 million in 2014 primarily due to the items discussed above in the Consolidated Results of Operations. • Net revenues in our EMEA operating segment increased $69.0 million to $203.1 million in 2015 from $134.1 million in 2014 primarily due to unit sales growth to wholesale partners in Germany and the United Kingdom. • Net revenues in our Asia-Pacific operating segment increased $74.5 million to $144.9 million in 2015 from $70.4 million in 2014 primarily due to an increase in mono-branded partner stores which are included in our wholesale channel. • Net revenues in our Latin America operating segment increased $42.0 million to $106.2 million in 2015 from $64.2 million in 2014 primarily due to unit sales growth to our wholesale partners in Chile and Brazil. 42 • Net revenues in our Connected Fitness operating segment increased $34.2 million to $53.4 million in 2015 from $19.2 million in 2014 primarily due to revenues generated from our two Connected Fitness acquisitions in 2015 and growth in our existing Connected Fitness business. Operating income (loss) by segment is summarized below: (In thousands) North America EMEA Asia-Pacific Latin America Connected Fitness Year Ended December 31, 2015 2014 $ Change % Change $460,961 3,122 36,358 (30,593) (61,301) $372,347 (11,763) 21,858 (15,423) (13,064) $ 88,614 14,885 14,500 (15,170) (48,237) 23.8% 126.5 66.3 (98.4) (369.2) Total operating income $408,547 $353,955 $ 54,592 15.4% The increase in total operating income was driven by the following: • Operating income in our North America operating segment increased $88.6 million to $461.0 million in 2015 from $372.4 million in 2014 primarily due to the items discussed above in the Consolidated Results of Operations. • Operating income in our EMEA operating segment increased $14.9 million to $3.1 million in 2015 from a loss of $11.8 million in 2014 primarily due to sales growth discussed above in the Consolidated Results of Operations. • Operating income in our Asia-Pacific operating segment increased $14.5 million to $36.4 million in 2015 from $21.9 million in 2014 primarily due to sales growth discussed above in the Consolidated Results of Operations. • Operating loss in our Latin America operating segment increased $15.2 million to $30.6 million in 2015 from $15.4 million in 2014 primarily due to increased investments to support growth in the region and the economic challenges in Brazil during the period. This increase in operating loss was offset by sales growth discussed above. • Operating loss in our Connected Fitness segment increased $48.2 million to $61.3 million in 2015 from $13.1 million in 2014 primarily due to investments to support growth in our Connected Fitness business, including the impact of our two Connected Fitness acquisitions in 2015. These acquisitions contributed $23.6 million to the operating loss for the Connected Fitness segment in 2015. Seasonality Historically, we have recognized a majority of our net revenues and a significant portion of our income from operations in the last two quarters of the year, driven primarily by increased sales volume of our products during the fall selling season, including our higher priced cold weather products, along with a larger proportion of higher margin direct to consumer sales. Seasonality could have an impact on the timing of accruals if the sales in the last two quarters of the year do not materialize. The level of our working capital generally reflects the seasonality and growth in our business. We generally expect inventory, accounts payable and certain accrued expenses to be higher in the second and third quarters in preparation for the fall selling season. 43 The following table sets forth certain financial information for the periods indicated. The data is prepared on the same basis as the audited consolidated financial statements included elsewhere in this Form 10-K. All recurring, necessary adjustments are reflected in the data below: (In thousands) 3/31/2015 6/30/2015 9/30/2015 12/31/2015 3/31/2016 6/30/2016 9/30/2016 12/31/2016 Quarter Ended (unaudited) Net revenues Gross profit Marketing SG&A expenses Other SG&A expenses Income from operations (As a percentage of annual totals) Net revenues Gross profit Marketing SG&A expenses Other SG&A expenses Income from operations $804,941 $783,577 $1,204,109 $1,170,686 $1,047,702 $1,000,783 $1,471,573 $1,305,277 583,704 377,664 379,053 561,670 587,160 480,636 698,624 477,647 87,977 70,854 99,756 74,462 122,483 107,835 139,517 107,665 185,857 194,404 219,438 225,503 323,270 350,434 359,797 312,139 27,667 31,901 171,397 177,582 34,883 19,378 199,310 163,900 20.3% 19.8% 19.8% 19.9% 30.4% 30.8% 29.5% 29.5% 21.7% 21.5% 20.7% 21.3% 30.5% 31.2% 27.1% 26.1% 26.4% 21.3% 29.9% 22.4% 25.7% 22.6% 29.2% 22.5% 22.5% 23.6% 26.6% 27.3% 24.0% 26.0% 26.7% 23.2% 6.8% 7.8% 42.0% 43.5% 8.4% 4.6% 47.7% 39.3% During the fourth quarter of 2016, as a change in estimate, we reversed $48.0 million of incentive compensation accruals. Financial Position, Capital Resources and Liquidity Our cash requirements have principally been for working capital and capital expenditures. We fund investments from cash flows from operating our working capital, primarily inventory, and capital activities, cash and cash equivalents on hand, borrowings available under our credit and long term debt facilities and the issuance of debt securities. Our working capital requirements generally reflect the seasonality and growth in our business as we recognize the majority of our net revenues in the back half of the year. Our capital investments have included expanding our in-store fixture and branded concept shop program, improvements and expansion of our distribution and corporate facilities to support our growth, leasehold improvements to our new brand and factory house stores, and investment and improvements in information technology systems. Our inventory strategy is focused on continuing to meet consumer demand while improving our inventory efficiency over the long term by putting systems and processes in place to improve our inventory management. These systems and processes are designed to improve our forecasting and supply planning capabilities. In addition to systems and processes, key areas of focus that we believe will enhance inventory performance are added discipline around the purchasing of product, production lead time reduction, and better planning and execution in selling of excess inventory through our factory house stores and other liquidation channels. We believe our cash and cash equivalents on hand, cash from operations, borrowings available to us under our credit agreement and other financing instruments and our ability to access the capital markets are adequate to meet our liquidity needs and capital expenditure requirements for at least the next twelve months. Although we believe we have adequate sources of liquidity over the long term, an economic recession or a slow recovery could adversely affect our business and liquidity (refer to the “Risk Factors” section included in Item 1A). In addition, instability in or tightening of the capital markets 44 could adversely affect our ability to obtain additional capital to grow our business on terms acceptable to us or at all. At December 31, 2016, $122.9 million, or approximately 49.1%, of cash and cash equivalents was held by our foreign subsidiaries where a repatriation of those funds to the United States would likely result in an additional tax expense. However, based on the capital and liquidity needs of our foreign operations, as well as the status of current tax law, we intend to indefinitely reinvest these funds outside the United States. In addition, our United States operations do not require the repatriation of these funds to meet our currently projected liquidity needs. Should we require additional capital in the United States, we may elect to repatriate indefinitely reinvested foreign funds or raise capital in the United States. If we were to repatriate indefinitely reinvested foreign funds, we would be required to accrue and pay additional U.S. taxes less applicable foreign tax credits. Determining the tax liability that would arise if these earnings were repatriated is not practical. Cash Flows The following table presents the major components of net cash flows used in and provided by operating, investing and financing activities for the periods presented: (In thousands) Net cash provided by (used in): Operating activities Investing activities Financing activities Effect of exchange rate changes on cash and Year Ended December 31, 2016 2015 2014 $ 304,487 (381,139) 205,995 $ (44,104) (847,475) 440,078 $ 219,033 (152,312) 182,306 cash equivalents (8,725) (11,822) (3,341) Net increase (decrease) in cash and cash equivalents $ 120,618 $(463,323) $ 245,686 Operating Activities Operating activities consist primarily of net income adjusted for certain non-cash items. Adjustments to net income for non-cash items include depreciation and amortization, unrealized foreign currency exchange rate gains and losses, losses on disposals of property and equipment, stock-based compensation, deferred income taxes and changes in reserves and allowances. In addition, operating cash flows include the effect of changes in operating assets and liabilities, principally inventories, accounts receivable, income taxes payable and receivable, prepaid expenses and other assets, accounts payable and accrued expenses. Cash flows provided by operating activities increased $348.6 million to $304.5 million in 2016 from $44.1 million of cash used in operating activities in 2015. The increase in cash from operating activities was due to increased net cash flows from operating assets and liabilities of $323.1 million, an increase in net income of $24.4 million year over year and an increase in adjustments to net income for non- cash items of $1.1 million year over year. The increase in cash outflows related to changes in operating assets and liabilities period over period was primarily driven by the following: • • an increase in accounts payable of $225.0 million in 2016 as compared to 2015, primarily due to the timing of inventory payments as well as significant increases in inventory in-transit in the current period, and a decrease in inventory investments of $130.5 million in 2016 as compared to 2015, primarily due to early deliveries of product to meet key seasonal floor set dates in the prior period, as well as strategic investments in auto-replenishment products in 2015; partially offset by 45 • a larger increase in accounts receivable of $58.0 million in 2016 as compared to 2015, primarily due to the timing of shipments and a higher proportion of sales to our international customers with longer payment terms compared to the prior year. Cash flows provided by operating activities decreased $263.1 million to $44.1 million of cash used by operating activities in 2015 from $219.0 million of cash provided by operating activities in 2014. The decrease in cash from operating activities was due to decreased net cash flows from operating assets and liabilities of $370.1 million, partially offset by adjustments to net income for non-cash items, which increased $82.5 million, and an increase in net income of $24.5 million year over year. The decrease in cash outflows related to changes in operating assets and liabilities period over period was primarily driven by the following: • • an increase in inventory investments of $193.9 million primarily due to early deliveries of product to meet key seasonal floor set dates, as well as strategic investments in auto- replenishment products, and a larger increase in accounts receivable of $90.8 million in 2015 as compared to 2014, primarily due to the timing of shipments. Investing Activities Cash used in investing activities decreased $466.4 million to $381.1 million in 2016 from $847.5 million in 2015, primarily due to the impact of our Connected Fitness acquisitions of MyFitnessPal and Endomondo which occurred during the first quarter of 2015. Cash used in investing activities increased $695.2 million to $847.5 million in 2015 from $152.3 million in 2014, primarily due to our Connected Fitness acquisitions of MyFitnessPal and Endomondo during the first quarter of 2015 and increased capital expenditures to improve and expand our corporate headquarters and invest in our new and expanding SAP platform in 2015. Total capital expenditures were $405.5 million, $325.5 million and $145.4 million in 2016, 2015 and 2014, respectively. Capital expenditures for 2017 are expected to be approximately $400.0 million, comprised primarily of investments in our global offices around the world including our headquarters in Baltimore, our distribution centers, our SAP platform, and global Direct-to-Consumer. Financing Activities Cash provided by financing activities decreased $234.1 million to $206.0 million in 2016 from $440.1 million in 2015. This decrease was primarily due to higher repayments on our revolving credit facility in the current period compared to the prior period, partially offset by the issuance of senior notes in 2016. Cash provided by financing activities increased $257.8 million to $440.1 million in 2015 from $182.3 million in 2014. This increase was primarily due to our amended credit agreement that provided an additional $650.0 million in term loan and revolving credit facility proceeds in 2015 offset by payments of $261.3 million. Credit Facility We are party to a credit agreement that provides revolving commitments for up to $1.25 billion of in each case maturing in January 2021. As of facility and borrowings, as well as term loan commitments, December 31, 2016 there was no outstanding balance under $186.3 million of term loan borrowings remained outstanding. the revolving credit 46 At our request and the lender’s consent, revolving and or term loan borrowings may be increased by up to $300.0 million in aggregate, subject to certain conditions as set forth in the credit agreement, as amended. Incremental borrowings are uncommitted and the availability thereof, will depend on market conditions at the time we seek to incur such borrowings. The borrowings under the revolving credit facility have maturities of less than one year. Up to $50.0 million of the facility may be used for the issuance of letters of credit. There were $2.6 million of letters of credit outstanding as of December 31, 2016. The credit agreement contains negative covenants that, subject to significant exceptions, limit our ability to, among other things, incur additional indebtedness, make restricted payments, pledge our assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates. We are also required to maintain a ratio of consolidated EBITDA, as defined in the credit agreement, to consolidated interest expense of not less than 3.50 to 1.00 and are not permitted to allow the ratio of consolidated total indebtedness to consolidated EBITDA to be greater than 3.25 to 1.00 (“consolidated leverage ratio”). As of December 31, 2016, we were in compliance with these ratios. In addition, the credit agreement contains events of default that are customary for a facility of this nature, and includes a cross default provision whereby an event of default under other material indebtedness, as defined in the credit agreement, will be considered an event of default under the credit agreement. Borrowings under the credit agreement bear interest at a rate per annum equal to, at our option, either (a) an alternate base rate, or (b) a rate based on the rates applicable for deposits in the interbank market for U.S. Dollars or the applicable currency in which the loans are made (“adjusted LIBOR”), plus in each case an applicable margin. The applicable margin for loans will be adjusted by reference to a grid (the “Pricing Grid”) based on the consolidated leverage ratio and ranges between 1.00% to 1.25% for adjusted LIBOR loans and 0.00% to 0.25% for alternate base rate loans. The weighted average interest rate under the outstanding term loans and revolving credit facility borrowings was 1.6% and 1.3% during the years ended December 31, 2016 and 2015, respectively. We pay a commitment fee on the average daily unused amount of the revolving credit facility and certain fees with respect to letters of credit. As of December 31, 2016, the commitment fee was 15.0 basis points. Since inception, we have incurred and deferred $3.9 million in financing costs in connection with the credit agreement. 3.250% Senior Notes In June 2016, we issued $600.0 million aggregate principal amount of 3.250% senior unsecured notes due June 15, 2026 (the “Notes”). The proceeds were used to pay down amounts outstanding under the revolving credit facility. Interest is payable semi-annually on June 15 and December 15 beginning December 15, 2016. Prior to March 15, 2026 (three months prior to the maturity date of the Notes), we may redeem some or all of the Notes at any time or from time to time at a redemption price equal to the greater of 100% of the principal amount of the Notes to be redeemed or a “make-whole” amount applicable to such Notes as described in the indenture governing the Notes, plus accrued and unpaid interest to, but excluding, the redemption date. On or after March 15, 2026 (three months prior to the maturity date of the Notes), we may redeem some or all of the Notes at any time or from time to time at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. The indenture governing the Notes contains covenants, including limitations that restrict our ability and the ability of certain of our subsidiaries to create or incur secured indebtedness and enter into sale and leaseback transactions and our ability to consolidate, merge or transfer all or substantially all of our properties or assets to another person, in each case subject to material exceptions described in the indenture. We incurred and deferred $5.3 million in financing costs in connection with the Notes. 47 Other Long Term Debt In December 2012, we entered into a $50.0 million recourse loan collateralized by the land, buildings and tenant improvements comprising our corporate headquarters. The loan has a seven year term and maturity date of December 2019. The loan bears interest at one month LIBOR plus a margin of 1.50%, and allows for prepayment without penalty. The loan includes covenants and events of default substantially consistent with our credit agreement discussed above. The loan also requires prior approval of the lender for certain matters related to the property, including transfers of any interest in the property. As of December 31, 2016 and 2015, the outstanding balance on the loan was $42.0 million and $44.0 million, respectively. The weighted average interest rate on the loan was 2.0% and 1.7% for the years ended December 31, 2016 and 2015, respectively. Interest expense, net was $26.4 million, $14.6 million, and $5.3 million for the years ended Interest expense includes the amortization of December 31, 2016, 2015 and 2014, respectively. deferred financing costs, bank fees, capital and built-to-suit lease interest and interest expense under the credit and other long term debt facilities. Amortization of deferred financing costs was $1.2 million, $0.8 million, and $0.6 million for the years ended December 31, 2016, 2015 and 2014, respectively. We monitor the financial health and stability of our lenders under the credit and other long term debt facilities, however during any period of significant instability in the credit markets lenders could be negatively impacted in their ability to perform under these facilities. Contractual Commitments and Contingencies We lease warehouse space, office facilities, space for our brand and factory house stores and certain equipment under non-cancelable operating leases. The leases expire at various dates through 2033, excluding extensions at our option, and include provisions for rental adjustments. In addition, this table includes executed lease agreements for brand and factory house stores that we did not yet occupy as of December 31, 2016. The operating leases generally contain renewal provisions for varying periods of time. Our significant contractual obligations and commitments as of December 31, 2016 as well as significant agreements entered into during the period after December 31, 2016 through the date of this report are summarized in the following table: (in thousands) Contractual obligations Long term debt obligations (1) Lease obligations (2) Product purchase obligations (3) Sponsorships and other (4) Payments Due by Period Total Less Than 1 Year 1 to 3 Years 3 to 5 Years More Than 5 Years $1,031,737 $ 1,422,426 684,511 1,355,605 52,211 114,857 684,262 176,138 $138,547 263,544 249 309,948 $153,229 255,845 $ 687,750 788,180 — — 243,024 626,495 Total $4,494,279 $1,027,468 $712,288 $652,098 $2,102,425 (1) (2) Includes estimated interest payments based on applicable fixed and currently effective floating interest rates as of December 31, 2016, timing of scheduled payments, and the term of the debt obligations. Includes the minimum payments for lease obligations. The lease obligations do not include any contingent rent expense we may incur at our brand and factory house stores based on future sales above a specified minimum or payments made for maintenance, insurance and real estate taxes. Contingent rent expense was $13.0 million for the year ended December 31, 2016. (3) We generally place orders with our manufacturers at least three to four months in advance of expected future sales. The amounts listed for product purchase obligations primarily represent our footwear and open production purchase orders with our manufacturers for our apparel, 48 (4) accessories, including expected inbound freight, duties and other costs. These open purchase orders specify fixed or minimum quantities of products at determinable prices. The product purchase obligations also includes fabric commitments with our suppliers, which secure a portion of our material needs for future seasons. The reported amounts exclude product purchase liabilities included in accounts payable as of December 31, 2016. Includes sponsorships with professional teams, professional leagues, colleges and universities, individual athletes, athletic events and other marketing commitments in order to promote our brand. Some of these sponsorship agreements provide for additional performance incentives and product supply obligations. It is not possible to determine how much we will spend on product supply obligations on an annual basis as contracts generally do not stipulate specific cash amounts to be spent on products. The amount of product provided to these sponsorships depends on many factors including general playing conditions, the number of sporting events in which they participate and our decisions regarding product and marketing initiatives. In addition, it is not possible to determine the performance incentive amounts we may be required to pay under these agreements as they are primarily subject to certain performance based and other variables. The amounts listed above are the fixed minimum amounts required to be paid under these sponsorship agreements. Additionally, these amounts include minimum guaranteed royalty payments to endorsers and licensors based upon a predetermined percent of sales of particular products. The table above excludes a liability of $69.5 million for uncertain tax positions, including the related interest and penalties, recorded in accordance with applicable accounting guidance, as we are unable to reasonably estimate the timing of settlement. Refer to Note 9 to the Consolidated Financial Statements for a further discussion of our uncertain tax positions. Off-Balance Sheet Arrangements In connection with various contracts and agreements, we have agreed to indemnify counterparties against certain third party claims relating to the infringement of intellectual property rights and other items. Generally, such indemnification obligations do not apply in situations in which our counterparties are grossly negligent, engage in willful misconduct, or act in bad faith. Based on our historical experience and the estimated probability of future loss, we have determined the fair value of such indemnifications is not material to our financial position or results of operations. Critical Accounting Policies and Estimates Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. To prepare these financial statements, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosures of contingent assets and liabilities. Actual results could be significantly different from these estimates. We believe the following discussion addresses the critical accounting policies that are necessary to understand and evaluate our reported financial results. Our significant accounting policies are described in Note 2 of the audited consolidated financial statements. The SEC suggests companies provide additional disclosure on those accounting policies considered most critical. The SEC considers an accounting policy to be critical if it is important to our financial condition and results of operations and requires significant judgments and estimates on the in its application. Our estimates are often based on complex judgments, part of management probabilities and assumptions that management believes to be reasonable, but that are inherently uncertain and unpredictable. It is also possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts. There were no significant changes to our critical accounting policies during the year ended December 31, 2016. 49 Revenue Recognition Net revenues consist of both net sales and license and other revenues. Net sales are recognized upon transfer of ownership, including passage of title to the customer and transfer of risk of loss related to those goods. Transfer of title and risk of loss are based upon shipment under free on board shipping point for most goods or upon receipt by the customer depending on the country of the sale and the agreement with the customer. In some instances, transfer of title and risk of loss take place at the point of sale, for example at our brand and factory house stores. We may also ship product directly from our supplier to the customer and recognize revenue when the product is delivered to and accepted by the customer. License revenues are primarily recognized based upon shipment of licensed products sold by our licensees. Sales taxes imposed on our revenues from product sales are presented on a net basis on the consolidated statements of income and therefore do not impact net revenues or costs of goods sold. We record reductions to revenue for estimated customer returns, allowances, markdowns and discounts. We base our estimates on historical rates of customer returns and allowances as well as the specific identification of outstanding returns, markdowns and allowances that have not yet been received by us. The actual amount of customer returns and allowances, which is inherently uncertain, may differ from our estimates. If we determine that actual or expected returns or allowances are significantly higher or lower than the reserves we established, we would record a reduction or increase, as appropriate, to net sales in the period in which we make such a determination. Provisions for customer specific discounts are based on contractual obligations with certain major customers. Reserves for returns, allowances, markdowns and discounts are recorded as an offset to accounts receivable as settlements are made through offsets to outstanding customer invoices. As of December 31, 2016 and 2015, there were $146.2 million and $94.5 million, respectively, in reserves for customer returns, allowances, markdowns and discounts. Allowance for Doubtful Accounts We make ongoing estimates relating to the collectability of accounts receivable and maintain an allowance for estimated losses resulting from the inability of our customers to make required payments. In determining the amount of the reserve, we consider historical levels of credit losses and significant economic developments within the retail environment that could impact the ability of our customers to pay outstanding balances and make judgments about the creditworthiness of significant customers based on ongoing credit evaluations. Because we cannot predict future changes in the financial stability of our customers, actual future losses from uncollectible accounts may differ from estimates. If the financial condition of customers were to deteriorate, resulting in their inability to make payments, a larger reserve might be required. In the event we determine a smaller or larger reserve is appropriate, we would record a benefit or charge to selling, general and administrative expense in the period in which such a determination was made. As of December 31, 2016 and 2015, the allowance for doubtful accounts was $11.3 million and $5.9 million, respectively. Inventory Valuation and Reserves Inventories consist primarily of finished goods. Costs of finished goods inventories include all costs incurred to bring inventory to its current condition, including inbound freight, duties and other costs. We value our inventory at standard cost which approximates landed cost, using the first-in, first-out method of cost determination. Market value is estimated based upon assumptions made about future demand and retail market conditions. If we determine that the estimated market value of our inventory is less than the carrying value of such inventory, we record a charge to cost of goods sold to reflect the lower of cost or market. If actual market conditions are less favorable than those that we projected, further adjustments may be required that would increase the cost of goods sold in the period in which such a determination was made. 50 Goodwill, Intangible Assets and Long-Lived Assets impairment test. The first step, Goodwill and intangible assets are recorded at their estimated fair values at the date of acquisition and are allocated to the reporting units that are expected to receive the related benefits. Goodwill and indefinite lived intangible assets are not amortized and are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. In conducting an annual impairment test, we first review qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If factors indicate that is the case, or if goodwill is allocated to a reporting unit for the first time, we impairment, perform the two-step goodwill compares the fair value of the reporting unit with its carrying amount. We calculate fair value using the discounted cash flows model, which indicates the fair value of the reporting unit based on the present value of the cash flows that we expect the reporting unit to generate in the future. Our significant estimates in the discounted cash flows model include: our weighted average cost of capital, long-term rate of growth and profitability of the reporting unit’s business, and working capital effects. If the carrying amount exceeds its fair value, the second step will be performed. The second step, measuring the impairment loss, compares the implied fair value of the goodwill with the carrying amount of the goodwill. Any excess of the goodwill carrying amount over the applied fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value. We perform our annual impairment tests in the fourth quarter of each fiscal year. As of December 31, 2016, no impairment of goodwill was identified and the fair value of each reporting unit substantially exceeded its carrying the value. The Connected Fitness valuation is dependent upon revenue growth assumptions. performance of this reporting unit does not meet expectations it could have a material impact on the fair value of the reporting unit. identifying a potential If We continually evaluate whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets may warrant revision or that the remaining balance may not be recoverable. These factors may include a significant deterioration of operating results, changes in business plans, or changes in anticipated cash flows. When factors indicate that an asset should be evaluated for possible impairment, we review long-lived assets to assess recoverability from future operations using undiscounted cash flows. If future undiscounted cash flows are less than the carrying value, an impairment is recognized in earnings to the extent that the carrying value exceeds fair value. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities at tax rates expected to be in effect when such assets or liabilities are realized or settled. Deferred income tax assets are reduced by valuation allowances when necessary. Assessing whether deferred tax assets are realizable requires significant judgment. We consider all available positive and negative evidence, including historical operating performance and expectations of future operating performance. The ultimate realization of deferred tax assets is often dependent upon future taxable income and therefore can be uncertain. To the extent we believe it is more likely than not that all or some portion of the asset will not be realized, valuation allowances are established against our deferred tax assets, which increase income tax expense in the period when such a determination is made. Income taxes include the largest amount of tax benefit for an uncertain tax position that is more likely than not to be sustained upon audit based on the technical merits of the tax position. Settlements 51 with tax authorities, the expiration of statutes of limitations for particular tax positions, or obtaining new information on particular tax positions may cause a change to the effective tax rate. We recognize accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes on the consolidated statements of income. Stock-Based Compensation We account for stock-based compensation in accordance with accounting guidance that requires all stock-based compensation awards granted to employees and directors to be measured at fair value and recognized as an expense in the financial statements. As of December 31, 2016, we had $64.5 million of unrecognized compensation expense expected to be recognized over a weighted average period of 1.7 years. This unrecognized compensation expense does not include any expense related to performance-based restricted stock units and stock options for which the performance targets have not been achieved as of December 31, 2016. The assumptions used in calculating the fair value of stock-based compensation awards represent management’s best estimates, but the estimates involve inherent uncertainties and the application of management judgment. In addition, compensation expense for performance-based awards is recorded over the related service period when achievement of the performance targets are deemed probable, which requires management judgment. The achievement of certain operating income targets related to the performance-based restricted stock units and stock options granted in 2016 were not deemed probable as of December 31, 2016. Additional stock-based compensation of up to $20.0 million would have been recorded from grant date through 2016 for these performance-based restricted stock units and stock options had the full achievement of all operating targets been deemed probable; however, currently we do not believe that these targets will be met. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. Refer to Note 2 and Note 11 to the Consolidated Financial Statements for a further discussion on stock-based compensation. Recently Issued Accounting Standards Refer to Note 2 to the notes to our financial statements included in this Form 10-K for our assessment of recently issued accounting standards. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Foreign Currency Risk We currently generate a majority of our consolidated net revenues in the United States, and the reporting currency for our consolidated financial statements is the U.S. dollar. As our net revenues and expenses generated outside of the United States increase, our results of operations could be adversely impacted by changes in foreign currency exchange rates. For example, as we recognize foreign revenues in local foreign currencies and if the U.S. dollar strengthens, it could have a negative impact on our foreign revenues upon translation of those results into the U.S. dollar upon consolidation of our financial statements. In addition, we are exposed to gains and losses resulting from fluctuations in foreign currency exchange rates on transactions generated by our foreign subsidiaries in currencies other than their local currencies. These gains and losses are primarily driven by intercompany transactions and inventory purchases denominated in currencies other than the functional currency of the purchasing entity. These exposures are included in other expense, net on the consolidated statements of income. From time to time, we may elect to use foreign currency contracts to reduce the risk from exchange rate fluctuations primarily on intercompany transactions and projected inventory purchases 52 for our international subsidiaries. As we expand our international business, we anticipate expanding our current hedging program to include additional currency pairs and instruments. We do not enter into derivative financial instruments for speculative or trading purposes. As of December 31, 2016, the aggregate notional value of our outstanding foreign currency contracts was $845.1 million, which was comprised of Canadian Dollar/U.S. Dollar, Euro/U.S. Dollar, Mexican Peso/U.S. Dollar, Yen/Euro, Mexican Peso/Euro and Pound Sterling/Euro currency pairs with contract maturities of one to eleven months. The majority of our foreign currency contracts are not designated as cash flow hedges, and accordingly, changes in their fair value are recorded in earnings. During 2014, we began entering into foreign currency contracts designated as cash flow hedges. For foreign currency contracts designated as cash flow hedges, changes in fair value, excluding any ineffective portion, is recorded in other comprehensive income until net income is affected by the variability in cash flows of the hedged transaction. The effective portion is generally released to net the related derivative and is classified in the same manner as the income after the maturity of underlying exposure. During the years ended December 31, 2016 and 2015, we reclassified $0.3 million and $3.5 million from other comprehensive income to cost of goods sold related to foreign currency contracts designated as cash flow hedges, respectively. The fair values of the Company’s foreign currency contracts were assets of $15.2 million and $3.8 million as of December 31, 2016 and 2015, respectively, and were included in prepaid expenses and other current assets on the consolidated balance sheet. Refer to Note 8 to the Consolidated Financial Statements for a discussion of the fair value measurements. Included in other expense, net were the following amounts related to changes in foreign currency exchange rates and derivative foreign currency contracts: (In thousands) Year Ended December 31, 2016 2015 2014 Unrealized foreign currency exchange rate gains (losses) $(12,627) $(33,359) $(11,739) Realized foreign currency exchange rate gains (losses) Unrealized derivative gains Realized derivative gains (6,906) 729 15,192 7,643 388 16,404 2,247 1 3,081 We enter into foreign currency contracts with major financial institutions with investment grade credit ratings and are exposed to credit losses in the event of non-performance by these financial institutions. This credit risk is generally limited to the unrealized gains in the foreign currency contracts. However, we monitor the credit quality of institutions and consider the risk of counterparty default to be minimal. Although we have entered into foreign currency contracts to minimize some of the impact of foreign currency exchange rate fluctuations on future cash flows, we cannot be assured that foreign currency exchange rate fluctuations will not have a material adverse impact on our financial condition and results of operations. these financial Interest Rate Risk In order to maintain liquidity and fund business operations, we enter into long term debt arrangements with various lenders which bear a range of fixed and variable rates of interest. The nature and amount of our long-term debt can be expected to vary as a result of future business requirements, market conditions and other factors. We may elect to enter into interest rate swap contracts to reduce the impact associated with interest rate fluctuations. We utilize interest rate swap contracts to convert a portion of variable rate debt to fixed rate debt. The contracts pay fixed and receive variable rates of interest. The interest rate swap contracts are accounted for as cash flow hedges and accordingly, the effective portion of the changes in fair value are recorded in other comprehensive income and reclassified into interest expense over the life of the underlying debt obligation. 53 As of December 31, 2016, the aggregate notional value of our outstanding interest rate swap contracts was $153.1 million. During the years ended December 31, 2016 and 2015, we recorded a $2.0 million and $2.7 million increase in interest expense, respectively, representing the effective portion of the contracts reclassified from accumulated other comprehensive income. The fair value of the interest rate swap contracts was a liability of $0.4 million and $1.5 million as of December 31, 2016 and 2015, respectively, and was included in other long term liabilities on the consolidated balance sheet. Credit Risk We are exposed to credit risk primarily on our accounts receivable. We provide credit to customers in the ordinary course of business and perform ongoing credit evaluations. We believe that our exposure to concentrations of credit risk with respect to trade receivables is largely mitigated by our customer base. We believe that our allowance for doubtful accounts is sufficient to cover customer credit risks as of December 31, 2016. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Allowance for Doubtful Accounts.” Inflation Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations in recent periods, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net revenues if the selling prices of our products do not increase with these increased costs. 54 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Management on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. We conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. the design This evaluation included review of effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on our evaluation, we have concluded that our internal control over financial reporting was effective as of December 31, 2016. the documentation of controls, evaluation of The effectiveness of our internal control over financial reporting as of December 31, 2016, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein. /S/ KEVIN A. PLANK Kevin A. Plank Chairman of the Board of Directors and Chief Executive Officer /S/ DAVID E. BERGMAN David E. Bergman Chief Financial Officer Dated: February 23, 2017 55 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Under Armour, Inc. In our opinion, the accompanying consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Under Armour, Inc. and its subsidiaries (the “Company”) at December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control—Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. is responsible for financial reporting includes those policies and procedures that A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ PricewaterhouseCoopers LLP Baltimore, Maryland February 23, 2017 56 Under Armour, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands, except share data) Assets Current assets Cash and cash equivalents Accounts receivable, net Inventories Prepaid expenses and other current assets Total current assets Property and equipment, net Goodwill Intangible assets, net Deferred income taxes Other long term assets Total assets Liabilities and Stockholders’ Equity Current liabilities Accounts payable Accrued expenses Current maturities of long term debt Other current liabilities Total current liabilities Long term debt, net of current maturities Other long term liabilities Total liabilities Commitments and contingencies (see Note 6) Stockholders’ equity Class A Common Stock, $0.0003 1/3 par value; 400,000,000 shares authorized as of December 31, 2016, and 2015; 183,814,911 shares issued and outstanding as of December 31, 2016, and 181,629,641 shares issued and outstanding as of December 31, 2015. Class B Convertible Common Stock, $0.0003 1/3 par value; 34,450,000 shares authorized, issued and outstanding as of December 31, 2016 and 2015. Class C Common Stock, $0.0003 1/3 par value; 400,000,000 shares authorized as of December 31, 2016 and 2015; 220,174,048 shares issued and outstanding as of December 31, 2016, and 216,079,641 shares issued and outstanding as of December 31, 2015. Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total stockholders’ equity Total liabilities and stockholders’ equity See accompanying notes. 57 December 31, 2016 December 31, 2015 $ 250,470 622,685 917,491 174,507 $ 129,852 433,638 783,031 152,242 1,965,153 804,211 563,591 64,310 136,862 110,204 1,498,763 538,531 585,181 75,686 92,157 75,652 $3,644,331 $2,865,970 $ 409,679 208,750 27,000 40,387 $ 200,460 192,935 42,000 43,415 685,816 790,388 137,227 478,810 624,070 94,868 1,613,431 1,197,748 61 11 61 11 73 823,484 1,259,414 (52,143) 72 636,558 1,076,533 (45,013) 2,030,900 1,668,222 $3,644,331 $2,865,970 Under Armour, Inc. and Subsidiaries Consolidated Statements of Income (In thousands, except per share amounts) Net revenues Cost of goods sold Gross profit Selling, general and administrative expenses Income from operations Interest expense, net Other expense, net Income before income taxes Provision for income taxes Net income Adjustment payment to Class C capital stockholders Year Ended December 31, 2015 2016 2014 $4,825,335 $3,963,313 $3,084,370 1,572,164 2,057,766 2,584,724 2,240,611 1,823,140 1,905,547 1,497,000 1,512,206 1,158,251 417,471 (26,434) (2,755) 388,282 131,303 256,979 59,000 408,547 (14,628) (7,234) 386,685 154,112 232,573 353,955 (5,335) (6,410) 342,210 134,168 208,042 — — Net income available to all stockholders 197,979 232,573 208,042 Basic net income per share of Class A and B common stock Basic net income per share of Class C common stock Diluted net income per share of Class A and B common stock Diluted net income per share of Class C common stock Weighted average common shares outstanding Class A $ $ $ $ 0.45 $ 0.72 $ 0.45 $ 0.71 $ 0.54 $ 0.54 $ 0.53 $ 0.53 $ 0.49 0.49 0.47 0.47 and B common stock Basic Diluted Weighted average common shares outstanding Class C common stock Basic Diluted 217,707 221,944 215,498 220,868 213,227 219,380 218,623 222,904 215,498 220,868 213,227 219,380 See accompanying notes. 58 Under Armour, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income (In thousands) Net income Other comprehensive income (loss): Foreign currency translation adjustment Unrealized gain (loss) on cash flow hedge, net of tax of $3,346, $415 and $(408) for the years ended December 31, 2016, 2015 and 2014, respectively. Gain (loss) on intra-entity foreign currency transactions Total other comprehensive income (loss) Comprehensive income Year Ended December 31, 2016 2015 2014 $256,979 $232,573 $208,042 (13,798) (31,816) (16,743) 9,084 (2,416) 1,611 — (259) — (7,130) (30,205) (17,002) $249,849 $202,368 $191,040 See accompanying notes. 59 Under Armour, Inc. and Subsidiaries Consolidated Statements of Stockholders’ Equity (In thousands) Class A Common Stock Class B Convertible Common Stock Shares Amount Shares Amount Shares Amount Class C Common Stock Additional Paid-in- Capital Accumulated Other Comprehensive Income Retained Earnings Total Equity 171,629 $ 57 40,000 $ 13 211,629 1,454 — — 1,454 1 70 $397,178 $ 653,842 $ 2,194 1 11,257 — Balance as of December 31, 2013 Exercise of stock options Shares withheld in consideration of employee tax obligations relative to stock-based compensation arrangements Issuance of Class A Common Stock, net of forfeitures Class B Convertible Common Stock converted to Class A Common Stock Stock-based compensation expense Net excess tax benefits from stock-based compensation arrangements Comprehensive income Balance as of December 31, Exercise of stock options Shares withheld in consideration of employee tax obligations relative to stock-based compensation arrangements Issuance of Class A Common Stock, net of forfeitures Class B Convertible Common Stock converted to Class A Common Stock Stock-based compensation expense Net excess tax benefits from stock-based compensation arrangements Comprehensive income Balance as of December 31, Exercise of stock options Shares withheld in consideration of employee tax obligations relative to stock-based compensation arrangements Issuance of Class A Common Stock, net of forfeitures Issuance of Class C Common Stock, net of forfeitures Issuance of Class C dividend Stock-based compensation expense Net excess tax benefits from stock-based compensation arrangements Comprehensive income (loss) Balance as of December 31, — — — — — — — — — $1,053,354 11,259 (5,197) 12,067 — 50,812 36,965 191,040 1,350,300 2,852 (12,727) 19,136 — 60,376 45,917 202,368 1,668,222 6,203 (15,098) 7,884 25,835 (2,927) 46,149 — — — — — — — — — — — — — — — — — — — (7,130) 44,783 249,849 (95) — — — (95) — — (5,197) 908 — — — 908 — 12,067 3,400 1 (3,400) (1) — — — — — — — — — 50,812 — — — — — — — — — — — — 36,965 — 2014 177,296 59 36,600 12 213,896 360 — — — 71 360 — 508,279 2,852 208,042 (17,002) 856,687 (14,808) (172) — — — (172) — — (12,727) 1,996 1 — — 1,996 1 19,134 2,150 1 (2,150) (1) — — — — — — — — — 60,376 — — — — — — — — — — — — 45,917 — 232,573 (30,205) 2015 181,630 61 34,450 11 216,080 636,558 1,076,533 (45,013) 792 — — — 6,203 — 72 971 — (199) — — — (276) — — (15,098) 1,592 — — — — — 7,884 — — — — — — — — 1 1,852 1,547 — 25,834 56,073 — — — — — — 46,149 — — — — — — — — — — — — 44,783 — — — (59,000) — — 256,979 2016 183,815 $ 61 34,450 $ 11 220,174 $ 73 $823,484 $1,259,414 $(52,143) $2,030,900 See accompanying notes. 60 Under Armour, Inc. and Subsidiaries Consolidated Statements of Cash Flows (In thousands) Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation and amortization Unrealized foreign currency exchange rate losses Loss on disposal of property and equipment Stock-based compensation Deferred income taxes Changes in reserves and allowances Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable Inventories Prepaid expenses and other assets Accounts payable Accrued expenses and other liabilities Income taxes payable and receivable Net cash provided by (used in) operating activities Cash flows from investing activities Purchases of property and equipment Purchases of property and equipment from related parties Purchase of businesses, net of cash acquired Purchases of available-for-sale securities Sales of available-for-sale securities Purchases of other assets Net cash used in investing activities Cash flows from financing activities Proceeds from long term debt and revolving credit facility Payments on long term debt and revolving credit facility Excess tax benefits from stock-based compensation arrangements Proceeds from exercise of stock options and other stock issuances Payments of debt financing costs Cash dividends paid Contingent consideration payments for acquisitions Net cash provided by financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents Beginning of period End of period Non-cash investing and financing activities Change in accrual for property and equipment Non-cash dividends Non-cash acquisition of business Property and equipment acquired under build-to-suit leases Other supplemental information Cash paid for income taxes Cash paid for interest, net of capitalized interest $ $ See accompanying notes. 61 Year Ended December 31, 2016 2015 2014 $ 256,979 $ 232,573 $ 208,042 144,770 12,627 1,580 46,149 (43,004) 70,188 100,940 33,359 549 60,376 (4,426) 40,391 72,093 11,739 261 50,812 (17,584) 31,350 (249,853) (148,055) (25,284) 202,446 52,656 (16,712) 304,487 (316,458) (70,288) — (24,230) 30,712 (875) (381,139) 1,327,601 (1,170,750) 44,783 15,485 (6,692) (2,927) (1,505) 205,995 (8,725) 120,618 (191,876) (278,524) (76,476) (22,583) 64,126 (2,533) (44,104) (101,057) (84,658) (33,345) 49,137 28,856 3,387 219,033 (298,928) (140,528) — (539,460) (103,144) 96,610 (2,553) (847,475) 650,000 (265,202) 45,917 10,310 (947) — — 440,078 (11,822) (463,323) — (10,924) — — (860) (152,312) 250,000 (118,722) 36,965 15,776 (1,713) — — 182,306 (3,341) 245,686 129,852 347,489 593,175 250,470 $ 129,852 $ 593,175 16,973 $ 17,758 $ (56,073) — — — — 5,631 4,922 — 11,233 — 135,959 21,412 99,708 11,176 103,284 4,146 Under Armour, Inc. and Subsidiaries Notes to the Audited Consolidated Financial Statements 1. Description of the Business Under Armour, Inc. is a developer, marketer and distributor of branded performance apparel, footwear and accessories. These products are sold worldwide and worn by athletes at all levels, from youth to professional on playing fields around the globe, as well as by consumers with active lifestyles. The Under Armour Connected FitnessTM platform powers the world’s largest digital health and fitness community. The Company uses this platform to engage its consumers and increase awareness and sales of its products. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements include the accounts of Under Armour, Inc. and its wholly owned subsidiaries (the “Company”). All intercompany balances and transactions have been eliminated. The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. On January 5, 2015, the Company acquired 100% of the outstanding equity of Endomondo ApS the (“Endomondo”), a Denmark-based digital connected fitness company. On March 17, 2015, Company acquired 100% of the outstanding equity of MyFitnessPal, Inc. (“MFP”), a digital nutrition and connected fitness company. Both companies were acquired to expand the Under Armour Connected Fitness community. The purchase price allocation for each acquisition is reflected in the consolidated balance sheet as of December 31, 2015. On March 16, 2016, the Board of Directors approved the issuance of the Company’s new Class C non-voting common stock, referred to as the Class C stock. The Class C stock was issued through a stock dividend on a one-for-one basis to all existing holders of the Company’s Class A and Class B common stock. The shares of Class C stock were distributed on April 7, 2016, to stockholders of record of Class A and Class B common stock as of March 28, 2016. Stockholders’ equity and all references to share and per share amounts in the accompanying consolidated financial statements have been retroactively adjusted to reflect this one-for-one stock dividend. On June 3, 2016, the Board of Directors approved the payment of a $59.0 million dividend to the holders of the Company’s Class C stock in connection with shareholder litigation related to the creation of the Class C stock. The Company’s Board of Directors approved the payment of this dividend in the form of additional shares of Class C stock, with cash in lieu of any fractional shares. This dividend was distributed on June 29, 2016, in the form of 1,470,256 shares of Class C stock and $2.9 million in cash. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less at date of inception to be cash and cash equivalents. Included in interest expense, net for the years ended December 31, 2016, 2015 and 2014 was interest income of $257.7 thousand, $164.0 thousand and $192.0 thousand, respectively, related to cash and cash equivalents. Concentration of Credit Risk Financial instruments that subject the Company to significant concentration of credit risk consist primarily of accounts receivable. The majority of the Company’s accounts receivable is due from large 62 the customer’s financial sporting goods retailers. Credit condition and collateral is not required. The Company’s largest customer in North America accounted for 16% and 19% of accounts receivable as of December 31, 2016 and December 31, 2015, respectively. The Company’s largest customer accounted for 10%, 12% and 14% of net revenues for the years ended December 31, 2016, 2015 and 2014, respectively. is extended based on an evaluation of Allowance for Doubtful Accounts its customers to pay outstanding balances and makes judgments about The Company makes ongoing estimates relating to the collectability of accounts receivable and maintains an allowance for estimated losses resulting from the inability of its customers to make required payments. In determining the amount of the reserve, the Company considers historical levels of credit losses and significant economic developments within the retail environment that could impact the the ability of creditworthiness of significant customers based on ongoing credit evaluations. Because the Company cannot predict future changes in the financial stability of its customers, actual future losses from uncollectible accounts may differ from estimates. the financial condition of customers were to deteriorate, resulting in their inability to make payments, a larger reserve might be required. In the event the Company determines a smaller or larger reserve is appropriate, it would record a benefit or charge to selling, general and administrative expense in the period in which such a determination was made. As of December 31, 2016 and 2015, the allowance for doubtful accounts was $11.3 million and $5.9 million, respectively. If Inventories Inventories consist primarily of finished goods. Costs of finished goods inventories include all costs incurred to bring inventory to its current condition, including inbound freight, duties and other costs. The Company values its inventory at standard cost which approximates landed cost, using the first-in, first-out method of cost determination. Market value is estimated based upon assumptions made about future demand and retail market conditions. If the Company determines that the estimated market value of its inventory is less than the carrying value of such inventory, it records a charge to cost of goods sold to reflect the lower of cost or market. If actual market conditions are less favorable than those projected by the Company, further adjustments may be required that would increase the cost of goods sold in the period in which such a determination was made. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities at tax rates expected to be in effect when such assets or liabilities are realized or settled. Deferred income tax assets are reduced by valuation allowances when necessary. Assessing whether deferred tax assets are realizable requires significant judgment. The Company considers all available positive and negative evidence, including historical operating performance and expectations of future operating performance. The ultimate realization of deferred tax assets is often dependent upon future taxable income and therefore can be uncertain. To the extent the Company believes it is more likely than not that all or some portion of the asset will not be realized, valuation allowances are established against the Company’s deferred tax assets, which increase income tax expense in the period when such a determination is made. Income taxes include the largest amount of tax benefit for an uncertain tax position that is more likely than not to be sustained upon audit based on the technical merits of the tax position. Settlements 63 with tax authorities, the expiration of statutes of limitations for particular tax positions, or obtaining new information on particular tax positions may cause a change to the effective tax rate. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes on the consolidated statements of income. Property and Equipment including the cost of Property and equipment are stated at cost, labor for software customized for internal use, less accumulated depreciation and amortization. Property and equipment is depreciated using the straight-line method over the estimated useful lives of the assets: 3 to 10 years for furniture, office equipment, software and plant equipment and 10 to 35 years for site improvements, buildings and building equipment. Leasehold and tenant improvements are amortized lives of the assets. The cost of in-store over the shorter of the lease term or the estimated useful apparel and footwear fixtures and displays are capitalized, included in furniture, fixtures and displays, and depreciated over 3 years. The Company periodically reviews assets’ estimated useful lives based upon actual experience and expected future utilization. A change in useful life is treated as a change in accounting estimate and is applied prospectively. internal The Company capitalizes the cost of interest for long term property and equipment projects based on the Company’s weighted average borrowing rates in place while the projects are in progress. Capitalized interest was $1.8 million and $1.0 million as of December 31, 2016 and 2015, respectively. Upon retirement or disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in selling, general and administrative expenses for that period. Major additions and betterments are capitalized to the asset accounts while maintenance and repairs, which do not improve or extend the lives of assets, are expensed as incurred. Goodwill, Intangible Assets and Long-Lived Assets Goodwill and intangible assets are recorded at their estimated fair values at the date of acquisition and are allocated to the reporting units that are expected to receive the related benefits. Goodwill and indefinite lived intangible assets are not amortized and are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. In conducting an annual impairment test, the Company first reviews qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If factors indicate that is the case, or if goodwill is allocated to a reporting unit for the first time, the Company performs the two-step goodwill impairment test. The first step, identifying a potential impairment, compares the fair value of the reporting unit with its carrying amount. The Company calculates fair value using the discounted cash flows model, which indicates the fair value of the reporting unit based on the present value of the cash flows that the Company expects the reporting unit to generate in the future. The Company’s significant estimates in the discounted cash flows model include: the Company’s weighted average cost of capital, long-term rate of growth and profitability of the reporting unit’s business, and working capital effects. If the carrying amount exceeds its fair value, the second step will be performed. The second step, measuring the impairment loss, compares the implied fair value of the goodwill with the carrying amount of the goodwill. Any excess of the goodwill carrying amount over the applied fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value. The Company performs its annual impairment tests in the fourth quarter of each fiscal year. As of December 31, 2016, no impairment of goodwill was identified and the fair value of each reporting unit substantially exceeded its carrying value. The Connected Fitness valuation is dependent upon revenue growth assumptions. If the performance of this reporting unit does not meet expectations it could have a material impact on the fair value of the reporting unit. 64 The Company continually evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets may warrant revision or that the remaining balance may not be recoverable. These factors may include a significant deterioration of operating results, changes in business plans, or changes in anticipated cash flows. When factors indicate that an asset should be evaluated for possible impairment, the Company reviews long-lived assets to assess recoverability from future operations using undiscounted cash flows. future undiscounted cash flows are less than the carrying value, an impairment is recognized in earnings to the extent that the carrying value exceeds fair value. If Accrued Expenses At December 31, 2016, accrued expenses primarily included $60.8 million and $24.7 million of accrued compensation and benefits and marketing expenses, respectively. At December 31, 2015, accrued expenses primarily included $63.8 million and $17.8 million of accrued compensation and benefits and marketing expenses, respectively. Foreign Currency Translation and Transactions The functional currency for each of the Company’s wholly owned foreign subsidiaries is generally the applicable local currency. The translation of foreign currencies into U.S. dollars is performed for assets and liabilities using current foreign currency exchange rates in effect at the balance sheet date and for revenue and expense accounts using average foreign currency exchange rates during the period. Capital accounts are translated at historical foreign currency exchange rates. Translation gains and losses are included in stockholders’ equity as a component of accumulated other comprehensive income. Adjustments that arise from foreign currency exchange rate changes on transactions, primarily driven by intercompany transactions, denominated in a currency other than the functional currency are included in other expense, net on the consolidated statements of income. Derivatives and Hedging Activities The Company uses derivative financial instruments in the form of foreign currency and interest rate swap contracts to minimize the risk associated with foreign currency exchange rate and interest rate fluctuations. The Company accounts for derivative financial instruments pursuant to applicable accounting guidance. This guidance establishes accounting and reporting standards for derivative financial instruments and requires all derivatives to be recognized as either assets or liabilities on the balance sheet and to be measured at fair value. Unrealized derivative gain positions are recorded as other current assets or other long term assets, and unrealized derivative loss positions are recorded as instrument’s accrued expenses or other long term liabilities, depending on the derivative financial maturity date. Currently, the majority of the Company’s foreign currency contracts are not designated as cash flow hedges, and accordingly, changes in their fair value are included in other expense, net on the consolidated statements of income. During 2014, the Company began entering into foreign currency contracts designated as cash flow hedges, and consequently, changes in fair value, excluding any ineffective portion, are recorded in other comprehensive income until net income is affected by the variability in cash flows of the hedged transaction. The effective portion is generally released to net the related derivative and is classified in the same manner as the income after the maturity of underlying exposure. Additionally, the Company has designated its interest rate swap contract as a cash flow hedge and accordingly, the effective portion of changes in fair value are recorded in other comprehensive income and reclassified into interest expense over the life of the underlying debt obligation. The ineffective portion, if any, is recognized in current period earnings. The Company does not enter into derivative financial instruments for speculative or trading purposes. 65 Revenue Recognition The Company recognizes revenue pursuant to applicable accounting standards. Net revenues consist of both net sales and license and other revenues. Net sales are recognized upon transfer of ownership, including passage of title to the customer and transfer of risk of loss related to those goods. Transfer of title and risk of loss is based upon shipment under free on board shipping point for most goods or upon receipt by the customer depending on the country of the sale and the agreement with the customer. In some instances, transfer of title and risk of loss takes place at the point of sale, for example, at the Company’s brand and factory house stores. The Company may also ship product directly from its supplier to the customer and recognize revenue when the product is delivered to and accepted by the customer. License and other revenues are primarily recognized based upon shipment of licensed products sold by the Company’s licensees. Sales taxes imposed on the Company’s revenues from product sales are presented on a net basis on the consolidated statements of income and therefore do not impact net revenues or costs of goods sold. The Company records reductions to revenue for estimated customer returns, allowances, markdowns and discounts. The Company bases its estimates on historical rates of customer returns and allowances as well as the specific identification of outstanding returns, markdowns and allowances that have not yet been received by the Company. The actual amount of customer returns and allowances, which is inherently uncertain, may differ from the Company’s estimates. If the Company determines that actual or expected returns or allowances are significantly higher or lower than the reserves it established, it would record a reduction or increase, as appropriate, to net sales in the period in which it makes such a determination. Provisions for customer specific discounts are based on contractual obligations with certain major customers. Reserves for returns, allowances, markdowns and discounts are recorded as an offset to accounts receivable as settlements are made through offsets to outstanding customer there were returns, allowances, $146.2 million and $94.5 million, markdowns and discounts. invoices. As of December 31, 2016 and 2015, in reserves for customer respectively, Advertising Costs Advertising costs are charged to selling, general and administrative expenses. Advertising production costs are expensed the first time an advertisement related to such production costs is run. Media (television, print and radio) placement costs are expensed in the month during which the advertisement appears, and costs related to event sponsorships are expensed when the event occurs. In addition, advertising costs include sponsorship expenses. Accounting for sponsorship payments is based upon specific contract provisions and the payments are generally expensed uniformly over the term of the contract after recording expense related to specific performance incentives once they are in-store marketing fixtures and deemed probable. Advertising expense, displays, was $477.5 million, $417.8 million and $333.0 million for the years ended December 31, 2016, 2015 and 2014, respectively. At December 31, 2016 and 2015, prepaid advertising costs were $32.0 million and $37.5 million, respectively. including amortization of Shipping and Handling Costs The Company charges certain customers shipping and handling fees. These fees are recorded in net revenues. The Company includes the majority of outbound handling costs as a component of selling, general and administrative expenses. Outbound handling costs include costs associated with preparing goods to ship to customers and certain costs to operate the Company’s distribution facilities. These costs, included within selling, general and administrative expenses, were $89.9 million, $63.7 million and $55.3 million for the years ended December 31, 2016, 2015 and 2014, respectively. The Company includes outbound freight costs associated with shipping goods to customers as a component of cost of goods sold. 66 Minority Investment The Company holds a minority investment the Company’s Japanese licensee. The Company invested ¥1,140.0 million, or $15.5 million, in exchange for 19.5% common stock ownership in Dome. As of December 31, 2016 and 2015, the carrying value of the Company’s investment was $11.7 million and $12.0 million, respectively, and was included in other long term assets on the consolidated balance sheets. The investment is subject to foreign currency translation rate fluctuations as it is held by the Company’s European subsidiary. in Dome Corporation (“Dome”), The Company accounts for its investment in Dome under the cost method given that it does not have the ability to exercise significant influence. Additionally, the Company concluded that no event or change in circumstances occurred during the year ended December 31, 2016 that may have a significant adverse effect on the fair value of the investment. Earnings per Share Basic earnings per common share is computed by dividing net income available to common stockholders for the period by the weighted average number of common shares outstanding during the period. Any stock-based compensation awards that are determined to be participating securities, which are stock-based compensation awards that entitle the holders to receive dividends prior to vesting, are included in the calculation of basic earnings per share using the two class method. Diluted earnings per common share is computed by dividing net income available to common stockholders for the period by the diluted weighted average common shares outstanding during the period. Diluted earnings per share reflects the potential dilution from common shares issuable through stock options, warrants, restricted stock units and other equity awards. Refer to Note 10 for further discussion of earnings per share. Stock-Based Compensation The Company accounts for stock-based compensation in accordance with accounting guidance requires all stock-based compensation awards granted to employees and directors to be that measured at fair value and recognized as an expense in the financial statements. In addition, this guidance requires that excess tax benefits related to stock-based compensation awards be reflected as financing cash flows. The Company uses the Black-Scholes option-pricing model to estimate the fair market value of stock-based compensation awards. The Company uses the “simplified method” to estimate the expected life of options, as permitted by accounting guidance. The “simplified method” calculates the expected life of a stock option equal to the time from grant to the midpoint between the vesting date and contractual term, taking into account all vesting tranches. The risk free interest rate is based on the yield for the U.S. Treasury bill with a maturity equal to the expected life of the stock option. Expected volatility is based on the Company’s historical average. Compensation expense is recognized net of forfeitures on a straight-line basis over the total vesting period, which is the implied requisite service period. Compensation expense for performance-based awards is recorded over the implied requisite service period when achievement of the performance target is deemed probable. The forfeiture rate is estimated at the date of grant based on historical rates. The Company issues new shares of Class A Common Stock and Class C Common Stock upon exercise of stock options, grant of restricted stock or share unit conversion. Refer to Note 11 for further details on stock-based compensation. 67 Management Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Fair Value of Financial Instruments The carrying amounts shown for the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short term maturity of those instruments. As of December 31, 2016, the fair value of the Company’s Senior Notes is $568.1 million. The fair value of the Company’s other long term debt approximates its carrying value based on the variable nature of interest rates and current market rates available to the Company. The fair value of foreign currency contracts is based on the net difference between the U.S. dollars to be received or paid at the contracts’ settlement date and the U.S. dollar value of the foreign currency to be sold or purchased at the current exchange rate. The fair value of the interest rate swap contract is based on the net difference between the fixed interest to be paid and variable interest to be received over the term of the contract based on current market rates. Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, which supersedes the most current revenue recognition requirements. This ASU requires entities to recognize revenue in a way that depicts the transfer of goods or services to customers in an amount that reflects the consideration which the entity expects to be entitled to in exchange for those goods or services. In 2016, the FASB issued ASUs 2016-08, 2016-10, 2016-11 and 2016-12, which provide supplemental adoption guidance and clarification to ASU 2014-09. These ASUs will be effective for annual and interim periods beginning after December 15, 2017 with early adoption for annual and interim periods beginning after December 15, 2016 permitted and should be applied retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. The Company currently anticipates adopting the guidance in this new ASU effective January 1, 2018. This ASU permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company has not yet determined its adoption method. The Company has identified a committee, agreed on a methodology for review of its revenue arrangements and initiated the review process for adoption of this ASU, and is evaluating the impact on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, which amends the existing guidance for leases and will require recognition of operating leases with lease terms of more than twelve months and all financing leases on the balance sheet. For these leases, companies will record assets for the rights and liabilities for the obligations that are created by the leases. This ASU will require disclosures that provide qualitative and quantitative information for the lease assets and liabilities recorded in the financial statements. This ASU is effective for fiscal years beginning after December 15, 2018. The Company is currently evaluating this ASU to determine the impact of its adoption on its consolidated financial statements. The Company currently anticipates adopting the new standard effective January 1, 2019. The Company has formed a committee and initiated the review process for adoption of this ASU. While the Company is still in the process of completing its analysis on the complete impact this ASU will have on its consolidated financial statements and related disclosures, it expects the ASU to have a material impact on its consolidated balance sheet for recognition of lease-related assets and liabilities. 68 In March 2016, the FASB issued ASU 2016-09, which effects all entities that issue share-based payment awards to their employees. The amendments in this ASU cover such areas as the recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows. This ASU is effective for annual and interim periods beginning after December 15, 2016. This guidance can be applied either prospectively, retrospectively or using a modified retrospective transition method. Early adoption is permitted. The Company will not early adopt this ASU. The adoption of this impact on the Company’s effective tax rate and income tax expense, guidance may have a material depending in part on whether significant employee stock option exercises occur. In August 2016, the FASB issued ASU 2016-15, which eliminates the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows, by adding or clarifying guidance on eight specific cash flow issues. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company does not believe this ASU will have a material impact on its consolidated financial statements. In October 2016, the FASB issued ASU 2016-16, which will require an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. This ASU is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted in the first interim period of 2017. Upon adoption, any deferred charge established upon an intra-company transfer would be recorded as a cumulative-effect adjustment to retained earnings. At December 31, 2016, the Company had a deferred charge of $26.0 million with $1.8 million and $24.2 million recorded within Prepaid expenses and Other long term assets, respectively. The Company plans to adopt this ASU during the interim period ending March 31, 2017. Recently Adopted Accounting Standards In April 2015, the FASB issued ASU 2015-03, which requires costs incurred to issue debt to be presented in the balance sheet as a direct deduction from the carrying value of the debt. This ASU is effective for annual and interim reporting periods beginning after December 15, 2015, with early adoption permitted. The Company adopted the provisions of this ASU in the first quarter of 2016, and reclassified approximately $2.9 million from “Other long term assets” to “Long term debt, net of current maturities” as of December 31, 2015. 3. Property and Equipment, Net Property and equipment consisted of the following: (In thousands) Leasehold and tenant improvements Furniture, fixtures and displays Buildings Software Office equipment Plant equipment Land Construction in progress Other Subtotal property and equipment Accumulated depreciation Property and equipment, net 69 December 31, 2016 2015 $ 326,617 168,720 47,216 151,059 75,196 124,140 83,574 204,362 20,383 $ 214,834 132,736 47,137 99,309 50,399 118,138 17,628 147,581 4,002 1,201,267 (397,056) 831,764 (293,233) $ 804,211 $ 538,531 Construction in progress primarily includes costs incurred for software systems, leasehold improvements and in-store fixtures and displays not yet placed in use. Depreciation expense related to property and equipment was $130.7 million, $86.3 million and $63.1 million for the years ended December 31, 2016, 2015 and 2014, respectively. 4. Goodwill and Intangible Assets, Net The following table summarizes changes in the carrying amount of the Company’s goodwill by reportable segment as of the periods indicated: North America EMEA Asia- Pacific Latin America Connected Fitness Total Balance as of December 31, 2015 $316,852 $109,890 $79,963 $51,116 $27,360 $585,181 Effect of currency translation adjustment Balance as of December 31, 471 (10,645) (2,377) (8,680) (359) (21,590) 2016 $317,323 $ 99,245 $77,586 $42,436 $27,001 $563,591 The following table summarizes the Company’s intangible assets as of the periods indicated: (In thousands) Intangible assets subject to amortization: User base Technology Customer relationships Trade name Nutrition database Lease-related intangible assets Other Total Indefinite-lived intangible assets Intangible assets, net December 31, 2016 December 31, 2015 Useful Lives from Date of Acquisitions (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount 10 5-7 2-3 4-5 10 1-15 5-10 $47,653 $ (8,733) (8,221) 19,612 $38,920 $47,922 $ (3,965) $43,957 14,698 (5,041) 11,391 19,739 9,527 7,653 4,500 3,896 1,373 (9,527) (4,816) (806) (3,075) (666) — 2,837 3,694 10,738 7,663 4,500 821 707 3,896 1,385 (8,354) (3,036) (356) (2,919) (444) 2,384 4,627 4,144 977 941 $94,214 $(35,844) $58,370 $95,843 $(24,115) $71,728 5,940 $64,310 3,958 $75,686 70 Amortization expense, which is included in selling, general and administrative expenses, was $13.0 million, $13.9 million and $8.5 million for the years ended December 31, 2016, 2015 and 2014, respectively. The following is the estimated amortization expense for the Company’s intangible assets as of December 31, 2016: (In thousands) 2017 2018 2019 2020 2021 2022 and thereafter Amortization expense of intangible assets $10,509 9,346 9,240 7,201 5,318 16,756 $58,370 At December 31, 2016, 2015 and 2014, the Company determined that its goodwill and indefinite- lived intangible assets were not impaired. 5. Credit Facility and Other Long Term Debt Credit Facility The Company is party to a credit agreement that provides revolving commitments for up to $1.25 billion of borrowings, as well as term loan commitments, in each case maturing in January 2021. As of December 31, 2016 there was no outstanding balance under the revolving credit facility and $186.3 million of term loan borrowings remained outstanding. At the Company’s request and the lender’s consent, revolving and or term loan borrowings may be increased by up to $300.0 million in aggregate, subject to certain conditions as set forth in the credit agreement, as amended. Incremental borrowings are uncommitted and the availability thereof, will depend on market conditions at the time the Company seeks to incur such borrowings. The borrowings under the revolving credit facility have maturities of less than one year. Up to $50.0 million of the facility may be used for the issuance of letters of credit. There were $2.6 million of letters of credit outstanding as of December 31, 2016. The credit agreement contains negative covenants that, subject to significant exceptions, limit the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make restricted payments, pledge their assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates. The Company is also required to maintain a ratio of consolidated EBITDA, as defined in the credit agreement, to consolidated interest expense of not less than 3.50 to 1.00 and is not permitted to allow the ratio of consolidated total indebtedness to consolidated EBITDA to be greater than 3.25 to 1.00 (“consolidated leverage ratio”). As of December 31, 2016, the Company was in compliance with these ratios. In addition, the credit agreement contains events of default that are customary for a facility of this nature, and includes a cross default provision whereby an event of default under other material indebtedness, as defined in the credit agreement, will be considered an event of default under the credit agreement. Borrowings under the credit agreement bear interest at a rate per annum equal the Company’s option, either (a) an alternate base rate, or (b) a rate based on the rates applicable for deposits in the interbank market for U.S. Dollars or the applicable currency in which the loans are made (“adjusted LIBOR”), plus in each case an applicable margin. The applicable margin for loans will to, at 71 be adjusted by reference to a grid (the “Pricing Grid”) based on the consolidated leverage ratio and ranges between 1.00% to 1.25% for adjusted LIBOR loans and 0.00% to 0.25% for alternate base rate loans. The weighted average interest rate under the outstanding term loans and revolving credit facility borrowings was 1.6% and 1.3% during the years ended December 31, 2016 and 2015, respectively. The Company pays a commitment fee on the average daily unused amount of the revolving credit facility and certain fees with respect to letters of credit. As of December 31, 2016, the commitment fee was 15.0 basis points. Since inception, the Company incurred and deferred $3.9 million in financing costs in connection with the credit agreement. 3.250% Senior Notes facility. In June 2016, the Company issued $600.0 million aggregate principal amount of 3.250% senior unsecured notes due June 15, 2026 (the “Notes”). The proceeds were used to pay down amounts is payable semi-annually on June 15 and outstanding under the revolving credit December 15 beginning December 15, 2016. Prior to March 15, 2026 (three months prior to the maturity date of the Notes), the Company may redeem some or all of the Notes at any time or from time to time at a redemption price equal to the greater of 100% of the principal amount of the Notes to be redeemed or a “make-whole” amount applicable to such Notes as described in the indenture governing the Notes, plus accrued and unpaid interest to, but excluding, the redemption date. On or after March 15, 2026 (three months prior to the maturity date of the Notes), the Company may redeem some or all of the Notes at any time or from time to time at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Interest The indenture governing the Notes contains covenants, the Company’s ability and the ability of certain of its subsidiaries to create or incur secured indebtedness and enter into sale and leaseback transactions and the Company’s ability to consolidate, merge or transfer all or substantially all of its properties or assets to another person, in each case subject to material exceptions described in the indenture. The Company incurred and deferred $5.3 million in financing costs in connection with the Notes. including limitations that restrict Other Long Term Debt In December 2012, the Company entered into a $50.0 million recourse loan collateralized by the land, buildings and tenant improvements comprising the Company’s corporate headquarters. The loan has a seven year term and maturity date of December 2019. The loan bears interest at one month LIBOR plus a margin of 1.50%, and allows for prepayment without penalty. The loan includes covenants and events of default substantially consistent with the Company’s credit agreement discussed above. The loan also requires prior approval of the lender for certain matters related to the property, including transfers of any interest in the property. As of December 31, 2016 and 2015, the outstanding balance on the loan was $42.0 million and $44.0 million, respectively. The weighted average interest rate on the loan was 2.0% and 1.7% for the years ended December 31, 2016 and 2015, respectively. The following are the scheduled maturities of long term debt as of December 31, 2016: (In thousands) 2017 2018 2019 2020 2021 2022 and thereafter Total scheduled maturities of long term debt Current maturities of long term debt 72 $ 27,000 27,000 63,000 25,000 86,250 600,000 $828,250 $ 27,000 Interest expense, net was $26.4 million, $14.6 million, and $5.3 million for the years ended December 31, 2016, 2015 and 2014, respectively. Interest expense includes the amortization of deferred financing costs, bank fees, capital and built-to-suit lease interest and interest expense under the credit and other long term debt facilities. Amortization of deferred financing costs was $1.2 million, $0.8 million, and $0.6 million for the years ended December 31, 2016, 2015 and 2014, respectively. The Company monitors the financial health and stability of its lenders under the credit and other long term debt facilities, however during any period of significant instability in the credit markets lenders could be negatively impacted in their ability to perform under these facilities. 6. Commitments and Contingencies Obligations Under Operating Leases The Company leases warehouse space, office facilities, space for its brand and factory house stores and certain equipment under non-cancelable operating leases. The leases expire at various dates through 2033, excluding extensions at the Company’s option, and include provisions for rental adjustments. The table below includes executed lease agreements for brand and factory house stores that the Company did not yet occupy as of December 31, 2016 and does not include contingent rent the Company may incur at its stores based on future sales above a specified minimum or payments made for maintenance, insurance and real estate taxes. The following is a schedule of future minimum lease payments for non-cancelable real property operating leases as of December 31, 2016 as well as significant operating lease agreements entered into during the period after December 31, 2016 through the date of this report: (In thousands) 2017 2018 2019 2020 2021 2022 and thereafter Total future minimum lease payments $ 114,857 127,504 136,040 133,092 122,753 788,180 $1,422,426 Included in selling, general and administrative expense was rent expense of $109.0 million, $83.0 million and $59.0 million for the years ended December 31, 2016, 2015 and 2014, respectively, under non-cancelable operating lease agreements. Included in these amounts was contingent rent expense of $13.0 million, $11.0 million and $11.0 million for the years ended December 31, 2016, 2015 and 2014, respectively. Sports Marketing and Other Commitments Within the normal course of business, the Company enters into contractual commitments in order to promote the Company’s brand and products. These commitments include sponsorship agreements with teams and athletes on the collegiate and professional levels, official supplier agreements, athletic event sponsorships and other marketing commitments. The following is a schedule of the Company’s future minimum payments under its sponsorship and other marketing agreements as of December 31, 73 2016, as well as significant sponsorship and other marketing agreements entered into during the period after December 31, 2016 through the date of this report: (In thousands) 2017 2018 2019 2020 2021 2022 and thereafter Total future minimum sponsorship and other payments $ 176,138 166,961 142,987 124,856 118,168 626,495 $1,355,605 The amounts listed above are the minimum compensation obligations and guaranteed royalty fees required to be paid under the Company’s sponsorship and other marketing agreements. The amounts listed above do not include additional performance incentives and product supply obligations provided under certain agreements. It is not possible to determine how much the Company will spend on product supply obligations on an annual basis as contracts generally do not stipulate specific cash amounts to be spent on products. The amount of product provided to the sponsorships depends on many factors including general playing conditions, the number of sporting events in which they participate and the Company’s decisions regarding product and marketing initiatives. In addition, the costs to design, develop, source and purchase the products furnished to the endorsers are incurred over a period of time and are not necessarily tracked separately from similar costs incurred for products sold to customers. Other In connection with various contracts and agreements, the Company has agreed to indemnify counterparties against certain third party claims relating to the infringement of intellectual property rights and other items. Generally, such indemnification obligations do not apply in situations in which the counterparties are grossly negligent, engage in willful misconduct, or act in bad faith. Based on the Company’s historical experience and the estimated probability of the Company has determined that the fair value of such indemnifications is not material to its consolidated financial position or results of operations. future loss, From time to time, the Company is involved in litigation and other proceedings, including matters related to commercial and intellectual property disputes, as well as trade, regulatory and other claims the Company believes that all current related to its business. Other than as described below, proceedings are routine in nature and incidental to the conduct of its business, and that the ultimate resolution of any such proceedings will not have a material adverse effect on its consolidated financial position, results of operations or cash flows. On February 10, 2017, a shareholder filed a securities case in the United States District Court for the District of Maryland (the “Court”) against the Company, the Company’s Chief Executive Officer and the Company’s former Chief Financial Officer (Brian Breece v. Under Armour, Inc.). On February 16, 2017, a second shareholder filed a securities case in the Court against the same defendants (Jodie Hopkins v. Under Armour, Inc.). The plaintiff in each case purports to represent a class of shareholders for the period between April 21, 2016 and January 30, 2017, inclusive. The complaints allege violations of Section 10(b) (and Rule 10b-5) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 20(a) control person liability under the Exchange Act against the officers named in the complaints. In general, the allegations in each case concern disclosures and statements made by 74 defendants regarding the Company’s expected revenue growth during that time period. The Company has not yet been served with the complaint in either matter. The Company believes that the claims are without merit and, once served, intends to defend each lawsuit vigorously. However, because of the inherent uncertainty as to the outcome of this proceeding, the Company is unable at this time to estimate the possible impact of the outcome of these proceedings. 7. Stockholders’ Equity The Company’s Class A Common Stock and Class B Convertible Common Stock have an authorized number of shares at December 31, 2016 of 400.0 million shares and 34.5 million shares, respectively, and each have a par value of $0.0003 1/3 per share. Holders of Class A Common Stock and Class B Convertible Common Stock have identical rights, including liquidation preferences, except that the holders of Class A Common Stock are entitled to one vote per share and holders of Class B Convertible Common Stock are entitled to 10 votes per share on all matters submitted to a stockholder vote. Class B Convertible Common Stock may only be held by Kevin Plank, the Company’s founder and Chief Executive Officer, or a related party of Mr. Plank, as defined in the Company’s charter. As a result, Mr. Plank has a majority voting control over the Company. Upon the transfer of shares of Class B Convertible Stock to a person other than Mr. Plank or a related party of Mr. Plank, the shares automatically convert into shares of Class A Common Stock on a one-for-one basis. In addition, all of the outstanding shares of Class B Convertible Common Stock will automatically convert into shares of Class A Common Stock on a one-for-one basis upon the death or disability of Mr. Plank or on the record date for any stockholders’ meeting upon which the shares of Class A Common Stock and Class B Convertible Common Stock beneficially owned by Mr. Plank is less than 15% of the total shares of Class A Common Stock and Class B Convertible Common Stock outstanding or upon the other events specified in the Class C Charter. Holders of the Company’s common stock are entitled to receive dividends when and if authorized and declared out of assets legally available for the payment of dividends. In June 2015, the Company’s Board of Directors (the “Board”) approved Articles Supplementary to the Company’s charter which designated 400.0 million shares of common stock as a new class of common stock, referred to as the Class C common stock, par value $0.0003 1/3 per share. The Articles Supplementary became effective on June 15, 2015. In April 2016, the Company issued shares of Class C common stock as a dividend to the Company’s holders of Class A and Class B common stock on a one-for-one basis. The terms of the Class C common stock are substantially identical to those of the Company’s Class A common stock, except that the Class C common stock has no voting rights (except in limited circumstances), will automatically convert into Class A common stock under certain circumstances and includes provisions intended to ensure equal treatment of Class C common stock and Class B common stock in certain corporate transactions, such as mergers, consolidations, statutory share exchanges, conversions or negotiated tender offers, and including consideration incidental to these transactions. 8. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The fair value accounting guidance outlines a valuation framework, creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures, and prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets; Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and Level 3: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions. 75 Financial assets and (liabilities) measured at fair value are set forth in the table below: (In thousands) Available-for-sale securities Derivative foreign currency contracts (see Note 13) Interest rate swap contracts (see Note 13) TOLI policies held by the Rabbi Trust (see Note 12) Deferred Compensation Plan obligations (see Note 12) December 31, 2016 December 31, 2015 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 $— $ — $— $6,534 $ — $— — — — — 15,238 — (420) — 4,880 — (7,023) — — — — — 3,811 — (1,486) — 4,456 — (5,072) — Fair values of the financial assets and liabilities listed above are determined using inputs that use as their basis readily observable market data that are actively quoted and are validated through external sources, including third-party pricing services and brokers. The Company purchases marketable securities that are designated as available-for-sale. The foreign currency contracts represent gains and losses on derivative contracts, which is the net difference between the U.S. dollar value to be received or paid at the contracts’ settlement date and the U.S. dollar value of the foreign currency to be sold or purchased at the current market exchange rate. The interest rate swap contracts represent gains and losses on the derivative contracts, which is the net difference between the fixed interest to be paid and variable interest to be received over the term of the contract based on current market rates. The fair value of the trust owned life insurance (“TOLI”) policies held by the Rabbi Trust is based on the cash-surrender value of the life insurance policies, which are invested primarily in mutual funds and a separately managed fixed income fund. These investments are initially made in the same funds and purchased in substantially the same amounts as the selected investments of participants in the Under Armour, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”), which represent the underlying liabilities to participants in the Deferred Compensation Plan. Liabilities under the Deferred Compensation Plan are recorded at amounts due to participants, based on the fair value of participants’ selected investments. As of December 31, 2016, the fair value of the Company’s Senior Notes is $568.1 million. The carrying value of the Company’s other long term debt approximated its fair value as of December 31, 2016 and 2015. The fair value of long-term debt is estimated based upon quoted prices for similar instruments or quoted prices for identical instruments in inactive markets (Level 2). 9. Provision for Income Taxes Income before income taxes is as follows: (In thousands) Income before income taxes: United States Foreign Total Year Ended December 31, 2016 2015 2014 $251,321 136,961 $272,739 113,946 $269,503 72,707 $388,282 $386,685 $342,210 76 The components of the provision for income taxes consisted of the following: (In thousands) Current Federal State Other foreign countries Deferred Federal State Other foreign countries Year Ended December 31, 2016 2015 2014 $116,637 29,989 32,394 $102,317 27,500 28,336 $110,439 24,419 16,489 179,020 158,153 151,347 (35,748) (10,658) (1,311) (47,717) 707 (5,703) 955 (4,041) (15,368) (4,073) 2,262 (17,179) Provision for income taxes $131,303 $154,112 $134,168 A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate is as follows: U.S. federal statutory income tax rate State taxes, net of federal tax impact Unrecognized tax benefits Permanent tax benefits/nondeductible expenses Foreign rate differential Foreign valuation allowance Other Effective income tax rate Year Ended December 31, 2016 2015 2014 35.0% 2.4 1.1 (1.3) (6.6) 2.3 0.9 33.8% 35.0% 3.2 3.4 2.2 (5.5) 2.7 (1.1) 39.9% 35.0% 3.8 1.9 1.0 (4.5) 2.5 (0.5) 39.2% The decrease in the 2016 full year effective income tax rate, as compared to 2015, is primarily attributable to increased international profitability and a tax benefit related to the Company’s prior period acquisitions. 77 Deferred tax assets and liabilities consisted of the following: (In thousands) Deferred tax asset Allowance for doubtful accounts and sales return reserves Reserves and accrued liabilities (1) Stock-based compensation Foreign net operating loss carry-forwards Tax basis inventory adjustment Deferred rent Inventory obsolescence reserves Foreign tax credit carry-forwards State tax credits, net of federal impact U.S. net operating loss carry forward Other Total deferred tax assets Less: valuation allowance Total net deferred tax assets Deferred tax liability Property, plant and equipment Prepaid expenses Intangible assets (1) Other Total deferred tax liabilities Total deferred tax assets, net December 31, 2016 2015 $ 53,811 38,819 32,910 26,964 25,776 21,168 15,479 8,664 7,408 3,032 3,107 $ 33,821 24,967 40,406 19,600 10,019 13,991 11,956 6,151 4,966 9,217 2,080 237,138 (37,969) 177,174 (24,043) 199,169 153,131 (45,178) (8,628) (6,815) (2,506) (31,069) (8,766) (20,381) (1,688) (63,127) (61,904) $136,042 $ 91,227 (1) Certain December 31, 2015 amounts have been reclassified from “Other” amounts presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 to conform to the current period’s presentation. As of December 31, 2016, the Company had $27.0 million in deferred tax assets associated with approximately $95.8 million in foreign net operating loss carryforwards which will begin to expire in 1 to 5 years. As of December 31, 2016, the Company believes certain deferred tax assets associated with foreign net operating loss carryforwards will expire unused based on the Company’s projections. Therefore, a full valuation allowance of $10.1 million was recorded against the Company’s net deferred tax assets in 2016. As of December 31, 2016, the Company had $8.7 million in deferred tax assets associated with foreign tax credits. As of December 31, 2016 the Company believes that the foreign taxes paid would not be creditable against its future income taxes. Therefore, a full valuation allowance was recorded against the Company’s net deferred tax assets. As of December 31, 2016, approximately $122.9 million of cash and cash equivalents was held by the Company’s non-U.S. subsidiaries whose cumulative undistributed earnings total $418.1 million. Withholding and U.S. taxes have not been provided on the undistributed earnings as the earnings are being permanently reinvested in its non-U.S. subsidiaries. Determining the tax liability that would arise if these earnings were repatriated is not practical. 78 The Company utilizes the “with and without” method for intraperiod allocation of income tax provisions. Certain tax benefits associated with the Company’s stock-based compensation arrangements are recorded directly to Stockholders’ equity including benefit from excess tax deductions. As of December 31, 2016 and 2015, the total liability for unrecognized tax benefits, including related interest and penalties, was approximately $70.4 million and $46.9 million, respectively. The following table represents a reconciliation of the Company’s total unrecognized tax benefits balances, excluding interest and penalties, for the years ended December 31, 2016, 2015 and 2014. (In thousands) Beginning of year Increases as a result of tax positions taken in a prior period Decreases as a result of tax positions taken in a prior period Increases as a result of tax positions taken during the current period Decreases as a result of tax positions taken during the current period Decreases as a result of settlements during the current period Reductions as a result of a lapse of statute of limitations during the Year Ended December 31, 2016 2015 2014 661 — 203 — $42,611 $28,353 $21,712 250 — 8,947 — — 14,382 26,482 — — — — current period End of year (5,395) (327) (2,556) $64,359 $42,611 $28,353 As of December 31, 2016, $42.4 million of unrecognized tax benefits, excluding interest and penalties, would impact the Company’s effective tax rate if recognized. As of December 31, 2016, 2015 and 2014, the liability for unrecognized tax benefits included $6.1 million, $4.3 million and $3.0 million, respectively, for the accrual of interest and penalties. For each of the years ended December 31, 2016, 2015 and 2014, the Company recorded $3.1 million, $1.7 million and $1.2 million, respectively, for the accrual of interest and penalties in its consolidated statements of income. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes on the consolidated statements of income. The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is currently under audit by the Internal Revenue Service for the 2012 and 2013 tax years. The majority of the Company’s returns for years before 2012 are no longer subject to U.S. federal, state and local or foreign income tax examinations by tax authorities. The total amount of unrecognized tax benefits relating to the Company’s tax positions is subject to change based on future events including, but not limited to, the settlements of ongoing tax audits and assessments and the expiration of applicable statutes of limitations. Although the outcomes and timing of such events are highly uncertain, the Company does not anticipate that the balance of gross unrecognized tax benefits, excluding interest and penalties, will change significantly during the next twelve months. However, changes in the occurrence, expected outcomes, and timing of such events could cause the Company’s current estimate to change materially in the future. 10. Earnings per Share The calculation of earnings per share for common stock shown below excludes the income attributable to outstanding restricted stock awards from the numerator and excludes the impact of 79 these awards from the denominator. The following is a reconciliation of basic earnings per share to diluted earnings per share: (In thousands, except per share amounts) Numerator Net income Adjustment payment to Class C capital stockholders Net income available to all stockholders Denominator—Class A and B shares Weighted average common shares outstanding Effect of dilutive securities Weighted average common shares and dilutive securities outstanding Earnings per share Class A and B—basic Earnings per share Class A and B—diluted Denominator—Class C shares Weighted average common shares outstanding Effect of dilutive securities Weighted average common shares and dilutive securities outstanding Earnings per share Class C—basic Earnings per share Class C—diluted Year Ended December 31, 2016 2015 2014 $256,979 $232,573 $208,042 59,000 — — $197,979 $232,573 $208,042 217,707 4,237 215,498 5,370 213,227 6,153 221,944 220,868 219,380 $ $ 0.45 $ 0.45 $ 0.54 $ 0.53 $ 0.49 0.47 218,623 4,281 215,498 5,370 213,227 6,153 222,904 220,868 219,380 $ $ 0.72 $ 0.71 $ 0.54 $ 0.53 $ 0.49 0.47 Effects of potentially dilutive securities are presented only in periods in which they are dilutive. Stock options, restricted stock units and warrants representing 114.0 thousand, 770.0 thousand and 22.6 thousand shares of Class A common stock outstanding for the years ended December 31, 2016, 2015 and 2014, respectively, were excluded from the computation of diluted earnings per share because their effect would be anti-dilutive. Stock options, restricted stock units and warrants representing 691.6 thousand, 770.0 thousand and 22.6 thousand shares of Class C common stock outstanding for the years ended December 31, 2016, 2015 and 2014, respectively, were excluded from the computation of diluted earnings per share because their effect would be anti-dilutive. 11. Stock-Based Compensation Stock Compensation Plans The Under Armour, Inc. Second Amended and Restated 2005 Omnibus Long-Term Incentive Plan as amended (the “2005 Plan”) provides for the issuance of stock options, restricted stock, restricted stock units and other equity awards to officers, directors, key employees and other persons. Stock options and restricted stock and restricted stock unit awards under the 2005 Plan generally vest ratably over a two to five year period. The contractual term for stock options is generally ten years from the date of grant. The Company generally receives a tax deduction for any ordinary income recognized by a participant in respect to an award under the 2005 Plan. The 2005 Plan terminates in 2025. As of December 31, 2016, 7.2 million Class A shares and 22.0 million Class C shares are available for future grants of awards under the 2005 Plan. Total stock-based compensation expense for the years ended December 31, 2016, 2015 and 2014 was $46.1 million, $60.4 million and $50.8 million, respectively. As of December 31, 2016, the 80 Company had $64.5 million of unrecognized compensation expense expected to be recognized over a weighted average period of 1.7 years. This unrecognized compensation expense does not include any expense related to performance-based restricted stock units and stock options for which the performance targets have not been deemed probable as of December 31, 2016. Refer to “Stock Options” and “Restricted Stock and Restricted Stock Units” below for further information on these awards. Employee Stock Purchase Plan The Company’s Employee Stock Purchase Plan (the “ESPP”) allows for the purchase of Class A Common Stock and Class C Common Stock by all eligible employees at a 15% discount from fair market value subject to certain limits as defined in the ESPP. As of December 31, 2016, 2.7 million Class A shares and 1.7 million Class C shares are available for future purchases under the ESPP. During the years ended December 31, 2016, 2015 and 2014, 290.8 thousand, 103.3 thousand and 87.6 thousand shares were purchased under the ESPP, respectively. Non-Employee Director Compensation Plan and Deferred Stock Unit Plan The Company’s Non-Employee Director Compensation Plan (the “Director Compensation Plan”) provides for cash compensation and equity awards to non-employee directors of the Company under the 2005 Plan. Non-employee directors have the option to defer the value of their annual cash retainers as deferred stock units in accordance with the Under Armour, Inc. Non-Employee Deferred Stock Unit Plan (the “DSU Plan”). Each new non-employee director receives an award of restricted stock units upon the initial election to the Board of Directors, with the units covering stock valued at $100.0 thousand on the grant date and vesting in three equal annual installments. In addition, each non-employee director receives, following each annual stockholders’ meeting, a grant under the 2005 Plan of restricted stock units covering stock valued at $125.0 thousand on the grant date. Each award vests 100% on the date of the next annual stockholders’ meeting following the grant date. The receipt of the shares otherwise deliverable upon vesting of the restricted stock units automatically defers into deferred stock units under the DSU Plan. Under the DSU Plan each deferred stock unit represents the Company’s obligation to issue one share of the Company’s Class A Common Stock with the shares delivered six months following the termination of the director’s service. Stock Options The weighted average fair value of a stock option granted for the years ended December 31, 2016 and 2015 was $14.87 and $27.21, respectively. There were no stock options granted during the year ended December 31, 2014. The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: Risk-free interest rate Average expected life in years Expected volatility Expected dividend yield Year Ended December 31, 2016 2015 2014 1.4% 1.8% — % 6.50 6.00 39.5% 44.3% — % — % — % — % 0 81 A summary of the Company’s stock options as of December 31, 2016, 2015 and 2014, and changes during the years then ended is presented below: (In thousands, except per share amounts) 2016 2015 2014 Year Ended December 31, Number of Stock Options Weighted Average Exercise Price Number of Stock Options Weighted Average Exercise Price Number of Stock Options Weighted Average Exercise Price Outstanding, beginning of year Granted, at fair market value Exercised Expired Forfeited 6,008 335 (1,763) — (315) $ 7.26 36.05 3.52 — 26.26 5,622 1,158 (720) — (52) $ 4.14 20.15 3.96 — 2.27 8,544 — (2,908) — (14) Outstanding, end of year 4,265 $ 9.63 6,008 $ 7.26 5,622 $4.06 — 3.87 — 8.23 $4.14 Options exercisable, end of year 3,385 $ 4.30 4,892 $ 4.13 5,414 $3.94 Included in the table above are 0.3 million and 0.6 million performance-based stock options awarded to certain executives and key employees under the 2005 Plan during the years ended December 31, 2016 and 2015, respectively. The performance-based stock options awarded in 2016 and 2015 have weighted average fair values of $14.87 and $18.03, respectively, and have vesting that is tied to the achievement of certain combined annual operating income targets. The intrinsic value of stock options exercised during the years ended December 31, 2016, 2015 and 2014 was $63.9 million, $27.5 million and $73.0 million, respectively. The following table summarizes information about stock options outstanding and exercisable as of December 31, 2016: (In thousands, except per share amounts) Options Outstanding Number of Underlying Shares 4,265 Weighted Average Exercise Price Per Share $9.63 Weighted Average Remaining Contractual Life (Years) Total Intrinsic Value Number of Underlying Shares Options Exercisable Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life (Years) Total Intrinsic Value 4.27 $81,740 3,385 $4.30 3.20 $77,545 Restricted Stock and Restricted Stock Units A summary of the Company’s restricted stock and restricted stock units as of December 31, 2016, 2015 and 2014, and changes during the years then ended is presented below: (In thousands, except per share amounts) 2016 2015 2014 Year Ended December 31, Outstanding, beginning of year Granted Forfeited Vested Outstanding, end of year Number of Restricted Shares Weighted Average Grant Date Fair Value Number of Restricted Shares Weighted Average Fair Value 6,760 4,002 (935) (3,056) 6,771 $23.23 35.20 30.35 16.25 $19.68 9,020 2,030 (652) (3,638) 6,760 $15.21 38.36 24.29 11.61 $23.23 Number of Restricted Shares 10,488 2,122 (1,916) (1,674) Weighted Average Fair Value $11.10 27.09 10.49 9.75 9,020 $15.21 82 Included in the table above are 2.5 million, 1.7 million and 2.0 million performance-based restricted stock units awarded to certain executives and key employees under the 2005 Plan during the years ended December 31, 2016, 2015 and 2014, respectively. The performance-based restricted stock units awarded in 2016, 2015 and 2014 have weighted average fair values of $35.71, $37.87 and $27.12, respectively, and have vesting that is tied to the achievement of certain combined annual operating income targets. During the year ended December 31, 2016, the Company deemed the achievement of certain operating income targets improbable for the performance-based stock options and restricted stock units granted in 2015 and 2016, and recorded reversals of expense of $3.6 million and $8.0 million, respectively, for the three months ended December 31, 2016. During the year ended December 31, 2015, the Company deemed the achievement of certain operating income targets probable for the performance-based stock options and restricted stock units granted in 2015 and 2014, and recorded $33.2 million for these awards, including a cumulative adjustment of $10.0 million during the three months ended September 30, 2015. During the year ended December 31, 2014, the Company deemed the achievement of certain operating income targets probable for the performance-based restricted stock units granted in 2014, 2013 and 2012, and recorded $38.4 million for a portion of these awards, including cumulative adjustments of $6.6 million during the three months ended March 31, 2014 and $3.8 million during the three months ended December 31, 2014. The Company will assess the probability of the achievement of the operating income targets at the end of each reporting period. If it becomes probable that any remaining performance targets related to these performance-based stock options and restricted stock units will be achieved, a cumulative adjustment will be recorded as if ratable stock-based compensation expense had been recorded since the grant date. Additional stock based compensation of up to $20.0 million would have been recorded through December 31, 2016 for all performance-based stock options and restricted stock units granted in 2016 had the full achievement of these operating income targets been deemed probable. Warrants In 2006, the Company issued fully vested and non-forfeitable warrants to purchase 1.92 million shares of the Company’s Class A Common Stock and 1.93 million shares of the Company’s Class C Common Stock to NFL Properties as partial consideration for footwear promotional rights which were recorded as an intangible asset. The warrants have a term of 12 years from the date of issuance and an exercise price of $4.66 per Class A share and $4.59 per Class C share. As of December 31, 2016, all outstanding warrants were exercisable, and no warrants were exercised. 12. Other Employee Benefits The Company offers a 401(k) Deferred Compensation Plan for the benefit of eligible employees. Employee contributions are voluntary and subject to Internal Revenue Service limitations. The Company matches a portion of the participant’s contribution and recorded expense of $9.0 million, $7.0 million and $4.9 million for the years ended December 31, 2016, 2015 and 2014, respectively. Shares of the Company’s Class A Common Stock and Class C common stock are not investment options in this plan. In addition, the Company offers the Under Armour, Inc. Deferred Compensation Plan which allows a select group of management or highly compensated employees, as approved by the Compensation Committee, to make an annual base salary and/or bonus deferral for each year. As of December 31, 2016 and 2015, the Deferred Compensation Plan obligations were $7.0 million and $5.1 million, respectively, and were included in other long term liabilities on the consolidated balance sheets. The Company established the Rabbi Trust to fund obligations to participants in the Deferred Compensation Plan. As of December 31, 2016 and 2015, the assets held in the Rabbi Trust were TOLI 83 policies with cash-surrender values of $4.9 million and $4.5 million, respectively. These assets are consolidated and are included in other long term assets on the consolidated balance sheet. Refer to Note 8 for a discussion of the fair value measurements of the assets held in the Rabbi Trust and the Deferred Compensation Plan obligations. 13. Risk Management and Derivatives Foreign Currency Risk Management The Company is exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to transactions generated by its international subsidiaries in currencies other than their local currencies. These gains and losses are primarily driven by intercompany transactions and inventory purchases denominated in currencies other the purchasing entity. From time to time, the Company may elect to enter into foreign currency contracts to reduce the risk associated with foreign currency exchange rate fluctuations on intercompany transactions and projected inventory purchases for its international subsidiaries. than the functional currency of As of December 31, 2016, the aggregate notional value of the Company’s outstanding foreign currency contracts was $845.1 million, which was comprised of Canadian Dollar/U.S. Dollar, Euro/U.S. Dollar, Yen/Euro, Mexican Peso/ Euro and Pound Sterling/Euro currency pairs with contract maturities ranging from one to eleven months. A portion of the Company’s foreign currency contracts are not designated as cash flow hedges, and accordingly, changes in their fair value are recorded in earnings. During 2014, the Company began entering into foreign currency contracts designated as cash flow hedges. For foreign currency contracts designated as cash flow hedges, changes in fair value, excluding any ineffective portion, are recorded in other comprehensive income until net income is affected by the variability in cash flows of the hedged transaction. The effective portion is generally released to net income after the maturity of the related derivative and is classified in the same manner as the underlying exposure. During the years ended December 31, 2016 and 2015, the Company reclassified $0.3 million and $3.5 million from other comprehensive income to cost of goods sold related to foreign currency contracts designated as cash flow hedges, respectively. The fair values of the Company’s foreign currency contracts were assets of $15.2 million and $3.8 million as of December 31, 2016 and 2015, respectively, and were included in prepaid expenses and other current assets on the consolidated balance sheet. Refer to Note 8 for a discussion of the fair value measurements. Included in other expense, net were the following amounts related to changes in foreign currency exchange rates and derivative foreign currency contracts: (In thousands) Year Ended December 31, 2016 2015 2014 Unrealized foreign currency exchange rate gains (losses) $(12,627) $(33,359) $(11,739) Realized foreign currency exchange rate gains (losses) Unrealized derivative gains Realized derivative gains (6,906) 729 15,192 7,643 388 16,404 2,247 1 3,081 Interest Rate Risk Management In order to maintain liquidity and fund business operations, the Company enters into long term debt arrangements with various lenders which bear a range of fixed and variable rates of interest. The nature and amount of the Company’s long-term debt can be expected to vary as a result of future business requirements, market conditions and other factors. The Company may elect to enter into interest rate swap contracts to reduce the impact associated with interest rate fluctuations. The 84 Company utilizes interest rate swap contracts to convert a portion of variable rate debt to fixed rate debt. The contracts pay fixed and receive variable rates of interest. The interest rate swap contracts are accounted for as cash flow hedges and accordingly, the effective portion of the changes in their fair value are recorded in other comprehensive income and reclassified into interest expense over the life of the underlying debt obligation. Refer to Note 5 for a discussion of long term debt. As of December 31, 2016, the notional value of our outstanding interest rate swap contracts was $153.1 million. During the years ended December 31, 2016 and 2015, the Company recorded a $2.0 million and $2.7 million increase in interest expense, respectively, representing the effective portion of the contracts reclassified from accumulated other comprehensive income. The fair value of the interest rate swap contracts was a liability of $0.4 million and $1.5 million as of December 31, 2016 and 2015, respectively, and were included in other long term liabilities on the consolidated balance sheet. The Company enters into derivative contracts with major financial institutions with investment grade credit ratings and is exposed to credit losses in the event of non-performance by these financial institutions. This credit risk is generally limited to the unrealized gains in the derivative contracts. However, the Company monitors the credit quality of these financial institutions and considers the risk of counterparty default to be minimal. 14. Related Party Transactions The Company has an operating lease agreement with an entity controlled by the Company’s CEO to lease an aircraft for business purposes. The Company paid $2.0 million, $2.0 million, and $1.8 million in lease payments to the entity for its use of the aircraft during the years ended December 31, 2016, 2015 and 2014, respectively. No amounts were payable to this related party as of December 31, 2016 and 2015. The Company determined the lease payments were at fair market lease rates. In June 2016, the Company purchased parcels of land from an entity controlled by the Company’s CEO, to be utilized to expand the Company’s corporate headquarters to accommodate its growth needs. The purchase price for these parcels totaled $70.3 million. The Company determined that the purchase price for the land represented the fair market value of the parcels and approximated the cost to the seller to purchase and develop the parcels, including costs related to the termination of a lease encumbering the parcels. In connection with the purchase of these parcels, in September 2016, the parties entered into an agreement pursuant to which the parties will share the burden of any special taxes arising due to infrastructure projects in the surrounding area. The allocation to the Company is based on the expected benefits to the Company’s parcels from these projects. No obligations were owed by either party under this agreement as of December 31, 2016. 15. Segment Data and Related Information The Company’s operating segments are based on how the Chief Operating Decision Maker (“CODM”) makes decisions about allocating resources and assessing performance. As such, the CODM receives discrete financial information for the Company’s principal business by geographic region based on the Company’s strategy to become a global brand. These geographic regions include North America; Latin America; Europe, the Middle East and Africa (“EMEA”); and Asia-Pacific. Each geographic segment operates exclusively in one industry: the development, marketing and distribution of branded performance apparel, footwear and accessories. Beginning in the first quarter of 2015, the CODM began receiving discrete financial information for the Company’s Connected Fitness business. The net revenues and operating income (loss) associated with the Company’s segments are summarized in the following tables. Net revenues represent sales to external customers for each 85 segment. Intercompany balances were eliminated for separate disclosure. The majority of corporate service costs within North America have not been allocated to the Company’s other segments. As the Company continues to grow its business outside of North America, a larger portion of its corporate overhead costs have begun to support global functions. Due to the individual materiality of our Asia- Pacific segment, the Company has separately presented its Asia-Pacific, EMEA and Latin America segments, as of December 31, 2016 and will no longer combine these segments for presentation purposes. Net revenues and operating income by segment presented for prior periods has been conformed to the current presentation. Total expenditures for additions to long-lived assets are not disclosed as this information is not regularly provided to the CODM. During 2017, the Company plans to separately disclose its unallocated corporate costs. The Company believes this presentation will provide the users of its financial statements with increased transparency and comparability of its operating results. (In thousands) Net revenues North America EMEA Asia-Pacific Latin America Connected Fitness Intersegment Eliminations Year Ended December 31, 2016 2015 2014 $4,005,314 330,584 268,607 141,793 80,447 (1,410) $3,455,737 203,109 144,877 106,175 53,415 — $2,796,390 134,118 70,419 64,234 19,209 — Total net revenues $4,825,335 $3,963,313 $3,084,370 (In thousands) Operating income (loss) North America EMEA Asia-Pacific Latin America Connected Fitness Total operating income Interest expense, net Other expense, net Year Ended December 31, 2016 2015 2014 $408,424 11,420 68,338 (33,891) (36,820) 417,471 (26,434) (2,755) $460,961 3,122 36,358 (30,593) (61,301) 408,547 (14,628) (7,234) $372,347 (11,763) 21,858 (15,423) (13,064) 353,955 (5,335) (6,410) Income before income taxes $388,282 $386,685 $342,210 Net revenues by product category are as follows: (In thousands) Apparel Footwear Accessories Total net sales Licensing revenues Connected Fitness Intersegment Eliminations Year Ended December 31, 2016 2015 2014 $3,229,142 1,010,693 406,614 $2,801,062 677,744 346,885 $2,291,520 430,987 275,409 4,646,449 99,849 80,447 (1,410) 3,825,691 84,207 53,415 — 2,997,916 67,229 19,225 — Total net revenues $4,825,335 $3,963,313 $3,084,370 86 With the exception of goodwill and intangible assets disclosed in Note 4, as of December 31, 2016 and 2015, the majority of the Company’s long-lived assets were located in the United States. Net revenues in the United States were $3,843.7 million, $3,317.0 million, and $2,639.5 million for the years ended December 31, 2016, 2015 and 2014, respectively. 16. Unaudited Quarterly Financial Data (In thousands) March 31, June 30, September 30, December 31, Quarter Ended (unaudited) Year Ended December 31, 2016 Net revenues Gross profit Income from operations Net income $1,047,702 $1,000,783 $1,471,573 698,624 199,310 128,225 480,636 34,883 19,180 477,647 19,378 6,344 $1,305,277 $4,825,335 2,240,611 417,471 256,979 583,704 163,900 103,230 Adjustment payment to Class C capital stockholders Net income available to all stockholders Basic net income (loss) per share of Class A and B common stock Basic net income per share of Class C common stock Diluted net income (loss) per share of Class A and B common stock Diluted net income per share of Class C common stock $ $ $ $ $ — 59,000 — — 59,000 19,180 $ (52,656) $ 128,225 $ 103,230 $ 197,979 0.04 $ (0.12) $ 0.29 0.04 $ 0.15 $ 0.29 0.04 $ (0.12) $ 0.29 0.04 $ 0.15 $ 0.29 $ $ $ $ 0.24 $ 0.45 0.24 $ 0.72 0.23 $ 0.45 0.23 $ 0.71 2015 Net revenues Gross profit Income from operations Net income Basic net income per share of Class A and B common stock Basic net income per share of Class C common stock Diluted net income per share of Class A and B common stock Diluted net income per share of Class C common stock $ 804,941 $ 783,577 $1,204,109 587,160 171,397 100,477 377,664 27,667 11,728 379,053 31,901 14,766 $1,170,686 $3,963,313 1,905,547 408,547 232,573 561,670 177,582 105,602 $ $ $ $ 0.03 $ 0.03 $ 0.23 0.03 $ 0.03 $ 0.23 0.03 $ 0.03 $ 0.23 0.03 $ 0.03 $ 0.23 $ $ $ $ 0.24 $ 0.54 0.24 $ 0.54 0.24 $ 0.53 0.24 $ 0.53 87 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None ITEM 9A. CONTROLS AND PROCEDURES Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of December 31, 2016 pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2016, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Refer to Item 8 of this report for the “Report of Management on Internal Control over Financial Reporting.” There has been no change in our internal control over financial reporting during the most recent fiscal quarter that has materially affected, or that is reasonably likely to materially affect our internal control over financial reporting. Global Operating and Financial Reporting System Implementation We are in the process of implementing a global operating and financial reporting information technology system, SAP Fashion Management Solution (“FMS”), as part of a multi-year plan to integrate and upgrade our systems and processes, which began during 2015 and will continue in phases over the next several years. We plan to substantially complete the migration of our North America, EMEA and Connected Fitness operations to FMS during 2017, and are in the process of developing an implementation strategy and roll-out plan for our Asia-Pacific and Latin America operations. As the phased implementation of this system occurs, we will experience certain changes to our processes and procedures which, in turn, result in changes to our internal control over financial reporting. While we expect FMS to strengthen our internal financial controls by automating certain manual processes and standardizing business processes and reporting across our organization, management will continue to evaluate and monitor our internal controls as each of the affected areas evolve. For a discussion of risks related to the implementation of new systems, see Item 1A—“Risk Factors—Risks Related to Our Business—Risks and uncertainties associated with the implementation of information systems may negatively impact our business.” ITEM 9B. OTHER INFORMATION None 88 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this Item regarding directors is incorporated herein by reference from the 2017 Proxy Statement, under the headings “NOMINEES FOR ELECTION AT THE ANNUAL MEETING,” “CORPORATE GOVERNANCE AND RELATED MATTERS: Audit Committee” and “SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.” Information required by this Item regarding executive officers is included under “Executive Officers of the Registrant” in Part 1 of this Form 10-K. Code of Ethics We have a written code of ethics and business conduct in place that applies to all our employees, including our principal executive officer, principal financial officer, and principal accounting officer and controller. A copy of our code of ethics and business conduct is available on our website: www.uabiz.com/investors.cfm. We are required to disclose any change to, or waiver from, our code of ethics and business policy for our senior financial officers. We intend to use our website as a method of disseminating this disclosure as permitted by applicable SEC rules. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference herein from the 2017 Proxy the headings “CORPORATE GOVERNANCE AND RELATED MATTERS: Statement under Compensation of Directors,” and “EXECUTIVE COMPENSATION.” ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this Item is incorporated by reference herein from the 2017 Proxy the heading “SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN Statement under BENEFICIAL OWNERS OF SHARES.” Also refer to Item 5 “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.” ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item is incorporated by reference herein from the 2017 Proxy Statement under the heading “TRANSACTIONS WITH RELATED PERSONS” and “CORPORATE GOVERNANCE AND RELATED MATTERS—Independence of Directors.” ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this Item is incorporated by reference herein from the 2017 Proxy Statement under the heading “INDEPENDENT AUDITORS.” 89 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES a. The following documents are filed as part of this Form 10-K: 1. Financial Statements: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2016 and 2015 Consolidated Statements of Income for the Years Ended December 31, 2016, 2015 and 2014 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2016, 2015 and 2014 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2016, 2015 and 2014 Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and 2014 Notes to the Audited Consolidated Financial Statements 2. Financial Statement Schedule Schedule II—Valuation and Qualifying Accounts 56 57 58 59 60 61 62 95 All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. 90 3. Exhibits The following exhibits are incorporated by reference or filed herewith. References to any Form 10-K of the Company below are to the Annual Report on Form 10-K for the related fiscal year. For example, references to the Company’s 2015 Form 10-K are to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015. Exhibit No. 3.01 3.02 3.03 4.01 4.02 4.03 4.04 10.01 Incorporation (incorporated by reference to Amended and Restated Articles of Exhibit 3.01 of the Company’s Quarterly Report on Form 10-Q for the quarterly period ending March 31, 2016). Articles Supplementary setting forth the terms of the Class C Common Stock, dated June 15, 2015 (incorporated by reference to Appendix F to the Preliminary Proxy Statement filed by the Company on June 15, 2015). Second Amended and Restated By-Laws (incorporated by reference to Exhibit 3.02 of the Company’s Current Report on Form 8-K filed February 21, 2013). Warrant Agreement between the Company and NFL Properties LLC dated as of August 3, 2006 (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed August 7, 2006). Indenture, dated as of June 13, 2016, between the Company and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on June 13, 2016). First Supplemental Indenture, dated as of June 13, 2016, relating to the 3.250% Senior Notes due 2026, between the Company and Wilmington Trust, National Association, as trustee, and the Form of 3.250% Senior Notes due 2026 (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on June 13, 2016). Terms of Settlement of In re: Under Armour Shareholder Litigation, Case No, 24-C-15-00324 (incorporated by reference from Exhibit 4.2 of the Company’s Registration Statement on Form 8-A filed on March 21, 2016). Credit Agreement, dated May 29, 2014, by and among the Company, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, PNC Bank, National Association, as Syndication Agent, Bank of America, N.A. SunTrust Bank and Wells Fargo Bank, National Association as Co-Documentation Agents and the other lenders and arrangers party thereto (the “Credit Agreement”) (incorporated by reference to Exhibit 10.01 of the Company’s Current Report on Form 8-K filed June 2, 2014), Amendment No. 1 thereto, dated as of March 17, 2015 (incorporated by reference to Exhibit 10.01 of the Company’s Current Report on Form 8-K filed March 17, 2015), Amendment No. 2 thereto, dated as of January 22, 2016 (incorporated by reference to Exhibit 10.01 of the Company’s Current Report on Form 8-K filed January 22, 2016), and Amendment No. 3 thereto, dated as of June 7, 2016 (incorporated by reference to Exhibit 10.01 of the Company’s Quarterly Report on Form 10-Q filed on August 3, 2016). 10.02 10.03 Under Armour, Inc. Executive Incentive Plan (incorporated by reference to Exhibit 10.01 of the Company’s Current Report on Form 8-K filed on May 6, 2013).* Inc. Deferred Compensation Plan (incorporated by reference to Under Armour, Exhibit 10.15 of the Company’s 2007 Form 10-K), Amendment One to this plan (incorporated by reference to Exhibit 10.14 of the Company’s 2010 Form 10-K) and Amendment Two to this plan (filed herewith).* 10.04 Form of Change in Control Severance Agreement.* 91 10.05 10.06 10.07 10.08 10.09 10.10 10.11 10.12 10.13 10.14 10.15 Under Armour, Inc. Second Amended and Restated 2005 Omnibus Long-Term Incentive Plan, as amended (incorporated by reference to Exhibit 4.5 of the Company’s Registration Statement on Form S-8 (Registration No. 333-210844) filed on April 20, 2016).* Forms of Non-Qualified Stock Option Grant Agreement under the Amended and Restated 2005 Omnibus Long- Term Incentive Plan between the Company and Kevin Plank.* Form of Restricted Stock Unit Grant Agreement under the Second Amended and Restated 2005 Omnibus Long- Term Incentive Plan (filed herewith and incorporated by reference to Exhibit 10.07 of the Company’s 2015 Form 10-K and Exhibit 10.08 of the Company’s 2014 Form 10-K).* Form of Performance-Based Stock Option Grant Agreement under the Second Amended and Restated 2005 Omnibus Long-Term Incentive Plan between the Company and Kevin Plank (filed herewith, and Forms of Performance-Based Stock Option Grant Agreements incorporated by reference to Exhibit 10.08 of the Company’s 2015 Form 10-K and 10.09 of the Company’s 2014 Form 10-K).* Forms of Performance-Based Restricted Stock Unit Grant Agreement under the Second Amended and Restated 2005 Omnibus Long-Term Incentive Plan (filed herewith and incorporated by reference to Exhibit 10.10 of the Company’s 2015 Form 10-K, Exhibit 10.11 of the Company’s 2014 Form 10-K, Exhibit 10.12 of the Company’s 2013 Form 10-K and Exhibit 10.12 of the Company’s 2012 Form 10-K) and Supplement to Restricted Stock Unit Grant Agreement (incorporated by reference to Exhibit 10.01 of the Company’s Form 10-Q for the quarterly period ended September 30, 2014).* Forms of Performance-Based Restricted Stock Unit Grant Agreement for International Employees under the Amended and Restated 2005 Omnibus Long-Term Incentive Plan (incorporated by reference to Exhibit 10.11 of the Company’s 2015 Form 10-K, Exhibit 10.12 of the Company’s 2014 Form 10-K and Exhibit 10.13 of the Company’s 2013 Form 10-K).* Form of Employee Confidentiality, Non-Competition and Non-Solicitation Agreement by and between certain executives and the Company.* Employment Agreement by and between Karl-Heinz Maurath and the Company (portions of treatment) (incorporated by reference to Exhibit 10.15 of the Company’s 2012 Form 10-K).* this exhibit have been omitted pursuant for confidential to a request Under Armour, Inc. 2015 Non-Employee Director Compensation Plan (incorporated by reference to Exhibit 10.15 of the Company’s 2014 Form 10-K), Form of Initial Restricted Stock Unit Grant (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed June 6, 2006), Form of Annual Stock Option Award (incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K filed June 6, 2006) and Form of Annual Restricted Stock Unit Grant (incorporated by reference to Exhibit 10.6 of the Company’s Form 10-Q for the quarterly period ended June 30, 2011).* Under Armour, Inc. 2006 Non-Employee Director Deferred Stock Unit Plan (incorporated by reference to Exhibit 10.02 of the Company’s Form 10-Q for the quarterly period ended March 31, 2010), Amendment One to this plan (incorporated by reference to Exhibit 10.23 of the Company’s 2010 Form 10-K) and Amendment Two to this plan (incorporated by reference to Exhibit 10.02 of the Company’s Form 10-Q for the quarterly period ended June 30, 2016).* Confidentiality, Non-Competition and Non-Solicitation Agreement, dated June 15, 2015, between the Company and Kevin Plank (incorporated by reference to Appendix E to the Preliminary Proxy Statement filed by Under Armour, Inc. on June 15, 2015), and the First Amendment thereto, dated April 7, 2016 (incorporated by reference to Exhibit 10.03 of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016). 92 10.16 12.01 21.01 23.01 31.01 31.02 32.01 32.02 Employment Agreement by and between Michael Lee and the Company, including the Exhibit Information and Invention Assignment Agreement by and between Michael Lee and the Company, dated February 3, 2015.* the Employee Confidential thereto, Statement re: computation of ratio of earnings to fixed charges. List of Subsidiaries. Consent of PricewaterhouseCoopers LLP. Section 302 Chief Executive Officer Certification. Section 302 Chief Financial Officer Certification. Section 906 Chief Executive Officer Certification. Section 906 Chief Financial Officer Certification. 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document * Management contract or a compensatory plan or arrangement required to be filed as an Exhibit pursuant to Item 15(b) of Form 10-K. 93 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UNDER ARMOUR, INC. By: /s/ KEVIN A. PLANK Kevin A. Plank Chairman of the Board of Directors and Chief Executive Officer Dated: February 23, 2017 Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. /s/ KEVIN A. PLANK Kevin A. Plank Chairman of the Board of Directors and Chief Executive Officer (principal executive officer) /s/ DAVID E. BERGMAN Chief Financial Officer (principal accounting and David E. Bergman financial officer) /s/ BYRON K. ADAMS, JR. Director Byron K. Adams, Jr. /s/ GEORGE W. BODENHEIMER Director George W. Bodenheimer /s/ DOUGLAS E. COLTHARP Director Douglas E. Coltharp /s/ ANTHONY W. DEERING Anthony W. Deering /s/ KAREN W. KATZ Karen W. Katz /s/ A.B. KRONGARD A.B. Krongard Director Director Director /s/ WILLIAM R. MCDERMOTT Director William R. McDermott /s/ ERIC T. OLSON Eric T. Olson /s/ HARVEY L. SANDERS Harvey L. Sanders Dated: February 23, 2017 Director Director 94 Schedule II Valuation and Qualifying Accounts (In thousands) Description Allowance for doubtful accounts For the year ended December 31, 2016 For the year ended December 31, 2015 For the year ended December 31, 2014 Sales returns and allowances For the year ended December 31, 2016 For the year ended December 31, 2015 For the year ended December 31, 2014 Deferred tax asset valuation allowance For the year ended December 31, 2016 For the year ended December 31, 2015 For the year ended December 31, 2014 Balance at Beginning of Year Charged to Costs and Expenses Write-Offs Net of Recoveries Balance at End of Year $ 5,930 3,693 2,938 $ 23,575 $ (18,164) $ 11,341 5,930 3,693 2,951 1,028 (714) (273) $72,615 52,973 34,102 $179,445 $(130,774) $121,286 72,615 (126,186) 52,973 (137,920) 145,828 156,791 $24,043 15,550 8,091 $ 13,951 $ 8,493 7,581 (25) $ 37,969 24,043 — 15,550 (122) 95 W O H S S C I N O R T C E L E R E M U S N O C | | C O N N E C T E D F I T N E S S (cid:214)(cid:228)(cid:225)(cid:3)(cid:215)(cid:234)(cid:224)(cid:225)(cid:238)(cid:3)(cid:195)(cid:238)(cid:233)(cid:235)(cid:241)(cid:238)(cid:3)(cid:197)(cid:235)(cid:234)(cid:234)(cid:225)(cid:223)(cid:240)(cid:225)(cid:224)(cid:3)(cid:200)(cid:229)(cid:240)(cid:234)(cid:225)(cid:239)(cid:239)(cid:3) (cid:223)(cid:235)(cid:233)(cid:233)(cid:241)(cid:234)(cid:229)(cid:240)(cid:245)(cid:3)(cid:287)(cid:234)(cid:229)(cid:239)(cid:228)(cid:225)(cid:224)(cid:3)(cid:30)(cid:28)(cid:29)(cid:34)(cid:3)(cid:243)(cid:229)(cid:240)(cid:228)(cid:3)(cid:234)(cid:225)(cid:221)(cid:238)(cid:232)(cid:245) 200 million members(cid:4)(cid:3)(cid:207)(cid:225)(cid:221)(cid:234)(cid:243)(cid:228)(cid:229)(cid:232)(cid:225)(cid:6)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3) (cid:196)(cid:238)(cid:221)(cid:234)(cid:224)(cid:3)(cid:239)(cid:240)(cid:235)(cid:232)(cid:225)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:239)(cid:228)(cid:235)(cid:243)(cid:3)(cid:240)(cid:228)(cid:229)(cid:239)(cid:3)(cid:236)(cid:221)(cid:239)(cid:240)(cid:3)(cid:204)(cid:221)(cid:234)(cid:241)(cid:221)(cid:238)(cid:245) (cid:221)(cid:240)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:30)(cid:28)(cid:29)(cid:35)(cid:3)(cid:197)(cid:235)(cid:234)(cid:239)(cid:241)(cid:233)(cid:225)(cid:238)(cid:3)(cid:199)(cid:232)(cid:225)(cid:223)(cid:240)(cid:238)(cid:235)(cid:234)(cid:229)(cid:223)(cid:239)(cid:3)(cid:213)(cid:228)(cid:235)(cid:243) (cid:156)(cid:197)(cid:199)(cid:213)(cid:157)(cid:3)(cid:243)(cid:229)(cid:240)(cid:228)(cid:3)(cid:229)(cid:240)(cid:239)(cid:3)(cid:239)(cid:228)(cid:235)(cid:243)(cid:223)(cid:221)(cid:239)(cid:225)(cid:3)(cid:235)(cid:226)(cid:3)(cid:221)(cid:240)(cid:228)(cid:232)(cid:225)(cid:240)(cid:225)(cid:239)(cid:3)(cid:221)(cid:234)(cid:224)(cid:3) (cid:240)(cid:225)(cid:223)(cid:228)(cid:234)(cid:235)(cid:232)(cid:235)(cid:227)(cid:245)(cid:3)(cid:235)(cid:234)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:288)(cid:235)(cid:235)(cid:238)(cid:4)(cid:3)(cid:203)(cid:234)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:223)(cid:238)(cid:235)(cid:243)(cid:224)(cid:153) (cid:226)(cid:221)(cid:242)(cid:235)(cid:238)(cid:229)(cid:240)(cid:225)(cid:3)(cid:215)(cid:195)(cid:3)(cid:222)(cid:235)(cid:235)(cid:240)(cid:228)(cid:6)(cid:3)(cid:226)(cid:221)(cid:234)(cid:239)(cid:3)(cid:223)(cid:235)(cid:241)(cid:232)(cid:224)(cid:3)(cid:240)(cid:221)(cid:231)(cid:225)(cid:3)(cid:221)(cid:3) (cid:216)(cid:229)(cid:238)(cid:240)(cid:241)(cid:221)(cid:232)(cid:3)(cid:212)(cid:225)(cid:221)(cid:232)(cid:229)(cid:240)(cid:245)(cid:3)(cid:240)(cid:235)(cid:241)(cid:238)(cid:3)(cid:229)(cid:234)(cid:240)(cid:235)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:236)(cid:238)(cid:225)(cid:153)(cid:227)(cid:221)(cid:233)(cid:225)(cid:3) (cid:233)(cid:229)(cid:234)(cid:224)(cid:239)(cid:225)(cid:240)(cid:3)(cid:235)(cid:226)(cid:3)(cid:237)(cid:241)(cid:221)(cid:238)(cid:240)(cid:225)(cid:238)(cid:222)(cid:221)(cid:223)(cid:231)(cid:3)(cid:214)(cid:235)(cid:233)(cid:3)(cid:196)(cid:238)(cid:221)(cid:224)(cid:245)(cid:6) and test their body readiness on our (cid:230)(cid:241)(cid:233)(cid:236)(cid:3)(cid:240)(cid:225)(cid:239)(cid:240)(cid:225)(cid:238)(cid:4) (cid:206)(cid:221)(cid:239)(cid:240)(cid:232)(cid:245)(cid:6)(cid:3)(cid:240)(cid:235)(cid:3)(cid:223)(cid:232)(cid:235)(cid:239)(cid:225)(cid:3)(cid:235)(cid:241)(cid:240)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:228)(cid:229)(cid:227)(cid:228)(cid:3)(cid:225)(cid:234)(cid:225)(cid:238)(cid:227)(cid:245) (cid:239)(cid:225)(cid:239)(cid:239)(cid:229)(cid:235)(cid:234)(cid:6)(cid:3)(cid:215)(cid:234)(cid:224)(cid:225)(cid:238)(cid:3)(cid:195)(cid:238)(cid:233)(cid:235)(cid:241)(cid:238)(cid:3)(cid:221)(cid:234)(cid:234)(cid:235)(cid:241)(cid:234)(cid:223)(cid:225)(cid:224) the Under Armour TB12 Athlete Recovery Sleepwear line. S E I R O G E T A C R A L L O D N O I L L I B | | M A S S I V E G R O W T H W I T H M O R E T O C O M E (cid:215)(cid:234)(cid:224)(cid:225)(cid:238)(cid:3)(cid:195)(cid:238)(cid:233)(cid:235)(cid:241)(cid:238)(cid:3)(cid:239)(cid:221)(cid:243)(cid:3)(cid:240)(cid:243)(cid:235)(cid:3)(cid:235)(cid:226)(cid:3)(cid:229)(cid:240)(cid:239)(cid:3)(cid:232)(cid:221)(cid:238)(cid:227)(cid:225)(cid:239)(cid:240)(cid:3) growth categories reach the billion- dollar mark(cid:3)(cid:229)(cid:234)(cid:3)(cid:30)(cid:28)(cid:29)(cid:34)(cid:4)(cid:3)(cid:214)(cid:228)(cid:225)(cid:3)(cid:215)(cid:195)(cid:3)(cid:243)(cid:235)(cid:233)(cid:225)(cid:234)(cid:266)(cid:239)(cid:3) (cid:222)(cid:241)(cid:239)(cid:229)(cid:234)(cid:225)(cid:239)(cid:239)(cid:3)(cid:236)(cid:238)(cid:235)(cid:224)(cid:241)(cid:223)(cid:225)(cid:224)(cid:3)(cid:222)(cid:225)(cid:221)(cid:241)(cid:240)(cid:229)(cid:226)(cid:241)(cid:232)(cid:6)(cid:3)(cid:242)(cid:225)(cid:238)(cid:239)(cid:221)(cid:153) (cid:240)(cid:229)(cid:232)(cid:225)(cid:6)(cid:3)(cid:236)(cid:225)(cid:238)(cid:226)(cid:235)(cid:238)(cid:233)(cid:221)(cid:234)(cid:223)(cid:225)(cid:153)(cid:224)(cid:238)(cid:229)(cid:242)(cid:225)(cid:234)(cid:3)(cid:236)(cid:238)(cid:235)(cid:224)(cid:241)(cid:223)(cid:240)(cid:3)(cid:240)(cid:235) (cid:223)(cid:235)(cid:234)(cid:234)(cid:225)(cid:223)(cid:240)(cid:3)(cid:243)(cid:229)(cid:240)(cid:228)(cid:3)(cid:221)(cid:234)(cid:224)(cid:3)(cid:223)(cid:221)(cid:236)(cid:240)(cid:241)(cid:238)(cid:225)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:226)(cid:225)(cid:233)(cid:221)(cid:232)(cid:225) (cid:223)(cid:235)(cid:234)(cid:239)(cid:241)(cid:233)(cid:225)(cid:238)(cid:4)(cid:3)(cid:208)(cid:235)(cid:240)(cid:3)(cid:240)(cid:235)(cid:3)(cid:222)(cid:225)(cid:3)(cid:235)(cid:241)(cid:240)(cid:224)(cid:235)(cid:234)(cid:225)(cid:6)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3) footwear business grew nearly 50%(cid:3)(cid:229)(cid:234)(cid:3)(cid:30)(cid:28)(cid:29)(cid:34)(cid:3)(cid:224)(cid:238)(cid:229)(cid:242)(cid:225)(cid:234)(cid:3)(cid:222)(cid:245)(cid:3)(cid:239)(cid:241)(cid:223)(cid:223)(cid:225)(cid:239)(cid:239)(cid:3)(cid:229)(cid:234) (cid:231)(cid:225)(cid:245)(cid:3)(cid:227)(cid:238)(cid:235)(cid:243)(cid:240)(cid:228)(cid:3)(cid:223)(cid:221)(cid:240)(cid:225)(cid:227)(cid:235)(cid:238)(cid:229)(cid:225)(cid:239)(cid:5)(cid:3)(cid:222)(cid:221)(cid:239)(cid:231)(cid:225)(cid:240)(cid:222)(cid:221)(cid:232)(cid:232) and running. (cid:214)(cid:228)(cid:225)(cid:239)(cid:225)(cid:3)(cid:233)(cid:229)(cid:232)(cid:225)(cid:239)(cid:240)(cid:235)(cid:234)(cid:225)(cid:239)(cid:3)(cid:238)(cid:225)(cid:229)(cid:234)(cid:226)(cid:235)(cid:238)(cid:223)(cid:225)(cid:3)(cid:235)(cid:241)(cid:238)(cid:3)(cid:222)(cid:225)(cid:232)(cid:229)(cid:225)(cid:226)(cid:3) (cid:240)(cid:228)(cid:221)(cid:240)(cid:3)(cid:222)(cid:235)(cid:240)(cid:228)(cid:3)(cid:223)(cid:221)(cid:240)(cid:225)(cid:227)(cid:235)(cid:238)(cid:229)(cid:225)(cid:239)(cid:3)(cid:221)(cid:238)(cid:225)(cid:3)(cid:230)(cid:241)(cid:239)(cid:240)(cid:3)(cid:222)(cid:225)(cid:227)(cid:229)(cid:234)(cid:153) (cid:234)(cid:229)(cid:234)(cid:227)(cid:3)(cid:240)(cid:235)(cid:3)(cid:239)(cid:223)(cid:238)(cid:221)(cid:240)(cid:223)(cid:228)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:239)(cid:241)(cid:238)(cid:226)(cid:221)(cid:223)(cid:225)(cid:3)(cid:235)(cid:226)(cid:3)global, scalable growth. K E L L E Y O ’ H A R A FIFA Women’s World Cup Champion Olympic Soccer Gold Medalist L I Z A R C H Yoga Teacher N ATA L I E U H L I N G Trainer 2016 brought the second 20 Cu Curry Tour and the release of t of the Curry 3. During the tour tour, Stephen made stops at Sh at Shenyang, Guangzhou, Hong Hong Kong and Taipei to e to engage with fans and represent the Brand. In 2016 Under Armour released two In 2016 Under Armour released two Limited Edition Cleats—the C1N MVP Limited Edition Cleats—the C1N MVP and the UA Harper One. and the UA Harper One. D E T R A T S G N I T T E G T S U J E R A E W | | Under Armour received the A’ Design Award in the Footwear, Shoes and Boots category for its 3D printed Architech training shoe. R E M U S N O C – O T – T C E R I D | | U N D E R A R M O U R G L O B A L R E T A I L (cid:200)(cid:238)(cid:235)(cid:233)(cid:3)(cid:230)(cid:241)(cid:239)(cid:240)(cid:3)(cid:226)(cid:235)(cid:241)(cid:238)(cid:3)(cid:239)(cid:240)(cid:235)(cid:238)(cid:225)(cid:239)(cid:3)(cid:221)(cid:234)(cid:224)(cid:3)(cid:235)(cid:234)(cid:225)(cid:3)(cid:243)(cid:225)(cid:222)(cid:239)(cid:229)(cid:240)(cid:225) (cid:29)(cid:29)(cid:3)(cid:245)(cid:225)(cid:221)(cid:238)(cid:239)(cid:3)(cid:221)(cid:227)(cid:235)(cid:6)(cid:3)(cid:240)(cid:228)(cid:225)(cid:3)(cid:215)(cid:234)(cid:224)(cid:225)(cid:238)(cid:3)(cid:195)(cid:238)(cid:233)(cid:235)(cid:241)(cid:238)(cid:3)(cid:224)(cid:229)(cid:238)(cid:225)(cid:223)(cid:240)(cid:153) (cid:240)(cid:235)(cid:153)(cid:223)(cid:235)(cid:234)(cid:239)(cid:241)(cid:233)(cid:225)(cid:238)(cid:3)(cid:222)(cid:241)(cid:239)(cid:229)(cid:234)(cid:225)(cid:239)(cid:239)(cid:3)(cid:228)(cid:221)(cid:239)(cid:3)(cid:227)(cid:238)(cid:235)(cid:243)(cid:234)(cid:3)(cid:240)(cid:235)(cid:3) (cid:233)(cid:235)(cid:238)(cid:225)(cid:3)(cid:240)(cid:228)(cid:221)(cid:234) 240 owned stores(cid:6)(cid:3)(cid:221)(cid:234)(cid:224)(cid:3)30 global E-Commerce sites. (cid:203)(cid:234)(cid:3)(cid:221)(cid:224)(cid:224)(cid:229)(cid:240)(cid:229)(cid:235)(cid:234)(cid:3)(cid:240)(cid:235)(cid:3)(cid:221)(cid:3)(cid:222)(cid:238)(cid:235)(cid:221)(cid:224)(cid:225)(cid:238)(cid:3)(cid:236)(cid:238)(cid:235)(cid:224)(cid:241)(cid:223)(cid:240)(cid:3)(cid:235)(cid:286)(cid:225)(cid:238)(cid:229)(cid:234)(cid:227)(cid:6)(cid:3) (cid:243)(cid:229)(cid:240)(cid:228)(cid:3)(cid:228)(cid:229)(cid:227)(cid:228)(cid:232)(cid:229)(cid:227)(cid:228)(cid:240)(cid:225)(cid:224)(cid:3)(cid:224)(cid:225)(cid:239)(cid:229)(cid:227)(cid:234)(cid:3)(cid:221)(cid:234)(cid:224)(cid:3)(cid:229)(cid:234)(cid:234)(cid:235)(cid:242)(cid:221)(cid:240)(cid:229)(cid:235)(cid:234)(cid:6)(cid:3) (cid:215)(cid:234)(cid:224)(cid:225)(cid:238)(cid:3)(cid:195)(cid:238)(cid:233)(cid:235)(cid:241)(cid:238)(cid:3)(cid:228)(cid:221)(cid:239)(cid:3)(cid:225)(cid:232)(cid:225)(cid:242)(cid:221)(cid:240)(cid:225)(cid:224)(cid:3)(cid:239)(cid:240)(cid:235)(cid:238)(cid:245)(cid:153)(cid:240)(cid:225)(cid:232)(cid:232)(cid:229)(cid:234)(cid:227)(cid:6)(cid:3) (cid:229)(cid:234)(cid:223)(cid:232)(cid:241)(cid:224)(cid:229)(cid:234)(cid:227)(cid:3)(cid:242)(cid:229)(cid:238)(cid:240)(cid:241)(cid:221)(cid:232)(cid:3)(cid:238)(cid:225)(cid:221)(cid:232)(cid:229)(cid:240)(cid:245)(cid:3)(cid:240)(cid:225)(cid:223)(cid:228)(cid:234)(cid:235)(cid:232)(cid:235)(cid:227)(cid:245)(cid:3)(cid:226)(cid:235)(cid:238) (cid:240)(cid:225)(cid:223)(cid:228)(cid:153)(cid:239)(cid:221)(cid:242)(cid:242)(cid:245)(cid:3)(cid:223)(cid:235)(cid:234)(cid:239)(cid:241)(cid:233)(cid:225)(cid:238)(cid:239)(cid:4)(cid:3) B O S T O N , M A S S A C H U S E T T S O R L A N D O , F L O R I D A M A D I S O N , W I S C O N S I N The Under Armour direct-to-consumer business posted , representing 3 27% growth in 2016 p of global revenue. 31% of global revenue. in 2016, representing B O A R D O F D I R E C T O R S K E V I N A . P L A N K Chairman of the Board and Chief Executive Officer B Y R O N K . A D A M S , J R . Former Managing Director and Founder, Rosewood Capital, LLC G E O R G E W . B O D E N H E I M E R Former President, ESPN, Inc. and ABC Sports D O U G L A S E . C O L T H A R P Executive Vice President and Chief Financial Officer, HealthSouth Corporation A N T H O N Y W . D E E R I N G Former Chief Executive Officer and Chairman of the Rouse Company K A R E N W . K AT Z President and Chief Executive Officer, Neiman Marcus Group LTD LLC A . B . K R O N G A R D Former Chief Executive Officer and Chairman, Alex.Brown, Incorporated W I L L I A M R . M C D E R M O T T Chief Executive Officer and Executive Board Member, SAP SE E R I C T . O L S O N Admiral, U.S. Navy (Retired) and Former Commander, U.S. Special Operations Command H A R V E Y L . S A N D E R S Former Chairman and Chief Executive Officer, Nautica Enterprises, Inc. UNDER ARMOUR, INC. 1020 HULL STREET | BALTIMORE, MD 21230 1 . 8 8 8 . 7 A R M O U R (cid:41)(cid:36)(cid:38)(cid:40)(cid:37)(cid:50)(cid:50)(cid:46)(cid:17)(cid:38)(cid:50)(cid:48)(cid:492)(cid:56)(cid:49)(cid:39)(cid:40)(cid:53)(cid:36)(cid:53)(cid:48)(cid:50)(cid:56)(cid:53) (cid:55)(cid:58)(cid:44)(cid:55)(cid:55)(cid:40)(cid:53)(cid:17)(cid:38)(cid:50)(cid:48)(cid:492)(cid:56)(cid:49)(cid:39)(cid:40)(cid:53)(cid:36)(cid:53)(cid:48)(cid:50)(cid:56)(cid:53) (cid:44)(cid:49)(cid:54)(cid:55)(cid:36)(cid:42)(cid:53)(cid:36)(cid:48)(cid:17)(cid:38)(cid:50)(cid:48)(cid:492)(cid:56)(cid:49)(cid:39)(cid:40)(cid:53)(cid:36)(cid:53)(cid:48)(cid:50)(cid:56)(cid:53)