Under Armour Inc. Annual Report 2017

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FY2017 Annual Report · Under Armour Inc.

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2017
ANNUAL
REPORT

2 0 1 7 I C O N I C A T H L E T E C O L L E C T I O N S

STEPHEN CURRY

JORDAN SPIETH

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LINLINDSEDSEY VY VONNONN

TOM BRADY

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DWAYNE “THE ROCK” JOHNSON

FROM THE

CHAIRMAN AND CEO

To Our Shareholders,

2017 was one of the most
challenging and opportunistic
years in Under Armour’s history.
It was a year that provided
invaluable learning and will
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success.

Following a sustained period
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investments to gain global scale,
a number of external and internal
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in our strategy to better align
our resources and operations
into an organization capable of
supporting the powerful brand
that is Under Armour.

Externally, disruption in our North
American business driven by retail
consolidation, bankruptcies and
shifts from physical to digital
consumption placed a great deal
of variability into the marketplace.
These dynamics, along with
changes in consumer preference
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contributed to a highly
promotional backdrop, putting
pressure on our largest regional
business throughout the year.

Internally, our quick pace
at obtaining global scale in
innovation, product, sport
categories and a larger
international footprint generated
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associated with our shift toward
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cost structure built to support
the expectation of being a larger
company by now.

The intersection of the external and
internal factors provided an exceptional
opportunity to transform our operations
and further sharpen our strategy. In
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and proactive decisions to advance our
operating systems, reset our structure
and recalibrate our leadership so that we
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utilize the scale and infrastructure we’ve
built to better serve our consumers and
retail customers. Fundamental to this
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design and storytelling, all while keeping
our consumer athletes at the center of
everything we do.

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years of investing to scale within one
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accelerating focus on discipline sets us up
to more consistently deliver sustainable,
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To empower this, Under Armour must
ensure that we are constantly delighting
our consumer athletes. Since the
beginning, our promise has been to make
athletes better. As we push ourselves to
become a smarter, faster and stronger
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athletic performance. And it’s precisely
through this lens, that our new mission
statement evolved – Under Armour Makes
You Better. This means that in every way
we connect – through the product we
create, the experiences we deliver and the
inspiration we provide – we will make you
better.

We’re proud of the incredibly strong brand
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leading innovation and a truly unique
intimacy with Under Armour athletes.
By building a stronger ecosystem with a

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FROM THE

CHAIRMAN AND CEO

As we drive forward into 2018,
Under Armour is a great brand
and a good company. We must
become a great company
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positioned to execute against
our strategies and new mission
to become better. We are the
best at getting better. It’s in our
DNA. By building on the strategic
decisions and actions we took in
2017 and ones thus far in 2018,
we are heads down and focused
on doing just that.

At Under Armour, we have the
best team. I am so incredibly
proud of the strength and
resilience my teammates
demonstrate each and every
day, all around the world.
With a high level of situational
awareness, and the right strategy
and leadership in place, we are
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fuel and innovate – emerging as a
stronger and better Under Armour
for our consumers, customers,
and shareholders.

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Chairman and
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empowering our team to create and operate
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drives an even deeper authenticity and
connection with our consumers, inspiring
them with incredible products they never
knew they needed and wondered how they
ever lived without.

In 2017, our revenue was up 3% to reach
$5.0 billion. Throughout the year, we
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leveraged our amazing roster of athletes
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international business. In fact, our
international business grew 46% to
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consumer, women’s and footwear on the
list of $1 billion businesses. Working as
a counterbalance to a contraction in our
North American business, the investments
we have made across our regions – EMEA,
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dividends, with their size and scale on the
precipice of being able to deliver more
meaningful returns in the years ahead.

In addition to diversifying our portfolio
across regions and categories, we are
optimizing and expanding our distribution
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right experience wherever and whenever
consumers choose to engage Under
Armour. Within our global wholesale
business, which declined 3% in 2017, we
are focused on improving our segmentation
and service levels to ensure we have the
right product in the right place at the right
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continued its strong momentum with a 14%
increase in annual revenue, representing
35% of sales as our retail stores and
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storytelling to deliver truly unique and
premium experiences.

#SHEPLAYSWEWIN CAMPAIGN

CAL BERKELEY

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HARPER 2

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AMSTERDAM BRAND HOUSE
AMSTERDAM BRAND HOUSE

BEIJING BRAND HOUSE

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, 2017

or
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934
For the transition period from

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)
1020 Hull Street
Baltimore, Maryland 21230
(Address of principal executive offices) (Zip Code)

52-1990078
(I.R.S. Employer
Identification No.)

(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. ‘

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 ‘
Emerging growth company ‘
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
to

revised financial accounting standards provided pursuant

transition period for complying with any new or
Section 13(a) of the Exchange Act. ‘

Indicate by check mark whether

Act). Yes ‘ No Í

the registrant

is a shell company (as defined in Rule 12b-2 of

the

As of June 30, 2017, 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
$4,001,622,620 and $3,838,231,258, respectively.

As of January 31, 2018, there were 185,279,913 shares of Class A Common Stock, 34,450,000 shares of Class B

Convertible Common Stock and 222,442,673 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 9, 2018

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 6

Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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PART IV.

Item 15 Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 16 Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

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 net revenues are generated primarily from the wholesale sales of our products to national,
regional, independent and specialty retailers and distributors. 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. Our digital strategy is focused on
supporting these long term objectives, emphasizing connecting and engaging with our consumers
through multiple digital touch points, including through our Connected Fitness business.

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 2017, sales of apparel, footwear and accessories
represented 66%, 21% and 9% of net revenues, respectively. 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 16 to the Consolidated Financial Statements for net revenues by
product.

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 UA HOVR™, 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 subscriptions, along with digital advertising through our MapMyFitness,

MyFitnessPal and Endomondo 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 2017, our
licensees offered collegiate, National Football League (“NFL), Major League Baseball (“MLB”), and
National Basketball Association (“NBA”) apparel and accessories, baby and kids’ apparel,
team
uniforms, socks, water bottles, eyewear, phone and golf accessories 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,
training, outdoor activities and as part of an active lifestyle. We seek to drive
consumer demand by building brand equity and awareness that our products deliver advantages to
help athletes perform better.

fitness,

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. We also seek to sponsor events to drive awareness and brand authenticity from a
grassroots level by hosting combines, camps and clinics for young athletes in many sports at regional
sites across the country. 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 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, now beginning with the
2019 season, which will allow us to provide on-field uniforms, apparel, and accessories to all thirty MLB
clubs on an exclusive basis, and, 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.

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 connectivity with our brand and our
products, and plan to increase our use of social media promotion in the future. For example, in 2017,
we launched our first entirely digital marketing campaign for our “Unlike Any” women’s campaign,
which included a variety of content on various social media platforms.

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
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
regional sporting goods chains,
independent and specialty retailers, department store chains,
In addition, we sell our products to
institutional athletic departments and leagues and teams.
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
important role in our overall
inventory management by allowing us to sell a significant portion of
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 2017, sales through our
wholesale, direct to consumer, licensing and Connected Fitness channels represented 61%, 35%, 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. The following table presents net revenues by segment for each of the
years ending December 31, 2017, 2016 and 2015:

2017

% of

Year ended December 31,

2016

% of

Net Revenues

Net Revenues Net Revenues

$3,802,406
469,997
433,647
181,324

76.5% $4,005,314
330,584
268,607
141,793

9.4
8.7
3.6

83.0% $3,455,737
203,109
144,877
106,175

6.9
5.6
2.9

89,179

—

1.8

—

80,447

(1,410)

1.6

—

53,415

—

2015

% of
Net Revenues

87.2%
5.1
3.7
2.7

1.3

—

(In thousands)

North America
EMEA
Asia-Pacific
Latin America
Connected
Fitness
Intersegment

Eliminations

Total net

revenues

$4,976,553

100.0% $4,825,335

100.0% $3,963,313

100.0%

North America

Our North America segment accounted for approximately 76.5% of our net revenues for 2017. 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 $3.6 billion, $3.8 billion and $3.3 billion for the years ended December 31, 2017, 2016 and 2015
respectively. See Note 16 to the Consolidated Financial Statements. No customers accounted for more
than 10% of our net revenues in 2017.

Our direct to consumer sales are generated through our brand and factory house stores and
internet websites. As of December 31, 2017, we had 162 factory house stores in North America
primarily located in outlet centers throughout the United States. As of December 31, 2017, we had 19
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’ sale of collegiate
and league apparel and accessories, as well as sales of other licensed products. 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 21.7% of our net revenues were generated from our international segments in
2017. 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
a third-party logistics provider. We sell our apparel, footwear and accessories through independent
distributors in the Middle East and Africa.
In 2017 we began selling our products to wholesale
customers in Russia.

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. 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.

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, Brazil and Argentina 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
Panama.

Connected Fitness

In 2013, we began offering digital fitness subscriptions and licenses, along with digital advertising
through our MapMyFitness platform. In 2015, we acquired the Endomondo and MyFitnessPal platforms
to create our Connected Fitness business. Approximately 1.8% of our net revenues were generated
from our Connected Fitness business in 2017. We plan to engage and grow this community by
developing innovative 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 2017 we also opened our newest center for footwear
footwear design and
performance innovation located in Portland, Oregon, bringing together
development teams into a centralized location.

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
2017, approximately 53% 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 2017, our
apparel and accessories products were manufactured by 39 primary contract manufacturers, operating
in 17 countries, with approximately 61% 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 2017, our footwear products were
manufactured by seven primary contract manufacturers, operating primarily in Vietnam, China and
Indonesia. Of our seven primary contract manufacturers, five produced approximately 83% of our
footwear products.

All manufacturers across all product divisions 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 strategically
located near our key partners 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, including
our new global operating and financial reporting information technology system, 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
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®, I
WILL®, and many trademarks that
incorporate the term ARMOUR such as, ARMOURSTORM®,
ARMOUR® FLEECE, and ARMOUR BRA®. We also own applications to protect connected fitness
branding such as 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 enforce 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 strategically 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 performance apparel and footwear,
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.

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, 2017, we had approximately 15,800 employees, including approximately
9,900 in our brand and factory house stores and approximately 1,500 at our distribution facilities.
Approximately 6,900 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.

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, our anticipated
charges and restructuring costs and the timing of these measures, the impact of recent tax reform
legislation on our results of operations, the development and introduction of new products and the
implementation of our marketing and branding strategies. In many cases, you can identify forward-
looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,”
these terms or other comparable
“estimates,” “predicts,” “outlook,” “potential” or the negative of
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 successfully execute our long-term strategies;

our ability to successfully execute any restructuring plans and realize expected benefits;

our ability to effectively drive operational efficiency in our business;

our ability to manage the increasingly complex operations of our 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 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;

any disruptions, delays or deficiencies in the design, implementation or application of our new
global operating and financial reporting information technology system;

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;

our ability to successfully manage or realize expected results from acquisitions and other
significant investments or capital expenditures;

risks related to foreign currency exchange rate fluctuations;

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 2017, sales through our wholesale channel represented approximately 61% 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 and results of operations.

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.

We generate a significant portion of our wholesale revenues from sales to our largest customers.
We currently do not enter into long term sales contracts with our 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, particularly in the sports specialty sector. 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 continue to grow our net revenues, or our net
revenues may decline.

We may not successfully execute our long-term strategies, which may negatively impact our
results of operations.

Our ability to execute on our long-term strategies depends, in part, on successfully executing 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 continue to invest in these growth initiatives in the
near-term may be negatively impacted by the performance of our North America business, which
represented 77% of our total net revenues in 2017 but declined by 5% over 2016, and in particular the
in North America. Our ability to execute on our long-term
performance of our wholesale channel
strategy also depends on our ability to successfully manage our cost structure and drive return on our
investments. If we cannot effectively execute our long-term growth strategies while managing costs
effectively, our business and results of operations could be negatively impacted.

We may not fully realize the expected benefits of any restructuring plans or other operating or
cost-saving initiatives, which may negatively impact our profitability.

We have recently announced restructuring plans designed to more closely align our financial
resources against the critical priorities of our business. These plans have included initiatives to improve
operational efficiencies, and our 2017 restructuring plan included a reduction in our global workforce.
We may not achieve our targeted operational improvements and efficiencies, which could adversely
impact our results of operations and financial condition. In addition, implementing any restructuring
plan presents significant potential risks that may impair our ability to achieve anticipated operating
improvements and/or cost reductions. These risks include, among others, higher than anticipated costs
in implementing our restructuring plans, management distraction from ongoing business activities,
failure to maintain adequate controls and procedures while executing our restructuring plans, damage
to our reputation and brand image and workforce attrition beyond planned reductions. If we fail to
achieve targeted operating improvements and/or cost reductions, our profitability and results of

operations could be negatively impacted and we may be required to implement additional restructuring-
related activities, which may be dilutive to our earnings in the short term.

We must successfully manage the increasingly complex operations of our global business, or
our business and results of operations may be negatively impacted.

We have expanded our business and operations rapidly since our inception and our net revenues
have increased to $4,976.6 million in 2017 from $2,332.1 million in 2013. We must continue to
successfully manage the operational difficulties associated with expanding our business to meet
increased consumer demand throughout
the world. We may experience difficulties in obtaining
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
initiatives cost
expanding workforce. We may not be successful
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 are unable to anticipate consumer preferences, successfully develop and introduce new,
innovative and updated products or engage our consumers, 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 or design
products in the categories and styles that consumers want, demand for our products could decline and
our brand image could be negatively impacted. 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.
if we
experience problems with the quality of our products, our brand reputation may be negatively impacted
and we may incur substantial expense to remedy the problems, which could negatively impact our
results of operations.

In addition,

In addition, consumer preferences regarding the shopping experience continue to rapidly evolve. If
we or our wholesale customers do not provide consumers with an attractive in-store experience, or if
we do not continue to provide an engaging and user-friendly digital commerce platform that attracts
consumers, our brand image and results of operations could be negatively impacted.

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
the last two quarters of the year, which historically has been our peak season. 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;

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
could adversely affect consumer confidence and spending or
interrupt production and
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 or in less preferred distribution channels, which
if we
could impair our brand image and have an adverse effect on gross margin.
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, lost sales, as well as damage to our reputation and retailer and
distributor relationships.

In addition,

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 or cause us not to achieve our
expected financial results.

Sales of performance products may not continue to grow or may decline, which could
negatively impact our sales and 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 or rather decline, our sales could be negatively impacted and we may not achieve our
expected financial results. In addition, 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
fragmented nature of
including those
specializing in products similar to ours and private label offerings of certain retailers, including some of
including
our retail customers. Many of our competitors have significant competitive advantages,
greater financial, distribution, marketing and other resources, 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
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:

the industry, we also compete with other manufacturers,

•

quickly adapting to changes in customer requirements or consumer preferences;

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 has been 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
in reductions in floor space in retail
competition by existing and future competitors could result
locations, reductions in sales or reductions in the prices of our products, and if retailers have better sell
through or 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
financial condition and results of
margin could have a material adverse effect on our business,
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 or engage in more promotional activity than we anticipate, 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. In addition, ongoing and sustained promotional activities could
negatively impact our brand image.

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
In addition, certain of our
raw materials can materially adversely affect our cost of goods sold.
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 raw materials 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 materials used in our products are technically advanced products developed by third
parties and may be available, in the short-term, from a very limited number of sources. Substantially all
of our products are manufactured by unaffiliated manufacturers, and, in 2017, 10 manufacturers
produced approximately 57% of our apparel and accessories products, and five produced
approximately 83% 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, 2017, 77% of our net revenues were earned in our North America segment.
We have limited experience with regulatory environments and market practices in certain regions
outside of North America, and may face difficulties in expanding to and successfully operating in those
markets. International expansion may place increased demands on our operational, managerial and
administrative resources and may be more costly than we expect. In addition, 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 developments and customers’ tastes and preferences. We may also
encounter difficulty expanding into new markets because of more 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 2017, our products were manufactured by 39 primary manufacturers, operating in 17 countries,
with 10 manufacturers accounting for approximately 57% of our apparel and accessories products, and
five produced approximately 83% of our footwear products. Approximately 61% 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.

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. 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.

Our credit agreement contains financial covenants, and both our credit agreement and debt
securities contain other restrictions on our actions, which could 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 and the issuance of debt securities. Our debt securities limit our ability to, subject to
certain significant exceptions, incur secured debt and engage in sale leaseback transactions. Our
credit agreement contains negative covenants that, subject to significant exceptions limit our ability,
among other things to incur additional
indebtedness, make restricted payments, pledge assets as
security, make investments,
loans, advances, guarantees and acquisitions, undergo 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. In February 2018, we amended
our credit agreement to increase our permitted leverage ratio during certain quarters in 2018. 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 under the credit agreement or our debt securities 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 (including our debt securities) 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. Our debt securities include
a cross acceleration provision which provides that the acceleration of certain other debt obligations
(including our credit agreement) will be considered an event of default under our debt securities and,
subject to certain time and notice periods, give bondholders the right to accelerate our debt securities.

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. Our credit ratings
have been downgraded previously, and we cannot assure that we will be able to maintain our current
ratings, which could increase our cost of borrowing in the future. 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 2017, 2016 and 2015, 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.

We generated approximately 27% of our consolidated net revenues outside 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
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 business could be negatively impacted if publicity diminishes the appeal of our brand to
consumers. For example, while we require our suppliers, manufacturers and licensees of our products
to operate their businesses in compliance with applicable laws and regulations as well as the social
and other standards and policies we impose on them, including our code of conduct, we do not control
their practices. A violation, or alleged violation of our policies, labor laws or other laws 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. These
and other types of negative publicity, especially through social media which potentially accelerates and
increases the scope of negative publicity, could negatively impact our brand image and result in
diminished loyalty to our brand. This could have a negative effect on our sales and results of
operations.

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
penalties or claims or be required to recall products, which could negatively impact our results of
operations and disrupt our ability to conduct our business, as well as damage our brand image with
consumers. In addition, the adoption of new regulations or changes in the interpretation of existing
regulations may result in significant unanticipated 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 severe weather conditions, 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 results of operations, as well as
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
a service interruption for a number of reasons,
including computer viruses, programming errors,
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 have a materially adverse impact on 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
interruption or attack. Consumers
mobile applications, and these systems face similar
increasingly utilize these services to purchase our products and to 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 services and the underlying
technical infrastructure, which incorporate complex software. If this software contains errors, bugs or

risk of

other vulnerabilities which impede or halt service, this could result in damage to our reputation and
brand, loss of users or loss of revenue.

Data security or privacy breaches could damage our reputation, cause us to incur additional
expense, expose us to litigation and adversely affect our business and results of operations.

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. We also rely on third parties for the operation of
certain of our e-commerce websites, and do not control these service providers. Hackers and data
thieves are increasingly sophisticated and operate large scale and complex automated attacks. Any
breach of our data security or that of our service providers could result in an unauthorized release or
transfer of customer, consumer, user or employee 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, which could negatively impact our
results of operations.

We must also comply with increasingly complex regulatory standards throughout

the world
enacted to protect personal
information and other data. Compliance with existing, proposed and
forthcoming laws and regulations can be costly and could negatively impact our profitability. In addition,
an inability to maintain compliance with these regulatory standards could result in a violation of data
privacy laws and regulations and subject us to litigation or other regulatory proceedings. This could
negatively impact our profitability, result in negative publicity and damage our brand image 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. The first phase of this
implementation became operational during 2017 in our North America, EMEA and Connected Fitness
operations, and we 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, implementation or application
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
deferred tax assets and liabilities, changes in tax laws and regulations or their interpretations and
application, the outcome of income tax audits in various jurisdictions around the world, and any

repatriation of non-U.S. earnings for which we have not previously provided for applicable withholding
tax, U.S. state income taxes, or foreign exchange rate impacts. 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.

The United States enacted the Tax Cuts and Jobs Act (the “Tax Act”) on December 22, 2017,
which had a significant impact to our provision for income taxes as of December 31, 2017. The Tax Act
includes a number of changes to existing U.S. tax laws that impact us, including the reduction of the
U.S. corporate income tax rate from 35 percent
tax years beginning after
December 31, 2017. The Tax Act also provides for a one-time transition tax on indefinitely reinvested
foreign earnings and the acceleration of depreciation for certain assets, as well as prospective changes
beginning in 2018, including the elimination of certain domestic deductions and credits, capitalization of
research and development expenditures, and limitations on the deductibility of executive compensation
and interest. The Tax Act transitions U.S. international taxation from a worldwide system to a modified
territorial system and includes base erosion prevention measures on non-U.S. earnings, which has the
effect of subjecting certain earnings of our foreign subsidiaries to U.S. taxation.

to 21 percent

for

The Tax Act requires complex computations to be performed that were not previously required
under U.S. tax law, significant judgments to be made in interpretation of the provisions of the Tax Act
and significant estimates in calculations, and the preparation and analysis of information not previously
relevant or regularly produced. The U.S. Treasury Department, the Internal Revenue Service, and
other standard-setting bodies could interpret or issue guidance on how provisions of the Tax Act will be
applied or otherwise administered that is different from our interpretation. As we complete our analysis
of the Tax Act, review all information, collect and prepare necessary data, and interpret any additional
guidance, we may make adjustments to provisional amounts that we have recorded, which could have
a material adverse effect on our business, results of operations or financial condition.

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 to support
our digital strategy. 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.
funds from other potential
Infrastructure investments may also divert
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

in harm to key customer
relationships,
unanticipated recruitment and training costs.

loss of key information, expertise or know-how and

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 profitably grow our business and manage our operations, 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
If we are unable to attract, assimilate and retain
experience similar difficulties in the future.
management and other employees with the necessary skills, we may not be able to grow or
successfully operate our business and achieve our long term objectives.

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
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, including our digital 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, litigation and investigations that could result in unexpected
expenses and have an adverse effect on our business, financial condition and results of
operations.

Given the size and extent of our global operations, we are involved in a variety of litigation,
arbitration and other legal proceedings and subject to investigations, audits, inquiries and similar
actions, including matters related to commercial disputes, intellectual property, employment, securities,
class action and product liability, as well as trade, regulatory and other claims related to our business
and our industry. These matters include those contained in Note 7 to our consolidated financial
statements included in Part II, Item 8 of this Annual Report on Form 10-K. Legal proceedings in
general, and securities and class action litigation and investigations in particular, can be expensive and
disruptive. Any of our legal proceedings could result in damages, fines or other penalties, divert
financial and management resources and result
the
outcome of any particular proceeding, and the costs incurred in these matters can be substantial,
regardless of the outcome. 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.

fees. We cannot predict

in significant

legal

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 non-voting Class C common stock has traded at a discount to 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.

ITEM 2.

PROPERTIES

The following includes a summary of

the principal properties that we own or lease as of

December 31, 2017.

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 located close to our
corporate office complex, to be utilized to expand our corporate headquarters to accommodate our
future growth needs. For our European headquarters, we lease an office in Amsterdam,
the
Netherlands, and we maintain an international management office in Panama. For our Greater China
headquarters, we lease an office in Shanghai, China. 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 2019. 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, 2017, we leased 295 brand and factory house stores located
primarily in the United States, Brazil, Canada, China, Chile and Mexico with lease end dates in 2018
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 7 to our Consolidated Financial Statements for information on certain
legal proceedings, which is incorporated by reference herein.

Executive Officers of the Registrant

Our executive officers are:

Name

Age Position

Kevin A. Plank . . . . . . . . . . . . . . . .

45 Chief Executive Officer and Chairman of the Board

David E. Bergman . . . . . . . . . . . . .

45 Chief Financial Officer

Colin Browne . . . . . . . . . . . . . . . . .

54 Chief Supply Chain Officer

Kerry D. Chandler . . . . . . . . . . . . .

53 Chief Human Resources Officer

Kevin Eskridge . . . . . . . . . . . . . . .

41 Chief Product Officer

Paul Fipps . . . . . . . . . . . . . . . . . . .

45 Chief Technology Officer

Patrik Frisk . . . . . . . . . . . . . . . . . .

55 President and Chief Operating Officer

Jason LaRose . . . . . . . . . . . . . . . .

44 President of North America

Karl-Heinz Maurath . . . . . . . . . . . .

56 Chief Revenue Officer

John Stanton . . . . . . . . . . . . . . . . .

57 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 Chief Financial Officer in November 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, and acting Chief Financial Officer from February 2017 to
November 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 the Chief Supply Chain Officer since July 2017. Prior to that, he served as
President of Global Sourcing from September 2016 to June 2017. 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.

Kevin Eskridge has been Chief Product Officer since May 2017, with oversight of the Company’s
category management model, product, merchandising and design functions. Mr. Eskridge joined our
Company in 2009 and has served in various leadership roles including Senior Director, Outdoor from
September 2009 to September 2012, Vice President, China from October 2012 to April 2015, Senior
Vice President, Global Merchandising from May 2015 to June 2016 and President, Sports Performance
from July 2016 to April 2017. Prior
to joining our Company, he served as Vice President,
Merchandising of Armani Exchange from 2006 to 2009.

Paul Fipps has been Chief Technology Officer since July 2017. Prior to that, he served as Chief
Information Officer from March 2015 and Executive Vice President of Global Operations from
September 2016 to June 2017 and 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.

Patrik Frisk has been President and Chief Operating Officer since July 2017. Prior to joining our
Company, he served as Chief Executive Officer for The ALDO Group from November 2014 to April
2017. Prior thereto, he spent 10 years with VF Corporation where he served as Coalition President of
lucy® and
Outdoor Americas with responsibility for The North Face®, Timberland®, JanSport®,
SmartWool® brands from April 2014 to November 2014, President of Timberland from September 2011
to March 2014, President of Outdoor and Action Sports, EMEA with responsibility for The North Face®,
Vans®, JanSport® and Reef® brands from August 2009 to August 2011 and other leadership positions
from 2004 to 2009. Before VF Corporation, he ran his own retail business in Scandinavia and held
senior positions with Peak Performance and W.L. Gore & Associates.

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.

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. On
February 28, 2018, we announced Mr. Maurath plans to retire effective March 31, 2018.

John Stanton has been 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 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.

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, 2018,
there were 1,524 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. The following table sets forth by quarter
the high and low sale prices of our Class A Common Stock on the NYSE during 2017 and 2016.

2017

First Quarter (January 1 – March 31)
Second Quarter (April 1 – June 30)
Third Quarter (July 1 – September 30)
Fourth Quarter (October 1 – December 31)

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

$31.06
23.46
22.37
17.61

$18.40
18.35
15.92
11.40

$43.42
47.95
44.68
39.20

$31.62
35.35
37.23
29.00

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 2017 and 2016.

2017

First Quarter (January 1 – March 31)
Second Quarter (April 1 – June 30)
Third Quarter (July 1 – September 30)
Fourth Quarter (October 1 – December 31)

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

$27.64
21.81
20.60
16.02

$17.05
17.21
14.80
10.36

—
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.

Dividends

No cash dividends were declared or paid during 2017 or 2016 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 6 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

3,240,620

$11.09

10,593,082

Class C

11,270,848

$13.86

16,724,610

Class A

2,079,385

$ 4.66

Class C

2,394,352

$ 4.59

—

Plan Category

Equity compensation plans
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 7.9 million shares of our Class A Common Stock and 15.5 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
1.2 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 12 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

as partial consideration for footwear promotional rights, and 159.4 thousand shares of our Class A
Common Stock and 460.3 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 12 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, 2012 through December 31, 2017. The
graph assumes an initial investment of $100 in Under Armour and each index as of December 31,
2012 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 2017

S
R
A
L
L
O
D

350.00

300.00

250.00

200.00

150.00

100.00

50.00

0.00

12/31/2012

12/31/2013

12/31/2014

12/31/2015

12/31/2016

12/31/2017

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 &

12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017

$100.00 $179.97 $279.97 $332.32 $231.84 $115.16
$100.00 $132.39 $150.51 $152.59 $170.84 $208.14

Luxury Goods

$100.00 $124.93 $126.16 $ 96.17 $ 85.31 $102.77

ITEM 6.

SELECTED FINANCIAL DATA

The following selected financial data is qualified by reference to, and should be read in conjunction
with, the Consolidated Financial Statements, including the notes thereto, and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-K.

Year Ended December 31,

(In thousands, except per share amounts)
Net revenues
Cost of goods sold
Gross profit

Selling, general and administrative

expenses

Restructuring and impairment charges

Income from operations

Interest expense, net
Other expense, net

Income (loss) before income taxes

Provision for income taxes
Net income (loss)

Adjustment payment to Class C
Net income (loss) available to all

stockholders

Net income available per common

Basic net income (loss) per share of
Class A and B common stock
Basic net income (loss) per share of

Class C common stock

Diluted net income (loss) per share of

Class A and B common stock

Diluted net income (loss) per share of

Class C common stock

Weighted average common shares

outstanding Class A and B
common stock

Basic
Diluted

Weighted average common shares

outstanding Class C common stock

Basic
Diluted
Dividends declared

2017

2016

2015
$4,976,553 $4,825,335 $3,963,313 $3,084,370 $2,332,051
2,737,830 2,584,724 2,057,766 1,572,164 1,195,381
2,238,723 2,240,611 1,905,547 1,512,206 1,136,670

2013

2014

2,086,831 1,823,140 1,497,000 1,158,251

871,572

124,049
27,843
(34,538)
(3,614)
(10,309)
37,951
(48,260)

—

417,471
(26,434)
(2,755)
388,282
131,303
256,979

408,547
(14,628)
(7,234)
386,685
154,112
232,573

353,955
(5,335)
(6,410)
342,210
134,168
208,042

265,098
(2,933)
(1,172)
260,993
98,663
162,330

—

59,000

—

$ (48,260) $ 197,979 $ 232,573 $ 208,042 $ 162,330

(0.11) $

0.45 $

0.54 $

0.49 $

(0.11) $

0.72 $

0.54 $

0.49 $

(0.11) $

0.45 $

0.53 $

0.47 $

(0.11) $

0.71 $

0.53 $

0.47 $

0.39

0.38

219,254
219,254

217,707
221,944

215,498
220,868

213,227
219,380

210,696
215,958

221,475
221,475

218,623
222,904

215,498
220,868

213,227
219,380

— $

59,000 $

— $

210,686
215,958

—

At December 31,

(In thousands)
Cash and cash equivalents
Working capital (1)
Inventories
Total assets
Total debt, including current

maturities

Total stockholders’ equity

2016

2017

2015
$ 312,483 $ 250,470 $ 129,852 $ 593,175 $ 347,489
702,181
1,019,953
469,006
783,031
1,576,369
2,865,970

1,279,337
917,491
3,644,331

1,127,772
536,714
2,092,428

1,277,304
1,158,548
4,006,367

2013

2014

917,046

151,551
$2,018,642 $2,030,900 $1,668,222 $1,350,300 $1,053,354

666,070

281,546

817,388

(1) Working capital is defined as current assets minus current liabilities.

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.

Our net revenues grew to $4,976.6 million in 2017 from $2,332.1 million in 2013. 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. Our long-term growth strategy is focused on
increased sales of our products through ongoing product innovation, investment in our distribution
channels and international expansion. While we plan to continue to invest in growth, we also plan to
improve efficiencies throughout our business as we seek to gain scale through our operations and
return on our investments.

Financial highlights for full year 2017 as compared to the prior year period include:

• Net revenues increased 3%.

• Wholesale revenue decreased 3% and Direct-to-Consumer revenues increased 14%.

• Apparel, footwear and accessories revenue increased 2%, 3% and 10%, respectively.

• Revenue in our North America segment decreased 5%. Revenue in our Asia-Pacific, EMEA
and Latin America segments grew 61%, 42% and 28%, respectively, with 11% growth in our
Connected Fitness segment.

• Selling, general and administrative expense increased 14%.

• Gross margin decreased 140 basis points.

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
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 or negatively impact our financial results, including,
among others, the risk of general economic or market conditions that could affect consumer spending and
the financial health of our retail customers. Additionally, we may not be able to successfully execute on our
long-term strategies, or successfully manage the increasingly complex operations of our global business
effectively. Although we have announced restructuring plans, we may not fully realize the expected benefits
of these plans or other operating or cost-saving initiatives. In addition, 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.

Recent Developments

On July 27, 2017, our Board of Directors approved a restructuring plan (the “2017 restructuring
plan”) to more closely align our financial resources with the critical priorities of our business. After
completion of the 2017 restructuring plan, we recognized approximately $100.4 million of pre-tax charges
in connection with this plan. In addition to these charges, we also recognized restructuring related
goodwill impairment charges of approximately $28.7 million for our Connected Fitness business.

On February 9, 2018, our Board of Directors approved an additional restructuring plan (the “2018
restructuring plan”) identifying further opportunities to optimize operations. In conjunction with the 2018
restructuring plan, approximately $110 to $130 million of pre-tax restructuring and related charges are
expected to be incurred during our 2018 fiscal year, including:

• Up to $105.0 million in cash charges, consisting of up to: $55.0 million in facility and lease
terminations and $50.0 million in contract termination and other restructuring charges; and

• Up to $25.0 million in non-cash charges comprised of approximately $10.0 million of inventory
intangibles and other asset related

related charges and approximately $15.0 million of
impairments.

The United States enacted the Tax Cuts and Jobs Act (the “Tax Act”) on December 22, 2017. The
new legislation contains several key tax provisions that affect us and, as required, we have included
reasonable estimates of the income tax effects of the changes in tax law and tax rate in our 2017
financial results. These changes include a one-time mandatory transition tax on indefinitely reinvested
foreign earnings and a re-measuring of deferred tax assets, resulting in an increase to our provision for
income taxes of $38.8 million. Since the Tax Act was passed late in the fourth quarter of 2017, we
consider the accounting for the transition tax, deferred tax re-measurements, and other items to be
provisional as the charge may be adjusted due to changes in interpretations and assumptions we have
made, guidance that may be issued, and actions we may take as a result of the tax legislation. We
expect to finalize our estimates within the one-year measurement period allowed by the SEC.

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 $101.5 million, $89.9 million and $63.7 million for the years
ended December 31, 2017, 2016 and 2015, respectively.

Our selling, general and administrative expenses consist of costs related to marketing, selling,
product innovation and supply chain and corporate services. We consolidate our selling, general and
administrative expenses into two primary categories: marketing and other, which includes our selling,
product innovation and supply chain and corporate services categories. Personnel costs are included
in these categories based on the employees’ function. Personnel costs include salaries, benefits,
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, league,
team, player and event sponsorships and depreciation expense specific to our in-store fixture program.

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
Restructuring and impairment charges

Income from operations

Interest expense, net
Other expense, net

Income (loss) before income taxes

Provision for income taxes

Net income (loss)
Adjustment payment to Class C capital

Year Ended December 31,

2017

2016

2015

$4,976,553
2,737,830

$4,825,335
2,584,724

$3,963,313
2,057,766

2,238,723
2,086,831
124,049

2,240,611
1,823,140

—

1,905,547
1,497,000

—

27,843
(34,538)
(3,614)

(10,309)
37,951

417,471
(26,434)
(2,755)

388,282
131,303

408,547
(14,628)
(7,234)

386,685
154,112

$ (48,260)

$ 256,979

$ 232,573

stockholders

—

59,000

—

Net income (loss) available to all stockholders

$ (48,260)

$ 197,979

$ 232,573

(As a percentage of net revenues)

Net revenues
Cost of goods sold

Gross profit

Selling, general and administrative expenses
Restructuring and impairment charges

Income from operations

Interest expense, net
Other expense, net

Income (loss) before income taxes

Provision for income taxes

Net income (loss)
Adjustment payment to Class C capital

stockholders

Net income (loss) available to all stockholders

Year Ended December 31,

2017

2016

2015

100.0%
55.0

100.0%
53.6

100.0%
51.9

45.0
41.9
2.5

0.6
(0.7)
(0.1)

(0.2)
0.8

(1.0)

—

(1.0)%

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%

Consolidated Results of Operations

Year Ended December 31, 2017 Compared to Year Ended December 31, 2016

Net revenues increased $151.2 million, or 3.1%, to $4,976.6 million in 2017 from $4,825.3 million

in 2016. 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,

2017

2016

$ Change

% Change

$3,287,121
1,037,840
445,838

$3,229,142
1,010,693
406,614

4,770,799
116,575
89,179

—

4,646,449
99,849
80,447
(1,410)

$ 57,979
27,147
39,224

124,350
16,726
8,732
1,410

1.8%
2.7
9.6

2.7
16.8
10.9
(100.0)

Total net revenues

$4,976,553

$4,825,335

$151,218

3.1%

The increase in net sales was driven primarily by:

• Apparel unit sales growth in multiple categories led by men’s and women’s training and golf;

and

• Accessories unit sales growth in multiple categories led by men’s training; and

• Footwear unit sales growth in multiple categories led by running.

License revenues increased $16.7 million, or 16.8%, to $116.6 million in 2017 from $99.8 million in
2016. This increase in license revenues was driven primarily by increased distribution of our licensed
products in North America .

Connected Fitness revenue increased $8.8 million, or 10.9%,

to $89.2 million in 2017 from
$80.4 million in 2016 primarily driven by increased subscribers on our fitness applications and higher
licensing revenue.

Gross profit decreased $1.9 million to $2,238.7 million in 2017 from $2,240.6 million in 2016.
Gross profit as a percentage of net revenues, or gross margin, decreased 140 basis points to 45.0% in
2017 compared to 46.4% in 2016. The decrease in gross margin percentage was primarily driven by
the following:

•

an approximate 190 basis point decrease due to inventory management efforts including
higher promotions and increased air freight; and

an approximate 20 basis point decrease due to our international business representing a
higher percentage of sales;

The above decreases were partially offset by:

•

an approximate 50 basis point increase driven primarily by favorable product input costs; and

an approximate 30 basis point
increased sales in our direct-to-consumer channel.

increase driven primarily by favorable channel mix with

With the exception of favorable product input costs and channel mix, we do not expect these

trends to have a material impact on 2018.

Selling, general and administrative expenses increased $263.7 million to $2,086.8 million in 2017
from $1,823.1 million in 2016. As a percentage of net revenues, selling, general and administrative
expenses increased to 41.9% in 2017 from 37.8% in 2016. Selling, general and administrative expense
was impacted by the following:

• Marketing costs increased $87.6 million to $565.1 million in 2017 from $477.5 million in 2016.
This increase was primarily due to increased marketing spend in connection with the growth
of our international business and in connection with our collegiate and professional athlete
sponsorships. As a percentage of net revenues, marketing costs increased to 11.4% in 2017
from 9.9% in 2016.

• Other costs increased $176.1 million to $1,521.7 million in 2017 from $1,345.6 million in 2016.
This increase was primarily driven by higher costs incurred for the continued expansion of our
direct to consumer distribution channel and international business. This increase was partially
offset by savings from our 2017 restructuring plan. As a percentage of net revenues, other
costs increased to 30.6% in 2017 from 27.9% in 2016.

Income from operations decreased $389.6 million, or 93.3%,

to $27.8 million in 2017 from
$417.5 million in 2016. Income from operations as a percentage of net revenues decreased to 0.6% in
Income from operations for the year ended December 31, 2017 was
2017 from 8.6% in 2016.
negatively impacted by $124.0 million of restructuring and impairment charges in connection with the
2017 restructuring plan.

Interest expense, net increased $8.1 million to $34.5 million in 2017 from $26.4 million in 2016.
increase of $99.7 million in total debt

This increase was primarily due to interest on the net
outstanding.

Other expense, net increased $0.9 million to $3.6 million in 2017 from $2.8 million in 2016. This
increase was due to lower 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 $93.3 million to $38.0 million in 2017 from $131.3 million in
2016. Our effective tax rate was (368.2)% in 2017 compared to 33.8% in 2016. Our effective tax rate

for 2017 was lower than the effective tax rate for 2016 primarily due to the significant decrease in
income before taxes, the impact of tax benefits recorded on losses in the United States, and reductions
in our total liability for unrecognized tax benefits as a result of a lapse in the statute of limitations during
the current period. These benefits were offset by the impact of the Tax Act, non-deductible goodwill
impairment charges, and the recording of certain valuation allowances.

Our provision for income taxes in 2017 included $38.8 million of income tax expense as a result of
the Tax Act, including a $13.9 million charge for our provisional estimate of the transition tax and
$24.9 million for the provisional re-measurement of our deferred tax assets for the reduction in the U.S.
corporate income tax rate from 35 percent to 21 percent.

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 revenues
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 in multiple categories led by training, golf and basketball; and

• Footwear unit sales growth, led by running and basketball.

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.

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;

approximate 70 basis point decrease driven by negative sales mix primarily driven by the
continued strength of our accelerated footwear growth; and

approximate 40 basis point decrease due to strengthening of
impacting our gross margins within our business outside the United States.

the U.S. dollar negatively

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; and

approximate 40 basis point increase driven primarily by lower air freight costs.

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 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. Additionally, we incurred $17.0 million in expenses
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. 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.

Segment Results of Operations

The net revenues and operating income (loss) associated with our segments are summarized in
the following tables. Intersegment revenue is generated by Connected Fitness which runs advertising
campaigns for other segments.

Year Ended December 31, 2017 Compared to Year Ended December 31, 2016

Net revenues by segment are summarized below:

(In thousands)

2017

2016

$ Change

% Change

Year Ended December 31,

North America
EMEA
Asia-Pacific
Latin America
Connected Fitness
Intersegment Eliminations

$3,802,406
469,997
433,647
181,324
89,179

—

$4,005,314
330,584
268,607
141,793
80,447
(1,410)

$(202,908)
139,413
165,040
39,531
8,732
1,410

(5.1)%
42.2
61.4
27.9
10.9
100.0

Total net revenues

$4,976,553

$4,825,335

$ 151,218

3.1%

The increase in total net revenues was driven by the following:

• Net

revenues in our North America operating segment decreased $202.9 million to
$3,802.4 million in 2017 from $4,005.3 million in 2016 primarily due to lower sales in our
wholesale channel driven by lower demand.

• Net revenues in our EMEA operating segment increased $139.4 million to $470.0 million in
2017 from $330.6 million in 2016 primarily due to unit sales growth to wholesale partners in
Germany and the United Kingdom and our our first full year of sales in Russia.

• Net revenues in our Asia-Pacific operating segment increased $165.0 million to $433.6 million
in 2017 from $268.6 million in 2016 primarily due to growth in our direct-to-consumer channel.

• Net

revenues in our Latin America operating segment

increased $39.5 million to
$181.3 million in 2017 from $141.8 million in 2016 primarily due to unit sales growth to
wholesale partners and through our direct to consumer channels in Mexico, Chile, and Brazil.

• Net

revenues in our Connected Fitness operating segment

increased $8.7 million to
$89.2 million in 2017 from $80.4 million in 2016 primarily driven by increased subscribers on
our fitness applications and higher licensing revenue.

Operating income (loss) by segment is summarized below. The majority of corporate expenses

within North America have not been allocated to our other segments.

(In thousands)

North America
EMEA
Asia-Pacific
Latin America
Connected Fitness

Year Ended December 31,

2017

2016

$ Change

% Change

$ 20,179
17,976
82,039
(37,085)
(55,266)

$408,424
11,420
68,338
(33,891)
(36,820)

$(388,245)
6,556
13,701
(3,194)
(18,446)

(95.1)%
57.4
20.0
(9.4)
(50.1)

Total operating income

$ 27,843

$417,471

$(389,628)

(93.3)%

The decrease in total operating income was driven by the following:

• Operating income in our North America operating segment decreased $388.2 million to
$20.2 million in 2017 from $408.4 million in 2016 primarily due to the decreases in net sales
and gross margins discussed above and $63.2 million in restructuring and impairment
charges.

• Operating income in our EMEA operating segment increased $6.6 million to $18.0 million in
2017 from $11.4 million in 2016 primarily due to sales growth discussed above, which was
partially offset by continued investment in operations.

• Operating income in our Asia-Pacific operating segment

increased $13.7 million to
$82.0 million in 2017 from $68.3 million in 2016 primarily due to sales growth discussed
above. 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 $3.2 million to $37.1 million
in 2017 from $33.9 million in 2016 primarily due to $11.5 million in restructuring and
impairment charges. This increase in operating loss was offset by sales growth discussed
above.

• Operating loss in our Connected Fitness segment increased $18.4 million to $55.3 million in
2017 from $36.8 million in 2016 primarily due to $47.8 million in restructuring and impairment
charges. This increase in operating loss was offset by sales growth discussed above and
savings from our 2017 restructuring plan.

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 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 and partner doors in our wholesale
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.

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
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.

Seasonality

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)

3/31/2016

6/30/2016

9/30/2016

12/31/2016 3/31/2017

6/30/2017

9/30/2017

12/31/2017

Quarter Ended (unaudited)

Net revenues
Gross profit
Marketing SG&A

expenses
Other SG&A
expenses

Restructuring and
impairment
charges

Income (loss) from

$1,047,702 $1,000,783 $1,471,573 $1,305,277 $1,117,331 $1,088,245 $1,405,615 $1,365,362
589,704

698,624

583,704

477,647

480,636

645,350

498,246

505,423

122,483

107,835

139,517

107,665

128,336

136,071

143,919

156,800

323,270

350,434

359,797

312,139

369,552

363,860

354,254

434,039

—

3,100

84,997

35,952

operations

34,883 $

19,378 $ 199,310 $ 163,900 $

7,536 $

(4,785) $

62,180 $ (37,088)

(As a percentage of
annual totals)

Net revenues
Gross profit
Marketing SG&A

expenses
Other SG&A
expenses

Restructuring and
impairment
charges

Income (loss) from

operations

21.7%
21.5%

20.7%
21.3%

30.5%
31.2%

27.1%
26.1%

22.5%
22.6%

21.9%
22.3%

28.2%
28.8%

27.4%
26.3%

25.7%

22.6%

29.2%

22.5%

22.7%

24.1%

25.5%

27.7%

24.0%

26.0%

26.7%

23.2%

24.3%

23.9%

23.3%

28.5%

— %

2.5%

68.5%

29.0%

8.4%

4.6%

47.7%

39.3%

27.1%

(17.2)% 223.3% (133.2)%

Financial Position, Capital Resources and Liquidity

Our cash requirements have principally been for working capital and capital expenditures. We fund
our working capital, primarily inventory, and capital
investments from cash flows from operating
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
leasehold improvements to our new brand and factory house stores, and
support our growth,
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,
including our new global operating and
financial reporting information technology system, 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
could adversely affect our ability to obtain additional capital to grow our business on terms acceptable
to us or at all.

At December 31, 2017, $158.7 million, or approximately 50.8%, of cash and cash equivalents was
held by our foreign subsidiaries. Based on the capital and liquidity needs of our foreign operations, 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.

The Tax Act provided for a one-time transition tax on indefinitely reinvested foreign earnings to
transition U.S. international taxation from a worldwide system to a modified territorial system. We
recorded a provisional
tax liability of $13.9 million relating to the one-time transition tax on our
indefinitely reinvested foreign earnings. If we were to repatriate indefinitely reinvested foreign funds, we
would not be subject to additional U.S. federal income tax, however, we would be required to accrue
and pay any applicable withholding tax and U.S. state income tax liabilities and record foreign
exchange rate impacts.

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):

Year Ended December 31,

2017

2016

2015

Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash and

cash equivalents

$ 234,063
(282,987)
106,759

$ 364,368
(381,139)
146,114

$ 14,541
(847,475)
381,433

4,178

(8,725)

(11,822)

Net increase (decrease) in cash and cash

equivalents

$ 62,013

$ 120,618

$(463,323)

Operating Activities

Operating activities consist primarily of net

income adjusted for certain non-cash items.
income for non-cash items include depreciation and amortization, unrealized
Adjustments to net
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 decreased $130.3 million to $234.1 million in 2017
from $364.4 million in 2016. The decrease in cash from operating activities was primarily due to a
decrease in net income of $305.2 million. This decrease was partially offset by a smaller decrease in
accounts receivable of $170.1 million.

Cash flows provided by operating activities increased $349.8 million to $364.4 million in 2016 from
$14.6 million in 2015. The increase in cash from operating activities was due to increased net cash
flows from operating assets and liabilities of $325.4 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

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.

Investing Activities

Cash used in investing activities decreased $98.2 million to $283.0 million in 2017 from

$381.1 million in 2016, primarily due lower capital expenditures in 2017.

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.

Total capital expenditures were $274.9 million, $405.5 million, and $325.5 in 2017, 2016 and

2015, respectively. Capital expenditures for 2018 are expected to be approximately $225.0 million.

Financing Activities

Cash provided by financing activities decreased $39.4 million to $106.8 million in 2017 from
$146.1 million in 2016. This decrease was primarily due to lower borrowing on our revolving credit
facility.

Cash provided by financing activities decreased $235.3 million to $146.1 million in 2016 from
$381.4 million in 2015. This decrease was primarily due to higher repayments on our revolving credit
facility, partially offset by the issuance of senior notes in 2016.

Credit Facility

We are 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, 2017 the outstanding balance under the revolving credit facility was $125.0 million and
$161.3 million of term loan borrowings remained outstanding.

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 $4.5 million of
letters of credit outstanding as of December 31, 2017.

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, 2017, we were in compliance with these ratios. In February 2018, we amended the
credit agreement to amend the definition of consolidated EBITDA, and to provide that our trailing four-
quarter consolidated leverage ratio may not exceed 3.75 to 1.00 for the four quarters ended June 30,
2018, and 4.00 to 1.00 for the four quarters ended September 30, 3018. Beginning with the four
quarters ended December 31, 2018 and thereafter, the consolidated leverage ratio requirement will
return to 3.25 to 1.00. 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 2.2% and 1.6% during the years ended December 31, 2017 and 2016, 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, 2017, the commitment fee was 17.5 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.

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 outstanding balance on the loan was
the property. As of December 31, 2017 and 2016,
$40.0 million and $42.0 million, respectively. The weighted average interest rate on the loan was 2.5%
and 2.0% for the years ended December 31, 2017 and 2016, respectively.

Interest expense, net was $34.5 million, $26.4 million, and $14.6 million for the years ended
December 31, 2017, 2016 and 2015, 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 $1.3 million,
$1.2 million, and $0.8 million for the years ended December 31, 2017, 2016 and 2015, 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, 2017. The operating leases generally contain renewal provisions for
varying periods of time. Our significant contractual obligations and commitments as of December 31,
2017 as well as significant agreements entered into during the period after December 31, 2017 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

$ 980,585 $
1,489,469
1,093,665
1,170,848

51,925
140,257
1,093,665
150,428

$134,932
297,759

$125,478
279,406

$ 668,250
772,047

—

261,191

241,493

517,736

Total

$4,734,567 $1,436,275

$693,882

$646,377

$1,958,033

(1)

(2)

Includes estimated interest payments based on applicable fixed and currently effective floating
interest rates as of December 31, 2017, 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 $15.5 million for the year ended December 31, 2017.

(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

(4)

open production purchase orders with our manufacturers for our apparel,
footwear and
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, 2017.
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 $54.4 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 10 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
part of management
in its application. Our estimates are often based on complex judgments,
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, 2017.

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, 2017 and 2016, there were $246.6 million and $146.2 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, 2017 and 2016, the allowance for
doubtful accounts was $19.7 million and $11.3 million, respectively.

Inventory Valuation and Reserves

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.

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, 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, we perform the goodwill impairment test. We compare 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
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, goodwill is impaired to the extent that the carrying value exceeds the fair value of the
reporting unit. We perform our annual impairment tests in the fourth quarter of each fiscal year.

include: our weighted average cost of capital,

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.

A significant portion of our deferred tax assets relate to U.S. federal and state taxing jurisdictions.
Realization of these deferred tax assets is dependent on future U.S. pre-tax earnings. Due to our
challenged U.S. results we incurred significant net operating losses (“NOLs”) in these jurisdictions in
2017. Based on these factors, we have evaluated our ability to utilize these deferred tax assets in
future years. In evaluating the recoverability of these deferred tax assets at December 31, 2017, we

have considered all available evidence, both positive and negative, including but not limited to the
following:

Positive

• Availability of taxable income in the U.S. federal and certain state NOL carryback periods;

• U.S. federal NOLs have an indefinite carryforward period, beginning in 2018 pursuant to the

Tax Act;

• Definite lived tax attributes with relatively long carryforward periods; a majority from 10 to 20

years;

• No history of U.S. federal and state tax attributes expiring unused;

• Three year cumulative U.S. federal and state pre-tax income;

• Relative low values of pre-tax income required to realized deferred tax assets relative to

historic income levels;

• Restructuring plans being undertaken to improve profitability;

• Availability of prudent and feasible tax planning strategies.

Negative

•

Inherent challenges in forecasting future pre-tax earnings which rely on improved profitability
from our restructuring efforts;

• The continuing challenge of changes in the U.S. consumer retail business environment;

• While relatively long, existence of definite lived tax attributes of certain U.S. federal tax credits

and state NOLs;

As of December 31, 2017, we believe that the weight of the positive evidence outweighs the
negative evidence regarding the realization of the majority of the net deferred tax assets. We will
continue to evaluate our ability to realize our net deferred tax assets on a quarterly basis.

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
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, 2017, we had
$87.7 million of unrecognized compensation expense expected to be recognized over a weighted
average period of 3.2 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, 2017.

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 revenue and operating income
targets related to the performance-based restricted stock units and stock options granted in 2017 were
not deemed probable as of December 31, 2017. Additional stock-based compensation expense of up
to $5.7 million would have been recorded from grant date through 2017 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 12 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 during the 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
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, 2017, the aggregate notional value of our outstanding foreign currency
contracts was $601.0 million, which was comprised of Canadian Dollar/U.S. Dollar, Euro/U.S. Dollar,
Mexican Peso/U.S. Dollar, Yen/U.S. Dollar, Mexican Peso/Euro and South Korean Won/U.S. Dollar.
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. We enter 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, 2017 and 2016, we reclassified
$0.4 million and $0.3 million, respectively, from other comprehensive income to cost of goods sold

related to foreign currency contracts designated as cash flow hedges. The fair value of our foreign
currency contracts was a liability of $6.8 million as of December 31, 2017 and was included in other
current liabilities on the consolidated balance sheet. The fair value of our foreign currency contracts
was an asset of $15.2 million as of December 31, 2016 and was included in prepaid expenses and
other current assets on the consolidated balance sheet. Refer to Note 9 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)

Unrealized foreign currency exchange rate gains

(losses)

Realized foreign currency exchange rate gains (losses)
Unrealized derivative gains (losses)
Realized derivative gains (losses)

Year Ended December 31,

2017

2016

2015

$ 29,246
611
(1,217)
(26,537)

$(12,627)
(6,906)
729
15,192

$(33,359)
7,643
388
16,404

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.
institutions and consider the risk of
However, we monitor the credit quality 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.

As of December 31, 2017, the aggregate notional value of our outstanding interest rate swap
contracts was $135.6 million. During the years ended December 31, 2017 and 2016, we recorded a
$0.9 million and $2.0 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 an asset of $1.1 million as of December 31, 2017 and was
included in other long term assets on the consolidated balance sheet. The fair value of the interest rate
swap contracts was a liability of $0.4 million as of December 31, 2016 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, 2017. 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.

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, 2017.

the documentation of controls, evaluation of

The effectiveness of our internal control over financial reporting as of December 31, 2017, 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 28, 2018

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Under Armour, Inc.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Under Armour, Inc. and its
subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of
operations, comprehensive income (loss), stockholders’ equity and of cash flows for each of the three
years in the period ended December 31, 2017, including the related notes and financial statement
schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated
financial statements”). We also have audited the Company’s internal control over financial reporting as
of December 31, 2017, based on criteria established in Internal Control—Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of
their operations and their cash flows for each of the three years in the period ended December 31,
2017 in conformity with accounting principles generally accepted in the United States of America. Also
in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2017, based on criteria established in Internal Control—Integrated
Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the

manner in which it accounts for share-based payment awards in 2017.

Basis for Opinions

financial

The Company’s management

internal control over financial reporting,

is responsible for these consolidated financial statements,
its assessment of
reporting, and for

for
maintaining effective internal control over
the
included in the accompanying Report of
effectiveness of
Management on Internal Control over Financial Reporting. Our responsibility is to express opinions on
the Company’s consolidated financial statements and on the Company’s internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards
require that we plan and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement, whether due to error or fraud, and
whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the
risks of material misstatement of the consolidated financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.

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.

Definition and Limitations of Internal Control over Financial Reporting

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 28, 2018

We have served as the Company’s auditor since 2003.

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

Revolving credit facility, current
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, 2017, and 2016; 185,257,423
shares issued and outstanding as of December 31, 2017, and
183,814,911 shares issued and outstanding as of December 31,
2016.

Class B Convertible Common Stock, $0.0003 1/3 par value;

34,450,000 shares authorized, issued and outstanding as of
December 31, 2017, and December 31, 2016.

Class C Common Stock, $0.0003 1/3 par value; 400,000,000 shares

authorized as of December 31, 2017, and 2016; 222,375,079
shares issued and outstanding as of December 31, 2017, and
220,174,048 shares issued and outstanding as of December 31,
2016.

Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss

Total stockholders’ equity
Total liabilities and stockholders’ equity

See accompanying notes.

December 31,
2017

December 31,
2016

$ 312,483
609,670
1,158,548
256,978

2,337,679
885,774
555,674
46,995
82,801
97,444
$4,006,367

$ 250,470
622,685
917,491
174,507

1,965,153
804,211
563,591
64,310
136,862
110,204
$3,644,331

$ 125,000
561,108
296,841
27,000
50,426

1,060,375
765,046
162,304

—

409,679
208,750
27,000
40,387

685,816
790,388
137,227

1,987,725

1,613,431

74
872,266
1,184,441
(38,211)

73
823,484
1,259,414
(52,143)

2,018,642
$4,006,367

2,030,900
$3,644,331

Under Armour, Inc. and Subsidiaries

Consolidated Statements of Operations
(In thousands, except per share amounts)

Net revenues
Cost of goods sold

Gross profit

Selling, general and administrative expenses
Restructuring and impairment charges

Income from operations

Interest expense, net
Other expense, net

Income (loss) before income taxes

Income tax expense

Net income (loss)

Year Ended December 31,

2017

2016

2015

$4,976,553 $4,825,335 $3,963,313
2,057,766
2,584,724

2,737,830

2,238,723
2,086,831
124,049

2,240,611
1,823,140

1,905,547
1,497,000

—

27,843
(34,538)
(3,614)

(10,309)
37,951

417,471
(26,434)
(2,755)

388,282
131,303

(48,260)

256,979

408,547
(14,628)
(7,234)

386,685
154,112

232,573

Adjustment payment to Class C capital stockholders

—

59,000

—

Net income (loss) available to all stockholders

(48,260)

197,979

232,573

Basic net income (loss) per share of Class A and B common

stock

Basic net income (loss) per share of Class C common stock
Diluted net income (loss) per share of Class A and B common

stock

Diluted net income (loss) per share of Class C common stock
Weighted average common shares outstanding Class A

and B common stock

Basic
Diluted

Weighted average common shares outstanding Class C

common stock

Basic
Diluted

$
$

(0.11) $
(0.11) $

0.45 $
0.72 $

0.45 $
0.71 $

0.54
0.54

0.53
0.53

219,254
219,254

217,707
221,944

215,498
220,868

221,475
221,475

218,623
222,904

215,498
220,868

See accompanying notes.

Under Armour, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (loss)
(In thousands)

Net income (loss)
Other comprehensive income (loss):

Foreign currency translation adjustment
Unrealized gain (loss) on cash flow hedge, net of tax of

$(5,668), $3,346 and $415 for the years ended December 31,
2017, 2016, and 2015 respectively.

Gain (loss) on intra-entity foreign currency transactions

Total other comprehensive income (loss)

Comprehensive income (loss)

Year Ended December 31,

2017

2016

2015

$(48,260) $256,979 $232,573

23,357

(13,798)

(31,816)

(16,624)
7,199

9,084
(2,416)

1,611
—

13,932

(7,130)

(30,205)

$(34,328) $249,849 $202,368

See accompanying notes.

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 (loss)

Retained
Earnings

Total
Equity

177,296 $ 59 36,600 $ 12 213,896

$508,279 $ 856,687

$(14,808)

360 —

— —

2,852

—

71
360 —

Balance as of December 31,

2014

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

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

Impact of adoption of

accounting standard
updates

Stock-based compensation

expense

Comprehensive income (loss)

Balance as of December 31,

(172) —

— —

(172) —

—

(12,727)

1,996

— —

1,996

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

823,484 1,259,414

(52,143)

609 —

— —

3,664

—

73
556 —

(65) —

— —

(78) —

—

(2,781)

898 —

— —

1,723

7,852

—

— —

(2,666)

(23,932)

— —
— —

39,932

—

(48,260)

13,932

2017

185,257

61 34,450

11 222,375

872,266 1,184,441

(38,211)

2,018,642

See accompanying notes.

—

—
—

—

$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

2,030,900
3,664

(2,781)

—

7,853

(26,598)

39,932
(34,328)

—
(7,130)

44,783
249,849

Under Armour, Inc. and Subsidiaries

Consolidated Statements of Cash Flows
(In thousands)

Year Ended December 31,
2016

2015

2017

Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash used in

operating activities

Depreciation and amortization
Unrealized foreign currency exchange rate loss (gains)
Impairment charges
Amortization of bond premium
Loss on disposal of property and equipment
Stock-based compensation
Excess tax benefit (loss) from stock-based compensation

arrangements

Deferred income taxes
Changes in reserves and allowances
Changes in operating assets and liabilities (net 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 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
Employee taxes paid for shares withheld for income taxes
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
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

$ (48,260) $

256,979 $ 232,573

173,747
(29,247)
71,378
254
2,313
39,932

(75)
55,910
108,757

(79,106)
(222,391)
(55,503)
145,695
109,823
(39,164)
234,063

(281,339)

—
—
—
—
(1,648)
(282,987)

763,000
(665,000)
(2,781)
11,540
—
—
—
106,759
4,178
62,013

144,770
12,627
—
—
1,580
46,149

44,783
(43,004)
70,188

(249,853)
(148,055)
(25,284)
202,446
67,754
(16,712)
364,368

(316,458)
(70,288)

—

(24,230)
30,712
(875)
(381,139)

1,327,601
(1,170,750)
(15,098)
15,485
(6,692)
(2,927)
(1,505)
146,114
(8,725)
120,618

100,940
33,359
—
—
549
60,376

45,917
(4,426)
40,391

(191,876)
(278,524)
(76,476)
(22,583)
76,854
(2,533)
14,541

(298,928)

—

(539,460)
(103,144)
96,610
(2,553)
(847,475)

650,000
(265,202)
(12,728)
10,310
(947)
—

381,433
(11,822)
(463,323)

250,470
$ 312,483 $

129,852
593,175
250,470 $ 129,852

$ 10,580 $
—
—

16,973 $ 17,758
(56,073)

—

5,631

36,921
29,750

135,959
21,412

99,708
11,176

See accompanying notes.

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 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, 2017, 2016 and 2015 was interest income of $0.4 million, $0.3 million and
$0.2 million, 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
the customer’s financial
sporting goods retailers. Credit
condition and collateral is not required. The Company’s largest customer in North America accounted
for 12% and 16% of accounts receivable as of December 31, 2017 and December 31, 2016,
respectively. The Company’s largest customer accounted for 10% and 12% of net revenues for the
years ended December 31, 2016 and 2015, respectively. For the year ended December 31, 2017, no
customer accounted for more than 10% of net revenues.

is extended based on an evaluation of

Allowance for Doubtful Accounts

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 ability of
the
creditworthiness of significant customers based on ongoing credit evaluations. Because the Company

its customers to pay outstanding balances and makes judgments about

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, 2017 and 2016, the allowance for doubtful accounts was $19.7 million and
$11.3 million, respectively.

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
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

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
over the shorter of the lease term or the estimated useful
lives of the assets. The cost of in-store
apparel and footwear fixtures and displays are capitalized, included in furniture, fixtures and displays,

including the cost of

internal

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.

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 $2.1 million and $1.8 million as of December 31, 2017 and 2016, 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.

As a part of the Company’s 2017 restructuring plan, the Company abandoned the use of several
assets included within Property and Equipment, resulting in an impairment charge of $30.7 million,
reducing the carrying value of these assets to their estimated fair values.

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
impairment test, the Company first reviews qualitative factors to
impaired. In conducting an annual
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, the Company performs the goodwill impairment
test. The Company 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,
goodwill is impaired to the extent that the carrying value exceeds the fair value of the reporting unit.

During the third quarter of 2017, the Company made the strategic decision to not pursue certain
planned future revenue streams in its Connected Fitness business in connection with the 2017
Restructuring Plan. The Company determined sufficient indication existed to trigger the performance of
an interim impairment
for the Company’s Connected Fitness reporting unit resulting in goodwill
impairment of $28.6 million, which represents all goodwill allocated to this reporting unit. The Company
performs its annual impairment tests in the fourth quarter of each fiscal year. As of December 31,
2017, no impairment of goodwill was identified and the fair value of each reporting unit substantially
exceeded its carrying value.

The Company continually evaluates whether events and circumstances have occurred that
life of long-lived assets may warrant revision or that the
indicate the remaining estimated useful
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
future
assets to assess recoverability from future operations using undiscounted cash flows.
undiscounted cash flows are less than the carrying value, an impairment is recognized in earnings to
In connection with the Company’s 2017
the extent

the carrying value exceeds fair value.

that

Restructuring Plan, strategic decisions were made during the third quarter in 2017 to abandon the use
of certain intangible assets in the Company’s Connected Fitness reporting unit. These intangible
assets included technology and brand names, resulting in total intangible asset impairment charges of
$12.1 million

Accrued Expenses

At December 31, 2017, accrued expenses primarily included $92.7 million and $47.0 million of
accrued compensation and benefits and marketing expenses, respectively. At December 31, 2016,
accrued expenses primarily included $60.8 million and $24.7 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
other current liabilities or other long term liabilities, depending on the derivative financial instrument’s
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.

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
$246.6 million and $146.2 million,
returns, allowances,
markdowns and discounts.

invoices. As of December 31, 2017 and 2016,

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
deemed probable. Advertising expense,
in-store marketing fixtures and
displays, was $565.1 million, $477.5 million and $417.8 million for the years ended December 31,
2017, 2016 and 2015, respectively. At December 31, 2017 and 2016, prepaid advertising costs were
$41.2 million and $32.0 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.
included within selling, general and administrative expenses, were $101.5 million,
These costs,
$89.9 million and $63.7 million for the years ended December 31, 2017, 2016 and 2015, respectively.
The Company includes outbound freight costs associated with shipping goods to customers as a
component of cost of goods sold.

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, 2017 and 2016, the carrying value of the
Company’s investment was $12.7 million and $11.7 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, 2017 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 11 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 operating 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 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 12 for further
details on stock-based compensation.

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.
the Company’s Senior Notes was $526.3 million and $568.1 million as of
The fair value of
December 31, 2017 and 2016, respectively. 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. This ASU 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.

The Company’s initial assessment of the guidance in this ASU has identified wholesale customer
support costs, direct to consumer incentive programs and customer related returns as transactions
potentially affected by this guidance. On the Consolidated Balance Sheet, reserves for returns,
allowances, discounts and markdowns will be included as other current liabilities rather than accounts
receivable, net and the value of inventory associated with reserves for sales returns will be included
within prepaid expenses and other current assets. While the Company has not completed its
evaluation, it expects the impact of the adoption of this ASU would primarily change presentation within
its consolidated financial statements but is currently not expected to have a material effect on income
from operations.

The Company will adopt the guidance in this new ASU effective January 1, 2018, and plans to use
the modified retrospective transition approach, which would result
to retained
earnings for the cumulative effect, if any, of applying this guidance to contracts in effect as of the
adoption date. Under this approach, the Company would not restate the prior financial statements
presented. The guidance in this ASU requires the Company to provide additional disclosures of the
amount by which each financial statement line item is affected in the current reporting period during
2018 as compared to the guidance that was in effect before the change, and an explanation of the
reasons for significant changes, if any.

in an adjustment

In January of 2016, the FASB issued ASU 2016-01 which simplifies the impairment assessment of
equity investments. This ASU requires equity investments to be measured at fair value with changes
recognized in net
to disclose the methods and
instruments, requires the use of the exit price for
assumptions to estimate fair value for financial
disclosure purposes, requires the change in liability due to a change in credit risk to be presented in
financial assets and liabilities by
other comprehensive income, requires separate presentation of

income. This ASU eliminates the requirement

measurement category and form of asset (securities and loans) and clarifies the need for a valuation
allowance on a deferred tax asset related to available-for-sale securities. The guidance in this ASU
becomes effective for fiscal periods beginning January 1, 2018 using a cumulative-effect adjustment to
the balance sheet. The guidance related to equity securities without readily determinable fair values
(including disclosure requirements) shall be applied prospectively to equity investments that exist as of
the date of adoption of this update. The Company does not believe the adoption of this ASU will have a
material 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.

In January 2018, the FASB released guidance on the accounting for tax on the global intangible
low-taxed income (“GILTI”) provisions of the Tax Act. The GILTI provisions impose a tax on foreign
foreign corporations. The guidance
income in excess of a deemed return on tangible assets of
indicates that either accounting for deferred taxes related to GILTI inclusions or to treat any taxes on
GILTI inclusions as period costs are both acceptable methods subject to an accounting policy election.
The Company has not yet made an accounting policy election in regards to the GILTI provisions under
the Tax Act. The Company will make its GILTI accounting policy election during the one-year
measurement period as allowed by the SEC. No amounts have been recorded in the Company’s 2017
financial statements for the impact of GILTI provisions.

Recently Adopted Accounting Standards

In March 2016, the FASB issued ASU 2016-09, which affects 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 and the classification of those taxes paid on
the statement of cash flows. The Company adopted the provisions of this ASU on January 1, 2017 on
a prospective basis and recorded an excess tax deficiency of $1.3 million as an increase in income tax
expense related to share-based compensation for vested awards. Additionally, the Company made a
policy election under the provisions of this ASU to account for forfeitures when they occur rather than
estimating the number of awards that are expected to vest. As a result of this election, upon adoption
of the guidance in this ASU, the Company recorded a $1.9 million cumulative-effect benefit to retained
earnings as of the date of adoption. The Company adopted the provisions of this ASU related to
changes on the Consolidated Statement of Cash Flows on a retrospective basis. Excess tax benefits
and deficiencies have been classified within cash flows from operating activities and employee taxes
paid for shares withheld for income taxes have been classified within cash flows from financing
activities on the Consolidated Statement of Cash Flows. This resulted in increases of $44.8 million and
$45.9 million to cash flows from operating activities for the years ended December 31, 2016 and 2015,
respectively. This also resulted in decreases of $15.1 million and $12.7 million to cash flows from
financing activities for the year ended December 31, 2015 and 2016, respectively.

In October 2016, the FASB issued ASU 2016-16, which requires an entity to recognize the income
tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs.
The Company adopted the provisions of this ASU on a modified retrospective basis on January 1,
2017, resulting in a cumulative-effect benefit to retained earnings of $26.0 million as of the date of
adoption.

In January 2017, the FASB issued ASU 2017-04, which simplifies how an entity is required to test
goodwill for impairment by eliminating step two of the test. The Company adopted the provisions of this
ASU on July 1, 2017, and recorded an impairment charge of $28.6 million during its interim goodwill
impairment test for the Connected Fitness reporting unit.

3. Restructuring and Impairment

A description of significant restructuring and related impairment charges is included below:

2017 Restructuring Plan

On July 27, 2017, the Company’s Board of Directors approved a restructuring plan (the “2017
restructuring plan”) to more closely align its financial resources with the critical priorities of
the
business. After completion of the 2017 restructuring plan, the Company recognized approximately
In addition to these
$100.4 million of pre-tax charges in connection with this restructuring plan.
charges,
impairment charges of
approximately $28.6 million for its Connected Fitness business.

the Company also recognized restructuring related goodwill

Impairment

As a part of the 2017 restructuring plan, the Company abandoned the use of several assets
included within Property and Equipment, resulting in an impairment charge of $30.7 million, reducing
the carrying value of these assets to their estimated fair values. Fair value was estimated using an
income-approach based on management’s forecast of future cash flows expected to be derived from
the assets’ use.

Additionally, in connection with the 2017 restructuring plan, strategic decisions were made during
the third quarter of 2017 to abandon the use of certain intangible assets in the Company’s Connected
Fitness reporting unit. These intangible assets included technology and brand names, resulting in total
intangible asset impairment charges of $12.1 million, reducing the carrying value of these assets to
their estimated fair values. Fair value was estimated using an income-approach based on
management’s forecast of future cash flows expected to be derived from the assets use. In addition,
the Company also made the strategic decision to not pursue certain other planned future revenue
streams in connection with the 2017 restructuring plan.

The Company determined sufficient indication existed to trigger the performance of an interim
goodwill
impairment for the Company’s Connected Fitness reporting unit. Using updated cash flow
projections, the Company calculated the fair value of the Connected Fitness reporting unit based on
the discounted cash flows model. The carrying value exceeded the fair value, resulting in an
impairment of goodwill. As the excess of the carrying value for the Connected Fitness reporting unit
was greater than the goodwill for this reporting unit, all of the goodwill was impaired.

The summary of the costs incurred during the year ended December 31, 2017 in connection with

the 2017 restructuring plan are as follows:

(In thousands)

Costs recorded in cost of goods sold:

Inventory write-offs (1)

Total costs recorded in cost of goods sold

Year Ended
December 31,

2017

$ 5,077

5,077

Costs recorded in restructuring and impairment charges:

Goodwill impairment
Property and equipment impairment
Employee related costs
Intangible asset impairment
Contract exit costs
Other restructuring costs

Total costs recorded in restructuring and

impairment charges

Total restructuring, impairment and restructuring

related costs

28,647
30,677
14,572
12,054
12,029
26,070

124,049

$129,126

(1) This table includes an additional non-cash charge of $5.1 million for the year ended December 31,
2017 associated with the disposition of inventory outside of current liquidation channels in line with
the 2017 restructuring plan.

A summary of the activity in the restructuring reserve related to the 2017 Restructuring Plan is as

follows:

Employee
Related costs

Contract
Exit Costs

Other
Restructuring
Related Costs

Balance at January 1, 2017
Additions charged to expense
Cash payments charged against reserve

$ —

14,572
(10,017)

12,029
(9,181)

13,070
(10,070)

Balance at December 31, 2017

$ 4,555

$ 2,848

$ 3,000

2018 Restructuring Plan

On February 9, 2018, the Company’s Board of Directors approved an additional restructuring plan
(the “2018 restructuring plan”) identifying further opportunities to optimize operations. In conjunction
with this plan, approximately $110 to $130 million of pre-tax restructuring and related charges are
expected to be incurred during the Company’s 2018 fiscal year, including:

• Up to $105.0 million in cash charges, consisting of up to: $55.0 million in facility and lease
terminations and $50.0 million in contract termination and other restructuring charges; and,

• Up to $25.0 million in non-cash charges comprised of approximately $10.0 million of inventory
intangibles and other asset related

related charges and approximately $15.0 million of
impairments.

4. 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

December 31,

2017

2016

$ 431,761
204,926
47,625
232,660
98,802
144,484
83,574
148,488
20,438

$ 326,617
168,720
47,216
151,059
75,196
124,140
83,574
204,362
20,383

1,412,758
(526,984)

1,201,267
(397,056)

Property and equipment, net

$ 885,774

$ 804,211

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 $164.3 million, $130.7 million and

$86.3 million for the years ended December 31, 2017, 2016 and 2015, respectively.

5. 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,

2016

$317,323 $ 99,245 $77,586 $42,436 $ 27,001 $563,591

Effect of currency translation

adjustment

Impairment

Balance as of December 31,

1,132

11,910

3,737

2,305

1,646

20,730

—

— (28,647)

(28,647)

2017

$318,455 $111,155 $81,323 $44,741 $ — $555,674

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, 2017

December 31, 2016

Useful Lives
from Date of
Acquisitions
(in years)

Gross
Carrying
Amount

Accumulated
Amortization Impairment

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

10
5-7

2-3
4-5
10

1-15
5-10

$48,561
19,611

$(13,499)
(9,524)

$ — $35,062 $47,653
— 19,612

(10,087)

$ (8,733) $38,920
11,391

(8,221)

9,527
7,653
4,500

3,896
1,353

(9,527)
(5,686)
(1,256)

(3,232)
(892)

—
(1,967)
—

— 9,527
— 7,653
4,500

3,244

—
—

664
461

3,896
1,373

(9,527)
(4,816)
(806)

(3,075)
(666)

—
2,837
3,694

821
707

$95,101

$(43,616)

$(12,054) $39,431 $94,214

$(35,844) $58,370

7,564

$46,995

5,940

$64,310

Amortization expense, which is included in selling, general and administrative expenses, was
$8.2 million, $13.0 million and $13.9 million for the years ended December 31, 2017, 2016 and 2015,
respectively. The following is the estimated amortization expense for the Company’s intangible assets
as of December 31, 2017:

(In thousands)

2018
2019
2020
2021
2022
2023 and thereafter

Amortization expense of intangible assets

6. Credit Facility and Other Long Term Debt

Credit Facility

$ 5,715
5,608
5,536
5,447
5,428
11,697

$39,431

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, 2017 the outstanding balance under the revolving credit facility was $125.0 million
and $161.3 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 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, 2017, the Company was in compliance with these
ratios. In February 2018, the Company amended the credit agreement to amend the definition of
consolidated EBITDA, and to provide that the Company’s trailing four-quarter consolidated leverage
ratio may not exceed 3.75 to 1.00 for the four quarters ended June 30, 2018, and 4.00 to 1.00 for the
four quarters ended September 30, 3018. Beginning with the four quarters ended December 31, 2018
and thereafter, the consolidated leverage ratio requirement will return to 3.25 to 1.00. 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
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 2.2% and 1.6% during the years ended December 31, 2017 and 2016, 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, 2017, the commitment fee
was 17.5 basis points. Since inception, the Company incurred and deferred $3.9 million in financing
costs in connection with the credit agreement.

to, at

3.250% Senior Notes

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
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), 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.

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, 2017 and 2016, the
outstanding balance on the loan was $40.0 million and $42.0 million, respectively. The weighted
average interest rate on the loan was 2.5% and 2.0% for the years ended December 31, 2017 and
2016, respectively.

The following are the scheduled maturities of long term debt as of December 31, 2017:

(In thousands)

2018
2019
2020
2021
2022
2023 and thereafter

Total scheduled maturities of long term debt

Current maturities of long term debt

$ 27,000
63,000
25,000
86,250

—

600,000

$801,250
$ 27,000

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.

7. 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, 2017 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, 2017 as well as

significant operating lease agreements entered into during the period after December 31, 2017 through
the date of this report:

(In thousands)

2018
2019
2020
2021
2022
2023 and thereafter

140,257
139,304
158,455
147,094
132,312
772,047

Total future minimum lease payments

$1,489,469

Included in selling, general and administrative expense was rent expense of $141.2 million,
$109.0 million and $83.0 million for the years ended December 31, 2017, 2016 and 2015, respectively,
under non-cancelable operating lease agreements. Included in these amounts was contingent rent
expense of $15.5 million, $13.0 million and $11.0 million for the years ended December 31, 2017, 2016
and 2015, 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,
2017, as well as significant sponsorship and other marketing agreements entered into during the
period after December 31, 2017 through the date of this report:

(In thousands)

2018
2019
2020
2021
2022
2023 and thereafter

150,428
135,165
126,026
121,710
119,783
517,736

Total future minimum sponsorship and other

payments

$1,170,848

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.

joined by named plaintiff Bucks County Employees Retirement Fund,

On March 23, 2017, three separate securities cases previously filed against the Company in the
United States District Court for the District of Maryland (the “Court”) were consolidated under the
caption In re Under Armour Securities Litigation, Case No. 17-cv-00388-RDB (the “Consolidated
Action”). On August 4, 2017, the lead plaintiff in the Consolidated Action, North East Scotland Pension
filed a consolidated
Fund,
amended complaint (the “Amended Complaint”) against the Company, the Company’s Chief Executive
Officer and former Chief Financial Officers, Lawrence Molloy and Brad Dickerson. The Amended
Complaint alleges 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 Amended Complaint, claiming that the defendants made material
misstatements and omissions regarding, among other things, the Company’s growth and consumer
demand for certain of the Company’s products. The class period identified in the Amended Complaint
is September 16, 2015 through January 30, 2017. The Amended Complaint also asserts claims under
Sections 11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”), in connection with
the Company’s public offering of senior unsecured notes in June 2016. The Securities Act claims are
asserted against the Company, the Company’s Chief Executive Officer, Mr. Molloy, the Company’s
directors who signed the registration statement pursuant to which the offering was made and the
underwriters that participated in the offering. The Amended Complaint alleges that
the offering
materials utilized in connection with the offering contained false and/or misleading statements and
omissions regarding, among other things, the Company’s growth and consumer demand for certain of
the Company’s products. On November 9, 2017, the Company and the other defendants filed a motion
to dismiss the Amended Complaint, which is still pending with the Court. The Company believes that
the claims asserted in the Consolidated Action are without merit and intends to defend the 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 this matter.

8. Stockholders’ Equity

The Company’s Class A Common Stock and Class B Convertible Common Stock have an
authorized number of shares at December 31, 2017 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 specified 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.

9. 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.

Financial assets and (liabilities) measured at fair value are set forth in the table below:

(In thousands)

Derivative foreign currency contracts (see

Note 8)

Interest rate swap contracts (see Note 8)
TOLI policies held by the Rabbi Trust
Deferred Compensation Plan obligations

December 31, 2017

December 31, 2016

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

$— $(6,818) $—
1,088 —
5,756 —
(7,971) —

—
—
—

$— $15,238

$—
(420) —
4,880 —
(7,023) —

—
—
—

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 the fair value of the Company’s Senior Notes was $526.3 million and $568.1 million as of
December 31, 2017 and 2016, respectively. The carrying value of the Company’s other long term debt
approximated its fair value as of December 31, 2017 and 2016. 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).

10. Provision for Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted in the United
States. The Tax Act includes a number of changes to existing U.S. tax laws that impact the Company
including the reduction of the U.S. corporate income tax rate from 35 percent to 21 percent for tax
years beginning after December 31, 2017. The Tax Act also provides for a one-time transition tax on
indefinitely reinvested foreign earnings and the acceleration of depreciation for certain assets placed
into service after September 27, 2017, as well as prospective change beginning in 2018, including the
elimination of certain domestic deductions and credits, capitalization of research and development
expenditures, and additional limitations on the deductibility of executive compensation and interest.

The Company recognized the income tax effects of the Tax Act in its 2017 financial statements in
accordance with Staff Accounting Bulletin No. 118, which provides SEC staff guidance for the
application of ASC Topic 740, Income Taxes, in the reporting period in which the Tax Act was signed
into law. As such, the Company’s financial results reflect the income tax effects of the Tax Act for
which accounting under ASC Topic 740 is incomplete but a reasonable estimate could be determined.
The Company did not identify items for which the income tax effects of the Tax Act have not been
completed and a reasonable estimate could not be determined as of December 31, 2017.

The changes to existing U.S. tax laws as a result of the Tax Act, which have the most significant

impact on the company’s provision for income taxes as of December 31, 2017 are as follows:

Reduction of the U.S. Corporate Income Tax Rate

The company measures deferred tax assets and liabilities using enacted tax rates that will apply in
the years in which the temporary differences are expected to be recovered or paid. Accordingly, the
company’s deferred tax assets and liabilities were adjusted to reflect
the reduction in the U.S.
corporate income tax rate from 35 percent to 21 percent, resulting in a $24.9 million increase in income
tax expense for the year ended December 31, 2017 and a corresponding $24.9 million decrease in net
deferred tax assets as of December 31, 2017.

Transition Tax on Foreign Earnings

The company recognized a provisional income tax expense of $13.9 million for the year ended
December 31, 2017 related to the one-time transition tax on indefinitely reinvested foreign earnings.
The determination of the transition tax requires further analysis regarding the amount and composition
of the company’s historical foreign earnings, the amount of foreign tax credits available, and the ability
to utilize certain foreign tax credits, which is expected to be completed in 2018.

The adjustments to the deferred tax assets and liabilities and the liability for the transition tax on
indefinitely reinvested foreign earnings, including the analysis of our ability to fully utilize foreign tax
credits associated with the transition tax, are provisional amounts estimated based on information
reviewed as of December 31, 2017. As we complete our analysis of the Tax Act, review all information,
collect and prepare necessary data, and interpret any additional guidance, we may make adjustments
to the provisional amounts that we have recorded as of December 31, 2017 that may materially impact
our provision for income taxes. Any subsequent adjustment will be recorded to current income tax
expense in the quarter of 2018 when the analysis is completed.

Income (loss) before income taxes is as follows:

(In thousands)

Income (loss) before income taxes:

United States
Foreign

Total

Year Ended December 31,

2017

2016

2015

$(131,475)
121,166

$ 251,321
136,961

$272,739
113,946

$ (10,309)

$ 388,282

$386,685

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,

2017

2016

2015

$(46,931)
(8,336)
34,005

$ 116,637
29,989
32,394

$102,317
27,500
28,336

(21,262)

179,020

158,153

51,447
12,080
(4,314)

59,213

(35,748)
(10,658)
(1,311)

(47,717)

707
(5,703)
955

(4,041)

Provision for income taxes

$ 37,951

$ 131,303

$154,112

A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate is

as follows:

Year Ended December 31,

2017

2016

2015

U.S. federal statutory income tax rate
State taxes, net of federal tax impact
Unrecognized tax benefits
Permanent tax benefits/nondeductible expenses
Goodwill impairment
Foreign rate differential
Valuation allowance
Impacts related to Tax Act
Other

$ (3,608)
(9,537)
1,178
2,246
8,522
(25,563)
29,563
38,833
(3,683)

35.0% $135,899
9,447
92.5
4,377
(11.4)
(5,177)
(21.8)
(82.7)
—
248.0
(290.3)
(376.7)
39.2

(25,768)
8,798
—
3,727

35.0% $135,340
12,252
12,931
8,475
—

2.4
1.1
(1.3)
—
(6.6)
2.3
—
0.9

(21,262)
10,504

—
(4,128)

35.0%
3.2
3.4
2.2
—
(5.5)
2.7
—
(1.1)

Effective income tax rate

$ 37,951

(368.2)% $131,303

33.8% $154,112

39.9%

The decrease in the 2017 full year effective income tax rate, as compared to 2016, is primarily
attributable to the significant decrease in pre-tax earnings. In 2017, the Company recorded tax benefits
for losses in the United States and reductions in the Company’s total
liability for unrecognized tax
benefits as a result of a lapse in the statute of limitations during the current period. These benefits were
offset by the impact of the Tax Act, non-deductible goodwill impairment charges and the recording of
certain valuation allowances.

Deferred tax assets and liabilities consisted of the following:

(In thousands)

Deferred tax asset
Allowance for doubtful accounts and sales return

reserves

Foreign net operating loss carry-forwards
Tax basis inventory adjustment
Reserves and accrued liabilities
Stock-based compensation
Deferred rent
U.S. net operating loss carryforward
Foreign tax credit carry-forwards
State tax credits, net of federal impact
Inventory obsolescence reserves
Other

Total deferred tax assets
Less: valuation allowance

Total net deferred tax assets

Deferred tax liability
Property, plant and equipment
Prepaid expenses
Intangible assets
Other

Total deferred tax liabilities

Total deferred tax assets, net

December 31,

2017

2016

$ 52,745
34,542
30,531
20,500
19,002
18,735
13,382
11,918
8,555
5,241
4,340

$ 53,811
26,964
25,776
38,819
32,910
21,168
3,032
8,664
7,408
15,479
3,107

219,491
(73,544)

237,138
(37,969)

145,947

199,169

(43,924)
(18,336)

—
(1,218)

(45,178)
(8,628)
(6,815)
(2,506)

(63,478)

(63,127)

$ 82,469

$136,042

All deferred tax assets and liabilities are classified in non-current on the Consolidated Balance
Sheets as of December 31, 2017 and December 31, 2016. In evaluating its ability to realize the net
deferred tax assets, the Company considered all available positive and negative evidence, including its
past operating results and the forecast of future market growth, forecasted earnings, future taxable
income, and prudent and feasible tax planning strategies. The assumptions utilized in determining
future taxable income require significant judgment and actual operating results in future years could
differ from our current assumptions, judgments and estimates.

A significant portion of the Company’s deferred tax assets relate to U.S. federal and state taxing
jurisdictions. Realization of these deferred tax assets is dependent on future U.S. pre-tax earnings.
Due to the Company’s losses in the United States, the Company incurred significant net operating
losses (“NOLs”) in these jurisdictions in 2017. Based on these factors, the Company has evaluated its
ability to utilize these deferred tax assets in future years. In evaluating the recoverability of these
deferred tax assets at December 31, 2017, the Company has considered all available evidence, both
positive and negative, including but not limited to the following:

Positive

• Availability of taxable income in the U.S. federal and certain state NOL carryback periods;

• U.S. federal NOLs have an indefinite carryforward period beginning in 2018, pursuant to the

Tax Act.

• Definite lived tax attributes with relatively long carryforward periods; a majority from 10 to 20

years;

• No history of U.S. federal and state tax attributes expiring unused;

• Three year cumulative U.S. federal and state pre-tax income;

• Relatively low values of pre-tax income required to realized deferred tax assets relative to

historic income levels;

• Restructuring plans being undertaken to improve profitability; and

• Availability of prudent and feasible tax planning strategies.

Negative

•

Inherent challenges in forecasting future pre-tax earnings which rely on improved profitability
from our restructuring efforts;

• The continuing challenge of changes in the U.S. consumer retail business environment; and

• While relatively long, existence of definite lived tax attributes of certain U.S. federal tax credits

and state NOLs.

Based on all available evidence considered, the Company believes it is more likely than not, that
most of the U.S. federal and state deferred tax assets recorded will ultimately be realized. However, as
of December 31, 2017, a valuation allowance of $15.9 million has been recorded against certain state
deferred tax assets where the Company has determined realization is not more likely than not.
Additionally, valuation allowances have been recorded against certain deferred tax assets associated
with foreign and state net operating loss carryforwards and foreign and state tax credit carryforwards
as discussed further below.

As of December 31, 2017, the Company had $34.5 million in deferred tax assets associated with
approximately $116.0 million in foreign net operating loss carryforwards, the majority of which have an

indefinite carryforward period. As of December 31, 2017, the Company is not able to forecast the
utilization of
the deferred tax assets associated with foreign net operating loss
carryforwards. Therefore, a valuation allowance of $32.8 million was recorded against the Company’s
net deferred tax assets in 2017.

the majority of

As of December 31, 2017 the Company had $13.4 million in deferred tax assets associated with
$207.5 million in state net operating loss carryforwards, which will begin to expire in 3 to 20 years. As
of December 31, 2017 the Company believes certain deferred tax assets associated with state net
operating loss carryforwards will expire unused based on the Company’s projections. Therefore, a
valuation allowance of $11.7 million is recorded against
these net deferred tax assets as of
December 31, 2017.

As of December 31, 2017, the Company had $11.9 million in deferred tax assets associated with
foreign tax credits. As of December 31, 2017 the Company believes that a portion of the foreign taxes
paid would not be creditable against its future income taxes. Therefore, a valuation allowance of
$9.9 million was recorded against the Company’s net deferred tax assets as of December 31, 2017.

As of December 31, 2017, the Company had $8.6 million in deferred tax assets associated with
state tax credits, net of federal impact, which will begin to expire in 5 to 20 years. As of December 31,
2017, the Company is not able to forecast the utilization of certain deferred tax assets associated with
state tax credits. Therefore a valuation allowance of $3.2 million is recorded against these net deferred
tax assets as of December 31, 2017.

As of December 31, 2017, approximately $158.7 million of cash and cash equivalents was held by
the Company’s non-U.S. subsidiaries whose cumulative undistributed earnings total $488.4 million.
These earnings were subject to the one-time transition tax on indefinitely reinvested foreign earnings
required by the Tax Act. The Company will continue to permanently reinvest these earnings, as well as
future earnings from our foreign subsidiaries, to fund international growth and operations.

As of December 31, 2017 and 2016, the total

liability for unrecognized tax benefits, including
related interest and penalties, was approximately $55.3 million and $70.4 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, 2017, 2016 and 2015.

(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

current period

End of year

Year Ended December 31,

2017

2016

2015

$ 64,359 $42,611 $28,353
203
—

661
—

457
(40)
14,580

26,482

14,382

—

(13,885)

—
—

(13,656)

(5,395)

(327)

$ 51,815 $64,359 $42,611

As of December 31, 2017, $46.2 million of unrecognized tax benefits, excluding interest and

penalties, would impact the Company’s effective tax rate if recognized.

As of December 31, 2017 and 2016, the liability for unrecognized tax benefits included $3.5 million
and $6.1 million, respectively, for the accrual of interest and penalties. For each of the years ended

December 31, 2017, 2016 and 2015, the Company recorded $1.6 million, $3.1 million and $1.7 million,
respectively, for the accrual of interest and penalties in its consolidated statements of operations. The
Company recognizes accrued interest and penalties related to unrecognized tax benefits in the
provision for income taxes on the consolidated statements of operations.

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 2015 and
2016 tax years. The majority of the Company’s returns for years before 2014 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.

11. 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
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 (loss)

Adjustment payment to Class C capital stockholders

Net income (loss) 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 (loss) per share Class C—basic
Earnings (loss) per share Class C—diluted

Year Ended December 31,

2017

2016

2015

$ (48,260) $256,979 $232,573

—

59,000

—

$ (48,260) $197,979 $232,573

219,254

—

217,707
4,237

215,498
5,370

219,254

221,944

220,868

$
$

(0.11) $
(0.11) $

0.45 $
0.45 $

0.54
0.53

221,475

—

218,623
4,281

215,498
5,370

221,475

222,904

220,868

$
$

(0.11) $
(0.11) $

0.72 $
0.71 $

0.54
0.53

Effects of potentially dilutive securities are presented only in periods in which they are dilutive.
Stock options, restricted stock units and warrants representing 256.0 thousand, 114.0 thousand and

770.0 thousand shares of Class A common stock outstanding for the years ended December 31, 2017,
2016 and 2015, 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 4.7 million, 691.6 thousand and 770.0 thousand shares of Class C common stock
outstanding for the years ended December 31, 2017, 2016 and 2015, respectively, were excluded from
the computation of diluted earnings per share because their effect would be anti-dilutive.

12. 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, 2017, 7.9 million Class A shares and 15.5 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, 2017, 2016 and
2015 was $39.9 million, $46.1 million and $60.4 million, respectively. As of December 31, 2017, the
Company had $87.7 million of unrecognized compensation expense expected to be recognized over a
weighted average period of 3.2 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, 2017. 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, 2017, 2.7 million
Class A shares and 1.2 million Class C shares are available for future purchases under the ESPP.
During the years ended December 31, 2017, 2016 and 2015, 563.9 thousand, 290.8 thousand and
103.3 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
their annual cash
the 2005 Plan. Non-employee directors have the option to defer the value of
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 $150.0 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 restricted stock units
automatically defers into deferred stock units under the DSU Plan. Under the DSU Plan each deferred

the shares otherwise deliverable upon vesting of

stock unit represents the Company’s obligation to issue one share of the Company’s Class C 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,
2017, 2016, and 2015 was $19.04, $14.87, and $27.21 respectively. 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,

2017

2016

2015

2.1% 1.4% 1.8%

6.00

6.50
6.50
39.6% 39.5% 44.3%
— % — % — %

A summary of the Company’s stock options as of December 31, 2017, 2016 and 2015, and

changes during the years then ended is presented below:

(In thousands, except per share amounts)

2017

2016

2015

Year Ended December 31,

Outstanding, beginning of year
Granted, at fair market value
Exercised
Expired
Forfeited

Number
of
Stock
Options

Weighted
Average
Exercise
Price

Number
of
Stock
Options

Weighted
Average
Exercise
Price

Number
of
Stock
Options

Weighted
Average
Exercise
Price

4,265
734
(1,046)
—
(171)

$ 9.63
19.04
3.72
—
17.59

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

Outstanding, end of year

3,782

$12.71

4,265

$ 9.63

6,008

$ 7.26

Options exercisable, end of year

2,512

$ 5.85

3,385

$ 4.30

4,892

$ 4.13

Included in the table above are 0.5 million and 0.3 million performance-based stock options
awarded to certain executives and key employees under the 2005 Plan during the years ended
December 31, 2017 and 2016, respectively. The performance-based stock options awarded in 2017
and 2016 have weighted average grant date fair values of $19.04 and $14.87, 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, 2017, 2016

and 2015 was $16.3 million, $63.9 million and $27.5 million, respectively.

The following table summarizes information about stock options outstanding and exercisable as of

December 31, 2017:

(In thousands, except per share amounts)

Options Outstanding

Number of
Underlying
Shares

3,782

Weighted
Average
Exercise
Price Per
Share

$12.71

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

4.55

$22,679

2,512

$5.85

2.52

$22,553

Restricted Stock and Restricted Stock Units

A summary of the Company’s restricted stock and restricted stock units as of December 31, 2017,

2016 and 2015, and changes during the years then ended is presented below:

(In thousands, except per share amounts)

2017

2016

2015

Year Ended December 31,

Number
of
Restricted
Shares

Weighted
Average
Grant Date
Fair Value

Number
of
Restricted
Shares

Outstanding, beginning of year
Granted
Forfeited
Vested

Outstanding, end of year

6,771
7,630
(2,290)
(2,188)

9,923

$19.68
18.84
28.71
24.78

6,760
4,002
(935)
(3,056)

24.41

6,771

19.68

6,760

Weighted
Average
Fair Value

$23.23
35.20
30.35
16.25

Number
of
Restricted
Shares

9,020
2,030
(652)
(3,638)

Weighted
Average
Fair Value

$15.21
38.36
24.29
11.61

23.23

Included in the table above are 1.9 million, 2.5 million and 1.7 million performance-based restricted
stock units awarded to certain executives and key employees under the 2005 Plan during the years
ended December 31, 2017, 2016 and 2015, respectively. The performance-based restricted stock units
awarded in 2017, 2016 and 2015 have weighted average grant date fair values of $18.76, $35.71 and
$37.87, respectively, and have vesting that is tied to the achievement of certain combined annual
operating income targets.

During the year ended December 31, 2017, the Company deemed the achievement of certain
revenue and operating income targets improbable for the performance-based stock options and
restricted stock units granted in 2017, and recorded a reversal of expense of $4.2 million for the three
months ended December 31, 2017. 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. 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 $5.7 million would have been recorded through December 31, 2017 for
all performance-based stock options and restricted stock units granted in 2017 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, 2017,
all outstanding warrants were exercisable, and no warrants were exercised.

13. 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 $7.4 million,
$9.0 million and $7.0 million for the years ended December 31, 2017, 2016 and 2015, 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,
2017 and 2016, the Deferred Compensation Plan obligations were $8.0 million and $7.0 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, 2017 and 2016, the assets held in the Rabbi Trust were TOLI
policies with cash-surrender values of $5.8 million and $4.9 million, respectively. These assets are
consolidated and are included in other long term assets on the consolidated balance sheet. Refer to
Note 9 for a discussion of the fair value measurements of the assets held in the Rabbi Trust and the
Deferred Compensation Plan obligations.

14. 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
the
and inventory purchases denominated in currencies other
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, 2017, the aggregate notional value of the Company’s outstanding foreign
currency contracts was $601.0 million, which had 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. The Company enters
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, 2017 and 2016, the Company reclassified $0.4 million and $0.3 million from other
comprehensive income to cost of goods sold related to foreign currency contracts designated as cash
flow hedges, respectively. The fair value of the Company’s foreign currency contracts was a liability of
$6.8 million as of December 31, 2017 and was included in other current liabilities on the consolidated
balance sheet. The fair value of
the Company’s foreign currency contracts was an asset of
$15.2 million as of December 31, 2016 and was included in prepaid expenses and other current assets
on the consolidated balance sheet. Refer to Note 9 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,

2017

2016

2015

Unrealized foreign currency exchange rate gains

(losses)

$ 29,246 $(12,627) $(33,359)

Realized foreign currency exchange rate gains

(losses)

Unrealized derivative gains (losses)
Realized derivative gains (losses)

611
(1,217)
(26,537)

(6,906)
729
15,192

7,643
388
16,404

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
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 6 for a discussion of long term debt.

As of December 31, 2017, the notional value of the Company’s outstanding interest rate swap
contracts was $135.6 million . During the years ended December 31, 2017 and 2016, the Company
recorded a $0.9 million and $2.0 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 an asset of $1.1 million as of December 31, 2017 and was
included in other long term assets on the consolidated balance sheet. The fair value of the interest rate
swap contracts was a liability of $0.4 million as of December 31, 2016 and was 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.

15. Related Party Transactions

The Company has an operating lease agreement with an entity controlled by the Company’s Chief
Executive Officer to lease an aircraft
for business purposes. The Company paid $2.0 million,
$2.0 million, and $2.0 million in lease payments to the entity for its use of the aircraft during the years
ended December 31, 2017, 2016 and 2015, respectively. No amounts were payable to this related
party as of December 31, 2017 and 2016. 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, 2017.

16. 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. The CODM also receives 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
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. Total expenditures for additions to long-lived
assets are not disclosed as this information is not regularly provided to the CODM.

(In thousands)

Net revenues
North America
EMEA
Asia-Pacific
Latin America
Connected Fitness
Intersegment Eliminations

Year Ended December 31,

2017

2016

2015

$3,802,406
469,997
433,647
181,324
89,179

—

$4,005,314
330,584
268,607
141,793
80,447
(1,410)

$3,455,737
203,109
144,877
106,175
53,415

—

Total net revenues

$4,976,553

$4,825,335

$3,963,313

Net revenues in the United States were $3,626.6 million, $3,843.7 million, and $3,317.0 million for

the years ended December 31, 2017, 2016 and 2015, respectively.

(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,

2017

2016

2015

$ 20,179
17,976
82,039
(37,085)
(55,266)

27,843
(34,538)
(3,614)

$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)

Income (loss) before income taxes

$(10,309)

$388,282

$386,685

The operating income information presented above includes the impact of restructuring and
impairment charges related to each of the Company’s 2017 restructuring plan and 2018 restructuring
plan. Charges incurred and expected to be incurred by segment in connection with each of the
respective restructuring plans are as follows:

(In thousands)

Costs recorded in restructuring and

impairment charges:
North America
EMEA
Asia-Pacific
Latin America
Connected Fitness

Costs Incurred During
the Year Ended
December 31, 2017 (1)

Costs to be Incurred
During the Year Ending
December 31, 2018

$ 63,170
1,525
38
11,506
47,810

$109,000
6,000
—

18,000

—

Total costs recorded in restructuring

and impairment charges

$124,049

$133,000

(1) This table excludes additional non-cash charges of $5.1 million associated with the reduction of

inventory outside of current liquidation channels in line with the 2017 restructuring plan.

Long-lived assets are primarily composed of Property and equipment, net. The Company’s long-

lived assets by geographic area were as follows:

(In thousands)

Long-lived assets
United States
Canada

Total North America

Other foreign countries

Total long lived assets

Year Ended December 31,

2017

2016

$763,477
14,077

$728,841
11,126

777,554
108,220

739,967
64,244

$885,774

$804,211

Net revenues by product category are as follows:

(In thousands)

Apparel
Footwear
Accessories

Total net sales
Licensing revenues
Connected Fitness
Intersegment Eliminations
Total net revenues

Year Ended December 31,

2017

2016

2015

$3,287,121
1,037,840
445,838
4,770,799
116,575
89,179

—

$4,976,553

$3,229,142
1,010,693
406,614
4,646,449
99,849
80,447
(1,410)
$4,825,335

$2,801,062
677,744
346,885
3,825,691
84,207
53,415

—

$3,963,313

Net revenues in the United States were $3,626.6 million, $3,843.7 million, and $3,317.0 million for

the years ended December 31, 2017, 2016 and 2015, respectively.

17. Unaudited Quarterly Financial Data

(In thousands)

March 31,

June 30,

September 30, December 31,

Quarter Ended (unaudited)

Year Ended
December 31,

2017
Net revenues
Gross profit
Income (loss) from operations
Net income (loss)
Net income (loss) available to all

stockholders

Basic net income (loss) per share
of Class A and B common stock
Basic net income (loss) per share

of Class C common stock

Diluted net income (loss) per share
of Class A and B common stock
Diluted net income (loss) per share

of Class C common stock

2016
Net revenues
Gross profit
Income from operations
Net income

Adjustment payment to

$1,117,331 $1,088,245 $1,405,615
645,350
62,180
54,242

498,246
(4,785)
(12,308)

505,423
7,536
(2,272)

$1,365,362 $4,976,553
2,238,723
27,843
(48,260)

589,704
(37,088)
(87,922)

(2,272) $ (12,308) $

54,242

$ (87,922) $ (48,260)

(0.01) $

(0.03) $

(0.01) $

(0.03) $

(0.01) $

(0.03) $

(0.01) $

(0.03) $

0.12

(0.20) $

(0.11)

(0.20) $

(0.11)

(0.20) $

(0.11)

(0.20) $

(0.11)

$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

Class C capital stockholders

—

59,000

—

59,000

Net income (loss) available to all

stockholders

Basic net income (loss) per share
of Class A and B common stock
Basic net income (loss) per share

of Class C common stock

Diluted net income (loss) per share
of Class A and B common stock
Diluted net income (loss) per share

of Class C common stock

19,180

(52,656)

128,225

103,230

197,979

0.04 $

(0.12) $

0.04 $

0.15 $

0.04 $

(0.12) $

0.04 $

0.15 $

0.29

0.24 $

0.23 $

0.45

0.72

0.45

0.71

Basic and diluted net income (loss) per share are computed independently for each of the periods

presented. Accordingly, the sum of the quarterly EPS amounts may not equal the total for the year.

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
the effectiveness of our disclosure controls and
Executive Officer and Chief Financial Officer,
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under
the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this
report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have
information
concluded that our disclosure controls and procedures are effective in ensuring that
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.

Changes in Internal Controls

In 2015, we began 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. The first phase of this implementation
became operational on July 5, 2017, in our North America, EMEA, and Connected Fitness operations.
We believe the implementation of the systems and related changes to internal controls will enhance
our internal controls over financial reporting. We also believe the necessary steps have been taken to
monitor and maintain appropriate internal control over financial reporting during this period of change
and will continue to evaluate the operating effectiveness of related key controls during subsequent
periods.

We are currently in the process of developing an implementation strategy and roll-out plan for

FMS in our Asia-Pacific and Latin America operations over the next several years.

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.”

There have been no changes in our internal control over financial reporting as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f) during the most recent fiscal quarter that have materially
affected, or that are reasonably likely to materially affect our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

Executive Retirement

On February 26, 2018, Karl-Heinz (Charlie) Maurath, our Chief Revenue Officer, notified us of his

decision to retire, effective March 31, 2018.

Amendment to Material Contract

“consolidated EBITDA” and “consolidated total

On February 22, 2018, we entered into Amendment No. 4 to our existing Credit Agreement,
originally dated May 29, 2014, by and among Under Armour, Inc. as borrower, JPMorgan Chase Bank,
lenders party thereto, as amended (the “Credit
N.A., as administrative agent and the other
to the Credit Agreement (the “Amendment”) modified the
Agreement”). The fourth amendment
definitions of
indebtedness” used in the Credit
Agreement, which are utilized to calculate our compliance with certain covenants set forth set forth in
the Credit Agreement, including our consolidated leverage ratio covenant. The Credit Agreement
requires that
indebtedness to consolidated
EBITDA be no greater than 3.25 to 1.00. The Amendment further provides that for the four quarters
ended June 30, 2018, our consolidated leverage ratio will not exceed 3.75 to 1.00, and for the four
quarters ended September 30, 2018, 4.00 to 1.00. Beginning with the four quarters ended
December 31, 2018 and thereafter, the consolidated leverage ratio requirement will return to 3.25 to
1.00. The other material terms of the Credit Agreement, as amended, remain unchanged.

the ratio of our trailing four-quarter consolidated total

In the ordinary course of their business, the financial

institutions party to the Amendment and
certain of their affiliates have in the past and/or may in the future engage in investment and commercial
banking or other transactions of a financial nature with us or our affiliates, including the provision of
certain advisory services and the making of loans to the Company and its affiliates in the ordinary
course of their business for which they will receive customary fees or expenses.

The foregoing does not constitute a complete summary of the terms of the Amendment or the
Credit Agreement and reference is made to the complete text of the Amendment, which is filed as
Exhibit 10.05 to this Annual Report on Form 10-K and incorporated by reference herein, as well as the
text of the Credit Agreement and other amendments thereto, which are also filed as Exhibits to this
Annual Report on Form 10-K.

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 2018 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 2018 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 2018 Proxy
Statement under
the heading “SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
BENEFICIAL OWNERS OF SHARES.” Also refer to Item 5 of this Annual Report on Form 10-K,
“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 2018 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 2018 Proxy

Statement under the heading “INDEPENDENT AUDITORS.”

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, 2017 and 2016

Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016 and 2015

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31,

2017, 2016 and 2015

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2017, 2016

and 2015

Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and

2015

Notes to the Audited Consolidated Financial Statements

2. Financial Statement Schedule

Schedule II—Valuation and Qualifying Accounts

105

All other schedules are omitted because they are not applicable or the required information is

shown in the consolidated financial statements or notes thereto.

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 2016 Form 10-K are to the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2016.

Exhibit
No.

3.01

3.02

3.03

4.01

4.02

4.03

4.04

10.01

10.02

10.03

10.04

Amended and Restated Articles of
Incorporation (incorporated by reference to
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).

Third Amended and Restated By-Laws (incorporated by reference to Exhibit 3.01 of the
Company’s Current Report on Form 8-K filed June 27, 2017).

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 to the Credit Agreement, 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 to the Credit Agreement, dated as of January 22, 2016 (incorporated
the Company’s Current Report on Form 8-K filed
by reference to Exhibit 10.01 of
January 22, 2016).

Amendment No. 3 to the Credit Agreement, 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).

10.05

Amendment No. 4 to the Credit Agreement, dated as of February 22, 2018.

100

Exhibit
No.

10.06

10.07

10.08

10.09

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20

10.21

10.22

10.23

10.24

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).*

Under Armour, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”)
(incorporated by reference to Exhibit 10.15 of the Company’s 2007 Form 10-K).*

Amendment One to the Deferred Compensation Plan (incorporated by reference to
Exhibit 10.14 of the Company’s 2010 Form 10-K).*

Amendment Two to the Deferred Compensation Plan (incorporated by reference to
Exhibit 10.03 of the Company’s 2016 Form 10-K).*

Form of Change in Control Severance Agreement
Exhibit 10.04 of the Company’s 2016 Form 10-K).*

(incorporated by reference to

Under Armour, Inc. Second Amended and Restated 2005 Omnibus Long-Term Incentive
Plan, as amended (the “2005 Plan”) (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).*

Form of Non-Qualified Stock Option Grant Agreement under the 2005 Plan between the
Company and Kevin Plank.*

Form of Non-Qualified Stock Option Grant Agreement under the 2005 Plan between the
Company and Kevin Plank (incorporated by reference to Exhibit 10.06 of the Company’s
2016 Form 10-K).*

Form of Restricted Stock Unit Grant Agreement under the 2005 Plan.*

Form of Restricted Stock Unit Grant Agreement under the 2005 Plan (incorporated by
reference to Exhibit 10.07 of the Company’s 2016 Form 10-K).*

Form of Performance-Based Stock Option Grant Agreement under
between the Company and Kevin Plank.*

the 2005 Plan

Form of Performance-Based Stock Option Grant Agreement under
(incorporated by reference to Exhibit 10.08 of the Company’s 2016 Form 10-K).*

the 2005 Plan

Form of Performance-Based Stock Option Grant Agreement under
(incorporated by reference to Exhibit 10.09 of the Company’s 2014 Form 10-K).*

the 2005 Plan

Form of Performance-Based Restricted Stock Unit Grant Agreement under the 2005
Plan.*

Form of Performance-Based Restricted Stock Unit Grant Agreement under the 2005 Plan
(incorporated by reference to Exhibit 10.09 of the Company’s 2016 Form 10-K).*

Form of Performance-Based Restricted Stock Unit Grant Agreement under the 2005 Plan
(incorporated by reference to Exhibit 10.11 of the Company’s 2014 Form 10-K).*

Form of Performance-Based Restricted Stock Unit Grant Agreement under the 2005 Plan
(incorporated by reference to Exhibit 10.12 of the Company’s 2013 Form 10-K).*

Supplement to Restricted Stock Unit Grant Agreements (incorporated by reference to
Exhibit 10.01 of the Company’s Form 10-Q for the quarterly period ended September 30,
2014).*

Form of Performance-Based Restricted Stock Unit Grant Agreement for International
Employees under the 2005 Plan (incorporated by reference to Exhibit 10.12 of
the
Company’s 2014 Form 10-K).*

101

Exhibit
No.

10.25

10.26

10.27

10.28

10.29

10.30

10.31

10.32

10.33

10.34

10.35

12.01

21.01

23.01

31.01

31.02

32.01

32.02

Form of Performance-Based Restricted Stock Unit Grant Agreement for International
Employees under the 2005 Plan (incorporated by reference to 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 (incorporated by reference to
Exhibit 10.11 of the Company’s 2016 Form 10-K).*

Under Armour,
Compensation Plan”) (incorporated by reference to Exhibit 10.01 of
Form 10-Q for the quarterly period ended March 31, 2017).*

Inc. 2017 Non-Employee Director Compensation Plan (the “Director
the Company’s

Initial Restricted Stock Unit Grant under the Director Compensation Plan
Form of
(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 under the Director Compensation Plan (incorporated
by reference to Exhibit 10.3 of the Current Report on Form 8-K filed June 6, 2006).*

Form of Annual Restricted Stock Unit Grant under the Director Compensation Plan
(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 (the “Director
DSU 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 the Director DSU Plan (incorporated by reference to Exhibit 10.23 of
the Company’s 2010 Form 10-K).*

Amendment Two to the Director DSU 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 (the “Plank Non-Compete Agreement”)
(incorporated by reference to Appendix E to the Preliminary Proxy Statement filed by
Under Armour, Inc. on June 15, 2015).

First Amendment
(incorporated by reference to Exhibit 10.03 of
Form 10-Q for the quarterly period ended March 31, 2016).

to the Plank Non-Compete Agreement, dated April 7, 2016
the Company’s Quarterly Report on

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

102

Exhibit
No.

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.

103

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 28, 2018

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

/s/ DAVID E. BERGMAN
David E. Bergman

Chairman of the Board of Directors and Chief

Executive Officer (principal executive officer)

Chief Financial Officer (principal accounting and

financial officer)

/s/ GEORGE W. BODENHEIMER

Director

George W. Bodenheimer

/s/ DOUGLAS E. COLTHARP
Douglas E. Coltharp

Director

/s/

JERRI L. DEVARD

Director

Jerri L. DeVard

/s/ KAREN W. KATZ

Director

Karen W. Katz

/s/ A.B. KRONGARD
A.B. Krongard

/s/ WILLIAM R. MCDERMOTT
William R. McDermott

/s/ ERIC T. OLSON
Eric T. Olson

Director

/s/ HARVEY L. SANDERS

Director

Harvey L. Sanders

Dated: February 28, 2018

104

Schedule II

Valuation and Qualifying Accounts

Balance at
Beginning
of Year

Charged to
Costs and
Expenses

Write-Offs
Net of
Recoveries

Balance at
End of
Year

$ 11,341 $ 9,520 $ (1,149) $ 19,712
11,341
5,930

(18,164)
(714)

23,575
2,951

5,930
3,693

$121,286 $285,474 $(215,966) $190,794
121,286
72,615

(130,774)
(126,186)

179,445
145,828

72,615
52,973

$ 37,969 $ 40,282 $ (4,707) $ 73,544
37,969
24,043

24,043
15,550

13,951
8,493

(25)
—

(In thousands)

Description

Allowance for doubtful accounts
For the year ended December 31, 2017
For the year ended December 31, 2016
For the year ended December 31, 2015

Sales returns and allowances
For the year ended December 31, 2017
For the year ended December 31, 2016
For the year ended December 31, 2015

Deferred tax asset valuation allowance
For the year ended December 31, 2017
For the year ended December 31, 2016
For the year ended December 31, 2015

105

[THIS PAGE INTENTIONALLY LEFT BLANK]

OARD
BOARD
OF
RECTORS
DIRECTORS

IN A . P L ANK
KE VIN A . PL ANK
man of the Board
Chairman of the Board
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K A REN W. K
K A REN W. K AT Z
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RGE W. BO DE NHE IME R
GE ORG E W. BOD ENH EI MER
r President, ESPN, Inc.
Former President, ESPN, Inc.
BC Sports
and ABC Sports

A . B. K RO NG
A . B. K RONG ARD
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Chairman, Alex.Brown, Incorp
Chairman, Alex.Brown, Incorporated

G L AS E . C OLT HARP
DO UGL AS E . COLTH ARP
tive Vice President and
Executive Vice President and
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W ILLIA M R . MCDERMOT T
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Executive Board Member, S
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JERRI L . D E VARD
RI L . DE VARD
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Executive Vice President,
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H O NY W. DEER ING
ANTHONY W. DEER ING
emoriam of Tony –
* In memoriam of Tony –
ed advisor and loyal friend.
a valued advisor and loyal friend.

ER I C T. O L
ER IC T. OL SON
Admiral, U.S. Navy (Retire
Admiral, U.S. Navy (Retired) and
Former Commander, U.S. S
Former Commander, U.S. Special
Operations Com
Operations Command

HAR V E Y L . SA N D
HA RV E Y L . SANDERS
Former Chairman and
Former Chairma
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Nautica Enterprise
Nautica Enterprises, Inc.