intrinsically understand an athlete’s journey
to compete. Our ethos – The Only Way is
Through – personifies the grit necessary
to break boundaries previously thought
impossible. Our love for athletes guides us
in everything we do. From an initial product
drawing to the moment of purchase and
how it feels while performing to driving
deep, emotional connections to inspire
achievement – we obsess over every detail
of empowering those who strive for more.
To get there, we are thoughtful and strategic
in investing to drive brand strength. In
2021, powerful storytelling translated to
increased awareness, engagement, and
conversion, with demand for Under Armour
gaining momentum. We delivered higher-
quality traffic to our owned retail stores and
online business through strategically placed
media and targeted e-mail activations that
contributed to increased brand affinity and
productivity. By staying disciplined, we are
focused on our vision to inspire athletes with
performance solutions they never knew
they needed and now can’t imagine living
without.
In our largest business, we saw a 33 percent
increase in apparel revenue in 2021, driven
by standout products such as UA RUSH™,
UA-ISO-Chill®, Rival Fleece, and continued
success in our women’s bra’s and bottom’s
business with our Armour® Crossback, UA
Infinity, and Meridian offerings empowering
her ability to compete at the highest levels
possible. In addition, we delivered a 35
percent increase in footwear revenue with
innovations like the UA Flow Velociti Wind,
which helps athletes achieve top speed
in a lightweight and rubberless shoe, and
franchises like UA HOVR® Sonic, Machina,
and Infinite leading the way, along with the
UA Charged Assert, Aurora and Pursuit,
and the Curry and Project Rock collections.
From training to competition and recovery,
we have proven time and again that Under
Armour products make you better.
Innovation is, of course, more than just
products. We have also amplified our online
and in-store experiences. In addition to
improved capabilities for engaging with our
consumers and product wayfinding in our
eCommerce business, we continue to make
strategic marketing and retail investments,
including opening our 1,000th store in
ANNUAL REPORT
LETTER FROM THE CEO
MARCH 24, 2022
DEAR SHAREHOLDERS,
We entered 2021 facing uncertainty about
continued COVID-19 impacts on our business,
including dynamic changes in purchase
behavior and marketplace demand. As a
result, we could have been conservative.
Instead, we went on offense and Under
Armour delivered a record year.
Our performance exemplified the power of
our long-term strategic plan, our hyper-focus
on execution, and the passion and discipline
our teammates bring to work every day.
Together, we expanded our brand’s awareness
and consumer engagement, underscored
our commitment to athletic performance
by delivering some of our most innovative
products yet, and deepened our relationships
with our wholesale partners worldwide.
In 2021, revenue was up 27 percent to $5.7
billion, gross margin improved 210 basis
points to 50.3 percent, our operating income
reached $486 million, diluted earnings per
share was $0.77, and we ended the year with
$1.7 billion in cash.
Each of these achievements is a record for
Under Armour. When viewed together, they
demonstrate our playbook is working, and
we’re on the right path. I am proud of the
progress we’ve made, the resilience we’ve
shown, and our potential to do even better in
the future.
What unifies and drives us is our purpose:
to empower those who strive for more. We
2021 ANNUAL REPORT
the Asia Pacific region. As consumers
changed where and how they shopped,
we consistently met them with better
presentation and the personalized,
unique shopping experiences they crave,
furthering our work to become a best-in-
class retailer.
As a backdrop, we have remained
steadfast in our operational excellence
and financial discipline principles. We are
intentional in creating and pulling levers
that drive our profitability. The evolution
and enhancements within our operating
model – sound inventory management,
promotional discipline, better pricing –
have made us a stronger and more resilient
business. By streamlining our wholesale
business and prioritizing opportunities for
more holistic expression, we have driven
fuller priced sell-through, expanded
shelf space opportunities, and realized
significantly better inventory turns. Our
unwavering focus on efficiency and
execution is working.
We expect to continue and build on this
trajectory for years to come. And while
current macro factors are impacting our
business in the near term, we have no
intentions of sitting idle. Innovation and
consumer connectivity are not tactics at
Under Armour – they are our way of life.
In 2022, we have already taken meaningful
steps to continue living our purpose.
As a decade-long effort, our recently
announced Access to Sport initiative
is grounded in our belief that everyone
deserves the right to engage in sport.
Accordingly, Under Armour will commit
our resources and expertise to help break
down barriers for the next generations of
those who strive for more. From expanding
our women’s UA Next™ efforts to launching
programs for historically black colleges
and universities and Hispanic serving
institutions, and more – we plan to create
opportunities for millions of youth athletes
by the year 2030 by providing access to
pathways, people, and performance.
Later this year, we intend to publish our
latest sustainability and social impact
report highlighting our commitment to
growing our business while caring for
society and the planet. Providing greater
2021 ANNUAL REPORT
transparency around our progress in
sustainability, including environmental-
based goals, community impact and
diversity, equity, and inclusion objectives, is
crucial to our progress as a purpose-driven
brand.
In closing, as we emerge from this
unpredictable time, we believe we can
become a stronger brand and a more
profitable business. And without question,
we have. Nevertheless, we are cautious in
the near term as we navigate a dynamic
operating environment that includes
supply chain constraints, rising wages, and
inflationary input cost pressures. However,
we remain confident in our long-term
strategy.
In this respect, we are committed to staying
agile and minimizing risk while executing
our strategies with an unrelenting focus
on the operational excellence that helped
us get here. In addition, Under Armour’s
brand strength, industry-leading athletic
products, and premium experiences, along
with the strongest financial position in our
history, means we are well-positioned to
achieve sustainable and profitable growth
over the long term – fulfilling our promise to
create an eternal brand.
My sincere thanks go out to our 17,500
global teammates – without which
our continued evolution, gains, and
accomplishments would not be possible.
Their hard work and commitment to
our purpose, discipline and operational
excellence enabled the strongest year in
Under Armour’s history. With this new year
comes new opportunities to underscore our
purpose, further our goals, and continue
to drive towards our full potential. I am
incredibly proud to lead this team and have
never been more excited about our future.
Thank you for your trust in our brand and
business.
Sincerely,
PATRIK FRISK
President &
Chief Executive Officer
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________
Form 10-K
______________________________________
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☑
☐
For the transition period from
to
Commission File No. 001-33202
______________________________________
UNDER ARMOUR, INC.
(Exact name of registrant as specified in its charter)
______________________________________
Maryland
(State or other jurisdiction of
incorporation or organization)
1020 Hull Street
Baltimore, Maryland 21230
52-1990078
(I.R.S. Employer
Identification No.)
(410) 468-2512
(Address of principal executive offices) (Zip Code)
(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)
UAA
UA
New York Stock Exchange
New York Stock Exchange
(Trading Symbols)
(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 ☑ 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 ☑
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 ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an
emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2
of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☑
☐
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 transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of June 30, 2021, the last business day of the registrant's 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 $3,975,044,486 and $3,826,345,691, respectively.
As of February 14, 2022 there were 188,668,560 shares of Class A Common Stock, 34,450,000 shares of Class B Convertible Common Stock and
253,217,673 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 11, 2022 are incorporated by reference in Part III of
DOCUMENTS INCORPORATED BY REFERENCE
this Form 10-K.
Table of Contents
UNDER ARMOUR, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
Forward Looking Statements
Item 1
Business
General
Products
Marketing and Promotion
Sales and Distribution
Product Design and Development
Sourcing, Manufacturing and Quality Assurance
Inventory Management
Intellectual Property
Competition
Human Capital Management
Information About Our Executive Officers
Available Information
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspection
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
Item 1A
Item 1B
Item 2
Item 3
Item 4
PART II
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
Item 9C
PART III
Item 10
Item 11
Item 12
Item 13
Item 14
PART IV
Item 15
Item 16
SIGNATURES
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N/A
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[THIS PAGE INTENTIONALLY LEFT BLANK]
Table of Contents
FORWARD-LOOKING STATEMENTS
PART I.
Some of the statements contained in this Form 10-K 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 share
repurchase program, our future financial condition or results of operations, our prospects and strategies for future
growth, the impact of the COVID-19 pandemic on our business and results of operations and the operations of our
suppliers and logistics providers, our plans to reduce our operating expenses, anticipated charges and restructuring
costs, projected savings related to our restructuring plans and the timing thereof, the development and introduction
of new products, the implementation of our marketing and branding strategies, and the future benefits and
opportunities from significant investments. In many cases, you can identify forward-looking statements by terms
such as “may,” “will,” "could," “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “outlook,”
“potential” or the negative of these terms or other comparable terminology.
The forward-looking statements contained in this Form 10-K 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 limited to, those factors
described in “Risk Factors” and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" herein. These factors include without limitation:
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•
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the impact of the COVID-19 pandemic on our industry and our business, financial condition and results of
operations, including recent impacts on the global supply chain;
failure of our suppliers, manufacturers or logistics providers to produce or deliver our products in a timely or
cost-effective manner;
labor or other disruptions at ports or our suppliers or manufacturers;
changes in general economic or market conditions, including increasing inflation, that could affect overall
consumer spending or our industry;
increased competition causing us to lose market share or reduce the prices of our products or to increase
our marketing efforts significantly;
fluctuations in the costs of raw materials and commodities we use in our products and our supply chain;
changes to the financial health of our customers;
our ability to successfully execute our long-term strategies;
our ability to effectively drive operational efficiency in our business and successfully execute any
restructuring plans and realize their expected benefits;
our ability to effectively develop and launch new, innovative and updated products;
our ability to accurately forecast consumer shopping and engagement preferences and consumer demand
for our products and manage our inventory in response to changing demands;
loss of key customers, suppliers or manufacturers;
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 manage the increasingly complex operations of our global business;
our ability to successfully manage or realize expected results from significant transactions and investments;
our ability to effectively market and maintain a positive brand image;
our ability to effectively meet the expectations of our stakeholders with respect to environmental, social and
governance practices;
the availability, integration and effective operation of information systems and other technology, as well as
any potential interruption of such systems or technology;
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•
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any disruptions, delays or deficiencies in the design, implementation or application of our global operating
and financial reporting information technology system;
our ability to attract key talent and retain the services of our senior management and other key employees;
our ability to access capital and financing required to manage our business on terms acceptable to us;
our ability to accurately anticipate and respond to seasonal or quarterly fluctuations in our operating results;
risks related to foreign currency exchange rate fluctuations;
our ability to comply with existing trade and other regulations, and the potential impact of new trade, tariff
and tax regulations on our profitability;
risks related to data security or privacy breaches; and
our potential exposure to litigation and other proceedings.
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.
Throughout this Annual Report on Form 10-K: (i) the term "Transition Period" means the period beginning
on January 1, 2022 and ending March 31, 2022; (ii) the term “Fiscal 2023” means our fiscal year beginning on April
1, 2022 and ending March 31, 2023; (iii) the term “Fiscal 2021” means our fiscal year beginning on January 1, 2021
and ended December 31, 2021; (iv) the term “Fiscal 2020” means our fiscal year beginning on January 1, 2020 and
ended December 31, 2020; and (v) the term “Fiscal 2019” means our fiscal year beginning on January 1, 2019 and
ended December 31, 2019. Our Consolidated Financial Statements are presented in U.S. dollars. 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.
ITEM 1. BUSINESS
General
Our principal business activities are developing, marketing and distributing branded performance apparel,
footwear and accessories for men, women and youth. Our performance products are engineered in many designs
and styles for use in nearly every climate and are worn worldwide by athletes at all levels, from youth to
professional, on various playing fields around the globe and by consumers with active lifestyles.
We generate net revenues from the sale of our products globally to national, regional, independent and
specialty wholesalers and distributors. We also generate net revenue from the sale of our products through our
direct-to-consumer sales channel, which includes our owned Brand and Factory House stores and e-commerce
websites. 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. We believe that our products appeal to athletes and consumers with active
lifestyles globally; thus international expansion is a meaningful part of our long-term growth strategy. Additionally,
our digital strategy is focused on supporting these long-term objectives, emphasizing connection and engagement
with our consumers through multiple digital touchpoints.
We were incorporated as a Maryland corporation in 1996. We have registered trademarks around the globe,
, and we
including UNDER ARMOUR®, HEATGEAR®, COLDGEAR®, HOVR™ and the Under Armour UA Logo
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 trade names 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 superior to non-
performance-oriented athletic products. In Fiscal 2021, sales of apparel, footwear and accessories represented
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68%, 22% and 8% of net revenues, respectively. Licensing arrangements represented the remaining 2% of net
revenues. Refer to Note 19 to the Consolidated Financial Statements for net revenues by product.
Apparel
Our apparel is offered in a variety of styles and fits to enhance comfort and mobility, support active
movement, regulate body temperature and improve performance regardless of weather conditions. Our apparel is
engineered to replace non-performance fabrics in athletics and fitness applications with innovation and technologies
designed and merchandised with various techniques and styles. Our apparel comes in three primary fit types:
compression (tight fit), fitted (athletic fit) and loose (relaxed fit). Our highly specialized products are sold in the
sporting goods, outdoor and active use markets. Our mission is to make athletes better, and we aim to innovate our
technical apparel products to provide performance benefits, such as creating breathable warmth, helping the body
stay cool and dry in hotter-than-normal conditions; harnessing the body's energy to help fight fatigue; adapting to
each athlete's unique body shape to improve fit and comfort and prevent slippage; and providing protection against
rain while maintaining breathability.
These types of innovations and technologies, embedded in many of our apparel products, include:
COLDGEAR® Reactor, HEATGEAR®, UA-ISO-Chill®, UA RUSH™, UA SMARTFORM™ and UA STORM™.
Footwear
Footwear includes products for running, training, basketball, cleated sports, recovery and outdoor
applications. Our footwear is built with the mindset of making athletes better through differentiated and industry
leading cushioning technologies such as Charged Cushioning®, UA Flow™, HOVR™ and UA Micro G®. These
cushioning platforms provide athletes with improved ground feel, enhanced responsiveness and lightweight
solutions. We also incorporate advanced materials and innovative consumer-centric constructions to enhance
performance.
Accessories
Accessories primarily includes the sale of athletic performance gloves, bags, headwear and sports masks.
Some of our accessories include the technologies mentioned above and are designed with advanced fabrications to
provide the same level of performance as our other products.
License
We have agreements with licensees to develop certain Under Armour apparel, accessories and equipment.
To maintain consistent brand quality, performance and compliance standards, our product, marketing, sales and
quality assurance teams are involved in all steps of the design and go-to-market process. During Fiscal 2021, our
licensees offered collegiate apparel and accessories, baby and youth apparel, team uniforms, socks, water bottles,
eyewear and other specific hard goods equipment that feature performance advantages and functionality like our
other product offerings.
Marketing and Promotion
We currently focus on marketing our products to consumers primarily for use in athletics, fitness, and
training activities, emphasizing on connecting with our target consumer - athletes". We seek to drive consumer
demand by building brand awareness that our products deliver advantages to help athletes perform better.
Sports Marketing
Our marketing and promotion strategy begins with providing and selling our products to high-performing
athletes and teams at the high school, collegiate and professional levels. We execute this strategy through outfitting
agreements, professional, club and collegiate sponsorship, individual athlete and influencer agreements and by
providing and selling our products directly to teams and individual athletes. We also seek to sponsor and host
consumer events to drive awareness and brand authenticity from a grassroots level by hosting combines, camps
and clinics for young athletes in a variety of sports. As a result, our products are seen on the field and the court, and
by various consumer audiences through the internet, television, magazines and live sporting events. This exposure
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 and professional
sport organizations, supporting the athletes on and off the field. We sponsor and sell our products to international
sports teams, which helps drive brand awareness in various countries and regions worldwide. Further, we leverage
our relationships with athletes, teams, leagues and youth experiences in our global and regional marketing and
promotions.
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Media
We feature our products in a variety of national digital, broadcast, and print media outlets. We also utilize
social media to engage consumers and promote connectivity with our brand and products while engaging with our
consumers throughout their performance journey.
Retail Presentation
The primary goal 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 point of sale displays and concept shops
within our major retail accounts have 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 point of sale displays
and 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, including national and regional
sporting goods chains, independent and specialty retailers, department store chains, mono-branded Under Armour
retail stores in certain international markets, institutional athletic departments and leagues and teams. In various
countries where we do not have direct sales operations, we sell our products to independent distributors or engage
licensees to sell our products.
We also sell our products directly to consumers through our global network of Brand and Factory House
stores and e-commerce websites. Factory House store products are specifically designed for sale in our Factory
House stores and serve an important role in our overall inventory management by allowing us to sell a portion of
excess, discontinued and out-of-season products, while maintaining the pricing integrity of our brand in our other
distribution channels. Consumers experience a premium expression of our brand through our Brand House stores
while having broader access to our performance products. In Fiscal 2021, sales through our wholesale, direct-to-
consumer and licensing channels represented 57%, 41% and 2% of net revenues, respectively.
Our primary business operates in four geographic segments: (1) North America, comprising the United
States and Canada, (2) Europe, the Middle East and Africa ("EMEA"), (3) Asia-Pacific, and (4) Latin America. These
geographic segments operate predominantly in one industry: developing, marketing and distributing branded
performance apparel, footwear and accessories. Refer to Note 19 to the Consolidated Financial Statements for net
revenues by segment.
Corporate Other consists mainly of general and administrative expenses not allocated to an operating
segment, including expenses associated with centrally managed departments such as global marketing, global IT,
global supply chain, innovation and other corporate support functions; costs related to our global assets and global
marketing, costs related to our headquarters; restructuring and restructuring-related charges; and certain foreign
currency hedge gains and losses. Corporate Other also includes the operating results of our MapMyFitness digital
platform, which includes MapMyRun® and MapMyRide® as well as other digital business opportunities.
Our North America segment accounted for approximately 67% of our net revenues for Fiscal 2021, while
our international segments represented approximately 33%. For Fiscal 2021, one customer in North America
accounted for approximately 11% of the Company's net revenues.
North America
We sell our 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 $3.5 billion
and $2.7 billion for Fiscal 2021 and Fiscal 2020, respectively.
Our direct-to-consumer sales are generated through our Brand and Factory House stores and e-commerce
website. As of December 31, 2021, in North America, we had 180 Factory House stores primarily located in outlet
centers and 19 Brand House stores throughout the United States and Canada. Consumers can also purchase our
products directly from our e-commerce website at either www.underarmour.com or www.ua.com.
In addition, we earn licensing revenue in North America based on our licensees’ sale of collegiate apparel
and accessories, as well as sales of other licensed products.
We distribute the majority of our products to our North American wholesale customers and our own retail
stores and e-commerce businesses 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
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primary locations in Canada, New Jersey and Florida. In some instances, we arrange to have products shipped
directly to customer-designated facilities from the factories that manufacture our products.
EMEA
We sell our apparel, footwear and accessories in EMEA primarily through wholesale customers and
independent distributors, along with e-commerce websites and Brand and Factory House stores we operate within
Europe. 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 in the
Netherlands and a bonded warehouse in the United Kingdom. We sell our apparel, footwear and accessories
through independent distributors in the Middle East, Africa and Russia.
Asia-Pacific
We sell our apparel, footwear and accessories products in China, South Korea, Australia, Singapore,
Malaysia and Thailand through stores operated by our distribution and wholesale partners, along with e-commerce
websites and Brand and Factory House stores that we own and operate. We also sell our products to distributors in
New Zealand, Taiwan, Hong Kong, India and other countries in Southeast Asia where we do not have direct sales
operations. We distribute our products in Asia-Pacific through third-party logistics providers based in Hong Kong,
China, South Korea and Australia.
We have a license agreement with a partner in Japan, which produces, markets and sells our branded
apparel, footwear and accessories. Our branded products are sold in this market to large sporting goods retailers,
independent specialty stores, professional sports teams and licensee-owned retail stores. We hold a non-controlling
stake in our partner.
Latin America
In Fiscal 2021, we transitioned away from direct sales operations to distributors in several countries within
the Latin America region. We currently sell our apparel, footwear and accessories in Mexico through wholesale and
direct-to-consumer channels. In countries where we no longer have direct sales operations, such as Chile,
Argentina, Colombia and Brazil, we distribute our products through independent distributors, sourced primarily
through our international distribution hub in Panama.
Product Design and Development
Our products are developed by internal product development teams and manufactured with technical
fabrications produced by third parties. This approach enables us to select and create superior, technically advanced
materials, curated to our specifications, while focusing our product development efforts on style, performance and
fit.
We seek to deliver superior performance in all products, with a mission to make athletes better. Our
developers proactively identify opportunities to create and improve performance products that meet the evolving
needs of our consumers. We design products with consumer-valued technologies, utilizing color, texture and
fabrication to enhance consumer perception and understanding of product use and benefits.
Our product development team also works closely with our sports marketing and sales teams and with
professional and collegiate athletes to identify product trends and determine market needs.
Sourcing, Manufacturing and Quality Assurance
Many specialty fabrics and other raw materials used in our apparel products are technically advanced
products developed by third parties. 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 Fiscal 2021,
our top five suppliers provided approximately 38% of the fabric used in our apparel and accessories. These fabric
suppliers have primary locations in Taiwan, China, Malaysia and Vietnam. The fabrics used by our suppliers and
manufacturers are primarily synthetic and involve raw materials, including petroleum-based products that may be
subject to price fluctuations and shortages. We also use cotton as a blended fabric in some of our apparel products.
Cotton is a commodity that is subject to price fluctuations and supply shortages. Additionally, our footwear uses raw
materials 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 Fiscal 2021, our apparel
and accessories products were manufactured by 29 primary contract manufacturers, operating in 18 countries, with
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approximately 67% of our apparel and accessories products manufactured in Vietnam, Jordan, Malaysia, Cambodia
and China. Of our 29 primary contract manufacturers, ten produced approximately 65% of our apparel and
accessories products. In Fiscal 2021, substantially all of our footwear products were manufactured by six primary
contract manufacturers, operating primarily in Vietnam, Indonesia and China.
All manufacturers across all product divisions are evaluated for quality systems, social compliance and
financial strength by our internal teams before being selected and on an ongoing basis. Where appropriate, we
strive to qualify multiple manufacturers for particular product types and fabrications. We also seek vendors that can
perform multiple manufacturing stages, such as procuring raw materials and providing finished products, which
helps us control our cost of goods sold. We enter into various agreements with our contract manufacturers,
including non-disclosure and confidentiality agreements. We require that manufacturers adhere to a supplier code of
conduct regarding manufacturing quality, working conditions and other social, labor and sustainability-related
matters. However, we do not have any long term agreements requiring us to utilize any particular manufacturer, and
no manufacturer is required to produce our products for the long term. We have subsidiaries strategically located
near our key partners to support our manufacturing, quality assurance and sourcing efforts.
Inventory Management
Inventory management is important 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 meeting 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 global operating and financial reporting information technology system, are
designed to improve 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 product purchasing,
production lead time reduction, and better planning and execution in selling 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.
Intellectual Property
We believe we own the material trademarks used in connection with the marketing, distribution and sale of
our products, 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 United Kingdom, the European Union, Japan, China and numerous other countries. We also
own trademark registrations for other trademarks including, among others, UA®, ARMOUR®, HEATGEAR®,
COLDGEAR®, PROTECT THIS HOUSE®, I WILL®, and many trademarks that incorporate the term ARMOUR
such as ARMOUR FLEECE® and ARMOUR BRATM. We also own registrations to protect our connected fitness
branding such as MapMyFitness® and associated MapMy marks. We own domain names for our primary
trademarks (most notably underarmour.com and ua.com) and hold copyright registrations for several commercials,
as well as for certain artwork. We intend to continue to strategically register, both domestically and internationally,
trademarks and copyrights we utilize today and those we develop in the future. We will continue to aggressively
police our trademarks and pursue those who infringe, both domestically and internationally.
We believe the distinctive trademarks we use in connection with our products are important in building our
brand image and distinguishing our products from those of others. These trademarks are among our most valuable
assets. In addition to our distinctive trademarks, we also place significant value on our trade dress, which is the
overall image and appearance of our products, and we believe our trade dress helps to distinguish our products in
the marketplace.
We traditionally have had limited patent protection on some 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. As we continue to expand and drive innovation in our
products, we seek patent protection on products, features and concepts we believe to be strategic and important to
our business. We will continue to file patent applications where we deem appropriate to protect our new products,
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innovations and designs that align with our corporate strategy. 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. Our most direct competitors include, among others, NIKE, Adidas, Puma and
lululemon athletica, which are large apparel and footwear companies with strong worldwide brand recognition and
significantly greater resources than us. Within our international markets, we also compete with local brands that
may have stronger brand recognition regionally. 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. 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 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 focus on athletic
performance product style and merchandising differentiates us from our competition. In the future we expect to
compete for consumer preferences and 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, preferences for inclusive products and brands and changing styles and
trends.
Sustainability
At Under Armour, our mission is to make athletes better. Our sustainability strategy sets forth our long-term
commitment to finding new ways to drive performance through sustainable innovations that not only deliver a better
product for athletes, but also a better world. We have always been focused on product innovation, and we are
challenging ourselves to be more innovative to increase the sustainability, durability and recyclability of our products
and to reduce the impact of our design, development and manufacturing processes on the environment. We are
exploring more ways to use digital technology to elevate the experience of our customers and consumers while also
reducing the impact of our operations on the environment. For example, we have created realistic, but fully virtual,
digital showrooms to display products for upcoming seasons to our customers, allowing us to produce and ship
fewer physical product samples.
Our sustainability strategy is centered around three interconnected pillars—our products, our teammates
and our home field—and focuses on enabling materials innovation to bring about a more circular system,
championing our teammates and communities across our entire value chain and leaving our planet and shared
spaces bettered by our presence. Increasingly, we are working with our supply chain to embed sustainable
practices, and be mindful about the sustainability profiles of key raw materials. In Fiscal 2021, we publicly
announced certain environmental and sustainability goals for 2025, 2030 and 2050 that focus on reducing our
greenhouse gas emissions and increasing our annual sourcing of renewable electricity in our owned and operated
facilities. These goals, which can be found on our website, are grounded in science and an assessment of where
our operations have the most significant impact on the environment.
Human Capital Management
Under Armour is led by its purpose—We Empower Those Who Strive for More—and our teammates, who
bring their different backgrounds, experiences and perspectives, are central to driving our long-term success as an
organization and brand. Consistent with our purpose, we believe that our brand is stronger when our collective team
is fully engaged and working together to support our athletes around the world. We also believe that having an
engaged, diverse and committed workforce not only enhances our culture, it drives our business success, ultimately
helping us to deliver the most innovative products that make athletes better. Our human capital management
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strategy is therefore focused on creating an inclusive workplace where our teammates can thrive by attracting,
developing and retaining talent through a competitive total rewards program, numerous development opportunities
and a diverse, inclusive and engaging work environment.
As of December 31, 2021, we had approximately 17,500 teammates worldwide, including approximately
13,000 in our Brand and Factory House stores and approximately 1,300 at our distribution facilities. Approximately
7,100 of our teammates were full-time. Of our approximately 10,400 part-time teammates, approximately 29% were
seasonal teammates.
Diversity, Equity and Inclusion
Our commitment to diversity, equity and inclusion starts at the top with a highly skilled and diverse Board of
Directors. Our Board of Directors has ongoing oversight of our human capital management strategies and programs
and regularly reviews our progress towards achieving our diversity, equity and inclusion goals.
We have set measurable goals for improving diversity amongst our team, including a commitment to
increase the number of historically underrepresented teammates throughout the levels of leadership within our
organization by 2023. These goals are publicly outlined on our corporate website, where we also publish our
representation statistics annually. We are also committed to continuing to increase representation of women in key
areas of our business particularly in leadership, commercial and technical roles globally. Our annual incentive plan
for all teammates, including executives, incorporates performance measures in furtherance of our diversity, equity
and inclusion goals.
As of December 31, 2021:
•
•
•
the race and ethnicity of our teammate population in the United States, including teammates in our Brand
and Factory House stores and our distribution facilities, was 49% White, 23% Hispanic or Latino, 18% Black
or African American, 6% Asian and 4% other;
the race and ethnicity of our "director" level and above positions in the United States was 75% White, 6%
Hispanic or Latino, 8% Black or African American, 8% Asian and 3% other; and
52% of our global teammates were women, and women represented 41% of our “director” level and above
positions.
In addition to building a more diverse team, we believe fostering an inclusive and ethical culture is key to
our values and who we are as an organization. We believe open lines of communication are critical to fostering this
environment. This starts with “tone at the top” and we emphasize the importance of our Code of Conduct and
encourage our teammates to “speak-up” when they have concerns. We require unconscious bias training for all of
our corporate teammates and our retail and distribution facility leadership, including training focused on promoting
diversity during our new-hire interview process. In Fiscal 2021, we continued a company-wide virtual series to
facilitate meaningful conversations on anti-racism and racial justice issues. For our senior leadership, we require
mandatory training on cultural competency and building inclusive environments. We also invest in professional
development specifically for our historically underrepresented and women teammates to improve retention and
advancement. We currently have nine teammate-led Teammate Resource Groups, which amplify business
initiatives, provide networking opportunities, support community outreach and promote cultural awareness. In
addition, we have an internal diversity, equity and inclusion council, known as the Global T.E.A.M. (Teammate Equity
and Accountability Movement) Council, which consists of “director” level and above corporate teammates and
focuses on fostering a diverse and inclusive work environment across our organization.
Total Rewards
Our total rewards strategy is focused on providing market competitive and internally equitable total rewards
packages that allow us to attract, engage and retain a talented, diverse and inclusive workforce. In determining our
compensation practices, we focus on offering competitive pay that is based on market data with packages that
appropriately reflect roles and geographic locations. We believe in “pay for performance” and seek to design plans
and programs to support a culture of high performance where we reward what is accomplished and how. In May
2021, we announced an increase in minimum pay rate for hourly teammates in the United States and Canada from
a minimum of $10 per hour to $15 per hour ($15.25 Canadian dollars per hour in Canada), which went into effect on
June 6, 2021. We are also committed to achieving pay equity within all teammate populations, and with the
assistance of third-party experts, conduct an annual review of pay equity and market comparison data. When we
identify opportunities, we take prompt actions to close any gaps.
Our total rewards programs, which are outlined on the careers page of our corporate website, are aimed at
the varying health, financial and home-life needs of our teammates. In the United States, where approximately 69%
of our workforce is located, in addition to market-competitive pay and broad-based bonuses, our full-time
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teammates are eligible for healthcare benefits; health savings accounts; flexible spending accounts; retirement
savings plan; paid time off; family, maternity and paternity leave; adoption assistance; child and adult care
resources; flexible work schedules; short and long term disability; life and accident insurance; tuition assistance;
fitness benefits at on-site gyms or eligible fitness programs; commuter benefits; Under Armour merchandise
discounts; and a Work-Life Assistance Program. We believe in promoting alignment between our teammates and
stockholders. As such, these teammates are also eligible to participate in our Employee Stock Purchase Plan, and
corporate teammates within our “director” level and above positions receive restricted stock unit awards as a key
component of their total compensation package. Outside of the United States, we provide similarly competitive
benefit packages to those of our U.S. teammates but tailored to market-specific practices and needs.
We believe that giving back to the communities where we live and work is central to our culture. In addition
to competitive time off benefits, our full-time teammates also receive 40 hours of additional paid time off each year
for personal volunteer activities performed during working hours.
Talent Development and Engagement
Our purpose of empowering those who strive for more is embodied in our commitment to helping our
teammates develop their skills, grow their careers and achieve their goals. We believe our investment in these
areas enhances our teammate engagement, improves the efficiency and productivity of our work and ultimately
drives better results for our business. We prioritize and invest in a wide range of training and development
opportunities for teammates at all levels, including through both online and instructor-led internal and external
programs. All of our teammates have access to an online learning platform and knowledge database, Armour U,
which offers an extensive, regularly updated library of seminars on a variety of topics. We also offer resources to
support individual development planning, including emphasizing development opportunities as part of teammates’
annual goal setting process.
We invest in developing the leadership strength and capabilities of people-leaders at all levels, including
through trainings focused on how to effectively manage, communicate with and drive the performance of teams.
Through our succession planning efforts, we further focus on talent development for key roles within our
organization.
We believe these efforts keep our teammates engaged and motivated to do their best work. However,
competition for employees in our industry is intense, and we regularly collect feedback to better understand and
improve our teammate experience and identify opportunities to continually strengthen our culture. See “Risk Factors
—Business and Operational Risks—Our future success is substantially dependent on the continued service of our
senior management and other key employees, and our continued ability to attract and retain highly talented new
team members” included in Item 1A of this Annual Report on Form 10-K.
Health and Safety
In Fiscal 2021, the COVID-19 pandemic continued to present unprecedented challenges to our business,
our communities, our athletes and our teammates. As we managed through these challenges, we prioritized the
health, safety and overall well-being of our teammates. We have a COVID-19 sick leave policy, which offers full-time
and part-time teammates in the United States and Canada additional paid sick time if they are unable to work due to
contracting COVID-19.
At each of our office, retail store and distribution house locations, we follow applicable local, state and
national government regulations, laws and recommended guidance. At our distribution houses, which have
remained open, we have implemented government-recommended COVID-19 prevention measures, including
reworking all job areas to reduce close contact, implementing daily health screening questions and temperature
checks, enhancing cleaning protocols, requiring face coverings and social distancing and adding physical distancing
barriers and increased hand sanitizing stations. Following significant store closures during Fiscal 2020 due to the
COVID-19 pandemic, during Fiscal 2021, most of our Brand and Factory House retail stores remained open, subject
to varying capacity constraints and other operating restrictions. In addition to requiring daily teammate wellness
assessments, we have implemented COVID-19 prevention measures at these locations similar to those described
above. With respect to our corporate teammates, many of our corporate offices (including our global headquarters)
have reopened in a limited capacity with teammates permitted to return to work on a voluntary basis. However, the
majority of our corporate teammates have continued to work partially, if not entirely, remotely. We offer resources for
teammates working remotely, which are targeted at optimizing remote work environments and managing COVID-19
related challenges and address topics such as office ergonomics and mental and emotional health and well-being.
During Fiscal 2021, we implemented new COVID-19 vaccine policies and procedures for our corporate teammates
in the United States and Canada, as well as incentive programs for our retail and distribution teammates. We have
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provided the ability for our teammates to receive the vaccine by offering on-site vaccination clinics at our various
facilities.
Information About Our Executive Officers
Our executive officers are:
Name
Kevin Plank
Patrik Frisk
David Bergman
Colin Browne
Lisa Collier
Massimo Baratto
Stephanie Pugliese
Tchernavia Rocker
John Stanton
Age
Position
49
59
49
57
56
59
51
48
61
Executive Chairman and Brand Chief
Chief Executive Officer and President
Chief Financial Officer
Chief Operating Officer
Chief Product Officer
Chief Consumer Officer
President of the Americas
Chief People and Administrative Officer
General Counsel and Corporate Secretary
Kevin Plank has been Executive Chairman and Brand Chief since January 2020. Prior to that, he served as
Chief Executive Officer and Chairman of the Board of Directors from 1996, when he founded our Company, to 2019,
and President from 1996 to July 2008 and August 2010 to July 2017. 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.
Patrik Frisk has been Chief Executive Officer and President and a member of our Board of Directors since
January 2020. Prior to that, he served as President and Chief Operating Officer from July 2017 to December 2019.
Prior to Under Armour, he was Chief Executive Officer of The ALDO Group, a global footwear and accessories
company. Previous to that, he spent more than a decade with VF Corporation where he held numerous leadership
positions including Coalition President of Outdoor Americas (The North Face® and Timberland®), President of the
Timberland® brand, President of Outdoor & Action Sports (EMEA), and Vice President and General Manager of The
North Face®. Before joining VF Corporation, Mr. Frisk ran his own retail business in Scandinavia and held senior
positions with Peak Performance and W.L. Gore & Associates.
David Bergman has been Chief Financial Officer since November 2017. Mr. Bergman joined our Company
in 2004 and has served in various Finance and Accounting leadership roles for the Company, including Corporate
Controller from 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 Chief Operating Officer since February 2020. Prior to that, he served as Chief
Supply Chain Officer from July 2017 to January 2020 and 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.
Lisa Collier has been Chief Product Officer since April 2020. Prior to joining our Company, Ms. Collier
served as President, Chief Executive Officer and Chairman of NYDJ (Not Your Daughter’s Jeans) from June 2016 to
January 2020. Prior thereto, Ms. Collier served as Executive Vice President and President of Global Dockers Brand
of Levi Strauss & Company from July 2013 to May 2016 and as Chief Transformation Officer from October 2013 to
January 2015. Ms. Collier also served as Senior Vice President of Product Development and Innovation across all
brands from 2012 to 2013, Senior Vice President Global Dockers Merchandising, Licensing, Supply Chain from
2010 to 2012, as Managing Director and General Manager of Levi Strauss Australia and New Zealand from 2007 to
2011, and prior to that in various other leadership roles at Levi Strauss & Company. Ms. Collier served in various
leadership roles at Sunrise Brands (formerly Tarrant Apparel Group) from 1999 to 2003. She also served in various
merchandising positions at The Limited from 1987 to 1999 and started her career in retail and apparel at Hess’s
Department Store.
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Massimo Baratto has been Chief Consumer Officer since November 2021. Prior to that, he served as
Senior Vice President, Managing Director EMEA from May 2018 to October 2021. Prior to joining our Company, he
served as Chief Executive Officer of the Oberalp Group, an international house of brands in the mountain sports
industry and a distribution partner for internationally renowned sports brands, from January 2003 to May 2018. He
has over 30 years experience in fast-moving consumer goods and sporting goods industries.
Stephanie Pugliese has been President of the Americas since June 2020. Prior to that she served as
President of North America from September 2019 to May 2020. Prior to joining our Company, Ms. Pugliese served
as Chief Executive Officer and President of Duluth Trading Company from February 2015 to August 2019, and as
President from February 2012 to August 2019. Prior thereto, Ms. Pugliese served as President and Chief Operating
Officer of Duluth Trading Company from February 2014 to February 2015, Senior Vice President and Chief
Merchandising Officer from July 2010 to February 2012 and as Vice President of Product Development from
November 2008 to July 2010. Ms. Pugliese also served in various leadership roles with Lands’ End, Inc. from 2005
to 2008 and at Ann Inc. from 2000 to 2003.
Tchernavia Rocker has been Chief People and Administrative Officer since June 2020. Prior to that she
served as Chief People and Culture Officer from February 2019 to May 2020. Prior to joining our Company, she
served more than 18 years in Human Resources leadership roles at Harley-Davidson, Inc., most recently as Vice
President and Chief Human Resources Officer from June 2016 through January 2019, as General Manager, Human
Resources from January 2012 through May 2016, and in various other Human Resources leadership positions
since joining the company in 2000. Prior to that, she served in various HR and operations roles at Goodyear Dunlop
North America Tire Inc.
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.
Available Information
We will make available free of charge on or through our website at https://about.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 Securities Exchange Act of 1934, as
amended (the "Exchange Act") as soon as reasonably practicable after we electronically 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.
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ITEM 1A. RISK FACTORS
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, results of operations and future prospects could be negatively impacted.
Economic and Industry Risks
The COVID-19 pandemic has caused and may continue to cause significant disruption in our industry,
which has and may continue to materially impact our business, financial condition and results of
operations.
Our business has been and may continue to be materially impacted by the effects of the widespread
outbreak of COVID-19, which was reported to have surfaced first in December 2019 and declared a global
pandemic in March 2020. This pandemic has negatively affected the U.S. and global economies, disrupted global
supply chains and financial markets, and led to significant travel and business restrictions, including mandatory
closures, orders to “shelter-in-place” and restrictions on how businesses operate.
During 2020, the COVID-19 pandemic materially negatively impacted our business and results of
operations. While conditions improved during 2021, the extent and duration of ongoing impacts remain uncertain.
The pandemic previously resulted in temporary closures of our retail stores and the stores of our wholesale
customers where our products are sold, reduced consumer traffic and consumer spending, temporary layoffs of
certain employees in our North America retail stores and distribution centers and incremental operating expenses
from adopting preventative health and safety measures in our stores, distribution centers and corporate offices.
These negative impacts may continue or resurface depending on the ongoing development of the virus and related
responses including resurgences and the impact of variants.
The disruption caused by the pandemic has and may continue to disrupt the operations of our business
partners, including our customers, suppliers, and vendors, and the financial condition of certain of our partners has
been and could again be significantly impacted. For example, in 2020 certain of our wholesale customers delayed
purchases of our products or cancelled previously placed orders in response to pandemic-related store closures.
More recently, we have experienced disruption amongst our distribution, logistics and sourcing partners, including
temporary closures or other restrictions placed on factories in key sourcing countries. Additionally, the COVID-19
pandemic has caused and may continue to cause global logistical challenges, including shipping container
shortages, transportation delays, port congestion and labor shortages. These challenges have and may continue to
negatively impact our partners and our business, including by disrupting our inventory flow, requiring us to incur
increased freight costs and requiring us to cancel or delay sales to some of our customers. This has and may
continue to negatively impact our net revenues, gross margin, net income and results of operations.
The COVID-19 pandemic and resulting economic disruption has also led to significant volatility in the capital
markets and adversely impacted our stock price. While we have taken measures to maintain our operations and
preserve and enhance our access to liquidity, our cash generated from operations was negatively impacted during
certain periods of the pandemic and future cash flows may be further impacted by the ongoing development of the
pandemic. If we are unable to effectively manage our spending in response to the pandemic, our profitability may be
negatively impacted.
Further, many of our employees in our corporate offices are working remotely, and may continue to do so.
An extended period of remote work arrangements could introduce operational risk, including but not limited to
cybersecurity risks.
The impact of the COVID-19 pandemic may also exacerbate other risks discussed below, any of which
could have a material effect on us. Though we continue to monitor the COVID-19 pandemic closely, the situation is
changing rapidly, including a resurgence in many countries, and additional impacts may arise that we are not aware
of currently.
Our business depends on consumer purchases of discretionary items, which can be negatively impacted
during an economic downturn or periods of inflation. This could materially impact our sales, profitability
and financial condition.
Many of our products may be considered discretionary items for consumers. Many factors impact
discretionary spending, including general economic conditions, unemployment, the availability of consumer credit
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and inflationary pressures and consumer confidence in future economic conditions. Global economic conditions
may continue to be uncertain, particularly in light of the impacts of COVID-19, and the potential impacts of
increasing inflation in the United States (our largest market) remain unknown, making trends in consumer
discretionary spending unpredictable. Historically, 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 lead to declines in sales and slow our long-term growth expectations. Any near or long-term economic
disruptions in markets where we sell our products, particularly in the United States, China or other key markets, may
materially harm our sales, profitability and financial condition and our prospects for growth. In addition, as pandemic
conditions improve and restrictions ease, we are unable to predict whether consumer preferences for discretionary
items will shift and the level of consumer spending within our industry will be negatively impacted for a period of
time. If this were to occur, our sales and prospects for growth may be negatively 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. Many of our competitors are large apparel and footwear companies with strong
worldwide brand recognition. Within our international markets, we also compete with local brands that may have
strong brand recognition amongst consumers within particular regions. Due to the fragmented nature of the industry,
we also compete with other manufacturers, including those specializing in products similar to ours and private label
offerings of certain retailers, including some of our retail customers. Many of our competitors have significant
competitive advantages, including greater financial, distribution, marketing, digital and other resources; longer
operating histories; better brand recognition among consumers; more experience in global markets; greater ability to
invest in technology, the digital consumer experience and innovations around sustainability; 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 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 their products, including significant
advertising, media placement, partnerships and product endorsement, 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 in certain markets expand our distribution to other retailers, retailers have limited resources and floor
space, and we must compete with others to develop relationships with them. Increased competition by existing and
future competitors could result in reductions in floor space in retail locations, reductions in sales or reductions in the
prices of our products, and if retailers 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 margin could have a negative effect on our brand image and a material adverse
effect on our business, financial condition and results of operations.
Our profitability may decline or our growth may be negatively impacted 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. Ongoing and
sustained promotional activities could negatively impact our brand image. On the other hand, if we are unwilling to
engage in promotional activity on a scale similar to that of our competitors, for instance, to protect our premium
brand positioning, and unable to simultaneously offset declining promotional activity with increased sales at
premium price points, our ability to achieve short-term growth targets may be negatively impacted, which could have
a material adverse effect on our results of operations, financial condition and the price of our stock.
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Fluctuations in the cost of raw materials and commodities we use in our products and costs related to our
supply chain 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, including due to inflation, or shortages in petroleum or other raw
materials can materially adversely affect our cost of goods sold. In addition, certain of our manufacturers are subject
to government regulations related to wage rates, and therefore the labor costs to produce our products may
fluctuate. The cost of transporting our products for distribution and sale is also subject to fluctuation due in large part
to the price of oil. Because most of our products are manufactured abroad, our products must be transported by
third parties over large geographical distances and an increase in the price of oil can significantly increase costs.
Manufacturing delays, such as those caused by COVID-19 related temporary closures and other restrictions placed
on factories in key sourcing countries, or unexpected transportation delays, such as those caused by COVID-19
related global logistics challenges, have caused and may continue to cause us to rely more heavily on airfreight to
achieve timely delivery to our customers. In addition, shipping costs have risen significantly throughout the world in
2021. These factors have and may continue to significantly increase our 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.
Our financial results and ability to grow our business may be negatively impacted by global events beyond
our control.
We operate retail, distribution and warehousing facilities and offices around the world and substantially all of
our manufacturers are located outside of the United States. We are subject to numerous risks and global events
beyond our control which could negatively impact consumer spending or the operations of us or our customers or
business partners, and therefore our results of operations, including: political or labor unrest; military conflict;
terrorism; public health crises, disease epidemics or pandemics (such as COVID-19); natural disasters and extreme
weather conditions, which may increase in frequency and severity due to climate change; economic instability
resulting in the disruption of trade from foreign countries; the imposition of new laws and regulations, including those
relating to labor conditions, minimum wage, quality and safety standards and disease epidemics or other public
health concerns, as well as rules and regulations regarding climate change; changes in trade policy or actions of
foreign or U.S. governmental authorities impacting trade and foreign investment, particularly during periods of
heightened tension between U.S. and foreign governments, including the imposition of new import limitations,
duties, tariffs, anti-dumping penalties, trade restrictions or restrictions on the transfer of funds; inflation; and
changes in local economic conditions in countries where our stores, customers, manufacturers and suppliers are
located.
These risks could hamper our ability to sell products, negatively affect the ability of our manufacturers to
produce or deliver our products or procure materials and increase our cost of doing business generally, any of which
could have an adverse effect on our results of operations, profitability, cash flows and financial condition. 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.
Business and Operational Risks
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 Fiscal 2021, sales through our wholesale channel represented approximately 57% 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 or getting customer insurance against non-collection. We face increased risk of order
reduction or cancellation and around collectibility when dealing with financially ailing customers or customers
struggling with economic uncertainty. As a result of the COVID-19 pandemic, many of our wholesale customers
throughout the world had to temporarily close their stores or operate their stores under significant restrictions and
experienced reduced consumer traffic and purchasing, which resulted in lower sales and cancellations of orders of
our products. Many of our wholesale customers have been able to reopen their stores and have experienced a
recovery in consumer traffic and purchasing, though consumer traffic in some areas remains below pre-pandemic
levels. Given the ongoing uncertainty and constantly evolving nature of the COVID-19 pandemic, it is uncertain
whether our wholesale customers will have to temporarily close their stores or operate them under significant
restrictions again, and whether they will again experience significantly reduced consumer traffic and purchasing. If
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our wholesale customers continue to experience significant disruptions, this could result in further reductions or
cancellations of orders or late or extended payment terms to us, which could negatively impact our results of
operations. In addition, 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. Furthermore, 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 company.
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.
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 grow our e-commerce and
mobile application offerings and digital experiences throughout the world, expand our global network of Brand and
Factory House stores and continue to successfully increase our product offerings and market share in footwear. Our
ability to invest in these growth initiatives on the timeline and at the scale we expect will be negatively impacted if
we again experience significant market disruption due to COVID-19 or other significant events, particularly if our
North America business, which represented 67% of our total net revenues in Fiscal 2021, does not grow sufficiently.
In addition, as we expand our global network of Brand and Factory House stores, if we are unable to operate our
stores profitably, our financial results could be impacted, or we could be required to recognize impairment charges.
Our long-term strategy also depends on our ability to successfully drive expansion of our gross margins, 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 could be negatively impacted and we may not achieve our
expected results of operations.
We may not fully realize the expected benefits of our restructuring plans or other operating or cost-saving
initiatives, which may negatively impact our profitability.
Since 2017, we have executed three separate restructuring plans designed to more closely align our
financial resources against the critical priorities of our business and rebalance our cost base to further improve
future profitability and cash flow generation. We have also implemented several changes to our operating model
and continue to refine our operating model in response to business and market conditions. We may not achieve the
operational improvements and efficiencies that we targeted in our restructuring plans and operating model changes,
which could adversely impact our results of operations and financial condition. Implementing any restructuring plan
or operating model change presents significant potential risks including, among others, higher than anticipated
implementation costs, management distraction from ongoing business activities, failure to maintain adequate
controls and procedures while executing our restructuring plans and operating model changes, 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, which may be dilutive to our earnings in the short term.
If we are unable to anticipate consumer preferences, successfully develop and introduce new, innovative
and updated products or engage our consumers, or if consumer preferences shift away from performance
products, our sales, net revenues and profitability may be negatively impacted.
Our success depends on our ability to identify and originate product trends and anticipate and react to
changing consumer demands in a timely manner. All of our products are subject to changing consumer preferences
that shift rapidly and cannot be predicted with certainty. Accordingly, our new products may not receive consumer
acceptance. In addition, long lead times for certain of our products may make it hard for us to respond quickly to
changes in consumer demands. Our ability to adequately react to and address consumer preferences depends in
part upon our continued ability to develop and introduce innovative, high-quality products and to optimize available
consumer data. Moreover, if consumers are not convinced performance apparel, footwear and accessories are a
better choice than, and worth the additional cost over, traditional alternatives, sales of performance products may
not grow or decline and growth in the industry and our business could be adversely affected. In addition, consumers
are increasingly focused on the environmental and social practices of brands, including the sustainability of the
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products sold. From time to time, we may also introduce limited run or specialized products that may increase our
sales in the near term, but that may fail to maintain sustained consumer demand. If we are unable to effectively
anticipate and respond to consumer preferences as a result of any of these factors, our brand image could be
negatively impacted, and our sales, net revenues and profitability may be negatively impacted.
Consumer shopping and engagement preferences and shifts in distribution channels continue to evolve
and if we fail to adapt accordingly our results of operations or future growth could be negatively impacted.
Consumer preferences regarding the shopping experience and how to engage with brands continue to
rapidly evolve. We sell our products through a variety of channels, including through wholesale customers and
distribution partners, as well as our own direct-to-consumer business consisting of our Brand and Factory House
stores and e-commerce platforms. If we or our wholesale customers do not provide consumers with an attractive in-
store experience, our brand image and results of operations could be negatively impacted. In addition, as part of our
growth strategy, we are investing significantly in enhancing our online platform capabilities and implementing
systems to evolve towards a more omni-channel approach to service our consumers. We are also investing in
capabilities and tools to drive higher digital engagement with our consumers and create new digital experiences. If
we do not successfully execute this strategy or continue to provide an engaging, reliable and user-friendly digital
commerce platform or digital experiences that attract consumers, our brand image, and results of operations as well
as our opportunities for future growth could be negatively impacted.
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 or maintain 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 or loss. These risks have materially
increased and may persist as the COVID-19 pandemic continues. 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
materially. In addition, we may from time to time exit relationships with certain wholesale customers to further drive
our premium brand position or for other reasons. This may negatively impact our net revenues if we are unable to
replace those sales with additional sales to our other customers or direct sales to consumers.
We must successfully manage the increasingly complex operations of our global business, including
continued expansion in certain markets where we have limited brand recognition, or our business and
results of operations may be negatively impacted.
A significant element of our growth strategy depends on our continued expansion outside of North America,
and we have limited brand recognition and operating experience in certain regions. We must continue to
successfully manage the operational difficulties associated with expanding our business to meet increased
consumer demand throughout the world. We have limited experience with regulatory requirements and market
practices in certain regions outside of North America, and may face difficulties expanding into and successfully
operating in those markets, including differences in regulatory environments, labor and market practices, and
difficulties in keeping abreast of market, business and technical developments and consumers’ tastes and
preferences. 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. We may not manage these efforts cost-effectively or these efforts could 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 or operational challenges leading to a decrease in net revenues and
results from operations.
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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
may be generated by at-once orders for immediate delivery to customers, particularly during the last two quarters of
the calendar 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. Excess inventory
may result in inventory write-downs or write-offs or sales at discounted prices or in less preferred distribution
channels, negatively impacting gross margin. On the other hand, if we underestimate the demand for our products,
our manufacturers may not be able to produce products to meet our customer requirements, resulting 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.
Factors that could affect our ability to accurately forecast demand for our products include: changing
consumer demand for our products; product introductions by competitors; unanticipated changes in general market
or economic 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, which may become more frequent or severe as a result of climate change; and
terrorism or acts of war, or the threat thereof, political or labor instability or unrest or public health concerns and
disease epidemics, such as the current COVID-19 pandemic.
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. These risks have
materially increased and may persist with the market disruption caused by COVID-19.
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 Fiscal 2021, ten manufacturers produced approximately 65% of
our apparel and accessories products, and six produced substantially all 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 and production capacity.
A number of factors may require us to seek alternative or additional suppliers, which we may not be able to
do in a timely or cost-effective manner. 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. Moreover, our suppliers may not be able to fill our
orders in a timely manner depending on market conditions or increased demand for product. For example, in Fiscal
2021 certain of our manufacturers experienced significant financial and operational disruption due to COVID-19,
including in key sourcing countries. We have historically provided supply chain finance support to certain of our
supply chain partners. In the past, the financial markets supporting supply chain finance programs experienced
disruption that resulted in a temporary disruption to our program and challenged the cash flow and liquidity of our
partners. While we worked with our partners through the disruption and have re-established a supply chain finance
program, there can be no guarantee that such disruption will not occur again. Additionally, if one or more of our
suppliers were to experience significant financial difficulty, bankruptcy, insolvency or cease operations, or failed to
comply with applicable labor or other laws, we may be required to seek alternative suppliers.
In addition, if 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. 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 (or higher net loss) both in the short and long term.
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We have occasionally received, and may in the future continue to receive, shipments of product that fail to
conform to our quality control standards. If we are unable 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 or other 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 and cost effective 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 and disruptions at various ports or at our suppliers or
manufacturers could create significant risks for our business, particularly if these disputes result in work slowdowns,
decreased operations, lockouts, strikes or other disruptions during our peak importing or manufacturing seasons.
For example, COVID-19 has resulted in delays and disruptions at ports due to workforce decreases, shipping
backlogs and capacity constraints, container shortages and other disruptions. This has resulted, and may continue
to result, in slower than planned deliveries of inventory and delayed sales to customers. If we experience significant
delays or disruption in receiving and distributing our products, this could have an adverse effect on our business,
potentially resulting in canceled orders by customers, unanticipated inventory accumulation or shortages, increased
expense (including air freight) to deliver our products and reduced net revenues and net income or higher net loss.
If we fail to successfully manage or realize expected results from significant transactions or investments, or
if we are required to recognize an impairment of our goodwill or other intangible assets, it may have an
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 acquired businesses can require significant efforts and resources, which could
divert management attention from more profitable business operations. From time to time we have also disposed of
certain assets where we did not think our activities aligned to our operating model. If we fail to successfully integrate
acquired businesses or effectively manage dispositions, we may not realize the financial benefits or other synergies
we anticipated. In addition, in connection with our acquisitions, we may record goodwill or other intangible assets.
We have recognized goodwill impairment charges in the past, and additional goodwill impairment charges could
have an adverse effect on our results of operations and financial position. Additionally, from time to time, we may
invest in business infrastructure, new businesses and expansion of existing businesses, such as the expansion of
our network of Brand and Factory House stores and our distribution facilities, implementing our global operating and
financial reporting information technology system, supporting our digital strategy (including our e-commerce
platform), or supporting our corporate infrastructure (including the development of our new global headquarters in
Port Covington in Baltimore). These investments require substantial cash investments and management attention,
and infrastructure investments may also divert funds from other potential business opportunities. 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.
The value of our brand and sales of our products could be diminished if we are associated with negative
publicity.
Our business could be adversely impacted if negative publicity regarding our brand, our company or our
business partners 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 the conduct of these third parties. 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. The risk that our business partners may not act in accordance with our
expectations may be exacerbated in markets where our direct sales, supply chain or logistics operations are not as
widespread. In addition, we have sponsorship contracts with a variety of athletes, teams and leagues, and many
athletes and teams use our products. Negative publicity regarding these partners could negatively impact our brand
image and result in diminished loyalty to our brand, regardless of whether such claims are accurate. Furthermore,
social media can potentially accelerate and increase the scope of negative publicity. This could diminish the value of
our proprietary rights or harm our reputation or have a negative effect on our sales and results of operations.
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If we fail to meet the expectations of our stakeholders with respect to our environmental, social and
governance practices, including those relating to sustainability and diversity, equity and inclusion, it may
have an adverse effect on our brand, sales of our products and our results of operations.
Certain customers, consumers, investors and other stakeholders are increasingly focusing on the
environment, social and governance (“ESG”) practices of companies, including those related to sustainability and
diversity, equity and inclusion. If our ESG practices do not meet such stakeholder expectations and standards,
which continue to evolve, our brand and reputation could be negatively impacted. Any sustainability report or other
information that we publish or make may describe our practices, targets and commitments on a variety of ESG
matters, including relating to our actions to address climate change, environmental targets and compliance, social
and labor policies and practices, human capital management matters (including those relating to diversity, equity
and inclusion) and the materials and manufacturing of our products. It is possible that stakeholders may not be
satisfied with such disclosures, our ESG practices or the speed of their adoption. Our failure, or perceived failure, to
meet stakeholder expectations or standards, or our targets or commitments, could harm our reputation, negatively
impact our employee retention or have a negative effect on our sales and results of operations. We may also incur
additional costs or require additional resources to monitor such stakeholder expectations and standards and to meet
our targets and commitments.
The costs and return on our investments for our sports marketing sponsorships may become more
challenging and this could impact the value of our brand image.
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 and sponsorship agreements with a
variety of sports teams and athletes at the collegiate and professional level to be their official supplier of
performance apparel and footwear. We have also developed licensing agreements to be an official supplier of
footwear and/or performance apparel to a variety of professional sports leagues and clubs. However, as competition
in the performance apparel and footwear industry has increased, the costs associated with athlete sponsorships
and official supplier licensing agreements, including the costs of obtaining and retaining these sponsorships and
agreements, have varied and at times increased greatly. 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. In addition, because travel and business restrictions related to the COVID-19 pandemic
have caused and may continue to cause professional and collegiate athletics and other sporting events to be
cancelled or delayed, we may not realize the expected benefits of these relationships. As a result, our brand image,
net revenues, expenses and profitability could be materially adversely affected.
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 or malware, 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, including public health crises or disease epidemics. For example, the current COVID-19 pandemic
may impede our ability to operate our distribution facilities at full capacity and may similarly impact our third-party
logistics providers. 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 or from all types of events
causing such disruptions. Significant disruptions could lead to 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. This
includes the shipping of product to and from our distribution facilities, as well as partnering with third-party
distribution facilities in certain regions where we do not maintain our own facilities. From time to time, certain of our
partners have experienced and may continue to experience disruptions to their operations, including cyber-related
disruptions and disruptions related to the COVID-19 pandemic. If we or our partners encounter such problems, 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.
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We rely significantly on information technology and any failure, inadequacy or interruption of that
technology could harm our ability to effectively operate our business.
We rely on our own and our vendors' information technology throughout our business operations, including
to design, forecast and order product, manage and maintain our inventory and internal reports, manage sales and
distribution, operate our e-commerce website and mobile applications, process transactions, manage retail
operations and other key business activities. We also communicate electronically throughout the world with our
employees and with third parties, such as customers, suppliers, vendors and consumers. Our operations are
dependent on the reliable performance of these systems and technologies and their underlying technical
infrastructure, which incorporate complex software. Any of these information systems could fail or experience a
service interruption for a number of reasons, including computer viruses, ransomware or other malware,
programming errors, hacking or other unlawful activities, disasters or a failure to properly maintain system
redundancy or protect, repair, maintain or upgrade the systems. For example, in 2021, a remote code execution
vulnerability in Apache log4j was identified as affecting large amounts of systems worldwide, including ours. We
have not experienced any material operational disruptions related to this event.
From time to time we have experienced, and may continue to experience, operational disruption due to
attacks on our systems and those of our vendors. Although we maintain certain business continuity plans, there can
be no assurance that our business continuity plans, or those of our vendors, will anticipate all material risks that
may arise or will effectively resolve the issues in a timely manner or adequately protect us from the adverse effects
that could be caused by significant disruptions in key information technology. The failure of these 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, lost sales, the exposure of sensitive business of
personal information and damage to the reputation of our brand. Depending on the system and scope of disruption,
in some instances a service interruption or shutdown could have a material adverse impact on our operating
activities or results of operations. Remediation and repair of any failure, problem or breach of our key systems or
known potential vulnerabilities could require significant capital investments, as well as divert resources and
management attention from key projects or initiatives.
We also heavily rely on information systems to process financial and accounting information for financial
reporting purposes. If we experience 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.
Our future success is substantially dependent on the continued service of our senior management and
other key employees, and our continued ability to attract and retain highly talented new team members.
Our future success is substantially dependent on the continued service of our senior management,
particularly Kevin A. Plank, our founder, Executive Chairman and Brand Chief, Patrik Frisk, our Chief Executive
Officer and President, other top executives and key employees who have substantial experience and expertise in
our business, including product creation, innovation, sales, marketing, supply chain, informational technology,
operational and other support personnel. 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 and
could result in harm to key customer relationships, loss of key information, expertise or know-how and unanticipated
recruitment and training costs.
In addition, 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, backgrounds and
experiences. Competition for employees in our industry is intense and in Fiscal 2021, we experienced the effects of
increased employee turnover that impacted global labor markets in many of our key operating jurisdictions.
Additionally, adoption of new work models and requirements about when or how often employees work on-site or
remotely may present new challenges. As certain jobs and employers increasingly operate remotely, traditional
geographic competition for talent may change in ways that cannot be fully predicted at this time, If we are unable to
attract, retain and motivate 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. In addition, we have invested
significant time and resources in building, maintaining and evolving our company culture and our values, which we
believe to be critical to our future success. Failure to maintain and continue to evolve our culture could negatively
affect our ability to attract, retain and motivate talented management and employees and to achieve our long-term
objectives.
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Financial Risks
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 Senior Notes limit our ability to, subject to certain significant
exceptions, incur secured debt and engage in sale leaseback transactions. Our amended credit agreement contains
negative covenants that, subject to significant exceptions limit our ability, among other things to incur additional
indebtedness, make restricted payments, sell or dispose of assets, 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
amended credit agreement. Our ability to continue to borrow amounts under our amended credit agreement is
limited by continued compliance with these financial covenants, and in the past we have amended our credit
agreement to provide certain relief from and revisions to our financial covenants for specified periods to provide us
with sufficient access to liquidity during those periods. 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 amended credit agreement or our Senior Notes could result in a default,
which could negatively impact our access to liquidity.
In addition, the amended 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
amended credit agreement. If an event of default occurs, the commitments of the lenders under the amended 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 to manage and grow our business, and we may not be able to raise
capital on terms acceptable to us or at all.
Managing and growing 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. For example, during the first and second quarters of Fiscal 2020, our
cash generated from operations was negatively impacted due to widespread temporary store closures as a result of
the COVID-19 pandemic. As of December 31, 2021, our cash and cash equivalents totaled $1.7 billion. However, if
in future periods our cash on hand, cash generated from operations and availability under our credit agreement are
not sufficient to meet our cash requirements, we will need to seek additional capital, potentially through debt or
equity financing, to fund our operations and future growth, and we may be unable to obtain debt and/or equity
financing on favorable terms or at all. 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 in the past, 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 or loss from operations. The majority of our net revenues are historically generated during the
last two quarters of the calendar year. Our quarterly results of operations may also fluctuate significantly as a result
of a variety of other factors, including the timing of our customer orders, our ability to timely delivery, the timing of
marketing expenses and changes in our product mix. As a result of these seasonal and quarterly fluctuations, we
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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 results of operations are affected by the performance of our equity investments, over which we do not
exercise control.
We maintain certain minority investments, and may in the future invest in additional minority investments,
which we account for under the equity method, and are required to recognize our allocable share of its net income
or loss in our Consolidated Financial Statements. Our results of operations are affected by the performance of these
businesses, over which we do not exercise control, and our net income or loss may be negatively impacted by
losses realized by these investments. For example, we have previously recognized losses related to our Japanese
licensee’s business. We are also required to regularly review our investments for impairment, and an impairment
charge may result from the occurrence of adverse events or management decisions that impact the fair value or
estimated future cash flows to be generated from our investments. In addition, to the extent our Japanese licensee
continues to experience challenges in the performance of its business, we may not continue to realize the licensing
revenues from our Japanese licensee in line with its past results, which could negatively impact our net revenues
and results of operations. Furthermore, based on its financial performance, our ability to recover our investment in
the long term may be limited.
Our financial results could be adversely impacted by currency exchange rate fluctuations.
During Fiscal 2021, we generated approximately 33% 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. In addition, we have previously designated cash flow hedges against certain forecasted transactions. If
we determine that such a transaction is no longer probable to occur in the time period we expected, we are required
to de-designate the hedging relationship and immediately recognize the derivative instrument gain or loss in our
earnings. The ongoing impacts of COVID-19 have caused and may continue to cause uncertainty in forecasted
cash flows, which has resulted and may continue to result in the de-designation of certain hedged transactions.
Legal, Regulatory and Compliance Risks
Our business is subject to a wide array of laws and regulations, and our failure to comply with these
requirements could lead to investigations or actions by government regulators, increased expense or
reputational damage.
Our business is subject to a wide array of laws and regulations, including those addressing consumer
protection, safety, labeling, distribution, importation, environmental matters, the marketing and sale of our products
and other matters. These requirements are enforced by various federal agencies, including the Federal Trade
Commission, Consumer Product Safety Commission and state attorneys general in the United States, 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 these regulations, we could become subject to significant
penalties or claims or be required to stop selling or otherwise 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 legislation, regulations or industry standards, including related to
climate change, 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 U.S. sanctions laws, as well as other anti-bribery and sanctions laws of foreign jurisdictions where we
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conduct business. Although we have policies and procedures to address compliance with the FCPA and similar laws
and sanctions requirements, there can be no assurance that all of our employees, contractors, agents and other
partners will not take actions in violations of our policies or that our procedures will effectively mitigate against such
risks. Any such violation could subject us to sanctions or other penalties that could negatively affect our reputation,
business and operating results.
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 digital
business (including our MapMyFitness platform). We collect and store a variety of information regarding our
consumers, and on some of our platforms 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. Like other companies in our industry, we have in the past experienced, and we
expect to continue to experience, cyberattacks, including phishing, cyber fraud incidents and other attempts to gain
unauthorized access to our systems. These attempted attacks have increased as COVID-19 has progressed and
many employees continue to work from home. To date, these attacks have not had a material impact on our
operations, but there can be no assurance that they will not have an impact in the future. Any breach of our data
security or that of our service providers could result in an unauthorized release or transfer of customer, consumer,
vendor or employee information, or the loss of money, 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 and evolving regulatory standards throughout the world
enacted to protect personal information and other data, including the General Data Protection Regulation, the
ePrivacy Directive, the California Consumer Privacy Act, the California Privacy Rights Act, the Virginia Consumer
Data Privacy Act, the Colorado Privacy Act and the Personal Information Protection Law in China. These laws and
related regulations impact our ability to engage with our consumers, and some of these privacy laws prohibit the
transfer of personal information to certain other jurisdictions. Compliance with existing laws and regulations can be
costly and could negatively impact our profitability. Moreover, data privacy laws and regulations continue to evolve
and it may be costly for us to adjust our operations to comply with new requirements. Regulatory bodies throughout
the world have increased enforcement efforts against companies who fail to comply with privacy requirements.
Failure to comply with these regulatory standards could result in a violation of data privacy laws and regulations and
subject us to legal proceedings against us by governmental entities or others, imposition of fines by governmental
authorities, negative publicity and damage to our brand image, all of which could have a negative impact on our
profitability.
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 applicable foreign withholding taxes, certain U.S. state income taxes, or foreign exchange rate impacts.
Moreover, we also engage in multiple types of intercompany transactions, and our allocation of profits and
losses among us and our subsidiaries through our intercompany transfer pricing arrangements are subject to review
by the Internal Revenue Service and foreign tax authorities. Although we believe we have clearly reflected the
economics of these transactions in accordance with current rules and regulations, which are generally consistent
with the arms-length standard, and the proper documentation is in place, tax authorities may propose and sustain
adjustments that could result in changes that may materially impact our tax provision.
Additionally, many countries have implemented legislation and other guidance to align their international tax
rules with the Organization for Economic Co-operation and Development’s (“OECD”) Base Erosion and Profit
Shifting recommendations and action plan, which aim to standardize and modernize global corporate tax policy and
include changes to cross-border tax, transfer pricing documentation rules and nexus-based tax incentive practices.
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As a result of this heightened scrutiny, we may experience an increase in income tax audits and prior decisions by
tax authorities regarding treatments and positions of corporate income taxes could be subject to enforcement
activities and/or legislative investigation, which could also result in changes in tax policies or prior tax rulings. Any
such activities may result in the taxes we previously paid being subject to change, which could have a material
impact on our tax provision.
Further, the U.S. House of Representatives passed the Build Back Better Act in November 2021 and the
U.S. Senate Finance Committee has drafted similar legislation. If these or similar legislation is enacted in the United
States, it could materially and adversely impact our tax provision, cash tax liability and effective tax rate.
In addition, member states of the OECD are continuing discussions surrounding fundamental changes to
the taxing rights of governments and allocation of profits among tax jurisdictions in which companies do business.
Specifically, the OECD has proposed rules intended to provide governments new taxing rights over the digital
economy and specified digital services as well as the implementation of a global minimum tax (“Pillar One” and
“Pillar Two,” respectively). The enactment of the Pillar One and/or Pillar Two Model Rules in jurisdictions where we
have operations may have a material impact on our global transfer pricing arrangements and a materially adverse
impact on our tax provision, cash tax liability and effective tax rate.
Failure to protect our intellectual property rights, or our conflict with the rights of others, could damage our
brand, weaken our competitive position and negatively impact our results of operations.
Our success depends in large part on our brand image. We currently rely on a combination of copyright,
trademark, trade dress, patent, anti-counterfeiting and 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 and intellectual property protection may be
unavailable or limited in some jurisdictions. In addition, intellectual property rights in the technology, fabrics and
processes used to manufacture the majority of our products are generally owned or controlled by our suppliers and
are generally not unique to us, and our current and future competitors are able to manufacture and sell products
with performance characteristics and fabrications similar to certain of our products.
From time to time, we have brought claims relating to the enforcement of our intellectual property rights
against others or have discovered 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 fail to
protect, maintain and enforce our intellectual property rights, the value of our brand could decrease and our
competitive position may suffer. In addition, from time to time others may seek to enforce infringement claims
against us. Successful infringement claims against us could result in significant monetary liability or prevent us from
selling or providing some of our products. The resolution of such claims may require us to pull product from the
market, 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.
We are the subject of a number of ongoing legal proceedings that have resulted in significant expense, and
adverse developments in our ongoing proceedings and/or future legal proceedings could have a material
adverse effect on our business, reputation, financial condition, results of operations or stock price.
We are actively involved in a variety of litigation and other legal matters and may be subject to additional
litigations, investigations, arbitration proceedings, audits, regulatory inquiries and similar actions, including matters
related to commercial disputes, intellectual property, employment, securities laws, disclosures, environmental, tax,
accounting, class action and product liability, as well as trade, regulatory and other claims related to our business
and our industry, which we refer to collectively as legal proceedings. For example, we are subject to an ongoing
securities class action proceeding regarding our prior disclosures (including regarding the use of "pull forward"
sales) and derivative complaints regarding related matters, as well as past related party transactions, among other
legal proceedings. Refer to Note 9 to our Consolidated Financial Statements of this Annual Report on Form 10-K for
additional information regarding these specific matters.
Legal proceedings in general, and securities and class action litigation and regulatory investigations in
particular, can be expensive and disruptive. We cannot predict the outcome of any particular legal proceeding, or
whether ongoing legal proceedings will be resolved favorably or ultimately result in charges or material damages,
fines or other penalties. Our insurance may not cover all claims that may be asserted against us, and we are unable
to predict how long the legal proceedings to which we are currently subject will continue. An unfavorable outcome of
any legal proceeding may have an adverse impact on our business, financial condition and results of operations or
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our stock price. Any legal proceeding could negatively impact our reputation among our customers or our
shareholders. Furthermore, publicity surrounding ongoing legal proceedings, even if resolved favorably for us, could
result in additional legal proceedings against us, as well as damage our brand image.
Risks Related to our Common Stock
Kevin Plank, our Executive Chairman and Brand Chief, 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 Executive Chairman and
Brand Chief, 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. Under certain circumstances, the Class B common stock
automatically converts to Class A common stock, which would also result in the conversion of our Class C common
stock into Class A common stock. As specified in our charter, these circumstances include when Mr. Plank
beneficially owns less than 15.0% of the total number of shares of Class A and Class B common stock outstanding,
if Mr. Plank were to resign as an Approved Executive Officer of the Company (or was otherwise terminated for
cause) or if Mr. Plank sells more than a specified number of any class of our common stock within a one-year
period. 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 stockholders 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.
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.
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,
2021.
Our principal executive and administrative offices are located at an office complex in Baltimore, Maryland,
the majority of which we own and a portion of which we lease. We also own office space and undeveloped acreage
near our office complex which we are in the process of renovating and further developing. We expect to move our
principal executive and administrative offices to this location by late 2024. For each of our EMEA, Latin America and
Asia Pacific headquarters, we lease office space.
We lease our primary distribution facilities, which are located in Sparrows Point, Maryland, Mount Juliet,
Tennessee and Rialto, California. Combined, these facilities represent approximately 3.5 million square feet of
facility space. These leases expire at various dates, with the earliest lease termination date through May 2023. 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, 2021, we leased 422 Brand and Factory House stores located primarily in
the United States, China, Canada, Mexico, Malaysia, Australia and Korea with lease end dates in 2022 through
2035. We also lease additional office space for sales, quality assurance and sourcing, marketing and administrative
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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 9 to our Consolidated Financial Statements for information on certain legal proceedings, which is
incorporated by reference herein.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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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 February 14, 2022, there were 2,405
record holders of our Class A Common Stock, 5 record holders of Class B Convertible Common Stock which are
beneficially owned by our Executive Chairman and Brand Chief, Kevin A. Plank, and 1,676 record holders of our
Class C Common Stock.
Our Class A Common Stock was listed on the NYSE under the symbol “UA” until December 6, 2016 and
under the symbol "UAA" since December 7, 2016. Prior to November 18, 2005, there was no public market for our
Class A Common Stock. Our Class C Common Stock was listed on the NYSE under the symbol “UA.C” since its
initial issuance on April 8, 2016 until December 6, 2016 and under the symbol "UA" since December 7, 2016.
Dividends
No cash dividends were declared or paid during Fiscal 2021 or Fiscal 2020 on any class of our common
stock. We currently anticipate we will retain future earnings for use in our business. As a result, we do not anticipate
paying any cash dividends in the foreseeable future. However, if we were to consider declaring a cash dividend to
our stockholders, we may be limited in our ability to do so under our credit facility. Refer to “Financial Position,
Capital Resources and Liquidity” within Management’s Discussion and Analysis and Note 8 to the Consolidated
Financial Statements for a further discussion of our credit facility.
Stock Compensation Plans
See Item 12 "Security Ownership of Certain beneficial Owners and Management and Related Stockholder
Matters" for information regarding our equity compensation plans.
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, 2016 through December 31, 2021. The graph assumes an initial investment of
$100 in Under Armour and each index as of December 31, 2016 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.
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Under Armour, Inc.
S&P 500
S&P 500 Apparel, Accessories & Luxury
Goods
12/31/2016
12/31/2017
12/31/2018
12/31/2019
12/31/2020
12/31/2021
$
$
100.00 $
49.67 $
60.83 $
74.35 $
59.10 $
72.94
100.00 $
121.83 $
116.49 $
153.17 $
181.35 $
233.41
$
100.00 $
120.46 $
101.48 $
125.06 $
112.10 $
118.90
ITEM 6. [RESERVED]
Not applicable.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and Results of Operations
("MD&A") is intended to help readers understand our results of operations and financial condition, and is provided
as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the
accompanying Notes to our Consolidated Financial Statements under Part II, Item 8 and the information contained
elsewhere in this Annual Report on Form 10-K under the captions “Risk Factors" and “Business.”
This Annual Report on Form 10-K, including this MD&A, contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, Section 21E of the U.S. Securities Exchange Act of
1934, as amended (the Exchange Act), and Section 27A of the U.S. Securities Act of 1933, as amended ("the
Securities Act"), and is subject to the safe harbors created by those sections. All statements other than statements
of historical facts are statements that could be deemed forward-looking statements. See "Forward Looking
Statements."
All dollar and percentage comparisons made herein refer to Fiscal 2021 compared with Fiscal 2020, unless
otherwise noted. Please refer to Part II, Item 7 of our Annual Report on Form 10-K for Fiscal 2020, filed with the
Securities Exchange Commission ("SEC") on February 24, 2021, for a comparative discussion of our Fiscal 2020
financial results as compared to Fiscal 2019.
OVERVIEW
We are a leading developer, marketer, and distributor of branded performance apparel, footwear, and
accessories. Our brand’s moisture-wicking fabrications are engineered in various 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, and by consumers
with active lifestyles.
During Fiscal 2021, we realized better than expected wholesale and direct-to-consumer sales based on
better sell through and demand for Under Armour products in North America, Asia-Pacific, and EMEA. Throughout
Fiscal 2021, we remained focused on the quality of our sales driven by four main strategies, particularly in our North
America business: reducing our promotional activities; constraining supply against demand; exiting undifferentiated
retail; and maintaining an appropriate level of liquidation sales within our wholesale channel. Strategically and
operationally, we remain focused on driving premium brand-right growth and improved profitability. Over the long
term, our growth strategy is predicated on delivering industry-leading product innovation; return-driven investments
focused on connecting with our consumers through marketing activations and premium experiences; and the
expansion of our direct-to-consumer and international businesses.
Fiscal 2021 Performance
Financial highlights for Fiscal 2021 as compared to Fiscal 2020 include:
•
Total net revenues increased 27.0%.
• Within our channels, wholesale revenue increased 36.2% and direct-to-consumer revenue increased
25.6%.
• Within our product categories, apparel revenue increased 33.3%, footwear revenue increased 35.3%, and
accessories revenue increased 11.5%.
•
•
Net revenue in our North America, EMEA, Asia-Pacific, and Latin-America segments increased 29.4%,
40.8%, 32.3%, and 18.5%, respectively.
Net revenues from Corporate Other decreased 97.4% primarily due to the sale of the MyFitnessPal platform
in December 2020.
• Gross margin increased 200 basis points to 50.3%.
•
•
Selling, general and administrative expenses increased 7.5%.
Restructuring and impairment charges, net decreased 93.3% from $601.6 million during Fiscal 2020 to
$40.5 million during Fiscal 2021.
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COVID-19 Update
The COVID-19 pandemic has caused, and we expect will continue to cause, disruption and volatility in our
business and in the businesses of our wholesale customers, licensing partners, suppliers, logistics providers and
vendors.
For instance, during Fiscal 2021 the pandemic caused manufacturing challenges, with temporary closures
or other restrictions placed on factories, in key sourcing countries in Southeast Asia, including Vietnam, where we
source approximately one third of our products, and certain partners continue to operate at reduced capacity.
Additionally, the COVID-19 pandemic has caused global logistical challenges, including shipping container
shortages, transportation delays, labor shortages and port congestion. These challenges have disrupted some of
our normal inbound and outbound inventory flow, which has required us to incur increased freight costs, and are
impacting the timing of sales to some of our customers as we work to manage product availability and inventory
levels and in certain cases adjust orders and shipping with our factory partners and logistic suppliers.
Simultaneously, freight and logistics costs have significantly increased throughout global supply chains. We expect
that these manufacturing and sourcing challenges will continue into the next few quarters and will negatively impact
our financial results, resulting in delayed sales to certain of our wholesale customers as well as unfulfilled demand
or cancelled sales. We also expect gross margin to be negatively impacted due to increased freight costs and
logistics costs over the next few quarters.
Moreover, governments worldwide continue to periodically impose preventative and protective actions, such
as temporary travel bans, forced business closures, and stay-at-home orders, all in an effort to reduce the spread of
the virus. However, such government measures are not implemented consistently or simultaneously around the
world, thus making our business susceptible to volatility on a global and regional basis. We believe we may
continue to experience varying degrees of volatility, business disruptions and periods of closure of our stores,
distribution centers and corporate facilities, although, as of December 31, 2021, substantially all of our Brand and
Factory House stores and the stores of our wholesale customers were open. Where reopening has been permitted,
some of these retail stores are operating with restrictive and precautionary measures in place such as reduced
operating hours, physical distancing, enhanced cleaning and sanitation, and limited occupancy levels.
The COVID-19 pandemic and related disruptions across the global supply chain and retail environment,
remains a risk that could have material adverse impacts to our future revenue growth as well as to our overall
profitability. The extent of the impact of the COVID-19 pandemic on our operational and financial performance
depends on future developments that are outside of our control. For a more complete discussion of the COVID-19
related risks facing our business, refer to our "Risk Factors" section included in Item 1A of this Annual Report on
Form 10-K.
In connection with global legislation, including the Coronavirus Aid, Relief, and Economic Security
("CARES") Act, we recognized certain incentives totaling $2.5 million for Fiscal 2021, and $9.0 million for Fiscal
2020. The incentives were recorded as a reduction of the associated costs which we incurred within selling, general
and administrative expenses in the Consolidated Statements of Operations.
Effects of Inflation
Despite recent heightened inflation in key global markets, including the United States, we do not believe
that inflation had a material impact on our results of operations in Fiscal 2021 or Fiscal 2020. However, our business
could be impacted by continued or increasing inflation in future periods. See "Risk Factors—Economic and Industry
Risks—Our business depends on consumer purchases of discretionary items, which can be negatively impacted
during an economic downturn or periods of inflation. This could materially harm our sales, profitability and financial
condition" and "—Fluctuations in the cost of raw materials and commodities we use in our products and costs
related to our supply chain could negatively affect our operating results" included in Item 1A of this Annual Report on
Form 10-K.
Segment Presentation and Marketing
As previously disclosed, effective January 1, 2021, we no longer report Connected Fitness as a discrete
reportable operating segment. Corporate Other now includes the remaining Connected Fitness business consisting
of our MapMyRun and MapMyRide platforms (collectively "MMR") for Fiscal 2021 and the entire Connected Fitness
business for Fiscal 2020. Please refer to Note 1 to our Consolidated Financial Statements for a basis of our
presentation and to Note 19 to our Consolidated Financial Statements for a complete presentation of the segment
data. All prior period balances have been recast to conform to current period presentation.
Corporate Other consists primarily of revenue and costs related to our MMR platforms, as well as general
and administrative expenses not allocated to an operating segment, including expenses associated with centrally
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managed departments such as global marketing, global IT, global supply chain, innovation, and other corporate
support functions; costs related to our global assets and global marketing, costs related to our headquarters;
restructuring and impairment related charges; and certain foreign currency hedge gains and losses.
Fiscal Year End Change
During the first quarter of Fiscal 2021, our Board of Directors approved a change in our fiscal year end from
December 31 to March 31, effective for the fiscal year beginning April 1, 2022. Because our largest quarters are
currently realized in the period from July 1 through December 31, we believe that this change will provide greater
alignment with our business cycle and financial reporting. There was no change to Fiscal 2021, which ended on
December 31, 2021. Following a three month-transition period (January 1, 2022 - March 31, 2022), our Fiscal 2023
will run from April 1, 2022 through March 31, 2023. Consequently, there will be no Fiscal 2022.
2020 Restructuring
During Fiscal 2020, our Board of Directors approved a restructuring plan ranging between $550.0 million to
$600.0 million in costs (the "2020 restructuring plan") designed to rebalance our cost base to further improve
profitability and cash flow generation.
Restructuring and related impairment charges and recoveries require us to make certain judgments and
estimates regarding the amount and timing as to when these charges or recoveries occur. The estimated liability
could change subsequent to its recognition, requiring adjustments to the expense and the liability recorded. On a
quarterly basis, we conduct an evaluation of the related liabilities and expenses and may revise our assumptions
and estimates as appropriate, as new or updated information becomes available. As of December 31, 2021, we
currently estimate total restructuring and related charges associated with the 2020 restructuring plan will range
between $525.0 million to $550.0 million.
The restructuring and related charges primarily consist of up to approximately:
•
•
$172.0 million of cash restructuring charges, of which approximately $26.0 million relates to employee
severance and benefit costs, $14.0 million relates to facility and lease termination costs and $132.0 million
relates to contract termination and other restructuring costs; and
$378.0 million of non-cash charges, of which approximately $293.0 million relates to an impairment charge
on our New York City flagship store and $85.0 million relates to intangibles and other asset related
impairments.
We recorded $41.0 million of restructuring and related impairment charges for Fiscal 2021 and $472.7
million for Fiscal 2020, under the 2020 restructuring plan. For more details on the 2020 restructuring plan, see Note
12 to our Consolidated Financial Statements.
We expect to recognize any remaining charges related to this plan by the end of the first quarter of Fiscal
2023.
31
RESULTS OF OPERATIONS
The following tables set 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 (loss) from operations
Interest income (expense), net
Other income (expense), net
Income (loss) before income taxes
Income tax expense (benefit)
Year ended December 31,
2021
2020
2019
$
5,683,466 $
4,474,667 $
5,267,132
2,821,967
2,861,499
2,334,691
40,518
486,290
(44,300)
(51,113)
390,877
32,072
2,314,572
2,160,095
2,171,934
601,599
(613,438)
(47,259)
168,153
(492,544)
49,387
2,796,599
2,470,533
2,233,763
—
236,770
(21,240)
(5,688)
209,842
70,024
(47,679)
92,139
Income (loss) from equity method investments
Net income (loss)
1,255 $
(7,246) $
$
360,060 $
(549,177) $
(As a percentage of net revenues)
Net revenues
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Restructuring and impairment charges
Income (loss) from operations
Interest income (expense), net
Other income (expense), net
Income (loss) before income taxes
Income tax expense (benefit)
Loss from equity method investment
Net income (loss)
Revenues:
Year ended December 31,
2021
2020
2019
100.0 %
100.0 %
49.7 %
50.3 %
41.1 %
0.7 %
8.6 %
(0.8) %
(0.9) %
6.9 %
0.6 %
— %
6.3 %
51.7 %
48.3 %
48.5 %
13.4 %
(13.7) %
(1.1) %
3.8 %
(11.0) %
1.1 %
(0.2) %
(12.3) %
100.0 %
53.1 %
46.9 %
42.4 %
— %
4.5 %
(0.4) %
(0.1) %
4.0 %
1.3 %
(0.9) %
1.7 %
Net revenues consist of net sales, license revenues, and revenues from digital subscriptions, sale of digital
assets and advertising. Net sales consist of sales from apparel, footwear and accessories products. Our license
revenues primarily consist of fees paid to us by licensees in exchange for the use of our trademarks on their
products. Net revenues by product category are summarized below for the periods indicated:
(In thousands)
2021
2020
$ Change
% Change
2019
$ Change
% Change
Year ended December 31,
$ 3,841,249 $ 2,882,562 $
958,687
33.3 % $ 3,470,285 $
(587,723)
Apparel
Footwear
Accessories
Net Sales
License revenues
Corporate Other (1)
1,264,127
461,894
934,333
414,082
329,794
47,812
5,567,270
4,230,977
1,336,293
112,623
105,779
6,844
3,573
(134,338)
Total net revenues $ 5,683,466 $ 4,474,667 $ 1,208,799
137,911
35.3 %
11.5 %
31.6 %
6.5 %
(97.4) %
1,086,551
(152,218)
416,354
(2,272)
4,973,190
(742,213)
138,775
155,167
(32,996)
(17,256)
27.0 % $ 5,267,132 $
(792,465)
(16.9) %
(14.0) %
(0.5) %
(14.9) %
(23.8) %
(11.1) %
(15.0) %
(1) Corporate Other primarily includes foreign currency hedge gains and losses related to revenues generated by entities within our operating
segments but managed through our central foreign exchange risk management program. Effective January 1, 2021, included within Corporate
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Table of Contents
Other is the operating results of the remaining Connected Fitness business consisting of MMR for Fiscal 2021 and the entire Connected Fitness
for Fiscal 2020 and Fiscal 2019. All prior periods were recast to conform to the current period presentation. Such reclassifications did not affect
total consolidated revenues, consolidated income from operations or consolidated net income (see Note 1 to our Consolidated Financial
Statements).
Net sales
Net sales increased by $1,336.3 million, or 31.6%, to $5,567.3 million in Fiscal 2021 from $4,231.0 million in
Fiscal 2020, primarily driven by increased unit sales across all our product categories. These increases as
compared to Fiscal 2020 were primarily due to the significant COVID-19 disruptions we experienced during Fiscal
2020, including cancellations of orders by our wholesale partners and closures of retail stores. Net sales growth for
Fiscal 2021 was also impacted by previously disclosed changes to customer order flow and supply chain timing
resulting in sales shifting from the fourth quarter of Fiscal 2020 to the first quarter of Fiscal 2021. Net sales for Fiscal
2021 increased 12% compared to Fiscal 2019.
License revenues
License revenues increased by $6.8 million, or 6.5%, to $112.6 million in Fiscal 2021, from $105.8 million in
Fiscal 2020, driven by higher demand and improved business and financial conditions of our licensees. The
increased revenue was primarily from our licensing partners in North America, as this region continues to recover
from the impacts of COVID-19.
Corporate Other revenues
Revenues from Corporate Other decreased by $134.3 million in Fiscal 2021, primarily due to the sale of
MyFitnessPal in December 2020. See Note 1 to our Consolidated Financial Statements for more details.
Gross Profit
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. 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 digital
subscription and advertising revenues, primarily website hosting costs, and no cost of goods sold is associated with
our license revenues.
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 $82.9 million and $80.5
million for Fiscal 2021 and Fiscal 2020, respectively.
Gross profit increased by $701.4 million to $2,861.5 million in Fiscal 2021, as compared to $2,160.1 million
in Fiscal 2020. Gross profit as a percentage of net revenues, or gross margin, increased 210 basis points to 50.3%,
compared to 48.3% in Fiscal 2020.
This increase in gross margin was primarily driven by the following benefits:
•
•
approximately 360 basis points of pricing improvements driven by lower promotional activity within our
direct-to-consumer channel, favorable pricing related to liquidation sales and lower promotions and
markdowns across our wholesale channel; and
approximately 40 basis points from changes in foreign currency.
These benefits were partially offset by the following negative impacts:
•
•
•
approximately 110 basis points related to the absence of MyFitnessPal, which was sold in December 2020;
approximately 50 basis points related to supply chain impacts as benefits in product costs were more than
offset by higher inbound freight and logistics costs due to COVID-19-related supply chain pressures; and
approximately 30 basis points related to channel mix as benefits of lower liquidation sales were more than
offset by lower e-commerce and a higher distributor sales.
We expect freight costs to continue negatively impacting our gross margin for the next few quarters.
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Table of Contents
Selling, General and Administrative Expenses
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. The other category is the sum of our selling, product
innovation and supply chain, and corporate services categories. The marketing category consists primarily of sports
and brand marketing, media, and retail presentation. Sports and brand marketing includes professional, club and
collegiate sponsorship agreements, individual athlete and influencer agreements, and providing and selling products
directly to teams and individual athletes. Media includes digital, broadcast, and print media outlets, including social
and mobile media. Retail presentation includes sales displays and concept shops and depreciation expense specific
to our in-store fixture programs. Our marketing costs are an important driver of our growth.
Year ended December 31,
(In thousands)
2021
2020
$ Change
% Change
2019
$ Change
% Change
Selling, General and
Administrative Expenses
$ 2,334,691 $ 2,171,934 $ 162,757
7.5 % $ 2,233,763 $
(61,829)
(2.8) %
Selling, general and administrative expenses increased by $162.8 million, or 7.5%, to $2,334.7 million in
Fiscal 2021, as compared to $2,171.9 million in Fiscal 2020. Within selling, general and administrative expense:
• Marketing costs increased $98.8 million or 18.0%, primarily due to reduced marketing activity in the prior
fiscal year due to the COVID-19 pandemic. This increase was partially offset by reductions in fees
associated with sports marketing assets. As a percentage of net revenues, marketing costs decreased to
11.4% from 12.3% in Fiscal 2020.
• Other costs increased $64.0 million or 3.9%, primarily driven by higher incentive compensation, non
salaried wages, retail facility expenses, and a general increase in business activities in Fiscal 2021, as
compared to Fiscal 2020, which was more severely impacted by COVID-19. These increases were partially
offset by lower legal and depreciation expense. As a percentage of net revenues, other costs decreased to
29.7% from 36.2% in Fiscal 2020.
As a percentage of net revenues, selling, general and administrative expenses decreased to 41.1% as
compared to 48.5% in Fiscal 2020.
Restructuring and Impairment Charges
(In thousands)
Restructuring and
Impairment Charges
2021
2020
$ Change
% Change
2019
$ Change
% Change
Year ended December 31,
$
40,518 $ 601,599 $ (561,081)
(93.3) % $
— $ 601,599
N/A
Restructuring and impairment charges within our operating expenses were $40.5 million and $601.6 million
in Fiscal 2021 and Fiscal 2020, respectively. Included in the prior fiscal year was $141.2 million of long-lived asset
and goodwill impairment charges, as well as a right of use asset impairment charge of $290.8 million relating to our
flagship store in New York City.
Income (Loss) from Operations
(In thousands)
Income (loss) from
Operations
2021
2020
$ Change
% Change
2019
$ Change
% Change
Year ended December 31,
$ 486,290 $ (613,438) $ 1,099,728
(179.3) % $ 236,770 $ (850,208)
(359.1)%
Income from operations increased by $1,099.7 million to $486.3 million in Fiscal 2021. The increase in
income from operations was driven primarily by increased revenues along with significantly lower restructuring and
impairment charges compared to the prior fiscal year.
Interest Expense, Net
Interest expense, net is primarily comprised of interest incurred on our debt facilities, offset by interest
income earned on our cash and cash equivalents.
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Table of Contents
(In thousands)
2021
2020
$ Change
% Change
2019
$ Change
% Change
Interest expense, net
$
44,300 $
47,259 $
(2,959)
(6.3) % $
21,240 $
26,019
122.5%
Year ended December 31,
Interest expense, net decreased by $3.0 million to $44.3 million in Fiscal 2021, as compared to $47.3
million in Fiscal 2020. The decrease was primarily due to a reduction in interest expense related to borrowings on
our revolving credit facility which were drawn on in the prior fiscal year, and a reduction in interest expense on our
Convertible Senior Notes as a result of our repurchase of approximately $419.1 million in aggregate principal
amount during Fiscal 2021, partially offset by higher interest expense on our Convertible Senior Notes resulting
from the full year impact of interest expense associated with our Convertible Senior Notes issued in May 2020. See
Note 8 to our Consolidated Financial Statements.
Other Income (Expense)
Other income (expense), net primarily 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. Other income (expense), net also includes rent expense relating to lease assets held solely for sublet
purposes, primarily the lease related to our New York City flagship store.
Year ended December 31,
(In thousands)
2021
2020
$ Change
% Change
2019
$ Change
% Change
Other income (expense),
net
$
(51,113) $ 168,153 $ (219,266)
(130.4) % $
(5,688) $ 173,841
(3056.3)%
Other income (expense), net decreased by $219.3 million in Fiscal 2021 as compared to Fiscal 2020. This
was primarily due to a gain of $179.3 million on the sale of MyFitnessPal platform in Fiscal 2020. In addition, we
recognized a $58.5 million loss upon the extinguishment of an aggregate $419.1 million in principal amount of our
Convertible Senior Notes in Fiscal 2021 and a loss of $10.7 million associated with changes in foreign exchange
rates. These were partially offset by a $35 million earn out recorded in connection with the sale of the MyFitnessPal
platform.
Income Tax Expense
Year ended December 31,
(In thousands)
2021
2020
$ Change
% Change
2019
$ Change
% Change
Income tax expense
$
32,072 $
49,387 $
(17,315)
(35.1) % $
70,024 $
(20,637)
(29.5)%
Income tax expense decreased by $17.3 million to $32.1 million in Fiscal 2021 as compared to $49.4 million
in Fiscal 2020. We recorded 2021 income tax expense on pretax earnings, inclusive of benefits for the reduction in
U.S. valuation allowances, compared to 2020 income tax expense on pretax losses, which included the impact of
recording valuation allowances for previously recognized deferred tax assets in the U.S. and China.
Income (Loss) from Equity Method Investments
Income from equity method investment increased by $8.5 million to $1.3 million in Fiscal 2021, as
compared to a loss of $7.2 million in Fiscal 2020, which was impacted by a $8.6 million impairment of our equity
method investment in our Japanese licensee.
SEGMENT RESULTS OF OPERATIONS
Our operating segments are based on how our Chief Operating Decision Maker (“CODM”) makes decisions
about allocating resources and assessing performance. Our segments are defined by geographic regions, including
North America, EMEA, Asia-Pacific, and Latin America.
Prior to the sale of MyFitnessPal in December 2020, our CODM also received discrete financial information
for our Connected Fitness Segment. However, beginning January 1, 2021, we no longer report Connected Fitness
as a discrete reportable operating segment. All prior period balances have been recast to conform to current period
presentation. Such reclassifications did not affect total consolidated revenues, consolidated income from operations
or consolidated net income. See Note 1 to our Consolidated Financial Statements.
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We exclude certain corporate costs from our segment profitability measures. We report these costs within
Corporate Other, which is designed to provide increased transparency and comparability of our operating segments
performance. The costs included within Corporate Other consists largely of revenue and costs related to our MMR
platforms and other digital business opportunities, as well as general and administrative expenses not allocated to
an operating segment, including expenses associated with centrally managed departments such as global
marketing, global IT, global supply chain and innovation, and other corporate support functions; costs related to our
global assets and global marketing; costs related to our headquarters; restructuring and restructuring related
charges; and certain foreign currency hedge gains and losses.
The net revenues and operating income (loss) associated with our segments are summarized in the
following tables.
Net revenues by segment and Corporate Other:
Year ended December 31,
(In thousands)
North America
EMEA
Asia-Pacific
Latin America
Corporate Other (1)
Total net revenues
2021
2020
$ Change
% Change
2019
$ Change
% Change
$ 3,810,372 $ 2,944,978 $
865,394
29.4 % $ 3,658,353 $
(713,375)
(19.5) %
842,511
831,762
195,248
3,573
598,296
628,657
164,825
137,911
244,215
203,105
30,423
40.8 %
621,137
32.3 %
636,343
18.5 %
196,132
(134,338)
(97.4) %
155,167
(22,841)
(7,686)
(31,307)
(17,256)
$ 5,683,466 $ 4,474,667 $ 1,208,799
27.0 % $ 5,267,132 $
(792,465)
(3.7) %
(1.2) %
(16.0) %
(11.1) %
(15.0) %
(1) Corporate Other primarily includes foreign currency hedge gains and losses related to revenues generated by entities within our operating
segments but managed through our central foreign exchange risk management program. Effective January 1, 2021, included within Corporate
Other is the operating results of the remaining Connected Fitness business consisting of our MMR platforms for Fiscal 2021 and the entire
Connected Fitness business for Fiscal 2020. All prior period balances were recast to conform to the current period presentation. Such
reclassifications did not affect total consolidated revenues, consolidated income from operations or consolidated net income. See Note 1 to our
Consolidated Financial Statements.
Net revenues increased across each of our regional operating segments primarily due to increased sales,
as compared to Fiscal 2020, as we experienced significant disruptions in Fiscal 2020 related to COVID-19. The
increase in total net revenues for Fiscal 2021, compared to Fiscal 2020, was driven by the following:
•
•
•
•
•
Net revenues in our North America region increased $865.4 million, or 29.4%, to $3,810.4 million for Fiscal
2021, as compared to $2,945.0 million during Fiscal 2020. This increase was driven by growth within our
wholesale and direct-to-consumer channels. When compared to Fiscal 2019, net revenues in our North
America region increased by 4.2%.
Net revenues in our EMEA region increased $244.2 million, or 40.8%, to $842.5 million for Fiscal 2021, as
compared to $598.3 million in Fiscal 2020. This increase was primarily driven by growth within our
wholesale, distributor and direct-to-consumer channels. The increase in sales was also due to timing shifts
related to changes in customer order flow and supply chain timing from the fourth quarter of Fiscal 2020 to
the first quarter of Fiscal 2021. When compared to Fiscal 2019, net revenues in our EMEA region increased
by 35.6%.
Net revenues in our Asia-Pacific region increased $203.1 million, or 32.3%, to $831.8 million for Fiscal
2021, as compared to $628.7 million during Fiscal 2020. This increase was primarily driven by growth within
our wholesale and direct-to-consumer channels. The increase in sales was also due to timing shifts related
to changes in customer order flow and supply chain timing from the fourth quarter of Fiscal 2020 to the first
quarter of Fiscal 2021. When compared to Fiscal 2019, net revenues in our Asia-Pacific region increased by
30.7%.
Net revenues in our Latin America region increased $30.4 million, or 18.5%, to $195.2 million for Fiscal
2021, as compared to $164.8 million in Fiscal 2020. This increase was primarily driven by growth within our
wholesale and distributor channel partially offset by a decrease in our direct-to-consumer channel as we
have moved to a distributor operating model for certain countries within this region. When compared to
Fiscal 2019, net revenues in our Latin America region decreased by 0.5%.
The decrease in Corporate Other for Fiscal 2021, as compared to Fiscal 2020 is primarily due to the sale of
MyFitnessPal in December 2020.
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Operating income (loss) by segment and Corporate Other:
(In thousands)
2021
2020
$ Change
% Change (1)
2019
$ Change
% Change (1)
Year ended December 31,
North America
$
972,093 $
474,584 $
497,509
104.8 % $
733,442 $
(258,858)
132,602
132,911
22,388
60,592
72,010
118.8 %
2
132,909
N/M
53,739
97,641
6,853
(97,639)
(100.0) %
(42,790)
65,178
152.3 %
(3,160)
(39,630)
(773,704) (1,105,826)
332,122
30.0 %
(644,892)
(460,934)
(35.3) %
12.8 %
N/M
71.5 %
EMEA
Asia-Pacific
Latin America
Corporate Other (2)
Total operating
income (loss)
$
486,290 $
(613,438) $ 1,099,728
179.3 % $
236,770 $
(850,208)
(359.1) %
(1) "N/M" = not meaningful
(2) Corporate Other primarily includes foreign currency hedge gains and losses related to revenues generated by entities within our operating
segments but managed through our central foreign exchange risk management program. Effective January 1, 2021, included within Corporate
Other is the operating results of the remaining Connected Fitness business consisting of our MMR platforms for Fiscal 2021 and the entire
Connected Fitness business for Fiscal 2020. All prior period balances were recast to conform to the current period presentation. Such
reclassifications did not affect total consolidated revenues, consolidated income from operations or consolidated net income. See Note 1 to our
Consolidated Financial Statements.
The increase in total operating income was driven by the following:
• Operating income in our North America region increased $497.5 million to $972.1 million for the Fiscal
2021, as compared to $474.6 million in Fiscal 2020. This was due to the increases in net revenues
discussed above and improvements in gross margin due to pricing improvements, including lower
promotional activity and markdowns, as well as improved sales mix due to lower liquidations. Additionally,
North America incurred lower bad debt expense and lower long lived asset impairment charges. These
decreases were partially offset by increased incentive compensation expense, non-salaried wages and
increased marketing-related expenses.
• Operating income in our EMEA region increased $72.0 million to $132.6 million for Fiscal 2021, as
compared to $60.6 million in Fiscal 2020. This was due to the increases in net revenues discussed above,
improved gross margins due to lower discounts and markdowns and lower selling expenses. These
improvements were partially offset by an increase in marketing-related expenses, increased incentive
compensation expense, non-salaried wages as well as increased distribution related expenses.
• Operating income in our Asia-Pacific region increased $132.9 million to $132.9 million for Fiscal 2021, as
compared to $2.0 thousand in Fiscal 2020. This was due to the increases in net revenues discussed above,
and improvements in gross margin due to pricing improvements driven primarily by lower discounts to
franchise partners and promotional activity. Additionally, operating income in our Asia-Pacific region was
impacted by lower long-lived asset impairment charges. These improvements were partially offset by an
increase in marketing and facility related expenses.
• Operating income in our Latin America region increased $65.2 million to $22.4 million for Fiscal 2021, as
compared to a loss of $42.8 million in Fiscal 2020. This was due to the increases in net revenues discussed
above, lower long-lived asset impairment charges, as well as a reduction in operational costs related to our
changing to a distributor model in certain countries within this region.
• Operating loss in our Corporate Other non-operating segment decreased $332.1 million to $773.7 million for
Fiscal 2021, as compared to $1,105.8 million in Fiscal 2020. The decrease in operating loss was primarily
due to lower restructuring and impairment charges incurred in Fiscal 2021 as compared to Fiscal 2020,
partially offset by the sale of MyFitnessPal in December 2020.
LIQUIDITY AND CAPITAL RESOURCES
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, and borrowings available under our credit and long term debt facilities. Our working capital
requirements generally reflect the seasonality in our business as we historically recognize the majority of our net
revenues in the last two quarters of the calendar year. Our capital investments have generally included expanding
our in-store fixture and branded concept shop program, improvements and expansion of our distribution and
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corporate facilities, leasehold improvements to our Brand and Factory House stores, and investment and
improvements in information technology systems. Our inventory strategy is focused on continuing to meet consumer
demand while improving our inventory efficiency over the long term by putting systems and processes in place to
improve our inventory management. These systems and processes are designed to improve our forecasting and
supply planning capabilities. In addition to systems and processes, key areas of focus that we believe 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.
As of December 31, 2021, we had $1.7 billion of cash and cash equivalents. We believe our cash and cash
equivalents on hand, cash from operations, our ability to reduce our expenditures as needed, borrowings available
to us under our amended credit agreement, our ability to access the capital markets, and other financing
alternatives are adequate to meet our liquidity needs and capital expenditure requirements for at least the next
twelve months. In addition, from time to time, based on prevailing market conditions, our liquidity requirements,
contractual restrictions and other factors and subject to compliance with applicable laws and regulations, we may
seek to utilize cash on hand, borrowings or raise capital to retire, repurchase or redeem our debt securities, repay
debt, repurchase shares of our common stock or otherwise enter into similar transactions to support our capital
structure and business or utilize excess cash flow on a strategic basis. For example, in May 2021 and August 2021,
we entered in Exchange Agreements pursuant to which we repurchased $250 million and $169.1 million,
respectively, aggregate principal amount of our Convertible Senior Notes in exchange for a combination of cash and
shares for our Class C Common Stock.
As discussed above, COVID-19 has continued to create supply chain challenges that will impact the
availability of inventory over the next few quarters. If there are unexpected material impacts to our business in future
periods from COVID-19 and we need to raise or conserve additional cash to fund our operations, we may consider
additional alternatives similar to those we used in Fiscal 2020, including further reducing our expenditures, changing
our investment strategies, negotiating payment terms with our customers and vendors, reductions in compensation
costs, including through temporary reductions in pay and layoffs, and limiting certain marketing and capital
expenditures. In addition, we may seek alternative sources of liquidity, including but not limited to, accessing the
capital markets, sale leaseback transactions or other sales of assets, or other alternative financing measures.
However, instability in, or tightening of the capital markets, could adversely affect our ability to access the capital
markets on terms acceptable to us or at all. Although we believe we have adequate sources of liquidity over the long
term, a prolonged or more severe economic recession, inflationary pressure, or a slow recovery could adversely
affect our business and liquidity.
Refer to our “Risk Factors” section included in Item 1A in this Annual Report on Form 10-K.
At December 31, 2021, $612.2 million or approximately 37%, 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 Company will continue to permanently reinvest these earnings, as well as future earnings from our
foreign subsidiaries, to fund international growth and operations. If we were to repatriate indefinitely reinvested
foreign funds, we would be required to accrue and pay certain taxes upon repatriation, including foreign withholding
taxes and certain U.S. state taxes and record foreign exchange rate impacts. Determination of the unrecorded
deferred tax liability that would be incurred if such amounts were repatriated is not practicable.
Contractual Commitments
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 2035, 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, 2021. The
operating leases generally contain renewal provisions for varying periods of time. Our significant contractual
obligations and commitments as of December 31, 2021 are summarized in the following table:
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Payments Due by Period
(In thousands)
Long term debt obligations (1)
Operating Lease obligations (2)
Product purchase obligations (3)
Sponsorships and other (4)
Total
Less Than 1 Year
1 to 3 years
3 to 5 Years
More Than 5
Years
$
771,704 $
20,714 $
121,740 $
629,250 $
—
993,616
169,994
273,198
171,291
379,133
1,475,814
1,475,814
—
287,556
98,726
139,172
—
45,313
—
4,345
Total future minimum payments $
3,528,690 $
1,765,248 $
534,110 $
845,854 $
383,478
(1) Includes estimated interest payments based on applicable fixed interest rates as of December 31, 2021, timing of scheduled payments, and
the term of the debt obligations.
(2) 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 $16.1 million for Fiscal 2021.
(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 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, 2021.
(4) 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 $38.9 million for uncertain tax positions, including the related interest
and penalties, recorded in accord with applicable accounting guidance, as we are unable to reasonable estimate the
timing of settlement. Refer to Note 17 to the Consolidated Financial Statements for a further discussion of our
uncertain tax positions.
Cash Flows
The following table presents the major components of our cash flows provided by and used in operating,
investing and financing activities for the periods presented:
(In thousands)
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Year ended December 31,
2021
2020
$ Change
2019
$ Change
$ 664,829 $ 212,864 $ 451,965 $ 509,031 $
(296,167)
(68,346)
66,345
(134,691)
(147,113)
213,458
(418,737)
436,853
(855,590)
(137,070)
573,923
Effect of exchange rate changes on cash and cash
equivalents
(23,391)
16,445
(39,836)
5,100
11,345
Net increase (decrease) in cash and cash equivalents $ 154,355 $ 732,507 $
(578,152) $ 229,948 $ 502,559
Operating Activities
Cash flows provided by operating activities increased by $452.0 million, as compared to Fiscal 2020,
primarily driven by an increase in net income, before the impact of non-cash items, of $632.3 million, partially offset
by a decrease from changes in working capital of $180.4 million.
The changes in working capital were primarily due to decreases of:
•
$433.3 million resulting from changes in accrued expenses and other liabilities, primarily due to the
commencement of the operating lease relating to our New York City flagship store which was included in
Fiscal 2020;
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•
•
$198.8 million resulting from changes in accounts receivable primarily due to our previously disclosed
changes to customer order flow and supply chain timing from the fourth quarter of Fiscal 2020 to the first
quarter of Fiscal 2021, and an increase in net revenues of $1,208.8 million; and
$19.6 million resulting from changes in customer refund liability.
These decreases in working capital were partially offset by increases in working capital of:
•
•
•
$339.5 million resulting from changes in other non-current assets, primarily due to the commencement of
our New York City flagship store and the related operating lease ROU asset which was included in Fiscal
2020;
$78.0 million resulting from changes in inventories on account of better inventory management and demand
constraints; and
$66.7 million resulting from changes in accounts payable.
Investing Activities
Cash flows used in investing activities decreased by $134.7 million, as compared to Fiscal 2020, primarily
due to proceeds from the sale of MyFitnessPal of $198.9 million in Fiscal 2020.
Total capital expenditures in Fiscal 2021 were $69.8 million, or approximately 1% of net revenues,
representing a $22.5 million decline from $92.3 million in Fiscal 2020. In Fiscal 2020 and Fiscal 2021, we reduced
capital expenditures in response to ongoing uncertainty related to COVID-19 and to preserve working capital.
Moving forward, we anticipate capital expenditures to normalize back towards our long-term operating principle of
between 3% and 5% of annual net revenues as we invest in our global direct-to-consumer, e-Commerce and digital
businesses, informational technology systems, distribution centers and our global offices. With regard to our new
corporate headquarters, in April 2021, we unveiled plans to construct a new global headquarters in the Port
Covington area of Baltimore, Maryland. We are designing our new headquarters in line with our long-term
sustainability strategy, which includes a commitment to reduce greenhouse gas emissions and increase sourcing of
renewable electricity in our owned and operated facilities. We expect a portion of our capital expenditures over the
short term to include investments incorporating sustainable and intelligent building design features into this facility.
Financing Activities
Cash flows used in financing activities increased by $855.6 million, as compared to Fiscal 2020. During
Fiscal 2021, we used $418.7 million of cash for financing activities, whereas during Fiscal 2020, we had cash inflow
of $436.9 million from financing activities. The cash outflow of $418.7 million was primarily related to approximately
$506.3 million paid to certain holders for the exchange of $419.1 million in aggregate principal amount of our 1.50%
convertible senior notes (the "Convertible Senior Notes"). Concurrently with these exchanges we entered into
agreements to terminate a portion of the capped call transactions previously entered into in connection with our
initial offering of the Convertible Senior Notes and received approximately $91.7 million from the option
counterparties in connection with such termination agreements. For more details, see discussion below under
"1.50% Convertible Senior Notes".
Capital Resources
Credit Facility
On March 8, 2019, we entered into an amended and restated credit agreement by and among us, as
borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders and arrangers party thereto
(the “credit agreement”). In May 2020, we entered into an amendment to the credit agreement (the “first
amendment”), pursuant to which the prior revolving credit commitments were reduced from $1.25 billion to $1.1
billion of borrowings. Subsequently, in May 2021, we entered into a second amendment to the credit agreement (the
"second amendment"), which provides for certain changes to our covenants and decreases to certain applicable
rates effected by the first amendment. In December 2021, we entered into a third amendment to the credit
agreement (the "third amendment" and, the credit agreement as amended by the first amendment, the second
amendment and the third amendment, the "amended credit agreement" or the "revolving credit facility"), which
extends the term of the credit agreement from March 8, 2024 to December 3, 2026, with permitted extension under
certain circumstances. As of December 31, 2021 and December 31, 2020, there were no amounts outstanding
under the revolving credit facility.
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Where the first amendment previously provided for suspensions of and adjustments to our existing interest
coverage covenant and leverage covenant (each as defined below), and further required us to maintain a specific
amount of minimum liquidity during certain quarters, the second amendment provided that these financial covenants
became effective again as of March 31, 2021 and removed the minimum liquidity covenant. The second amendment
also (i) decreases the interest rate margins that were previously provided for under the first amendment; (ii)
reverses limitations effected by the first amendment on expansions of and extensions of the maturity of the
revolving credit facility during the covenant suspension period; and (iii) removes additional limitations on the
availability of certain exceptions to the negative covenants, including the restricted payments covenant, that were
imposed during the covenant suspension period.
The third amendment also (i) decreases the applicable margins for borrowings and undrawn commitment
fees; (ii) provides for the fall away of collateral and guarantee requirements following an investment-grade rating
from two rating agencies; (iii) implements SOFR as the replacement of LIBOR as a benchmark interest rate for U.S.
dollar borrowings (and analogous benchmark rate replacements for borrowings in Yen, Canadian Dollars, Pound
Sterling and Euro); and (iv) amends certain affirmative and negative covenants and related definitions.
At our request and a lender's consent, commitments under the amended credit agreement may be
increased by up to $300.0 million in aggregate, subject to certain conditions as set forth in the amended credit
agreement. Incremental borrowings are uncommitted and the availability thereof will depend on market conditions at
the time we seek to incur such borrowings.
Borrowings, if any, 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. As of December 31, 2021, there was $4.3
million of letters of credit outstanding (December 31, 2020 had $4.3 million letters of credit outstanding).
Our obligations under the amended credit agreement are guaranteed by certain domestic significant
subsidiaries of Under Armour, Inc., subject to customary exceptions (the “subsidiary guarantors”) and primarily
secured by a first-priority security interest in substantially all of the assets of Under Armour, Inc. and the subsidiary
guarantors, excluding real property, capital stock in and debt of subsidiaries of Under Armour, Inc. holding certain
real property and other customary exceptions. However, the third amendment provides for the permanent fall away
of guarantees and collateral upon our achievement of investment grade rating from two rating agencies.
The amended credit agreement contains negative covenants that, subject to significant exceptions, limit our
ability to, among other things: incur additional secured and unsecured indebtedness; pledge the assets as security;
make investments, loans, advances, guarantees and acquisitions, (including investments in and loans to non-
guarantor subsidiaries); undergo fundamental changes; sell assets outside the ordinary course of business; enter
into transactions with affiliates; and make restricted payments.
We are also required to maintain a ratio of consolidated EBITDA, to consolidated interest expense of not
less than 3.50 to 1.0 (the "interest coverage covenant") and we are not permitted to allow the ratio of consolidated
total indebtedness to consolidated EBITDA to be greater than 3.25 to 1.0 (the "leverage covenant"), as described in
more detail in the amended credit agreement.
As of December 31, 2021, we were in compliance with the applicable covenants.
In addition, the amended 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 amended credit agreement, will be considered an event of default under the amended credit
agreement.
Borrowings under the amended credit agreement bear interest at a rate per annum equal to, at our option,
either (a) an alternate base rate (for borrowings in U.S. dollars), (b) a term rate (for borrowings in U.S. dollars,
Euros, Japanese Yen or Canadian Dollars) or (c) a "risk free" rate (for borrowings in U.S. dollars or Pounds
Sterling), 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 leverage ratio of consolidated total indebtedness to consolidated EBITDA and
ranges between 1.00% to 1.75% (or, in the case of alternate base rate loans 0.00% to 0.75%). We will also pay a
commitment fee determined in accordance with the pricing grid on the average daily unused amount of the revolving
credit facility and certain fees with respect to letters of credit.
The weighted average interest rate under the revolving credit facility borrowings was 2.3% during Fiscal
2020. There were no borrowings outstanding during Fiscal 2021. As of December 31, 2021, the commitment fee
was 15 basis points.
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1.50% Convertible Senior Notes
In May 2020, we issued $500.0 million aggregate principal amount of 1.50% convertible senior notes due
2024 (the “Convertible Senior Notes”). The Convertible Senior Notes bear interest at the rate of 1.50% per annum,
payable semiannually in arrears on June 1 and December 1 of each year, beginning December 1, 2020. The
Convertible Senior Notes will mature on June 1, 2024, unless earlier converted in accordance with their terms,
redeemed in accordance with their terms or repurchased.
The net proceeds from the offering (including the net proceeds from the exercise of the over-allotment
option) were $488.8 million, after deducting the initial purchasers’ discount and estimated offering expenses that we
paid, of which we used $47.9 million to pay the cost of the capped call transactions described below. We utilized
$439.9 million to repay indebtedness that was outstanding under our revolving credit facility at the time, and to pay
related fees and expenses.
The Convertible Senior Notes are not secured and are not guaranteed by any of our subsidiaries. The
indenture governing the Convertible Senior Notes does not contain any financial or operating covenants or
restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of
securities by us or any of our subsidiaries.
In May 2021, we entered into exchange agreements with certain holders of the Convertible Senior Notes
(the "first exchanging holders"), who agreed to exchange $250.0 million in aggregate principal amount of the
Convertible Senior Notes for cash and/or shares of our Class C Common Stock, plus payment for accrued and
unpaid interest (the "First Exchange"). In connection with the First Exchange, we paid approximately $300.0 million
cash and issued approximately 11.1 million shares of the Company's Class C Common Stock to the first exchanging
holders. In August 2021, we entered into additional exchange agreements with certain holders of the Convertible
Senior Notes (the "second exchanging holders"), who agreed to exchange approximately $169.1 million in
aggregate principal amount of the Convertible Senior Notes for cash and/or shares of our Class C Common Stock,
plus payment for accrued and unpaid interest (the "Second Exchange" and, together with the First Exchange, the
"Exchanges"). In connection with the Second Exchange, we paid approximately $207.0 million cash and issued
approximately 7.7 million shares of our Class C Common Stock to the second exchanging holders. In connection
with the Exchanges, we recognized a loss on debt extinguishment of approximately $58.5 million for Fiscal 2021,
which has been recorded within Other Income (Expense), net on our Consolidated Statement of Operations.
Following the Exchanges, approximately $80.9 million aggregate principal amount of the Convertible Senior Notes
remain outstanding.
The Convertible Senior Notes are convertible into cash, shares of our Class C Common Stock or a combination
of cash and shares of Class C Common Stock, at our election, as described further below. The initial conversion
rate is 101.8589 shares of our Class C Common Stock per $1,000 principal amount of Convertible Senior Notes
(equivalent to an initial conversion price of approximately $9.82 per share of Class C Common Stock), subject to
adjustment if certain events occur. Prior to the close of business on the business day immediately preceding
January 1, 2024, holders may (at their option) convert their Convertible Senior Notes only upon satisfaction of one
or more of the following conditions:
•
•
•
•
during any calendar quarter commencing after the calendar quarter ended on September 30, 2020 (and
only during such calendar quarter), if the last reported sale price of our Class C Common Stock for at least
20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on,
and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to
130% of the conversion price on each applicable trading day;
during the five business day period after any five consecutive trading day period (the “measurement
period”) in which the trading price per $1,000 principal amount of Convertible Senior Notes for each trading
day of the measurement period was less than 98% of the product of the last reported sale price of our Class
C Common Stock and the conversion rate on each such trading day;
upon the occurrence of specified corporate events or distributions on our Class C Common Stock; or
if we call any Convertible Senior Notes for redemption prior to the close of business on the business day
immediately preceding January 1, 2024.
On or after January 1, 2024, until the close of business on the second scheduled trading day immediately
preceding the maturity date, holders may convert all or any portion of their Convertible Senior Notes at the
conversion rate at any time irrespective of the foregoing conditions.
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On or after December 6, 2022, we may redeem for cash all or any part of the Convertible Senior Notes, at
our option, if the last reported sale price of our Class C Common Stock has been at least 130% of the conversion
price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day
period (including the last trading day of such period) ending on, and including, the trading day immediately
preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the aggregate
principal amount of the Convertible Senior Notes to be redeemed, plus accrued and unpaid interest to, but
excluding, the redemption date.
If we undergo a fundamental change (as defined in the indenture governing the Convertible Senior Notes)
prior to the maturity date, subject to certain conditions, holders may require us to repurchase for cash all or any
portion of their Convertible Senior Notes in principal amounts of $1,000 or an integral multiple thereof at a price
which will be equal to 100% of the aggregate principal amount of the Convertible Senior Notes to be repurchased,
plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
Concurrently with the offering of the Convertible Senior Notes, we entered into privately negotiated capped
call transactions with JPMorgan Chase Bank, National Association, HSBC Bank USA, National Association, and
Citibank, N.A. (the “option counterparties”). The capped call transactions are expected generally to reduce potential
dilution to our Class C Common Stock upon any conversion of Convertible Senior Notes and/or offset any cash
payments we are required to make in excess of the aggregate principal amount of converted Convertible Senior
Notes upon any conversion thereof, as the case may be, with such reduction and/or offset subject to a cap based
on the cap price. The cap price of the capped call transactions is initially $13.4750 per share of our Class C
Common Stock, representing a premium of 75% above the last reported sale price of our Class C Common Stock
on May 21, 2020, and is subject to certain adjustments under the terms of the capped call transactions.
In May 2021 and August 2021, concurrently with the Exchanges, we entered into, with each of the option
counterparties, termination agreements relating to a number of options corresponding to the number of Convertible
Senior Notes exchanged. Pursuant to such termination agreements, each of the option counterparties paid us a
cash settlement amount in respect of the portion of capped call transactions being terminated. We received
approximately $53.0 million and $38.6 million in connection with such termination agreements related to the First
Exchange and the Second Exchange, respectively.
The Convertible Senior Notes contain a cash conversion feature, and as a result, we have separated it into
liability and equity components. We valued the liability component based on our borrowing rate for a similar debt
instrument that does not contain a conversion feature. The equity component, which is recognized as a debt
discount, was valued as the difference between the face value of the Convertible Senior Notes and the fair value of
the liability component.
In connection with the Convertible Senior Notes issuance, we incurred deferred financing costs of
$12.3 million, primarily related to fees paid to the initial purchasers of the offering, as well as legal and accounting
fees. These costs were allocated on a pro rata basis, with $10.0 million allocated to the debt component and
$2.2 million allocated to the equity component. As of December 31, 2021, the equity component, net of issuance
costs was $88.7 million.
The debt discount and the debt portion of the deferred financing costs are being amortized to interest
expense over the term of the Convertible Senior Notes using the effective interest rate method. The effective
interest rate for the three months ended December 31, 2021 was 6.8%.
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 “Senior Notes”). The proceeds were used to pay down amounts outstanding under the
revolving credit facility, at the time. 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 Senior 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 Senior Notes to be redeemed or a "make-whole" amount applicable to such Senior
Notes as described in the indenture governing the Senior Notes, plus accrued and unpaid interest to, but excluding,
the redemption date.
The indenture governing the Senior 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.
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CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
Our Consolidated Financial Statements have been prepared in accordance with U.S. GAAP. 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. 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. Actual results could be significantly different from these estimates. We believe the following addresses the
critical accounting estimates and assumptions that are necessary to understand and evaluate our reported financial
results.
Revenue Recognition
We recognize revenue pursuant to Accounting Standards Codification 606 ("ASC 606"). The amount of
revenue recognized considers terms of sale that create variability in the amount of consideration that we ultimately
expect to be entitled to in exchange for the products or services and is subject to an overall constraint that a
significant revenue reversal will not occur in future periods.
We record reductions to revenue at the time of the transaction for estimated customer returns, allowances,
markdowns and discounts. We base these 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 are 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 included within customer
refund liability and the value of inventory associated with reserves for sales returns are included within prepaid
expenses and other current assets on the Consolidated Balance Sheets. As of December 31, 2021 and 2020, there
were $164.3 million and $203.4 million, respectively, in reserves for returns, allowances, markdowns and discounts
within customer refund liability and $47.6 million and $57.9 million, respectively, as the estimated value of inventory
associated with the reserves for sales returns within prepaid expenses and other current assets on the Consolidated
Balance Sheets.
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, 2021 and 2020, the allowance for doubtful
accounts was $7.1 million and $20.4 million, respectively.
Inventory Valuation and Reserves
Inventories consist primarily of finished goods. Costs of finished goods inventories include all costs incurred
to bring inventory to its current condition, including inbound freight, duties and other costs. We value our inventory
at standard cost which approximates landed cost, using the first-in, first-out method of cost determination. Net
realizable value is estimated based upon assumptions made about future demand and retail market conditions.
If we determine that the estimated net realizable value of our inventory is less than the carrying value of such
inventory, we record a charge to cost of goods sold to reflect the lower of cost or net realizable value. 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. As of December 31, 2021
and 2020, the inventory reserve was $32.0 million and $44.6 million, respectively.
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
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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 it is more likely than not that the fair value of the
reporting unit is less than its carrying amount. 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 estimate fair value using the discounted cash flows model, under the
income approach, which indicates the fair value of the reporting unit based on the present value of the cash flows
that we expect the reporting unit to generate in the future. Our significant estimates in the discounted cash flows
model include: our weighted average cost of capital, long-term rate of growth and profitability of the reporting unit's
business, and working capital effects. If the carrying amount of a reporting unit exceeds its fair value, goodwill is
impaired to the extent that the carrying value exceeds the fair value of the reporting unit.
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. The Company has made the
policy election to record any liability associated with Global Intangible Low Taxed Income (“GILTI”) in the period in
which it is incurred.
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 Statement of Operations.
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. In evaluating the
recoverability of these deferred tax assets as of December 31, 2021, the Company has considered all available
evidence, both positive and negative, including but not limited to the following:
•
•
•
•
•
•
•
•
•
Positive
Current year pre-tax earnings.
Restructuring plans undertaken in 2017, 2018, and 2020, which aim to improve future profitability.
No history of U.S. federal and state tax attributes expiring unused.
Existing sources of taxable income.
Available prudent and feasible tax planning strategies.
Negative
Restructuring plan undertaken in Fiscal 2020 resulting in significant charges in pre-tax income, reducing
profitability in the United States.
The negative economic impact and uncertainty resulting from the COVID-19 pandemic.
Cumulative pre-tax losses in recent years in the United States.
Inherent challenges in forecasting future pre-tax earnings which rely, in part, on improved profitability from
our restructuring efforts.
As of December 31, 2021, we believe that the weight of the negative evidence outweighs the positive
evidence regarding the realization of our U.S. deferred tax assets and have recorded a valuation allowance against
the U.S. deferred tax assets.
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As of each reporting date, management considers new evidence, both positive and negative, that could
affect its view of the future realization of DTAs. Our current forecasts for the United States indicate that it is probable
that additional deferred taxes could be realizable based on near term trend towards three-year cumulative taxable
earnings. The actualization of these forecasted results may potentially outweigh the negative evidence, resulting in
a reversal of all or a portion of previously recorded valuation allowances in the United States. The release of
valuation allowances would result in a benefit to income tax expense in the period the release is recorded, which
could have a material impact on net income. The timing and amount of the potential valuation allowance release are
subject to significant management judgment, as well as prospective pre-tax earnings in the United States. We will
continue to evaluate our ability to realize our net deferred tax assets on a quarterly basis.
Stock-Based Compensation
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 is deemed probable, which requires management judgment.
Summary of Significant Account Policies
Refer to Note 2 of our Consolidated Financial Statements, included in this Annual Report on Form 10-K, for
a summary of our significant accounting policies and our assessment of recently issued accounting standards.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency and Interest Rate Risk
We are exposed to global market risks, including the effects of changes in foreign currency and interest
rates. We use derivative instruments to manage financial exposures that occur in the normal course of business and
do not hold or issue derivatives for trading or speculative purposes.
We may elect to designate certain derivatives as hedging instruments under U.S. GAAP. We formally
document all relationships between designated hedging instruments and hedged items, as well as our risk
management objectives and strategies for undertaking hedged transactions. This process includes linking all
derivatives designated as hedges to forecasted cash flows and assessing, both at inception and on an ongoing
basis, the effectiveness of the hedging relationships.
Our foreign exchange risk management program consists of designated cash flow hedges and
undesignated hedges. As of December 31, 2021, we had hedge instruments, primarily for British Pound/U.S. Dollar,
U.S. Dollar/Chinese Renminbi, Euro/U.S. Dollar, U.S. Dollar/Canadian Dollar, U.S. Dollar/Japanese Yen and U.S.
Dollar/Mexican Peso currency pairs. All derivatives are recognized on the Consolidated Balance Sheets at fair value
and classified based on the instruments maturity dates. The table below provides information about our foreign
currency forward exchange agreements and presents the notional amounts and weighted average exchange rates
by contractual maturity dates:
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(In thousands)
2022
2023
2024
2025
On-Balance Sheet Financial Instruments
USD Functional Currency
Fair Value as of Year Ended
2026 and
Thereafter
Total
December 31,
2021
December 31,
2020
EUR
Notional
$ 63,500 $ 23,423 $
— $
— $
— $ 86,923 $
4,447 $
(5,565)
Weighted Average
Exchange Rate
1.21
1.21
1.21
GBP
Notional
170,773
30,657
—
—
— 201,430
3,270
(6,634)
Weighted Average
Exchange Rate
1.37
1.40
1.37
JPY
Notional
9,873
3,151
—
—
—
13,024
495
(126)
Weighted Average
Exchange Rate
110.38
109.73
110.23
CNY Functional Currency
USD
Notional
113,045
27,935
—
—
— 140,980
(6,090)
(5,414)
Weighted Average
Exchange Rate
6.75
6.74
6.74
CAD Functional Currency
USD
Notional
52,761
18,062
—
—
—
70,823
(343)
(3,824)
Weighted Average
Exchange Rate
1.29
1.23
1.27
MXN Functional Currency
USD
Notional
35,068
8,234
—
—
—
43,302
(237)
(739)
Weighted Average
Exchange Rate
21.32
22.20
21.48
We currently generate a majority of our consolidated net revenues in the United States, and the reporting
currency for our Consolidated Financial Statements is the U.S. dollar. As our net revenues and expenses generated
outside of the United States increase, our results of operations could be adversely impacted by changes in foreign
currency exchange rates. For example, as we recognize foreign revenues in local foreign currencies and if the U.S.
dollar strengthens, it could have a negative impact on our foreign revenues upon translation of those results into the
U.S. dollar upon consolidation of our financial statements. In addition, we are exposed to gains and losses resulting
from fluctuations in foreign currency exchange rates relating to transactions generated by our international
subsidiaries in currencies other than their local currencies. These gains and losses are driven by non-functional
currency generated revenue, non-functional currency inventory purchases, investments in U.S. Dollar denominated
available-for-sale debt securities, and certain other intercompany transactions. As of December 31, 2021, the
aggregate notional value of our outstanding cash flow hedges was $556.5 million, with contract maturities ranging
from one to twenty-four months.
In order to maintain liquidity and fund business operations, we may 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 from time to time. Our interest rate swap contracts are accounted for as cash flow hedges.
For contracts designated as cash flow hedges, the changes in fair value are reported as other
comprehensive income and are recognized in current earnings in the period or periods during which the hedged
transaction affects current earnings. One of the criteria for this accounting treatment is the notional value of these
derivative contracts should not be in excess of specifically identified anticipated transactions. By their very nature,
our estimates of the anticipated transactions may fluctuate over time and may ultimately vary from actual
transactions. When anticipated transaction estimates or actual transaction amounts decline below hedged levels, or
if it is no longer probable a forecasted transaction will occur by the end of the originally specified time period or
within an additional two-month period of time, we are required to reclassify the cumulative change in fair value of the
over-hedged portion of the related hedge contract from Other comprehensive income (loss) to Other expense, net
during the period in which the decrease occurs.
We enter into derivative 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 derivative contracts. However, we monitor the credit quality of these
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financial institutions and consider the risk of counterparty default to be minimal. Although we have entered into
foreign currency contracts to minimize some of the impact of foreign currency exchange rate fluctuations on future
cash flows, we cannot be assured that foreign currency exchange rate fluctuations will not have a material adverse
impact on our financial condition and results of operations.
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, 2021. Refer to
"Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting
Policies and Estimates - Allowance for Doubtful Accounts" for a further discussion on our policies.
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, our business could be impacted by continued or increasing inflation in future
periods. See our "Risk Factors—Economic and Industry Risks—Our business depends on consumer purchases of
discretionary items, which can be negatively impacted during an economic downturn or periods of inflation. This
could materially harm our sales, profitability and financial condition" included in Item 1A of this Annual Report on
Form 10-K.
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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. This evaluation included review of the
documentation of controls, evaluation of the design 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, 2021.
The effectiveness of our internal control over financial reporting as of December 31, 2021, has been audited
by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which
appears herein.
/s/ PATRIK FRISK
Patrik Frisk
Chief Executive Officer and President
/s/ DAVID E. BERGMAN
Chief Financial Officer
Dated: February 23, 2022
David E. Bergman
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Table of Contents
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 (the
“Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations,
comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended
December 31, 2021, including the related notes and schedule of valuation and qualifying accounts for each of the
three years in the period ended December 31, 2021 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2021 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, 2021, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the COSO.
Changes in Accounting Principles
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it
accounts for leases in 2019.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our
responsibility is to express opinions on 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
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 financial reporting
includes those policies and procedures that (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
50
Table of Contents
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.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that (i)
relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Reserve for Customer Returns
As described in Notes 2 and 11 to the consolidated financial statements, the Company recorded $164.3 million as of
December 31, 2021 in reserves for returns, allowances, markdowns and discounts within customer refund liability.
Management bases its estimates of the reserve for customer returns 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 principal considerations for our determination that performing procedures relating to the reserve for customer
returns is a critical audit matter are the high degree of auditor judgment, subjectivity, and effort, in performing
procedures and evaluating management’s significant assumption related to the amount of outstanding returns that
have not yet been received by the Company.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of
controls relating to the estimation of management’s customer returns reserve, including the assumption related to
the outstanding returns that have not yet been received by the Company. These procedures also included, among
others, testing management’s process for developing the customer returns reserve; evaluating the appropriateness
of the method; testing the completeness, accuracy, and relevance of underlying data used in the estimate; and
evaluating the reasonableness of the significant assumption related to the amount of outstanding returns that have
not yet been received by the Company. Evaluating management’s assumption related to outstanding returns that
have not yet been received by the Company involved evaluating whether the assumption used by management was
reasonable considering (i) historical rates of customer returns; (ii) specific identification of outstanding returns; and
(iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.
/s/ PricewaterhouseCoopers LLP
Baltimore, Maryland
February 23, 2022
We have served as the Company’s auditor since 2003.
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Under Armour, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share data)
December 31,
2021
December 31,
2020
Assets
Current assets
Cash and cash equivalents
Accounts receivable, net (Note 3)
Inventories
Prepaid expenses and other current assets, net
Total current assets
Property and equipment, net (Note 4)
Operating lease right-of-use assets
Goodwill (Note 6)
Intangible assets, net (Note 7)
Deferred income taxes (Note 17)
Other long term assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable
Accrued expenses
Customer refund liabilities (Note 11)
Operating lease liabilities (Note 5)
Other current liabilities
Total current liabilities
Long term debt, net of current maturities (Note 8)
Operating lease liabilities, non-current (Note 5)
Other long term liabilities
Total liabilities
Stockholders’ equity (Note 10)
$
$
$
1,669,453 $
569,014
811,410
286,422
3,336,299
607,226
448,364
495,215
11,010
17,812
75,470
4,991,396 $
613,307 $
460,165
164,294
138,664
73,746
1,450,176
662,531
703,111
86,584
2,902,402
Class A Common Stock, $0.0003 1/3 par value; 400,000,000 shares authorized as of
December 31, 2021 and December 31, 2020; 188,650,987 shares issued and
outstanding as of December 31, 2021 (December 31, 2020: 188,603,686)
Class B Convertible Common Stock, $0.0003 1/3 par value; 34,450,000 shares
authorized, issued and outstanding as of December 31, 2021 and December 31, 2020
Class C Common Stock, $0.0003 1/3 par value; 400,000,000 shares authorized as of
December 31, 2021 and December 31, 2020; 253,161,064 shares issued and
outstanding as of December 31, 2021 (December 31, 2020: 231,953,667)
63
11
84
1,517,361
527,340
895,974
282,300
3,222,975
658,678
536,660
502,214
13,295
23,930
72,876
5,030,628
575,954
378,859
203,399
162,561
92,503
1,413,276
1,003,556
839,414
98,389
3,354,635
62
11
77
Additional paid-in capital
Retained earnings
Accumulated other comprehensive (income) loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
Commitments and Contingencies (Note 9)
Related Party Transactions (Note 20)
Subsequent Event (Note 21)
1,108,613
1,027,833
(47,610)
2,088,994
4,991,396 $
1,061,173
673,855
(59,185)
1,675,993
5,030,628
$
See accompanying notes.
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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 (loss) from operations
Interest income (expense), net
Other income (expense), net
Income (loss) before income taxes
Income tax expense (benefit)
Income (loss) from equity method investments
Net income (loss)
Basic net income (loss) per share of Class A, B and C common stock
Diluted net income (loss) per share of Class A, B and C common stock
Weighted average common shares outstanding Class A, B and C
common stock
Basic
Diluted
Year Ended December 31,
2021
2020
2019
$
5,683,466 $
4,474,667 $
5,267,132
2,821,967
2,861,499
2,334,691
40,518
486,290
(44,300)
(51,113)
390,877
32,072
1,255
2,314,572
2,160,095
2,171,934
601,599
2,796,599
2,470,533
2,233,763
—
(613,438)
236,770
(47,259)
168,153
(492,544)
49,387
(7,246)
(21,240)
(5,688)
209,842
70,024
(47,679)
92,139
$
$
$
360,060 $
(549,177) $
0.77 $
0.77 $
(1.21) $
(1.21) $
0.20
0.20
465,504
468,644
454,089
454,089
450,964
454,274
See accompanying notes.
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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 hedges, net of tax benefit
(expense) of $(5,725), $1,791 and $7,798 for the years ended
December 31, 2021, 2020 and 2019, respectively.
Gain (loss) on intra-entity foreign currency transactions
Total other comprehensive income (loss)
Comprehensive income (loss)
Year Ended December 31,
2021
2020
2019
$
360,060 $
(549,177) $
92,139
(6,552)
(5,060)
10,754
18,603
(18,075)
(21,646)
(476)
14,715
11,575
(8,420)
$
371,635 $
(557,597) $
(886)
(11,778)
80,361
See accompanying notes.
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Table of Contents
Under Armour, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(In thousands)
Class A
Common Stock
Class B
Convertible
Common Stock
Class C
Common Stock
Shares
Amount
Shares
Amount
Shares
Amount
Additional
Paid-in-
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Equity
Balance as of December 31, 2018 187,710 $
62
34,450 $
11
226,422 $
75 $ 916,628 $ 1,139,082 $
(38,987) $ 2,016,871
Exercise of stock options and
warrants
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
Stock-based compensation
expense
Comprehensive income (loss)
441
—
—
—
293
—
2,101
—
—
2,101
(15)
154
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(227)
—
—
2,540
—
—
—
—
—
—
1
—
—
—
—
5,370
49,618
(4,235)
—
—
—
—
—
—
—
—
92,139
(11,778)
(4,235)
—
5,371
49,618
80,361
Balance as of December 31, 2019 188,290 $
62
34,450 $
11
229,028 $
76 $ 973,717 $ 1,226,986 $
(50,765) $ 2,150,087
Exercise of stock options
148 $
—
— $
—
136 $
— $
517 $
— $
— $
517
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
Stock-based compensation
expense
Equity Component value of
convertible note issuance, net
Comprehensive income (loss)
(1) $
—
— $
—
(262) $
— $
— $
(3,954) $
— $
(3,954)
166 $
—
— $
—
— $
— $
— $
— $
— $
—
— $
—
— $
—
3,052 $
1 $
4,225 $
— $
— $
4,226
— $
—
— $
—
— $
— $
42,070 $
— $
— $
42,070
— $
— $
—
—
— $
— $
—
—
— $
— $
— $
40,644 $
— $
— $
40,644
— $
— $ (549,177) $
(8,420) $
(557,597)
Balance as of December 31, 2020 188,603 $
62
34,450 $
11
231,954 $
77 $ 1,061,173 $ 673,855 $
(59,185) $ 1,675,993
Exercise of stock options
6 $
—
— $
—
7 $
— $
23 $
— $
— $
23
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
Stock-based compensation
expense
Comprehensive income (loss)
— $
—
— $
—
(291) $
— $
— $
(6,082) $
— $
(6,082)
42 $
1
— $
—
— $
— $
— $
— $
— $
1
— $
—
— $
—
21,491 $
7 $
3,623 $
— $
— $
3,630
— $
— $
—
—
— $
— $
—
—
— $
— $
— $
43,794 $
— $
— $
43,794
— $
— $ 360,060 $
11,575 $ 371,635
Balance as of December 31, 2021 188,651 $
63
34,450 $
11
253,161 $
84 $ 1,108,613 $ 1,027,833 $
(47,610) $ 2,088,994
See accompanying notes.
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Table of Contents
Under Armour, Inc. and Subsidiaries`
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash used in operating activities
Year Ended December 31,
2021
2020
2019
$
360,060 $
(549,177) $
92,139
Depreciation and amortization
Unrealized foreign currency exchange rate gain (loss)
Loss on extinguishment of senior convertible notes
Loss on disposal of property and equipment
Gain on sale of the MyFitnessPal platform
Non-cash restructuring and impairment charges
Amortization of bond premium
Stock-based compensation
Deferred income taxes
Changes in reserves and allowances
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other assets
Other non-current assets
Accounts payable
Accrued expenses and other liabilities
Customer refund liability
Income taxes payable and receivable
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchases of property and equipment
Sale of property and equipment
Sale of the MyFitnessPal platform
Purchase of businesses
Purchases of other assets
Net cash provided by (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
Proceeds from capped call
Purchase of capped call
Employee taxes paid for shares withheld for income taxes
Proceeds from exercise of stock options and other stock issuances
Payments of debt financing costs
Other financing fees
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash
141,144
18,877
58,526
4,468
—
26,938
16,891
43,794
(2,642)
(25,766)
(31,153)
93,287
10,224
79,782
26,027
(114,794)
(38,861)
(1,973)
664,829
164,984
(9,295)
—
3,740
(179,318)
470,543
12,070
42,070
43,992
10,347
167,614
15,306
18,603
(259,735)
(40,673)
318,532
(19,250)
2,511
212,864
186,425
(2,073)
—
4,640
—
39,000
254
49,618
38,132
(26,096)
(45,450)
149,519
24,334
19,966
59,458
(18,987)
(80,710)
18,862
509,031
(69,759)
(92,291)
(145,802)
1,413
—
—
—
(68,346)
—
198,916
(40,280)
—
66,345
—
1,288,753
(506,280)
(800,000)
91,722
—
(5,983)
3,688
(1,884)
—
(418,737)
(23,391)
154,355
—
(47,850)
(3,675)
4,744
(5,219)
100
436,853
16,445
732,507
—
—
—
(1,311)
(147,113)
25,000
(162,817)
—
—
(4,235)
7,472
(2,553)
63
(137,070)
5,100
229,948
566,060
796,008
Beginning of period
End of period
1,528,515
796,008
$
1,682,870 $
1,528,515 $
Non-cash investing and financing activities
Change in accrual for property and equipment
Other supplemental information
Cash paid (received) for income taxes, net of refunds
Cash paid for interest, net of capitalized interest
$
19,214 $
(13,875) $
(8,084)
42,623
25,226
24,443
28,626
23,352
18,031
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Under Armour, Inc. and Subsidiaries`
Consolidated Statements of Cash Flows
(In thousands)
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents
Restricted cash
December 31,
2021
December 31,
2020
December 31,
2019
$
1,669,453 $
1,517,361 $
788,072
13,417
11,154
7,936
Total cash, cash equivalents and restricted cash
$
1,682,870 $
1,528,515 $
796,008
See accompanying notes.
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Under Armour, Inc. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Business
Under Armour, Inc. (together with its wholly owned subsidiaries, the "Company") is a developer, marketer
and distributor of branded athletic performance apparel, footwear and accessories. The Company creates products
engineered to make athletes better with a vision to inspire performance solutions you never knew you needed and
can't imagine living without. The Company's products are made, sold and worn worldwide.
Basis of Presentation
The accompanying Consolidated Financial Statements include the accounts of Under Armour, Inc. and its
wholly owned subsidiaries. All intercompany balances and transactions were eliminated upon consolidation. The
accompanying Consolidated Financial Statements were prepared in accordance with accounting principles
generally accepted in the United States of America ("U.S. GAAP"). Throughout this Annual Report on Form 10-K,
the term “Fiscal 2021” means the Company's fiscal year beginning on January 1, 2021 and ended December 31,
2021; the term “Fiscal 2020” means the Company's fiscal year beginning on January 1, 2020 and ended December
31,2020; and the term "Fiscal 2019" means the Company's fiscal year beginning on January 1, 2019 and ended
December 31, 2019.
Connected Fitness
Prior to January 1, 2021, the Company's previously reported "Connected Fitness" segment was comprised
of digital subscription and advertising conducted through various platforms, predominantly the MyFitnessPal,
MapMyFitness, consisting of applications such as MapMyRun and MapMyRide (collectively "MMR"), and
Endomondo platforms. While the Company continues to operate the MMR platforms, MyFitnessPal was sold in
December 2020 and Endomondo was wound down in December 2020 as part of the Company's 2020 restructuring
plan. As a result of these changes, beginning in the first quarter of Fiscal 2021, the Company no longer reports
Connected Fitness as a discrete reportable segment. The operating results of MMR are now included within the
Company’s Corporate Other segment. Where applicable, all prior periods that used to separately reflect financial
information about the Connected Fitness business have been recast to be included within the Corporate Other
reportable segment, in order to conform with current period presentation. Such reclassifications did not affect total
consolidated net revenues, consolidated income from operations or consolidated net income.
Management Estimates and COVID-19 Update
The preparation of financial statements in conformity with U.S. GAAP requires management to make
estimates, judgments, 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. These estimates, judgments and assumptions are evaluated on
an on-going basis. The Company bases its estimates on historical experience and on various other assumptions
that it believes are reasonable at that time; however, actual results could differ from these estimates.
Further, COVID-19 continues to significantly impact the global economy. As the impacts of the pandemic
continue to evolve, estimates and assumptions about future events and their effects cannot be determined with
certainty and therefore require increased judgment. The extent to which the evolving pandemic impacts the
Company's financial statements will depend on a number of factors including, but not limited to, any new information
that may emerge concerning the severity of COVID-19 and the actions that governments around the world may take
to contain the virus or treat its impact. While the Company believes it has made appropriate accounting estimates
and assumptions based on the facts and circumstances available as of this reporting date, the Company may
experience further impacts based on long-term effects on the Company's customers and the countries in which the
Company operates. Please see the risk factors discussed in Part I, Item 1A "Risk Factors" of this Annual Report on
Form 10-K.
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NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash, Cash Equivalents and Restricted Cash
In accordance with Accounting Standards Codification ("ASC") Topic 305 "Cash and Cash Equivalents", the
Company considers all highly liquid investments with an original maturity of three months or less at the date of
purchase to be cash and cash equivalents. The Company's restricted cash is reserved for cash collateral held for
standby letters of credit and payments related to claims for its captive insurance program, which is included in
prepaid expenses and other current assets on the Company's Consolidated Balance Sheets.
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 wholesale customers.
One of the Company's customers accounted for more than 10% of the accounts receivable balance as of
December 31, 2021. None of the Company's customers accounted for more than 10% of the accounts receivable
balance as of December 31, 2020. For Fiscal 2021, one customer in North America accounted for approximately
11% of the Company's net revenues. For Fiscal 2020 and Fiscal 2019, no customer accounted for more than 10%
of the Company's net revenues. The Company regularly evaluates the credit risk of its large wholesale customers,
which make up the majority of the Company's accounts receivable. Refer to "Credit Losses - Allowance for Doubtful
Accounts" below for a discussion of the evaluation of credit losses.
Credit Losses - Allowance for Doubtful Accounts
Credit losses are the risk of financial loss to the Company if a customer or counterparty to a financial
instrument fails to meet its contractual obligations. The Company is exposed to credit losses primarily through
customer receivables associated with the sale of products within the Company's wholesale channel, recorded within
accounts receivable, net on the Company's Consolidated Balance Sheets. The Company also has other
receivables, including receivables from licensing arrangements recorded in prepaid expenses and other current
assets on the Company's Consolidated Balance Sheets.
Credit is extended to wholesale customers based on a credit review. The credit review considers each
customer’s financial condition, including a review of the customer's established credit rating or, if an established
credit rating is not available, then the Company's assessment of the customer’s creditworthiness is based on their
financial statements, local industry practices, and business strategy. A credit limit and invoice terms are established
for each customer based on the outcome of this review. The Company actively monitors ongoing credit exposure
through review of customer balances against terms and payments against due dates. To mitigate credit risk from the
wholesale channel, the Company may require customers to provide security in the form of guarantees, letters of
credit, deposits, collateral or prepayment. Further, to mitigate certain risk from other wholesale customers, the
Company has acquired specific trade accounts receivable insurance policies.
The Company is also exposed to credit losses through credit card receivables associated with the sale of
products within the Company's direct-to-consumer channel.
The allowance for doubtful accounts is based on the Company’s assessment of the collectability of
customer accounts receivable. In accordance with Accounting Standards Update ("ASU") No. 2016-13 "Financial
Instruments - Credit Losses", the Company makes ongoing estimates relating to the collectability of accounts
receivable and records an allowance for estimated losses expected from the inability of its customers to make
required payments. The Company establishes expected credit losses by evaluating historical levels of credit losses,
current economic conditions that may affect a customer’s ability to pay, and creditworthiness of significant
customers. These inputs are used to determine a range of expected credit losses and an allowance is recorded
within the range. Accounts receivable are written off when there is no reasonable expectation of recovery.
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. In accordance with ASC
Topic 330 "Inventory", the Company values its inventory at standard cost which approximates landed cost, using the
first-in, first-out method of cost determination. Net realizable value is estimated based upon assumptions made
about future demand and retail market conditions. If the Company determines that the estimated net realizable
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 net realizable value. If actual market conditions are less favorable than those projected
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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.
Property and Equipment
In accordance with ASC Topic 360 "Property, Plant and Equipment", property and equipment are stated at
cost, including the cost of internal 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, as follows:
Furniture, fixtures and displays, office equipment, software and plant equipment (1)
Site improvements, buildings and building equipment
Leasehold and tenant improvements
Years
3 to 10
10 to 35
Shorter of the remaining lease term
or related asset life
(1) The cost of in-store apparel and footwear fixtures and displays are capitalized as part of "furniture, fixtures and displays", and depreciated over
three years.
The Company periodically reviews its 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
$1.2 million as of December 31, 2021 (Fiscal 2020: $1.4 million).
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 useful lives of the assets, are expensed as incurred.
Leases
The Company enters into operating leases domestically and internationally to lease certain 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 2035, excluding extensions at the Company's option,
and include provisions for rental adjustments.
In accordance with ASC Topic 842 "Leases", the Company accounts for a contract as a lease when it has
the right to direct the use of the asset for a period of time while obtaining substantially all of the asset’s economic
benefits. The Company determines the initial classification and measurement of its right-of-use ("ROU") assets and
lease liabilities at the lease commencement date and thereafter if modified. ROU assets represent the Company’s
right to control the underlying assets under lease, over the contractual term. ROU assets and lease liabilities are
recognized on the Consolidated Balance Sheets based on the present value of future minimum lease payments to
be made over the lease term. ROU assets and lease liabilities are established on the Company's Consolidated
Balance Sheets for leases with an expected term greater than one year. Short-term lease payments were not
material for Fiscal 2021 and Fiscal 2020.
As the rate implicit in a lease is not readily determinable, the Company uses its secured incremental
borrowing rate to determine the present value of the lease payments. The Company calculates the incremental
borrowing rate based on the current market yield curve and adjusts for foreign currency impacts for international
leases.
Fixed lease costs are included in the recognition of ROU assets and lease liabilities. Variable lease costs
are not included in the measurement of the lease liability. These variable lease payments are recognized in the
Consolidated Statements of Operations in the period in which the obligation for those payments is incurred. Variable
lease payments primarily consist of payments dependent on sales in Brand and Factory House stores. The
Company has elected to combine lease and non-lease components in the determination of lease costs for its
leases. The lease liability includes lease payments related to options to extend or renew the lease term only if the
Company is reasonably certain to exercise those options.
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Income Taxes
In accordance with ASC Topic 740 "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. The Company has made the policy election to record any liability associated with
Global Intangible Low Tax Income (“GILTI”) in the period in which it is incurred.
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 line on the Consolidated Statements of Operations.
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, in accordance with ASC Topic 350-20 "Goodwill", are required to be tested
for impairment at least annually or sooner whenever events or changes in circumstances indicate that it is more
likely than not that the fair value of the reporting unit is less than its carrying amount. In conducting an annual
impairment test, the Company first reviews qualitative factors to determine whether it is more likely than not that the
fair value of the reporting unit is less than its carrying amount. If factors indicate that is the case, the Company
performs the goodwill impairment test. The Company compares the fair value of the reporting unit with its carrying
amount. The Company estimates fair value using the discounted cash flows model, under the income approach,
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 of a reporting unit exceeds its fair
value, goodwill is impaired to the extent that the carrying value exceeds the fair value of the reporting unit. The
Company performs its annual impairment testing in the fourth quarter of each year.
The Company continually evaluates whether events and circumstances have occurred that indicate the
remaining estimated useful life of long-lived assets may warrant revision or that the remaining balance may not be
recoverable. These factors may include a significant deterioration of operating results, changes in business plans,
or changes in anticipated cash flows. When factors indicate that an asset should be evaluated for possible
impairment, the Company reviews long-lived assets to assess recoverability from future operations using
undiscounted cash flows. 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.
During Fiscal 2021, the Company performed an impairment analysis on its long-lived assets, including retail
stores at an individual store level. Based on this analysis, the Company determined that certain long-lived assets
had net carrying values that exceeded their estimated undiscounted future cash flows. Accordingly, the Company
estimated the fair values of these long-lived assets based on their market rent assessments or discounted cash
flows. The Company compared these estimated fair values to the net carrying values. Accordingly, the Company
recognized $2.0 million of long-lived asset impairment charges for Fiscal 2021 (Fiscal 2020: $89.7 million; Fiscal
2019: $0). In Fiscal 2021, the long-lived asset impairment charge was recorded within selling, general and
administrative expenses on the Consolidated Statements of Operations and recorded as a reduction to the related
asset balances on the Consolidated Balance Sheets. In Fiscal 2020, these long-lived asset impairment charges
were part of our restructuring and impairment charges on the Consolidated Statements of Operations. The long-
lived asset impairment charges for Fiscal 2021 are included within the Company's operating segments as follows:
$0.2 million recorded in North America, $1.7 million recorded in Asia-Pacific,and $0.1 million recorded in Latin
America.
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The significant estimates used in the fair value methodology, which are based on Level 3 inputs, include:
the Company's expectations for future operations and projected cash flows, including net revenue, gross profit and
operating expenses and market conditions, including estimated market rent.
Additionally, during Fiscal 2021, the Company recognized $1.7 million of long-lived asset impairment
charges related to the Company's New York City flagship store, which was recorded in connection with the
Company's 2020 restructuring plan (Fiscal 2020: $290.8 million; Fiscal 2019: $0). Refer to Note 12 for a further
discussion of the restructuring and related impairment charges.
Accrued Expenses
As of December 31, 2021, accrued expenses primarily included $151.9 million and $58.8 million of accrued
compensation and benefits and marketing expenses, respectively (as of December 31, 2020: $77.9 million and
$45.9 million, 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. In accordance with ASC Topic 830 "Foreign Currency Matters", 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 Operations.
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 in accordance with ASC Topic 815 "Derivatives and
Hedging". 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.
For contracts designated as cash flow hedges, changes in fair value are reported as other comprehensive
income and are recognized in current earnings in the period or periods during which the hedged transaction affects
current earnings. One of the criteria for this accounting treatment is the notional value of these derivative contracts
should not be in excess of specifically identified anticipated transactions. By their very nature, the Company's
estimates of the anticipated transactions may fluctuate over time and may ultimately vary from actual transactions.
When anticipated transaction estimates or actual transaction amounts decline below hedged levels, or if it is no
longer probable a forecasted transaction will occur by the end of the originally specified time period or within an
additional two-month period of time, the Company is required to reclassify the cumulative change in fair value of the
over-hedged portion of the related hedge contract from Other comprehensive income (loss) to Other expense, net
during the period in which the decrease occurs. The Company does not enter into derivative financial instruments
for speculative or trading purposes.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606 "Revenue from Contracts with
Customers". Net revenues primarily consist of net sales of apparel, footwear and accessories, license revenues and
revenues from digital subscriptions, advertising and other digital business.
The Company recognizes revenue when it satisfies its performance obligations by transferring control of
promised products or services to its customers, which occurs either at a point in time or over time, depending on
when the customer obtains the ability to direct the use of and obtain substantially all of the remaining benefits from
the products or services. The amount of revenue recognized considers terms of sale that create variability in the
amount of consideration that the Company ultimately expects to be entitled to in exchange for the products or
services and is subject to an overall constraint that a significant revenue reversal will not occur in future periods.
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Sales taxes imposed on the Company’s revenues from product sales are presented on a net basis on the
Consolidated Statements of Operations, and therefore do not impact net revenues or costs of goods sold.
Revenue transactions associated with the sale of apparel, footwear, and accessories, comprise a single
performance obligation, which consists of the sale of products to customers either through wholesale or direct-to-
consumer channels. The Company satisfies the performance obligation and records revenues when transfer of
control has passed to the customer, based on the terms of sale. In the Company’s wholesale channel, transfer of
control 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. The Company may also ship product
directly from its supplier to wholesale customers and recognize revenue when the product is delivered to and
accepted by the customer. In the Company’s direct-to-consumer channel, transfer of control takes place at the point
of sale for Brand and Factory House customers and upon shipment to substantially all e-commerce customers.
Payment terms for wholesale transactions are established in accordance with local and industry practices. Payment
is generally required within 30 to 60 days of shipment to or receipt by the wholesale customer in the United States,
and generally within 60 to 90 days of shipment to or receipt by the wholesale customer internationally. Payment is
generally due at the time of sale for direct-to-consumer transactions.
Gift cards issued to customers by the Company are recorded as contract liabilities until they are redeemed,
at which point revenue is recognized. The Company also estimates and recognizes revenue for gift card balances
not expected to ever be redeemed ("breakage") to the extent that it does not have a legal obligation to remit the
value of such unredeemed gift cards to the relevant jurisdiction as unclaimed or abandoned property. Such
estimates are based upon historical redemption trends, with breakage income recognized in proportion to the
pattern of actual customer redemptions.
Revenue from the Company's licensing arrangements is recognized over time during the period that
licensees are provided access to the Company's trademarks and benefit from such access through their sales of
licensed products. These arrangements require licensees to pay a sales-based royalty, which for most
arrangements may be subject to a contractually guaranteed minimum royalty amount. Payments are generally due
quarterly. The Company recognizes revenue for sales-based royalty arrangements (including those for which the
royalty exceeds any contractually guaranteed minimum royalty amount) as licensed products are sold by the
licensee. If a sales-based royalty is not ultimately expected to exceed a contractually guaranteed minimum royalty
amount, the minimum is recognized as revenue over the contractual period, if all other criteria of revenue
recognition have been met. This sales-based output measure of progress and pattern of recognition best represents
the value transferred to the licensee over the term of the arrangement, as well as the amount of consideration that
the Company is entitled to receive in exchange for providing access to its trademarks.
Revenue from digital subscriptions is recognized on a gross basis and is recognized over the term of the
subscription. The Company receives payments in advance of revenue recognition for subscriptions and these
payments are recorded as contract liabilities in the Company's Consolidated Balance Sheets. Related commission
cost is included in selling, general and administrative expense in the Consolidated Statements of Operations.
Revenue from digital advertising is recognized as the Company satisfies performance obligations pursuant to
customer insertion orders.
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
negotiated arrangements with certain major customers. Reserves for returns, allowances, markdowns, and
discounts are included within customer refund liability and the value of inventory associated with reserves for sales
returns are included within prepaid expenses and other current assets on the Consolidated Balance Sheets. At a
minimum, the Company reviews and refines these estimates on a quarterly basis.
Practical Expedients and Policy Elections
The Company has made a policy election to account for shipping and handling activities that occur after the
customer has obtained control of a good as a fulfillment cost rather than an additional promised service.
Additionally, the Company has elected not to disclose certain information related to unsatisfied performance
obligations for subscriptions for its MMR platforms as they have an original expected length of one year or less.
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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, including amortization of in-store marketing
fixtures and displays, was $649.2 million for Fiscal 2021 (Fiscal 2020 and Fiscal 2019: $550.4 million and
$578.9 million, respectively). As of December 31, 2021, prepaid advertising costs were $22.4 million (as of
December 31, 2020: $15.2 million).
Shipping and Handling Costs
The Company charges customers shipping and handling fees based on contractual terms, which are
recorded in net revenues. The Company incurs freight costs associated with shipping goods to customers. These
costs are recorded as a component of cost of goods sold.
The Company also incurs outbound handling costs associated with preparing goods to ship to customers
and certain costs to operate the Company’s distribution facilities. These costs are recorded as a component of
selling, general and administrative expenses. For Fiscal 2021, these costs totaled $82.9 million (Fiscal 2020 and
Fiscal 2019: $80.5 million and $81.0 million, respectively).
Equity Method Investment
The Company has a common stock investment of 29.5% in its Japanese licensee. The Company accounts
for its investment in its licensee under the equity method, given it has the ability to exercise significant influence, but
not control, over the entity. The Company recorded its allocable share of its Japanese licensee's net income (loss)
of $1.8 million for Fiscal 2021, (Fiscal 2020 and Fiscal 2019: $3.5 million and $(8.7) million, respectively) within
income (loss) from equity method investment on the Consolidated Statements of Operations and as an adjustment
to the invested balance within other long term assets on the Consolidated Balance Sheets. As of December 31,
2021, the carrying value of the Company's investment in its Japanese licensee was $1.8 million. The Company's
investment in its Japanese licensee had no carrying value as of December 31, 2020 as it was fully impaired in
Fiscal 2020.
In connection with the license agreement with the Japanese licensee, the Company recorded license
revenues of $42.4 million for Fiscal 2021 (Fiscal 2020 and Fiscal 2019: $40.1 million and $37.8 million,
respectively). As of December 31, 2021 and December 31, 2020, the Company had $17.1 million and $22.9 million,
respectively, in licensing receivables outstanding, recorded in the prepaid expenses and other current assets line
item within the Company's Consolidated Balance Sheets.
On March 2, 2020, as part of the Company's acquisition of Triple Pte. Ltd., the Company assumed 49.5% of
common stock ownership in UA Sports (Thailand) Co., Ltd. (“UA Sports Thailand”). The Company accounts for its
investment in UA Sports Thailand under the equity method, given it has the ability to exercise significant influence,
but not control, over UA Sports Thailand. For Fiscal 2021, the Company recorded the allocable share of UA Sports
Thailand’s net income (loss) of $(0.6) million (Fiscal 2020 and Fiscal 2019: $(1.1) million and $0, respectively) within
income (loss) from equity method investment on the Consolidated Statements of Operations and as an adjustment
to the invested balance within other long term assets on the Consolidated Balance Sheets. As of December 31,
2021 and December 31, 2020, the carrying value of the Company’s investment in UA Sports Thailand was $5.0
million and $4.5 million, respectively.
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 18 for a further discussion of
earnings per share.
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Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC Topic 718 "Compensation -
Stock Compensation", which requires all stock-based compensation awards granted to be measured at fair value
and recognized as an expense in the financial statements over the service period. 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 option
awards and grant date fair value for other 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 14 for further details on stock-based
compensation.
Fair Value of Financial Instruments
The carrying amounts shown for the Company’s cash and cash equivalents, accounts receivable and
accounts payable approximate fair value because of the short term maturity of those instruments. As of December
31, 2021, the fair value of the Company's 3.250% Senior Notes were $619.9 million (December 31, 2020: $602.6
million). The fair value of the Company's 1.50% Convertible Senior Notes, was $149.6 million as of December 31,
2021 (December 31, 2020: $828.2 million). The fair value of the Company's other long term debt approximates its
carrying value based on the variable nature of interest rates and current market rates available to the Company. The
fair value of a foreign currency contract 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 an 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 August 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-06 "Debt - Debt with
Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity
(Subtopic 815-40)" ("ASU 2020-06"). The amendment in this update simplifies the accounting for convertible
instruments by reducing the number of accounting models available for convertible debt instruments and convertible
preferred stock. This update also amends the guidance for the derivatives scope exception for contracts in an
entity's own equity to reduce form-over-substance-based accounting conclusions and requires the application of the
if-converted method for calculating diluted earnings per share. The update also requires entities to provide
expanded disclosures about the terms and features of convertible instruments, how the instruments have been
reported in the entity’s financial statements, and information about events, conditions, and circumstances that can
affect how to assess the amount or timing of an entity’s future cash flows related to those instruments. The guidance
is effective for interim and annual periods beginning after December 15, 2021. The Company will adopt ASU
2020-06, effective January 1, 2022 by applying a cumulative effect adjustment to retained earnings. The effect on
the Company's Consolidate Statement of Operations and related disclosures will not be material.
Recently Adopted Accounting Standards
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects
of Reference Rate Reform on Financial Reporting and then issued a subsequent amendment to the initial guidance
under ASU 2021-01 (collectively Topic 848). Topic 848 provides practical expedients and exceptions for applying
GAAP to contracts, hedging relationships, derivatives and other transactions affected by reference rate reform if
certain criteria are met. The expedients and exceptions provided by the amendments in this update apply only to
contracts, hedging relationships, derivatives and other transactions that reference the London interbank offered rate
(“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform. The Company
adopted Topic 848 in the third quarter of Fiscal 2021. The adoption did not have an impact to the Company's
Consolidated Financial Statements.
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NOTE 3. ALLOWANCE FOR DOUBTFUL ACCOUNTS
The following table illustrates the activity in the Company's allowance for doubtful accounts:
(In thousands)
Balance at December 31, 2019
Increases (decreases) to costs and expenses
Write-offs, net of recoveries
Balance at December 31, 2020
Increases (decreases) to costs and expenses
Write-offs, net of recoveries
Balance at December 31, 2021
(1) Includes an allowance pertaining to a royalty receivable.
Allowance for doubtful accounts -
within accounts receivable, net
Allowance for doubtful accounts -
within prepaid expenses and other
current assets (1)
$
$
$
15,083 $
10,456
(5,188)
20,350 $
(3,821)
(9,401)
7,128 $
—
7,029
—
7,029
—
—
7,029
The allowance for doubtful accounts was established with information available as of December 31, 2021,
including reasonable and supportable estimates of future risk.
For Fiscal 2020, the increase in allowance for doubtful accounts was primarily due to negative
developments experienced by our customers as a result of the COVID-19 pandemic, representing a higher risk of
credit default.
NOTE 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 (2)
Other
Subtotal property and equipment
Accumulated depreciation
Property and equipment, net
December 31,
2021
2020 (1)
$
462,588 $
259,534
48,382
333,560
132,629
178,187
83,626
52,598
5,545
462,597
237,275
48,382
342,937
129,546
200,625
83,626
31,217
6,047
1,556,649
1,542,252
(949,423)
(883,574)
$
607,226 $
658,678
(1) Certain prior period balances have been reclassified to conform to the current period presentation. Such reclassifications were not considered
material and did not affect the consolidated financial statements.
(2) 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 $139.2 million for Fiscal 2021 (Fiscal 2020:
$154.4 million; Fiscal 2019: $177.3 million).
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NOTE 5. LEASES
The Company enters into operating leases domestically and internationally to lease certain 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 2035, excluding extensions at the Company's option,
and include provisions for rental adjustments. Short-term lease payments were not material for Fiscal 2021 and
Fiscal 2020.
As a result of the impacts of COVID-19, the Company sought concessions during Fiscal 2020 from
landlords for certain leases of Brand and Factory House stores in the form of rent deferrals or rent waivers.
Consistent with updated guidance from the FASB in April 2020, the Company elected to account for treating these
concessions as though the enforceable rights and obligations to the deferrals existed in the respective contracts at
lease inception and will not account for the concessions as lease modifications, unless the concession results in a
substantial change in the Company's obligations.
The Company's rent deferrals had no impact to rent expense during Fiscal 2021 and Fiscal 2020, and
amounts deferred and payable in future periods have been included in short term lease liability on the Company's
Consolidated Balance Sheet as of December 31, 2021. The Company's rent waivers, which were recorded as a
reduction of rent expense, were approximately $5.5 million for Fiscal 2021 (Fiscal 2020: $4.1 million; Fiscal 2019:
$0).
Lease Costs and Other Information
The Company recognizes lease expense on a straight-line basis over the lease term.
The following table illustrates operating and variable lease costs, included in selling, general and
administrative expenses within the Company's Consolidated Statements of Operations, for the periods indicated:
(In thousands)
Operating lease costs
Variable lease costs
Year ended December 31,
2021
2020
2019
$
$
142,965 $
16,115 $
147,390 $
9,293 $
153,551
12,856
There are no residual value guarantees that exist, and there are no restrictions or covenants imposed by
leases. The Company rents or subleases excess office facilities and warehouse space to third parties. Sublease
income is not material.
The weighted average remaining lease term and discount rate for the periods indicated below were as
follows:
Weighted average remaining lease term (in years)
Weighted average discount rate
Supplemental Cash Flow Information
December 31, 2021
December 31, 2020
8.73
3.72 %
9.12
3.83 %
The following table presents supplemental information relating to cash flow arising from lease transactions:
(In thousands)
Cash paid for amounts included in the measurement of lease liabilities
Year ended December 31,
2021
2020
2019
Operating cash outflows from operating leases
Leased assets obtained in exchange for new operating lease liabilities
$
$
177,391 $
155,990 $
116,811
28,244 $
390,957 $
70,075
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Maturity of Lease Liabilities
The following table presents the future minimum lease payments under our operating lease liabilities as of
December 31, 2021:
(In thousands)
Fiscal year ending December 31,
2022
2023
2024
2025
2026
2027 and thereafter
Total lease payments
Less: Interest
Total present value of lease liabilities
$
$
$
169,994
146,732
126,466
96,066
75,225
379,133
993,616
151,841
841,775
As of December 31, 2021, the Company has additional operating lease obligations that have not yet
commenced of approximately $1.5 million, which are not reflected in the table above.
NOTE 6. GOODWILL
The following table summarizes changes in the carrying amount of the Company’s goodwill by reportable
segment as of the periods indicated:
(In thousands)
North
America
EMEA
Asia-Pacific
Latin America
Total
Balance as of December 31, 2019
Effect of currency translation adjustment
$
318,288 $
(1,420)
106,066 $
6,971
Impairment
Balance as of December 31, 2020
Effect of currency translation adjustment
Balance as of December 31, 2021
(15,345)
301,523
(152)
$
301,371 $
—
113,037
(5,296)
107,741 $
79,168 $
8,486
—
87,654
(1,551)
86,103 $
46,656 $
(10,426)
(36,230)
—
—
— $
550,178
3,611
(51,575)
502,214
(6,999)
495,215
During Fiscal 2021, there were no goodwill impairments recorded.
During Fiscal 2020, as a result of the impacts of COVID-19, the Company determined that sufficient
indicators existed to trigger an interim goodwill impairment analysis for all of the Company’s reporting units. The
Company recognized goodwill impairment charges of $51.6 million for the Latin America reporting unit and the
Canada reporting unit, which is within the North America operating segment.
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NOTE 7. INTANGIBLE ASSETS, NET
The following tables summarize the Company’s intangible assets as of the periods indicated:
(In thousands)
Intangible assets subject to amortization:
Technology
Customer relationships
User/Nutrition database
Lease-related intangible assets
Other
Total
Indefinite-lived intangible assets
Intangible assets, net
(In thousands)
Intangible assets subject to amortization:
Technology
Customer relationships
User/Nutrition database
Lease-related intangible assets
Other
Total
Indefinite-lived intangible assets
Intangible assets, net
Useful Lives
from Date of
Acquisitions
(in years)
Gross
Carrying
Amount
Accumulated
Amortization
Impairment
Sale of
Business
Purchase
of Business
Net
Carrying
Amount
December 31, 2021
5-7
2-3
10
1-15
5-10
$ 2,536 $
(2,003) $
— $
— $
— $
533
8,567
—
(2,552)
—
8,852
475
$ 20,430 $
(8,602)
(415)
(13,572) $
—
—
—
—
— $
—
—
—
—
— $
—
—
6,015
—
250
—
—
60
— $ 6,858
4,152
$ 11,010
Useful Lives
from Date of
Acquisitions
(in years)
Gross
Carrying
Amount
Accumulated
Amortization
Impairment
Sale of
Business
Purchase
of Business
Net
Carrying
Amount
December 31, 2020
5-7
2-3
10
1-15
5-10
$ 1,138 $
(145) $
— $
— $
— $
993
—
(1,208)
—
—
8,770
7,562
46,314
12,896
(23,790)
(4,351)
(18,173)
(9,180)
(1,058)
295
(188)
—
—
—
—
—
—
—
2,658
107
$ 60,643 $
(34,510) $
(5,410) $ (18,173) $
8,770 $ 11,320
1,975
$ 13,295
Amortization expense, which is included in selling, general and administrative expenses, was $2.0 million,
$7.0 million and $6.1 million for Fiscal 2021, Fiscal 2020 and Fiscal 2019, respectively.
The following is the estimated amortization expense for the Company’s intangible assets as of December
31, 2021:
(In thousands)
2022
2023
2024
2025
2026
2027 and thereafter
Amortization expense of intangible assets
$
$
2,000
1,641
1,479
1,479
259
—
6,858
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NOTE 8. CREDIT FACILITY AND OTHER LONG TERM DEBT
The Company's outstanding debt consisted of the following:
(In thousands)
As of December 31,
2021
As of December 31,
2020
1.50% Convertible Senior Notes due 2024
$
80,919 $
3.25% Senior Notes due 2026
Credit Facility borrowings
Total principal payments due
Unamortized debt discount on Convertible Senior Notes
Unamortized debt discount on Senior Notes
Unamortized debt issuance costs - Convertible Senior Notes
Unamortized debt issuance costs - Senior Notes
Unamortized debt issuance costs - Credit facility
Total amount outstanding
Less:
Current portion of long-term debt:
Credit Facility borrowings
600,000
—
680,919
(9,207)
(1,131)
(779)
(2,401)
(4,870)
500,000
600,000
—
1,100,000
(79,031)
(1,385)
(8,763)
(2,940)
(4,325)
662,531
1,003,556
—
—
Non-current portion of long-term debt
$
662,531 $
1,003,556
Credit Facility
On March 8, 2019, the Company entered into an amended and restated credit agreement by and among
the Company, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders and
arrangers party thereto (the “credit agreement”). In May 2020, the Company entered into an amendment to the
credit agreement (the “first amendment”), pursuant to which the prior revolving credit commitments were reduced
from $1.25 billion to $1.1 billion of borrowings. Subsequently, in May 2021, the Company entered into a second
amendment to the credit agreement (the "second amendment"), which provides for certain changes to the
Company's covenants and decreases to certain applicable rates effected by the first amendment. In December
2021, the Company entered into a third amendment to the credit agreement (the "third amendment" and, the credit
agreement as amended by the first amendment and the second amendment, the "amended credit agreement" or
the "revolving credit facility"), which extends the term of the credit agreement from March 8, 2024 to December 3,
2026, with permitted extensions under certain circumstances. As of December 31, 2021 and December 31, 2020
there were no amounts outstanding under the revolving credit facility.
Where the first amendment previously provided for suspensions of and adjustments to the Company's
existing interest coverage covenant and leverage covenant (each as defined below), and further required the
Company to maintain a specific amount of minimum liquidity during certain quarters, the second amendment
provided that these financial covenants became effective again as of March 31, 2021 and removed the minimum
liquidity covenant. The second amendment also (i) decreases the interest rate margins that were previously
provided for under the first amendment; (ii) reverses limitations effected by the first amendment on expansions of
and extensions of the maturity of the revolving credit facility during the covenant suspension period; and (iii)
removes additional limitations on the availability of certain exceptions to the negative covenants, including the
restricted payments covenant, that were imposed during the covenant suspension period.
The third amendment also (i) decreases the applicable margins for borrowings and undrawn commitment
fees; (ii) provides for the fall away of collateral and guarantee requirements following an investment-grade rating
from two rating agencies; (iii) implements SOFR as the replacement of LIBOR as a benchmark interest rate for U.S.
dollar borrowings (and analogous benchmark rate replacements for borrowings in Yen, Canadian Dollars, Pound
Sterling and Euro); and (iv) amends certain affirmative and negative covenants and related definitions.
At the Company's request and a lender's consent, commitments under the amended credit agreement may
be increased by up to $300.0 million in aggregate, subject to certain conditions as set forth in the amended credit
agreement. Incremental borrowings are uncommitted and the availability thereof will depend on market conditions at
the time the Company seeks to incur such borrowings.
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Borrowings, if any, 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. As of December 31, 2021, there were $4.3
million of letters of credit outstanding (December 31, 2020 had $4.3 million letters of credit outstanding).
The obligations of the Company under the amended credit agreement are guaranteed by certain domestic
significant subsidiaries of Under Armour, Inc., subject to customary exceptions (the “subsidiary guarantors”) and
primarily secured by a first-priority security interest in substantially all of the assets of Under Armour, Inc. and the
subsidiary guarantors, excluding real property, capital stock in and debt of subsidiaries of Under Armour, Inc.
holding certain real property and other customary exceptions. However, the third amendment provides for the
permanent fall away of guarantees and collateral upon the Company's achievement of investment grade rating from
two rating agencies.
The amended credit agreement contains negative covenants that, subject to significant exceptions, limit the
Company's ability to, among other things: incur additional secured and unsecured indebtedness; pledge the assets
as security; make investments, loans, advances, guarantees and acquisitions, (including investments in and loans
to non-guarantor subsidiaries); undergo fundamental changes; sell assets outside the ordinary course of business;
enter into transactions with affiliates; and make restricted payments.
The Company is also required to maintain a ratio of consolidated EBITDA, to consolidated interest expense
of not less than 3.50 to 1.0 (the "interest coverage covenant") and the Company is not permitted to allow the ratio of
consolidated total indebtedness to consolidated EBITDA to be greater than 3.25 to 1.0 (the "leverage covenant"), as
described in more detail in the amended credit agreement. As of December 31, 2021, the Company was in
compliance with the applicable covenants.
In addition, the amended 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 amended credit agreement, will be considered an event of default under the amended credit
agreement.
Borrowings under the amended credit agreement bear interest at a rate per annum equal to, at the
Company’s option, either (a) an alternate base rate (for borrowings in U.S. dollars), (b) a term rate (for borrowings in
U.S. dollars, Euro, Japaneses Yen or Canadian Dollars) or (c) a "risk free" rate (for borrowings in U.S. dollars or
Pounds Sterling), 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 leverage ratio of consolidated total indebtedness to consolidated
EBITDA and ranges between 1.00% to 1.75% (or, in the case of alternate base loans, 0.00% to 0.75%). The
Company will also pay a commitment fee determined in accordance with the pricing grid on the average daily
unused amount of the revolving credit facility and certain fees with respect to letters of credit.
The weighted average interest rate under the revolving credit facility borrowings was 2.3% during Fiscal
2020. There were no borrowings outstanding during Fiscal 2021. As of December 31, 2021, the commitment fee
was 15 basis points.
1.50% Convertible Senior Notes
In May 2020, the Company issued $500.0 million aggregate principal amount of 1.50% convertible senior
notes due 2024 (the “Convertible Senior Notes”). The Convertible Senior Notes bear interest at the rate of 1.50%
per annum, payable semiannually in arrears on June 1 and December 1 of each year, beginning December 1, 2020.
The Convertible Senior Notes will mature on June 1, 2024, unless earlier converted in accordance with their terms,
redeemed in accordance with their terms or repurchased.
The net proceeds from the offering (including the net proceeds from the exercise of the over-allotment
option) were $488.8 million, after deducting the initial purchasers’ discount and estimated offering expenses paid by
the Company, of which the Company used $47.9 million to pay the cost of the capped call transactions described
below. The Company utilized $439.9 million to repay indebtedness that was outstanding under its revolving credit
facility at the time, and to pay related fees and expenses.
The Convertible Senior Notes are not secured and are not guaranteed by any of the Company’s
subsidiaries. The indenture governing the Convertible Senior Notes does not contain any financial or operating
covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or
repurchase of securities by the Company or any of its subsidiaries.
In May 2021, the Company entered into exchange agreements with certain holders of the Convertible
Senior Notes (the "first exchanging holders"), who agreed to exchange $250.0 million in aggregate principal amount
of the Convertible Senior Notes for cash and/or shares of the Company's Class C Common Stock, plus payment for
accrued and unpaid interest (the "First Exchange"). In connection with the First Exchange, the Company paid
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approximately $300.0 million cash and issued approximately 11.1 million shares of the Company's Class C
Common Stock to the first exchanging holders. In August 2021, the Company entered into additional exchange
agreements with certain holders of the Convertible Senior Notes (the "second exchanging holders"), who agreed to
exchange approximately $169.1 million in aggregate principal amount of the Convertible Senior Notes for cash and/
or shares of the Company's Class C Common Stock, plus payment for accrued an unpaid interest (the "Second
Exchange" and, together with the First Exchange, the "Exchanges"). In connection with the Second Exchange, the
Company paid approximately $207.0 million cash and issued approximately 7.7 million shares of the Company's
Class C Common Stock to the second exchanging holders. In connection with the Exchanges, the Company
recognized a loss on debt extinguishment of approximately $58.5 million for Fiscal 2021, which has been recorded
within Other Income (Expense), net on the Company's Consolidated Statements of Operations. Following the
Exchanges, approximately $80.9 million aggregate principal amount of the Convertible Senior Notes remain
outstanding.
The Convertible Senior Notes are convertible into cash, shares of the Company’s Class C Common Stock or a
combination of cash and shares of Class C Common Stock, at the Company’s election, as described further below.
The initial conversion rate is 101.8589 shares of the Company’s Class C Common Stock per $1,000 principal
amount of Convertible Senior Notes (equivalent to an initial conversion price of approximately $9.82 per share of
Class C Common Stock), subject to adjustment if certain events occur. Prior to the close of business on the
business day immediately preceding January 1, 2024, holders may (at their option) convert their Convertible Senior
Notes only upon satisfaction of one or more of the following conditions:
•
•
•
•
during any calendar quarter commencing after the calendar quarter ended on September 30, 2020 (and
only during such calendar quarter), if the last reported sale price of the Company’s Class C Common Stock
for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days
ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than
or equal to 130% of the conversion price on each applicable trading day;
during the five business day period after any five consecutive trading day period (the “measurement
period”) in which the trading price per $1,000 principal amount of Convertible Senior Notes for each trading
day of the measurement period was less than 98% of the product of the last reported sale price of the
Company’s Class C Common Stock and the conversion rate on each such trading day;
upon the occurrence of specified corporate events or distributions on the Company’s Class C Common
Stock; or
if the Company calls any Convertible Senior Notes for redemption prior to the close of business on the
business day immediately preceding January 1, 2024.
On or after January 1, 2024, until the close of business on the second scheduled trading day immediately
preceding the maturity date, holders may convert all or any portion of their Convertible Senior Notes at the
conversion rate at any time irrespective of the foregoing conditions.
On or after December 6, 2022, the Company may redeem for cash all or any part of the Convertible Senior
Notes, at its option, if the last reported sale price of the Company’s Class C Common Stock has been at least 130%
of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30
consecutive trading day period (including the last trading day of such period) ending on, and including, the trading
day immediately preceding the date on which the Company provides notice of redemption at a redemption price
equal to 100% of the aggregate principal amount of the Convertible Senior Notes to be redeemed, plus accrued and
unpaid interest to, but excluding, the redemption date.
If the Company undergoes a fundamental change (as defined in the indenture governing the Convertible
Senior Notes) prior to the maturity date, subject to certain conditions, holders may require the Company to
repurchase for cash all or any portion of their Convertible Senior Notes in principal amounts of $1,000 or an integral
multiple thereof at a price which will be equal to 100% of the aggregate principal amount of the Convertible Senior
Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase
date.
Concurrently with the offering of the Convertible Senior Notes, the Company entered into privately
negotiated capped call transactions with JPMorgan Chase Bank, National Association, HSBC Bank USA, National
Association, and Citibank, N.A. (the “option counterparties”). The capped call transactions are expected generally to
reduce potential dilution to the Company’s Class C Common Stock upon any conversion of Convertible Senior
Notes and/or offset any cash payments the Company is required to make in excess of the aggregate principal
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amount of converted Convertible Senior Notes upon any conversion thereof, as the case may be, with such
reduction and/or offset subject to a cap based on the cap price. The cap price of the capped call transactions is
initially $13.4750 per share of the Company’s Class C Common Stock, representing a premium of 75% above the
last reported sale price of the Company’s Class C Common Stock on May 21, 2020, and is subject to certain
adjustments under the terms of the capped call transactions.
In May 2021 and August 2021, concurrently with the Exchanges, the Company entered into, with each of
the option counterparties, termination agreements relating to a number of options corresponding to the number of
Convertible Senior Notes exchanged. Pursuant to such termination agreements, each of the option counterparties
paid the Company a cash settlement amount in respect of the portion of capped call transactions being terminated.
The Company received approximately $53.0 million and $38.6 million, in connection with such termination
agreements related to the First Exchange and the Second Exchange, respectively.
The Convertible Senior Notes contain a cash conversion feature, and as a result, the Company has separated it
into liability and equity components. The Company valued the liability component based on its borrowing rate for a
similar debt instrument that does not contain a conversion feature. The equity component, which is recognized as a
debt discount, was valued as the difference between the face value of the Convertible Senior Notes and the fair
value of the liability component.
In connection with the Convertible Senior Notes issuance, the Company incurred deferred financing costs of
$12.3 million, primarily related to fees paid to the initial purchasers of the offering, as well as legal and accounting
fees. These costs were allocated on a pro rata basis, with $10.0 million allocated to the debt component and
$2.2 million allocated to the equity component. As of December 31, 2021, the equity component, net of issuance
costs was $88.7 million.
The debt discount and the debt portion of the deferred financing costs are being amortized to interest
expense over the term of the Convertible Senior Notes using the effective interest rate method. The effective
interest rate for Fiscal 2021 was 6.8%.
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 “Senior Notes”). Interest is payable semi-annually on June 15 and December 15
beginning December 15, 2016. The Company may redeem some or all of the Senior Notes at any time, or from time
to time, at redemption prices described in the indenture governing the Senior Notes. The indenture governing the
Senior Notes contains negative covenants that limit the Company’s ability to engage in certain transactions and are
subject to material exceptions described in the indenture. The Company incurred and deferred $5.4 million in
financing costs in connection with the Senior Notes.
Interest Expense
Interest expense includes 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.
Interest expense, net, was $44.3 million, $47.3 million and $21.2 million for Fiscal 2021, 2020 and 2019,
respectively.
The following are the scheduled maturities of long term debt as of December 31, 2021:
(In thousands)
2022
2023
2024
2025
2026
2027 and thereafter
Total scheduled maturities of long term debt
Current maturities of long term debt
$
$
$
—
—
80,919
—
600,000
680,919
—
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.
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NOTE 9. COMMITMENTS AND CONTINGENCIES
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, 2021:
(In thousands)
2022
2023
2024
2025
2026
2027 and thereafter
$
98,726
78,038
61,134
37,205
8,108
4,345
Total future minimum sponsorship and other payments
$
287,556
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 the 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 future loss, the Company has determined that the fair value of such indemnifications is not
material to its consolidated financial position or results of operations.
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 related to its business.
Other than as described below, the Company believes that all current proceedings are routine in nature and
incidental to the conduct of its business. However, the matters described below, if decided adversely to or settled by
the Company, could result, individually or in the aggregate, in a liability material to the Company's consolidated
financial position, results of operations or cash flows.
In re Under Armour Securities Litigation
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 “District Court”) were consolidated under the caption In re
Under Armour Securities Litigation, Case No. 17-cv-00388-RDB (the “Consolidated Securities Action”). On August 4,
2017, the lead plaintiff in the Consolidated Securities Action, Aberdeen City Council as Administrating Authority for
the North East Scotland Pension Fund (“Aberdeen”), joined by named plaintiff Bucks County Employees Retirement
Fund (“Bucks County”), filed a consolidated amended complaint (the “Amended Complaint”) against the Company,
the Company’s then-Chief Executive Officer, Kevin Plank, and former Chief Financial Officers Lawrence Molloy and
Brad Dickerson. The Amended Complaint alleged 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 was September 16, 2015
through January 30, 2017. The Amended Complaint also asserted 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
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unsecured notes in June 2016. The Securities Act claims were asserted against the Company, Mr. Plank, 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 alleged 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 motions to dismiss the Amended
Complaint. On September 19, 2018, the District Court dismissed the Securities Act claims with prejudice and the
Exchange Act claims without prejudice. Lead plaintiff Aberdeen, joined by named plaintiff Monroe County
Employees’ Retirement Fund (“Monroe”), filed a Second Amended Complaint on November 16, 2018, asserting
claims under the Exchange Act and naming the Company and Mr. Plank as the remaining defendants. The
remaining defendants filed a motion to dismiss the Second Amended Complaint on January 17, 2019. On August
19, 2019, the District Court dismissed the Second Amended Complaint with prejudice.
In September 2019, plaintiffs Aberdeen and Bucks County filed an appeal in the United States Court of
Appeals for the Fourth Circuit challenging the decisions by the District Court on September 19, 2018 and August 19,
2019 (the “Appeal”). The Appeal was fully briefed as of January 16, 2020.
On November 6 and December 17, 2019, two purported shareholders of the Company filed putative
securities class actions in the District Court against the Company and certain of its current and former executives
(captioned Patel v. Under Armour, Inc., No. 1:19-cv-03209-RDB (“Patel”), and Waronker v. Under Armour, Inc., No.
1:19-cv-03581-RDB (“Waronker”), respectively). The complaints in Patel and Waronker alleged violations of Section
10(b) (and Rule 10b-5) of the Exchange Act, against all defendants, and Section 20(a) control person liability under
the Exchange Act against the current and former officers named in the complaints. The complaints claimed that the
defendants’ disclosures and statements supposedly misrepresented or omitted that the Company was purportedly
shifting sales between quarterly periods allegedly to appear healthier and that the Company was under investigation
by and cooperating with the United States Department of Justice (“DOJ”) and the United States Securities and
Exchange Commission (“SEC”) since July 2017.
On November 18, 2019, Aberdeen, the lead plaintiff in the Consolidated Securities Action, filed in the District
Court a motion for an indicative ruling under Federal Rule of Civil Procedure 62.1 (the “Rule 62.1 Motion”) seeking
relief from the final judgment pursuant to Federal Rule of Civil Procedure 60(b). The Rule 62.1 Motion alleged that
purported newly discovered evidence entitled Aberdeen to relief from the District Court’s final judgment. Aberdeen
also filed motions seeking (i) to consolidate the Patel and Waronker cases with the Consolidated Securities Action,
and (ii) to be appointed lead plaintiff over the consolidated cases.
On January 22, 2020, the District Court granted Aberdeen’s Rule 62.1 motion and indicated that it would
grant a motion for relief from the final judgment and provide Aberdeen with the opportunity to file a third amended
complaint if the Fourth Circuit remanded for that purpose. The District Court further stated that it would, upon
remand, consolidate the Patel and Waronker cases with the Consolidated Securities Action and appoint Aberdeen
as the lead plaintiff over the consolidated cases.
On August 13, 2020, the Fourth Circuit remanded the Appeal to the District Court for the limited purpose of
allowing the District Court to rule on Aberdeen’s motion seeking relief from the final judgment pursuant to Federal
Rule of Civil Procedure 60(b). On September 14, 2020, the District Court issued an order granting that relief. The
District Court’s order also consolidated the Patel and Waronker cases into the Consolidated Securities Action and
appointed Aberdeen as lead plaintiff over the Consolidated Securities Action.
On October 14, 2020, Aberdeen, along with named plaintiffs Monroe and KBC Asset Management NV, filed
a third amended complaint (the “TAC”) in the Consolidated Securities Action, asserting claims under Sections 10(b)
and 20(a) of the Exchange Act against the Company and Mr. Plank and under Section 20A of the Exchange Act
against Mr. Plank. The TAC alleges that the defendants supposedly concealed purportedly declining consumer
demand for certain of the Company's products between the third quarter of 2015 and the fourth quarter of 2016 by
making allegedly false and misleading statements regarding the Company’s performance and future prospects and
by engaging in undisclosed and allegedly improper sales and accounting practices, including shifting sales between
quarterly periods allegedly to appear healthier. The TAC also alleges that the defendants purportedly failed to
disclose that the Company was under investigation by and cooperating with DOJ and the SEC since July 2017. The
class period identified in the TAC is September 16, 2015 through November 1, 2019.
On December 4, 2020, the Company and Mr. Plank filed a motion to dismiss the TAC for failure to state a
claim. That motion was denied by the Court on May 18, 2021. Discovery in the Consolidated Securities Action
commenced on June 4, 2021 and is currently ongoing. On July 23, 2021, the Company and Mr. Plank filed an
answer to the TAC denying all allegations of wrongdoing and asserting affirmative defenses to the claims asserted
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in the TAC. On December 1, 2021, the plaintiffs filed a motion seeking, among other things, certification of the class
they are seeking to represent in the Consolidated Securities Action. The Company and Mr. Plank have opposed this
motion, and briefing on the motion is scheduled to be completed as of May 12, 2022.
The Company continues to believe that the claims asserted in the Consolidated Securities 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 this matter.
State Court Derivative Complaints
In June and July 2018, two purported stockholder derivative complaints were filed in Maryland state court
(in cases captioned Kenney v. Plank, et al. (filed June 29, 2018) and Luger v. Plank, et al. (filed July 26, 2018),
respectively). The cases were consolidated on October 19, 2018 under the caption Kenney v. Plank, et. al. The
consolidated complaint in the Kenney matter names Mr. Plank, certain other current and former members of the
Company’s Board of Directors, certain former Company executives, and Sagamore Development Company, LLC
(“Sagamore”) as defendants, and names the Company as a nominal defendant. The consolidated complaint asserts
breach of fiduciary duty, unjust enrichment, and corporate waste claims against the individual defendants and
asserts a claim against Sagamore for aiding and abetting certain of the alleged breaches of fiduciary duty. The
consolidated complaint seeks damages on behalf of the Company and certain corporate governance related
actions.
The consolidated complaint includes allegations similar to those in the Amended Complaint in the
Consolidated Securities Action matter discussed above, challenging, among other things, the Company’s
disclosures related to growth and consumer demand for certain of the Company’s products, as well as stock sales
by certain individual defendants. The consolidated complaint also makes allegations related to the Company’s
purchase of certain parcels of land from entities controlled by Mr. Plank (through Sagamore). Sagamore purchased
the parcels in 2014. Its total investment in the parcels was approximately $72.0 million, which included the initial
$35.0 million purchase price for the property, an additional $30.6 million to terminate a lease encumbering the
property and approximately $6.4 million of development costs. As previously disclosed, in June 2016, the Company
purchased the unencumbered parcels for $70.3 million in order to further expand the Company’s corporate
headquarters to accommodate its growth needs. The Company negotiated a purchase price for the parcels that it
determined represented the fair market value of the parcels and approximated the cost to the seller to purchase and
develop the parcels. In connection with its evaluation of the potential purchase, the Company engaged an
independent third-party to appraise the fair market value of the parcels, and the Audit Committee of the Company’s
Board of Directors engaged its own independent appraisal firm to assess the parcels. The Audit Committee
determined that the terms of the purchase were reasonable and fair, and the transaction was approved by the Audit
Committee in accordance with the Company’s policy on transactions with related persons.
On March 29, 2019, the court in the consolidated Kenney action granted the Company’s and the
defendants’ motion to stay that case pending the outcome of both the Consolidated Securities Action and an earlier-
filed derivative action asserting similar claims relating to the Company’s purchase of parcels in Port Covington
(which derivative action has since been dismissed in its entirety).
Prior to the filing of the derivative complaints in Kenney v. Plank, et al. and Luger v. Plank, et al., both of the
purported stockholders had sent the Company’s Board of Directors a letter demanding that the Company pursue
claims similar to the claims asserted in the derivative complaints. Following an investigation, a majority of
disinterested and independent directors of the Company determined that the claims should not be pursued by the
Company and informed both of these purported stockholders of that determination.
In 2020, two additional purported shareholder derivative complaints were filed in Maryland state court, in
cases captioned Cordell v. Plank, et al. (filed August 11, 2020) and Salo v. Plank, et al. (filed October 21, 2020),
respectively.
The complaints in the Cordell and Salo cases name Mr. Plank, certain other current and former members of
the Company’s Board of Directors, and certain current and former Company executives as defendants, and name
the Company as a nominal defendant. The complaints in these actions assert allegations similar to those in the TAC
filed in the Consolidated Securities Action matter discussed above, including allegations challenging (i) the
Company’s disclosures related to growth and consumer demand for certain of the Company’s products; (ii) the
Company’s practice of shifting sales between quarterly periods supposedly to appear healthier and its purported
failure to disclose that practice; (iii) the Company’s internal controls with respect to revenue recognition and
inventory management; (iv) the Company’s supposed failure to timely disclose investigations by the SEC and DOJ;
(v) the compensation paid to the Company’s directors and executives while the alleged wrongdoing was occurring;
and/or (vi) stock sales by certain individual defendants. The complaints assert breach of fiduciary duty, unjust
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enrichment, and corporate waste claims against the individual defendants. These complaints seek damages on
behalf of the Company and certain corporate governance related actions.
Prior to the filing of the derivative complaints in these two actions, neither of the purported stockholders
made a demand that the Company’s Board of Directors pursue the claims asserted in the complaints.
In October 2021, the court issued an order (i) consolidating the Cordell and Salo actions with the
consolidated Kenney action into a single consolidated derivative action (the "Consolidated State Derivative Action");
(ii) designating the Kenney action as the lead case; and (iii) specifying that the scheduling order in the Kenney
action shall control the Consolidated State Derivative Action. On December 20, 2021, the court issued an order
dismissing the Consolidated State Derivative Action for lack of prosecution pursuant to Maryland Rule 2-507 without
prejudice to plaintiffs' right to reinstate the action.
Federal Court Derivative Complaints
In July 2018, a stockholder derivative complaint was filed in the United States District Court for the District
of Maryland, in a case captioned Andersen v. Plank, et al. The complaint in the Andersen matter names Mr. Plank,
certain other current and former members of the Company’s Board of Directors and certain former Company
executives as defendants, and names the Company as a nominal defendant. The complaint asserts breach of
fiduciary duty and unjust enrichment claims against the individual defendants, and seeks damages on behalf of the
Company and certain corporate governance related actions. The complaint includes allegations similar to those in
the Amended Complaint in the Consolidated Securities Action matter discussed above, challenging, among other
things, the Company’s disclosures related to growth and consumer demand for certain of the Company’s products
and stock sales by certain individual defendants.
The Andersen action was stayed from December 2018 to August 2019 and again from September 2019 to
September 2020 (the “2019 Stay Order”). Pursuant to a series of court ordered stipulations, the terms of the 2019
Stay Order remained in effect through and including January 19, 2021. The stay expired on January 19, 2021.
Prior to the filing of the complaint in the Andersen action, the plaintiff had sent the Company’s Board of
Directors a letter demanding that the Company pursue claims similar to the claims asserted in the complaint.
Following an investigation, a majority of disinterested and independent directors of the Company determined that
the claims should not be pursued by the Company and informed the plaintiff of that determination. During the
pendency of the Andersen action, the plaintiff sent the Company’s Board of Directors a second letter demanding
that the Company pursue claims similar to the claims asserted in the TAC in the Consolidated Securities Action.
Following an investigation, a majority of disinterested and independent directors of the Company determined that
the claims should not be pursued by the Company and informed the plaintiff of that determination.
In September 2020, two additional derivative complaints were filed in the United States District Court for the
District of Maryland (in cases captioned Olin v. Plank, et al. (filed September 1, 2020), and Smith v. Plank, et al.
(filed September 8, 2020), respectively). Prior to the filing of the derivative complaints in these two actions, neither
of the purported stockholders made a demand that the Company’s Board of Directors pursue the claims asserted in
the complaints. On November 20, 2020, another derivative complaint was filed in the United States District Court for
the District of Maryland, in a case captioned Viskovich v. Plank, et al. Prior to filing his derivative complaint, the
plaintiff in the Viskovich matter made a demand that the Company’s Board of Directors pursue the claims asserted
in the complaint but filed suit before the Board had responded to the demand. Following an investigation, a majority
of disinterested and independent directors of the Company determined that the claims asserted in the demand by
the plaintiff in the Viskovich action should not be pursued by the Company and informed the plaintiff of that
determination.
The complaints in the Olin, Smith, and Viskovich cases name Mr. Plank, certain other current and former
members of the Company’s Board of Directors, and certain current and former Company executives as defendants,
and name the Company as a nominal defendant. The complaints in these actions assert allegations similar to those
in the TAC filed in the Consolidated Securities Action matter discussed above, including allegations challenging (i)
the Company’s disclosures related to growth and consumer demand for certain of the Company’s products; (ii) the
Company’s practice of shifting sales between quarterly periods supposedly to appear healthier and its purported
failure to disclose that practice; (iii) the Company’s internal controls with respect to revenue recognition and
inventory management; (iv) the Company’s supposed failure to timely disclose investigations by the SEC and DOJ;
and/or (v) the compensation paid to the Company’s directors and executives while the alleged wrongdoing was
occurring. The complaints assert breach of fiduciary duty, unjust enrichment, gross mismanagement, and/or
corporate waste claims against the individual defendants. The Viskovich complaint also asserts a contribution claim
against certain defendants under the federal securities laws. These complaints seek damages on behalf of the
Company and certain corporate governance related actions.
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On January 27, 2021, the court entered an order consolidating for all purposes the Andersen, Olin, Smith
and Viskovich actions into a single action under the caption Andersen v. Plank, et al. (the “Federal Court Derivative
Action”). In February 2021, counsel for the Smith and Olin plaintiffs, on the one hand, and counsel for the Andersen
and Viskovich plaintiffs, on the other hand, filed motions seeking to be appointed as lead counsel in the Federal
Court Derivative Action. These motions are currently pending.
The Company believes that the claims asserted in the Federal Court Derivative Action are without merit and
intends to defend this matter 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.
NOTE 10. STOCKHOLDERS’ EQUITY
The Company’s Class A Common Stock and Class B Convertible Common Stock have an authorized
number of 400.0 million shares and 34.45 million shares, respectively, and each have a par value of $0.0003 1/3 per
share as of December 31, 2021. 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, Executive Chairman and Brand Chief, or a related party of Mr. Plank, as defined in the
Company’s charter. As a result, Mr. Plank has a majority voting control over the Company. Upon the transfer of
shares of Class B Convertible Stock to a person other than Mr. Plank or a related party of Mr. Plank, the shares
automatically convert into shares of Class A Common Stock on a one-for-one basis. In addition, all of the
outstanding shares of Class B Convertible Common Stock will automatically convert into shares of Class A Common
Stock on a one-for-one basis upon the death or disability of Mr. Plank or on the record date for any stockholders’
meeting upon which the shares of Class A Common Stock and Class B Convertible Common Stock beneficially
owned by Mr. Plank is less than 15% of the total shares of Class A Common Stock and Class B Convertible
Common Stock outstanding or upon the other events specified in the Class C Articles Supplementary to the
Company's charter as documented below. 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.
The Company's Class C Common Stock has an authorized number of of 400.0 million shares and have a
par value of $0.0003 1/3 per share as of December 31, 2021. 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.
NOTE 11. REVENUES
For a discussion of disaggregated revenue, refer to Note 19.
The Company records reductions to revenue for estimated customer returns, allowances, markdowns and
discounts. These reserves are included within customer refund liability and the value of the inventory associated
with reserves for sales returns are included within prepaid expenses and other current assets on the Consolidated
Balance Sheets. The following table presents the customer refund liability, as well as the associated value of
inventory for the periods indicated:
(In thousands)
Customer refund liability
Inventory associated with the reserves
Contract Liabilities
Balance as of
December 31, 2021
Balance as of
December 31, 2020
$
$
164,294 $
47,569 $
203,399
57,867
Contract liabilities are recorded when a customer pays consideration, or the Company has a right to an
amount of consideration that is unconditional, before the transfer of a good or service to the customer, and thus
represent the Company's obligation to transfer the good or service to the customer at a future date. The Company's
contract liabilities primarily consist of payments received in advance of revenue recognition for subscriptions for the
Company's digital fitness applications and royalty arrangements, included in other current and other long-term
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liabilities, and gift cards, included in accrued expenses on the Company's Consolidated Balance Sheets. As of
December 31, 2021 and December 31, 2020, contract liabilities were $39.1 million and $26.7 million, respectively.
For Fiscal 2021, the Company recognized $21.5 million of revenue that was previously included in contract
liabilities as of December 31, 2020. For Fiscal 2020, the Company recognized $16.1 million of revenue that was
previously included in contract liabilities as of December 31, 2019. The change in the contract liabilities balance
primarily results from the timing differences between the Company's satisfaction of performance obligations and the
customer's payment. Commissions related to subscription revenue are capitalized and recognized over the
subscription period.
NOTE 12. RESTRUCTURING AND RELATED IMPAIRMENT CHARGES
During Fiscal 2020, the Company's Board of Directors approved a restructuring plan ranging between
$550 million to $600 million in costs (the "2020 restructuring plan") designed to rebalance the Company’s cost base
to further improve profitability and cash flow generation.
Restructuring and related impairment charges and recoveries require the Company to make certain judgments
and estimates regarding the amount and timing as to when these charges or recoveries occur. The estimated
liability could change subsequent to its recognition, requiring adjustments to the expense and the liability recorded.
On a quarterly basis, the Company conducts an evaluation of the related liabilities and expenses and revises its
assumptions and estimates as appropriate, as new or updated information becomes available. As of December 31,
2021, the Company currently estimates total restructuring and related charges associated with the 2020
restructuring plan will range between $525 million to $550 million.
The restructuring and related charges primarily consist of approximately:
•
•
$172 million of cash restructuring charges, of which approximately $26 million relates to employee
severance and benefit costs, $14 million relates to facility and lease termination costs and $132 million
relates to contract termination and other restructuring costs; and
$378 million of non-cash charges, of which approximately $293 million relates to an impairment charge on
the Company’s New York City flagship store and $85 million relates to intangibles and other asset related
impairments.
The Company recorded $41.0 million of restructuring and related impairment charges during Fiscal 2021
and $472.7 million during Fiscal 2020, under the 2020 restructuring plan. As of December 31, 2021, $513.8 million
of restructuring and related impairment charges under the 2020 restructuring plan have been recorded since the
inception of the plan.
The following table illustrates the costs recorded during Fiscal 2021 and Fiscal 2020, as well as the
Company's current estimates of the amount expected to be incurred in connection with the 2020 restructuring plan:
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(In thousands)
Costs recorded in cost of goods sold:
Contract-based royalties
Inventory write-offs
Total costs recorded in cost of goods sold
Net costs (recoveries) recorded in restructuring
and related impairment charges:
Property and equipment impairment
Intangible asset impairment
Right-of-use asset impairment
Employee related costs
Contract exit costs (2)
Other asset write off
Other restructuring costs
Year ended December 31,
2021
2020
Estimated Restructuring and
Impairment Charges (1)
Remaining to be
Incurred
Total Plan
$
— $
11,608 $
— $
515
515
768
12,376
3,064
—
1,686
(1,655)
14,954
1,821
20,648
29,280
4,351
293,495
28,579
79,008
13,074
12,564
—
—
—
—
—
—
35,240
—
1,000
11,608
1,283
12,891
32,344
4,351
295,181
26,924
129,202
14,895
34,212
537,109
550,000
Total costs recorded in restructuring and
impairment charges
40,518
460,351
36,240
Total restructuring and impairment charges
$
41,033 $
472,727 $
36,240 $
(1) Estimated restructuring and impairment charges reflect the high end of the range of the estimated charges expected by the Company in
connection with the 2020 restructuring plan.
(2) Contract exit costs primarily consist of proposed lease exits of certain Brand and Factory House stores and office facilities, and proposed
marketing and other contract exits.
All restructuring and related impairment charges are included in the Company's Corporate Other segment.
For Fiscal 2021, approximately $17.6 million of the charges are North America related, $23.2 million are
Latin America related and $1.8 million are Asia-Pacific related. These charges were offset by a recovery of $1.6
million related to EMEA.
For Fiscal 2020, approximately $397.6 million of the charges are North America related, $14.4 million are
EMEA related, $14.9 million are Latin America related and $6.8 million are Asia-Pacific related and $4.6 million are
Connected Fitness related.
A summary of the activity in the restructuring reserve related to the Company's 2020 restructuring plan, as
well as prior restructuring plans in 2018 and 2017, for Fiscal 2021 and Fiscal 2020 are as follows:
(In thousands)
Balance at January 1, 2020
Net additions (recoveries) charged to expense
Cash payments charged against reserve
Changes in reserve estimate
Balance at December 31, 2020
Net additions (recoveries) charged to expense
Cash payments charged against reserve
Foreign exchange and other
Balance at December 31, 2021
Employee
Related Costs
Contract Exit
Costs
Other
Restructuring
Related Costs
$
462 $
17,843 $
27,452
72,747
(14,584)
(28,456)
(462)
(492)
$
12,868 $
61,642 $
(1,655)
(5,473)
(2,192)
17,814
(47,486)
(565)
—
11,843
(5,745)
—
6,098
(1,494)
(6,078)
120
$
3,548 $
31,405 $
(1,354)
During Fiscal 2021, the Company also incurred net costs of $25.9 million associated with abandoned
facilities and the write-off of fixed assets under the 2020 restructuring plan.
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Latin America operating model change
During the Fiscal 2021, the Company substantially completed its change to a distributor model for certain
countries within its Latin America region. The Company recognized a net loss on disposal of its assets and liabilities
of approximately $30.6 million, which has been recorded as part of total restructuring expense.
NOTE 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 $8.9 million, $5.4 million and $7.5 million for Fiscal 2021,
Fiscal 2020 and Fiscal 2019, respectively. During Fiscal 2020, the Company temporarily suspended 401(k)
matching contributions for approximately five months as part of the Company's capital preservation efforts in
response to COVID-19. 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, 2021 and 2020, the Deferred
Compensation Plan obligations were $14.5 million and $14.3 million, respectively, and were included in other long
term liabilities on the Consolidated Balance Sheets.
The Company established a Rabbi Trust to fund obligations to participants in the Deferred Compensation
Plan. As of December 31, 2021 and 2020, the assets held in the Rabbi Trust were TOLI policies with cash-surrender
values of $9.0 million and $7.7 million, respectively. These assets are consolidated and are included in other long
term assets on the Consolidated Balance Sheets. Refer to Note 15 for a discussion of the fair value measurements
of the assets held in the Rabbi Trust and the Deferred Compensation Plan obligations.
NOTE 14. STOCK BASED COMPENSATION
The Under Armour, Inc. Third 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. The 2005 Plan terminates in 2025. As
of December 31, 2021, 8.3 million Class A shares and 28.6 million Class C shares are available for future grants of
awards under the 2005 Plan.
Awards Granted to Employees and Non-Employee Directors
Total stock-based compensation expense associated with awards granted to employees and non-employee
directors for Fiscal 2021, Fiscal 2020 and Fiscal 2019 was $43.8 million, $42.1 million and $49.6 million,
respectively. The related tax benefits, excluding consideration of valuation allowances, were $8.2 million, $9.0
million, and $11.8 million for Fiscal 2021, Fiscal 2020, and Fiscal 2019, respectively. The deferred tax assets and
valuation allowances associated with these benefits were $7.2 million, $9.0 million, and $2.7 million for Fiscal 2021,
Fiscal 2020, and Fiscal 2019, respectively. As of December 31, 2021, the Company had $78.5 million of
unrecognized compensation expense related to these awards expected to be recognized over a weighted average
period of 2.44 years. Refer to “Stock Options” and “Restricted Stock and Restricted Stock Unit Awards” below for
further information on these awards.
A summary of each of these plans is as follows:
Employee Stock Compensation Plan
Stock options, restricted stock and restricted stock unit awards under the 2005 Plan generally vest ratably
over a two to five years period. The contractual term for stock options is generally 10 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.
Non-Employee Director Compensation Plan
The Company’s Non-Employee Director Compensation Plan (the “Director Compensation Plan”) provides
for cash compensation and equity awards to non-employee directors of the Company under the 2005 Plan. Non-
employee directors have the option to defer the value of their annual cash retainers as deferred stock units in
accordance with the Under Armour, Inc. Non-Employee Deferred Stock Unit Plan (the “DSU Plan”). Each new non-
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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 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 thousand on the grant date. Each award vests
100% on the date of the next annual stockholders’ meeting following the grant date.
The receipt of the shares otherwise deliverable upon vesting of the restricted stock units automatically
defers into deferred stock units under the DSU Plan. Under the DSU Plan each deferred stock unit represents the
Company’s obligation to issue one share of the Company’s Class A or Class C Common Stock with the shares
delivered six months following the termination of the director’s service.
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, 2021, 2.7 million Class A shares and 1.7 million Class C
shares are available for future purchases under the ESPP. During Fiscal 2021, Fiscal 2020 and Fiscal 2019, 234.7
thousand, 482.9 thousand and 329.1 thousand Class C shares were purchased under the ESPP, respectively.
Awards granted to Marketing Partners
In addition to the plans discussed above, the Company may also, from time to time, issue deferred stock
units or restricted stock units 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 units to be
granted and the delivery dates for the shares, which range over a multi-year period, depending on the contract.
Total stock-based compensation expense related to these awards for Fiscal 2021, Fiscal 2020 and Fiscal
2019 was $3.5 million, $3.5 million and $3.1 million, respectively. As of December 31, 2021, we had $8.5 million of
unrecognized compensation expense associated with these awards expected to be recognized over a weighted
average period of 2.74 years.
Summary by Award Classification:
Stock Options
No stock options were granted during Fiscal 2021. The weighted average fair value of a stock option
granted for Fiscal 2020 and Fiscal 2019 was $6.61 and $8.70, 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
2021
n/a
n/a
n/a
n/a
Year ended December 31,
2020
2019
1.5 %
6.25
43.1 %
— %
2.5 %
6.50
41.0 %
— %
A summary of the Company’s stock options as of December 31, 2021 and changes during the year then
ended is presented below:
(In thousands, except per share amounts)
Outstanding, beginning of year
Granted, at fair market value
Exercised
Forfeited
Outstanding, end of year
Options exercisable, end of year
Number
of Stock
Options
Weighted
Average
Exercise
Price
1,862 $
—
(13)
(271)
1,578 $
1,092 $
19.31
—
4.08
19.38
19.44
20.88
Weighted
Average
Remaining
Contractual
Life (Years)
Total
Intrinsic
Value
7.18 $
186
6.07 $
5.53 $
2,403
1,362
Included in the table above are 0.2 million performance-based stock options awarded to the Company’s
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Executive Chairman and Brand Chief under the 2005 Plan for Fiscal 2019, which have been fully forfeited due to the
failure to meet performance conditions. There were no performance-based stock options awarded during Fiscal
2021 or Fiscal 2020. The performance-based stock options awarded in Fiscal 2019 had a weighted average fair
value of $8.70 and had vesting that is tied to the achievement of certain combined annual operating income targets.
The intrinsic value of stock options exercised during Fiscal 2021, Fiscal 2020 and Fiscal 2019 was
$0.2 million, $4.5 million and $12.4 million, respectively.
For Fiscal 2021, Fiscal 2020 and Fiscal 2019 income tax benefits related to stock options exercised,
excluding consideration of valuation allowances were $0.0, $1.2 million, and $2.7 million, respectively.
Restricted Stock and Restricted Stock Unit Awards
A summary of the Company’s restricted stock and restricted stock unit awards as of December 31, 2021
and changes during the year then ended is presented below:
(In thousands, except per share amounts)
Outstanding, beginning of year
Granted
Forfeited
Vested
Outstanding, end of year
Number of
Restricted Shares
Weighted Average
Grant Date Fair Value
6,274 $
4,514
(1,154)
(2,601)
7,033 $
15.52
19.18
17.77
16.85
16.40
Included in the table above are 0.6 million performance-based restricted stock units awarded to certain
executives and key employees under the 2005 Plan during Fiscal 2019, which have been fully forfeited due to the
failure to meet the performance conditions. There were no performance-based restricted stock units awarded during
Fiscal 2021 or Fiscal 2020. The performance-based restricted stock units awarded in Fiscal 2019 had weighted
average grant date fair values of $19.39 and had vesting that was tied to the achievement of certain combined
annual revenue and operating income targets. The Company deemed the achievement of these revenue and
operating income targets improbable, and accordingly, a reversal of expense of $2.9 million and $1.5 million were
recorded for the performance-based restricted stock units and stock options for Fiscal 2020 and Fiscal 2019,
respectively.
NOTE 15. 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.
The Company's financial assets (liabilities) measured at fair value on a recurring basis consisted of the
following types of instruments as of the following periods:
(In thousands)
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Derivative foreign currency contracts (see Note 16)
$
— $
631 $
TOLI policies held by the Rabbi Trust (see Note 13)
$
Deferred Compensation Plan obligations (see Note 13) $
— $ 9,008 $
— $ (14,489) $
— $
— $
— $
— $ (22,122) $
— $ 7,697 $
— $ (14,314) $
—
—
—
December 31, 2021
December 31, 2020
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 foreign currency contracts represent unrealized gains and losses on
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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 fair value of the trust owned life insurance (“TOLI”) policies held by the Rabbi Trust are 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.
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).
As of December 31, 2021 and December 31, 2020, the fair value of the Convertible Senior Notes was
$149.6 million and $828.2 million, respectively. The Company entered into exchange agreements with certain
holders during Fiscal 2021 to exchange approximately $419.0 million in aggregate principal amount of the
Convertible Senior Notes for a combination of cash and shares (see Note 8 to the Consolidated Financial
Statements).
As of December 31, 2021 and December 31, 2020 the fair value of the Senior Notes was $619.9 million and
$602.6 million, respectively.
Certain assets are not remeasured to fair value on an ongoing basis but are subject to fair value
adjustments only in certain circumstances. These assets can include long-lived assets and goodwill that have been
reduced to fair value when impaired. Assets that are written down to fair value when impaired are not subsequently
adjusted to fair value unless further impairment occurs.
NOTE 16. RISK MANAGEMENT AND DERIVATIVES
The Company is exposed to global market risks, including the effects of changes in foreign currency and
interest rates. The Company uses derivative instruments to manage financial exposures that occur in the normal
course of business and does not hold or issue derivatives for trading or speculative purposes.
The Company may elect to designate certain derivatives as hedging instruments under U.S. GAAP. The
Company formally documents all relationships between designated hedging instruments and hedged items, as well
as its risk management objectives and strategies for undertaking hedge transactions. This process includes linking
all derivatives designated as hedges to forecasted cash flows and assessing, both at inception and on an ongoing
basis, the effectiveness of the hedging relationships.
The Company's foreign exchange risk management program consists of designated cash flow hedges and
undesignated hedges. As of December 31, 2021, the Company has hedge instruments primarily for:
•
•
•
•
•
•
British Pound/U.S. Dollar;
U.S. Dollar/Chinese Renminbi;
Euro/U.S. Dollar;
U.S. Dollar/Canadian Dollar;
U.S. Dollar/Mexican Peso; and
U.S. Dollar/Japanese Yen.
All derivatives are recognized on the Consolidated Balance Sheets at fair value and classified based on the
instrument’s maturity date.
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The following table presents the fair values of derivative instruments within the Consolidated Balance
Sheets. Refer to Note 15 of the Consolidated Financial Statements for a discussion of the fair value measurements.
(In thousands)
Balance Sheet Classification
December 31, 2021
December 31, 2020
Derivatives designated as hedging instruments under ASC 815
Foreign currency contracts
Foreign currency contracts
Other current assets
Other long term assets
Total derivative assets designated as hedging instruments
Foreign currency contracts
Foreign currency contracts
Other current liabilities
Other long term liabilities
Total derivative liabilities designated as hedging instruments
Derivatives not designated as hedging instruments under ASC 815
Foreign currency contracts
Other current assets
Total derivative assets not designated as hedging instruments
Foreign currency contracts
Other current liabilities
Total derivative liabilities not designated as hedging instruments
$
$
$
$
$
$
$
$
7,488 $
2,887
10,375 $
8,663 $
779
9,442 $
1,999 $
1,999 $
4,648 $
4,648 $
—
—
—
17,601
6,469
24,070
2,384
2,384
6,464
6,464
The following table presents the amounts in the Consolidated Statements of Operations in which the effects
of cash flow hedges are recorded and the effects of cash flow hedge activity on these line items:
Year ended December 31,
2021
2020
2019
Amount of
Gain (Loss)
on Cash
Flow Hedge
Activity
Total
Amount of
Gain (Loss)
on Cash
Flow Hedge
Activity
Total
Amount of
Gain (Loss)
on Cash
Flow Hedge
Activity
Total
$ 5,683,466 $
(6,410) $4,474,667 $
2,098 $ 5,267,132 $
18,789
$ 2,821,967 $
(11,825) $ 2,314,572 $
9,516 $ 2,796,599 $
(In thousands)
Net revenues
Cost of goods sold
Interest income (expense), net
Other income (expense), net
$
$
(44,300) $
(51,113) $
(37) $
(47,259) $
(36) $
(21,240) $
— $ 168,153 $
25 $
(5,688) $
4,703
1,598
871
The following tables present the amounts affecting the Consolidated Statements of Comprehensive Income
(Loss):
(In thousands)
Balance as of
December 31, 2020
Amount of gain (loss)
recognized in other
comprehensive
income (loss) on
derivatives
Amount of gain (loss)
reclassified from
other comprehensive
income (loss) into
income
Balance as of
December 31, 2021
Derivatives designated as cash flow hedges
Foreign currency contracts
Interest rate swaps
Total designated as cash flow hedges
$
$
(25,908) $
(541)
(26,449) $
6,056 $
(18,235) $
—
(37)
6,056 $
(18,272) $
(1,617)
(504)
(2,121)
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(In thousands)
Balance as of
December 31, 2019
Amount of gain (loss)
recognized in other
comprehensive
income (loss) on
derivatives
Amount of gain (loss)
reclassified from
other comprehensive
income (loss) into
income
Balance as of
December 31, 2020
Derivatives designated as cash flow hedges
Foreign currency contracts
Interest rate swaps
Total designated as cash flow hedges
$
$
(6,005) $
(577)
(6,582) $
(8,336) $
11,567 $
(25,908)
—
(36)
(541)
(8,336) $
11,531 $
(26,449)
(In thousands)
Balance as of
December 31, 2018
Amount of gain (loss)
recognized in other
comprehensive
income (loss) on
derivatives
Amount of gain (loss)
reclassified from
other comprehensive
income (loss) into
income
Balance as of
December 31, 2019
Derivatives designated as cash flow hedges
Foreign currency contracts
Interest rate swaps
Total designated as cash flow hedges
$
$
21,908 $
(3,550) $
24,363 $
954
67
1,598
22,862 $
(3,483) $
25,961 $
(6,005)
(577)
(6,582)
The following table presents the amounts in the Consolidated Statements of Operations in which the effects
of undesignated derivative instruments are recorded and the effects of fair value hedge activity on these line items:
(In thousands)
Total
Year ended December 31,
2021
2020
2019
Amount of
Gain (Loss) on
Fair Value
Hedge Activity
Total
Amount of
Gain (Loss) on
Fair Value
Hedge Activity
Total
Amount of
Gain (Loss) on
Fair Value
Hedge Activity
Other income (expense), net
$
(51,113) $
(8,502) $
168,153 $
(2,173) $
(5,688) $
(6,141)
Cash Flow Hedges
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 driven by non-functional currency generated revenue, non-functional currency inventory
purchases, investments in U.S. Dollar denominated available-for-sale debt securities, and certain other
intercompany transactions. The Company enters into foreign currency contracts to reduce the risk associated with
the foreign currency exchange rate fluctuations on these transactions. Certain contracts are designated as cash
flow hedges. As of December 31, 2021 and December 31, 2020, the aggregate notional value of the Company's
outstanding cash flow hedges was $556.5 million and $812.5 million, respectively, with contract maturities ranging
from one to twenty-four months.
The Company may 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 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 interest rate swap
contracts are accounted for as cash flow hedges. Refer to Note 8 of the Consolidated Financial Statements for a
discussion of long term debt.
For contracts designated as cash flow hedges, the changes in fair value are reported as other
comprehensive income (loss) and are recognized in current earnings in the period or periods during which the
hedged transaction affects current earnings. Effective hedge results are classified in the Consolidated Statements of
Operations in the same manner as the underlying exposure.
Undesignated Derivative Instruments
The Company may elect to enter into foreign exchange forward contracts to mitigate the change in fair
value of specific assets and liabilities on the Consolidated Balance Sheets. These undesignated instruments are
recorded at fair value as a derivative asset or liability on the Consolidated Balance Sheets with their corresponding
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change in fair value recognized in other expense, net, together with the re-measurement gain or loss from the
hedged balance sheet position. As of December 31, 2021 and December 31, 2020, the total notional value of the
Company's outstanding undesignated derivative instruments was $258.2 million and $313.1 million, respectively.
Credit Risk
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.
NOTE 17. PROVISION FOR INCOME TAXES
Income (loss) before income taxes is as follows:
(In thousands)
Income (loss) before income taxes
United States
Foreign
Total
Year Ended December 31,
2021
2020
2019
$
$
191,201 $
(478,465) $
199,676
(14,079)
390,877 $
(492,544) $
81,122
128,720
209,842
The components of the income tax expense (benefit) consisted of the following:
(In thousands)
Current
Federal
State
Foreign
Deferred
Federal
State
Foreign
Year Ended December 31,
2021
2020
2019
$
(2,454) $
(30,047) $
864
36,304
34,714
5,148
(3,645)
(4,145)
(2,642)
34
16,720
(13,293)
50,620
587
11,473
62,680
7,232
771
21,952
29,955
12,750
25,508
1,811
40,069
70,024
Income tax expense (benefit)
$
32,072 $
49,387 $
A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate is as follows:
Year Ended December 31,
2021
2020
2019
U.S. federal statutory income tax rate
State taxes, net of federal tax impact
Foreign rate differential
$ 82,086
21.0 % $ (103,434)
21.0 % $ 44,067
21.0 %
23,508
6.0 %
(29,341)
6.0 %
4,620
2.2 %
(10,697)
(2.7) %
(972)
0.2 %
(10,494)
(5.0) %
Permanent tax benefits/nondeductible expenses
(12,343)
(3.2) %
15,993
(3.2) %
328
0.2 %
Permanent tax benefits/nondeductible losses -
divestitures
Unrecognized tax benefits
Impacts related to U.S. Tax Act
Valuation allowance
Other
Effective income tax rate
7,317
9,813
1.9 %
(118,321)
24.0 %
—
— %
1.1 %
2,260
(0.5) %
(2,031)
(1.0) %
—
— %
(13,987)
2.8 %
—
— %
(63,418)
(14.9) %
302,575
(61.4) %
30,137
14.4 %
(4,194)
(1.1) %
(5,386)
1.1 %
3,397
1.6 %
$ 32,072
8.2 % $
49,387
(10.0) % $ 70,024
33.4 %
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Income tax expense decreased $17.3 million to an expense of $32.1 million in 2021 from an expense of
$49.4 million in 2020. The Company recorded 2021 income tax expense on pretax earnings, inclusive of benefits for
the reduction in U.S. valuation allowances, compared to 2020 income tax expense on pretax losses, which included
the impact of recording valuation allowances for previously recognized deferred tax assets in the U.S. and China.
Deferred tax assets and liabilities consisted of the following:
(In thousands)
Deferred tax assets
Operating lease liabilities
U.S. Federal and State Capital Loss
Reserves and accrued liabilities
Foreign net operating loss carry-forwards
Inventory
Intangible assets
U.S. state net operating loss
Allowance for doubtful accounts and sales return reserves
Stock-based compensation
Foreign tax credits
U.S. tax credits
Deductions limited by income
Other
Total deferred tax assets
Less: valuation allowance
Total net deferred tax assets
Deferred tax liabilities
Right-of-use asset
Prepaid expenses
Property, plant and equipment
Convertible debt instruments
Other
Total deferred tax liabilities
Total deferred tax assets, net
December 31,
2021
2020
$
197,682 $
257,233
57,097
41,943
33,875
26,860
26,281
16,636
14,940
11,301
8,606
7,273
3,288
5,490
69,332
50,226
51,040
28,079
31,965
28,343
19,864
12,447
10,023
8,775
7,509
3,303
451,272
578,139
(318,221)
(388,432)
$
133,051 $
189,707
$
(98,085) $
(136,308)
(8,356)
(7,018)
(1,066)
(3,743)
(9,443)
(8,107)
(9,878)
(4,780)
(118,268)
(168,516)
$
14,783 $
21,191
All deferred tax assets and liabilities are classified as non-current on the Consolidated Balance Sheets as of
December 31, 2021 and December 31, 2020. 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 the Company's 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. In evaluating the
recoverability of these deferred tax assets at December 31, 2021, the Company has considered all available
evidence, both positive and negative, including but not limited to the following:
Positive
•
•
•
•
Current year pre-tax earnings.
Restructuring plans undertaken in 2017, 2018, and 2020, which aim to improve future profitability.
No history of U.S. federal and state tax attributes expiring unused.
Existing sources of taxable income.
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•
Available prudent and feasible tax planning strategies.
Negative
•
•
•
•
Restructuring plan undertaken in 2020 resulting in significant charges in pre-tax income, reducing
profitability in the United States.
The negative economic impact and uncertainty resulting from the COVID-19 pandemic.
Cumulative pre-tax losses in recent years in the United States.
Inherent challenges in forecasting future pre-tax earnings which rely, in part, on improved
profitability from our restructuring efforts.
As of December 31, 2021, the Company believes that the weight of the negative evidence outweighs the
positive evidence regarding the realization of the United States deferred tax assets and have recorded a valuation
allowance of $250.1 million against the U.S. federal and state deferred tax assets.
As of each reporting date, management considers new evidence, both positive and negative, that could
affect its view of the future realization of DTAs. The Company's current forecasts for the United States indicate that it
is probable that additional deferred taxes could be realizable based on near term trend towards three-year
cumulative taxable earnings. The actualization of these forecasted results may potentially outweigh the negative
evidence, resulting in a reversal of all or a portion of previously recorded valuation allowances in the United States.
The release of valuation allowances would result in a benefit to income tax expense in the period the release is
recorded, which could have a material impact on net income. The timing and amount of the potential valuation
allowance release are subject to significant management judgment, as well as prospective pre-tax earnings in the
United States. The Company will continue to evaluate its ability to realize its net deferred tax assets on a quarterly
basis.
As of December 31, 2021, the Company had $16.6 million in deferred tax assets associated with
$295.1 million in state net operating loss carryforwards and $7.3 million in deferred tax assets associated with state
and federal tax credits, the majority of which are definite lived. Certain of the definite lived state net operating losses
and state tax credits will begin to expire within one to five years, and the majority will begin to expire within five to
twenty years. The Company had $57.1 million in deferred tax assets associated with federal and state capital loss
carryforwards of $126.8 million, which, if unused, will expire in four years. The Company is not able to forecast the
utilization of the deferred tax assets associated with state net operating loss carryforwards, the deferred tax assets
associated with federal and state capital loss carryforwards, and a majority of the deferred tax assets associated
with state and federal tax credits and has recorded a valuation allowance of $80 million against these deferred tax
assets.
As of December 31, 2021, the Company had $39.2 million in deferred tax assets associated with
approximately $199.4 million in foreign net operating loss carryforwards and $8.6 million in deferred tax assets
associated with foreign tax credit carryforwards. While the majority of the foreign net operating loss carryforwards
and foreign tax credit carryforwards have an indefinite carryforward period, certain are definite lived, with the
majority to expire within 5 to 12 years. Additionally, the Company is not able to forecast the utilization of a majority of
the deferred tax assets associated with foreign net operating loss carryforwards, foreign tax credit carryforwards
and certain other foreign deferred tax assets and has recorded a valuation allowance of $68.2 million against these
foreign deferred tax assets.
As of December 31, 2021, approximately $612.2 million of cash and cash equivalents was held by the
Company's non-U.S. subsidiaries whose cumulative undistributed earnings total $957.3 million. The Tax Cuts and
Jobs Act of 2017 imposed U.S. federal tax on all post-1986 foreign unrepatriated earnings accumulated through
December 31, 2017. The portion of these earnings not subject to U.S. federal income tax as part of the one-time
transition tax should, in general, not be subject to U.S. federal income tax. The Company will continue to
permanently reinvest these earnings, as well as future earnings from its foreign subsidiaries, to fund international
growth and operations. If the Company was to repatriate indefinitely reinvested foreign funds, it would still be
required to accrue and pay certain taxes upon repatriation, including foreign withholding taxes and certain U.S. state
taxes and record foreign exchange rate impacts. Determination of the unrecorded deferred tax liability that would be
incurred if such amounts were repatriated is not practicable.
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The following table represents a reconciliation of the Company's total unrecognized tax benefits balances,
excluding interest and penalties, for Fiscal 2021, Fiscal 2020 and Fiscal 2019.
(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 settlements during the current period
Reductions as a result of divestiture
End of year
Year Ended December 31,
2021
2020
2019
$
40,314 $
41,194 $
55,855
6,713
1,738
1,545
(332)
(2,309)
(11,005)
2,430
—
—
2,142
(1,500)
(951)
1,158
(6,359)
—
$
49,125 $
40,314 $
41,194
As of December 31, 2021, 2020 and 2019, the total liability for unrecognized tax benefits was approximately
$54.6 million, $44.6 million and $44.3 million, respectively. These liabilities include $5.5 million, $4.3 million, and
$3.1 million, respectively, for the accrual of interest and penalties. For each of Fiscal 2021, Fiscal 2020 and Fiscal
2019, the Company recorded $1.2 million, $1.2 million, and $2.0 million, respectively, for the accrual of interest and
penalties within the provision for income taxes on its Consolidated Statements of Operations. As of December 31,
2021, $35.8 million of unrecognized tax benefits, excluding interest and penalties, would impact the Company's
effective tax rate if recognized. Also included in the balance are unrecognized tax benefits of $11.7 million that, if
recognized, would result in adjustments to other tax accounts, primarily valuation allowances on deferred tax
assets.
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 U.S. Internal Revenue Service for the years 2015 through
2017. The majority of the Company's other returns for years before 2015 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.
NOTE 18. EARNINGS PER SHARE
The following represents a reconciliation from basic income (loss) per share to diluted income (loss) per
share:
(In thousands, except per share amounts)
2021
2020
2019
Year Ended December 31,
Numerator
Net income (loss)
Denominator
$
360,060 $
(549,177) $
92,139
Weighted average common shares outstanding Class A, B and C
Effect of dilutive securities Class A, B, and C
465,504
3,140
454,089
—
450,964
3,310
Weighted average common shares and dilutive securities outstanding
Class A, B, and C
468,644
454,089
454,274
Basic net income (loss) per share of Class A, B and C common stock
Diluted net income (loss) per share of Class A, B and C common stock
$
$
0.77 $
0.77 $
(1.21) $
(1.21) $
0.20
0.20
Effects of potentially dilutive securities are presented only in periods in which they are dilutive. Stock options
and restricted stock units representing 1.6 million, 6.4 million and 1.8 million shares of Class A and Class C
Common Stock outstanding for Fiscal 2021, Fiscal 2020 and Fiscal 2019, respectively, were excluded from the
computation of diluted earnings per share because their effect would have been anti-dilutive. Due to the Company
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being in a net loss position for Fiscal 2020, there were no stock options or restricted stock units included in the
computation of diluted earnings per share, as their effect would have been anti-dilutive.
NOTE 19. SEGMENT DATA AND DISAGGREGATED REVENUE
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
of being a global brand. These geographic regions include North America, Europe, the Middle East and Africa
(“EMEA”), Asia-Pacific, and Latin America. Each geographic segment operates exclusively in one industry: the
development, marketing and distribution of branded performance apparel, footwear and accessories. Total
expenditures for additions to long-lived assets are not disclosed as this information is not regularly provided to the
CODM.
Prior to the sale of MyFitnessPal in December 2020, the CODM also received discrete financial information
for the Connected Fitness segment. However, beginning January 1, 2021, the Company no longer reports
Connected Fitness as a discrete reportable operating segment (see Note 1 to the Consolidated Financial
Statements). All prior period balances have been recast to conform to current period presentation. Such
reclassifications did not affect total consolidated revenues, consolidated income from operations or consolidated net
income.
The Company excludes certain corporate costs from its segment profitability measures. The Company
reports these costs within Corporate Other, along with the revenue and costs related to the Company's MMR
platforms, which is designed to provide increased transparency and comparability of the Company's operating
segments' performance. Furthermore, the majority of the costs included within Corporate Other consist largely of
general and administrative expenses not allocated to an operating segment, including expenses associated with
centrally managed departments such as global marketing, global IT, global supply chain, innovation and other
corporate support functions; costs related to the Company's global assets and global marketing; costs related to the
Company’s headquarters, such as restructuring and restructuring related charges; and certain foreign currency
hedge gains and losses.
The following tables summarize the Company's net revenues and operating income (loss) by its geographic
segments. Intercompany balances were eliminated for separate disclosure:
(In thousands)
Net revenues
North America
EMEA
Asia-Pacific
Latin America
Corporate Other (1)
Total net revenues
(In thousands)
Operating income (loss)
North America
EMEA
Asia-Pacific
Latin America
Corporate Other (1)
Total operating income (loss)
Interest expense, net
Other income (expense), net
Year Ended December 31,
2021
2020
2019
$
3,810,372 $
2,944,978 $
3,658,353
842,511
831,762
195,248
3,573
598,296
628,657
164,825
137,911
621,137
636,343
196,132
155,167
$
5,683,466 $
4,474,667 $
5,267,132
Year Ended December 31,
2021
2020
2019
$
972,093 $
474,584 $
733,442
132,602
132,911
22,388
60,592
2
(42,790)
53,739
97,641
(3,160)
(773,704)
(1,105,826)
(644,892)
486,290
(613,438)
236,770
(44,300)
(51,113)
(47,259)
168,153
(21,240)
(5,688)
Income (loss) before income taxes
$
390,877 $
(492,544) $
209,842
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The following tables summarize the Company's net revenues by product category and distribution channels:
(In thousands)
Apparel
Footwear
Accessories
Net Sales
License revenues
Corporate Other (1)
Total net revenues
(In thousands)
Wholesale
Direct-to-consumer
Net Sales
License revenues
Corporate Other (1)
Total net revenues
Year Ended December 31,
2021
2020
2019
$
3,841,249 $
2,882,562 $
3,470,285
1,264,127
461,894
5,567,270
112,623
3,573
934,333
414,082
4,230,977
105,779
137,911
1,086,551
416,354
4,973,190
138,775
155,167
$
5,683,466 $
4,474,667 $
5,267,132
Year Ended December 31,
2021
2020
2019
$
3,245,749 $
2,383,353 $
3,167,625
2,321,521
5,567,270
112,623
3,573
1,847,624
4,230,977
105,779
137,911
1,805,565
4,973,190
138,775
155,167
$
5,683,466 $
4,474,667 $
5,267,132
(1) Prior to Fiscal 2021, the Company's Connected Fitness segment was separately disclosed, however, effective January 1, 2021, Corporate
Other now includes the remaining Connected Fitness business consisting of MMR for Fiscal 2021 and the entire Connected Fitness business for
Fiscal 2020 and Fiscal 2019. All prior periods were recast to conform to the current period presentation. Such reclassifications did not affect total
consolidated net revenues, consolidated income from operations or consolidated net income (see Note 1 to the Consolidated Financial
Statements).
Long-lived assets are primarily composed of Property and equipment, net and Operating lease right-of-use
assets. 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,
2021
2020
$
801,130 $
21,094
822,224
233,366
896,789
23,122
919,911
275,427
$
1,055,590 $
1,195,338
NOTE 20. RELATED PARTY TRANSACTIONS
The Company has an operating lease agreement with an entity controlled by the Company’s Executive
Chairman and Brand Chief to lease an aircraft for business purposes. The Company paid $2.0 million in lease
payments to the entity for its use of the aircraft during Fiscal 2021 ($2.0 million for both Fiscal 2020 and Fiscal
2019) No amounts were payable to this related party as of December 31, 2021 and 2020. 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
Executive Chairman and Brand Chief, 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
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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, 2021.
NOTE 21. SUBSEQUENT EVENT
Share Repurchase Plan
On February 23, 2022, the Company’s board of directors authorized the repurchase of up to $500 million of
the Company’s Class C Common Stock over the next two years. The Class C Common Stock may be repurchased
from time to time at prevailing prices in the open market, through plans designed to comply with Rule 10b5-1 under
the Securities Exchange Act of 1934, as amended, via private purchases through forward, derivative, accelerated
share repurchase transactions or otherwise, subject to applicable regulatory restrictions on volume, pricing and
timing. The timing and amount of any repurchases will depend on market conditions, the Company’s financial
condition, results of operations, liquidity and other factors.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our Chief Executive
Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as 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 concluded that our disclosure controls and procedures are effective in
ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed,
summarized and reported in a timely manner and (2) accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.
Management's Annual Report on Internal control over Financial Reporting is included in Item 8 of this
Annual Report on Form 10-K.
Changes in Internal Controls
We have assessed the impact on changes to our internal controls over financial reporting, and conclude
that 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 controls over financial reporting. We have not experienced any material impact
to our internal controls over financial reporting despite the fact that a significant number of our employees are
working remotely due to the COVID-19 pandemic. We continue to monitor and assess impacts of the COVID-19
pandemic on our control environment and control activities in order to minimize the impact on the design and
operating effectiveness of our controls.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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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 2022
Proxy Statement, under the headings “Election of Directors,” “Corporate Governance and Related Matters - Board
Meetings and Committees - Audit Committee.” Information required by this Item regarding executive officers is
included under “Executive Officers” 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: https://about.underarmour.com/investor-relations/
governance. 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. INFORMATION ABOUT OUR EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference herein from the 2022 Proxy Statement
under the headings “Corporate Governance and Related Matters - 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 2022 Proxy Statement
under the headings “Security Ownership of Management and Certain Beneficial Owners of Shares” and "Equity
Compensation Plan Information."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated by reference herein from the 2022 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 2022 Proxy Statement
under the heading “Independent Auditors.”
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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 (PCAOB ID 238)
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019
Notes to the Audited Consolidated Financial Statements
2. Financial Statement Schedule
Schedule II—Valuation and Qualifying Accounts
52
55
56
57
58
59
60
99
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 2020 Form 10-K are to the Company’s Annual Report on Form 10-K for the fiscal year ended December
31, 2020.
Exhibit
No.
3.01
3.02
3.03
4.01
4.02
4.03
4.04
10.01
10.02
10.03
Amended and Restated Articles of Incorporation.
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).
Amended and Restated Bylaws of Under Armour, Inc. (incorporated by reference to Exhibit
3.01 of the Company’s Current Report on Form 8-K filed on February 10, 2021).
Description of the Company’s Securities Registered Pursuant to Section 12 of the Exchange Act (incorporated by
reference to Exhibit 4.01 of the Company's 2020 Form 10-K).
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).
Indenture, dated as of May 27, 2020, relating to the Company’s 1.50% Convertible Senior Notes due 2024,
between the Company and Wilmington Trust, National Association, as Trustee and the Form of 1.50% Convertible
Senior Notes due 2024 (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K
filed on May 28, 2020).
Credit Agreement, dated March 8, 2019, by and among the Company, as borrower, JPMorgan Chase Bank, N.A.,
as administrative agent, PNC Bank, National Association, as syndication agent and the other lenders and
arrangers party thereto (incorporated by reference to Exhibit 10.01 of the Company’s Current Report on Form 8-K
filed March 8, 2019).
Amendment No. 1, dated May 12, 2020, to the Amended and Restated Credit Agreement, dated March 8, 2019,
by and among the Company, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the other
lenders and arrangers party thereto (incorporated by reference to Exhibit 10.01 of the Company’s Current Report
on Form 8-K filed on May 12, 2020).
Amendment No. 2, dated May 17, 2021, to the Amended and Restated Credit Agreement dated March 8, 2019, by
and among the Company, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the other
lenders and arrangers party thereto (incorporated by reference to Exhibit 10.01 of the Company's Current Report
on Form 8-K filed on May 19, 2021).
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Table of Contents
Exhibit
No.
10.04
10.05
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
10.25
10.26
10.27
10.28
10.29
Amendment No. 3, dated December 3, 2021, to the Amended and Restated Credit Agreement, dated March 8,
2019, by and among the Company, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the
other lenders and arrangers party thereto (incorporated by reference to Exhibit 10.01 of the Company's Current
Report in Form 8-K filed on December 8, 2021).
Form of Capped Call Confirmation (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on
Form 8-K filed on May 28, 2020).
Under Armour, Inc. Amended and Restated Executive Incentive Compensation Plan (incorporated by reference to
Exhibit 10.01 of the Company's Quarterly Report on Form 10-Q filed for the quarterly period ending September
30, 2020).*
Under Armour, Inc. Amended and Restated Deferred Compensation Plan (incorporated by reference to Exhibit
10.10 of the Company’s 2018 Form 10-K).*
Form of Change in Control Severance Agreement (incorporated by reference to Exhibit 10.04 of the Company’s
2016 Form 10-K).*
Under Armour, Inc. Third Amended and Restated 2005 Omnibus Long-Term Incentive Plan (the “2005 Plan”)
(incorporated by reference to Exhibit 10.01 of the Company’s Quarterly Report on Form 10-Q filed on August 1,
2019).*
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 2019 Form 10-K).*
Form of Non-Qualified Stock Option Grant Agreement under the 2005 Plan between the Company and Kevin
Plank (incorporated by reference to Exhibit 10.13 of the Company’s 2018 Form 10-K).*
Form of Annual Restricted Stock Unit Grant Agreement under the 2005 Plan.*
Form of Special 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 10.08
of the Company’s 2019 Form 10-K).*
Form of Restricted Stock Unit Grant Agreement under the 2005 Plan (incorporated by reference to Exhibit 10.14
of the Company's 2017 Form 10-K).*
Form of Performance-Based Stock Option Grant Agreement under the 2005 Plan (incorporated by reference to
Exhibit 10.16 of the Company’s 2017 Form 10-K).*
Form of Performance-Based Restricted Stock Unit Agreement under the 2005 Plan (incorporated by reference to
Exhibit 10.19 of the Company’s 2017 Form 10-K).*
Form of Employee Confidentiality, Non-Competition and Non-Solicitation Agreement by and between certain
executives of the Company.*
Under Armour, Inc. 2021 Non-Employee Director Compensation Plan (the “Director Compensation
Plan”)(incorporated by reference to Exhibit 10.15 of the Company's 2020 Form 10-K).*
Form of Initial Restricted Stock Unit Grant under the Director Compensation Plan (incorporated by reference to
Exhibit 10.1 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).*
Amendment Three to the Director DSU Plan (incorporated by reference to Exhibit 10.22 of the Company’s 2019
Form 10-K).*
Employee Confidentiality, Non-Competition and Non-Solicitation Agreement by and between Patrik Frisk and the
Company (incorporated by reference to Exhibit 10.01 of the Company’s Form 10-Q for the quarterly period ended
March 31, 2018).*
First Amendment to Employee Confidentiality, Non-Competition and Non-Solicitation Agreement, dated June 30,
2021, by and between Patrik Frisk and the Company (incorporated by reference to Exhibit 10.03 of the
Company's Form 10-Q for the quarterly period ended June 30, 2021).*
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 to the Plank Non-Compete Agreement, dated April 7, 2016 (incorporated by reference to Exhibit
10.03 of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016).*
21.01
List of Subsidiaries.
96
Table of Contents
Exhibit
No.
23.01
31.01
31.02
32.01
32.02
101.INS
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.
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL
tags are embedded within the Inline XBRL document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (embedded within the Inline XBRL 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.
97
Table of Contents
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/ PATRIK FRISK
Patrik Frisk
Chief Executive Officer and President
Date: February 23, 2022
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/ PATRIK FRISK
Patrik Frisk
/s/ DAVID E. BERGMAN
David E. Bergman
/s/ ADITYA MAHESHWARI
Aditya Maheshwari
/s/ KEVIN A. PLANK
Kevin A. Plank
/s/ DOUGLAS E. COLTHARP
Douglas E. Coltharp
/s/ JERRI L. DEVARD
Jerri L. DeVard
/s/ MOHAMED A. EL-ERIAN
Mohamed A. El-Erian
/s/ DAVID W. GIBBS
David W. Gibbs
/s/ KAREN W. KATZ
Karen W. Katz
/s/ WESTLEY MOORE
Westley Moore
/s/ ERIC T. OLSON
Eric T. Olson
/s/ HARVEY L. SANDERS
Harvey L. Sanders
Dated: February 23, 2022
Chief Executive Officer, President and Director (principal executive
officer)
Chief Financial Officer (principal financial officer)
Controller and Chief Accounting Officer (principal accounting officer)
Executive Chairman and Brand Chief
Director
Director
Director
Director
Director
Director
Director
Director
98
[THIS PAGE INTENTIONALLY LEFT BLANK]
KEY
FINANCIALS
NET REVENUE
BY PRODUCT
(PERCENT OF 2021 TOTAL)
2%
8%
22%
NET REVENUE
BY REGION
(PERCENT OF 2021 TOTAL)
15%
15%
3%
NET REVENUE
BY CHANNEL
(PERCENT OF 2021 TOTAL)
2%
41%
57%
68%
67%
Apparel
Footwear
Accessories
Licensing
North America
Latin America
Asia Pacific
Wholesale
Licensing
Europe, Middle East & Africa
Direct-to-Consumer
NET REVENUE
($ IN MILLIONS)
GROSS MARGIN*
(PERCENT OF REVENUE)
INCOME FROM OPERATIONS*
($ IN MILLIONS AND PERCENT OF REVENUE)
$5,193
$5,267
$4,989
$5,683
$4,475
50.4%
48.6%
46.9%
45.5%
45.2%
$527
9.3%
$237
4.5%
$179
$157
3.1%
3.4%
$1
0.0%
2017
2018
2019
2020
2021
2017*
2018*
2019
2020*
2021*
2017*
2018*
2019
2020*
2021*
*Adjusted basis: Excludes 0.1%, 0.3%, 0.4% and 0.1%
of restructuring impacts in 2021, 2020, 2018 & 2017
respectively; GAAP Basis 50.3%, 48.3%, 45.1% and 45.1%
for 2021, 2020, 2018 & 2017 respectively
*Adjusted basis: Excludes $41M, $614M, $204M and
$129M of restructuring impacts in 2021, 2020, 2018 & 2017
respectively; GAAP Basis $486M, ($613M), ($25M) and
$28M for 2021, 2020, 2018 & 2017 respectively
2021 ANNUAL REPORT
BOARD OF
DIRECTORS
KEVIN A. PLANK
Executive Chairman and
Brand Chief
DAVID W. GIBBS
Chief Executive Officer of
Yum! Brands, Inc.
PATRIK FRISK
President and Chief
Executive Officer
KAREN W. KATZ
Former President and Chief
Executive Officer, Nieman
Marcus Group LTD LLC
DOUGLAS E. COLTHARP
Executive Vice President and Chief
Financial Officer, Encompass Health
Corporation
WESTLEY MOORE
Former Chief Executive
Officer of the Robin Hood
Foundation
JERRI L. DEVARD
Former Executive Vice
President, Chief Customer
Officer of Office Depot, Inc.
ERIC T. OLSON
Admiral U.S. Navy (Retired)
and Former Commander, U.S.
Special Operations Command
MOHAMED A. EL-ERIAN
Former Chief Executive Officer and
Co-Chief Investment Officer of
PIMCO
HARVEY L. SANDERS
Former Chief Executive
Officer and Chairman, Nautica
Enterprises, Inc.
2021 ANNUAL REPORT