We are also proud of the re-launch of Protect
This House, a ubiquitous ethos of Under
Armour that has driven positive and inspiring
responses from our athletes and customers.
We are also energized by the launch of the
UA SlipSpeed heel-up/heel-down footwear
platform, including our versatile training
sneakers, which bring together design,
engineering, storytelling, and an ‘it’ factor
wrapped in a solution only Under Armour can
create.
As we work into our next chapter, I am
confident that we have a strong foundation,
the right plans, and a brand capable of
delivering sustainable, profitable growth
over the long term. In this respect, we
must increase our focus, execution, and
accountability. It is with that spirit that I have
set three priorities based on my assessment
of Under Armour’s current strengths and
opportunities. This is about three big things
over the next three years – appropriately
called “Protect This House 3” – which
is meant to drive clarity and business
alignment across Under Armour:
1. Drive Global Brand Heat with a Focus
on the United States. Under Armour
has a globally recognized brand and
strong franchises, including compression
apparel like ColdGear and HeatGear,
trusted by the highest-level athletes in
sport. We are one of few brands that can
be found on the fields of play worldwide
at the highest levels of competition.
Yet, we need to pull in our fair share of
market growth. Conversion should be
more active, especially in the United
States, where consumers are aware of
and engaged with the Under Armour
brand at the highest level. Globally,
we’re assessing how our products,
athletes, and marketing strategies are
– or are not – breaking through to reach
our target consumers. With love for a
brand that plays considerably larger
than the business – I am confident
that simplification and doing more
with less in our brand activations will
be an outstanding unlock to generate
excitement and increase conversion
towards greater top-line growth.
ANNUAL
REPORT
LET TER F ROM THE CEO
JUNE 27, 2023
DEAR SHAREHOLDERS,
As an athlete and sports enthusiast, I have
always admired the Under Armour brand and
what it stands for – a hard-earned, unique
reputation for grit, strength, and innovation.
After spending my first several months at the
company meeting with athletes, customers,
investors, and teammates, my enthusiasm
and confidence in this brand have grown
exponentially. I believe the potential for Under
Armour is even more significant than I initially
imagined, and I am excited and energized for
what comes next.
Reflecting on fiscal 2023, as we navigated an
increasingly uncertain macroeconomic and
industry backdrop, Under Armour delivered
3 percent revenue growth, reaching $5.9
billion. And despite a decline in gross margin,
driven primarily by a highly promotional
environment and supply chain impacts,
including higher freight and product costs,
we delivered $0.84 of diluted earnings per
share. We also ended the year with lower-
than-expected inventory growth, $712 million
of cash on hand, and, over the past year and
a half, have bought $425 million of Under
Armour class C stock under the company’s
share repurchase program.
This past year also saw strong brand
momentum, exemplified by the
announcement of our stronger partnership
with Stephen Curry – a crucial catalyst for
Under Armour as we drive and prioritize the
impact of sport on communities worldwide.
FISCA L 2023 A NNUA L R EPORT
2. Deliver Elevated Design and Products
with a Focus on Footwear, Women,
and Sportstyle. Undoubtedly, we
offer industry-leading performance
innovations for athletes, yet we can
extend our reach even further. Under
Armour has a significant growth
opportunity to expand our existing
offerings and partnerships and to
deliver more premium products,
particularly in footwear, our women’s
business, and Sportstyle. To do so, we
have solicited help from sneaker and
branding experts who will add industry-
proven design horsepower. We also
have exceptional women’s products.
However, there is an opportunity
to deliver more consistently for our
female athletes and cut through the
competition. Finally, we are focusing
energy and resources on our evolving
Sportstyle offering, a broadening of
our product aperture that embodies
the intersection of style, design, and
performance.
3. Grow U.S. Sales While Leveraging
Continued Growth in Our
International Business. Fiscal 2023
saw strong results in EMEA and Asia-
Pacific, and while we have made solid
progress in the quality of our business
in the United States, there’s still
significant potential to drive growth in
our home market. In addition to driving
brand heat and delivering best-in-class
products, Under Armour will focus on
driving productivity in our direct retail
and digital channels and expanding our
‘better’ and ‘best’ wholesale footprint
to create a dramatically improved
consumer experience with an emphasis
on exceptional service, inspiration,
and premium experience. We have
a significant opportunity to elevate
our brand and showcase it in the best
presentation possible in the United
States, and we are focused on doing so.
These priorities are a starting point as we
work to unlock Under Armour’s potential
for improved results – all of which are
engineered to drive revenue growth,
expand margins, elevate our brand, and
deliver exemplary service to whomever we
serve, both inside and outside our business
– continuously identifying tangible ways to
get better.
This also applies to our approach to
protecting the planet and our efforts to
reduce harmful environmental impacts
while respecting the rights and improving
the lives of our teammates and suppliers’
workers. Our latest Sustainability & Impact
Report outlines 23 goals and targets
across three key pillars – Products, Home
Field, and Team. From how we create our
products to our workplace, interactions
with suppliers, and relationships with key
stakeholders worldwide, I am inspired every
day by the efforts of our team to reach our
objectives while being transparent about
our progress, goals, and opportunities as a
purpose-driven brand.
Under Armour’s purpose in serving athletes
is distinct within our culture and aligned
with Kevin Plank’s vision. As an incredible
thought partner, I look forward to working
with Kevin and the entire global team as we
continue building into the next chapter for
this iconic brand.
I love and believe in Under Armour, and
I couldn’t be more excited to lead this
fantastic company toward realizing its full
potential and the vision we all have for it. As
we move forward – now is the time for bold
decisions and distinct actions that yield
results.
We are operating with our eyes wide
open and know the urgency of the work
ahead of us. Our renewed strategic focus
on world-class execution and increased
accountability across all levels of the
organization is front and center in our
efforts to drive Under Armour toward
more robust, profitable growth over the
long term. Our athletes, teammates,
shareholders, and brand deserve it.
Thank you for your continued support of our
brand and our business.
STEPHANIE C. LINNARTZ
President & Chief Executive Officer
FISCA L 2023 A NNUA L R EPORT
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 March 31, 2023
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. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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 September 30, 2022, 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 $1,250,424,223 and $1,147,881,110,
respectively.
As of May 15, 2023 there were 188,704,689 shares of Class A Common Stock, 34,450,000 shares of Class B Convertible Common Stock
and 221,441,390 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 August 29, 2023 are incorporated by
reference in Part III of this Annual Report on Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
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
Sustainability
Human Capital Management
Information About Our Executive Officers
Available Information
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Properties
Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5.
Item 6.
Item 7.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Reserved
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
SIGNATURES
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PART I. FINANCIAL INFORMATION
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this Annual Report on 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, expectations
regarding promotional activities, freight, product cost pressures and foreign currency impacts, the impact of global
economic conditions and inflation on our results of operations, 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 Annual Report on 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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changes in general economic or market conditions, including increasing inflation, that could affect overall
consumer spending or our industry;
the impact of the COVID-19 pandemic on our industry and our business, financial condition and results of
operations, including 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;
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
(including labor);
changes to the financial health of our customers;
our ability to successfully execute our long-term strategies;
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 effectively market and maintain a positive brand image;
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;
the impact of global events beyond our control, including military conflict;
our ability to successfully manage or realize expected results from significant transactions and investments;
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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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 effectively drive operational efficiency in our business and realize expected benefits from
restructuring plans;
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 Annual Report on Form 10-K reflect our views and
assumptions only as of the date of this Annual Report on 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 "Fiscal 2024" means our fiscal year beginning on
April 1, 2023 and ending March 31, 2024; (ii) the term "Fiscal 2023" means our fiscal year beginning on April 1,
2022 and ended March 31, 2023; (iii) the term "Transition Period" means the period beginning on January 1, 2022
and ended March 31, 2022; (iii) the term "Fiscal 2021" means our fiscal year beginning on January 1, 2021 and
ended December 31, 2021; and (iv) the term "Fiscal 2020" means our fiscal year beginning on January 1, 2020 and
ended December 31, 2020. 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; growth in our direct-to-consumer sales channel; and expansion of our wholesale
distribution. We believe that achievement of our long-term growth objectives depends, in part, on our ability to
execute strategic initiatives in key areas including our wholesale, footwear, women’s and direct-to-consumer
businesses. 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,
including UNDER ARMOUR®, HEATGEAR®, COLDGEAR®, HOVR® and the Under Armour UA Logo
we have applied to register many other trademarks. This Annual Report on Form 10-K also contains additional
trademarks and tradenames of our Company and our subsidiaries. All trademarks and trade names appearing in
this Annual Report on Form 10-K are the property of their respective holders.
®, and
2
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. Our products are primarily designed for athletic and active occasions,
though many of our products can be worn or used in casual occasions. In Fiscal 2023, sales of apparel, footwear
and accessories represented 66%, 25% and 7% of net revenues, respectively. Licensing arrangements represented
2% of net revenues. Refer to Note 11 to the Consolidated Financial Statements for net revenues by product
category.
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 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®, COLDGEAR INFRARED®, 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 plush underfoot and 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, socks 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, footwear, 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
2023, 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 our ability to support the needs of our athletes at all moments of their day. 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
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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.
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 day.
Retail Presentation
Our retail marketing strategy is focused on increasing floor space dedicated to our products within our major
wholesale accounts and elevating the presentation of our products within our Brand and Factory House retail stores.
A key component of our strategy to secure prime floor space within our major wholesale accounts is the design of
Under Armour point of sale displays and concept shops, which enhance our brand’s presentation by creating a
shop-in-shop approach using dedicated space—including flooring, lighting, walls, displays and images—exclusively
for our products through which we create an exciting environment for the consumer to experience and learn about
our brand.
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 2023, sales through our wholesale, direct-to-
consumer and licensing channels represented 59%, 38% and 2% of net revenues, respectively.
Our primary business operates in four geographic segments: (i) North America, comprising the United
States and Canada, (ii) Europe, the Middle East and Africa ("EMEA"), (iii) Asia-Pacific, and (iv) 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 primarily of (i) operating results related to our MapMyFitness digital platform,
which includes MapMyRun® and MapMyRide® (collectively "MMR"), and other digital business opportunities; (ii)
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; (iii) restructuring and restructuring related charges; and (iv) certain foreign currency
hedge gains and losses.
Our North America segment accounted for approximately 65% of our net revenues for Fiscal 2023, while
our EMEA, Asia-Pacific and Latin America segments combined represented approximately 34%. For Fiscal 2023, no
single customer accounted for more than 10% of the Company's net revenues.
North America
We sell our apparel, footwear and accessories in North America through wholesale and direct-to-consumer
channels. Net revenues generated from the sales of our products in the United States were $3.5 billion for Fiscal
2023.
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Our direct-to-consumer sales are generated through our Brand and Factory House stores and e-commerce
website. As of March 31, 2023, in North America, we had 176 Factory House stores primarily located in outlet
centers and 18 Brand House stores throughout the United States and Canada. Consumers can also purchase our
products directly from our e-commerce website.
In addition, we earn license revenues in North America based on our licensees' sales of collegiate apparel
and accessories, as well as other licensed products.
We distribute the majority of our products to our North American wholesale customers and our own retail
stores and e-commerce channels from distribution facilities we lease and operate in California, Maryland and
Tennessee. In addition, we distribute our products in North America through third-party logistics providers with
primary locations in Canada, New Jersey and Florida. In some instances, we arrange to have products shipped
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 and Africa.
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, Australia and Singapore.
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 teams also work closely with our sports marketing and sales teams and with professional,
collegiate and varsity athletes to identify product developments, 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 produced by third parties. The fabric and other raw materials used to manufacture our apparel products
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are sourced by our contracted manufacturers from a limited number of suppliers pre-approved by us. In Fiscal 2023,
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, Turkey and Malaysia. 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 2023, our apparel
and accessories products were manufactured by 33 primary contract manufacturers, operating in 20 countries, with
approximately 59% of our apparel and accessories products manufactured in Jordan, Vietnam, Cambodia and
Malaysia. Of our 33 primary contract manufacturers, ten produced approximately 62% of our apparel and
accessories products. In Fiscal 2023, substantially all of our footwear products were manufactured by eight primary
contract manufacturers, operating primarily in Vietnam, Indonesia and China.
All of our 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 our 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, we strive to enhance our inventory
performance by focusing on adding discipline around product purchasing, reducing production lead time and
improving planning and execution for selling excess inventory through our Factory House stores and other
liquidation channels.
Our practice, and the general practice in the apparel, footwear and accessory industry, is to offer retail
customers the right to return defective or improperly shipped merchandise. From time to time, when introducing new
products, which often requires large initial launch shipments, we commence production before receiving orders for
those products.
Intellectual Property
We own the material trademarks used in connection with the marketing, distribution and sale of our
® and UNDER ARMOUR®, both of which are
products in the United States and in key international markets where our products are currently sold or
manufactured. Our major trademarks include the UA Logo
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.
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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 also have copyright protection covering various designs and other original works.
We apply for, own and maintain utility and design patents that protect certain technologies, materials,
manufacturing processes, product features and industrial and aesthetic designs. These patents cover various
footwear, apparel, accessories, equipment and digital applications. However, 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 important with respect to our innovative products 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, innovations and designs that align with our corporate strategy.
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 wholesale 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 or their own private
label offerings, 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. Our sustainability strategy is centered around three interconnected
pillars—products, home field and team. Within these pillars, our strategy focuses on enabling materials innovation to
bring about a more circular system, leaving our planet and shared spaces bettered by our presence. Additionally,
our strategy focuses on championing diversity, equity and inclusion and human rights within our company, with our
suppliers and their workers and in communities across our entire supply chain.
We have always been focused on product innovation, and we are challenging ourselves to be more
innovative to improve our existing materials and to create new materials that meet our athletes' expectations—all
while using circular design principles to expand our products' sustainability attributes and while reducing 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. Increasingly, we are working with our supply chain to embed sustainable practices,
and be mindful about the sustainability profiles of key raw materials.
7
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. In Fiscal 2023, we published our 2021 Sustainability & Impact
Report, which can be found on our website. Aligned with Global Reporting Initiative and Sustainable Accounting
Standard Board industry standards, our 2021 Sustainability & Impact Report outlines our 23 goals and targets
across the three pillars of our sustainability strategy and describes our progress toward a more sustainable future.
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
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 March 31, 2023, we had approximately 15,000 teammates worldwide, including approximately 10,000
in our Brand and Factory House stores and approximately 1,400 at our distribution facilities. Approximately 7,400 of
our teammates were full-time. Of our approximately 7,400 part-time teammates, approximately 6% were seasonal
teammates. Our total number of teammates fluctuates throughout the year, with a significant increase in seasonal
teammates during the third quarter of each fiscal year.
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, time-bound 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. 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 March 31, 2023:
•
•
•
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 47% White, 24% Hispanic or Latino, 17% Black
or African American, 8% Asian and 4% other;
the race and ethnicity of our "director" level and above positions in the United States was 75% White, 5%
Hispanic or Latino, 9% Black or African American, 8% Asian and 3% other; and
53% of our global teammates were women, and women represented 42% of our "director" level and above
positions globally.
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 and provide multiple reporting mechanisms for
them to do so. 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 2023, we continued a company-wide virtual series to facilitate meaningful conversations on anti-
racism and social justice issues. For our senior leadership, we require mandatory training on cultural competency
and building inclusive environments. In addition to our broader professional development programs described more
fully below, we also invest in programs 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.
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(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 and are transparently communicated. 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. 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 65%
of our workforce is located, in addition to market-competitive pay and broad-based bonuses, our full-time
teammates are eligible for healthcare benefits; health savings accounts; flexible spending accounts; retirement
savings plan; paid time off; caregiver 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 have implemented a hybrid working model where many of our global corporate teammates
are designated as in-office for a certain number of days each week and remote for the remainder, allowing us to
provide our teammates flexibility while still achieving our objectives. 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 provide our corporate
teammates two meeting-free days per year designated to focusing on professional development. 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. We leverage
assessments, mentoring, executive coaching, and interactive training programs across a variety of leadership topics
to improve leadership effectiveness and drive the performance of our team. Additionally, 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
We prioritize the health, safety and overall well-being of our teammates. We have policies and trainings in
place to ensure a safe workplace environment across our organization, such as our crisis management plan, which
prepares us to respond to critical incidents, including those involving our teammates. Throughout the COVID-19
pandemic, we continued to invest in the health and safety of our teammates by implementing COVID-19 protection
9
and prevention measures at our distribution houses, Brand and Factory House retail stores and corporate offices,
as well as providing a variety of additional physical, emotional and mental well-being resources.
Information About Our Executive Officers
Our executive officers are:
Name
Kevin Plank
Stephanie Linnartz
Colin Browne
David Bergman
David Baxter
Lisa Collier
Tchernavia Rocker
Mehri Shadman-Valavi
Age
Position
50
55
58
50
56
58
49
41
Executive Chair and Brand Chief
President and Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
President of the Americas
Chief Product Officer
Chief People and Administrative Officer
Chief Legal Officer and Corporate Secretary
Kevin Plank has been Executive Chair and Brand Chief since January 2020. Prior to that, he served as
Chief Executive Officer and Chair 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.
Stephanie Linnartz has been President and Chief Executive Officer and a member of our Board of Directors
since February 2023. Before joining Under Armour, Ms. Linnartz served as the President of Marriott International,
Inc. beginning in February 2021. Prior to her role as President, she served as Marriott’s Group President Consumer
Operations, Technology and Emerging Businesses from 2020 to 2021, and as Marriott’s Executive Vice President
and Global Chief Commercial Officer from 2013 to 2019. Ms. Linnartz joined Marriott as a financial analyst in 1997,
and held several positions in finance before moving into sales and marketing. Ms. Linnartz also serves on the Board
of Directors of The Home Depot, Inc. and is a member of its Audit and Leadership Development & Compensation
Committees.
Colin Browne has been Chief Operating Officer since February 2020. He served as interim President and
Chief Executive Officer from June 2022 through February 2023. Previously, 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.
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.
David Baxter has been President of the Americas since October 2022 and served as SVP, North America
Wholesale from April 2020 to October 2022. Before joining Under Armour, Mr. Baxter served as President and CEO
of LIDS Sports Group from June 2016 through February 2019. From March 2010 through June 2014, he was Vice
President of adidas’s America’s Sport Performance division, where he directed the North American product and
marketing strategies for sport performance categories, and prior to that oversaw all of adidas and Reebok’s sports
licensed businesses with the major U.S. professional sports leagues. Prior to that, Mr. Baxter spent nine years at
Reebok, where he held various roles, including key leadership roles within Reebok’s on-field and sports licensed
divisions. Earlier in his career, he held various senior level sales positions at Logo Athletic.
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
10
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.
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.
Mehri Shadman has been Chief Legal Officer and Corporate Secretary since October 2022. Ms. Shadman
joined Under Armour in 2013 and served as Assistant Corporate Secretary from January 2017 to October 2022.
Most recently she held the role of Deputy General Counsel, Corporate and Risk, overseeing the corporate legal,
global ethics and compliance, data privacy, and enterprise risk management functions, and served as Vice
President within the legal department from March 2019 through October 2022. Prior to that, she served as Senior
Director, Managing Counsel, Corporate Affairs from January 2017 to February 2019. Before joining Under Armour,
Ms. Shadman began her career as an associate at a large international law firm, in its capital markets practice.
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.
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 Annual
Report on 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
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
and inflationary pressures and consumer confidence in future economic conditions. Global and U.S. economic
conditions continue to be uncertain, particularly in light of rising interest rates, recession fears and instability in the
U.S. banking system. 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.
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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 COVID-19 pandemic, which 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. The pandemic had an adverse impact on our business and results of
operations, particularly in Fiscal 2020, and although conditions improved during Fiscal 2021, the Transition Period
and Fiscal 2023, adverse impacts may continue. The extent of the impact of the COVID-19 pandemic on our
business and financial performance will depend on future developments, including any resurgences, which are
uncertain and cannot be predicted.
During Fiscal 2020, the COVID-19 pandemic 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. For example, during Fiscal 2023,
ongoing impacts of the COVID-19 pandemic in China caused labor disruptions resulting in temporary closures of
our Brand and Factory House stores, distribution centers and corporate facilities, as well as negatively impacted
consumer traffic and demand. Although, as of March 31, 2023, substantially all of our Brand and Factory House
stores, distribution centers and corporate facilities in China were open, we may continue to experience varying
degrees of volatility, business disruptions and periods of closure, which may continue to negatively impact our
financial results.
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. Additionally, the COVID-19 pandemic has caused and may continue
to cause global logistical challenges, including increased freight costs, shipping container shortages, transportation
delays, labor shortages and port congestion. While we continue to see improvements across our supply chain,
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 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.
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 latest developments regarding the COVID-19
pandemic closely, we are unable to predict the extent of any continued impact of the pandemic on our business,
operations and financial condition due to the uncertainty of future developments, including the impact of
resurgences, and additional impacts may arise that we are not aware of currently.
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 wholesale customers. Many of our competitors have significant
competitive advantages, including greater financial, distribution, marketing, digital and other resources; longer
12
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, 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 could result in
reductions in floor space in retail locations or 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, the amount of excess
inventory in the marketplace 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.
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 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. 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 (such
as the ongoing conflict between Russia and Ukraine); terrorism; public health crises, disease epidemics or
pandemics (such as COVID-19); natural disasters and extreme weather conditions, which may increase in
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frequency and severity due to climate change; economic instability resulting in the disruption of trade from foreign
countries; the imposition of new laws, regulations and rules, including those relating to sustainability and climate
change, data privacy, labor conditions, minimum wage, quality and safety standards and disease epidemics or other
public health concerns; 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 2023, sales through our wholesale channel represented approximately 59% 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. If our wholesale customers again experience significant disruptions, this could result in 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, such as periods of high inflation and recessionary fears,
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 and we have been unable
to collect all or a portion of the amounts owed to us. 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 realize our long-term growth objectives depends, in part, on our ability to successfully execute
strategic initiatives in key areas including our wholesale, footwear, women’s and direct-to-consumer businesses.
With respect to our direct-to-consumer business, our growth depends on our ability to continue to successfully grow
our digital offerings and experiences throughout the world, expand our global network of Brand and Factory House
stores and continue to increase our product offerings and market share in footwear successfully. Our ability to invest
in these growth initiatives could 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 65% of our total
net revenues in Fiscal 2023, 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 and leverage 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.
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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. In addition, consumers are increasingly focused on the
environmental and social practices of brands, including the sustainability of the products sold. 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. In addition, long lead times for
certain of our products may make it hard for us to respond quickly to changes in consumer demands. Accordingly,
our new products may not receive consumer acceptance. 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 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 may
decline. We also must successfully design and market our performance products for use by consumers in casual
occasions. 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, profitability and long-
term growth plans 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, implementing systems to
evolve towards a more omni-channel approach to service our consumers and establishing and growing consumer
loyalty programs in certain regions. 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. 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.
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
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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. From time to time, we also enter into collaborative arrangements with
athletes, designers or other partners. 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.
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.
Part 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.
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 based on estimated future demand for particular products, and before firm orders are placed by our
wholesale customers. In addition, a portion of our net revenues may be generated by at-once orders for immediate
delivery to wholesale 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 wholesale customers or for our direct-to-consumer channel. 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 wholesale and consumer 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.
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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 2023, 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.
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, the COVID-19 pandemic caused delays and disruptions at ports due to workforce decreases, shipping
backlogs and capacity constraints, container shortages and other disruptions, which resulted in slower than planned
deliveries of inventory and delayed sales to customers. Significant delays or disruption in receiving and distributing
our products, has had, and may again have, an adverse effect on our business, including 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.
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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 and loyalty programs), or supporting our corporate infrastructure (including the development of our new
global headquarters located in the Baltimore Peninsula, an area of Baltimore previously referred to as Port
Covington). 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.
Climate change and an increased focus on sustainability issues, including those related to climate change,
human rights and diversity, equity and inclusion, may have an adverse effect on our brand, sales of our
products and our results of operations.
There are concerns that increased levels of greenhouse gases in the atmosphere have caused, and may
continue to cause, increases in global temperatures, changes in weather patterns and an increase in the frequency
and severity of natural disasters and extreme weather events. Climate change has the potential to impact our
business in numerous ways. These concerns may impact consumer preferences and, if we fail to adapt accordingly,
consumer demand for our product. The physical impacts of climate change, such as an increase in the frequency
and severity of storms and flooding, may increase volatility in the supply chain, which could affect the availability,
quality and cost of raw materials, and disruption to the production and distribution of our products. In addition,
governmental authorities in various countries have proposed, and are likely to continue to propose, legislation and
regulation to reduce or mitigate the impacts of climate change. Various countries and regions are following different
approaches to the regulation of climate change, which could increase the complexity of, and potential cost related to
complying with, such regulations. Any of the foregoing may require us to make additional investments. Failure to
monitor, adapt, build resilience and develop solutions against the physical and transitional impacts from climate
change may negatively impact our brand and reputation, sales of our products and our results of operations.
Certain customers, consumers, investors and other stakeholders are increasingly focusing on the
sustainability and human rights practices of companies, including those related to climate change and diversity,
equity and inclusion. If our sustainability and human rights practices do not meet such stakeholder expectations and
standards, which continue to evolve, our brand and reputation could be negatively impacted. We have published,
and may continue to publish, a sustainability report and other information describing our practices, targets and
commitments on a variety of sustainability and human rights 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
sustainability and human rights practices, targets or commitments or the speed or success of their adoption. We
may incur additional costs, face market and technological barriers, require additional resources or change
investment decisions, which may require us to adjust or restate some or all of our targets and commitments. Any
failure, or perceived failure, to meet stakeholder expectations 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.
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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, collegiate and young 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 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.
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. 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.
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 Fiscal 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 or
personal information and damage to the reputation of our brand. Depending on the system and scope of disruption,
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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. While we have purchased cybersecurity insurance, there can
be no assurance that the coverage would be adequate in relation to any incurred losses. Moreover, as cyber attacks
increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in amounts and on terms
we view as appropriate for our operations.
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 Plank, our founder, Executive Chair and Brand Chief, Stephanie Linnartz, our President and Chief
Executive Officer, 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. Changes in our senior management can also disrupt our business. The failure to
successfully transition and assimilate key employees could adversely affect our results of operations.
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 experienced and well-qualified employees in our industry is intense and we may not
be successful in attracting and retaining such personnel. Additionally, changes to our current and future office
environments, adoption of new work models and requirements about when or how often employees work on-site or
remotely may fail to meet the expectations of our employees and 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.
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.
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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 March 31, 2023, our cash and cash equivalents totaled $712 million. 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 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
21
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 license
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 2023, we generated approximately 34% 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. These amounts can be material. 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. From time to time, our results of
operations have been, and may continue to be, adversely impacted by foreign currency exchange rate fluctuations.
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. From time to time, global macroeconomic factors, such as the ongoing impacts of COVID-19, have
caused and may continue to cause uncertainty in forecasted cash flows, which has resulted and may in the future
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, sustainability and environmental matters, labor and human
rights matters, the marketing and sale of our products, data privacy 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 data privacy, sustainability and climate change, or
changes in the interpretation of existing regulations may result in significant unanticipated compliance costs or
22
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
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.
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 of 2018, the California Privacy Rights Act, state privacy
laws in Virginia, Utah, Connecticut and Colorado 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.
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 proprietary business information and 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 throughout the COVID-19 pandemic and with our implementation
of a hybrid work model for many of our global corporate employees. There can be no assurance that these attacks
will not have a material 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.
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.
23
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 ("BEPS") 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. As a result of this heightened scrutiny, we may experience an increase in income tax audits. In addition,
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 adverse impact on our tax provision.
The OECD has issued rules intended to provide governments new taxing rights over the digital economy
and specific digital services (“Pillar One”), as well as the implementation of a global minimum tax (“Pillar Two”).
Many countries in which we have operations are required to, or voluntarily plan to, implement Pillar Two taxes. For
example, we have operations in the European Union, where member states are required to enact Pillar Two taxes
by December 31, 2023, and in South Korea, which has enacted Pillar Two taxes effective for fiscal years beginning
on or after January 1, 2024. The enactment of Pillar One and Pillar Two taxes in jurisdictions where we have
operations could have a material adverse impact on our global transfer pricing arrangements, tax provision, cash
tax liability, effective tax rate and profitability.
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. Despite our strategic enforcement
efforts, we may not be able to prevent adequately 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, insurance coverage, 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
24
to predict how long the legal proceedings to which we are currently subject will continue. An unfavorable outcome of
any legal proceeding may have a material adverse impact on our business, financial condition and results of
operations or 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 Chair 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 Chair and Brand
Chief, Kevin 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 March 31, 2023.
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
in the Baltimore Peninsula, an area of Baltimore, Maryland previously referred to as Port Covington, 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 occurring in December
2027. 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 March 31, 2023, we leased 439 Brand and Factory House stores located primarily in the
United States, China, Canada, Mexico, Korea, Chile, Australia, the United Kingdom, and Malaysia with lease
25
termination dates occurring in 2023 through 2035. We also lease additional office space for sales, quality assurance
and sourcing, marketing and administrative functions. We anticipate that we will be able to extend these leases that
expire in the near future on satisfactory terms or relocate to other locations.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we have been involved in litigation and other proceedings, including matters related to
commercial disputes and intellectual property, as well as trade, regulatory and other claims related to our business.
See Note 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.
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 May 15, 2023, there were 2,306 record
holders of our Class A Common Stock, 5 record holders of Class B Convertible Common Stock which are
beneficially owned by our Executive Chair and Brand Chief, Kevin A. Plank, and 1,578 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.
Unregistered Sales of Equity Securities and Use of Proceeds
The following table sets forth the Company's repurchases of Class C Common Stock during the quarter
ended March 31, 2023 under the two-year $500 million share repurchase program authorized by our Board of
Directors in February 2022.
Total Number of
Shares Purchased
Average Price
Paid per Share
1,049,821 $
— $
— $
9.14
—
—
Total Number of Shares
Purchased as Part of a
Publicly Announced
Program
Approximately Dollar
Value of Shares that May
Yet be Purchased Under
the Program
(in millions)
1,049,821 $
— $
— $
75.0
75.0
75.0
Period
01/01/2023 to 01/31/2023
02/01/2023 to 02/28/2023
03/01/2023 to 03/31/2023
Dividends
No cash dividends were declared or paid during Fiscal 2023, Fiscal 2021, Fiscal 2020 or the Transition
Period 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.
26
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, 2017 through March 31, 2023. The graph assumes an initial investment of $100 in
Under Armour and each index as of December 31, 2017 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.
12/31/2017
12/31/2018
12/31/2019
12/31/2020
12/31/2021
3/31/2022
3/31/2023
$ 100.00 $ 122.45 $ 149.69 $ 118.99 $ 146.85 $ 117.94 $
65.76
$ 100.00 $
95.62 $ 125.72 $ 148.85 $ 191.58 $ 182.77 $ 168.65
$ 100.00 $
84.24 $ 103.82 $
93.06 $
98.71 $
81.67 $
56.59
Under Armour, Inc.
S&P 500
S&P 500 Apparel, Accessories &
Luxury Goods
ITEM 6. [RESERVED]
Not applicable.
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 "Business" and "Risk Factors".
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."
27
All dollar and percentage comparisons made herein refer to Fiscal 2023 compared with the twelve months
ended March 31, 2022, unless otherwise noted. Please refer to Part II, Item 7 of our Annual Report on Form 10-K,
filed with the Securities Exchange Commission ("SEC") on February 23, 2022, for a comparative discussion of our
Fiscal 2021 financial results as compared to Fiscal 2020, which is incorporated by reference herein.
Fiscal Year End Change
As previously disclosed, we changed our fiscal year end from December 31 to March 31, effective for the
fiscal year beginning April 1, 2022. Our current fiscal year began on April 1, 2022 and ended on March 31, 2023
("Fiscal 2023"). We refer to the period beginning on January 1, 2022 and ending on March 31, 2022 as the
"Transition Period". We filed a Transition Report on Form 10-QT that included financial information for the Transition
Period with the SEC on May 9, 2022. Our 2021 fiscal year began on January 1, 2021 and ended on December 31,
2021 ("Fiscal 2021"). There was no Fiscal 2022.
We have presented the twelve months ended March 31, 2022 as a comparison to our results for Fiscal
2023 as we believe this comparison is more meaningful to a reader’s understanding of our Fiscal 2023 results of
operations than a comparison to Fiscal 2021. A comparison of the three-months ended March 31, 2022 to the three-
months ended March 31, 2021 may be found in Part I, Item 2, of our Transition Report on Form 10-QT for the three-
months ended March 31, 2022 filed with the SEC on May 9, 2022.
The following tables have been included to help readers better understand how the statement of operations
and statement of cash flows for the twelve months ended March 31, 2022 were derived.
(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)
Income (loss) from equity method investments
Deduct:
Add:
Year ended
December 31,
2021
Three Months
ended March 31,
2021
Three Months
Ended March 31,
2022
Twelve months
ended
March 31, 2022
$
5,683,466 $
1,257,195 $
1,300,945 $
5,727,216
2,821,967
2,861,499
2,334,691
40,518
486,290
(44,300)
(51,113)
390,877
32,072
1,255
628,554
628,641
514,638
7,113
106,890
(14,137)
(7,180)
85,573
9,881
2,060
695,781
605,164
594,446
56,674
(45,956)
(6,154)
(51)
(52,161)
8,181
732
2,889,194
2,838,022
2,414,499
90,079
333,444
(36,317)
(43,984)
253,143
30,372
(73)
Net income (loss)
$
360,060 $
77,752 $
(59,610) $
222,698
(In thousands)
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash
and cash equivalents
Net increase (decrease) in cash and cash
equivalents
OVERVIEW
Deduct:
Add:
Year ended
December 31,
2021
Three Months
ended March 31,
2021
Three Months
Ended March 31,
2022
Twelve months
ended
March 31, 2022
$
664,829 $
(150,588) $
(321,443) $
493,974
(68,346)
(418,737)
(7,904)
(3,443)
(39,923)
(310,512)
(100,365)
(725,806)
(23,391)
(6,900)
11,134
(5,357)
$
154,355 $
(168,835) $
(660,744) $
(337,554)
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
28
and worn by athletes at all levels, from youth to professional, on playing fields around the globe, and by consumers
with active lifestyles.
Strategically and operationally, we remain focused on driving premium brand-right growth and improved
profitability. We plan to continue to grow our business over the long-term through increased sales of our apparel,
footwear and accessories; growth in our direct-to-consumer sales channel; and expansion of our wholesale
distribution. We believe that achievement of our long-term growth objectives depends, in part, on our ability to
execute strategic initiatives in key areas including our wholesale, footwear, women’s and direct-to-consumer
businesses. Additionally, our digital strategy is focused on supporting these long-term objectives, emphasizing
connection and engagement with our consumers through multiple digital touchpoints.
During Fiscal 2023, we faced a challenging retail environment that included higher promotions and
discounting related to industry-wide elevated inventory balances, ongoing COVID-19 related impacts in China and
further negative impacts from changes in foreign currency rates.
Fiscal 2023 Performance
Financial highlights for Fiscal 2023 as compared to the twelve months ended March 31, 2022 include:
•
Total net revenues increased 3.1%.
• Within our channels, wholesale revenue increased 5.9% and direct-to-consumer revenue decreased 2.5%.
• Within our product categories, apparel revenue decreased 0.9%, footwear revenue increased 16.3%, and
accessories revenue decreased 7.4%.
•
Net revenue in Europe, the Middle East and Africa ("EMEA"), Latin America and Asia-Pacific increased
13.2%, 10.7% and 2.7%, respectively, while revenue decreased 0.6% in North America.
• Gross margin decreased 470 basis points to 44.9%.
•
Selling, general and administrative expenses decreased 2.0%.
COVID-19 Update
The COVID-19 pandemic has caused, and may continue to cause, disruption and volatility in our business
and in the businesses of our wholesale customers, licensing partners, suppliers, logistics providers and vendors.
During Fiscal 2023, we continued to experience COVID-19 related impacts, including global logistical
challenges, such as increased freight costs and transportation delays, and labor disruptions in China, which caused
temporary closures of our Brand and Factory House stores, distribution centers and corporate facilities in China and
negatively impacted consumer traffic and demand. As of March 31, 2023, we continue to see improvements across
our supply chain, including progress towards a return to pre-pandemic production efficiency and improving freight
costs, and all of our Brand and Factory House stores, distribution centers and corporate facilities in China were
open. However, the ongoing impacts of the COVID-19 pandemic negatively impacted our financial results for Fiscal
2023, and we cannot predict how the COVID-19 pandemic may impact our business and results of operations in
Fiscal 2024.
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.
Effects of Inflation and Other Global Events
Macroeconomic factors, such as inflationary pressures and fluctuations in foreign currency exchange rates
have and may continue to impact our business. We continue to monitor these factors and the potential impacts they
may have on our financial results, including product input costs, freight costs and consumer discretionary spending
and therefore consumer demand for our products. We also continue to monitor the broader impacts of the Russia
Ukraine conflict on the global economy, including its effect on inflationary pressures and the price of oil globally.
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 impact our sales, profitability and financial condition"; "—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"; "—Our financial results and ability to grow our business may be negatively impacted by global events
beyond our control"; and "—Financial Risks—Our financial results could be adversely impacted by currency
exchange rate fluctuations" included in Item 1A of this Annual Report on Form 10-K.
29
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)
Income (loss) from equity method investments
Net income (loss)
(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)
Year ended
March 31, 2023
Twelve months ended
March 31, 2022
$
5,903,636 $
3,254,296
2,649,340
2,365,529
—
283,811
(12,826)
16,780
287,765
(101,046)
(2,042)
386,769 $
$
5,727,216
2,889,194
2,838,022
2,414,499
90,079
333,444
(36,317)
(43,984)
253,143
30,372
(73)
222,698
Year ended
March 31, 2023
Twelve months ended
March 31, 2022
100.0 %
55.1 %
44.9 %
40.1 %
— %
4.8 %
(0.2) %
0.3 %
4.9 %
(1.7) %
— %
6.6 %
100.0 %
50.4 %
49.6 %
42.2 %
1.6 %
5.8 %
(0.6) %
(0.8) %
4.4 %
0.5 %
— %
3.9 %
30
Revenues
Net revenues consist of net sales, license revenues, and revenues from digital subscriptions, other digital
business opportunities 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. The following tables summarize net revenues by product category and distribution channel for the
periods indicated:
(In thousands)
Net Revenues by Product Category
Apparel(2)
Footwear
Accessories
Net Sales
License revenues
Corporate Other (3)
Total net revenues
Net Revenues by Distribution Channel
Wholesale
Direct-to-consumer(2)
Net Sales
License revenues
Corporate Other (3)
Total net revenues
Year ended
March 31, 2023
Twelve months
ended
March 31, 2022
Change
$
Change
%(1)
$
3,871,638 $
3,907,812 $
(36,174)
1,455,265
1,251,776
408,521
441,301
5,735,424
5,600,889
116,746
51,466
117,568
8,759
203,489
(32,780)
134,535
(822)
42,707
$
5,903,636 $
5,727,216 $
176,420
$
3,468,126 $
3,275,341 $
192,785
2,267,298
5,735,424
116,746
51,466
2,325,548
5,600,889
117,568
8,759
(58,250)
134,535
(822)
42,707
$
5,903,636 $
5,727,216 $
176,420
(0.9) %
16.3 %
(7.4) %
2.4 %
(0.7) %
N/M
3.1 %
5.9 %
(2.5) %
2.4 %
(0.7) %
N/M
3.1 %
(1) "N/M" = not meaningful
(2) During the Fiscal 2023, we recognized approximately $10.1 million of revenue relating to gift cards not expected to be redeemed ("breakage"),
which was previously included in contract liabilities. Refer to Note 11 of the Consolidated Financial Statements for additional details.
(3) 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, as well as subscription revenues from MMR and
revenue from other digital business opportunities.
Net sales
Net sales increased by $134.5 million, or 2.4%, to $5,735.4 million during Fiscal 2023, from $5,600.9 million
during the twelve months ended March 31, 2022. Apparel decreased primarily due to lower average selling prices,
resulting from higher discounts and promotions and the impact of foreign exchange rates, partially offset by higher
unit sales and favorable channel mix. Additionally, apparel was positively impacted by the recognition of breakage
relating to gift cards, as described in the table above. Footwear increased primarily due to higher unit sales which
benefited from better product availability, partially offset by the impact of foreign exchange rates and unfavorable
channel mix. Accessories decreased primarily due to lower average selling prices, the impact of foreign exchange
rates and unfavorable channel mix. From a channel perspective, the increase in net sales was due to an increase in
wholesale, partially offset by a decrease in direct-to-consumer.
License revenues
License revenues decreased by $0.8 million or 0.7%, to $116.7 million during Fiscal 2023, from $117.6
million during the twelve months ended March 31, 2022. This was primarily due to lower revenues from our
Japanese licensee, partially offset by higher revenues from our licensing partners in the North America region.
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
31
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 $79.5 million in Fiscal
2023 (twelve months ended March 31, 2022: $76.9 million).
Gross profit decreased by $188.7 million to $2,649.3 million during Fiscal 2023, from $2,838.0 million during
the twelve months ended March 31, 2022. Gross profit as a percentage of net revenues, or gross margin,
decreased to 44.9% from 49.6%. This decrease in gross margin of 470 basis points was primarily driven by
negative impacts of approximately:
•
•
•
•
•
•
170 basis points from higher promotions and discounting within our direct-to-consumer channel and
unfavorable pricing of sales to the off-price channel;
130 basis points of supply chain impact mainly due to higher product input costs and freight costs;
70 basis points from unfavorable channel impacts;
50 basis points from changes in foreign currency;
30 basis points from unfavorable product mix due to the strength of footwear sales; and
20 basis points from unfavorable regional mix.
We expect higher discounting and promotional activities and elevated product input costs to continue to
negatively impact our gross margin in the near term.
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.
(In thousands)
Year ended
March 31, 2023
Twelve months
ended
March 31, 2022
Change
$
Change
%
Selling, General and Administrative Expenses
$
2,365,529 $
2,414,499 $
(48,970)
(2.0) %
Selling, general and administrative expenses decreased by $49.0 million, or 2.0%, during Fiscal 2023 as
compared to the twelve months ended March 31, 2022. Within selling, general and administrative expense:
• Marketing costs decreased $65.3 million or 9.6%, due to lower marketing activity during the period. As a
percentage of net revenues, marketing costs decreased to 10.5% from 11.9%.
• Other costs increased $16.4 million or 0.9%, primarily driven by higher salaries, other selling expenses,
litigation accrual, travel expenses and facility-related expenses, partially offset by lower incentive
compensation expenses and lower consulting expenses. As a percentage of net revenues, other costs
decreased to 29.6% from 30.2%.
As a percentage of net revenues, selling, general and administrative expenses decreased to 40.1% during
Fiscal 2023 as compared to 42.2% during the twelve months ended March 31, 2022.
32
Restructuring and Impairment Charges
(In thousands)
Year ended
March 31, 2023
Twelve months
ended
March 31, 2022
Change
$
Change
%
Restructuring and Impairment Charges
$
— $
90,079 $
(90,079)
(100.0) %
Restructuring and impairment charges within our operating expenses were $90.1 million during the twelve
months ended March 31, 2022. No charges were recorded during Fiscal 2023. See Note 12 to our Consolidated
Financial Statements.
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.
(In thousands)
Interest expense, net
Year ended
March 31, 2023
Twelve months
ended
March 31, 2022
Change
$
Change
%
$
12,826 $
36,317 $
(23,491)
(64.7) %
Interest expense, net decreased by $23.5 million to $12.8 million during Fiscal 2023. This was primarily due
to an increase in interest income as a result of higher interest rates and a reduction in interest expense on our
Convertible Senior Notes as a result of repurchasing approximately $419.1 million in aggregate principal amount
during the twelve months ended March 31, 2022. See Note 8 to our Consolidated Financial Statements.
Other Income (Expense), net
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, 5th Avenue location.
(In thousands)
Year ended
March 31, 2023
Twelve months
ended
March 31, 2022
Change
$
Change
%
Other income (expense), net
$
16,780 $
(43,984) $
60,764
138.2 %
Other income (expense), net increased by $60.8 million to income of $16.8 million during Fiscal 2023. This
was primarily due to a loss of $58.5 million that was recognized during the twelve months ended March 31, 2022
upon the extinguishment of $419.1 million in principal amount of our Convertible Senior Notes. Additionally, other
income increased during Fiscal 2023, due to a $10 million higher earnout recorded in connection with the sale of the
MyFitnessPal platform. These increases were offset by losses on foreign currency hedges of $5.9 million and losses
from changes in foreign currency exchange rates of $2.4 million.
Income Tax Expense (Benefit)
(In thousands)
Year ended
March 31, 2023
Twelve months
ended
March 31, 2022
Change
$
Change
%
Income tax expense (benefit)
$
(101,046) $
30,372 $
(131,418)
(432.7) %
During Fiscal 2023, income tax expense decreased $131.4 million resulting in an income tax benefit of
$101.0 million from an income tax expense of $30.4 million during the twelve months ended March 31, 2022. The
change was primarily due to the recognition of an income tax benefit from the release of the U.S. federal valuation
allowance on beginning of year deferred tax assets.
On August 16, 2022, the Inflation Reduction Act (the "Act") was enacted and signed into law in the United
States. The Act contains a number of revisions to the Internal Revenue Code, including a 15% corporate minimum
tax and a 1% excise tax on corporate stock repurchases in tax years beginning after December 31, 2022. We do not
expect these tax provisions to have a material impact to our consolidated financial statements.
33
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.
We exclude certain corporate items from our segment profitability measures. We report these items within
Corporate Other, which is designed to provide increased transparency and comparability of our operating segments'
performance. Corporate Other consists primarily of (i) operating results related to our MMR platforms and other
digital business opportunities; (ii) general and administrative expenses not allocated to an operating segment,
including expenses associated with centrally managed departments which include global marketing, global IT, global
supply chain and innovation, and other corporate support functions; (iii) restructuring and restructuring related
charges; and (iv) 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
(In thousands)
North America (2)
EMEA
Asia-Pacific
Latin America
Corporate Other (3)
Total net revenues
Year ended
March 31, 2023
Twelve months
ended
March 31, 2022
$
3,820,993 $
3,845,746 $
992,624
825,338
213,215
51,466
876,684
803,450
192,577
8,759
Change
$
Change
%(1)
(24,753)
115,940
21,888
20,638
42,707
(0.6) %
13.2 %
2.7 %
10.7 %
N/M
3.1 %
$
5,903,636 $
5,727,216 $
176,420
(1) "N/M" = not meaningful
(2) During Fiscal 2023, we recognized approximately $10.1 million of revenue relating to gift cards not expected to be redeemed ("breakage"),
which was previously included in contract liabilities. Refer to Note 11 of the Consolidated Financial Statements for additional details.
(3) 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, as well as subscription revenues from MMR and
revenue from other digital business opportunities.
The increase in total net revenues for Fiscal 2023, compared to the twelve months ended March 31, 2022,
was driven by the following:
•
•
•
•
Net revenues in our North America region decreased by $24.8 million, or 0.6%, to $3,821.0 million from
$3,845.7 million. This was driven by a decrease in both our direct-to-consumer channel, which includes the
recognition of breakage relating to gift cards as described in the table above, and our wholesale channel,
partially offset by an increase in license revenues. Within our direct-to-consumer channel, net revenues
were lower due to a decrease in owned and operated retail store sales, partially offset by an increase in e-
commerce sales.
Net revenues in our EMEA region increased by $115.9 million, or 13.2%, to $992.6 million from
$876.7 million. This was primarily driven by an increase in both our wholesale channel and direct-to-
consumer channel. Within our direct-to-consumer channel, net revenues increased in both owned and
operated retail store sales and e-commerce sales. Net revenues in our EMEA region were also negatively
impacted by changes in foreign exchange rates.
Net revenues in our Asia-Pacific region increased by $21.9 million, or 2.7%, to $825.3 million from
$803.5 million. This was driven by an increase in our wholesale channel, partially offset by a decrease in
our direct-to-consumer channel and a decrease in license revenues from our Japanese licensee. Within our
direct-to-consumer channel, net revenues were lower due to decreases in both e-commerce and owned
and operated retail store sales, which were negatively impacted by COVID-19 related restrictions and
limitations in China. Net revenues in our Asia-Pacific region were also negatively impacted by changes in
foreign exchange rates.
Net revenues in our Latin America region increased by $20.6 million, or 10.7%, to $213.2 million from
$192.6 million. This was primarily driven by an increase in our wholesale channel, as we have moved to a
distributor operating model for certain countries within this region. Within our direct-to-consumer channel,
34
net revenues were slightly higher due to increases in both owned and operated retail store sales and e-
commerce sales.
•
Net revenues in our Corporate Other non-operating segment increased by $42.7 million to $51.5 million
from $8.8 million. This was primarily driven by foreign currency hedge gains related to revenues generated
by entities within our operating segments, but managed through our central foreign exchange risk
management program.
Operating Income (loss)
(In thousands)
North America
EMEA
Asia-Pacific
Latin America
Corporate Other (1)
Year ended
March 31, 2023
Twelve months
ended
March 31, 2022
Change
$
Change
%
$
734,881 $
915,615 $
(180,734)
112,161
100,276
23,487
136,252
91,862
27,274
(686,994)
(837,559)
(24,091)
8,414
(3,787)
150,565
(49,633)
(19.7) %
(17.7) %
9.2 %
(13.9) %
18.0 %
(14.9) %
Total operating income (loss)
$
283,811 $
333,444 $
(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, as well as subscription revenues from MMR and
revenue from other digital business opportunities. Corporate Other also includes expenses related to our central supporting functions.
The decrease in total operating income for Fiscal 2023, compared to the twelve months ended March 31,
2022, was primarily driven by the following:
• Operating income in our North America region decreased by $180.7 million to $734.9 million from $915.6
million. This was primarily due to a decline in gross profit and higher distribution and selling expenses,
partially offset by lower marketing-related expenses. The decline in gross profit was driven by higher
product input and freight costs, increased promotions and discounting and lower net revenues as discussed
above.
• Operating income in our EMEA region decreased by $24.1 million to $112.2 million from $136.3 million. This
was primarily due to a decline in gross profit, higher distribution and selling expenses and higher bad debt
expense, partially offset by lower marketing-related expenses. The decline in gross profit was driven by
unfavorable channel mix, partially offset by higher net revenues as discussed above.
• Operating income in our Asia-Pacific region increased by $8.4 million to $100.3 million from $91.9 million.
This was primarily due to a decrease in marketing-related expenses, consulting expenses and facility-
related expenses, partially offset by a decline in gross profit. The decline in gross profit was driven by
increased promotions and discounting, partially offset by higher net revenues as discussed above.
• Operating income in our Latin America region decreased by $3.8 million to $23.5 million from $27.3 million.
This was primarily due to higher freight and distribution costs, partially offset by higher net revenues.
• Operating loss in our Corporate Other non-operating segment decreased by $150.6 million to $687.0 million
from $837.6 million. This was primarily due to gains from foreign currency hedges, lower incentive
compensation expenses and no further restructuring charges, partially offset by an increase in salaries
expenses and litigation expenses.
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
corporate facilities, including construction of our new global headquarters, 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
35
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, we strive to
enhance our inventory performance by focusing on adding discipline around product purchasing, reducing
production lead time and improving planning and execution for selling excess inventory through our Factory House
stores and other liquidation channels.
As of March 31, 2023, we had approximately $711.9 million 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, as described below, in
February 2022, our Board of Directors authorized the repurchase of up to $500 million of our Class C Common
Stock over the following two years and, subsequently, during the Transition Period and Fiscal 2023, we entered into
agreements related to accelerated share repurchase transactions to repurchase $425 million of our Class C
Common Stock.
If there are unexpected material impacts to our business in future periods from COVID-19 or other global
macroeconomic factors 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, reducing compensation costs, including through temporary reductions in pay and layoffs,
limiting certain marketing and capital expenditures, and negotiating, extending or delaying payment terms with our
customers and vendors. 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 and could require us to take certain of the liquidity preserving actions
described above.
As of March 31, 2023, $396.5 million or approximately 56% 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 borrow in the United States or elect to repatriate indefinitely reinvested foreign funds. 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 recognized foreign exchange rate
impacts. Determination of the unrecorded deferred tax liability that would be incurred if such amounts were
repatriated is not practicable.
Refer to our "Risk Factors" section included in Item 1A of this Annual Report on Form 10-K.
Share Repurchase Program
On February 23, 2022, our Board of Directors authorized us to repurchase up to $500 million (exclusive of
fees and commissions) of outstanding shares of our Class C Common Stock over the following 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, our financial condition, results of operations, liquidity and other factors.
Pursuant to the previously disclosed accelerated share repurchase transactions that we entered into in
February 2022, May 2022, August 2022 and November 2022 (the "ASR Agreements"), we repurchased 18.7 million
and 16.2 million shares of Class C Common Stock, which were immediately retired, during Fiscal 2023 and the
Transition Period, respectively. As a result, $174.0 million was recorded to retained earnings to reflect the difference
between the market price of the Class C Common Stock repurchased and its par value during Fiscal 2023
(Transition Period: $240.0 million).
36
As of the date of this Annual Report on Form 10-K, we have repurchased a total of $425 million or
34.9 million outstanding shares of our Class C Common Stock under the share repurchase program.
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 March 31, 2023. The
operating leases generally contain renewal provisions for varying periods of time. Our significant contractual
obligations and commitments as of March 31, 2023 are summarized in the following table:
(In thousands)
Long term debt obligations (1)
Operating Lease obligations (2)
Product purchase obligations (3)
Sponsorships and other (4)
Payments Due by Period
Total
Less Than 1 Year
1 to 3 Years
3 to 5 Years
More Than 5
Years
$
750,990 $
20,714 $
120,526 $
609,750 $
—
1,027,700
1,161,097
412,425
176,218
1,161,097
290,688
199,724
361,070
83,342
189,758
—
—
40,575
—
98,750
Total future minimum payments $
3,352,212 $
1,441,371 $
600,972 $
850,049 $
459,820
(1) Includes estimated interest payments based on applicable fixed interest rates as of March 31, 2023, 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 $14.2 million for Fiscal 2023.
(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 March 31,
2023.
(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 $58.8 million for uncertain tax positions, inclusive of related interest
and penalties, as the Company is unable to reasonably estimate the timing an amount of future cash 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
Effect of exchange rate changes on cash and cash equivalents
Year ended
March 31, 2023
Twelve months
ended
March 31, 2022
Change
$
$
(9,914) $
493,974 $
(503,888)
(152,796)
(126,375)
(5,315)
(100,365)
(725,806)
(5,357)
(52,431)
599,431
42
Net increase (decrease) in cash and cash equivalents
$
(294,400) $
(337,554) $
43,154
37
Operating Activities
Cash flows from operating activities decreased by $503.9 million, as compared to the twelve months ended
March 31, 2022, primarily driven by a decrease in net income before the impact of non-cash items of $54.0 million
and a decrease from changes in working capital of $449.9 million.
The changes in working capital were due to the following outflows:
•
•
•
•
$411.3 million from changes in inventories;
$140.7 million from changes in other non-current assets;
$69.5 million from changes in accounts receivable; and
$20.3 million from changes in prepaid expenses and other current assets.
These outflows were partially offset by the following working capital inflows:
•
•
•
•
$127.6 million from changes in accrued expenses and other liabilities;
$33.2 million from changes in customer refund liabilities;
$26.4 million from changes in accounts payable; and
$5.0 million from changes in income taxes payable and receivable, net.
Investing Activities
Cash flows used in investing activities increased by $52.4 million, as compared to the twelve months ended
March 31, 2022. This was primarily due to an increase in capital expenditures, partially offset by the collection of the
year one earn-out previously recorded in connection with the sale of the MyFitnessPal platform.
Total capital expenditures during Fiscal 2023 were $187.8 million, or approximately 3% of net revenues,
representing an $86.6 million increase from $101.2 million during the twelve months ended March 31, 2022. During
Fiscal 2021, we reduced capital expenditures in response to ongoing uncertainty related to COVID-19. Our long-
term operating principle for capital expenditures is to spend between 3% and 5% of annual net revenues as we
invest in our global direct-to-consumer, e-Commerce and digital businesses, information technology systems,
distribution centers and our global offices, including our new global headquarters in the Baltimore Peninsula, an
area of Baltimore, Maryland, previously referred to as Port Covington. During Fiscal 2023, we incurred capital
expenditures of $68.1 million relating to the construction of our new global headquarters. As previously disclosed,
our plans for our new headquarters have been designed in line with our long-term sustainability strategy and include
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 next few years to include
investments incorporating sustainable and intelligent building design features into this facility.
Financing Activities
Cash flows used in financing activities decreased by $599.4 million, as compared to the twelve months
ended March 31, 2022. During the twelve months ended March 31, 2022, we paid $506.3 million to certain
exchanging holders for the exchange of approximately $419.1 million in aggregate principal amount of our 1.50%
Convertible Senior Notes. Concurrently with these exchanges we terminated certain capped call agreements and in
exchange received approximately $91.7 million. For more details, see discussion below under "1.50% Convertible
Senior Notes". Additionally, during Fiscal 2023 and the twelve months ended March 31, 2022, we paid $125.0
million and $300.0 million, respectively, to repurchase shares of our Class C Common Stock through accelerated
share repurchase programs. For more details, see discussion above under "Share Repurchase Program".
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, May 2021 and December 2021, we entered into the first, second and third
amendments to the credit agreement, respectively (the credit agreement as amended and the "amended credit
agreement" or the "revolving credit facility"). The amended credit agreement provides for revolving credit
commitments of $1.1 billion and has a term that ends on December 3, 2026, with permitted extensions under certain
circumstances. As of March 31, 2023 and March 31, 2022, there were no amounts outstanding under the revolving
credit facility.
38
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 March 31, 2023, there was $4.4 million of
letters of credit outstanding (March 31, 2022: $4.5 million).
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. The amended credit agreement 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 March 31, 2023, 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.
The amended credit agreement implements SOFR as the replacement of LIBOR as a benchmark interest
rate for the U.S. dollar borrowings (and analogous benchmark rate replacements for borrowings in Yen, Canadian
dollars, Pound Sterling and Euro). 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. As of March 31, 2023,
the commitment fee was 17.5 basis points.
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 fixed 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.
39
During Fiscal 2021, we entered into exchange agreements with certain holders of the Convertible Senior
Notes, who agreed to exchange approximately $419.1 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 "Exchanges"). In connection with the Exchanges, we paid approximately $507.0 million cash and issued
approximately 18.8 million shares of the Company's Class C Common Stock to the exchanging holders. Additionally,
we recognized losses on debt extinguishment of $58.5 million during Fiscal 2021, within Other Income (Expense),
net on our Consolidated Statements of Operations. Following the Exchanges, approximately $80.9 million
aggregate principal amount of the Convertible Senior Notes remain outstanding as of March 31, 2023.
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.
Beginning on 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.
During Fiscal 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
40
cash settlement amount in respect of the portion of capped call transactions being terminated. We received
approximately $91.7 million in connection with such termination agreements related to the Exchanges.
The Convertible Senior Notes contain a cash conversion feature. Prior to the adoption of Accounting
Standards Update ("ASU") No. 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"), we had separated
it into liability and equity components. We 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 was 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.
We adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method. As a result, the
Convertible Senior Notes are no longer accounted for as separate liability and equity components, but rather a
single liability. See Note 2 to the Condensed Consolidated Financial Statements included in Part I of our Transition
Report on Form 10-QT for the three months ended March 31, 2022 for more details.
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. The Senior Notes bear interest at the fixed rate of 3.250% per annum, 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.
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.
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 March 31, 2023 and 2022, there
were $160.5 million and $159.6 million, respectively, in reserves for returns, allowances, markdowns and discounts
within customer refund liability and $40.7 million and $44.3 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.
41
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 March 31, 2023 and 2022, the allowance for doubtful
accounts was $10.8 million and $7.1 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 March 31, 2023 and
2022, the inventory reserve was $34.8 million and $26.8 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
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. We have 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.
42
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 March 31, 2023, we have considered all available evidence, both
positive and negative, including but not limited to the following:
Positive
•
•
•
•
•
•
Current year pre-tax earnings including positive financial taxable income in the U.S. federal jurisdiction.
Prior three-year cumulative positive financial taxable income in the U.S. federal jurisdiction.
Forecasted future positive financial taxable income in the U.S.
No material definite lived tax attributes (excluding capital loss) subject to expiration in the near short
term.
No history of U.S. federal and material state tax attributes expiring unused.
Available prudent and feasible tax planning strategies.
Negative
•
•
•
Prior three-year cumulative financial taxable loss in the U.S. state jurisdictions.
Inherent challenges in forecasting sufficient future U.S. state pre-tax earnings to overcome existing
cumulative losses in prior years.
Existing definite life state attributes related to credits and net operating losses.
As of March 31, 2023, we believe that the weight of the positive evidence outweighs the negative evidence
regarding the realization of our U.S. federal deferred tax assets, resulting in the release of the corresponding
valuation allowances in the fourth quarter of the Fiscal 2023. The release of U.S. federal valuation allowance
(excluding capital losses) resulted in a material benefit to income tax expense and net income in the period. As of
March 31, 2023, for U.S. states, we believe the weight of the negative evidence continues to outweigh the positive
evidence regarding the realization of the state deferred tax assets and have maintained a valuation allowance
against these assets. Our current forecast for the U.S. indicates that there is a possibility that within the next 12
months, sufficient positive evidence may become available to reach a conclusion that a portion of the U.S state
valuation allowance will no longer be required. The actualization of these forecasted results may result in a reversal
of a portion of previously recorded U.S state 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. The timing and
amount are subject to change based on the actual profitability that we are able to actually achieve in the United
States.
As of each reporting date, management considers new evidence, both positive and negative, that could affect
its view of the future realization of deferred tax assets. 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.
43
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 March 31, 2023, 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/Mexican Peso and U.S.
Dollar/South Korean Won 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 for the currencies listed above and presents the notional amounts
and weighted average exchange rates by contractual maturity dates:
Fiscal year ending March 31,
Fair Value as of
(In thousands)
2024
2025
2026
2027
On-Balance Sheet Financial Instruments
USD Functional Currency
2028 and
There-
after
Total
March 31,
2023
March 31,
2022
December
31, 2021
EUR
Notional
$ 91,046 $ 22,218 $
— $
— $
— $ 113,264 $
(3,263) $
2,238 $
4,447
Weighted Average
Exchange Rate
1.07
1.05
1.07
GBP
Notional
213,437
43,741
—
—
— 257,178
6,024
8,764
3,270
Weighted Average
Exchange Rate
1.29
1.19
1.27
CNY Functional Currency
USD
Notional
121,935
35,842
—
—
— 157,777
2,461
(7,691)
(6,090)
Weighted Average
Exchange Rate
6.65
6.75
6.67
CAD Functional Currency
USD
Notional
71,318
32,491
—
—
— 103,809
3,538
(775)
(343)
Weighted Average
Exchange Rate
1.29
1.32
1.30
MXN Functional Currency
USD
Notional
75,527
15,568
—
—
—
91,095
(15,271)
(2,917)
(237)
Weighted Average
Exchange Rate
22.00
22.58
22.10
KRW Functional Currency
USD
Notional
25,561
16,714
—
—
—
42,275
646
(1,790)
—
Weighted Average
Exchange Rate
1,234.64 1,310.96
1,264.82
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 March 31, 2023, the aggregate
notional value of our outstanding cash flow hedges was $799.7 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.
44
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
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 March 31, 2023. 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 pressures have and may continue to adversely affect our operating results. We continue to
monitor these factors and the potential impacts they may have on our financial results, including product input costs,
freight costs and consumer discretionary spending and therefore consumer demand on our products. 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 impact
our sales, profitability and financial condition" included in Item 1A of this Annual Report on Form 10-K.
45
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 March 31, 2023.
The effectiveness of our internal control over financial reporting as of March 31, 2023, has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which
appears herein.
/s/ STEPHANIE C. LINNARTZ
President and Chief Executive Officer
Stephanie C. Linnartz
/s/ DAVID E. BERGMAN
David E. Bergman
Dated: May 24, 2023
Chief Financial Officer
46
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 March 31, 2023, March 31, 2022 and December 31, 2021, and the related consolidated
statements of operations, of comprehensive income (loss), of stockholders' equity and of cash flows for the year
ended March 31, 2023, for the three months ended March 31, 2022 and for the years ended December 31, 2021
and 2020, including the related notes and schedule of valuation and qualifying accounts for the year ended March
31, 2023, for the three months ended March 31, 2022 and for the years ended December 31, 2021 and 2020 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 March 31, 2023, 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 March 31, 2023, March 31, 2022 and December 31, 2021, and the results of
its operations and its cash flows for the year ended March 31, 2023, for the three months ended March 31, 2022
and for the years ended December 31, 2021 and 2020 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 March 31, 2023, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the COSO.
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,
47
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
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 Note 2 to the consolidated financial statements, the Company recorded $160.5 million as of March
31, 2023 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 (i) the significant judgment by management in developing the estimate of
reserve for customer returns, and (ii) a 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 management’s estimate of the reserve for customer returns, 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 management’s significant assumption related to the amount of outstanding returns
that have not yet been received by the Company. Evaluating management’s significant 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
May 24, 2023
We have served as the Company's auditor since 2003.
48
Under Armour, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share data)
March 31,
2023
March 31,
2022
December 31,
2021
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 (Note 5)
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)
Class A Common Stock, $0.0003 1/3 par value; 400,000,000
shares authorized as of March 31, 2023, March 31, 2022 and
December 31, 2021; 188,704,689 shares issued and outstanding
as of March 31, 2023 (March 31, 2022: 188,668,560 and
December 31, 2021: 188,650,987)
Class B Convertible Common Stock, $0.0003 1/3 par value;
34,450,000 shares authorized, issued and outstanding as of March
31, 2023, March 31, 2022 and December 31, 2021
Class C Common Stock, $0.0003 1/3 par value; 400,000,000
shares authorized as of March 31, 2023, March 31, 2022 and
December 31, 2021; 221,346,517 shares issued and outstanding
as of March 31, 2023 (March 31, 2022: 238,472,217 and
December 31, 2021: 253,161,064)
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)
$
$
$
711,910 $
759,860
1,190,253
297,563
2,959,586
672,736
489,306
481,992
8,940
186,167
58,356
4,857,083 $
649,116 $
354,643
160,533
140,990
51,609
1,356,891
674,478
705,713
121,598
2,858,680
1,009,139 $
702,197
824,455
297,034
2,832,825
601,365
420,397
491,508
10,580
20,141
76,016
4,452,832 $
560,331 $
317,963
159,628
134,833
125,840
1,298,595
672,286
668,983
84,014
2,723,878
63
11
73
63
11
79
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
63
11
84
1,136,536
929,562
(67,842)
1,046,961
721,926
(40,086)
1,998,403
4,857,083 $
1,728,954
4,452,832 $
$
1,108,613
1,027,833
(47,610)
2,088,994
4,991,396
See accompanying notes.
49
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
Three Months
Ended
March 31, 2022
(Transition
Period)
Year Ended
March 31, 2023
Year Ended
December 31,
2021
Year Ended
December 31,
2020
$
5,903,636 $
1,300,945 $
5,683,466 $
4,474,667
3,254,296
2,649,340
2,365,529
—
283,811
(12,826)
16,780
287,765
(101,046)
(2,042)
695,781
605,164
594,446
56,674
(45,956)
(6,154)
(51)
2,821,967
2,861,499
2,334,691
40,518
486,290
(44,300)
(51,113)
(52,161)
390,877
8,181
732
32,072
1,255
2,314,572
2,160,095
2,171,934
601,599
(613,438)
(47,259)
168,153
(492,544)
49,387
(7,246)
Net income (loss)
$
386,769 $
(59,610) $
360,060 $
(549,177)
Basic net income (loss) per share of Class A, B and C
common stock (Note 18)
Diluted net income (loss) per share of Class A, B and
C common stock (Note 18)
$
$
0.86 $
(0.13) $
0.77 $
(1.21)
0.84 $
(0.13) $
0.77 $
(1.21)
Weighted average common shares outstanding
Class A, B and C common stock
Basic
Diluted
451,426
461,509
471,425
471,425
465,504
468,644
454,089
454,089
See accompanying notes.
50
Under Armour, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
Net income (loss)
Other comprehensive income (loss):
Three Months
Ended
March 31, 2022
(Transition
Period)
Year Ended
March 31, 2023
Year Ended
December 31,
2021
Year Ended
December 31,
2020
$
386,769 $
(59,610) $
360,060 $
(549,177)
Foreign currency translation adjustment
(10,402)
7,045
(6,552)
(5,060)
Unrealized gain (loss) on cash flow hedges, net of tax
benefit (expense) of $6,241, $(909), $(5,725) and
$1,791 for the year ended March 31, 2023, three
months ended March 31, 2022 and years ended
December 31, 2021, 2020, respectively.
Gain (loss) on intra-entity foreign currency
transactions
1,473
758
18,603
(18,075)
(18,827)
(279)
(476)
14,715
Total other comprehensive income (loss)
(27,756)
7,524
11,575
(8,420)
Comprehensive income (loss)
$
359,013 $
(52,086) $
371,635 $
(557,597)
See accompanying notes.
51
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, 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
Equity component value of
convertible note issuance, net
Stock-based compensation
expense
Comprehensive income (loss)
(1)
166
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(262)
—
—
3,052
—
—
—
—
—
—
—
—
1
—
—
—
—
—
4,225
40,644
42,070
(3,954)
—
—
—
—
—
—
—
—
—
(3,954)
—
4,226
40,644
42,070
—
(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
—
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)
—
42
—
—
—
—
1
—
—
—
—
—
—
—
—
—
—
(291)
—
—
21,491
—
—
—
—
—
—
7
—
—
—
—
3,623
43,794
(6,082)
—
—
—
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
Adoption of ASU 2020-06
—
—
—
—
—
—
(14,351)
5,144
—
(9,207)
—
360,060
11,575
371,635
Shares withheld in consideration of
employee tax obligations relative to
stock-based compensation
arrangements
Class C Common Stock
repurchased
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)
—
—
18
—
—
—
Balance as of March 31, 2022
188,669 $
Exercise of stock options
Shares withheld in consideration of
employee tax obligations relative to
stock-based compensation
arrangements
Class C Common Stock
repurchased
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)
—
—
—
36
—
—
—
—
—
—
—
—
—
63
—
—
—
—
—
—
—
—
—
—
—
—
—
34,450 $
—
—
—
—
—
—
—
—
—
—
—
(11,446)
—
(16,151)
(5)
(60,000)
(239,995)
—
—
—
1,462
—
—
—
—
11
—
—
935
11,764
—
—
—
—
—
—
—
—
(59,610)
7,524
(52,086)
238,472 $
79 $ 1,046,961 $ 721,926 $
(40,086) $ 1,728,954
—
—
—
—
—
—
—
—
(5,151)
—
(18,725)
(6)
48,988
(173,982)
—
—
—
1,600
—
—
—
—
—
—
—
—
—
3,776
36,811
—
—
—
Balance as of March 31, 2023
188,705 $
63
34,450 $
11
221,347 $
73 $ 1,136,536 $ 929,562 $
(67,842) $ 1,998,403
See accompanying notes.
52
—
386,769
(27,756)
359,013
—
—
—
—
—
23
(6,082)
1
3,630
43,794
—
—
—
—
—
(11,446)
(300,000)
—
935
11,764
—
—
—
—
—
—
—
(5,151)
(125,000)
—
3,776
36,811
Under Armour, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Three Months
Ended
March 31, 2022
(Transition
Period)
Year Ended
March 31, 2023
Year Ended
December 31,
2021
Year Ended
December 31,
2020
$
386,769 $
(59,610) $
360,060 $
(549,177)
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
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 and debt issuance costs
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
Cash flows from investing activities
Purchases of property and equipment
Sale of property and equipment
Earn-out from the sale of MyFitnessPal platform
Sale of MyFitnessPal platform
Purchase of businesses
137,620
(8,463)
—
2,619
—
1,959
2,192
36,811
(152,403)
11,696
(62,162)
(373,714)
(36,652)
(52,795)
77,558
12,081
851
6,119
34,960
(8,585)
—
1,604
—
(1,871)
549
11,764
(2,500)
(5,250)
141,144
18,877
58,526
4,468
—
26,938
16,891
43,794
(2,642)
(25,766)
(131,988)
(31,153)
(6,425)
(4,326)
27,628
(54,970)
(122,589)
(4,398)
4,564
93,287
10,224
79,782
26,027
(114,794)
(38,861)
(1,973)
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
—
—
198,916
(40,280)
66,345
Net cash provided by (used in) operating activities
(9,914)
(321,443)
664,829
(187,796)
(39,923)
(69,759)
(92,291)
—
35,000
—
—
—
—
—
—
1,413
—
—
—
Net cash provided by (used in) investing activities
(152,796)
(39,923)
(68,346)
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
Common shares repurchased
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
—
—
—
—
—
—
—
—
(125,000)
(5,151)
(300,000)
(11,446)
3,776
—
—
934
—
—
—
1,288,753
(506,280)
91,722
—
—
(5,983)
3,688
(1,884)
—
(800,000)
—
(47,850)
—
(3,675)
4,744
(5,219)
100
Net cash provided by (used in) financing activities
(126,375)
(310,512)
(418,737)
436,853
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
(5,315)
11,134
(23,391)
16,445
(294,400)
(660,744)
154,355
732,507
Beginning of period
End of period
1,022,126
1,682,870
1,528,515
796,008
$
727,726 $
1,022,126 $
1,682,870 $
1,528,515
53
Under Armour, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Three Months
Ended
March 31, 2022
(Transition
Period)
Year Ended
March 31, 2023
Year Ended
December 31,
2021
Year Ended
December 31,
2020
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 (received) for interest, net of capitalized interest
$
$
$
7,581 $
(23,533) $
19,214 $
(13,875)
28,542 $
19,218 $
6,851 $
7,120 $
42,623 $
25,226 $
24,443
28,626
Reconciliation of cash, cash equivalents and restricted
cash
March 31,
2023
March 31,
2022
December 31,
2021
December 31,
2020
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash
$
$
711,910 $
1,009,139 $
1,669,453 $
1,517,361
15,816
12,987
13,417
11,154
727,726 $
1,022,126 $
1,682,870 $
1,528,515
See accompanying notes.
54
Under Armour, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(Tabular amounts in thousands, except share and per share data)
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.
Fiscal Year End Change
As previously disclosed, the Company changed its fiscal year end from December 31 to March 31, effective
for the fiscal year beginning April 1, 2022. The Company's current fiscal year began on April 1, 2022 and ended on
March 31, 2023 ("Fiscal 2023"). This Annual Report on Form 10-K refers to the period beginning on January 1, 2022
and ending March 31, 2022 as the "Transition Period". The Company filed a Transition Report on Form 10-QT that
included financial information for the Transition Period with the SEC on May 9, 2022. The Company's 2021 fiscal
year began on January 1, 2021 and ended on December 31, 2021 ("Fiscal 2021"). There was no Fiscal 2022.
Basis of Presentation
The accompanying Consolidated Financial Statements are presented in U.S. Dollars and include the
accounts of Under Armour, Inc. and its wholly owned subsidiaries and were prepared in accordance with accounting
principles generally accepted in the United States of America ("U.S. GAAP"). Intercompany balances and
transactions were eliminated upon consolidation. Throughout this Annual Report on Form 10-K, in addition to the
terms Fiscal 2023, Transition Period and Fiscal 2021 which are defined above, the term "Fiscal 2020" means the
Company's fiscal year beginning January 1, 2020 and ended December 31, 2020.
Reclassifications
As previously disclosed, beginning in the first quarter of Fiscal 2021, the Company no longer reports
Connected Fitness as a discrete reportable 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.
Additionally, certain prior period comparative amounts in Note 17 and Note 18 have been reclassified to
conform to the current period presentation. Such reclassifications were not material and did not not affect the
consolidated financial statements.
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.
As the impacts of major global events, including the COVID-19 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 events impact 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
these major events and the actions that governments around the world may take in response. 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.
55
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. As
of March 31, 2023, no single customer accounted for more than 10% of the Company's accounts receivable
balance. As of March 31, 2022 and December 31, 2021, one customer accounted for more than 10% of the
Company's accounts receivable balance. For Fiscal 2023, no single customer accounted for more than 10% of the
Company's net revenues. For Fiscal 2021, one customer within the North America region accounted for
approximately 11% of the Company's net revenues. For Fiscal 2020 and the Transition Period, no single customer
accounted for more than 10% of the Company's net revenues.
Accounts Receivable and Credit Losses - Allowance for Doubtful Accounts
The Company is exposed to credit losses primarily through customer receivables associated with the sale
of products within the Company's wholesale channel and through credit card receivables associated with the sale of
products within the Company's direct-to-consumer 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. 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 allowance for doubtful accounts is based on the Company's assessment of the collectability of
customer accounts receivable. In accordance with ASC Topic 326 "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
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.
56
Property and Equipment
In accordance with ASC Topic 360 "Property, Plant and Equipment", property and equipment are stated at
cost less accumulated depreciation. The Company includes the cost associated with software customized for
internal use within Property and Equipment on the Company's Consolidated Balance Sheets. 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
$3.1 million as of March 31, 2023 (March 31, 2022: $1.1 million; December 31, 2021: $1.2 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 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 2023, Fiscal 2021, Fiscal 2020 and the Transition Period.
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.
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
57
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 fiscal year. No goodwill impairments
were recorded during Fiscal 2023, Fiscal 2021 or the Transition Period. 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.
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 2023, the Company performed an impairment analysis on its long-lived assets, including retail
stores at an individual store level and 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 and compared these
estimated fair values to the net carrying values. 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.
As a result, the Company recorded $2.0 million of long-lived asset impairment charges within selling, general and
administrative expenses on the Consolidated Statements of Operations and as a reduction to the related asset
balances on the Consolidated Balance Sheets. The long-lived asset impairment charges for Fiscal 2023 are
included within the Company's operating segments as follows: $1.4 million recorded in North America and $0.6
million recorded in Asia-Pacific.
During Fiscal 2021, the Company recorded $2.0 million of long-lived asset impairment charges within
selling, general and administrative expenses on the Consolidated Statements of Operations and as a reduction to
the related asset balances on the Consolidated Balance Sheets. During Fiscal 2020, as a result of the impacts of
COVID-19, the Company recorded $89.7 million of long-lived asset impairment charges as part of the Company's
restructuring and impairment charges on the Consolidated Statements of Operations. Additionally, in connection
with the Company's 2020 restructuring plan, the Company recognized $1.7 million and $290.8 million of long-lived
asset impairment charges related to the Company's New York City flagship store during Fiscal 2021 and Fiscal
2020, respectively. Refer to Note 12 for a further discussion of the restructuring and related impairment
charges.There were no impairment charges taken during the Transition Period.
Accrued Expenses
Accrued expenses consisted of the following:
As of March 31, 2023
As of March 31, 2022
As of December 31, 2021
Accrued compensation and benefits
Accrued marketing
$
Accrued royalties
Accrued taxes
Forward currency contract liabilities
Other
66,742 $
39,832
25,415
26,297
28,067
168,290
69,361 $
41,854
17,262
20,055
12,303
157,128
Total Accrued Expenses
$
354,643 $
317,963 $
151,887
58,754
16,386
35,588
13,193
184,357
460,165
58
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.
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. From time to
time, based on market circumstances, the Company does grant certain customers with longer than average
payment terms. 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. During the year-ended March 31, 2023, the Company completed an
assessment of its process for estimating revenue recognized for gift card balances not expected to be redeemed
(“breakage”). Based on the assessment, which included analyzing historical gift card redemption data, the Company
has determined that substantially all of its gift cards are redeemed within 24 months of issuance, and after 24
months the likelihood of a gift card being redeemed is remote. Therefore, 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, the Company recognizes gift card breakage at that time when the likelihood of the gift card being
redeemed is remote, which the Company has determined to be 24 months following its issuance.
The Company offers customer loyalty programs in which customers earn points based on purchases and
other promotional activities that can be redeemed for discounts on future purchases or other rewards. A contract
liability is estimated based on the standalone selling price of benefits earned by customers through the programs
and the related redemption experience under the programs. The value of each point earned is recorded as deferred
revenue and is included within accrued expenses on the Consolidated Balance Sheets.
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. Commissions related
to subscription revenue are capitalized and recognized over the subscription period, which are included in selling,
59
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.
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.
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 2023, these costs totaled $79.5 million (Fiscal 2021:
$82.9 million; Fiscal 2020: $80.5 million; Transition Period: $17.3 million).
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 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
$618.3 million for Fiscal 2023 (Fiscal 2021: $649.2 million; Fiscal 2020: $550.4 million; Transition Period:
$173.2 million). As of March 31, 2023, prepaid advertising costs were $41.8 million (March 31, 2022: $30.3 million;
December 31, 2021: $22.4 million).
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
60
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.
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, other equity awards and the Company's 1.50% convertible senior
notes due 2024. Refer to Note 18 for a further discussion of earnings per share.
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 $(2.5) million for Fiscal 2023, (Fiscal 2021: $1.8 million; Fiscal 2020: $3.5 million; Transition Period: $0.9 million)
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
March 31, 2023, the carrying value of the Company's investment in its Japanese licensee was $0.3 million
(March 31, 2022: $2.7 million; December 31, 2021: $1.8 million).
In connection with the license agreement with the Japanese licensee, the Company recorded license
revenues of $36.8 million for Fiscal 2023 (Fiscal 2021: $42.4 million; Fiscal 2020: $40.1 million; Transition Period:
$9.9 million). As of March 31, 2023, the Company had $7.6 million in licensing receivables outstanding, recorded in
the prepaid expenses and other current assets line item within the Company's Consolidated Balance Sheets
(March 31, 2022: $8.9 million; December 31, 2021:$17.1 million).
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 2023, the Company recorded the allocable share of UA Sports
Thailand's net income (loss) of $0.8 million (Fiscal 2021: $(0.6) million; Fiscal 2020: $(1.1) million; Transition Period:
$(0.2) million) 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 March 31, 2023, the carrying value of the Company's investment in UA Sports Thailand was $5.9 million
(March 31, 2022: $5.7 million; December 31, 2021: $5.0 million).
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.
61
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 March 31,
2023, the fair value of the Company's 3.250% Senior Notes were $553.9 million (March 31, 2022: $580.0 million;
December 31, 2021: $619.9 million). The fair value of the Company's 1.50% Convertible Senior Notes, was $85.8
million as of March 31, 2023 (March 31, 2022: $126.6 million; December 31, 2021: $149.6 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.
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.
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.
Recently Adopted Account Pronouncements
The Company assesses the applicability and impact of all Accounting Standard Updates ("ASUs"). There
were no ASUs adopted during Fiscal 2023.
Recently Issued Accounting Pronouncements
In September 2022, the Financial Accounting Standards Board ("FASB") issued ASU 2022-04 "Liabilities -
Supplier Finance Programs (Subtopic 405-50)" ("ASU 2022-04") which requires entities to disclose the key terms of
supplier finance programs used in connection with the purchase of goods and services along with information about
their obligations under these programs, including a rollforward of those obligations. The Company adopted ASU
2022-04 on April 1, 2023 on a retrospective basis, except for the amendments relating to the rollforward
requirement, which are required to be adopted on April 1, 2024 on a prospective basis. The adoption did not have a
material impact on the Company's Consolidated Financial Statements and related disclosures.
62
NOTE 3. ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company's allowance for doubtful accounts was established with information available as of March 31,
2023, including reasonable and supportable estimates of future risk. The following table illustrates the activity in the
Company's allowance for doubtful accounts:
Allowance for doubtful accounts -
within accounts receivable, net
Allowance for doubtful accounts -
within prepaid expenses and other
current assets (1)
Balance as of December 31, 2020
Increases (decreases) to costs and expenses
Write-offs, net of recoveries
Balance as of December 31, 2021
Increases (decreases) to costs and expenses
Write-offs, net of recoveries
Balance as of March 31, 2022
Increases (decreases) to costs and expenses
Write-offs, net of recoveries
Balance as of March 31, 2023
$
$
$
$
(1) Includes an allowance pertaining to a royalty receivable.
NOTE 4. PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following:
20,350 $
(3,821)
(9,401)
7,128 $
(36)
21
7,113 $
5,193
(1,493)
10,813 $
7,029
—
—
7,029
—
—
7,029
—
(6,802)
227
As of March 31, 2023
As of March 31, 2022
As of December 31, 2021
Leasehold and tenant improvements
$
462,721 $
461,394 $
Furniture, fixtures and displays
Buildings
Software
Office equipment
Plant equipment
Land
Construction in progress (1)
Other
289,539
48,632
380,586
132,301
178,194
83,626
143,243
17,837
263,749
48,382
339,722
132,452
178,188
83,626
64,869
5,751
Subtotal property and equipment
Accumulated depreciation
Property and equipment, net
$
1,736,679
(1,063,943)
672,736 $
1,578,133
(976,768)
601,365 $
462,588
259,534
48,382
333,560
132,629
178,187
83,626
52,598
5,545
1,556,649
(949,423)
607,226
(1) Construction in progress primarily includes costs incurred for construction of corporate offices, software systems, leasehold improvements and
in-store fixtures and displays not yet placed in use.
Depreciation expense related to property and equipment was $135.7 million for Fiscal 2023 (Fiscal 2021:
$139.2 million; Fiscal 2020: $154.4 million; Transition Period: $34.5 million).
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 2023, Fiscal
2021, Fiscal 2020 or the Transition Period.
63
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:
Year Ended
March 31,
2023
Three Months
Ended
March 31, 2022
(Transition
Period)
Year Ended
December 31,
2021
Year Ended
December 31,
2020
Operating lease costs
Variable lease costs
$
$
148,760 $
36,699 $
142,965 $
147,390
14,177 $
3,759 $
16,115 $
9,293
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
As of
March 31, 2023
As of
March 31, 2022
As of
December 31, 2021
8.03
4.69 %
8.69
3.72 %
8.73
3.72 %
The following table presents supplemental information relating to cash flow arising from lease transactions:
Year Ended
March 31,
2023
Three Months
Ended
March 31, 2022
(Transition
Period)
Year Ended
December 31,
2021
Year Ended
December 31,
2020
167,774 $
43,903 $
177,391 $
155,990
181,080 $
(892) $
28,244 $
390,957
Operating cash outflows from operating leases
Leased assets obtained in exchange for new
operating lease liabilities
$
$
Maturity of Lease Liabilities
The following table presents the future minimum lease payments under the Company's operating lease
liabilities as of March 31, 2023:
Fiscal year ending March 31,
2024
2025
2026
2027
2028
2029 and thereafter
Total lease payments
Less: Interest
Total present value of lease liabilities
$
$
$
175,002
160,326
127,319
107,147
89,890
355,135
1,014,819
168,116
846,703
As of March 31, 2023, the Company has additional operating lease obligations that have not yet
commenced of approximately $13.0 million, which are not reflected in the table above.
64
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:
Balance as of December 31, 2020
Effect of currency translation adjustment
Balance as of December 31, 2021
Effect of currency translation adjustment
Balance as of March 31, 2022
Effect of currency translation adjustment
Balance as of March 31, 2023
North
America
$
301,523 $
(152)
$
301,371 $
—
$
301,371 $
—
$
301,371 $
EMEA
Asia-Pacific
Latin America
113,037 $
(5,296)
107,741 $
(2,688)
105,053 $
(3,957)
101,096 $
87,654 $
(1,551)
86,103 $
(1,019)
85,084 $
(5,559)
79,525 $
— $
—
— $
—
— $
—
— $
Total
502,214
(6,999)
495,215
(3,707)
491,508
(9,516)
481,992
There were no goodwill impairments recorded during Fiscal 2023, Fiscal 2021 or the Transition Period.
NOTE 7. INTANGIBLE ASSETS, NET
The following tables summarize the Company's intangible assets as of the periods indicated:
Intangible assets subject to amortization:
Technology
Customer relationships
Lease-related intangible assets
Total
Indefinite-lived intangible assets
Intangible assets, net
Intangible assets subject to amortization:
Technology
Customer relationships
Lease-related intangible assets
Other
Total
Indefinite-lived intangible assets
Intangible assets, net
Useful Lives
from Date of
Acquisitions
(in years)
Gross
Carrying
Amount
As of March 31, 2023
Accumulated
Amortization
Net Carrying
Amount
5-7
2-6
1-15
$
2,536 $
(2,503) $
8,711
1,664
$
12,911 $
(4,377)
(1,542)
(8,422) $
$
33
4,334
122
4,489
4,451
8,940
Useful Lives
from Date of
Acquisitions
(in years)
Gross
Carrying
Amount
As of March 31, 2022
Accumulated
Amortization
Net Carrying
Amount
5-7
2-6
1-15
5-10
$
2,536 $
(2,103) $
8,552
(2,893)
9,112
475
20,675 $
(8,892)
(427)
(14,315) $
$
433
5,659
220
48
6,360
4,220
$
10,580
65
Intangible assets subject to amortization:
Technology
Customer relationships
Lease-related intangible assets
Other
Total
Indefinite-lived intangible assets
Intangible assets, net
Useful Lives
from Date of
Acquisitions
(in years)
Gross
Carrying
Amount
As of December 31, 2021
Accumulated
Amortization
Net Carrying
Amount
5-7
2-6
1-15
5-10
$
2,536 $
(2,003) $
8,567
8,852
475
(2,552)
(8,602)
(415)
$
20,430 $
(13,572) $
533
6,015
250
60
6,858
4,152
$
11,010
Amortization expense, which is included in selling, general and administrative expenses, was $1.9 million
for Fiscal 2023 (Fiscal 2021: $2.0 million; Fiscal 2020: $7.0 million; Transition Period: $0.5 million).
During Fiscal 2023, the Company reduced the gross carrying amount and related accumulated amortization
of certain of its lease-related and other intangible assets by $8.3 million as a result of such assets being fully
amortized and no longer in use.
The following is the estimated amortization expense for the Company's intangible assets as of March 31,
2023:
Fiscal year ending March 31,
2024
2025
2026
2027
2028 and thereafter
Total amortization expense of intangible assets
NOTE 8. CREDIT FACILITY AND OTHER LONG TERM DEBT
The Company's outstanding debt consisted of the following:
$
$
1,561
1,522
1,397
9
—
4,489
As of
March 31, 2023
As of
March 31, 2022
As of
December 31, 2021
1.50% Convertible Senior Notes due 2024
$
80,919 $
80,919 $
3.25% Senior Notes due 2026
Total principal payments due
Unamortized debt discount on Convertible Senior Notes(1)
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
600,000
680,919
—
(814)
(267)
(1,728)
(3,632)
—
(1,067)
(677)
(2,266)
(4,623)
80,919
600,000
680,919
(9,207)
(1,131)
(779)
(2,401)
(4,870)
674,478
672,286
662,531
—
—
—
Non-current portion of long-term debt
$
674,478 $
672,286 $
662,531
(1) The Company adopted ASU 2020-06, effective January 1, 2022 using the modified retrospective transition approach. As a result of this
adoption, the Company derecognized the remaining unamortized debt discount on Convertible Senior Notes and recorded a cumulative effect
adjustment to retained earnings.
66
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, May 2021 and December 2021, the Company
entered into the first, second and third amendments to the credit agreement, respectively (the credit agreement as
amended, the "amended credit agreement" or the "revolving credit facility"). The amended credit agreement
provides for revolving credit commitments of $1.1 billion and has a term that ends on December 3, 2026, with
permitted extensions under certain circumstances. As of March 31, 2023, March 31, 2022 and December 31, 2021,
there were no amounts outstanding under the revolving credit facility.
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.
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 March 31, 2023, there were $4.4 million
of letters of credit outstanding (March 31, 2022: $4.5 million; December 31, 2021: $4.3 million).
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. The amended credit agreement 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 March 31, 2023, 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.
The amended credit agreement 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). 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, 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 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. As
of March 31, 2023, the commitment fee was 17.5 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 fixed 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
67
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.
During Fiscal 2021, the Company entered into exchange agreements with certain holders of the Convertible
Senior Notes, who agreed to exchange approximately $419.1 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 and unpaid interest (the "Exchanges"). In connection with the Exchanges, the Company paid approximately
$507.0 million cash and issued approximately 18.8 million shares of the Company's Class C Common Stock to the
exchanging holders. Additionally, the Company recognized losses on debt extinguishment of $58.5 million during
Fiscal 2021, 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 as of March 31, 2023.
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.
Beginning on 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
68
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
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.
During Fiscal 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 $91.7 million in connection with such termination agreements related to the
Exchanges.
The Convertible Senior Notes contain a cash conversion feature. Prior to the adoption of ASU 2020-06, the
Company had 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 was 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.
The Company adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method. As a
result, the Convertible Senior Notes are no longer accounted for as separate liability and equity components, but
rather a single liability. See Note 2 to the Condensed Consolidated Financial Statements included in Part I of the
Company's Transition Report of Form 10-QT for the three months ended March 31, 2022 for more details.
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"). The Senior Notes bear interest at the fixed rate of 3.250% per
annum, 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
$12.8 million for Fiscal 2023 (Fiscal 2021: $44.3 million; Fiscal 2020: $47.3 million; Transition Period: $6.2 million).
69
Maturity of Long Term Debt
The following are the scheduled maturities of long term debt as of March 31, 2023:
Fiscal year ending March 31,
2024
2025
2026
2027
2028
2029 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.
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 March 31, 2023:
Fiscal year ending March 31,
2024
2025
2026
2027
2028
2029 and thereafter
$
83,342
142,396
47,362
23,867
16,708
98,750
Total future minimum sponsorship and other payments
$
412,425
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
70
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
November 6 and December 17, 2019, two additional putative securities class actions were filed 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). On September 14, 2020, the District Court issued an order that, among other things, consolidated the
Patel and Waronker cases into the Consolidated Securities Action.
The operative complaint (the Third Amended Complaint or the "TAC") in the Consolidated Securities Action,
was filed on October 14, 2020. The TAC asserts claims under Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934, as amended (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 the U.S. Department of Justice
("DOJ") and the U.S. Securities and Exchange Commission (the "SEC") since July 2017. The class period identified
in the TAC is September 16, 2015 through November 1, 2019.
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 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. On September 29, 2022, the court granted the plaintiffs' class certification motion.
The Company continues to believe that the claims asserted in the Consolidated Securities Action are
without merit and intends to defend the lawsuit vigorously.
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 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 2016
purchase from entities controlled by Mr. Plank (through Sagamore) of certain parcels of land to accommodate the
Company's growth needs, which was approved by the Audit Committee of the Company's Board of Directors 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 to those asserted in the Kenney action relating to the Company's
purchase of parcels in the Baltimore Peninsula, an area of Baltimore previously referred to as 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
71
disinterested and independent directors of the Company determined that the claims should not be pursued by the
Company and both of these purported stockholders were informed 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.
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.
The Company believes that the claims asserted in the Consolidated State 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.
Federal Court Derivative Complaints
On January 27, 2021, the District Court entered an order consolidating for all purposes four separate
stockholder derivative cases that previously had been filed in the court. On February 2, 2023, the District Court
issued an order appointing Balraj Paul and Anthony Viskovich as lead plaintiffs (“Derivative Lead Plaintiffs”),
appointing counsel for the Derivative Lead Plaintiffs as lead counsel, and recaptioning the consolidated case as
Paul et al. v. Plank et al. (the “Federal Court Derivative Action”). Prior to their filing derivative complaints, both of the
Derivative Lead Plaintiffs 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 the Derivative Lead Plaintiffs were informed of that determination.
On March 16, 2023, the District Court issued an order granting a motion for voluntary dismissal without
prejudice that had been filed by the plaintiff in one of the four derivative cases who had not been appointed as a
lead plaintiff. The other three consolidated derivative cases remain pending as part of the Federal Court Derivative
Action.
On April 24, 2023, the Derivative Lead Plaintiffs designated an operative complaint in the Federal Court
Derivative Action. The operative complaint 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. It asserts 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; and (iv) the Company's
supposed failure to timely disclose investigations by the SEC and DOJ. The operative complaint asserts breach of
fiduciary duty and unjust enrichment claims against the defendants, and asserts a contribution claim under the
federal securities laws against certain defendants. It seeks damages on behalf of the Company and certain
corporate governance related actions. The deadline for the Company and the defendants to respond to the
operative complaint is June 23, 2023.
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.
Contingencies
In accordance with Accounting Standards Codification (“ASC”) Topic 450 “Contingencies” (“Topic 450”), the
Company establishes accruals for contingencies when (i) the Company believes it is probable that a loss will be
incurred and (ii) the amount of the loss can be reasonably estimated. If the reasonable estimate is a range, the
Company will accrue the best estimate in that range; where no best estimate can be determined, the Company will
accrue the minimum. As of March 31, 2023, the Company has estimated its liability and recorded $20 million in
respect of certain ongoing legal proceedings summarized above. The timing of the resolution is unknown and the
amount of loss ultimately incurred in connection with these matters may be substantially higher or lower than the
amount accrued for these matters, and the Company expects a portion of the loss, if any is incurred, to be covered
72
by the Company’s insurance. Legal proceedings for which no accrual has been established are disclosed to the
extent required by ASC 450.
In addition, in connection with the matters described above and previously disclosed government
investigations, the Company provided notice of claims under multiple director and officer liability insurance policy
periods. With respect to one policy period, a lawsuit was filed against the Company by certain of its insurance
carriers seeking a declaration that no further amounts will be payable with respect to that policy period and with
respect to one carrier, reimbursement for $10 million in defense and investigation costs previously paid to the
Company. On April 26, 2023, the Company and one of its insurance carriers resolved the dispute related to that
carrier’s claims for a declaration that no further amounts would be payable and seeking reimbursement of previously
paid amounts. The resolution resulted in no reimbursement payable by the Company. The other carriers remaining
in the case continue to seek a declaration that no further amounts will be payable with respect to that policy period.
The timing of the resolution is unknown for the remaining claims in this matter.
From time to time, the Company’s view regarding probability of loss with respect to outstanding legal
proceedings will change, proceedings for which the Company is able to estimate a loss or range of loss will change,
and the estimates themselves will change. In addition, while many matters presented in financial disclosures involve
significant judgment and may be subject to significant uncertainties, estimates with respect to legal proceedings are
subject to particular uncertainties. Other than as described above, the Company believes that all current
proceedings are routine in nature and incidental to the conduct of its business. However, the matters described
above, 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.
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 March 31, 2023. 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 Chair 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 400.0 million shares and has a par
value of $0.0003 1/3 per share as of March 31, 2023. 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.
Share Repurchase Program
On February 23, 2022, the Company's Board of Directors authorized the Company to repurchase up to
$500 million (exclusive of fees and commissions) of outstanding shares 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.
73
Pursuant to the previously disclosed accelerated share repurchase transactions that the Company entered
into in February 2022, May 2022, August 2022 and November 2022 (the "ASR Agreements"), the Company
repurchased 18.7 million and 16.2 million shares of Class C Common Stock, which were immediately retired, during
Fiscal 2023 and the Transition Period, respectively. As a result, $174.0 million was recorded to retained earnings to
reflect the difference between the market price of the Class C Common Stock repurchased and its par value during
Fiscal 2023 (Transition Period: $240.0 million).
As of the date of this Annual Report on Form 10-K, the Company has repurchased a total of $425 million or
34.9 million outstanding shares of its Class C Common Stock under its share repurchase program.
NOTE 11. REVENUES
The following tables summarize the Company's net revenues by product category and distribution channels:
Apparel
Footwear
Accessories
Net Sales
License revenues
Corporate Other
Year Ended
March 31, 2023
Three Months Ended
March 31, 2022
(Transition Period)
Year Ended
December 31, 2021
Year Ended
December 31, 2020
$
3,871,638 $
876,604 $
3,841,249 $
2,882,562
1,455,265
408,521
5,735,424
116,746
51,466
296,696
96,803
1,270,103
26,602
4,240
1,264,127
461,894
5,567,270
112,623
3,573
934,333
414,082
4,230,977
105,779
137,911
Total net revenues
$
5,903,636 $
1,300,945 $
5,683,466 $
4,474,667
Wholesale
Direct-to-consumer
Net Sales
License revenues
Corporate Other
Year Ended
March 31, 2023
Three Months Ended
March 31, 2022
(Transition Period)
Year Ended
December 31, 2021
Year Ended
December 31, 2020
$
3,468,126 $
829,179 $
3,245,749 $
2,267,298
5,735,424
116,746
51,466
440,924
1,270,103
26,602
4,240
2,321,521
5,567,270
112,623
3,573
2,383,353
1,847,624
4,230,977
105,779
137,911
Total net revenues
$
5,903,636 $
1,300,945 $
5,683,466 $
4,474,667
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:
Customer refund liability
Inventory associated with reserves for sales returns
Contract Liabilities
As of
March 31, 2023
As of
March 31, 2022
As of
December 31, 2021
$
$
160,533 $
40,661 $
159,628 $
44,291 $
164,294
47,569
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 which are in in other current and other long-term
liabilities, and gift cards, included in accrued expenses on the Company's Consolidated Balance Sheets. As of
March 31, 2023, contract liabilities were $25.9 million (March 31, 2022: $35.3 million; December 31, 2021:
$39.1 million).
74
During Fiscal 2023, the Company completed an assessment of its process for estimating revenue
recognized for gift card balances not expected to be redeemed (“breakage”). Based on the assessment, which
included analyzing historical gift card redemption data, the Company has determined that substantially all of its gift
cards are redeemed within 24 months of issuance, and after 24 months the likelihood of a gift card being redeemed
is remote. Therefore, 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, the Company recognizes gift card breakage
at that time when the likelihood of the gift card being redeemed is remote, which the Company has determined to be
24 months following its issuance. As a result, the Company recognized approximately $10.1 million of revenue
during Fiscal 2023, that was previously included in contract liabilities, which benefited net income by $10.1 million,
or $0.02 per share of Class A, B and C Common Stock.
For Fiscal 2023, including the breakage discussed above, the Company recognized approximately $19.3
million, of revenue that was previously included in contract liabilities as of March 31, 2022. For Fiscal 2021, the
Company recognized approximately $21.5 million of revenue that was previously included in contract liabilities as of
December 31, 2020. For the Transition Period, the Company recognized $5.0 million of revenue that was previously
included in contract liabilities as of December 31, 2021. 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, and with respect to Fiscal 2023, the breakage discussed above.
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. The Company concluded the 2020 restructuring plan during
the Transition Period.
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. No
adjustments to expense were recorded during Fiscal 2023.
All restructuring and related impairment charges are included in the Company's Corporate Other segment. 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 are as follows:
Employee Related
Costs
Contract Exit
Costs
Other
Restructuring
Related Costs
Balance as of December 31, 2020
$
12,868 $
61,642 $
Net additions (recoveries) charged to expense
Cash payments
Foreign exchange and other
Balance as of December 31, 2021
Net additions (recoveries) charged to expense
Cash payments
Foreign exchange and other
Balance as of March 31, 2022
Net additions (recoveries) charged to expense
Cash payments
Foreign exchange and other
Balance as of March 31, 2023
(1,655)
(5,473)
(2,192)
17,814
(47,486)
(565)
3,548 $
31,405 $
(10)
(955)
89
58,555
(9,280)
(2,443)
2,672 $
78,237 $
—
(1,057)
(659)
956 $
—
(76,287)
(1,832)
118 $
$
$
$
75
6,098
(1,494)
(6,078)
120
(1,354)
(1,871)
—
3,225
—
—
—
—
—
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 for Fiscal 2023 of $11.6 million (Fiscal 2021: $8.9 million; Fiscal
2020: $5.4 million; Transition Period: $6.1 million)
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 Human Capital and Compensation
Committee of the Board of Directors, to make an annual base salary and/or bonus deferral for each year. As of
March 31, 2023, the Deferred Compensation Plan obligations were $14.1 million (March 31, 2022: $14.2 million;
December 31, 2021: $14.5 million) 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 March 31, 2023, the assets held in the Rabbi Trust were trust owned life insurance ("TOLI") policies with
cash-surrender values of $7.7 million (March 31, 2022: $8.4 million; December 31, 2021: $9.0 million). 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 2029. As
of March 31, 2023, 8.3 million Class A shares and 23.9 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 2023 was $36.8 million (Fiscal 2021: $43.8 million; Fiscal 2020: $42.1 million; Transition Period:
$11.8 million). The related tax benefits, excluding consideration of valuation allowances, were $6.3 million for Fiscal
2023 (Fiscal 2021: $8.2 million; Fiscal 2020: $9.0 million; Transition Period: $2.0 million). The valuation allowances
associated with these benefits were $1.2 million for Fiscal 2023 (Fiscal 2021: $7.2 million; Fiscal 2020: $9.0 million;
Transition Period: $1.0 million) As of March 31, 2023, the Company had $70.4 million of unrecognized
compensation expense related to these awards expected to be recognized over a weighted average period of 2.06
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 period of two to five years. 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-
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. However, in May
2022, following the 2022 annual stockholders' meeting, each non-employee director received a grant under the
2005 plan of restricted stock units covering stock valued at $187.5 thousand to account for the Company's change
in fiscal year. Each award vests 100% on the date of the next annual stockholders' meeting following the grant date.
76
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. The Company had 0.8 million deferred stock
units outstanding as of March 31, 2023.
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 March 31, 2023, 2.7 million Class A shares and 1.1 million Class C
shares are available for future purchases under the ESPP. During Fiscal 2023, 536.0 thousand Class C shares were
purchased under the ESPP (Fiscal 2021: 234.7 thousand; Fiscal 2020: 482.9 thousand; Transition Period: 69.8
thousand).
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 2023 was $3.3 million (Fiscal
2021: $3.5 million; Fiscal 2020: $3.5 million; Transition Period: $0.8 million). As of March 31, 2023, we had
$4.3 million of unrecognized compensation expense associated with these awards expected to be recognized over
a weighted average period of 1.68 years.
As previously disclosed, on April 3, 2023, subsequent to the fiscal year end, the Company issued an award
of restricted stock units for 8.8 million shares of the Company's Class C common stock to an entity affiliated with
professional basketball player Stephen Curry. The award was issued in connection with Mr. Curry's entry into a
stock unit agreement and an Under Armour, Inc. Athlete Product, Brand, Ambassador, and Endorsement Agreement
with the Company, pursuant to which Mr. Curry is continuing his relationship with the Company.
Summary by Award Classification:
Stock Options
No stock options were granted during Fiscal 2023, Fiscal 2021 or the Transition Period. The weighted
average fair value of stock options granted in Fiscal 2020 was $6.61. 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:
Year Ended
March 31, 2023
Three Months Ended
March 31, 2022
(Transition Period)
Year Ended
December 31, 2021
Year Ended
December 31, 2020
Risk-free interest rate
Average expected life in years
Expected volatility
Expected dividend yield
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1.5 %
6.25
43.1 %
— %
77
A summary of the Company's stock options activity for the year ended March 31, 2023 is presented below:
Outstanding at March 31, 2022
Granted, at fair market value
Exercised
Forfeited
Outstanding at March 31, 2023
Options exercisable at March 31, 2023
Number
of Stock
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (Years)
Total
Intrinsic
Value
1,578 $
19.44
5.82 $
217
—
—
—
1,578 $
1,503 $
—
—
—
19.44
19.66
—
—
—
4.82 $
4.72 $
—
—
—
—
—
No stock options were exercised during Fiscal 2023 or the Transition Period. For Fiscal 2021 and Fiscal
2020, the intrinsic value of stock options exercised was $0.2 million and $4.5 million, respectively. The income tax
benefits related to stock options exercised, excluding consideration of valuation allowances were $0.0 million and
$1.2 million for Fiscal 2021 and Fiscal 2020, respectively.
Restricted Stock and Restricted Stock Unit Awards
A summary of the Company's restricted stock and restricted stock unit awards activity for the year ended
March 31, 2023 is presented below:
Outstanding at March 31, 2022
Granted
Forfeited
Vested
Outstanding at March 31, 2023
Number of
Restricted Shares
Weighted Average
Grant Date Fair Value
7,807 $
3,759
(2,002)
(1,906)
7,658 $
16.57
8.75
14.88
17.53
13.01
The awards outstanding at March 31, 2023 in the table above includes 1.1 million performance-based
restricted stock units that were awarded to certain executives and key employees during Fiscal 2023 under the
2005 Plan. The performance-based restricted stock units awarded have a weighted average fair value of $9.13 and
have vesting that is tied to the achievement of certain combined annual revenue and operating income targets. The
Company deemed the achievement of certain of these targets probable and recorded $1.4 million of stock-based
compensation expense related to these awards during Fiscal 2023. The Company assesses the probability of the
achievement of the remaining revenue and operating income targets at the end of each reporting period and based
on that assessment cumulative adjustments may be recorded in future periods.
NOTE 15. FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or the exit price that would be paid
to transfer a liability in an orderly transaction between market participants at the measurement date. 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.
78
Financial assets and liabilities measured at fair value on a recurring basis
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:
March 31, 2023
March 31, 2022
December 31, 2021
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Derivative foreign
currency contracts (see
Note 16)
$
— $ (3,127) $
— $
— $
988 $
— $
— $
631 $
—
TOLI policies held by the
Rabbi Trust (see Note 13) $
— $ 7,691 $
— $
— $ 8,379 $
— $
— $ 9,008 $
—
Deferred Compensation
Plan obligations (see Note
13)
$
— $ (14,082) $
— $
— $ (14,230) $
— $
— $ (14,489) $
—
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
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 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 March 31, 2023, the fair value of the Convertible Senior Notes was $85.8 million (March 31, 2022:
$126.6 million; December 31, 2021: $149.6 million).
As of March 31, 2023, the fair value of the Senior Notes was $553.9 million (March 31, 2022: $580.0 million;
December 31, 2021: $619.9 million).
Assets and liabilities measured at fair value on a non-recurring basis
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 March 31, 2023, the Company has hedge instruments primarily for:
•
•
•
British Pound/U.S. Dollar;
U.S. Dollar/Chinese Renminbi;
Euro/U.S. Dollar;
79
•
•
•
U.S. Dollar/Canadian Dollar;
U.S. Dollar/Mexican Peso; and
U.S. Dollar/Korean Won.
All derivatives are recognized on the Consolidated Balance Sheets at fair value and classified based on the
instrument's maturity date.
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.
Balance Sheet
Classification
March 31, 2023
March 31, 2022
December 31, 2021
Derivatives designated as hedging instruments under ASC 815
Foreign currency contracts
Other current assets
Foreign currency contracts
Other long term assets
Total derivative assets designated as hedging instruments
Foreign currency contracts
Other current liabilities
Foreign currency contracts
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
Foreign currency contracts
Other long term liabilities
Total derivative liabilities not designated as hedging instruments
$
$
$
$
$
$
$
$
$
22,473 $
11,561 $
619
2,730
23,092 $
14,291 $
21,622 $
11,209 $
5,769
3,645
27,391 $
14,854 $
3,408 $
3,408 $
6,563 $
4 $
6,567 $
4,412 $
4,412 $
1,213 $
— $
1,213 $
7,488
2,887
10,375
8,663
779
9,442
1,999
1,999
4,648
—
4,648
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
March 31, 2023
Three Months Ended
March 31, 2022
(Transition Period)
Year Ended
December 31, 2021
Year Ended
December 31, 2020
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
Amount of
Gain (Loss)
on Cash
Flow Hedge
Activity
Total
Net revenues
$ 5,903,636 $ 44,492 $ 1,300,945 $
2,049 $ 5,683,466 $
(6,410) $ 4,474,667 $
2,016 $ 695,781 $
(2,903) $ 2,821,967 $
(11,825) $ 2,314,572 $
2,098
9,516
Cost of goods sold $ 3,254,296 $
Interest income
(expense), net
(12,826) $
$
(37) $
(6,154) $
(9) $
(44,300) $
(37) $
(47,259) $
(36)
Other income
(expense), net
$ 16,780 $
— $
(51) $
— $
(51,113) $
— $ 168,153 $
25
80
The following tables present the amounts affecting the Consolidated Statements of Comprehensive Income
(Loss):
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
March 31, 2023
Balance as of
March 31, 2022
Derivatives designated as cash flow hedges
Foreign currency contracts
Interest rate swaps
Total designated as cash flow hedges
$
$
41 $
(495)
(454) $
41,703 $
—
41,703 $
46,508 $
(37)
46,471 $
(4,764)
(458)
(5,222)
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
March 31, 2022
Balance as of
December 31, 2021
Derivatives designated as cash flow hedges
Foreign currency contracts
Interest rate swaps
Total designated as cash flow hedges
$
$
(1,617) $
(504)
(2,121) $
804 $
—
804 $
(854) $
(9)
(863) $
41
(495)
(454)
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
Balance as of
December 31, 2020
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)
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
Balance as of
December 31, 2019
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)
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:
Year Ended
March 31, 2023
Amount of
Gain (Loss)
on Fair
Value Hedge
Activity
Total
Three Months Ended
March 31, 2022
(Transition Period)
Amount of
Gain (Loss)
on Fair
Value Hedge
Activity
Total
Year Ended
December 31, 2021
Year Ended
December 31, 2020
Amount of
Gain (Loss)
on Fair
Value Hedge
Activity
Total
Amount of
Gain (Loss)
on Fair
Value Hedge
Activity
Total
Other income
(expense), net
$
16,780 $
(7,200) $
(51) $
4,481 $
(51,113) $
(8,502) $ 168,153 $
(2,173)
81
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 March 31, 2023, the aggregate notional value of the Company's outstanding cash flow hedges
was $799.7 million (as March 31, 2022: $1,096.5 million; December 31, 2021: $556.5 million) of which 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.
In March 2023, the Company unwound and de-designated certain derivative instruments previously
designated as cash flow hedges. The pre-tax gain of $2.3 million, which had been recorded in other comprehensive
income prior to the de-designation of the derivative instruments, was recognized in earnings during the period.
Undesignated Derivative Instruments
The Company has entered into foreign exchange forward contracts to mitigate the change in fair value of
specific assets and liabilities on the Consolidated Balance Sheets. Undesignated instruments are recorded at fair
value as a derivative asset or liability on the Consolidated Balance Sheets with their corresponding 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 March 31, 2023, the total notional value of the Company's outstanding undesignated derivative
instruments was $396.7 million (March 31, 2022: $228.4 million; December 31, 2021: $258.2 million).
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
Year Ended
March 31, 2023
Three Months Ended
March 31, 2022
(Transition Period)
Year Ended
December 31, 2021
Year Ended
December 31, 2020
United States
Foreign
Total
$
$
27,650 $
(88,789) $
191,201 $
260,115
36,628
199,676
287,765 $
(52,161) $
390,877 $
(478,465)
(14,079)
(492,544)
82
The components of the income tax expense (benefit) consisted of the following:
(In thousands)
Current
Federal
State
Foreign
Deferred
Federal
State
Foreign
Year Ended
March 31, 2023
Three Months Ended
March 31, 2022
(Transition Period)
Year Ended
December 31, 2021
Year Ended
December 31, 2020
$
18,483 $
331 $
(2,454) $
(30,047)
3,771
29,103
51,357
(159,277)
215
6,659
(152,403)
(101,046) $
99
10,251
10,681
159
(4)
(2,655)
(2,500)
8,181 $
864
36,304
34,714
5,148
(3,645)
(4,145)
(2,642)
32,072 $
34
16,720
(13,293)
50,620
587
11,473
62,680
49,387
Income tax expense (benefit)
$
A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate is as follows:
U.S. federal statutory income tax
rate
State taxes, net of federal tax
impact
Effect of foreign earnings
Permanent tax benefits/
nondeductible expenses
Year Ended
March 31, 2023
Three Months Ended
March 31, 2022
(Transition Period)
Year Ended
December 31, 2021
Year Ended
December 31, 2020
$ 60,431
21.0 % $ (10,954)
21.0 % $ 82,086
21.0 % $ (103,434)
21.0 %
8,800
3.0 %
(5,314)
10.2 %
23,508
6.0 %
(29,341)
(2,019)
(0.7) %
(361)
0.7 %
(10,697)
(2.7) %
(762)
6.0 %
0.2 %
(9,330)
(3.2) %
(900)
1.7 %
(12,343)
(3.2) %
15,993
(3.2) %
Permanent tax benefits/
nondeductible losses - divestitures
—
— %
(552)
1.1 %
Unrecognized tax benefits
11,560
4.0 %
750
(1.4) %
7,317
9,813
1.9 % (118,321)
24.0 %
1.1 %
2,260
(0.5) %
Impacts related to U.S. Tax Act
—
— %
—
— %
—
— %
(13,987)
2.8 %
Valuation allowance
(170,414)
(59.2) %
26,223
(50.3) %
(63,418)
(14.9) % 302,575
(61.4) %
Other
(74)
— %
(711)
1.3 %
(4,194)
(1.1) %
(5,596)
1.1 %
Effective income tax rate
$ (101,046)
(35.1) % $
8,181
(15.7) % $ 32,072
8.2 % $ 49,387
(10.0) %
For Fiscal 2023 the Company recorded an income tax benefit of $101.0 million compared to income tax
expense of $8.2 million and $32.1 million in the periods ending March 31, 2022, and December 31, 2021,
respectively. The change was primarily due to the recognition of an income tax benefit from the release of the U.S.
federal valuation on beginning of year deferred tax assets in the period ending March 31, 2023. In the period ending
March 31, 2022, additional valuation allowances were recorded for the U.S. and for the period ended December 31,
2021, the income tax benefits for the reduction in U.S. valuation allowances was limited to the current period
earnings.
On August 16, 2022, the Inflation Reduction Act (the "Act") was enacted and signed into law in the United
States. The Act contains a number of revisions to the Internal Revenue Code, including a 15% corporate minimum
tax and a 1% excise tax on corporate stock repurchases in tax years beginning after December 31, 2022. The
Company does not expect these tax provisions to have a material impact to the consolidated financial statements.
83
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
Capitalized research expenditures
Inventory
Foreign net operating loss carry-forwards
Intangible assets
U.S. state net operating loss
Allowance for doubtful accounts and sales return reserves
Foreign tax credits
Stock-based compensation
Deductions limited by income
U.S. tax credits
Convertible debt instruments
Other
Total deferred tax assets
Less: valuation allowance
Total net deferred tax assets
Deferred tax liabilities
Right-of-use asset
Convertible debt instruments
Prepaid expenses
Property, plant and equipment
Other
Total deferred tax liabilities
Total deferred tax assets, net
March 31, 2023
March 31, 2022
December 31, 2021
$
$
$
$
213,381 $
45,099
44,401
35,539
33,768
33,492
22,923
13,708
13,112
9,522
8,076
5,957
4,567
725
8,674
492,944
(175,185)
317,759 $
(122,286) $
—
(4,875)
(3,862)
(1,888)
(132,911)
184,848 $
191,342 $
57,200
61,846
8,646
18,862
38,069
25,935
17,438
15,168
9,423
6,299
6,083
7,970
1,196
8,896
474,373
(350,610)
123,763 $
(93,541) $
—
(8,012)
(1,913)
(2,042)
(105,508)
18,255 $
197,682
57,097
41,943
—
26,860
33,875
26,281
16,636
14,940
8,606
11,301
3,288
7,273
—
5,490
451,272
(318,221)
133,051
(98,085)
(1,066)
(8,356)
(7,018)
(3,743)
(118,268)
14,783
All deferred tax assets and liabilities are classified as non-current on the Consolidated Balance Sheets as of
March 31, 2023, March 31, 2022 and December 31, 2021. 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 as of March 31, 2023, the Company has considered all available
evidence, both positive and negative, including but not limited to the following:
Positive
•
•
•
•
•
•
Current year pre-tax earnings including positive financial taxable income in the U.S. federal jurisdiction.
Prior three-year cumulative positive financial taxable income in the U.S. federal jurisdiction.
Forecasted future positive financial taxable income in the U.S.
No material definite lived tax attributes (excluding capital loss) subject to expiration in the near short
term.
No history of U.S. federal and material state tax attributes expiring unused.
Available prudent and feasible tax planning strategies.
84
Negative
•
•
•
Prior three-year cumulative financial taxable loss in the U.S. state jurisdiction.
Inherent challenges in forecasting sufficient future state pre-tax earnings to overcome existing
cumulative losses in prior years.
Existing definite life state attributes related to credits and net operating losses.
As of March 31, 2023, the Company believes that the weight of the positive evidence outweighs the
negative evidence regarding the realization of the Company’s U.S. federal deferred tax assets, resulting in the
release of the corresponding valuation allowance. The release of valuation allowance (excluding capital losses)
resulted in a material benefit to income tax expense and net income in the period. As of March 31, 2023, for U.S
states the Company believes the weight of the negative evidence continues to outweigh the positive evidence
regarding the realization of the state deferred tax assets and the Company has maintained a valuation allowance
against these assets. The Company's current forecast for the U.S. indicates that there is a possibility that within the
next 12 months, sufficient positive evidence may become available to reach a conclusion that a portion of the U.S
state valuation allowance will no longer be required. The actualization of these forecasted results may result in a
reversal of a portion of previously recorded U.S state 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. The
timing and amount are subject to change based on the actual profitability that the Company is able to actually
achieve in the United States. The Company also continues to maintain a valuation allowance against its net
deferred income tax assets in certain foreign tax jurisdictions and will evaluate its ability to realize its net deferred
tax assets on a quarterly basis.
As of each reporting date, management considers new evidence, both positive and negative, that could
affect its view of the future realization of deferred tax assets. The Company will continue to evaluate our ability to
realize our net deferred tax assets on a quarterly basis.
As of March 31, 2023, the Company had $13.7 million in deferred tax assets associated with $261.5 million
in state net operating loss carryforwards and $4.6 million in deferred tax assets associated with state tax credits, the
majority of which are definite lived. Certain definite lived state net operating losses and state tax credits will begin to
expire within ten to twenty years. The Company had $45.1 million in deferred tax assets associated with federal and
state capital loss carryforwards of $176.8 million, which, if unused, will expire in two 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 tax credits and has recorded a valuation allowance of $63.1 million against these
deferred tax assets.
As of March 31, 2023, the Company had $38.4 million in deferred tax assets associated with approximately
$177.6 million in foreign net operating loss carryforwards and $9.5 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, expected to expire within three
to fifteen 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 $68.9 million against these foreign deferred
tax assets.
As of March 31, 2023, approximately $396.5 million of cash and cash equivalents was held by the
Company's non-U.S. subsidiaries whose cumulative undistributed earnings total $1.3 billion. 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 recognized foreign exchange rate impacts. Determination of the unrecorded deferred tax liability that
would be incurred if such amounts were repatriated is not practicable.
85
The following table represents a reconciliation of the Company's total unrecognized tax benefits balances,
excluding interest and penalties.
(In thousands)
Beginning of period
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
Year Ended
March 31, 2023
Three Months Ended
March 31, 2022
(Transition Period)
Year Ended
December 31, 2021
Year Ended
December 31, 2020
$
49,842 $
49,125 $
40,314 $
41,194
4,987
(598)
4,594
—
—
159
(37)
595
—
—
6,713
1,738
(332)
(2,309)
2,430
2,142
—
—
(1,500)
(951)
40,314
End of period
$
58,825 $
49,842 $
49,125 $
As of March 31, 2023, the total liability for unrecognized tax benefits was approximately $67.2 million
(March 31, 2022: $55.6 million; December 31, 2021: $54.6 million) including $8.5 million for the accrual of interest
and penalties (March 31, 2022: $5.7 million; December 31, 2021: $5.5 million).
For Fiscal 2023, the Company recorded $2.7 million for the accrual of interest and penalties within the
provision for income taxes on its Consolidated Statements of Operations (Fiscal 2021: $1.2 million; Fiscal 2020:
$1.2 million; Transition Period: $0.2 million).
As of March 31, 2023, $50.3 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
$6.6 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
2020. The majority of the Company's other returns for years before 2017 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.
86
NOTE 18. EARNINGS PER SHARE
The following represents a reconciliation from basic net income (loss) per share to diluted net income (loss)
per share:
$
$
Numerator
Net income (loss) - Basic
Interest on Convertible Senior Notes due 2024,
net of tax (2)
Net income (loss) - Diluted
Denominator
Weighted average common shares outstanding
Class A, B and C - Basic
Dilutive effect of Class A, B, and C securities (2)
Dilutive effect of Convertible Senior Notes due
2024 (2)
Weighted average common shares and dilutive
securities outstanding Class A, B, and C
Year Ended
March 31,
2023
Three Months
Ended
March 31, 2022
(Transition
Period)
Year Ended
December 31,
2021(1)
Year Ended
December 31,
2020
386,769 $
(59,610) $
360,060 $
(549,177)
899
—
—
—
387,668 $
(59,610) $
360,060 $
(549,177)
451,426
1,841
8,242
471,425
—
—
465,504
3,035
105
454,089
—
—
461,509
471,425
468,644
454,089
Class A and Class C securities excluded as anti-
dilutive (3)
6,989
6,539
1,578
6,364
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
$
$
0.86 $
(0.13) $
0.77 $
(1.21)
0.84 $
(0.13) $
0.77 $
(1.21)
(1) The Company adopted Accounting Standard Update No. 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) on January 1, 2022 using the modified
retrospective transition approach. As a result, prior period comparatives have not been restated to conform to current period presentation.
(2) Effects of potentially dilutive securities are presented only in periods in which they are dilutive. No stock options, restricted stock units, or
effects from the Convertible Senior Notes due 2024 are included in the computation of diluted earnings per share during periods when the
Company is in the net loss position, as their effect would be anti-dilutive.
(3) Represents stock options and restricted stock units of Class A and Class C Common Stock outstanding that were excluded from the
computation of diluted earnings per share because their effect would have been anti-dilutive.
NOTE 19. SEGMENT DATA
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.
The Company excludes certain corporate items from its segment profitability measures. The Company
reports these items within Corporate Other, which is designed to provide increased transparency and comparability
of the Company's operating segments' performance. Corporate Other consists primarily of (i) operating results
related to MMR platforms and other digital business opportunities; (ii) general and administrative expenses not
allocated to an operating segment, including expenses associated with centrally managed departments which
include global marketing, global IT, global supply chain and innovation, and other corporate support functions; (iii)
restructuring and restructuring related charges; and (iv) certain foreign currency hedge gains and losses.
87
The following tables summarize the Company's net revenues and operating income (loss) by its geographic
segments. Intercompany balances were eliminated for separate disclosure:
Net revenues
North America
EMEA
Asia-Pacific
Latin America
Corporate Other
Year Ended
March 31, 2023
Three Months Ended
March 31, 2022
(Transition Period)
Year Ended
December 31, 2021
Year Ended
December 31, 2020
$
3,820,993 $
841,101 $
3,810,372 $
2,944,978
992,624
825,338
213,215
51,466
228,056
181,908
45,640
4,240
842,511
831,762
195,248
3,573
598,296
628,657
164,825
137,911
Total net revenues
$
5,903,636 $
1,300,945 $
5,683,466 $
4,474,667
Operating income (loss)
North America
EMEA
Asia-Pacific
Latin America
Corporate Other
Year Ended
March 31,
2023
Three Months Ended
March 31, 2022
(Transition Period)
Year Ended
December 31, 2021
Year Ended
December 31, 2020
$
734,881 $
154,084 $
972,093 $
112,161
100,276
23,487
30,336
5,464
6,343
132,602
132,911
22,388
474,584
60,592
2
(42,790)
(686,994)
(242,183)
(773,704)
(1,105,826)
Total operating income (loss)
Interest expense, net
Other income (expense), net
283,811
(12,826)
16,780
(45,956)
(6,154)
(51)
486,290
(44,300)
(51,113)
Income (loss) before income taxes
$
287,765 $
(52,161) $
390,877 $
(613,438)
(47,259)
168,153
(492,544)
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:
Long-lived assets
United States
Canada
Total North America
Other foreign countries
Total long-lived assets
March 31, 2023
March 31, 2022
December 31, 2021
$
921,845 $
787,806 $
15,671
937,516
224,526
20,756
808,562
213,200
801,130
21,094
822,224
233,366
$
1,162,042 $
1,021,762 $
1,055,590
NOTE 20. RELATED PARTY TRANSACTIONS
The Company has an operating lease agreement with an entity controlled by the Company's Executive
Chair and Brand Chief to lease an aircraft for business purposes. The Company recorded $2.0 million for lease
payments to the entity for its use of the aircraft during Fiscal 2023, of which $0.6 million remained payable as of
March 31, 2023 (Fiscal 2021: $2.0 million; Fiscal 2020: $2.0 million; Transition Period: $0.5 million). 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 Chair 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, the parties entered into an agreement in September 2016
and a supplement thereto in May 2022, pursuant to which the parties will share the burden of any special taxes
88
arising due to infrastructure projects in the surrounding area. The allocation to the Company is based on the
expected benefits to the Company's parcels from these projects. No amounts were owed by either party under this
agreement as of March 31, 2023.
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 have
transitioned to a hybrid work environment. We continue to monitor and assess impacts of hybrid work on our control
environment and control activities in order to minimize the impact on the design and operating effectiveness of our
controls.
We have implemented a new e-commerce order management system in North America. In connection with
this implementation and resulting business process changes, we did not make any material changes to the design
and operation of our internal controls over financial reporting.
ITEM 9B. OTHER INFORMATION
On May 23, 2023, the Board of Directors of the Company approved and adopted certain amendments (the
“Amendments”) to the Company’s Bylaws (the “Bylaws” and, as amended, the “Amended Bylaws”), which became
effective immediately.
The Amendments update various provisions of the Bylaws to require parties proposing a nominee for
election of a director to comply with the universal proxy rules recently adopted by the U.S. Securities and Exchange
Commission. In addition, the Amendments update the Bylaws’ proxy and advance notice provisions, specifically, the
notice required thereby, to require, among other things: (i) certain representations with respect to the solicitation
intentions of a proposing stockholder; (ii) additional representations regarding the willingness and ability of a
proposed nominee to serve on the Board, if elected; and (iii) that advance notice of any nomination or proposal of
other business contain all information that would be required to be disclosed in a proxy statement or other filing
required to be made in connection with the solicitation of proxies in support of such nominee or proposal pursuant to
Regulation 14A of the Securities Exchange Act of 1934, as well as disclosure of any substantial direct or indirect
interests of the proposing stockholder, persons acting in concert with the stockholder and any proposed nominee in
the Company, other than by virtue of ownership of Company stock. The Amendments also clarify that a stockholder
may not nominate more individuals than there are directors to be elected or substitute or replace a proposed
89
nominee without compliance with the requirements for nomination in the bylaws, including compliance with
applicable deadlines.
The Amendments also update the title of “chairman” to “chair” and remove gendered language throughout
the Bylaws, make various other conforming and technical changes including clarification of the duties of the
inspector of elections and the powers of the chair of a stockholder meeting and update provisions relating to virtual
meetings to align with changes to the Maryland General Corporation Law statutory language.
The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the
full text of the Amended Bylaws, a copy of which is attached hereto as Exhibit 3.03 and incorporated herein by
reference.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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 2023
Proxy Statement, under the headings "Election of Directors," "Corporate Governance and Related Matters - Board
Meetings and Committees." Information required by this Item regarding executive officers is included under
"Executive Officers" in Part 1 of this Annual Report on 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 2023 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 2023 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 2023 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 2023 Proxy Statement
under the heading "Independent Auditors."
90
PART IV.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a. The following documents are filed as part of this Annual Report on Form 10-K:
1. Financial Statements:
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
Consolidated Balance Sheets as of March 31, 2023, March 31, 2022 and December 31, 2021
Consolidated Statements of Operations for the Year March 31, 2023, the Three Months Ended March 31, 2022, and the
Years Ended December 31, 2021 and 2020
Consolidated Statements of Comprehensive Income (Loss) for the Year Ended March 31, 2023, the Three Months
Ended March 31, 2022, and the Years Ended December 31, 2021 and 2020
Consolidated Statements of Stockholders’ Equity for the Year Ended March 31, 2023, the Three Months Ended March
31, 2022, and the Years Ended December 31, 2021, and 2020
Consolidated Statements of Cash Flows for the Year Ended March 31, 2023, the Three Months Ended March 31, 2022,
and the Years Ended December 31, 2021, and 2020
Notes to the Audited Consolidated Financial Statements
2. Financial Statement Schedule
Schedule II—Valuation and Qualifying Accounts
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.
47
49
50
51
52
53
55
97
Exhibit
No.
3.01
3.02
3.03
4.01
4.02
4.03
4.04
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. (effective May 23, 2023).
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 Annual Report on Form 10-K for the fiscal year ended December 31,
2020, filed on February 24, 2021).
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).
10.01
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 on March 8, 2019).
91
Exhibit
No.
10.02
10.03
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
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).
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 on Form 8-K filed on December 8, 2021).
Technical Modification, dated February 24, 2023, 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.
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).
Form of Accelerated Share Repurchase Agreement (incorporated by reference to Exhibit 10.1 of the Company's
Current Report on Form 8-K filed on February 25, 2022).
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 for the quarter ended June 30, 2022, filed on
August 4, 2022).*
Under Armour, Inc. Amended and Restated Deferred Compensation Plan (incorporated by reference to Exhibit
10.10 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed on
February 22, 2019).*
Under Armour, Inc. Executive Change in Control Severance Plan.*
Under Armour, Inc. Executive Severance Program.*
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 for the quarter
ended June 30, 2019, 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 Annual Report on Form 10-K for the fiscal
year ended December 31, 2019, filed on February 26, 2020).*
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 Annual Report on Form 10-K for the fiscal
year ended December 31, 2018, filed on February 22, 2019).*
Form of Annual Restricted Stock Unit Grant Agreement under the 2005 Plan (incorporated by reference to Exhibit
10.12 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed on
February 23, 2022).*
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 Performance-Based Restricted Stock Unit Agreement under the 2005 Plan (incorporated by reference to
Exhibit 10.02 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, filed on
August 4, 2022).*
Form of Special Restricted Stock Unit Grant Agreement under the 2005 Plan (incorporated by reference to Exhibit
10.13 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed on
February 23, 2022).*
Form of Restricted Stock Unit Grant Agreement under the 2005 Plan (incorporated by reference to Exhibit 10.08
of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed on February
26, 2020).*
Form of Restricted Stock Unit Grant Agreement under the 2005 Plan (incorporated by reference to Exhibit 10.14
of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed on February
28, 2018).*
92
Exhibit
No.
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
21.01
23.01
31.01
31.02
32.01
32.02
Form of Performance-Based Stock Option Grant Agreement under the 2005 Plan (incorporated by reference to
Exhibit 10.16 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed
on February 28, 2018).*
Form of Employee Confidentiality, Non-Competition and Non-Solicitation Agreement by and between certain
executives of the Company.*
Under Armour, Inc. Fiscal 2024 Non-Employee Director Compensation Plan (the “Director Compensation Plan”).*
Form of Initial Restricted Stock Unit Grant under the Director Compensation Plan (incorporated by reference to
Exhibit 10.1 of the Company's Current Report on Form 8-K filed on June 6, 2006).*
Form of Annual Restricted Stock Unit Grant under the Director Compensation Plan (incorporated by reference to
Exhibit 10.06 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed on
August 4, 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 Quarterly Report on Form 10-Q for the quarter
ended March 31, 2010, filed on May 5, 2010).*
Amendment One to the Director DSU Plan (incorporated by reference to Exhibit 10.23 of the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2010, filed on February 24, 2011).*
Amendment Two to the Director DSU Plan (incorporated by reference to Exhibit 10.02 of the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2016, filed on August 3, 2016).*
Amendment Three to the Director DSU Plan (incorporated by reference to Exhibit 10.22 of the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2019, filed on February 26, 2020).*
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 Quarterly Report on Form 10-Q for the
quarter ended March 31, 2018, filed on May 9, 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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, filed on August 5, 2021).*
Separation Agreement between the Company and Patrik Frisk dated May 17, 2022, including General Release
and Form of Consulting Agreement (incorporated by reference to Exhibit 10.01 of the Company’s Current Report
on Form 8-K filed on May 18, 2022).*
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 quarter ended March 31, 2016, filed on April 29,
2016).*
Form of Separation Agreement between the Company and Stephanie Pugliese, including General Release
(incorporated by reference to Exhibit 10.03 of the Company's Quarterly Report of Form 10-Q for the quarter
ended September 30, 2022, filed on November 8, 2022).*
Employment Offer Letter (including specific contractual obligations), dated December 14, 2022, by and between
Stephanie C. Linnartz and the Company (incorporated by reference to Exhibit 10.01 of the Company’s Quarterly
Report on Form 10-Q for the quarter ended December 31, 2022, filed on February 8, 2023)*
Special Restricted Stock Unit Agreement under the 2005 Plan, dated February 27, 2023, between the Company
and Stephanie C. Linnartz.*
List of Subsidiaries.
Consent of PricewaterhouseCoopers LLP.
Section 302 Chief Executive Officer Certification.
Section 302 Chief Financial Officer Certification.
Section 906 Chief Executive Officer Certification.
Section 906 Chief Financial Officer Certification.
101.INS
101.SCH
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
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
93
Exhibit
No.
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.
94
ITEM 16. FORM 10-K SUMMARY
None.
95
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.
SIGNATURES
UNDER ARMOUR, INC.
By:
/s/ STEPHANIE C. LINNARTZ
Stephanie C. Linnartz
President and Chief Executive Officer
Date: May 24, 2023
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/ STEPHANIE C. LINNARTZ
President and Chief Executive Officer (principal executive officer)
Stephanie C. Linnartz
/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
Chief Financial Officer (principal financial officer)
Senior Vice President and Chief Accounting Officer (principal
accounting officer)
Executive Chair and Brand Chief
Director
Director
Director
/s/ CAROLYN N. EVERSON
Director
Carolyn N. Everson
/s/ DAVID W. GIBBS
David W. Gibbs
/s/ KAREN W. KATZ
Karen W. Katz
/s/ ERIC T. OLSON
Eric T. Olson
Director
Director
Director
/s/ PATRICK W. WHITESELL
Director
Patrick W. Whitesell
Dated: May 24, 2023
96
Schedule II
Valuation and Qualifying Accounts
(In thousands)
Description
Allowance for doubtful accounts
For the year ended March 31, 2023
For the three months ended March 31, 2022
(Transition Period)
For the year ended December 31, 2021
For the year ended December 31, 2020
Sales returns and allowances
For the year ended March 31, 2023
For the three months ended March 31, 2022
(Transition Period)
For the year ended December 31, 2021
For the year ended December 31, 2020
Deferred tax asset valuation allowance
For the year ended March 31, 2023
For the three months ended March 31, 2022
(Transition Period)
For the year ended December 31, 2021
For the year ended December 31, 2020
Balance at
Beginning
of Year
Charged to
Costs and
Expenses
Write-Offs
Net of
Recoveries
Balance at
End of
Year
$
7,113 $
5,193 $
(1,493) $
10,813
7,128
20,350
15,082
(36)
(3,821)
10,456
21
(9,401)
(5,188)
7,113
7,128
20,350
$
70,136 $
(125,816) $
125,871 $
70,191
69,070
94,179
98,652
(23,649)
(96,632)
24,715
71,523
(431,253)
426,780
70,136
69,070
94,179
$
350,610 $
5,338 $
(180,763) $
175,185
318,221
388,431
101,997
33,743
12,605
291,887
(1,354)
(82,815)
(5,453)
350,610
318,221
388,431
97
KEY
FINANCIALS¹
NET REVENUE BY
PRODUCT
(PERCENT OF FY23 TOTAL)
NET REVENUE BY
REGION
(PERCENT OF FY23 TOTAL)
1%2%
7%
1%
17%
NET REVENUE BY
CHANNEL
(PERCENT OF FY23 TOTAL)
2%
1%
25%
66%
14%
4%
38%
65%
59%
Apparel
Footwear
Accessories
Licensing
Corporate Other
North America
Latin America
Asia Pacific
EMEA
Corporate Other
Wholesale
Direct to Consumer
Licensing
Corporate Other
NET REVENUE
($ IN BILLIONS)
GROSS MARGIN²
(PERCENT OF REVENUE)
INCOME FROM OPERATIONS³
($ IN MILLIONS & PERCENT OF REVENUE)
$5.7
$5.9
$5.2
$5.3
$4.5
50.4%
48.6%
46.9%
45.5%
$237
4.5%
$179
3.4%
44.9%
$527
9.3%
$304
5.1%
$1
0.0%
FY18
FY19
FY20
FY21
FY23
FY18²
FY19
FY202
FY21²
FY23
FY18³
FY19
FY20³
FY21³
FY23³
1
2
3
Following a transition quarter (January 1 to March 31, 2022), Under Armour changed its fiscal year-end from December 31 to March 31, beginning its fiscal 2023
(FY23) on April 1, 2022. Accordingly, the company did not have a fiscal 2022 nor are the prior fiscal years presented in these charts directly comparable twelve-month
periods to FY23. Please see the company’s Form 10-K for the most recent comparable prior twelve-month periods related to FY23.
Adjusted basis: Excludes 0.1%, 0.3% and 0.4% of restructuring impacts in FY21, FY20 and FY18, respectively; GAAP Basis 50.3%, 48.3% and 45.1% for FY21, FY20
and FY18, respectively.
Adjusted basis: Excludes $20M litigation reserve in FY23 and excludes $41M, $614M and $204M of restructuring and impairment impacts in FY21, FY20 and FY18
respectively; GAAP Basis $284M, $486M, ($613M) and ($25M) for FY23, FY21, FY20 and FY18 respectively.
FISCA L 2023 A NNUA L R EPORT
BOARD OF
DIRECTORS
KEVIN A. PLANK
Executive Chair and
Brand Chief
CAROLYN N. EVERSON
Senior Advisor for Permira;
Former Vice President, Global
Business Group of Meta
STEPHANIE C. LINNARTZ
President and
Chief Executive Officer
DAVID W. GIBBS
Chief Executive Officer of
Yum! Brands, Inc.
DOUGLAS E. COLTHARP
Executive Vice President
and Chief Financial Officer,
Encompass Health Corporation
KAREN W. KATZ
Former President and Chief
Executive Officer, Nieman
Marcus Group LTD LLC
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
PATRICK W. WHITESELL
Executive Chairman of
Endeavor Holdings Group
FISCA L 2023 A NNUA L R EPORT