Under Armour 2007 Annual Report Download - page 48

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Contractual Commitments and Contingencies
We lease warehouse space, office facilities, space for our retail stores and certain equipment under
non-cancelable capital and operating leases. The leases expire at various dates through 2018, excluding
extensions at our option, and contain various provisions for rental adjustments. The operating leases generally
contain renewal provisions for varying periods of time. Our significant contractual obligations and commitments
as of December 31, 2007 are summarized in the following table:
Payments Due by Period
(In thousands) Total
Less Than
1 Year
1to3
Years
3to5
Years
More Than
5 Years
Contractual obligations
Subordinated debt obligations(1) ................. $ 15,117 $ 4,841 $ 6,895 $ 3,381 $ —
Capital lease obligations ........................ 985 508 477 — —
Operating lease obligations(2) ................... 60,062 9,697 21,465 16,515 12,385
Sponsorships and other(3) ...................... 53,584 14,684 27,770 10,927 203
Total(4) ..................................... $129,748 $29,730 $56,607 $30,823 $12,588
(1) Includes a total of $1.7 million in interest payments on subordinated debt obligations.
(2) Includes the minimum payments for operating lease obligations.
(3) Includes footwear promotional rights fees, sponsorships of individual athletes, sports teams and athletic
events and other marketing commitments in order to promote our brand. Some of these sponsorship
agreements provide for additional incentives based on performance achievements while wearing or using
our products. It is not possible to determine the amounts we may be required to pay under these agreements
as they are primarily subject to certain performance based variables. The amounts listed above are the fixed
minimum amounts required to be paid under these agreements.
(4) The table above excludes a $2.6 million liability for uncertain tax positions, including the related interest
and penalties, in accordance with FASB Interpretation (“FIN”) No. 48 “Accounting for Uncertainty in
Income Taxes,” (“FIN 48”) as we are unable to reasonably estimate the timing of settlement (see Note 11 to
the Consolidated Financial Statements for a further discussion on FIN 48).
Off-Balance Sheet Arrangements
We currently do not have any off-balance sheet arrangements or financing activities with special-purpose
entities.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States. To prepare these financial statements, we must make estimates and
assumptions that affect the reported amounts of assets and liabilities. These estimates also affect our reported
revenues and expenses. Judgments must be made about the disclosure of contingent liabilities as well. Actual
results could be significantly different from these estimates. We believe that the following discussion addresses
the critical accounting policies that are necessary to understand and evaluate our reported financial results.
Revenue Recognition
Net revenues consist of both net sales and license revenues. Net sales are recognized upon transfer of
ownership, including passage of title to the customer and transfer of risk of loss related to those goods. Transfer
of title and risk of loss is based upon shipment under free on board shipping point for most goods or upon receipt
by the customer depending on the country of the sale and the agreement with the customer. In some instances,
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