Under Armour 2014 Annual Report Download - page 27

we impose on them, including our code of conduct. We do not control these suppliers, manufacturers or licensee
s
o
r their labor practices. A violation or reported (or alleged) violation of our policies, labor laws or other laws b
y
o
ur suppliers, manufacturers or licensees could interrupt or otherwise disrupt our sourcing or damage our bran
d
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 su
pp
liers, manufacturers or licensees
.
I
n addition, we have sponsorship contracts with a variety of athletes and feature those athletes in ou
r
advertising and marketing efforts, and many athletes and teams use our products, including those teams o
r
leagues for which we are an official supplier. Actions taken by athletes, teams or leagues associated with ou
r
p
roducts could harm the reputations of those athletes, teams or leagues. As a result, our brand image, ne
t
r
evenues and profitability could be adversely affected.
S
ponsorships and designations as an official supplier may become more expensive and this could impact
t
he value o
f
our brand
i
mage.
A
key element of our marketing strategy has been to create a link in the consumer market between ou
r
p
roducts and professional and collegiate athletes. We have developed licensing agreements to be the officia
l
supplier of performance apparel and footwear to a variety of sports teams and leagues at the collegiate and
p
rofessional level and sponsorship agreements with athletes. However, as competition in the performance apparel
and footwear industry has increased, the costs associated with athlete sponsorships and official supplier licensing
agreements have increased, including the costs associated with obtaining and retaining these sponsorships and
agreements. If we are unable to maintain our current association with professional and collegiate athletes, team
s
and leagues, or to do so at a reasonable cost, we could lose the on-field authenticity associated with our products
,
and we may be required to modify and substantially increase our marketing investments. As a result, our brand
image, net revenues, expenses and profitability could be materially adversely affected
.
O
ur
f
a
i
lure to comply w
i
th trade and other regulat
i
ons could lead to
i
nvest
i
gat
i
ons or act
i
ons b
y
government regulators and negat
i
ve publ
i
c
i
ty.
The labeling, distribution, importation, marketing and sale of our products are subject to extensiv
e
r
egulation by various federal agencies, including the Federal Trade Commission, Consumer Product Safety
Commission and state attorneys general in the U.S., as well as by various other federal, state, provincial, loca
l
and international regulatory authorities in the locations in which our products are distributed or sold. If we fail t
o
comply with those regulations, we could become subject to significant penalties or claims or be required to recal
l
p
roducts, which could harm our brand as well as our results of operations or our ability to conduct our business.
In addition, the adoption of new regulations or changes in the interpretation of existing regulations may result in
significant compliance costs or discontinuation of product sales and may impair the marketing of our products,
r
esulting in significant loss of net revenues.
Our international operations are also subject to compliance with the U.S. Foreign Corrupt Practices Act, or
FCPA, and other anti-bribery laws applicable to our operations. Although we have policies and procedures to
address compliance with the FCPA and similar laws, there can be no assurance that all of our employees, agents
and other partners will not take actions in violations of our policies. Any such violation could subject us t
o
sanctions or other penalties that could negatively affect our reputation, business and operating results.
If
we encounter
p
roblems w
i
th our d
i
str
i
but
i
on s
y
stem, our ab
i
l
i
t
y
to del
i
ver our
p
roducts to the marke
t
could be adversel
y
a
ff
ected
.
We rely on a limited number of distribution facilities for our product distribution. Our distribution facilitie
s
utilize computer controlled and automated equipment, which means the operations are complicated and may b
e
subject to a number of risks related to security or computer viruses, the proper operation of software and
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