Under Armour 2015 Annual Report Download - page 25

currency exchange rates. Revenues and certain expenses in markets outside of the United States are recognized in
local foreign currencies, and we are exposed to potential gains or losses from the translation of those amounts
into U.S. dollars for consolidation into our financial statements. Similarly, we are exposed to gains and losses
resulting from currency exchange rate fluctuations on transactions generated by our foreign subsidiaries in
currencies other than their local currencies. In addition, the business of our independent manufacturers may also
be disrupted by currency exchange rate fluctuations by making their purchases of raw materials more expensive
and more difficult to finance. As a result, foreign currency exchange rate fluctuations may adversely impact our
results of operations.
The value of our brand and sales of our products could be diminished if we are associated with negative
publicity.
We require our suppliers, manufacturers and licensees of our products to operate their businesses in
compliance with the laws and regulations that apply to them as well as the social and other standards and policies
we impose on them, including our code of conduct. We do not control these suppliers, manufacturers or licensees
or their labor practices. A violation or reported (or alleged) violation of our policies, labor laws or other laws by
our suppliers, manufacturers or licensees could interrupt or otherwise disrupt our sourcing or damage our brand
image. Negative publicity regarding production methods, alleged practices or workplace or related conditions of
any of our suppliers, manufacturers or licensees could adversely affect our reputation and sales and force us to
locate alternative suppliers, manufacturers or licensees.
In addition, we have sponsorship contracts with a variety of athletes and feature those athletes in our
advertising and marketing efforts, and many athletes and teams use our products, including those teams or
leagues for which we are an official supplier. Actions taken by athletes, teams or leagues associated with our
products could harm the reputations of those athletes, teams or leagues. As a result, our brand image, net
revenues and profitability could be adversely affected.
Sponsorships and designations as an official supplier may become more expensive and this could impact
the value of our brand image.
A key element of our marketing strategy has been to create a link in the consumer market between our
products and professional and collegiate athletes. We have developed licensing agreements to be the official
supplier of performance apparel and footwear to a variety of sports teams and leagues at the collegiate and
professional level and sponsorship agreements with athletes. However, as competition in the performance apparel
and footwear industry has increased, the costs associated with athlete sponsorships and official supplier licensing
agreements have increased, including the costs associated with obtaining and retaining these sponsorships and
agreements. If we are unable to maintain our current association with professional and collegiate athletes, teams
and leagues, or to do so at a reasonable cost, we could lose the on-field authenticity associated with our products,
and we may be required to modify and substantially increase our marketing investments. As a result, our brand
image, net revenues, expenses and profitability could be materially adversely affected.
Our failure to comply with trade and other regulations could lead to investigations or actions by
government regulators and negative publicity.
The labeling, distribution, importation, marketing and sale of our products are subject to extensive
regulation by various federal agencies, including the Federal Trade Commission, Consumer Product Safety
Commission and state attorneys general in the U.S., as well as by various other federal, state, provincial, local
and international regulatory authorities in the locations in which our products are distributed or sold. If we fail to
comply with those regulations, we could become subject to significant penalties or claims or be required to recall
products, which could 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,
resulting in significant loss of net revenues.
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