Under Armour 2006 Annual Report Download - page 12

We work with our retailers to establish optimal placement for our products and to have the brand
represented in the many departments of a traditional large national or regional chain. The fixtures and displays
enable us to achieve placement of our products throughout stores by providing retailers with outposts to use in
various store sections.
Customers
Our products are offered in approximately 8,000 retail stores in North America and approximately 12,000
retail stores worldwide, which includes our wholesale distribution and product licensing. We also sell our
products directly to athletes and teams through our sports marketing group and to consumers through our retail
stores, website and toll-free call center. We rely on our distribution facilities in Glen Burnie, Maryland for
substantially all of our product distribution for North America. In addition, we also distribute our products in
Europe through a third-party logistics provider based out of Tilburg, Netherlands.
Wholesale Distribution
In 2006, approximately 88% of our net revenues were derived from wholesale distribution. Our principal
customers include national and regional retail chains, such as Dick’s Sporting Goods, The Sports Authority,
Academy Ltd., Hibbett Sporting Goods, Modell’s Sporting Goods; hunting and fishing, mountain sports and
outdoor retailers such as Cabela’s and Bass Pro Shops; and The Army and Air Force Exchange Service. In 2006,
our two largest customers were, in alphabetical order, Dick’s Sporting Goods and The Sports Authority. These
two customers accounted for approximately 37% of our net revenues in 2006, and each of these customers
individually accounted for at least 10% of our net revenues in 2006.
In 2006, 69% of our wholesale distribution was derived from large format national and regional retail chains in
North America. Additional wholesale distribution in 2006 was derived from independent and specialty retailers.
These retailers are serviced by a combination of in-house sales personnel and third-party commissioned
manufacturer’s representatives. These retail stores continue to represent an important part of our product
distribution strategy and help build on the authenticity of our products. In addition to reaching the general public,
they sell to institutional athletic departments, leagues and teams. Our independent sales also include sales to military
specialists, fitness specialists, outdoor retailers and other specialty channels throughout the United States.
Direct to Consumer Distribution
Approximately 8% of our net revenues in 2006 were generated through our Direct to Consumer business.
Direct to consumer sales include sales through our Global Direct business (website and catalog sales) at our
manufacturer’s suggested retail price, and sales through our retail outlet stores and by our sports marketing group
for use by professional and collegiate athletes.
Product Licensing
In addition to generating revenues through wholesale distribution and direct to consumer distribution, we
generate revenues from licensing arrangements to manufacture and distribute Under Armour branded products. In
order to maintain consistent quality and performance, we pre-approve all products manufactured and sold by our
product licensees, and our quality assurance team strives to ensure that the products meet the same quality and
compliance standards as the products that we sell directly. While we have confidence in our ability to increase net
revenues through arrangements with licensees, we carefully select each of our licensees and take measures to
preserve our existing distribution channels. We have formed product licensing relationships with several licensees
for socks and accessories. In addition, we have a relationship with one Japanese licensee that has the exclusive
rights to distribute our products in Japan. In 2006, license fees accounted for 4% of our net revenues.
International Revenues
Our international revenues include net revenues generated in Europe, primarily in the United Kingdom,
France and Germany. In addition, international revenues include net revenues generated through third-party
distributors primarily in Italy, Scandinavia, Australia and New Zealand, along with license revenues from our
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