Under Armour 2006 Annual Report Download - page 23

2002, or at our suppliers or manufacturers, create significant risks for our business, particularly if these disputes
result in work slowdowns, lockouts, strikes or other disruptions during our peak importing or manufacturing
seasons, and could have an adverse effect on our business, potentially resulting in cancelled orders by customers,
unanticipated inventory accumulation or shortages and reduced net revenues and net income.
The value of our brand, and sales of our products, could be diminished if we are associated with negative
publicity.
We require that our suppliers, independent manufacturers and licensees of our products 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. We do not control these suppliers, manufacturers or licensees or their
labor practices. A 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 the
production methods of any of our suppliers, manufacturers or licensees could adversely affect our reputation and
sales and force us to locate alternative suppliers, manufacturing sources 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
that harm the reputations of those athletes, teams or leagues could also harm our brand image and result in a
material decrease in our net revenues and net income, which could have a material adverse effect on our financial
condition and liquidity.
Our international operations and the operations of many of our manufacturers are subject to additional
risks that are beyond our control and that could harm our business.
In 2006, our apparel products were manufactured by 18 primary manufacturers, operating in 19 countries,
four of which manufactured approximately 50% of our products. These four manufacturers are located in
Mexico, China and Colombia. In 2006, approximately 40% of our products were manufactured in Asia, with
32% manufactured in Central and South America and 24% manufactured in Mexico. In addition, approximately
4% of our 2006 net revenues were generated through international sales and licensing fees. As a result of our
international manufacturing and sales, we are subject to risks associated with doing business abroad, including:
• political unrest, terrorism and economic instability resulting in the disruption of trade from foreign
countries in which our products are manufactured;
• currency exchange fluctuations;
• the imposition of new laws and regulations, including those relating to labor conditions, quality and
safety standards, imports, duties, taxes and other charges on imports, as well as trade restrictions and
restrictions on the transfer of funds;
• reduced protection for intellectual property rights in some countries;
• understanding foreign consumer tastes and preferences that may differ from those in the United States;
• complying with foreign laws and regulations that differ from country to country;
• disruptions or delays in shipments; and
• changes in local economic conditions in countries where our manufacturers, suppliers or customers are
located.
Our senior secured credit facility provides our lenders with a first-priority lien against substantially all of
our assets and contains financial covenants and other restrictions on our actions, and it could therefore
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 senior
secured credit facility. The senior secured credit facility is a revolving facility of up to $100.0 million (based on
the value of our accounts receivable and inventory).
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