Under Armour 2007 Annual Report Download - page 24

If the financial condition of our retail customers declines, our financial condition and results of operations
could be adversely impacted.
We extend credit to our customers based on an assessment of a customer’s financial condition, generally
without requiring collateral. We face increased risk of order reduction or cancellation when dealing with
financially ailing customers or customers struggling with economic uncertainty. A slowing economy in our key
markets or a continued decline in consumer purchases of sporting goods generally could have an adverse effect
on the financial health of our retail customers, which could in turn have an adverse effect on our sales, our ability
to collect on receivables, our ability to borrow under our revolving credit facility and our financial condition.
If we encounter problems with our distribution system, our ability to deliver our products to the market
would be adversely affected.
We rely on our two distribution facilities in Glen Burnie, Maryland for the majority of our product
distribution. Our distribution facilities include computer controlled and automated equipment, which means the
operations are complicated and may be subject to a number of risks related to security or computer viruses, the
proper operation of software and hardware, power interruptions or other system failures. In addition, because the
majority of our products are distributed from two nearby locations, our operations could also be interrupted by
floods, fires or other natural disasters near our distribution facilities, as well as labor difficulties. We maintain
business interruption insurance, but it may not adequately protect us from the adverse effects that could be
caused by significant disruptions in our distribution facilities, such as the long-term loss of customers or an
erosion of our brand image. In addition, our distribution capacity is dependent on the timely performance of
services by third parties, including the shipping of product to and from our distribution facilities. If we encounter
problems with our distribution facilities, our ability to meet customer expectations, manage inventory, complete
sales and achieve objectives for operating efficiencies could be materially adversely affected.
We rely on third-party suppliers and manufacturers to provide fabrics for and to produce our products,
and we have limited control over these suppliers and manufacturers and may not be able to obtain quality
products on a timely basis or in sufficient quantity.
Many of the specialty fabrics used in our products are technically advanced textile products developed by
third parties and may be available, in the short-term, from a very limited number of sources. Substantially all of
our products are manufactured by unaffiliated manufacturers, and, in 2007, seven manufacturers produced
approximately 55% of our products. We have no long-term contracts with our suppliers or manufacturing
sources, and we compete with other companies for fabrics, raw materials, production and import quota capacity.
There can be no assurance that there will not be a significant disruption in the supply of fabrics or raw
materials from current sources or, in the event of a disruption, that we would be able to locate alternative
suppliers of materials of comparable quality at an acceptable price, or at all. In addition, we cannot be certain that
our unaffiliated manufacturers will be able to fill our orders in a timely manner. If we experience significant
increased demand, or need to replace an existing manufacturer, there can be no assurance that additional supplies
of fabrics or raw materials or additional manufacturing capacity will be available when required on terms that are
acceptable to us, or at all, or that any supplier or manufacturer would allocate sufficient capacity to us in order to
meet our requirements. In addition, even if we are able to expand existing or find new manufacturing or fabric
sources, we may encounter delays in production and added costs as a result of the time it takes to train our
suppliers and manufacturers in our methods, products and quality control standards. Any delays, interruption or
increased costs in the supply of fabric or manufacture of our products could have an adverse effect on our ability
to meet retail customer and consumer demand for our products and result in lower revenues and net income both
in the short and long-term.
In addition, there can be no assurance that our suppliers and manufacturers will continue to provide fabrics
and raw materials and to manufacture products that are consistent with our standards. We have occasionally
received, and may in the future continue to receive, shipments of product that fail to conform to our quality
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