Under Armour 2008 Annual Report Download - page 14

We are introducing our performance apparel in international markets methodically, in a manner consistent with
our past brand-building strategy including selling our products directly to teams and individual athletes in these
markets, thereby providing us with product exposure to broad audiences of potential consumers in these markets.
Since 2002, we have had a license agreement with Dome Corporation, which produces, markets and sells
our branded products in Japan. We work closely with this licensee to develop variations of our products for the
different sizes, sports interests and preferences of the Japanese consumer. Our branded products are now sold in
Japan to professional sports teams, including baseball and soccer teams, and to over 1,500 independent specialty
stores and large sporting goods retailers, such as Alpen, Sports Depot, The Sports Authority and Xebio.
In 2005, we expanded our sales into Europe, beginning with the United Kingdom. We have sold our branded
products to numerous players on European soccer teams; First Division Football clubs and multiple cricket clubs
in the United Kingdom; soccer teams in Italy, Spain, Holland, Ireland and Germany as well as First Division
Rugby clubs in the United Kingdom, France, Italy and Ireland. In addition, in January 2006, we opened our
European headquarters in Amsterdam, The Netherlands from which our European sales, marketing and logistics
functions are conducted (see Note 16 to the Consolidated Financial Statements for consolidated net revenues for
each of the last three years attributed to the United States and to other foreign countries).
Seasonality
Historically, we have recognized a significant portion of our income from operations in the last two quarters
of the year, driven by increased sales volume of our products during the fall selling season, reflecting our
historical strength in fall sports, and the seasonality of our higher priced COLDGEAR®line. During 2008, a
larger portion of our income from operations was in the last two quarters partially due to the shift in the timing of
marketing investments to the first two quarters of 2008 as compared to prior years. The majority of our net
revenues were generated during the last two quarters in each of 2008, 2007 and 2006. The level of our working
capital generally reflects the seasonality and growth in our business. We generally expect inventory, accounts
payable and certain accrued expenses to be higher in the second and third quarters in preparation for the fall
selling season. Nonetheless, the historical high percentage of income from operations and net revenues in the
second half of the year may have been in part due to our growth in net revenues.
Product Design and Development
Our products are manufactured with technical fabrications produced by third parties and developed in
collaboration with our product development team. This approach enables us to select and create superior,
technically advanced fabrics, produced to our specifications, while focusing our product development efforts on
design, fit, climate and product end use.
We seek to constantly upgrade and improve our gearlines and products with the latest in textile technology
while broadening our product offerings. Our goal, to deliver superior performance in all Under Armour gearlines
and products, provides our developers and licensees with a clear, overarching direction for the brand and helps
them identify new opportunities to replace basic cotton products and create performance products that meet the
changing needs of athletes. We design products with “visible technology,” utilizing color, texture and fabrication
to enhance our customers’ perception and understanding of product use and benefits. We have taken this same
approach in the design and development of our footwear which contain innovative technologies, design and
fabrication to deliver on our goal of superior performance footwear.
Our product development team has significant prior industry experience at leading fabric suppliers and
branded athletic apparel and footwear companies throughout the world. This team works closely with our sports
marketing and sales teams as well as professional and collegiate athletes to identify product trends and determine
market needs. For example, these teams worked closely together to identify the opportunity and market for our
Armour Fleece and our UA Tech-T, a synthetic stretch shirt that is intended to look and feel like cotton, but that
also includes our performance product attributes in a synthetic textile.
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