Under Armour 2011 Annual Report Download - page 17

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to build and ship apparel products on tight deadlines for high-profile athletes, leagues and teams. While the
apparel products manufactured in the quick turn, Special Make-Up Shop represent an immaterial portion of our
total net revenues, we believe the facility helps us to provide superior service to select customers.
Inventory Management
Inventory management is important to the financial condition and operating results of our business. We
manage our inventory levels based on any existing orders, anticipated sales and the rapid-delivery requirements
of our customers. Our inventory strategy is focused on continuing to meet consumer demand while improving
our inventory efficiency over the long term by putting systems and processes in place to improve our inventory
management. These systems and processes are designed to improve our forecasting and supply planning
capabilities. In addition to systems and processes, key areas of focus that we believe will enhance inventory
performance are SKU rationalization, added discipline around the purchasing of product, production lead time
reduction, and better planning and execution in selling of excess inventory through our factory house stores and
other liquidation channels. With regards to SKU rationalization, we anticipate a reduction of our total number of
SKUs by approximately 20% from 2011 to 2012.
Our practice, and the general practice in the apparel, footwear and accessory industries, is to offer retail
customers the right to return defective or improperly shipped merchandise. As it relates to new product
introductions, which can often require large initial launch shipments, we commence production before receiving
orders for those products from time to time. This can affect our inventory levels as we build pre-launch
quantities.
Intellectual Property
We believe we own the internally developed material trademarks used in connection with the marketing,
distribution and sale of all our products, both domestically and internationally, where our products are currently
sold or manufactured. Our major trademarks include the UA Logo and UNDER ARMOUR®, both of which are
registered in the United States, Canada, Mexico, the European Union, Japan, China and several other foreign
countries in which we sell or plan to sell our products. We also own trademark registrations for UA®,
ARMOUR®, HEATGEAR®, COLDGEAR®, ALLSEASONGEAR®, PROTECT THIS HOUSE®, THE
ADVANTAGE IS UNDENIABLE ®, DUPLICITY®, MPZ®, BOXERJOCK®, RECHARGE®, COMBINE®,
CHARGED COTTON®, MICRO G®and several other trademarks, including numerous trademarks that
incorporate the term ARMOUR such as ARMOURBITE®, ARMOURLOFT®, ARMOURSTORM®, ARMOUR
FLEECE®, BABY ARMOUR®, and several others. In addition, we have applied to register numerous other
trademarks including: ARE YOU FROM HERE?™, E39™ and 4D FOAM™. We also own domain names for
our primary trademarks (most notably underarmour.com and ua.com) and hold copyright registrations for several
commercials, as well as for certain artwork. We intend to continue to strategically register, both domestically and
internationally, trademarks and copyrights we utilize today and those we develop in the future. We will continue
to aggressively police our trademarks and pursue those who infringe, both domestically and internationally.
We believe the distinctive trademarks we use in connection with our products are important in building our
brand image and distinguishing our products from those of others. These trademarks are among our most
valuable assets. In addition to our distinctive trademarks, we also place significant value on our trade dress,
which is the overall image and appearance of our products, and we believe our trade dress helps to distinguish
our products in the marketplace.
The intellectual property rights in much of the technology, materials and processes used to manufacture our
products are often owned or controlled by our suppliers. However, we seek to protect certain innovative products
and features that we believe to be new, strategic and important to our business. In 2011, we filed several patent
applications in connection with certain of our products and designs that we believe offer a unique utility or
function. We will continue to file patent applications where we deem appropriate to protect our inventions and
designs, and we expect the number of applications to grow as our business grows and as we continue to innovate.
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