Under Armour 2012 Annual Report Download - page 14

We seek to regularly upgrade and improve our products with the latest in innovative technology while
broadening our product offerings. Our goal, to deliver superior performance in all our products, provides our
developers and licensees with a clear, overarching direction for the brand and helps them identify new
opportunities to 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.
Our product development 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 to identify the opportunity and market for our CHARGED COTTON®products, which are
made from natural cotton but perform like our synthetic products, drying faster and wicking away moisture from
the body, and our Storm Fleece products with a unique, water-resistant finish that repels water, without stifling
airflow. In 2012, in partnership with Swiss Company, Schoeller, we launched coldblack®technology which
repels heat created from the sun to keep the wearer cooler outside.
Sourcing, Manufacturing and Quality Assurance
Many of the specialty fabrics and other raw materials used in our products are technically advanced
products developed by third parties and may be available, in the short term, from a limited number of sources.
The fabric and other raw materials used to manufacture our products are sourced by our manufacturers from a
limited number of suppliers pre-approved by us. In 2012, approximately 50% to 55% of the fabric used in our
products came from five suppliers. These fabric suppliers have locations in China, Malaysia, Mexico, Taiwan
and Vietnam. We continue to seek new suppliers and believe, although there can be no assurance, that this
concentration will decrease over time. The fabrics used by our suppliers and manufacturers are primarily
synthetic fabrics and involve raw materials, including petroleum based products, that may be subject to price
fluctuations and shortages. In 2011, we introduced CHARGED COTTON®products which primarily use cotton
fabrics that also may be subject to price fluctuations and shortages.
Substantially all of our products are manufactured by unaffiliated manufacturers and, in 2012, ten
manufacturers produced approximately 49% of our products. In 2012, our products were manufactured by 27
primary manufacturers, operating in 14 countries, with approximately 53% of our products manufactured in Asia,
19% in Central and South America, 18% in the Middle East and 8% in Mexico. All manufacturers are evaluated
for quality systems, social compliance and financial strength by our quality assurance team prior to being
selected and on an ongoing basis. Where appropriate, we strive to qualify multiple manufacturers for particular
product types and fabrications. We also seek out vendors that can perform multiple manufacturing stages, such as
procuring raw materials and providing finished products, which helps us to control our cost of goods sold. We
enter into a variety of agreements with our manufacturers, including non-disclosure and confidentiality
agreements, and we require that all of our manufacturers adhere to a code of conduct regarding quality of
manufacturing and working conditions and other social concerns. We do not, however, have any long term
agreements requiring us to utilize any manufacturer, and no manufacturer is required to produce our products in
the long term. We have a subsidiary in Hong Kong to support our manufacturing, quality assurance and sourcing
efforts for apparel and a subsidiary in Guangzhou, China to support our manufacturing, quality assurance and
sourcing efforts for footwear and accessories.
We also manufacture a limited number of apparel products on-premises in our quick turn, Special Make-Up
Shop located at one of our distribution facilities in Maryland. Through this 17,000 square-foot shop, we are able
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.
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