Under Armour 2012 Annual Report Download - page 48

(1) Excludes a total of $0.3 million of fixed interest payments on long term debt obligations.
(2) Includes the minimum payments for operating lease obligations. The operating lease obligations do not
include any contingent rent expense we may incur at our factory house stores based on future sales above a
specified minimum or payments made for maintenance, insurance and real estate taxes. Contingent rent
expense was $6.2 million for the year ended December 31, 2012.
(3) We generally place orders with our manufacturers at least three to four months in advance of expected
future sales. The amounts listed for product purchase obligations primarily represent our open production
purchase orders with our manufacturers for our apparel, footwear and accessories, including expected
inbound freight, duties and other costs. These open purchase orders specify fixed or minimum quantities of
products at determinable prices. The product purchase obligations also includes fabric commitments with
our suppliers, which secure a portion of our material needs for future seasons. The reported amounts exclude
product purchase liabilities included in accounts payable as of December 31, 2012. When compared to the
product purchase obligation included in our 2011 Form 10-K, product purchase obligations have increased
by 128% primarily due to the timing of product purchases and increased fabric commitments with our
suppliers.
(4) Includes sponsorships with professional teams, professional leagues, colleges and universities, individual
athletes, high schools, youth organizations, athletic events and other marketing commitments in order to
promote our brand. Some of these sponsorship agreements provide for additional performance incentives
and product supply obligations. It is not possible to determine how much we will spend on product supply
obligations on an annual basis as contracts generally do not stipulate specific cash amounts to be spent on
products. The amount of product provided to these sponsorships depends on many factors including general
playing conditions, the number of sporting events in which they participate and our decisions regarding
product and marketing initiatives. In addition, the costs to design, develop, source and purchase the products
furnished to the endorsers are incurred over a period of time and are not necessarily tracked separately from
similar costs incurred for products sold to customers. In addition, it is not possible to determine the amounts
we may be required to pay under these agreements as they are primarily subject to certain performance
based variables. The amounts listed above are the fixed minimum amounts required to be paid under these
agreements.
The table above excludes a liability of $17.1 million for uncertain tax positions, including the related
interest and penalties, recorded in accordance with applicable accounting guidance, as we are unable to
reasonably estimate the timing of settlement. Refer to Note 10 to the Consolidated Financial Statements for a
further discussion of our uncertain tax positions.
Off-Balance Sheet Arrangements
In connection with various contracts and agreements, we have agreed to indemnify counterparties against
certain third party claims relating to the infringement of intellectual property rights and other items. Generally,
such indemnification obligations do not apply in situations in which our counterparties are grossly negligent,
engage in willful misconduct, or act in bad faith. Based on our historical experience and the estimated probability
of future loss, we have determined the fair value of such indemnifications is not material to our financial position
or results of operations.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America. To prepare these financial statements, we must make
estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as
the disclosures of contingent assets and liabilities. Actual results could be significantly different from these
estimates. We believe the following discussion addresses the critical accounting policies that are necessary to
understand and evaluate our reported financial results.
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