Under Armour 2012 Annual Report Download - page 72

identical rights, including liquidation preferences, except that the holders of Class A Common Stock are entitled
to one vote per share and holders of Class B Convertible Common Stock are entitled to 10 votes per share on all
matters submitted to a stockholder vote. Class B Convertible Common Stock may only be held by Kevin Plank,
the Company’s founder and Chief Executive Officer, or a related party of Mr. Plank, as defined in the
Company’s charter. As a result, Mr. Plank has a majority voting control over the Company. Upon the transfer of
shares of Class B Convertible Stock to a person other than Mr. Plank or a related party of Mr. Plank, the shares
automatically convert into shares of Class A Common Stock on a one-for-one basis. In addition, all of the
outstanding shares of Class B Convertible Common Stock will automatically convert into shares of Class A
Common Stock on a one-for-one basis upon the death or disability of Mr. Plank or on the record date for any
stockholders’ meeting upon which the shares of Class A Common Stock and Class B Convertible Common Stock
beneficially owned by Mr. Plank is less than 15% of the total shares of Class A Common Stock and Class B
Convertible Common Stock outstanding. Holders of the Company’s common stock are entitled to receive
dividends when and if authorized and declared out of assets legally available for the payment of dividends.
During the year ended December 31, 2012, 1.2 million shares of Class B Convertible Common Stock were
converted into shares of Class A Common Stock on a one-for-one basis in connection with stock sales.
9. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date (an exit price). The fair value
accounting guidance outlines a valuation framework, creates a fair value hierarchy in order to increase the
consistency and comparability of fair value measurements and the related disclosures, and prioritizes the inputs
used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs for which there is little or no market data, which require the reporting entity to
develop its own assumptions.
Financial assets and (liabilities) measured at fair value are set forth in the table below:
December 31, 2012 December 31, 2011
(In thousands) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Derivative foreign currency forward contracts (see Note 14) $ — $ 5 $ — $ — $ (695) $ —
Interest rate swap contract (see Note 14) — (141) — — — —
TOLI policies held by the Rabbi Trust (see Note 13) — 4,250 — — 3,943 —
Deferred Compensation Plan obligations (see Note 13) — (2,837) — — (3,485) —
Fair values of the financial assets and liabilities listed above are determined using inputs that use as their basis
readily observable market data that are actively quoted and are validated through external sources, including third-party
pricing services and brokers. The foreign currency forward contracts represent gains and losses on derivative contracts,
which is the net difference between the U.S. dollar value to be received or paid at the contracts’ settlement date and the
U.S. dollar value of the foreign currency to be sold or purchased at the current forward exchange rate. The interest rate
swap contract represents gains and losses on the derivative contract, which is the net difference between the fixed
interest to be paid and variable interest to be received over the term of the contract based on current market rates. The
fair value of the trust owned life insurance (“TOLI”) policies held by the Rabbi Trust is based on the cash-surrender
value of the life insurance policies, which are invested primarily in mutual funds and a separately managed fixed
income fund. These investments are in the same funds and purchased in substantially the same amounts as the selected
investments of participants in the Under Armour, Inc. Deferred Compensation Plan (the “Deferred Compensation
Plan”), which represent the underlying liabilities to participants in the Deferred Compensation Plan. Liabilities under
the Deferred Compensation Plan are recorded at amounts due to participants, based on the fair value of participants’
selected investments.
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