Under Armour 2013 Annual Report Download - page 16

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Seasonality
Historically, we have recognized a majority of our net revenues and a significant portion of our income from
operations in the last two quarters of the year, driven primarily by increased sales volume of our products during
the fall selling season, including our higher priced cold weather products, along with a larger proportion of
higher margin direct to consumer sales. 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.
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 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 2013, we introduced ColdGear®Infrared, a ceramic print technology on the inside of our garments
that provides athletes with lightweight warmth.
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 2013, approximately 50% to 55% of the fabric used in our
products came from six suppliers. These fabric suppliers have primary locations in China, Malaysia, Mexico,
Taiwan and Vietnam. We strengthened our relations with key strategic suppliers in 2013, while also continuing
to seek new suppliers to diversify our source base. 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. CHARGED COTTON®products that we introduced in 2011 continue to
perform strongly in the market. This product primarily uses cotton fabrics that may also be subject to commodity
price fluctuations and shortages.
Substantially all of our products are manufactured by unaffiliated manufacturers and, in 2013, fourteen
manufacturers produced approximately 65% of our products, with primary locations in Jordan, Philippines,
China, Nicaragua. Malaysia, Cambodia, Indonesia, Vietnam, Mexico, El Salvador and Honduras. In 2013, our
products were manufactured by 26 primary manufacturers, operating in 19 countries, with approximately 66% of
our products manufactured in Asia, 14% in Central and South America, 15% in the Middle East and 5% 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
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