Under Armour 2013 Annual Report Download - page 17

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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, primarily for high-profile athletes and teams, on-premises in
our quick turn, Special Make-Up Shop located at one of our distribution facilities in Maryland.
Inventory Management
Inventory management is important to the financial condition and operating results of our business. We
manage our inventory levels based on 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 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.
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 material trademarks used in connection with the marketing, distribution and sale of
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 numerous other countries. We also own
trademark registrations for other trademarks including, among others, UA®, ARMOUR®, HEATGEAR®,
COLDGEAR®, ALLSEASONGEAR®, PROTECT THIS HOUSE®, I WILL®, and many trademarks that
incorporate the term ARMOUR such as ARMOUR39®, ARMOURBITE®, ARMOURLOFT®,
ARMOURSTORM®, ARMOUR FLEECE®, and ARMOUR BRA®. 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.
We traditionally have had limited patent protection on much of the technology, materials and processes used
in the manufacture of our products. However, as we continue to drive innovation in our products, we expect to
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