Under Armour 2015 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 2013, we introduced ColdGear®Infrared, a ceramic print technology on the inside of our garments
that provides athletes with lightweight warmth, and Speedform®, a proprietary 3-dimensional molding
technology for footwear which delivers superior fit and feel.
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 2015, approximately 54% of the fabric used in our products
came from five suppliers. These fabric suppliers have primary locations in Taiwan, Malaysia and Mexico. 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. We also use cotton in
our products, as blended fabric and also in our CHARGED COTTON®line. Cotton is a commodity that is
subject to price fluctuations and supply shortages. Additionally, our footwear uses raw materials that are sourced
from a diverse base of third party suppliers. This includes chemicals and petroleum-based components such as
rubber that are also subject to price fluctuations and supply shortages.
Substantially all of our products are manufactured by unaffiliated manufacturers. In 2015, our products were
manufactured by 44 primary manufacturers, operating in 16 countries, with approximately 63% of our products
manufactured in China, Jordan, Vietnam and Indonesia. Of our 44 primary manufacturing partners, 10 produced
approximately 45% of our products. 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 subsidiaries in Hong Kong,
Panama, Vietnam, Indonesia and China to support our manufacturing, quality assurance and sourcing efforts for
our products. 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
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