Under Armour 2015 Annual Report Download - page 56

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Interest Rate Risk
In order to maintain liquidity and fund business operations, we enter into long term debt arrangements with
various lenders which bear a range of fixed and variable rates of interest. The nature and amount of our long-term
debt can be expected to vary as a result of future business requirements, market conditions and other factors. We
may elect to enter into interest rate swap contracts to reduce the impact associated with interest rate fluctuations.
We utilize interest rate swap contracts to convert a portion of variable rate debt to fixed rate debt. The contracts
pay fixed and receive variable rates of interest. The interest rate swap contracts are accounted for as cash flow
hedges and accordingly, the effective portion of the changes in fair value are recorded in other comprehensive
income and reclassified into interest expense over the life of the underlying debt obligation.
As of December 31, 2015, the aggregate notional value of our outstanding interest rate swap contracts was
$170.7 million. During the years ended December 31, 2015 and 2014, we recorded a $2.7 million and $1.7
million increase in interest expense, respectively, representing the effective portion of the contracts reclassified
from accumulated other comprehensive income. The fair value of the interest rate swap contracts was a liability
of $1.5 million and $0.6 million as of December 31, 2015 and 2014, respectively, and was included in other long
term liabilities on the consolidated balance sheet.
Credit Risk
We are exposed to credit risk primarily on our accounts receivable. We provide credit to customers in the
ordinary course of business and perform ongoing credit evaluations. We believe that our exposure to
concentrations of credit risk with respect to trade receivables is largely mitigated by our customer base. We
believe that our allowance for doubtful accounts is sufficient to cover customer credit risks as of December 31,
2015. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical
Accounting Policies and Estimates—Allowance for Doubtful Accounts.”
Inflation
Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our
operating results. Although we do not believe that inflation has had a material impact on our financial position or
results of operations in recent periods, a high rate of inflation in the future may have an adverse effect on our
ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage
of net revenues if the selling prices of our products do not increase with these increased costs.
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