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What changed in Under Armour, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Under Armour, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+392 added−410 removedSource: 10-K (2023-05-24) vs 10-K (2022-02-23)

Top changes in Under Armour, Inc.'s 2023 10-K

392 paragraphs added · 410 removed · 280 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

75 edited+15 added−19 removed48 unchanged
Biggest changeDiversity, Equity and Inclusion Our commitment to diversity, equity and inclusion starts at the top with a highly skilled and diverse Board of Directors. Our Board of Directors has ongoing oversight of our human capital management strategies and programs and regularly reviews our progress towards achieving our diversity, equity and inclusion goals.
Biggest changeOur Board of Directors has ongoing oversight of our human capital management strategies and programs and regularly reviews our progress towards achieving our diversity, equity and inclusion goals. We have set measurable, time-bound goals for improving diversity amongst our team, including a commitment to increase the number of historically underrepresented teammates throughout the levels of leadership within our organization.
We require that manufacturers adhere to a supplier code of conduct regarding manufacturing quality, working conditions and other social, labor and sustainability-related matters. However, we do not have any long term agreements requiring us to utilize any particular manufacturer, and no manufacturer is required to produce our products for the long term.
We require that manufacturers adhere to our supplier code of conduct regarding manufacturing quality, working conditions and other social, labor and sustainability-related matters. However, we do not have any long term agreements requiring us to utilize any particular manufacturer, and no manufacturer is required to produce our products for the long term.
We also sell our products to distributors in New Zealand, Taiwan, Hong Kong, India and other countries in Southeast Asia where we do not have direct sales operations. We distribute our products in Asia-Pacific through third-party logistics providers based in Hong Kong, China, South Korea and Australia.
We also sell our products to distributors in New Zealand, Taiwan, Hong Kong, India and other countries in Southeast Asia where we do not have direct sales operations. We distribute our products in Asia-Pacific through third-party logistics providers based in Hong Kong, China, South Korea, Australia and Singapore.
We generally distribute our products to our retail customers and e-commerce consumers in Europe through a third-party logistics provider in the Netherlands and a bonded warehouse in the United Kingdom. We sell our apparel, footwear and accessories through independent distributors in the Middle East, Africa and Russia.
We generally distribute our products to our retail customers and e-commerce consumers in Europe through a third-party logistics provider in the Netherlands and a bonded warehouse in the United Kingdom. We sell our apparel, footwear and accessories through independent distributors in the Middle East and Africa.
Our footwear is built with the mindset of making athletes better through differentiated and industry leading cushioning technologies such as Charged Cushioning®, UA Flow™, HOVR™ and UA Micro G®. These cushioning platforms provide athletes with improved ground feel, enhanced responsiveness and lightweight solutions. We also incorporate advanced materials and innovative consumer-centric constructions to enhance performance.
Our footwear is built with the mindset of making athletes better through differentiated and industry leading cushioning technologies such as Charged Cushioning®, UA Flow™, HOVR® and UA Micro G®. These cushioning platforms provide athletes with plush underfoot and improved ground feel, enhanced responsiveness and lightweight solutions. We also incorporate advanced materials and innovative consumer-centric constructions to enhance performance.
These fabric suppliers have primary locations in Taiwan, China, Malaysia and Vietnam. The fabrics used by our suppliers and manufacturers are primarily synthetic and involve raw materials, including petroleum-based products that may be subject to price fluctuations and shortages. We also use cotton as a blended fabric in some of our apparel products .
These fabric suppliers have primary locations in Taiwan, China, Turkey and Malaysia. The fabrics used by our suppliers and manufacturers are primarily synthetic and involve raw materials, including petroleum-based products that may be subject to price fluctuations and shortages. We also use cotton as a blended fabric in some of our apparel products.
Accessories Accessories primarily includes the sale of athletic performance gloves, bags, headwear and sports masks. Some of our accessories include the technologies mentioned above and are designed with advanced fabrications to provide the same level of performance as our other products. License We have agreements with licensees to develop certain Under Armour apparel, accessories and equipment.
Accessories Accessories primarily includes the sale of athletic performance gloves, bags, headwear, socks and sports masks. Some of our accessories include the technologies mentioned above and are designed with advanced fabrications to provide the same level of performance as our other products. License We have agreements with licensees to develop certain Under Armour apparel, footwear, accessories and equipment.
Many of the fabrics and technology used in manufacturing our products are not unique to us, and we own a limited number of fabric or process patents. We also compete with other manufacturers, including those specializing in performance apparel and footwear, and private label offerings of certain retailers, including some of our retail customers.
Many of the fabrics and technology used in manufacturing our products are not unique to us, and we own a limited number of fabric or process patents. We also compete with other manufacturers, including those specializing in performance apparel and footwear, and private label offerings of certain retailers, including some of our wholesale customers.
These types of innovations and technologies, embedded in many of our apparel products, include: COLDGEAR® Reactor, HEATGEAR®, UA-ISO-Chill®, UA RUSH™, UA SMARTFORM™ and UA STORM™. Footwear Footwear includes products for running, training, basketball, cleated sports, recovery and outdoor applications.
These types of innovations and technologies, embedded in many of our apparel products, include: COLDGEAR®, COLDGEAR INFRARED®, HEATGEAR®, UA Iso-Chill™, UA RUSH™, UA SMARTFORM™ and UA STORM™. Footwear Footwear includes products for running, training, basketball, cleated sports, recovery and outdoor applications.
During Fiscal 2021, our licensees offered collegiate apparel and accessories, baby and youth apparel, team uniforms, socks, water bottles, eyewear and other specific hard goods equipment that feature performance advantages and functionality like our other product offerings.
During Fiscal 2023, our licensees offered collegiate apparel and accessories, baby and youth apparel, team uniforms, socks, water bottles, eyewear and other specific hard goods equipment that feature performance advantages and functionality like our other product offerings.
Prior to that, he served as Chief Executive Officer and Chairman of the Board of Directors from 1996, when he founded our Company, to 2019, and President from 1996 to July 2008 and August 2010 to July 2017. Mr.
Prior to that, he served as Chief Executive Officer and Chair of the Board of Directors from 1996, when he founded our Company, to 2019, and President from 1996 to July 2008 and August 2010 to July 2017. Mr.
We plan to continue to grow our business over the long-term through increased sales of our apparel, footwear and accessories; expansion of our wholesale distribution; growth in our direct-to-consumer sales channel; and expansion in international markets.
We plan to continue to grow our business over the long-term through increased sales of our apparel, footwear and accessories; growth in our direct-to-consumer sales channel; and expansion of our wholesale distribution.
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.
We will continue to aggressively police our trademarks and pursue those who infringe, both domestically and internationally. 6 Table of Contents 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.
See “Risk Factors—Business and Operational Risks—Our future success is substantially dependent on the continued service of our senior management and other key employees, and our continued ability to attract and retain highly talented new team members” included in Item 1A of this Annual Report on Form 10-K.
See "Risk Factors—Business and Operational Risks—Our future success is substantially dependent on the continued service of our senior management and other key employees, and our continued ability to attract and retain highly talented new team members" included in Item 1A of this Annual Report on Form 10-K.
In addition, we distribute our products in North America through third-party logistics providers with 4 Table of Contents primary locations in Canada, New Jersey and Florida. In some instances, we arrange to have products shipped directly to customer-designated facilities from the factories that manufacture our products.
In addition, we distribute our products in North America through third-party logistics providers with primary locations in Canada, New Jersey and Florida. In some instances, we arrange to have products shipped directly to customer-designated facilities from the factories that manufacture our products.
Our human capital management 7 Table of Contents strategy is therefore focused on creating an inclusive workplace where our teammates can thrive by attracting, developing and retaining talent through a competitive total rewards program, numerous development opportunities and a diverse, inclusive and engaging work environment.
Our human capital management strategy is therefore focused on creating an inclusive workplace where our teammates can thrive by attracting, developing and retaining talent through a competitive total rewards program, numerous development opportunities and a diverse, inclusive and engaging work environment.
In determining our compensation practices, we focus on offering competitive pay that is based on market data with packages that appropriately reflect roles and geographic locations. We believe in “pay for performance” and seek to design plans and programs to support a culture of high performance where we reward what is accomplished and how.
In determining our compensation practices, we focus on offering competitive pay that is based on market data with packages that appropriately reflect roles and geographic locations and are transparently communicated. We believe in "pay for performance" and seek to design plans and programs to support a culture of high performance where we reward what is accomplished and how.
In the United States, where approximately 69% of our workforce is located, in addition to market-competitive pay and broad-based bonuses, our full-time 8 Table of Contents teammates are eligible for healthcare benefits; health savings accounts; flexible spending accounts; retirement savings plan; paid time off; family, maternity and paternity leave; adoption assistance; child and adult care resources; flexible work schedules; short and long term disability; life and accident insurance; tuition assistance; fitness benefits at on-site gyms or eligible fitness programs; commuter benefits; Under Armour merchandise discounts; and a Work-Life Assistance Program.
In the United States, where approximately 65% of our workforce is located, in addition to market-competitive pay and broad-based bonuses, our full-time teammates are eligible for healthcare benefits; health savings accounts; flexible spending accounts; retirement savings plan; paid time off; caregiver leave; adoption assistance; child and adult care resources; flexible work schedules; short and long term disability; life and accident insurance; tuition assistance; fitness benefits at on-site gyms or eligible fitness programs; commuter benefits; Under Armour merchandise discounts; and a Work-Life Assistance Program.
We also post on this website our key corporate governance documents, including our board committee charters, our corporate governance guidelines and our code of conduct and ethics. 11 Table of Contents
We also post on this website our key corporate governance documents, including our board committee charters, our corporate governance guidelines and our code of conduct and ethics.
However, if retailers earn higher margins from our competitors’ products, they may favor the display and sale of those products. We believe we have been able to compete successfully because of our brand image and recognition, the performance and quality of our products and our selective distribution policies.
However, if retailers earn higher margins from our competitors' products or their own private label offerings, they may favor the display and sale of those products. We believe we have been able to compete successfully because of our brand image and recognition, the performance and quality of our products and our selective distribution policies.
In addition, we earn licensing revenue in North America based on our licensees’ sale of collegiate apparel and accessories, as well as sales of other licensed products. We distribute the majority of our products to our North American wholesale customers and our own retail stores and e-commerce businesses from distribution facilities we lease and operate in California, Maryland and Tennessee.
In addition, we earn license revenues in North America based on our licensees' sales of collegiate apparel and accessories, as well as other licensed products. We distribute the majority of our products to our North American wholesale customers and our own retail stores and e-commerce channels from distribution facilities we lease and operate in California, Maryland and Tennessee.
In Fiscal 2021, substantially all of our footwear products were manufactured by six pr imary contract manufacturers, operating primarily in Vietnam, Indonesia and China. All manufacturers across all product divisions are evaluated for quality systems, social compliance and financial strength by our internal teams before being selected and on an ongoing basis.
In Fiscal 2023, substantially all of our footwear products were manufactured by eight p r imary contract manufacturers, operating primarily in Vietnam, Indonesia and China. All of our manufacturers across all product divisions are evaluated for quality systems, social compliance and financial strength by our internal teams before being selected and on an ongoing basis.
Consumers experience a premium expression of our brand through our Brand House stores while having broader access to our performance products. In Fiscal 2021, sales through our wholesale, direct-to-consumer and licensing channels represented 57%, 41% and 2% of net revenues, respectively.
Consumers experience a premium expression of our brand through our Brand House stores while having broader access to our performance products. In Fiscal 2023, sales through our wholesale, direct-to-consumer and licensing channels represented 59%, 38% and 2% of net revenues, respectively.
Our product development team also works closely with our sports marketing and sales teams and with professional and collegiate athletes to identify product trends and determine market needs. Sourcing, Manufacturing and Quality Assurance Many specialty fabrics and other raw materials used in our apparel products are technically advanced products developed by third parties.
Our product teams also work closely with our sports marketing and sales teams and with professional, collegiate and varsity athletes to identify product developments, trends and determine market needs. Sourcing, Manufacturing and Quality Assurance Many specialty fabrics and other raw materials used in our apparel products are technically advanced products produced by third parties.
Our primary business operates in four geographic segments: (1) North America, comprising the United States and Canada, (2) Europe, the Middle East and Africa ("EMEA"), (3) Asia-Pacific, and (4) Latin America. These geographic segments operate predominantly in one industry: developing, marketing and distributing branded performance apparel, footwear and accessories.
Our primary business operates in four geographic segments: (i) North America, comprising the United States and Canada, (ii) Europe, the Middle East and Africa ("EMEA"), (iii) Asia-Pacific, and (iv) Latin America. These geographic segments operate predominantly in one industry: developing, marketing and distributing branded performance apparel, footwear and accessories.
We have registered trademarks around the globe, including UNDER ARMOUR®, HEATGEAR®, COLDGEAR®, HOVR™ and the Under Armour UA Logo , and we have applied to register many other trademarks. This Annual Report on Form 10-K also contains additional trademarks and tradenames of our Company and our subsidiaries.
We were incorporated as a Maryland corporation in 1996. We have registered trademarks around the globe, including UNDER ARMOUR®, HEATGEAR®, COLDGEAR®, HOVR® and the Under Armour UA Logo ®, and we have applied to register many other trademarks. This Annual Report on Form 10-K also contains additional trademarks and tradenames of our Company and our subsidiaries.
The fabric and other raw materials us ed to manufacture our apparel products are sourced by our contracted manufacturers from a limited number of suppliers pre-approved by us . In Fiscal 2021, our top five suppliers provided approximately 38% o f the fabric used in our apparel and accessories .
The fabric and other raw materials used to manufacture our apparel products 5 Table of Contents are sourced by our contracted manufacturers from a limited number of suppliers pre-approved by us . In Fiscal 2023, our top five suppliers provided approximately 38% of the fabric used in our apparel and accessories.
We believe in promoting alignment between our teammates and stockholders. As such, these teammates are also eligible to participate in our Employee Stock Purchase Plan, and corporate teammates within our “director” level and above positions receive restricted stock unit awards as a key component of their total compensation package.
As such, these teammates are also eligible to participate in our Employee Stock Purchase Plan, and corporate teammates within our "director" level and above positions receive restricted stock unit awards as a key component of their total compensation package.
Plank also serves on the Board of Directors of the National Football Foundation and College Hall of Fame, Inc., and is a member of the Board of Trustees of the University of Maryland College Park Foundation. Patrik Frisk has been Chief Executive Officer and President and a member of our Board of Directors since January 2020.
Plank also serves on the Board of Directors of the National Football Foundation and College Hall of Fame, Inc., and is a member of the Board of Trustees of the University of Maryland College Park Foundation. Stephanie Linnartz has been President and Chief Executive Officer and a member of our Board of Directors since February 2023.
Net revenues generated from the sales of our products in the United States were $3.5 billion and $2.7 billion for Fiscal 2021 and Fiscal 2020, respectively. Our direct-to-consumer sales are generated through our Brand and Factory House stores and e-commerce website.
Net revenues generated from the sales of our products in the United States were $3.5 billion for Fiscal 2023. 4 Table of Contents Our direct-to-consumer sales are generated through our Brand and Factory House stores and e-commerce website.
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.
Our practice, and the general practice in the apparel, footwear and accessory industry, is to offer retail customers the right to return defective or improperly shipped merchandise. From time to time, when introducing new products, which often requires large initial launch shipments, we commence production before receiving orders for those products.
Intellectual Property We believe we own the material trademarks used in connection with the marketing, distribution and sale of our products, domestically and internationally, where our products are currently sold or manufactured.
Intellectual Property We own the material trademarks used in connection with the marketing, distribution and sale of our products in the United States and in key international markets where our products are currently sold or manufactured.
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.
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 also have copyright protection covering various designs and other original works.
Marketing and Promotion We currently focus on marketing our products to consumers primarily for use in athletics, fitness, and training activities, emphasizing on connecting with our target consumer - athletes". We seek to drive consumer demand by building brand awareness that our products deliver advantages to help athletes perform better.
Marketing and Promotion We currently focus on marketing our products to consumers primarily for use in athletics, fitness, and training activities, emphasizing our ability to support the needs of our athletes at all moments of their day. We seek to drive consumer demand by building brand awareness that our products deliver advantages to help athletes perform better.
Our sustainability strategy sets forth our long-term commitment to finding new ways to drive performance through sustainable innovations that not only deliver a better product for athletes, but also a better world.
Our sustainability strategy sets forth our long-term commitment to finding new ways to drive performance through sustainable innovations that not only deliver a better product for athletes, but also a better world. Our sustainability strategy is centered around three interconnected pillars—products, home field and team.
Ms. Collier served in various leadership roles at Sunrise Brands (formerly Tarrant Apparel Group) from 1999 to 2003. She also served in various merchandising positions at The Limited from 1987 to 1999 and started her career in retail and apparel at Hess’s Department Store. 10 Table of Contents Massimo Baratto has been Chief Consumer Officer since November 2021.
Ms. Collier served in various leadership roles at Sunrise Brands (formerly Tarrant Apparel Group) from 1999 to 2003. She also served in various merchandising positions at The Limited from 1987 to 1999 and started her career in retail and apparel at Hess's Department Store. Tchernavia Rocker has been Chief People and Administrative Officer since June 2020.
As of December 31, 2021, we had approximately 17,500 teammates worldwide, including approximately 13,000 in our Brand and Factory House stores and approximately 1,300 at our distribution facilities. Approximately 7,100 of our teammates were full-time. Of our approximately 10,400 part-time teammates, approximately 29% were seasonal teammates.
As of March 31, 2023, we had approximately 15,000 teammates worldwide, including approximately 10,000 in our Brand and Factory House stores and approximately 1,400 at our distribution facilities. Approximately 7,400 of our teammates were full-time. Of our approximately 7,400 part-time teammates, approximately 6% were seasonal teammates.
Prior to that, he served as Chief Supply Chain Officer from July 2017 to January 2020 and President of Global Sourcing from September 2016 to June 2017.
He served as interim President and Chief Executive Officer from June 2022 through February 2023. Previously, he served as Chief Supply Chain Officer from July 2017 to January 2020 and President of Global Sourcing from September 2016 to June 2017.
As of December 31, 2021: • the race and ethnicity of our teammate population in the United States, including teammates in our Brand and Factory House stores and our distribution facilities, was 49% White, 23% Hispanic or Latino, 18% Black or African American, 6% Asian and 4% other; • the race and ethnicity of our "director" level and above positions in the United States was 75% White, 6% Hispanic or Latino, 8% Black or African American, 8% Asian and 3% other; and • 52% of our global teammates were women, and women represented 41% of our “director” level and above positions.
As of March 31, 2023: • the race and ethnicity of our teammate population in the United States, including teammates in our Brand and Factory House stores and our distribution facilities, was 47% White, 24% Hispanic or Latino, 17% Black or African American, 8% Asian and 4% other; • the race and ethnicity of our "director" level and above positions in the United States was 75% White, 5% Hispanic or Latino, 9% Black or African American, 8% Asian and 3% other; and • 53% of our global teammates were women, and women represented 42% of our "director" level and above positions globally.
As of December 31, 2021, in North America, we had 180 Factory House stores primarily located in outlet centers and 19 Brand House stores throughout the United States and Canada. Consumers can also purchase our products directly from our e-commerce website at either www.underarmour.com or www.ua.com.
As of March 31, 2023, in North America, we had 176 Factory House stores primarily located in outlet centers and 18 Brand House stores throughout the United States and Canada. Consumers can also purchase our products directly from our e-commerce website.
Lisa Collier has been Chief Product Officer since April 2020. Prior to joining our Company, Ms. Collier served as President, Chief Executive Officer and Chairman of NYDJ (Not Your Daughter’s Jeans) from June 2016 to January 2020. Prior thereto, Ms.
Collier served as President, Chief Executive Officer and Chairman of NYDJ (Not Your Daughter’s Jeans) from June 2016 to 10 Table of Contents January 2020. Prior thereto, Ms.
In Fiscal 2021 , our apparel and accessories products were manufactu r ed by 29 primary contract manufacturers, operating in 18 countries, with 5 Table of Contents approximately 67% of our apparel and accessories products manufactured in Vietnam, Jordan, Malaysia, Cambodia and China. Of our 29 primary contract manufacturers, ten produced approximately 65% of our apparel and accessories products.
In Fiscal 2023 , our apparel and accessories products were manufactu r ed by 33 primary contract manufacturers, operating in 20 countries, with approximately 59% of our apparel and accessories products manufactured in Jordan, Vietnam, Cambodia and Malaysia. Of our 33 primary contract manufacturers, ten produced approximately 62% of our apparel and accessories products.
Corporate Other consists mainly of general and administrative expenses not allocated to an operating segment, including expenses associated with centrally managed departments such as global marketing, global IT, global supply chain, innovation and other corporate support functions; costs related to our global assets and global marketing, costs related to our headquarters; restructuring and restructuring-related charges; and certain foreign currency hedge gains and losses.
Corporate Other consists primarily of (i) operating results related to our MapMyFitness digital platform, which includes MapMyRun® and MapMyRide® (collectively "MMR"), and other digital business opportunities; (ii) general and administrative expenses not allocated to an operating segment, including expenses associated with centrally managed departments such as global marketing, global IT, global supply chain and innovation, and other corporate support functions; (iii) restructuring and restructuring related charges; and (iv) certain foreign currency hedge gains and losses.
In Fiscal 2021, sales of apparel, footwear and accessories represented 2 Table of Contents 68%, 22% and 8% of net revenues, respectively. Licensing arrangements represented the remaining 2% of net revenues. Refer to Note 19 to the Consolidated Financial Statements for net revenues by product.
In Fiscal 2023, sales of apparel, footwear and accessories represented 66%, 25% and 7% of net revenues, respectively. Licensing arrangements represented 2% of net revenues. Refer to Note 11 to the Consolidated Financial Statements for net revenues by product category.
All trademarks and trade names appearing in this Annual Report on Form 10-K are the property of their respective holders. Products Our product offerings consist of apparel, footwear and accessories for men, women and youth. We market our products at multiple price levels and provide consumers with products that we believe are superior to non-performance-oriented athletic products.
All trademarks and trade names appearing in this Annual Report on Form 10-K are the property of their respective holders. 2 Table of Contents Products Our product offerings consist of apparel, footwear and accessories for men, women and youth.
Further, we leverage our relationships with athletes, teams, leagues and youth experiences in our global and regional marketing and promotions. 3 Table of Contents Media We feature our products in a variety of national digital, broadcast, and print media outlets.
Further, we leverage our relationships with athletes, teams, leagues and youth experiences in our global and regional marketing and promotions. Media We feature our products in a variety of national digital, broadcast, and print media outlets. We also utilize social media to engage consumers and promote connectivity with our brand and products while engaging with our consumers throughout their day.
We also seek to sponsor and host consumer events to drive awareness and brand authenticity from a grassroots level by hosting combines, camps and clinics for young athletes in a variety of sports. As a result, our products are seen on the field and the court, and by various consumer audiences through the internet, television, magazines and live sporting events.
We also seek to sponsor and host consumer events to drive awareness and brand authenticity from a grassroots level by hosting combines, camps and clinics for young athletes in a variety of sports.
We expect the number of applications to increase as our business grows and as we continue to expand our products and innovate. Competition The market for performance apparel, footwear and accessories is highly competitive and includes many new competitors as well as increased competition from established companies expanding their production and marketing of performance products.
We will continue to file patent applications where we deem appropriate to protect our new products, innovations and designs that align with our corporate strategy. Competition The market for performance apparel, footwear and accessories is highly competitive and includes many new competitors as well as increased competition from established companies expanding their production and marketing of performance products.
Information About Our Executive Officers Our executive officers are: Name Age Position Kevin Plank 49 Executive Chairman and Brand Chief Patrik Frisk 59 Chief Executive Officer and President David Bergman 49 Chief Financial Officer Colin Browne 57 Chief Operating Officer Lisa Collier 56 Chief Product Officer Massimo Baratto 59 Chief Consumer Officer Stephanie Pugliese 51 President of the Americas Tchernavia Rocker 48 Chief People and Administrative Officer John Stanton 61 General Counsel and Corporate Secretary Kevin Plank has been Executive Chairman and Brand Chief since January 2020.
Information About Our Executive Officers Our executive officers are: Name Age Position Kevin Plank 50 Executive Chair and Brand Chief Stephanie Linnartz 55 President and Chief Executive Officer Colin Browne 58 Chief Operating Officer David Bergman 50 Chief Financial Officer David Baxter 56 President of the Americas Lisa Collier 58 Chief Product Officer Tchernavia Rocker 49 Chief People and Administrative Officer Mehri Shadman-Valavi 41 Chief Legal Officer and Corporate Secretary Kevin Plank has been Executive Chair and Brand Chief since January 2020.
In Fiscal 2021, we publicly announced certain environmental and sustainability goals for 2025, 2030 and 2050 that focus on reducing our greenhouse gas emissions and increasing our annual sourcing of renewable electricity in our owned and operated facilities.
Increasingly, we are working with our supply chain to embed sustainable practices, and be mindful about the sustainability profiles of key raw materials. 7 Table of Contents In Fiscal 2021, we publicly announced certain environmental and sustainability goals for 2025, 2030 and 2050 that focus on reducing our greenhouse gas emissions and increasing our annual sourcing of renewable electricity in our owned and operated facilities.
We also offer resources to support individual development planning, including emphasizing development opportunities as part of teammates’ annual goal setting process. We invest in developing the leadership strength and capabilities of people-leaders at all levels, including through trainings focused on how to effectively manage, communicate with and drive the performance of teams.
We provide our corporate teammates two meeting-free days per year designated to focusing on professional development. We also offer resources to support individual development planning, including emphasizing development opportunities as part of teammates' annual goal setting process. We invest in developing the leadership strength and capabilities of people-leaders at all levels.
We currently have nine teammate-led Teammate Resource Groups, which amplify business initiatives, provide networking opportunities, support community outreach and promote cultural awareness. In addition, we have an internal diversity, equity and inclusion council, known as the Global T.E.A.M.
We currently have nine teammate-led Teammate Resource Groups, which amplify business initiatives, provide networking opportunities, support community outreach and promote cultural awareness.
(Teammate Equity and Accountability Movement) Council, which consists of “director” level and above corporate teammates and focuses on fostering a diverse and inclusive work environment across our organization. Total Rewards Our total rewards strategy is focused on providing market competitive and internally equitable total rewards packages that allow us to attract, engage and retain a talented, diverse and inclusive workforce.
Total Rewards Our total rewards strategy is focused on providing market competitive and internally equitable total rewards packages that allow us to attract, engage and retain a talented, diverse and inclusive workforce.
Through our succession planning efforts, we further focus on talent development for key roles within our organization. We believe these efforts keep our teammates engaged and motivated to do their best work.
We leverage assessments, mentoring, executive coaching, and interactive training programs across a variety of leadership topics to improve leadership effectiveness and drive the performance of our team. Additionally, through our succession planning efforts, we further focus on talent development for key roles within our organization. We believe these efforts keep our teammates engaged and motivated to do their best work.
For Fiscal 2021, one customer in North America accounted for approximately 11% of the Company's net revenues. North America We sell our apparel, footwear and accessories in North America through our wholesale and direct-to-consumer channels.
Our North America segment accounted for approximately 65% of our net revenues for Fiscal 2023, while our EMEA, Asia-Pacific and Latin America segments combined represented approximately 34%. For Fiscal 2023, no single customer accounted for more than 10% of the Company's net revenues. North America We sell our apparel, footwear and accessories in North America through wholesale and direct-to-consumer channels.
In addition to systems and processes, key areas of focus that we believe will enhance inventory performance are added discipline around product purchasing, production lead time reduction, and better planning and execution in selling excess inventory through our Factory House stores and other liquidation channels.
In addition, we strive to enhance our inventory performance by focusing on adding discipline around product purchasing, reducing production lead time and improving planning and execution for selling excess inventory through our Factory House stores and other liquidation channels.
In Fiscal 2021 , we continued a company-wide virtual series to facilitate meaningful conversations on anti-racism and racial justice issues. For our senior leadership, we require mandatory training on cultural competency and building inclusive environments. We also invest in professional development specifically for our historically underrepresented and women teammates to improve retention and advancement.
For our senior leadership, we require mandatory training on cultural competency and building inclusive environments. In addition to our broader professional development programs described more fully below, we also invest in programs specifically for our historically underrepresented and women teammates to improve retention and advancement.
Our apparel comes in three primary fit types: compression (tight fit), fitted (athletic fit) and loose (relaxed fit). Our highly specialized products are sold in the sporting goods, outdoor and active use markets.
Our apparel comes in three primary fit types: compression (tight fit), fitted (athletic fit) and loose (relaxed fit).
Under Armour point of sale displays and concept shops enhance our brand’s presentation within our major retail accounts with a shop-in-shop approach, using dedicated floor space exclusively for our products, including flooring, lighting, walls, displays and images.
A key component of our strategy to secure prime floor space within our major wholesale accounts is the design of Under Armour point of sale displays and concept shops, which enhance our brand’s presentation by creating a shop-in-shop approach using dedicated space—including flooring, lighting, walls, displays and images—exclusively for our products through which we create an exciting environment for the consumer to experience and learn about our brand.
Prior to joining the Company, Mr. Bergman worked as a C.P.A. within the audit and assurance practices at Ernst & Young LLP and Arthur Andersen LLP. Colin Browne has been Chief Operating Officer since February 2020.
Prior to joining the Company, Mr. Bergman worked as a C.P.A. within the audit and assurance practices at Ernst & Young LLP and Arthur Andersen LLP. David Baxter has been President of the Americas since October 2022 and served as SVP, North America Wholesale from April 2020 to October 2022. Before joining Under Armour, Mr.
We are exploring more ways to use digital technology to elevate the experience of our customers and consumers while also reducing the impact of our operations on the environment. For example, we have created realistic, but fully virtual, digital showrooms to display products for upcoming seasons to our customers, allowing us to produce and ship fewer physical product samples.
We are exploring more ways to use digital technology to elevate the experience of our customers and consumers while also reducing the impact of our operations on the environment.
We have always been focused on product innovation, and we are challenging ourselves to be more innovative to increase the sustainability, durability and recyclability of our products and to reduce the impact of our design, development and manufacturing processes on the environment.
We have always been focused on product innovation, and we are challenging ourselves to be more innovative to improve our existing materials and to create new materials that meet our athletes' expectations—all while using circular design principles to expand our products' sustainability attributes and while reducing the impact of our design, development and manufacturing processes on the environment.
We are also committed to continuing to increase representation of women in key areas of our business particularly in leadership, commercial and technical roles globally. Our annual incentive plan for all teammates, including executives, incorporates performance measures in furtherance of our diversity, equity and inclusion goals.
Our annual incentive plan for all teammates, including executives, incorporates performance measures in furtherance of our diversity, equity and inclusion goals.
Our sustainability strategy is centered around three interconnected pillars—our products, our teammates and our home field—and focuses on enabling materials innovation to bring about a more circular system, championing our teammates and communities across our entire value chain and leaving our planet and shared spaces bettered by our presence.
Within these pillars, our strategy focuses on enabling materials innovation to bring about a more circular system, leaving our planet and shared spaces bettered by our presence. Additionally, our strategy focuses on championing diversity, equity and inclusion and human rights within our company, with our suppliers and their workers and in communities across our entire supply chain.
We sponsor and sell our products to international sports teams, which helps drive brand awareness in various countries and regions worldwide.
We are the official outfitter of athletic teams in several high-profile collegiate conferences and professional sport organizations, supporting the athletes on and off the field. We sponsor and sell our products to international sports teams, which helps drive brand awareness in various countries and regions worldwide.
As we continue to expand and drive innovation in our products, we seek patent protection on products, features and concepts we believe to be strategic and important to our business. We will continue to file patent applications where we deem appropriate to protect our new products, 6 Table of Contents innovations and designs that align with our corporate strategy.
In addition, patents are important with respect to our innovative products and investments. As we continue to expand and drive innovation in our products, we seek patent protection on products, features and concepts we believe to be strategic and important to our business.
We believe that our products appeal to athletes and consumers with active lifestyles globally; thus international expansion is a meaningful part of our long-term growth strategy. Additionally, our digital strategy is focused on supporting these long-term objectives, emphasizing connection and engagement with our consumers through multiple digital touchpoints. We were incorporated as a Maryland corporation in 1996.
We believe that achievement of our long-term growth objectives depends, in part, on our ability to execute strategic initiatives in key areas including our wholesale, footwear, women’s and direct-to-consumer businesses. Additionally, our digital strategy is focused on supporting these long-term objectives, emphasizing connection and engagement with our consumers through multiple digital touchpoints.
Prior to that, she served in various HR and operations roles at Goodyear Dunlop North America Tire Inc. John Stanton has been General Counsel since March 2013, and Corporate Secretary since February 2008. Prior thereto, he served as Vice President, Corporate Governance and Compliance from October 2007 to February 2013 and Deputy General Counsel from February 2006 to September 2007.
Prior to that, she served in various HR and operations roles at Goodyear Dunlop North America Tire Inc. Mehri Shadman has been Chief Legal Officer and Corporate Secretary since October 2022. Ms. Shadman joined Under Armour in 2013 and served as Assistant Corporate Secretary from January 2017 to October 2022.
This starts with “tone at the top” and we emphasize the importance of our Code of Conduct and encourage our teammates to “speak-up” when they have concerns. We require unconscious bias training for all of our corporate teammates and our retail and distribution facility leadership, including training focused on promoting diversity during our new-hire interview process.
We require unconscious bias training for all of our corporate teammates and our retail and distribution facility leadership, including training focused on promoting diversity during our new-hire interview process. In Fiscal 2023 , we continued a company-wide virtual series to facilitate meaningful conversations on anti-racism and social justice issues.
This exposure helps us establish on-field authenticity as consumers can see our products being worn by high-performing athletes. We are the official outfitter of athletic teams in several high-profile collegiate conferences and professional sport organizations, supporting the athletes on and off the field.
As a result, our products are seen on the field and the court, and 3 Table of Contents by various consumer audiences through the internet, television, magazines and live sporting events. This exposure helps us establish on-field authenticity as consumers can see our products being worn by high-performing athletes.
Pugliese also served in various leadership roles with Lands’ End, Inc. from 2005 to 2008 and at Ann Inc. from 2000 to 2003. Tchernavia Rocker has been Chief People and Administrative Officer since June 2020. Prior to that she served as Chief People and Culture Officer from February 2019 to May 2020.
Prior to that she served as Chief People and Culture Officer from February 2019 to May 2020.
We also utilize social media to engage consumers and promote connectivity with our brand and products while engaging with our consumers throughout their performance journey. Retail Presentation The primary goal of our retail marketing strategy is to increase brand floor space dedicated to our products within our major retail accounts.
Retail Presentation Our retail marketing strategy is focused on increasing floor space dedicated to our products within our major wholesale accounts and elevating the presentation of our products within our Brand and Factory House retail stores.
Frisk ran his own retail business in Scandinavia and held senior positions with Peak Performance and W.L. Gore & Associates. David Bergman has been Chief Financial Officer since November 2017. Mr.
David Bergman has been Chief Financial Officer since November 2017. Mr.
We have set measurable goals for improving diversity amongst our team, including a commitment to increase the number of historically underrepresented teammates throughout the levels of leadership within our organization by 2023. These goals are publicly outlined on our corporate website, where we also publish our representation statistics annually.
These goals are publicly outlined on our corporate website, where we also publish our representation statistics annually. We are also committed to continuing to increase representation of women in key areas of our business particularly in leadership, commercial and technical roles globally.
We traditionally have had limited patent protection on some of the technology, materials and processes used in the manufacture of our products. In addition, patents are increasingly important with respect to our innovative products and new businesses and investments.
We apply for, own and maintain utility and design patents that protect certain technologies, materials, manufacturing processes, product features and industrial and aesthetic designs. These patents cover various footwear, apparel, accessories, equipment and digital applications. However, we traditionally have had limited patent protection on some of the technology, materials and processes used in the manufacture of our products.
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The design and funding of Under Armour point of sale displays and concept shops within our major retail accounts have been a key initiative for securing prime floor space, educating the consumer and creating an exciting environment for the consumer to experience our brand.
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We market our products at multiple price levels and provide consumers with products that we believe are superior to non-performance-oriented athletic products. Our products are primarily designed for athletic and active occasions, though many of our products can be worn or used in casual occasions.
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Corporate Other also includes the operating results of our MapMyFitness digital platform, which includes MapMyRun® and MapMyRide® as well as other digital business opportunities. Our North America segment accounted for approximately 67% of our net revenues for Fiscal 2021, while our international segments represented approximately 33%.
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In Fiscal 2023, we published our 2021 Sustainability & Impact Report, which can be found on our website. Aligned with Global Reporting Initiative and Sustainable Accounting Standard Board industry standards, our 2021 Sustainability & Impact Report outlines our 23 goals and targets across the three pillars of our sustainability strategy and describes our progress toward a more sustainable future.
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Increasingly, we are working with our supply chain to embed sustainable practices, and be mindful about the sustainability profiles of key raw materials.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAdditionally, many countries have implemented legislation and other guidance to align their international tax rules with the Organization for Economic Co-operation and Development’s (“OECD”) Base Erosion and Profit Shifting recommendations and action plan, which aim to standardize and modernize global corporate tax policy and include changes to cross-border tax, transfer pricing documentation rules and nexus-based tax incentive practices. 23 Table of Contents As a result of this heightened scrutiny, we may experience an increase in income tax audits and prior decisions by tax authorities regarding treatments and positions of corporate income taxes could be subject to enforcement activities and/or legislative investigation, which could also result in changes in tax policies or prior tax rulings.
Biggest changeAlthough we believe we have clearly reflected the economics of these transactions in accordance with current rules and regulations, which are generally consistent with the arms-length standard, and the proper documentation is in place, tax authorities may propose and sustain adjustments that could result in changes that may materially impact our tax provision. 23 Table of Contents Additionally, many countries have implemented legislation and other guidance to align their international tax rules with the Organization for Economic Co-operation and Development's ("OECD") Base Erosion and Profit Shifting ("BEPS") recommendations and action plan, which aim to standardize and modernize global corporate tax policy and include changes to cross-border tax, transfer pricing documentation rules and nexus-based tax incentive practices.
The failure of these systems to operate effectively or to integrate with other systems, or a breach in security of these systems could cause delays in product fulfillment and reduced efficiency of our operations, lost sales, the exposure of sensitive business of personal information and damage to the reputation of our brand.
The failure of these systems to operate effectively or to integrate with other systems, or a breach in security of these systems could cause delays in product fulfillment and reduced efficiency of our operations, lost sales, the exposure of sensitive business or personal information and damage to the reputation of our brand.
However, if in future periods our cash on hand, cash generated from operations and availability under our credit agreement are not sufficient to meet our cash requirements, we will need to seek additional capital, potentially through debt or equity financing, to fund our operations and future growth, and we may be unable to obtain debt and/or equity financing on favorable terms or at all.
However, if in future periods our cash on hand, cash generated from operations and availability under our credit agreement are not sufficient to meet our cash requirements, we will need to seek additional capital, potentially through debt or equity financing, to fund our operations and future growth, and we may be unable to obtain debt or equity financing on favorable terms or at all.
A key element of our marketing strategy has been to create a link in the consumer market between our products and professional and collegiate athletes. We have developed licensing and sponsorship agreements with a variety of sports teams and athletes at the collegiate and professional level to be their official supplier of performance apparel and footwear.
A key element of our marketing strategy has been to create a link in the consumer market between our products and professional, collegiate and young athletes. We have developed licensing and sponsorship agreements with a variety of sports teams and athletes at the collegiate and professional level to be their official supplier of performance apparel and footwear.
If we are unable to maintain our current association with professional and collegiate athletes, teams and leagues, or to do so at a reasonable cost, we could lose the on-field authenticity associated with our products, and we may be required to modify and substantially increase our marketing investments.
If we are unable to maintain our current association with professional athletes, teams and leagues, or to do so at a reasonable cost, we could lose the on-field authenticity associated with our products, and we may be required to modify and substantially increase our marketing investments.
Historically, consumer purchases of discretionary items tend to decline during recessionary periods when disposable income is lower or during other periods of economic instability or uncertainty, which may lead to declines in sales and slow our long-term growth expectations.
Consumer purchases of discretionary items tend to decline during recessionary periods when disposable income is lower or during other periods of economic instability or uncertainty, which may lead to declines in sales and slow our long-term growth expectations.
We are actively involved in a variety of litigation and other legal matters and may be subject to additional litigations, investigations, arbitration proceedings, audits, regulatory inquiries and similar actions, including matters related to commercial disputes, intellectual property, employment, securities laws, disclosures, environmental, tax, accounting, class action and product liability, as well as trade, regulatory and other claims related to our business and our industry, which we refer to collectively as legal proceedings.
We are actively involved in a variety of litigation and other legal matters and may be subject to additional litigations, investigations, arbitration proceedings, audits, regulatory inquiries and similar actions, including matters related to commercial disputes, intellectual property, employment, securities laws, disclosures, environmental, tax, accounting, insurance coverage, class action and product liability, as well as trade, regulatory and other claims related to our business and our industry, which we refer to collectively as legal proceedings.
Within our international markets, we also compete with local brands that may have strong brand recognition amongst consumers within particular regions. Due to the fragmented nature of the industry, we also compete with other manufacturers, including those specializing in products similar to ours and private label offerings of certain retailers, including some of our retail customers.
Within our international markets, we also compete with local brands that may have strong brand recognition amongst consumers within particular regions. Due to the fragmented nature of the industry, we also compete with other manufacturers, including those specializing in products similar to ours and private label offerings of certain retailers, including some of our wholesale customers.
Substantially all of our products are manufactured by unaffiliated manufacturers, and, in Fiscal 2021, ten manufacturers produced approximately 65% of our apparel and accessories products, and six produced substantially all of our footwear products. We have no long-term contracts with our suppliers or manufacturing sources, and we compete with other companies for fabrics, raw materials and production capacity.
Substantially all of our products are manufactured by unaffiliated manufacturers, and, in Fiscal 2023, ten manufacturers produced approximately 65% of our apparel and accessories products, and six produced substantially all of our footwear products. We have no long-term contracts with our suppliers or manufacturing sources, and we compete with other companies for fabrics, raw materials and production capacity.
Furthermore, publicity surrounding ongoing legal proceedings, even if resolved favorably for us, could result in additional legal proceedings against us, as well as damage our brand image. Risks Related to our Common Stock Kevin Plank, our Executive Chairman and Brand Chief, controls the majority of the voting power of our common stock.
Furthermore, publicity surrounding ongoing legal proceedings, even if resolved favorably for us, could result in additional legal proceedings against us, as well as damage our brand image. Risks Related to our Common Stock Kevin Plank, our Executive Chair and Brand Chief, controls the majority of the voting power of our common stock.
Our Class A common stock has one vote per share, our Class B common stock has 10 votes per share and our Class C common stock has no voting rights (except in limited circumstances). Our Executive Chairman and Brand Chief, Kevin A. Plank, beneficially owns all outstanding shares of Class B common stock. As a result, Mr.
Our Class A common stock has one vote per share, our Class B common stock has 10 votes per share and our Class C common stock has no voting rights (except in limited circumstances). Our Executive Chair and Brand Chief, Kevin Plank, beneficially owns all outstanding shares of Class B common stock. As a result, Mr.
In addition, a significant portion of our net revenues may be generated by at-once orders for immediate delivery to customers, particularly during the last two quarters of the calendar year, which historically has been our peak season.
In addition, a portion of our net revenues may be generated by at-once orders for immediate delivery to wholesale customers, particularly during the last two quarters of the calendar year, which historically has been our peak season.
In addition, to the extent our Japanese licensee continues to experience challenges in the performance of its business, we may not continue to realize the licensing revenues from our Japanese licensee in line with its past results, which could negatively impact our net revenues and results of operations.
In addition, to the extent our Japanese licensee continues to experience challenges in the performance of its business, we may not continue to realize the license revenues from our Japanese licensee in line with its past results, which could negatively impact our net revenues and results of operations.
If we or our partners encounter such problems, our results of operations, as well as our ability to meet customer expectations, manage inventory, complete sales and achieve objectives for operating efficiencies could be materially adversely affected. 19 Table of Contents We rely significantly on information technology and any failure, inadequacy or interruption of that technology could harm our ability to effectively operate our business.
If we or our partners encounter such problems, our results of operations, as well as our ability to meet customer expectations, manage inventory, complete sales and achieve objectives for operating efficiencies could be materially adversely affected. We rely significantly on information technology and any failure, inadequacy or interruption of that technology could harm our ability to effectively operate our business.
Many of our competitors have significant competitive advantages, including greater financial, distribution, marketing, digital and other resources; longer operating histories; better brand recognition among consumers; more experience in global markets; greater ability to invest in technology, the digital consumer experience and innovations around sustainability; and greater economies of scale.
Many of our competitors have significant competitive advantages, including greater financial, distribution, marketing, digital and other resources; longer 12 Table of Contents operating histories; better brand recognition among consumers; more experience in global markets; greater ability to invest in technology, the digital consumer experience and innovations around sustainability; and greater economies of scale.
For example, while we require our suppliers, manufacturers and licensees of our products to operate their businesses in compliance with applicable laws and regulations as well as the social and other standards and policies we impose on them, including our code of conduct, we do not control the conduct of these third parties.
For example, while we require our suppliers, manufacturers and licensees of our products to operate their businesses in compliance with applicable laws and 15 Table of Contents regulations, as well as the social and other standards and policies we impose on them, including our code of conduct, we do not control the conduct of these third parties.
As a result, these competitors may be better equipped than we are to influence consumer preferences or otherwise increase their market share by quickly adapting to changes in customer requirements or consumer preferences, readily taking advantage of acquisition and other opportunities, discounting excess inventory that has been written down or written off, devoting resources to the marketing and sale of their products, including significant advertising, media placement, partnerships and product endorsement, adopting aggressive pricing policies and engaging in lengthy and costly intellectual property and other disputes.
As a result, these competitors may be better equipped than we are to influence consumer preferences or otherwise increase their market share by quickly adapting to changes in customer requirements or consumer preferences, discounting excess inventory that has been written down or written off, devoting resources to the marketing and sale of their products, including significant advertising, media placement, partnerships and product endorsement, adopting aggressive pricing policies and engaging in lengthy and costly intellectual property and other disputes.
If we experience difficulties in supporting the growth of our business, we could experience an erosion of our brand image or operational challenges leading to a decrease in net revenues and results from operations. 16 Table of Contents Our results of operations could be materially harmed if we are unable to accurately forecast demand for our products.
If we experience difficulties in supporting the growth of our business, we could experience an erosion of our brand image or operational challenges leading to a decrease in net revenues and results from operations. Our results of operations could be materially harmed if we are unable to accurately forecast demand for our products.
If the financial condition of our customers declines, our financial condition and results of operations could be adversely impacted. In Fiscal 2021, sales through our wholesale channel represented approximately 57% of our net revenues. We extend credit to our wholesale customers based on an assessment of a customer’s financial condition, generally without requiring collateral or getting customer insurance against non-collection.
If the financial condition of our customers declines, our financial condition and results of operations could be adversely impacted. In Fiscal 2023, sales through our wholesale channel represented approximately 59% of our net revenues. We extend credit to our wholesale customers based on an assessment of a customer's financial condition, generally without requiring collateral or getting customer insurance against non-collection.
Our international operations are also subject to compliance with the U.S. Foreign Corrupt Practices Act, or FCPA, and U.S. sanctions laws, as well as other anti-bribery and sanctions laws of foreign jurisdictions where we 22 Table of Contents conduct business.
Our international operations are also subject to compliance with the U.S. Foreign Corrupt Practices Act, or FCPA, and U.S. sanctions laws, as well as other anti-bribery and sanctions laws of foreign jurisdictions where we conduct business.
We are subject to numerous risks and global events beyond our control which could negatively impact consumer spending or the operations of us or our customers or business partners, and therefore our results of operations, including: political or labor unrest; military conflict; terrorism; public health crises, disease epidemics or pandemics (such as COVID-19); natural disasters and extreme weather conditions, which may increase in frequency and severity due to climate change; economic instability resulting in the disruption of trade from foreign countries; the imposition of new laws and regulations, including those relating to labor conditions, minimum wage, quality and safety standards and disease epidemics or other public health concerns, as well as rules and regulations regarding climate change; changes in trade policy or actions of foreign or U.S. governmental authorities impacting trade and foreign investment, particularly during periods of heightened tension between U.S. and foreign governments, including the imposition of new import limitations, duties, tariffs, anti-dumping penalties, trade restrictions or restrictions on the transfer of funds; inflation; and changes in local economic conditions in countries where our stores, customers, manufacturers and suppliers are located.
We are subject to numerous risks and global events beyond our control which could negatively impact consumer spending or the operations of us or our customers or business partners, and therefore our results of operations, including: political or labor unrest; military conflict (such as the ongoing conflict between Russia and Ukraine); terrorism; public health crises, disease epidemics or pandemics (such as COVID-19); natural disasters and extreme weather conditions, which may increase in 13 Table of Contents frequency and severity due to climate change; economic instability resulting in the disruption of trade from foreign countries; the imposition of new laws, regulations and rules, including those relating to sustainability and climate change, data privacy, labor conditions, minimum wage, quality and safety standards and disease epidemics or other public health concerns; changes in trade policy or actions of foreign or U.S. governmental authorities impacting trade and foreign investment, particularly during periods of heightened tension between U.S. and foreign governments, including the imposition of new import limitations, duties, tariffs, anti-dumping penalties, trade restrictions or restrictions on the transfer of funds; inflation; and changes in local economic conditions in countries where our stores, customers, manufacturers and suppliers are located.
A significant element of our growth strategy depends on our continued expansion outside of North America, and we have limited brand recognition and operating experience in certain regions. We must continue to successfully manage the operational difficulties associated with expanding our business to meet increased consumer demand throughout the world.
Part of our growth strategy depends on our continued expansion outside of North America, and we have limited brand recognition and operating experience in certain regions. We must continue to successfully manage the operational difficulties associated with expanding our business to meet increased consumer demand throughout the world.
Furthermore, based on its financial performance, our ability to recover our investment in the long term may be limited. Our financial results could be adversely impacted by currency exchange rate fluctuations. During Fiscal 2021, we generated approximately 33% of our consolidated net revenues outside the United States.
Furthermore, based on its financial performance, our ability to recover our investment in the long term may be limited. Our financial results could be adversely impacted by currency exchange rate fluctuations. During Fiscal 2023, we generated approximately 34% of our consolidated net revenues outside the United States.
On the other hand, if we underestimate the demand for our products, our manufacturers may not be able to produce products to meet our customer requirements, resulting in delays in the shipment of our products and our ability to recognize revenue, lost sales, as well as damage to our reputation and retailer and distributor relationships.
On the other hand, if we underestimate the demand for our products, our manufacturers may not be able to produce products to meet our customer requirements, resulting in delays in the shipment of our products and our ability to recognize revenue, lost sales, as well as damage to our reputation and wholesale and consumer relationships.
The loss of the services of our senior management or other key employees could make it more difficult to successfully operate our business and achieve our business goals and could result in harm to key customer relationships, loss of key information, expertise or know-how and unanticipated recruitment and training costs.
The loss of the services of our senior management or other key employees could make it more difficult to successfully operate our business and achieve our business goals and could result in harm to key customer relationships, loss of key information, expertise or know-how and unanticipated recruitment and training costs. Changes in our senior management can also disrupt our business.
Revenues and certain expenses in markets outside of the United States are recognized in local foreign currencies, and we are exposed to potential gains or losses from the translation of those amounts into U.S. dollars for consolidation into our financial statements.
Revenues and certain expenses in markets outside of the United States are recognized in local foreign currencies, and we are exposed to potential gains or losses from the translation of those amounts into U.S. dollars for consolidation into our financial statements. These amounts can be material.
Increased competition by existing and future competitors could result in reductions in floor space in retail locations, reductions in sales or reductions in the prices of our products, and if retailers have better sell through or earn greater margins from our competitors’ products, they may favor the display and sale of those products.
Increased competition could result in reductions in floor space in retail locations or reductions in sales or reductions in the prices of our products, and if retailers have better sell through or earn greater margins from our competitors' products, they may favor the display and sale of those products.
Depending on the system and scope of disruption, in some instances a service interruption or shutdown could have a material adverse impact on our operating activities or results of operations.
Depending on the system and scope of disruption, 19 Table of Contents in some instances a service interruption or shutdown could have a material adverse impact on our operating activities or results of operations.
Our future success is substantially dependent on the continued service of our senior management and other key employees, and our continued ability to attract and retain highly talented new team members. Our future success is substantially dependent on the continued service of our senior management, particularly Kevin A.
Our future success is substantially dependent on the continued service of our senior management and other key employees, and our continued ability to attract and retain highly talented new team members.
Additionally, the COVID-19 pandemic has caused and may continue to cause global logistical challenges, including shipping container shortages, transportation delays, port congestion and labor shortages.
Additionally, the COVID-19 pandemic has caused and may continue to cause global logistical challenges, including increased freight costs, shipping container shortages, transportation delays, labor shortages and port congestion.
If we fail to accurately forecast customer demand we may experience excess inventory levels or a shortage of product to deliver to our customers. Excess inventory may result in inventory write-downs or write-offs or sales at discounted prices or in less preferred distribution channels, negatively impacting gross margin.
If we fail to accurately forecast customer demand we may experience excess inventory levels or a shortage of product to deliver to our wholesale customers or for our direct-to-consumer channel. Excess inventory may result in inventory write-downs or write-offs or sales at discounted prices or in less preferred distribution channels, negatively impacting gross margin.
If we are unable to effectively anticipate and respond to consumer preferences as a result of any of these factors, our brand image could be negatively impacted, and our sales, net revenues and profitability may be negatively impacted.
If we are unable to effectively anticipate and respond to consumer preferences as a result of any of these factors, our brand image could be negatively impacted, and our sales, net revenues, profitability and long-term growth plans may be negatively impacted.
Our industry is subject to significant pricing pressure caused by many factors, including intense competition, consolidation in the retail industry, pressure from retailers to reduce the costs of products and changes in consumer demand.
Our industry is subject to significant pricing pressure caused by many factors, including intense competition, consolidation in the retail industry, pressure from retailers to reduce the costs of products, the amount of excess inventory in the marketplace and changes in consumer demand.
Our insurance may not cover all claims that may be asserted against us, and we are unable to predict how long the legal proceedings to which we are currently subject will continue.
Our insurance may not cover all claims that may be asserted against us, and we are unable 24 Table of Contents to predict how long the legal proceedings to which we are currently subject will continue.
The pandemic previously resulted in temporary closures of our retail stores and the stores of our wholesale customers where our products are sold, reduced consumer traffic and consumer spending, temporary layoffs of certain employees in our North America retail stores and distribution centers and incremental operating expenses from adopting preventative health and safety measures in our stores, distribution centers and corporate offices.
During Fiscal 2020, the COVID-19 pandemic resulted in temporary closures of our retail stores and the stores of our wholesale customers where our products are sold, reduced consumer traffic and consumer spending, temporary layoffs of certain employees in our North America retail stores and distribution centers and incremental operating expenses from adopting preventative health and safety measures in our stores, distribution centers and corporate offices.
In addition, the adoption of new legislation, regulations or industry standards, including related to climate change, or changes in the interpretation of existing regulations may result in significant unanticipated compliance costs or discontinuation of product sales and may impair the marketing of our products, resulting in significant loss of net revenues.
In addition, the adoption of new legislation, regulations or industry standards, including related to data privacy, sustainability and climate change, or changes in the interpretation of existing regulations may result in significant unanticipated compliance costs or 22 Table of Contents discontinuation of product sales and may impair the marketing of our products, resulting in significant loss of net revenues.
We must also comply with increasingly complex and evolving regulatory standards throughout the world enacted to protect personal information and other data, including the General Data Protection Regulation, the ePrivacy Directive, the California Consumer Privacy Act, the California Privacy Rights Act, the Virginia Consumer Data Privacy Act, the Colorado Privacy Act and the Personal Information Protection Law in China.
We must also comply with increasingly complex and evolving regulatory standards throughout the world enacted to protect personal information and other data, including the General Data Protection Regulation, the ePrivacy Directive, the California Consumer Privacy Act of 2018, the California Privacy Rights Act, state privacy laws in Virginia, Utah, Connecticut and Colorado and the Personal Information Protection Law in China.
Additionally, from time to time, we may invest in business infrastructure, new businesses and expansion of existing businesses, such as the expansion of our network of Brand and Factory House stores and our distribution facilities, implementing our global operating and financial reporting information technology system, supporting our digital strategy (including our e-commerce platform), or supporting our corporate infrastructure (including the development of our new global headquarters in Port Covington in Baltimore).
Additionally, from time to time, we may invest in business infrastructure, new businesses and expansion of existing businesses, such as the expansion of our network of Brand and Factory House stores and our distribution facilities, implementing our global operating and financial reporting information technology system, supporting our digital strategy (including our e-commerce platform and loyalty programs), or supporting our corporate infrastructure (including the development of our new global headquarters located in the Baltimore Peninsula, an area of Baltimore previously referred to as Port Covington).
Our success depends on our ability to identify and originate product trends and anticipate and react to changing consumer demands in a timely manner. All of our products are subject to changing consumer preferences that shift rapidly and cannot be predicted with certainty. Accordingly, our new products may not receive consumer acceptance.
Our success depends on our ability to identify and originate product trends and anticipate and react to changing consumer demands in a timely manner. All of our products are subject to changing consumer preferences that shift rapidly and cannot be predicted with certainty.
An unfavorable outcome of any legal proceeding may have an adverse impact on our business, financial condition and results of operations or 24 Table of Contents our stock price. Any legal proceeding could negatively impact our reputation among our customers or our shareholders.
An unfavorable outcome of any legal proceeding may have a material adverse impact on our business, financial condition and results of operations or our stock price. Any legal proceeding could negatively impact our reputation among our customers or our shareholders.
In addition, during weak economic conditions, customers may be more cautious with orders or may slow investments necessary to maintain a high quality in-store experience for consumers, which may result in lower sales of our products.
In addition, during weak economic conditions, such as periods of high inflation and recessionary fears, customers may be more cautious with orders or may slow investments necessary to maintain a high quality in-store experience for consumers, which may result in lower sales of our products.
Our business is subject to a wide array of laws and regulations, including those addressing consumer protection, safety, labeling, distribution, importation, environmental matters, the marketing and sale of our products and other matters.
Our business is subject to a wide array of laws and regulations, including those addressing consumer protection, safety, labeling, distribution, importation, sustainability and environmental matters, labor and human rights matters, the marketing and sale of our products, data privacy and other matters.
Certain customers, consumers, investors and other stakeholders are increasingly focusing on the environment, social and governance (“ESG”) practices of companies, including those related to sustainability and diversity, equity and inclusion. If our ESG practices do not meet such stakeholder expectations and standards, which continue to evolve, our brand and reputation could be negatively impacted.
Certain customers, consumers, investors and other stakeholders are increasingly focusing on the sustainability and human rights practices of companies, including those related to climate change and diversity, equity and inclusion. If our sustainability and human rights practices do not meet such stakeholder expectations and standards, which continue to evolve, our brand and reputation could be negatively impacted.
If 14 Table of Contents our wholesale customers continue to experience significant disruptions, this could result in further reductions or cancellations of orders or late or extended payment terms to us, which could negatively impact our results of operations.
If our wholesale customers again experience significant disruptions, this could result in reductions or cancellations of orders or late or extended payment terms to us, which could negatively impact our results of operations.
As this consolidation continues, it increases the risk that if any one customer significantly reduces their purchases of our products, we may be unable to find sufficient alternative customers to continue to grow our net revenues, or our net revenues may decline materially.
In addition, our customers continue to experience ongoing industry consolidation, particularly in the sports specialty sector. As this consolidation continues, it increases the risk that if any one customer significantly reduces their purchases of our products, we may be unable to find sufficient alternative customers to continue to grow our net revenues, or our net revenues may decline materially.
Any sustainability report or other information that we publish or make may describe our practices, targets and commitments on a variety of ESG matters, including relating to our actions to address climate change, environmental targets and compliance, social and labor policies and practices, human capital management matters (including those relating to diversity, equity and inclusion) and the materials and manufacturing of our products.
We have published, and may continue to publish, a sustainability report and other information describing our practices, targets and commitments on a variety of sustainability and human rights matters, including relating to our actions to address climate change, environmental targets and compliance, social and labor policies and practices, human capital management matters (including those relating to diversity, equity and inclusion) and the materials and manufacturing of our products.
On the other hand, if we are unwilling to engage in promotional activity on a scale similar to that of our competitors, for instance, to protect our premium brand positioning, and unable to simultaneously offset declining promotional activity with increased sales at premium price points, our ability to achieve short-term growth targets may be negatively impacted, which could have a material adverse effect on our results of operations, financial condition and the price of our stock. 13 Table of Contents Fluctuations in the cost of raw materials and commodities we use in our products and costs related to our supply chain could negatively affect our operating results.
On the other hand, if we are unwilling to engage in promotional activity on a scale similar to that of our competitors, for instance, to protect our premium brand positioning, and unable to simultaneously offset declining promotional activity with increased sales at premium price points, our ability to achieve short-term growth targets may be negatively impacted, which could have a material adverse effect on our results of operations, financial condition and the price of our stock.
The enactment of the Pillar One and/or Pillar Two Model Rules in jurisdictions where we have operations may have a material impact on our global transfer pricing arrangements and a materially adverse impact on our tax provision, cash tax liability and effective tax rate.
The enactment of Pillar One and Pillar Two taxes in jurisdictions where we have operations could have a material adverse impact on our global transfer pricing arrangements, tax provision, cash tax liability, effective tax rate and profitability.
For example, COVID-19 has resulted in delays and disruptions at ports due to workforce decreases, shipping backlogs and capacity constraints, container shortages and other disruptions. This has resulted, and may continue to result, in slower than planned deliveries of inventory and delayed sales to customers.
For example, the COVID-19 pandemic caused delays and disruptions at ports due to workforce decreases, shipping backlogs and capacity constraints, container shortages and other disruptions, which resulted in slower than planned deliveries of inventory and delayed sales to customers.
Furthermore, a slowing economy in our key markets or a continued decline in consumer purchases of sporting goods generally could have an adverse effect on the financial health of our company. From time to time, certain of our customers have experienced financial difficulties.
Furthermore, a slowing economy in our key markets or a continued decline in consumer purchases of sporting goods generally could have an adverse effect on the financial health of our company. From time to time, certain of our customers have experienced financial difficulties and we have been unable to collect all or a portion of the amounts owed to us.
The ongoing impacts of COVID-19 have caused and may continue to cause uncertainty in forecasted cash flows, which has resulted and may continue to result in the de-designation of certain hedged transactions.
From time to time, global macroeconomic factors, such as the ongoing impacts of COVID-19, have caused and may continue to cause uncertainty in forecasted cash flows, which has resulted and may in the future result in the de-designation of certain hedged transactions.
Our ability to invest in these growth initiatives on the timeline and at the scale we expect will be negatively impacted if we again experience significant market disruption due to COVID-19 or other significant events, particularly if our North America business, which represented 67% of our total net revenues in Fiscal 2021, does not grow sufficiently.
Our ability to invest in these growth initiatives could be negatively impacted if we again experience significant market disruption due to COVID-19 or other significant events, particularly if our North America business, which represented 65% of our total net revenues in Fiscal 2023, does not grow sufficiently.
ITEM 1A. RISK FACTORS Our results of operations and financial condition could be adversely affected by numerous risks. You should carefully consider the risk factors detailed below in conjunction with the other information contained in this Form 10-K. Should any of these risks actually materialize, our business, financial condition, results of operations and future prospects could be negatively impacted.
ITEM 1A. RISK FACTORS Our results of operations and financial condition could be adversely affected by numerous risks. You should carefully consider the risk factors detailed below in conjunction with the other information contained in this Annual Report on Form 10-K.
In addition, to profitably grow our business and manage our operations, we will need to continue to attract, retain and motivate highly talented management and other employees with a range of skills, backgrounds and experiences.
The failure to successfully transition and assimilate key employees could adversely affect our results of operations. In addition, to profitably grow our business and manage our operations, we will need to continue to attract, retain and motivate highly talented management and other employees with a range of skills, backgrounds and experiences.
Our growth in these areas depends on our ability to continue to successfully grow our e-commerce and mobile application offerings and digital experiences throughout the world, expand our global network of Brand and Factory House stores and continue to successfully increase our product offerings and market share in footwear.
With respect to our direct-to-consumer business, our growth depends on our ability to continue to successfully grow our digital offerings and experiences throughout the world, expand our global network of Brand and Factory House stores and continue to increase our product offerings and market share in footwear successfully.
We may also be required to expend significant capital and other resources to protect against or respond to or alleviate problems caused by a security breach, which could negatively impact our results of operations.
We may also be required to expend significant capital and other resources to protect against or respond to or alleviate problems caused by a security breach, which could negatively impact our results of operations. Changes in tax laws and unanticipated tax liabilities could adversely affect our effective income tax rate and profitability.
Negative publicity regarding these partners could negatively impact our brand image and result in diminished loyalty to our brand, regardless of whether such claims are accurate. Furthermore, social media can potentially accelerate and increase the scope of negative publicity.
From time to time, we also enter into collaborative arrangements with athletes, designers or other partners. Negative publicity regarding these partners could negatively impact our brand image and result in diminished loyalty to our brand, regardless of whether such claims are accurate. Furthermore, social media can potentially accelerate and increase the scope of negative publicity.
For example, in 2021, a remote code execution vulnerability in Apache log4j was identified as affecting large amounts of systems worldwide, including ours. We have not experienced any material operational disruptions related to this event. From time to time we have experienced, and may continue to experience, operational disruption due to attacks on our systems and those of our vendors.
For example, in Fiscal 2021, a remote code execution vulnerability in Apache log4j was identified as affecting large amounts of systems worldwide, including ours. We have not experienced any material operational disruptions related to this event.
Because most of our products are manufactured abroad, our products must be transported by third parties over large geographical distances and an increase in the price of oil can significantly increase costs.
The cost of transporting our products for distribution and sale is also subject to fluctuation due in large part to the price of oil. Because most of our products are manufactured abroad, our products must be transported by third parties over large geographical distances and an increase in the price of oil can significantly increase costs.
To ensure adequate inventory supply, we must forecast inventory needs and place orders with our manufacturers before firm orders are placed by our customers.
To ensure adequate inventory supply, we must forecast inventory needs and place orders with our manufacturers based on estimated future demand for particular products, and before firm orders are placed by our wholesale customers.
We must successfully manage the increasingly complex operations of our global business, including continued expansion in certain markets where we have limited brand recognition, or our business and results of operations may be negatively impacted.
This could diminish the value of our proprietary rights or harm our reputation or have a negative effect on our sales and results of operations. We must successfully manage the increasingly complex operations of our global business, including continued expansion in certain markets where we have limited brand recognition, or our business and results of operations may be negatively impacted.
Any breach of our data security or that of our service providers could result in an unauthorized release or transfer of customer, consumer, vendor or employee information, or the loss of money, valuable business data or cause a disruption in our business.
There can be no assurance that these attacks will not have a material impact in the future. Any breach of our data security or that of our service providers could result in an unauthorized release or transfer of customer, consumer, vendor or employee information, or the loss of money, valuable business data or cause a disruption in our business.
Like other companies in our industry, we have in the past experienced, and we expect to continue to experience, cyberattacks, including phishing, cyber fraud incidents and other attempts to gain unauthorized access to our systems. These attempted attacks have increased as COVID-19 has progressed and many employees continue to work from home.
Like other companies in our industry, we have in the past experienced, and we expect to continue to experience, cyberattacks, including phishing, cyber fraud incidents and other attempts to gain unauthorized access to our systems. These attempted attacks have increased throughout the COVID-19 pandemic and with our implementation of a hybrid work model for many of our global corporate employees.
Any delays, interruption or increased costs in the supply of fabric or manufacture of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in lower net revenues and net income (or higher net loss) both in the short and long term. 17 Table of Contents We have occasionally received, and may in the future continue to receive, shipments of product that fail to conform to our quality control standards.
Any delays, interruption or increased costs in the supply of fabric or manufacture of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in lower net revenues and net income (or higher net loss) both in the short and long term.
This pandemic has negatively affected the U.S. and global economies, disrupted global supply chains and financial markets, and led to significant travel and business restrictions, including mandatory closures, orders to “shelter-in-place” and restrictions on how businesses operate. During 2020, the COVID-19 pandemic materially negatively impacted our business and results of operations.
Our business has been and may continue to be materially impacted by the COVID-19 pandemic, which has negatively affected the U.S. and global economies, disrupted global supply chains and financial markets, and led to significant travel and business restrictions, including mandatory closures, orders to "shelter-in-place" and restrictions on how businesses operate.
The steps taken by us to protect our proprietary rights may not be adequate to prevent infringement of our trademarks and proprietary rights by others, including imitation of our products and misappropriation of our brand and intellectual property protection may be unavailable or limited in some jurisdictions.
Despite our strategic enforcement efforts, we may not be able to prevent adequately infringement of our trademarks and proprietary rights by others, including imitation of our products and misappropriation of our brand, and intellectual property protection may be unavailable or limited in some jurisdictions.
Manufacturing delays, such as those caused by COVID-19 related temporary closures and other restrictions placed on factories in key sourcing countries, or unexpected transportation delays, such as those caused by COVID-19 related global logistics challenges, have caused and may continue to cause us to rely more heavily on airfreight to achieve timely delivery to our customers.
Manufacturing delays or unexpected transportation delays, such as those caused by COVID-19 related global logistics challenges, have caused and may continue to cause us to rely more heavily on airfreight to achieve timely delivery to our customers. These factors have and may continue to significantly increase our freight costs.
Many factors impact discretionary spending, including general economic conditions, unemployment, the availability of consumer credit 12 Table of Contents and inflationary pressures and consumer confidence in future economic conditions.
Many of our products may be considered discretionary items for consumers. Many factors impact discretionary spending, including general economic conditions, unemployment, the availability of consumer credit and inflationary pressures and consumer confidence in future economic conditions.
These challenges have and may continue to negatively impact our partners and our business, including by disrupting our inventory flow, requiring us to incur increased freight costs and requiring us to cancel or delay sales to some of our customers. This has and may continue to negatively impact our net revenues, gross margin, net income and results of operations.
While we continue to see improvements across our supply chain, these challenges have and may continue to negatively impact our partners and our business, including by disrupting our inventory flow, requiring us to incur increased freight costs and requiring us to cancel or delay sales to some of our customers.
As a result, foreign currency exchange rate fluctuations may adversely impact our results of operations. In addition, we have previously designated cash flow hedges against certain forecasted transactions.
From time to time, our results of operations have been, and may continue to be, adversely impacted by foreign currency exchange rate fluctuations. In addition, we have previously designated cash flow hedges against certain forecasted transactions.
If we are unable to obtain replacement products in a timely manner, we risk the loss of net revenues resulting from the inability to sell those products and related increased administrative and shipping costs.
We have occasionally received, and may in the future continue to receive, shipments of product that fail to conform to our quality control standards. If we are unable to obtain replacement products in a timely manner, we risk the loss of net revenues resulting from the inability to sell those products and related increased administrative and shipping costs.
Our business depends on consumer purchases of discretionary items, which can be negatively impacted during an economic downturn or periods of inflation. This could materially impact our sales, profitability and financial condition. Many of our products may be considered discretionary items for consumers.
Should any of these risks actually materialize, our business, financial condition, results of operations and future prospects could be negatively impacted. Economic and Industry Risks Our business depends on consumer purchases of discretionary items, which can be negatively impacted during an economic downturn or periods of inflation. This could materially impact our sales, profitability and financial condition.
In addition, as part of our growth strategy, we are investing significantly in enhancing our online platform capabilities and implementing systems to evolve towards a more omni-channel approach to service our consumers. We are also investing in capabilities and tools to drive higher digital engagement with our consumers and create new digital experiences.
In addition, as part of our growth strategy, we are investing significantly in enhancing our online platform capabilities, implementing systems to evolve towards a more omni-channel approach to service our consumers and establishing and growing consumer loyalty programs in certain regions.
Plank, our founder, Executive Chairman and Brand Chief, Patrik Frisk, our Chief Executive Officer and President, other top executives and key employees who have substantial experience and expertise in our business, including product creation, innovation, sales, marketing, supply chain, informational technology, operational and other support personnel.
Our future success is substantially dependent on the continued service of our senior management, particularly Kevin Plank, our founder, Executive Chair and Brand Chief, Stephanie Linnartz, our President and Chief Executive Officer, other top executives and key employees who have substantial experience and expertise in our business, including product creation, innovation, sales, marketing, supply chain, informational technology, operational and other support personnel.
The COVID-19 pandemic and resulting economic disruption has also led to significant volatility in the capital markets and adversely impacted our stock price.
This has and may continue to negatively impact our net revenues, gross margin, net income and results of operations. The COVID-19 pandemic and resulting economic disruption also led to significant volatility in the capital markets and adversely impacted our stock price.
Any near or long-term economic disruptions in markets where we sell our products, particularly in the United States, China or other key markets, may materially harm our sales, profitability and financial condition and our prospects for growth.
Any near or long-term economic disruptions in markets where we sell our products, particularly in the United States, China or other key markets, may materially harm our sales, profitability and financial condition and our prospects for growth. 11 Table of Contents The COVID-19 pandemic has caused and may continue to cause significant disruption in our industry, which has and may continue to materially impact our business, financial condition and results of operations.
Moreover, if consumers are not convinced performance apparel, footwear and accessories are a better choice than, and worth the additional cost over, traditional alternatives, sales of performance products may not grow or decline and growth in the industry and our business could be adversely affected.
If consumers are not convinced performance apparel, footwear and accessories are a better choice than, and worth the additional cost over, traditional alternatives, sales of performance products may not grow or may decline. We also must successfully design and market our performance products for use by consumers in casual occasions.
If we are unable to anticipate consumer preferences, successfully develop and introduce new, innovative and updated products or engage our consumers, or if consumer preferences shift away from performance products, our sales, net revenues and profitability may be negatively impacted.
If we cannot effectively execute our long-term growth strategies while managing costs effectively, our business could be negatively impacted and we may not achieve our expected results of operations. 14 Table of Contents If we are unable to anticipate consumer preferences, successfully develop and introduce new, innovative and updated products or engage our consumers, or if consumer preferences shift away from performance products, our sales, net revenues and profitability may be negatively impacted.
In addition, consumers are increasingly focused on the environmental and social practices of brands, including the sustainability of the 15 Table of Contents products sold. From time to time, we may also introduce limited run or specialized products that may increase our sales in the near term, but that may fail to maintain sustained consumer demand.
From time to time, we may also introduce limited run or specialized products that may increase our sales in the near term, but that may fail to maintain sustained consumer demand.
Any such violation could subject us to sanctions or other penalties that could negatively affect our reputation, business and operating results. Data security or privacy breaches could damage our reputation, cause us to incur additional expense, expose us to litigation and adversely affect our business and results of operations.
Any such violation could subject us to sanctions or other penalties that could negatively affect our reputation, business and operating results.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe our distribution facilities and space available through our third-party logistics providers will be adequate to meet our short term needs. In addition, as of December 31, 2021, we leased 422 Brand and Factory House stores located primarily in the United States, China, Canada, Mexico, Malaysia, Australia and Korea with lease end dates in 2022 through 2035.
Biggest changeIn addition, as of March 31, 2023, we leased 439 Brand and Factory House stores located primarily in the United States, China, Canada, Mexico, Korea, Chile, Australia, the United Kingdom, and Malaysia with lease 25 Table of Contents termination dates occurring in 2023 through 2035.
We also lease additional office space for sales, quality assurance and sourcing, marketing and administrative 25 Table of Contents functions. We anticipate that we will be able to extend these leases that expire in the near future on satisfactory terms or relocate to other locations.
We also lease additional office space for sales, quality assurance and sourcing, marketing and administrative functions. We anticipate that we will be able to extend these leases that expire in the near future on satisfactory terms or relocate to other locations.
ITEM 2. PROPERTIES The following includes a summary of the principal properties that we own or lease as of December 31, 2021. Our principal executive and administrative offices are located at an office complex in Baltimore, Maryland, the majority of which we own and a portion of which we lease.
ITEM 2. PROPERTIES The following includes a summary of the principal properties that we own or lease as of March 31, 2023. Our principal executive and administrative offices are located at an office complex in Baltimore, Maryland, the majority of which we own and a portion of which we lease.
We also own office space and undeveloped acreage near our office complex which we are in the process of renovating and further developing. We expect to move our principal executive and administrative offices to this location by late 2024. For each of our EMEA, Latin America and Asia Pacific headquarters, we lease office space.
We also own office space and undeveloped acreage in the Baltimore Peninsula, an area of Baltimore, Maryland previously referred to as Port Covington, which we are in the process of renovating and further developing. We expect to move our principal executive and administrative offices to this location by late 2024.
We lease our primary distribution facilities, which are located in Sparrows Point, Maryland, Mount Juliet, Tennessee and Rialto, California. Combined, these facilities represent approximately 3.5 million square feet of facility space. These leases expire at various dates, with the earliest lease termination date through May 2023.
For each of our EMEA, Latin America and Asia-Pacific headquarters, we lease office space. We lease our primary distribution facilities, which are located in Sparrows Point, Maryland, Mount Juliet, Tennessee and Rialto, California. Combined, these facilities represent approximately 3.5 million square feet of facility space.
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These leases expire at various dates, with the earliest lease termination date occurring in December 2027. We believe our distribution facilities and space available through our third-party logistics providers will be adequate to meet our short term needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we have been involved in litigation and other proceedings, including matters related to commercial disputes and intellectual property, as well as trade, regulatory and other claims related to our business. See Note 9 to our Consolidated Financial Statements for information on certain legal proceedings, which is incorporated by reference herein.
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we have been involved in litigation and other proceedings, including matters related to commercial disputes and intellectual property, as well as trade, regulatory and other claims related to our business. See Note 9 to our Consolidated Financial Statements for information on certain legal proceedings, which is incorporated by reference herein. ITEM 4.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStock Performance Graph The stock performance graph below compares cumulative total return on Under Armour, Inc. Class A Common Stock to the cumulative total return of the S&P 500 Index and S&P 500 Apparel, Accessories and Luxury Goods Index from December 31, 2016 through December 31, 2021.
Biggest changeClass A Common Stock to the cumulative total return of the S&P 500 Index and S&P 500 Apparel, Accessories and Luxury Goods Index from December 31, 2017 through March 31, 2023. The graph assumes an initial investment of $100 in Under Armour and each index as of December 31, 2017 and reinvestment of any dividends.
Our Class A Common Stock was listed on the NYSE under the symbol “UA” until December 6, 2016 and under the symbol "UAA" since December 7, 2016. Prior to November 18, 2005, there was no public market for our Class A Common Stock.
Our Class A Common Stock was listed on the NYSE under the symbol "UA" until December 6, 2016 and under the symbol "UAA" since December 7, 2016. Prior to November 18, 2005, there was no public market for our Class A Common Stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Under Armour’s Class A Common Stock and Class C Common Stock are traded on the New York Stock Exchange (“NYSE”) under the symbols “UAA” and "UA", respectively.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Under Armour's Class A Common Stock and Class C Common Stock are traded on the New York Stock Exchange ("NYSE") under the symbols "UAA" and "UA", respectively.
As of February 14, 2022, there were 2,405 record holders of our Class A Common Stock, 5 record holders of Class B Convertible Common Stock which are beneficially owned by our Executive Chairman and Brand Chief, Kevin A. Plank, and 1,676 record holders of our Class C Common Stock.
As of May 15, 2023, there were 2,306 record holders of our Class A Common Stock, 5 record holders of Class B Convertible Common Stock which are beneficially owned by our Executive Chair and Brand Chief, Kevin A. Plank, and 1,578 record holders of our Class C Common Stock.
Our Class C Common Stock was listed on the NYSE under the symbol “UA.C” since its initial issuance on April 8, 2016 until December 6, 2016 and under the symbol "UA" since December 7, 2016. Dividends No cash dividends were declared or paid during Fiscal 2021 or Fiscal 2020 on any class of our common stock.
Our Class C Common Stock was listed on the NYSE under the symbol "UA.C" since its initial issuance on April 8, 2016 until December 6, 2016 and under the symbol "UA" since December 7, 2016.
Refer to “Financial Position, Capital Resources and Liquidity” within Management’s Discussion and Analysis and Note 8 to the Consolidated Financial Statements for a further discussion of our credit facility. Stock Compensation Plans See Item 12 "Security Ownership of Certain beneficial Owners and Management and Related Stockholder Matters" for information regarding our equity compensation plans.
Refer to "Financial Position, Capital Resources and Liquidity" within Management's Discussion and Analysis and Note 8 to the Consolidated Financial Statements for a further discussion of our credit facility.
The performance shown on the graph below is not intended to forecast or be indicative of possible future performance of our common stock. 27 Table of Contents 12/31/2016 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 Under Armour, Inc. $ 100.00 $ 49.67 $ 60.83 $ 74.35 $ 59.10 $ 72.94 S&P 500 $ 100.00 $ 121.83 $ 116.49 $ 153.17 $ 181.35 $ 233.41 S&P 500 Apparel, Accessories & Luxury Goods $ 100.00 $ 120.46 $ 101.48 $ 125.06 $ 112.10 $ 118.90
The performance shown on the graph below is not intended to forecast or be indicative of possible future performance of our common stock. 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 3/31/2022 3/31/2023 Under Armour, Inc. $ 100.00 $ 122.45 $ 149.69 $ 118.99 $ 146.85 $ 117.94 $ 65.76 S&P 500 $ 100.00 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 182.77 $ 168.65 S&P 500 Apparel, Accessories & Luxury Goods $ 100.00 $ 84.24 $ 103.82 $ 93.06 $ 98.71 $ 81.67 $ 56.59
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The graph assumes an initial investment of $100 in Under Armour and each index as of December 31, 2016 and reinvestment of any dividends.
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Unregistered Sales of Equity Securities and Use of Proceeds The following table sets forth the Company's repurchases of Class C Common Stock during the quarter ended March 31, 2023 under the two-year $500 million share repurchase program authorized by our Board of Directors in February 2022.
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Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Program Approximately Dollar Value of Shares that May Yet be Purchased Under the Program (in millions) 01/01/2023 to 01/31/2023 1,049,821 $ 9.14 1,049,821 $ 75.0 02/01/2023 to 02/28/2023 — $ — — $ 75.0 03/01/2023 to 03/31/2023 — $ — — $ 75.0 Dividends No cash dividends were declared or paid during Fiscal 2023, Fiscal 2021, Fiscal 2020 or the Transition Period on any class of our common stock.
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Stock Compensation Plans See Item 12 "Security Ownership of Certain beneficial Owners and Management and Related Stockholder Matters" for information regarding our equity compensation plans. 26 Table of Contents Stock Performance Graph The stock performance graph below compares cumulative total return on Under Armour, Inc.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFiscal 2021 Performance Financial highlights for Fiscal 2021 as compared to Fiscal 2020 include: • Total net revenues increased 27.0%. • Within our channels, wholesale revenue increased 36.2% and direct-to-consumer revenue increased 25.6%. • Within our product categories, apparel revenue increased 33.3%, footwear revenue increased 35.3%, and accessories revenue increased 11.5%. • Net revenue in our North America, EMEA, Asia-Pacific, and Latin-America segments increased 29.4%, 40.8%, 32.3%, and 18.5%, respectively. • Net revenues from Corporate Other decreased 97.4% primarily due to the sale of the MyFitnessPal platform in December 2020. • Gross margin increased 200 basis points to 50.3%. • Selling, general and administrative expenses increased 7.5%. • Restructuring and impairment charges, net decreased 93.3% from $601.6 million during Fiscal 2020 to $40.5 million during Fiscal 2021. 29 Table of Contents COVID-19 Update The COVID-19 pandemic has caused, and we expect will continue to cause, disruption and volatility in our business and in the businesses of our wholesale customers, licensing partners, suppliers, logistics providers and vendors.
Biggest changeFiscal 2023 Performance Financial highlights for Fiscal 2023 as compared to the twelve months ended March 31, 2022 include: • Total net revenues increased 3.1%. • Within our channels, wholesale revenue increased 5.9% and direct-to-consumer revenue decreased 2.5%. • Within our product categories, apparel revenue decreased 0.9%, footwear revenue increased 16.3%, and accessories revenue decreased 7.4%. • Net revenue in Europe, the Middle East and Africa ("EMEA"), Latin America and Asia-Pacific increased 13.2%, 10.7% and 2.7%, respectively, while revenue decreased 0.6% in North America. • Gross margin decreased 470 basis points to 44.9%. • Selling, general and administrative expenses decreased 2.0%.
Prior to the close of business on the business day immediately preceding January 1, 2024, holders may (at their option) convert their Convertible Senior Notes only upon satisfaction of one or more of the following conditions: • during any calendar quarter commencing after the calendar quarter ended on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of our Class C Common Stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; • during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Convertible Senior Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our Class C Common Stock and the conversion rate on each such trading day; • upon the occurrence of specified corporate events or distributions on our Class C Common Stock; or • if we call any Convertible Senior Notes for redemption prior to the close of business on the business day immediately preceding January 1, 2024.
Prior to the close of business on the business day immediately preceding January 1, 2024, holders may (at their option) convert their Convertible Senior Notes only upon satisfaction of one or more of the following conditions: • during any calendar quarter commencing after the calendar quarter ended on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of our Class C Common Stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; • during the five business day period after any five consecutive trading day period (the "measurement period") in which the trading price per $1,000 principal amount of Convertible Senior Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our Class C Common Stock and the conversion rate on each such trading day; • upon the occurrence of specified corporate events or distributions on our Class C Common Stock; or • if we call any Convertible Senior Notes for redemption prior to the close of business on the business day immediately preceding January 1, 2024.
The Convertible Senior Notes bear interest at the rate of 1.50% per annum, payable semiannually in arrears on June 1 and December 1 of each year, beginning December 1, 2020. The Convertible Senior Notes will mature on June 1, 2024, unless earlier converted in accordance with their terms, redeemed in accordance with their terms or repurchased.
The Convertible Senior Notes bear interest at the fixed rate of 1.50% per annum, payable semiannually in arrears on June 1 and December 1 of each year, beginning December 1, 2020. The Convertible Senior Notes will mature on June 1, 2024, unless earlier converted in accordance with their terms, redeemed in accordance with their terms or repurchased.
Our obligations under the amended credit agreement are guaranteed by certain domestic significant subsidiaries of Under Armour, Inc., subject to customary exceptions (the “subsidiary guarantors”) and primarily secured by a first-priority security interest in substantially all of the assets of Under Armour, Inc. and the subsidiary guarantors, excluding real property, capital stock in and debt of subsidiaries of Under Armour, Inc. holding certain real property and other customary exceptions.
Our obligations under the amended credit agreement are guaranteed by certain domestic significant subsidiaries of Under Armour, Inc., subject to customary exceptions (the "subsidiary guarantors") and primarily secured by a first-priority security interest in substantially all of the assets of Under Armour, Inc. and the subsidiary guarantors, excluding real property, capital stock in and debt of subsidiaries of Under Armour, Inc. holding certain real property and other customary exceptions.
Capital Resources Credit Facility On March 8, 2019, we entered into an amended and restated credit agreement by and among us, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders and arrangers party thereto (the “credit agreement”).
Capital Resources Credit Facility On March 8, 2019, we entered into an amended and restated credit agreement by and among us, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders and arrangers party thereto (the "credit agreement").
In addition, our United States operations do not require the repatriation of these funds to meet our currently projected liquidity needs. Should we require additional capital in the United States, we may elect to repatriate indefinitely reinvested foreign funds or raise capital in the United States.
In addition, our United States operations do not require the repatriation of these funds to meet our currently projected liquidity needs. Should we require additional capital in the United States, we may borrow in the United States or elect to repatriate indefinitely reinvested foreign funds.
Goodwill and indefinite lived 44 Table of Contents intangible assets are not amortized and are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount.
Goodwill and indefinite lived intangible assets are not amortized and are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount.
The applicable margin for loans will be adjusted by reference to a grid (the “pricing grid”) based on the leverage ratio of consolidated total indebtedness to consolidated EBITDA and ranges between 1.00% to 1.75% (or, in the case of alternate base rate loans 0.00% to 0.75%).
The applicable margin for loans will be adjusted by reference to a grid (the "pricing grid") based on the leverage ratio of consolidated total indebtedness to consolidated EBITDA and ranges between 1.00% to 1.75% (or, in the case of alternate base rate loans 0.00% to 0.75%).
Our brand’s moisture-wicking fabrications are engineered in various designs and styles for wear in nearly every climate to provide a performance alternative to traditional products. Our products are sold worldwide and worn by athletes at all levels, from youth to professional, on playing fields around the globe, and by consumers with active lifestyles.
Our brand's moisture-wicking fabrications are engineered in various designs and styles for wear in nearly every climate to provide a performance alternative to traditional products. Our products are sold worldwide 28 Table of Contents and worn by athletes at all levels, from youth to professional, on playing fields around the globe, and by consumers with active lifestyles.
These open purchase orders specify fixed or minimum quantities of products at determinable prices. The product purchase obligations also includes fabric commitments with our suppliers, which secure a portion of our material needs for future seasons. The reported amounts exclude product purchase liabilities included in accounts payable as of December 31, 2021.
These open purchase orders specify fixed or minimum quantities of products at determinable prices. The product purchase obligations also includes fabric commitments with our suppliers, which secure a portion of our material needs for future seasons. The reported amounts exclude product purchase liabilities included in accounts payable as of March 31, 2023.
If there are unexpected material impacts to our business in future periods from COVID-19 and we need to raise or conserve additional cash to fund our operations, we may consider additional alternatives similar to those we used in Fiscal 2020, including further reducing our expenditures, changing our investment strategies, negotiating payment terms with our customers and vendors, reductions in compensation costs, including through temporary reductions in pay and layoffs, and limiting certain marketing and capital expenditures.
If there are unexpected material impacts to our business in future periods from COVID-19 or other global macroeconomic factors and we need to raise or conserve additional cash to fund our operations, we may consider additional alternatives similar to those we used in Fiscal 2020, including further reducing our expenditures, changing our investment strategies, reducing compensation costs, including through temporary reductions in pay and layoffs, limiting certain marketing and capital expenditures, and negotiating, extending or delaying payment terms with our customers and vendors.
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.
Our inventory strategy is focused on continuing to meet consumer demand while improving our inventory efficiency over the long 35 Table of Contents 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.
(2) Includes the minimum payments for lease obligations. The lease obligations do not include any contingent rent expense we may incur at our Brand and Factory house stores based on future sales above a specified minimum or payments made for maintenance, insurance and real estate taxes. Contingent rent expense was $16.1 million for Fiscal 2021.
(2) Includes the minimum payments for lease obligations. The lease obligations do not include any contingent rent expense we may incur at our Brand and Factory house stores based on future sales above a specified minimum or payments made for maintenance, insurance and real estate taxes. Contingent rent expense was $14.2 million for Fiscal 2023.
See Note 8 to our Consolidated Financial Statements. Other Income (Expense) Other income (expense), net primarily consists of unrealized and realized gains and losses on our foreign currency derivative financial instruments, and unrealized and realized gains and losses on adjustments that arise from fluctuations in foreign currency exchange rates relating to transactions generated by our international subsidiaries.
Other Income (Expense), net Other income (expense), net primarily consists of unrealized and realized gains and losses on our foreign currency derivative financial instruments, and unrealized and realized gains and losses on adjustments that arise from fluctuations in foreign currency exchange rates relating to transactions generated by our international subsidiaries.
Concurrently with the offering of the Convertible Senior Notes, we entered into privately negotiated capped call transactions with JPMorgan Chase Bank, National Association, HSBC Bank USA, National Association, and Citibank, N.A. (the “option counterparties”).
Concurrently with the offering of the Convertible Senior Notes, we entered into privately negotiated capped call transactions with JPMorgan Chase Bank, National Association, HSBC Bank USA, National Association, and Citibank, N.A. (the "option counterparties").
Securities Exchange Act of 1934, as amended (the Exchange Act), and Section 27A of the U.S. Securities Act of 1933, as amended ("the Securities Act"), and is subject to the safe harbors created by those sections. All statements other than statements of historical facts are statements that could be deemed forward-looking statements.
Securities Act of 1933, as amended ("the Securities Act"), and is subject to the safe harbors created by those sections. All statements other than statements of historical facts are statements that could be deemed forward-looking statements.
Other income (expense), net also includes rent expense relating to lease assets held solely for sublet purposes, primarily the lease related to our New York City flagship store.
Other income (expense), net also includes rent expense relating to lease assets held solely for sublet purposes, primarily the lease related to our New York City, 5th Avenue location.
In May 2021 and August 2021, concurrently with the Exchanges, we entered into, with each of the option counterparties, termination agreements relating to a number of options corresponding to the number of Convertible Senior Notes exchanged.
During Fiscal 2021, concurrently with the Exchanges, we entered into, with each of the option counterparties, termination agreements relating to a number of options corresponding to the number of Convertible Senior Notes exchanged.
In the event we determine a smaller or larger reserve is appropriate, we would record a benefit or charge to selling, general and administrative expense in the period in which such a determination was made. As of December 31, 2021 and 2020, the allowance for doubtful accounts was $7.1 million and $20.4 million, respectively.
In the event we determine a smaller or larger reserve is appropriate, we would record a benefit or charge to selling, general and administrative expense in the period in which such a determination was made. As of March 31, 2023 and 2022, the allowance for doubtful accounts was $10.8 million and $7.1 million, respectively.
Our capital investments have generally included expanding our in-store fixture and branded concept shop program, improvements and expansion of our distribution and 37 Table of Contents corporate facilities, leasehold improvements to our Brand and Factory House stores, and investment and improvements in information technology systems.
Our capital investments have generally included expanding our in-store fixture and branded concept shop program, improvements and expansion of our distribution and corporate facilities, including construction of our new global headquarters, leasehold improvements to our Brand and Factory House stores, and investment and improvements in information technology systems.
To the extent we believe it is more likely than not that all or some portion of the asset will not be realized, valuation allowances are established against our deferred tax assets, which increase income tax expense in the period when such a determination is made.
To the extent we believe it is more likely than not that all or some portion of the asset will not be realized, valuation allowances are established against our deferred tax assets, which increase income tax expense in the period when such a determination is made. 42 Table of Contents A significant portion of our deferred tax assets relate to U.S. federal and state taxing jurisdictions.
On or after January 1, 2024, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Convertible Senior Notes at the conversion rate at any time irrespective of the foregoing conditions. 42 Table of Contents On or after December 6, 2022, we may redeem for cash all or any part of the Convertible Senior Notes, at our option, if the last reported sale price of our Class C Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the aggregate principal amount of the Convertible Senior Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
Beginning on December 6, 2022, we may redeem for cash all or any part of the Convertible Senior Notes, at our option, if the last reported sale price of our Class C Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the aggregate principal amount of the Convertible Senior Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
However, the third amendment provides for the permanent fall away of guarantees and collateral upon our achievement of investment grade rating from two rating agencies.
The amended credit agreement provides for the permanent fall away of guarantees and collateral upon our achievement of investment grade rating from two rating agencies.
This increase was primarily driven by growth within our wholesale and distributor channel partially offset by a decrease in our direct-to-consumer channel as we have moved to a distributor operating model for certain countries within this region.
This was primarily driven by an increase in our wholesale channel, as we have moved to a distributor operating model for certain countries within this region.
If actual market conditions are less favorable than those that we projected, further adjustments may be required that would increase the cost of goods sold in the period in which such a determination was made. As of December 31, 2021 and 2020, the inventory reserve was $32.0 million and $44.6 million, respectively.
If actual market conditions are less favorable than those that we projected, further adjustments may be required that would increase the cost of goods sold in the period in which such a determination was made. As of March 31, 2023 and 2022, the inventory reserve was $34.8 million and $26.8 million, respectively.
As of December 31, 2021, we were in compliance with the applicable covenants.
As of March 31, 2023, we were in compliance with the applicable covenants.
The indenture governing the Senior Notes contains covenants, including limitations that restrict our ability and the ability of certain of our subsidiaries to create or incur secured indebtedness and enter into sale and leaseback transactions and our ability to consolidate, merge or transfer all or substantially all of our properties or assets to another person, in each case subject to material exceptions described in the indenture. 43 Table of Contents CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS Our Consolidated Financial Statements have been prepared in accordance with U.S.
The indenture governing the Senior Notes contains covenants, including limitations that restrict our ability and the ability of certain of our subsidiaries to create or incur secured indebtedness and enter into sale and leaseback transactions and our ability to consolidate, merge or transfer all or substantially all of our properties or assets to another person, in each case subject to material exceptions described in the indenture.
At December 31, 2021, $612.2 million or approximately 37%, of cash and cash equivalents was held by our foreign subsidiaries. Based on the capital and liquidity needs of our foreign operations, we intend to indefinitely reinvest these funds outside the United States.
As of March 31, 2023, $396.5 million or approximately 56% of cash and cash equivalents was held by our foreign subsidiaries. Based on the capital and liquidity needs of our foreign operations, we intend to indefinitely reinvest these funds outside the United States.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help readers understand our results of operations and financial condition, and is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes to our Consolidated Financial Statements under Part II, Item 8 and the information contained elsewhere in this Annual Report on Form 10-K under the captions “Risk Factors" and “Business.” This Annual Report on Form 10-K, including this MD&A, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 21E of the U.S.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help readers understand our results of operations and financial condition, and is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes to our Consolidated Financial Statements under Part II, Item 8 and the information contained elsewhere in this Annual Report on Form 10-K under the captions "Business" and "Risk Factors".
The costs included within Corporate Other consists largely of revenue and costs related to our MMR platforms and other digital business opportunities, as well as general and administrative expenses not allocated to an operating segment, including expenses associated with centrally managed departments such as global marketing, global IT, global supply chain and innovation, and other corporate support functions; costs related to our global assets and global marketing; costs related to our headquarters; restructuring and restructuring related charges; and certain foreign currency hedge gains and losses.
Corporate Other consists primarily of (i) operating results related to our MMR platforms and other digital business opportunities; (ii) general and administrative expenses not allocated to an operating segment, including expenses associated with centrally managed departments which include global marketing, global IT, global supply chain and innovation, and other corporate support functions; (iii) restructuring and restructuring related charges; and (iv) certain foreign currency hedge gains and losses.
As of December 31, 2021, the commitment fee was 15 basis points. 41 Table of Contents 1.50% Convertible Senior Notes In May 2020, we issued $500.0 million aggregate principal amount of 1.50% convertible senior notes due 2024 (the “Convertible Senior Notes”).
As of March 31, 2023, the commitment fee was 17.5 basis points. 1.50% Convertible Senior Notes In May 2020, we issued $500.0 million aggregate principal amount of 1.50% convertible senior notes due 2024 (the "Convertible Senior Notes").
In general, as a percentage of net revenues, we expect cost of goods sold associated with our apparel and accessories to be lower than that of our footwear. A limited portion of cost of goods sold is associated with digital subscription and advertising revenues, primarily website hosting costs, and no cost of goods sold is associated with our license revenues.
In general, as a percentage of net revenues, we expect cost of goods sold associated with our apparel and accessories to be lower than that of our footwear.
The leases expire at various dates through 2035, excluding extensions at our option, and include provisions for rental adjustments. In addition, this table includes executed lease agreements for Brand and Factory House stores that we did not yet occupy as of December 31, 2021. The operating leases generally contain renewal provisions for varying periods of time.
In addition, this table includes executed lease agreements for Brand and Factory House stores that we did not yet occupy as of March 31, 2023. The operating leases generally contain renewal provisions for varying periods of time.
We will also pay a commitment fee determined in accordance with the pricing grid on the average daily unused amount of the revolving credit facility and certain fees with respect to letters of credit. The weighted average interest rate under the revolving credit facility borrowings was 2.3% during Fiscal 2020. There were no borrowings outstanding during Fiscal 2021.
We will also pay a commitment fee determined in accordance with the pricing grid on the average daily unused amount of the revolving credit facility and certain fees with respect to letters of credit.
The Convertible Senior Notes are convertible into cash, shares of our Class C Common Stock or a combination of cash and shares of Class C Common Stock, at our election, as described further below.
Following the Exchanges, approximately $80.9 million aggregate principal amount of the Convertible Senior Notes remain outstanding as of March 31, 2023. The Convertible Senior Notes are convertible into cash, shares of our Class C Common Stock or a combination of cash and shares of Class C Common Stock, at our election, as described further below.
Additionally, these amounts include minimum guaranteed royalty payments to endorsers and licensors based upon a predetermined percent of sales of particular products. The table above excludes a liability of $38.9 million for uncertain tax positions, including the related interest and penalties, recorded in accord with applicable accounting guidance, as we are unable to reasonable estimate the timing of settlement.
Additionally, these amounts include minimum guaranteed royalty payments to endorsers and licensors based upon a predetermined percent of sales of particular products. The table above excludes a liability of $58.8 million for uncertain tax positions, inclusive of related interest and penalties, as the Company is unable to reasonably estimate the timing an amount of future cash settlement.
It is also possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts. Actual results could be significantly different from these estimates. We believe the following addresses the critical accounting estimates and assumptions that are necessary to understand and evaluate our reported financial results.
Our estimates are often based on complex judgments, probabilities and assumptions that management believes to be reasonable, but that are inherently uncertain and unpredictable. It is also possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts. Actual results could be significantly different from these estimates.
For a more complete discussion of the COVID-19 related risks facing our business, refer to our "Risk Factors" section included in Item 1A of this Annual Report on Form 10-K.
For a more complete discussion of the COVID-19 related risks facing our business, refer to our "Risk Factors" section included in Item 1A of this Annual Report on Form 10-K. Effects of Inflation and Other Global Events Macroeconomic factors, such as inflationary pressures and fluctuations in foreign currency exchange rates have and may continue to impact our business.
Please refer to Part II, Item 7 of our Annual Report on Form 10-K for Fiscal 2020, filed with the Securities Exchange Commission ("SEC") on February 24, 2021, for a comparative discussion of our Fiscal 2020 financial results as compared to Fiscal 2019. OVERVIEW We are a leading developer, marketer, and distributor of branded performance apparel, footwear, and accessories.
Please refer to Part II, Item 7 of our Annual Report on Form 10-K, filed with the Securities Exchange Commission ("SEC") on February 23, 2022, for a comparative discussion of our Fiscal 2021 financial results as compared to Fiscal 2020, which is incorporated by reference herein.
Pursuant to such termination agreements, each of the option counterparties paid us a cash settlement amount in respect of the portion of capped call transactions being terminated. We received approximately $53.0 million and $38.6 million in connection with such termination agreements related to the First Exchange and the Second Exchange, respectively.
Pursuant to such termination agreements, each of the option counterparties paid us a 40 Table of Contents cash settlement amount in respect of the portion of capped call transactions being terminated. We received approximately $91.7 million in connection with such termination agreements related to the Exchanges. The Convertible Senior Notes contain a cash conversion feature.
Income taxes include the largest amount of tax benefit for an uncertain tax position that is more likely than not to be sustained upon audit based on the technical merits of the tax position.
We have made the policy election to record any liability associated with Global Intangible Low Taxed Income (“GILTI”) in the period in which it is incurred. Income taxes include the largest amount of tax benefit for an uncertain tax position that is more likely than not to be sustained upon audit based on the technical merits of the tax position.
The equity component, which is recognized as a debt discount, was valued as the difference between the face value of the Convertible Senior Notes and the fair value of the liability component.
We valued the liability component based on its borrowing rate for a similar debt instrument that does not contain a conversion feature. The equity component, which was recognized as a debt discount, was valued as the difference between the face value of the Convertible Senior Notes and the fair value of the liability component.
See "Forward Looking Statements." All dollar and percentage comparisons made herein refer to Fiscal 2021 compared with Fiscal 2020, unless otherwise noted.
See "Forward Looking Statements." 27 Table of Contents All dollar and percentage comparisons made herein refer to Fiscal 2023 compared with the twelve months ended March 31, 2022, unless otherwise noted.
Moving forward, we anticipate capital expenditures to normalize back towards our long-term operating principle of between 3% and 5% of annual net revenues as we invest in our global direct-to-consumer, e-Commerce and digital businesses, informational technology systems, distribution centers and our global offices.
Our long-term operating principle for capital expenditures is to spend between 3% and 5% of annual net revenues as we invest in our global direct-to-consumer, e-Commerce and digital businesses, information technology systems, distribution centers and our global offices, including our new global headquarters in the Baltimore Peninsula, an area of Baltimore, Maryland, previously referred to as Port Covington.
We expect freight costs to continue negatively impacting our gross margin for the next few quarters. 33 Table of Contents Selling, General and Administrative Expenses Our selling, general and administrative expenses consist of costs related to marketing, selling, product innovation and supply chain, and corporate services.
We expect higher discounting and promotional activities and elevated product input costs to continue to negatively impact our gross margin in the near term. Selling, General and Administrative Expenses Our selling, general and administrative expenses consist of costs related to marketing, selling, product innovation and supply chain, and corporate services.
Although we believe we have adequate sources of liquidity over the long term, a prolonged or more severe economic recession, inflationary pressure, or a slow recovery could adversely affect our business and liquidity. Refer to our “Risk Factors” section included in Item 1A in this Annual Report on Form 10-K.
Although we believe we have adequate sources of liquidity over the long term, a prolonged or more severe economic recession, inflationary pressure, or a slow recovery could adversely affect our business and liquidity and could require us to take certain of the liquidity preserving actions described above.
See "Risk Factors—Economic and Industry Risks— Our business depends on consumer purchases of discretionary items, which can be negatively impacted during an economic downturn or periods of inflation.
We also continue to monitor the broader impacts of the Russia Ukraine conflict on the global economy, including its effect on inflationary pressures and the price of oil globally. See "Risk Factors—Economic and Industry Risks— Our business depends on consumer purchases of discretionary items, which can be negatively impacted during an economic downturn or periods of inflation.
A significant portion of our deferred tax assets relate to U.S. federal and state taxing jurisdictions. Realization of these deferred tax assets is dependent on future U.S. pre-tax earnings.
Realization of these deferred tax assets is dependent on future U.S. pre-tax earnings.
In evaluating the recoverability of these deferred tax assets as of December 31, 2021, the Company has considered all available evidence, both positive and negative, including but not limited to the following: Positive • Current year pre-tax earnings. • Restructuring plans undertaken in 2017, 2018, and 2020, which aim to improve future profitability. • No history of U.S. federal and state tax attributes expiring unused. • Existing sources of taxable income. • Available prudent and feasible tax planning strategies.
In evaluating the recoverability of these deferred tax assets as of March 31, 2023, we have considered all available evidence, both positive and negative, including but not limited to the following: Positive • Current year pre-tax earnings including positive financial taxable income in the U.S. federal jurisdiction. • Prior three-year cumulative positive financial taxable income in the U.S. federal jurisdiction. • Forecasted future positive financial taxable income in the U.S. • No material definite lived tax attributes (excluding capital loss) subject to expiration in the near short term. • No history of U.S. federal and material state tax attributes expiring unused. • Available prudent and feasible tax planning strategies.
In August 2021, we entered into additional exchange agreements with certain holders of the Convertible Senior Notes (the "second exchanging holders"), who agreed to exchange approximately $169.1 million in aggregate principal amount of the Convertible Senior Notes for cash and/or shares of our Class C Common Stock, plus payment for accrued and unpaid interest (the "Second Exchange" and, together with the First Exchange, the "Exchanges").
The indenture governing the Convertible Senior Notes does not contain any financial or operating covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by us or any of our subsidiaries. 39 Table of Contents During Fiscal 2021, we entered into exchange agreements with certain holders of the Convertible Senior Notes, who agreed to exchange approximately $419.1 million in aggregate principal amount of the Convertible Senior Notes for cash and/or shares of our Class C Common Stock, plus payment for accrued and unpaid interest (the "Exchanges").
GAAP. To prepare these financial statements, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosures of contingent assets and liabilities. Our estimates are often based on complex judgments, probabilities and assumptions that management believes to be reasonable, but that are inherently uncertain and unpredictable.
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS Our Consolidated Financial Statements have been prepared in accordance with U.S. GAAP. To prepare these financial statements, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosures of contingent assets and liabilities.
At our request and a lender's consent, commitments under the amended credit agreement may be increased by up to $300.0 million in aggregate, subject to certain conditions as set forth in the amended credit agreement. Incremental borrowings are uncommitted and the availability thereof will depend on market conditions at the time we seek to incur such borrowings.
As of March 31, 2023 and March 31, 2022, there were no amounts outstanding under the revolving credit facility. 38 Table of Contents At our request and a lender's consent, commitments under the amended credit agreement may be increased by up to $300.0 million in aggregate, subject to certain conditions as set forth in the amended credit agreement.
Borrowings, if any, under the revolving credit facility have maturities of less than one year. Up to $50.0 million of the facility may be used for the issuance of letters of credit. As of December 31, 2021, there was $4.3 million of letters of credit outstanding (December 31, 2020 had $4.3 million letters of credit outstanding).
Incremental borrowings are uncommitted and the availability thereof will depend on market conditions at the time we seek to incur such borrowings. Borrowings, if any, under the revolving credit facility have maturities of less than one year. Up to $50.0 million of the facility may be used for the issuance of letters of credit.
The cash outflow of $418.7 million was primarily related to approximately $506.3 million paid to certain holders for the exchange of $419.1 million in aggregate principal amount of our 1.50% convertible senior notes (the "Convertible Senior Notes").
During the twelve months ended March 31, 2022, we paid $506.3 million to certain exchanging holders for the exchange of approximately $419.1 million in aggregate principal amount of our 1.50% Convertible Senior Notes. Concurrently with these exchanges we terminated certain capped call agreements and in exchange received approximately $91.7 million.
In addition to systems and processes, key areas of focus that we believe 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.
In addition, we strive to enhance our inventory performance by focusing on adding discipline around product purchasing, reducing production lead time and improving planning and execution for selling excess inventory through our Factory House stores and other liquidation channels. As of March 31, 2023, we had approximately $711.9 million of cash and cash equivalents.
This was primarily due to a gain of $179.3 million on the sale of MyFitnessPal platform in Fiscal 2020. In addition, we recognized a $58.5 million loss upon the extinguishment of an aggregate $419.1 million in principal amount of our Convertible Senior Notes in Fiscal 2021 and a loss of $10.7 million associated with changes in foreign exchange rates.
This was primarily due to a loss of $58.5 million that was recognized during the twelve months ended March 31, 2022 upon the extinguishment of $419.1 million in principal amount of our Convertible Senior Notes. Additionally, other income increased during Fiscal 2023, due to a $10 million higher earnout recorded in connection with the sale of the MyFitnessPal platform.
As of December 31, 2021 and 2020, there were $164.3 million and $203.4 million, respectively, in reserves for returns, allowances, markdowns and discounts within customer refund liability and $47.6 million and $57.9 million, respectively, as the estimated value of inventory associated with the reserves for sales returns within prepaid expenses and other current assets on the Consolidated Balance Sheets.
As of March 31, 2023 and 2022, there were $160.5 million and $159.6 million, respectively, in reserves for returns, allowances, markdowns and discounts within customer refund liability and $40.7 million and $44.3 million, respectively, as the estimated value of inventory associated with the reserves for sales returns within prepaid expenses and other current assets on the Consolidated Balance Sheets. 41 Table of Contents Allowance for Doubtful Accounts We make ongoing estimates relating to the collectability of accounts receivable and maintain an allowance for estimated losses resulting from the inability of our customers to make required payments.
We are designing our new headquarters in line with our long-term sustainability strategy, which includes a commitment to reduce greenhouse gas emissions and increase sourcing of renewable electricity in our owned and operated facilities. We expect a portion of our capital expenditures over the short term to include investments incorporating sustainable and intelligent building design features into this facility.
During Fiscal 2023, we incurred capital expenditures of $68.1 million relating to the construction of our new global headquarters. As previously disclosed, our plans for our new headquarters have been designed in line with our long-term sustainability strategy and include a commitment to reduce greenhouse gas emissions and increase sourcing of renewable electricity in our owned and operated facilities.
Outbound handling costs include costs associated with preparing goods to ship to customers and certain costs to operate our distribution facilities. These costs were $82.9 million and $80.5 million for Fiscal 2021 and Fiscal 2020, respectively. Gross profit increased by $701.4 million to $2,861.5 million in Fiscal 2021, as compared to $2,160.1 million in Fiscal 2020.
Outbound handling costs include costs associated with preparing goods to ship to customers and certain costs to operate our distribution facilities. These costs were $79.5 million in Fiscal 2023 (twelve months ended March 31, 2022: $76.9 million). Gross profit decreased by $188.7 million to $2,649.3 million during Fiscal 2023, from $2,838.0 million during the twelve months ended March 31, 2022.
The Company will continue to permanently reinvest these earnings, as well as future earnings from our foreign subsidiaries, to fund international growth and operations. If we were to repatriate indefinitely reinvested foreign funds, we would be required to accrue and pay certain taxes upon repatriation, including foreign withholding taxes and certain U.S. state taxes and record foreign exchange rate impacts.
If we were to repatriate indefinitely reinvested foreign funds, we would be required to accrue and pay certain taxes upon repatriation, including foreign withholding taxes and certain U.S. state taxes and recognized foreign exchange rate impacts. Determination of the unrecorded deferred tax liability that would be incurred if such amounts were repatriated is not practicable.
In December 2021, we entered into a third amendment to the credit agreement (the "third amendment" and, the credit agreement as amended by the first amendment, the second amendment and the third amendment, the "amended credit agreement" or the "revolving credit facility"), which extends the term of the credit agreement from March 8, 2024 to December 3, 2026, with permitted extension under certain circumstances.
In May 2020, May 2021 and December 2021, we entered into the first, second and third amendments to the credit agreement, respectively (the credit agreement as amended and the "amended credit agreement" or the "revolving credit facility").
Fiscal Year End Change During the first quarter of Fiscal 2021, our Board of Directors approved a change in our fiscal year end from December 31 to March 31, effective for the fiscal year beginning April 1, 2022.
Fiscal Year End Change As previously disclosed, we changed our fiscal year end from December 31 to March 31, effective for the fiscal year beginning April 1, 2022. Our current fiscal year began on April 1, 2022 and ended on March 31, 2023 ("Fiscal 2023").
The decrease in operating loss was primarily due to lower restructuring and impairment charges incurred in Fiscal 2021 as compared to Fiscal 2020, partially offset by the sale of MyFitnessPal in December 2020. LIQUIDITY AND CAPITAL RESOURCES Our cash requirements have principally been for working capital and capital expenditures.
This was primarily due to gains from foreign currency hedges, lower incentive compensation expenses and no further restructuring charges, partially offset by an increase in salaries expenses and litigation expenses. LIQUIDITY AND CAPITAL RESOURCES Our cash requirements have principally been for working capital and capital expenditures.
In connection with the Second Exchange, we paid approximately $207.0 million cash and issued approximately 7.7 million shares of our Class C Common Stock to the second exchanging holders.
In connection with the Exchanges, we paid approximately $507.0 million cash and issued approximately 18.8 million shares of the Company's Class C Common Stock to the exchanging holders. Additionally, we recognized losses on debt extinguishment of $58.5 million during Fiscal 2021, within Other Income (Expense), net on our Consolidated Statements of Operations.
The effective interest rate for the three months ended December 31, 2021 was 6.8%. 3.250% Senior Notes In June 2016, we issued $600.0 million aggregate principal amount of 3.250% senior unsecured notes due June 15, 2026 (the “Senior Notes”). The proceeds were used to pay down amounts outstanding under the revolving credit facility, at the time.
The proceeds were used to pay down amounts outstanding under the revolving credit facility, at the time. The Senior Notes bear interest at the fixed rate of 3.250% per annum, payable semi-annually on June 15 and December 15 beginning December 15, 2016.
Such reclassifications did not affect total consolidated revenues, consolidated income from operations or consolidated net income. See Note 1 to our Consolidated Financial Statements. 35 Table of Contents We exclude certain corporate costs from our segment profitability measures. We report these costs within Corporate Other, which is designed to provide increased transparency and comparability of our operating segments performance.
Our segments are defined by geographic regions, including North America, EMEA, Asia-Pacific, and Latin America. We exclude certain corporate items from our segment profitability measures. We report these items within Corporate Other, which is designed to provide increased transparency and comparability of our operating segments' performance.
Determination of the unrecorded deferred tax liability that would be incurred if such amounts were repatriated is not practicable. Contractual Commitments We lease warehouse space, office facilities, space for our Brand and Factory House stores and certain equipment under non-cancelable operating leases.
Contractual Commitments We lease warehouse space, office facilities, space for our Brand and Factory House stores and certain equipment under non-cancelable operating leases. The leases expire at various dates through 2035, excluding extensions at our option, and include provisions for rental adjustments.
Our significant contractual obligations and commitments as of December 31, 2021 are summarized in the following table: 38 Table of Contents Payments Due by Period (In thousands) Total Less Than 1 Year 1 to 3 years 3 to 5 Years More Than 5 Years Long term debt obligations (1) $ 771,704 $ 20,714 $ 121,740 $ 629,250 $ — Operating Lease obligations (2) 993,616 169,994 273,198 171,291 379,133 Product purchase obligations (3) 1,475,814 1,475,814 — — — Sponsorships and other (4) 287,556 98,726 139,172 45,313 4,345 Total future minimum payments $ 3,528,690 $ 1,765,248 $ 534,110 $ 845,854 $ 383,478 (1) Includes estimated interest payments based on applicable fixed interest rates as of December 31, 2021, timing of scheduled payments, and the term of the debt obligations.
Our significant contractual obligations and commitments as of March 31, 2023 are summarized in the following table: Payments Due by Period (In thousands) Total Less Than 1 Year 1 to 3 Years 3 to 5 Years More Than 5 Years Long term debt obligations (1) $ 750,990 $ 20,714 $ 120,526 $ 609,750 $ — Operating Lease obligations (2) 1,027,700 176,218 290,688 199,724 361,070 Product purchase obligations (3) 1,161,097 1,161,097 — — — Sponsorships and other (4) 412,425 83,342 189,758 40,575 98,750 Total future minimum payments $ 3,352,212 $ 1,441,371 $ 600,972 $ 850,049 $ 459,820 (1) Includes estimated interest payments based on applicable fixed interest rates as of March 31, 2023, timing of scheduled payments, and the term of the debt obligations.
As of December 31, 2021, we believe that the weight of the negative evidence outweighs the positive evidence regarding the realization of our U.S. deferred tax assets and have recorded a valuation allowance against the U.S. deferred tax assets. 45 Table of Contents As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of DTAs.
As of March 31, 2023, for U.S. states, we believe the weight of the negative evidence continues to outweigh the positive evidence regarding the realization of the state deferred tax assets and have maintained a valuation allowance against these assets.
SEGMENT RESULTS OF OPERATIONS Our operating segments are based on how our Chief Operating Decision Maker (“CODM”) makes decisions about allocating resources and assessing performance. Our segments are defined by geographic regions, including North America, EMEA, Asia-Pacific, and Latin America.
We do not expect these tax provisions to have a material impact to our consolidated financial statements. 33 Table of Contents SEGMENT RESULTS OF OPERATIONS Our operating segments are based on how our Chief Operating Decision Maker ("CODM") makes decisions about allocating resources and assessing performance.
The third amendment also (i) decreases the applicable margins for borrowings and undrawn commitment fees; (ii) provides for the fall away of collateral and guarantee requirements following an investment-grade rating from two rating agencies; (iii) implements SOFR as the replacement of LIBOR as a benchmark interest rate for U.S. dollar borrowings (and analogous benchmark rate replacements for borrowings in Yen, Canadian Dollars, Pound Sterling and Euro); and (iv) amends certain affirmative and negative covenants and related definitions.
The amended credit agreement implements SOFR as the replacement of LIBOR as a benchmark interest rate for the U.S. dollar borrowings (and analogous benchmark rate replacements for borrowings in Yen, Canadian dollars, Pound Sterling and Euro).
As a percentage of net revenues, marketing costs decreased to 11.4% from 12.3% in Fiscal 2020. • Other costs increased $64.0 million or 3.9%, primarily driven by higher incentive compensation, non salaried wages, retail facility expenses, and a general increase in business activities in Fiscal 2021, as compared to Fiscal 2020, which was more severely impacted by COVID-19.
As a percentage of net revenues, marketing costs decreased to 10.5% from 11.9%. • Other costs increased $16.4 million or 0.9%, primarily driven by higher salaries, other selling expenses, litigation accrual, travel expenses and facility-related expenses, partially offset by lower incentive compensation expenses and lower consulting expenses. As a percentage of net revenues, other costs decreased to 29.6% from 30.2%.
Gross profit as a percentage of net revenues, or gross margin, increased 210 basis points to 50.3%, compared to 48.3% in Fiscal 2020.
Gross profit as a percentage of net revenues, or gross margin, decreased to 44.9% from 49.6%.
The increase in total net revenues for Fiscal 2021, compared to Fiscal 2020, was driven by the following: • Net revenues in our North America region increased $865.4 million, or 29.4%, to $3,810.4 million for Fiscal 2021, as compared to $2,945.0 million during Fiscal 2020. This increase was driven by growth within our wholesale and direct-to-consumer channels.
The increase in total net revenues for Fiscal 2023, compared to the twelve months ended March 31, 2022, was driven by the following: • Net revenues in our North America region decreased by $24.8 million, or 0.6%, to $3,821.0 million from $3,845.7 million.
The decrease was primarily due to a reduction in interest expense related to borrowings on our revolving credit facility which were drawn on in the prior fiscal year, and a reduction in interest expense on our Convertible Senior Notes as a result of our repurchase of approximately $419.1 million in aggregate principal amount during Fiscal 2021, partially offset by higher interest expense on our Convertible Senior Notes resulting from the full year impact of interest expense associated with our Convertible Senior Notes issued in May 2020.
This was primarily due to an increase in interest income as a result of higher interest rates and a reduction in interest expense on our Convertible Senior Notes as a result of repurchasing approximately $419.1 million in aggregate principal amount during the twelve months ended March 31, 2022. See Note 8 to our Consolidated Financial Statements.
This increase in gross margin was primarily driven by the following benefits: • approximately 360 basis points of pricing improvements driven by lower promotional activity within our direct-to-consumer channel, favorable pricing related to liquidation sales and lower promotions and markdowns across our wholesale channel; and • approximately 40 basis points from changes in foreign currency.
This decrease in gross margin of 470 basis points was primarily driven by negative impacts of approximately: • 170 basis points from higher promotions and discounting within our direct-to-consumer channel and unfavorable pricing of sales to the off-price channel; • 130 basis points of supply chain impact mainly due to higher product input costs and freight costs; • 70 basis points from unfavorable channel impacts; • 50 basis points from changes in foreign currency; • 30 basis points from unfavorable product mix due to the strength of footwear sales; and • 20 basis points from unfavorable regional mix.
Cash Flows The following table presents the major components of our cash flows provided by and used in operating, investing and financing activities for the periods presented: Year ended December 31, (In thousands) 2021 2020 $ Change 2019 $ Change Net cash provided by (used in): Operating activities $ 664,829 $ 212,864 $ 451,965 $ 509,031 $ (296,167) Investing activities (68,346) 66,345 (134,691) (147,113) 213,458 Financing activities (418,737) 436,853 (855,590) (137,070) 573,923 Effect of exchange rate changes on cash and cash equivalents (23,391) 16,445 (39,836) 5,100 11,345 Net increase (decrease) in cash and cash equivalents $ 154,355 $ 732,507 $ (578,152) $ 229,948 $ 502,559 Operating Activities Cash flows provided by operating activities increased by $452.0 million, as compared to Fiscal 2020, primarily driven by an increase in net income, before the impact of non-cash items, of $632.3 million, partially offset by a decrease from changes in working capital of $180.4 million.
Cash Flows The following table presents the major components of our cash flows provided by and used in operating, investing and financing activities for the periods presented: (In thousands) Year ended March 31, 2023 Twelve months ended March 31, 2022 Change $ Net cash provided by (used in): Operating activities $ (9,914) $ 493,974 $ (503,888) Investing activities (152,796) (100,365) (52,431) Financing activities (126,375) (725,806) 599,431 Effect of exchange rate changes on cash and cash equivalents (5,315) (5,357) 42 Net increase (decrease) in cash and cash equivalents $ (294,400) $ (337,554) $ 43,154 37 Table of Contents Operating Activities Cash flows from operating activities decreased by $503.9 million, as compared to the twelve months ended March 31, 2022, primarily driven by a decrease in net income before the impact of non-cash items of $54.0 million and a decrease from changes in working capital of $449.9 million.
The release of valuation allowances would result in a benefit to income tax expense in the period the release is recorded, which could have a material impact on net income. The timing and amount of the potential valuation allowance release are subject to significant management judgment, as well as prospective pre-tax earnings in the United States.
The actualization of these forecasted results may result in a reversal of a portion of previously recorded U.S state valuation allowances in the United States. The release of valuation allowances would result in a benefit to income tax expense in the period the release is recorded.
When compared to Fiscal 2019, net revenues in our Asia-Pacific region increased by 30.7%. • Net revenues in our Latin America region increased $30.4 million, or 18.5%, to $195.2 million for Fiscal 2021, as compared to $164.8 million in Fiscal 2020.
Net revenues in our Asia-Pacific region were also negatively impacted by changes in foreign exchange rates. • Net revenues in our Latin America region increased by $20.6 million, or 10.7%, to $213.2 million from $192.6 million.
Year ended December 31, (In thousands) 2021 2020 $ Change % Change 2019 $ Change % Change Selling, General and Administrative Expenses $ 2,334,691 $ 2,171,934 $ 162,757 7.5 % $ 2,233,763 $ (61,829) (2.8) % Selling, general and administrative expenses increased by $162.8 million , or 7.5%, to $2,334.7 million in Fiscal 2021, as compared to $2,171.9 million in Fiscal 2020.
(In thousands) Year ended March 31, 2023 Twelve months ended March 31, 2022 Change $ Change % Selling, General and Administrative Expenses $ 2,365,529 $ 2,414,499 $ (48,970) (2.0) % Selling, general and administrative expenses decreased by $49.0 million , or 2.0%, during Fiscal 2023 as compared to the twelve months ended March 31, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+1 added−1 removed11 unchanged
Biggest changeThe table below provides information about our foreign currency forward exchange agreements and presents the notional amounts and weighted average exchange rates by contractual maturity dates: 46 Table of Contents Fair Value as of Year Ended (In thousands) 2022 2023 2024 2025 2026 and Thereafter Total December 31, 2021 December 31, 2020 On-Balance Sheet Financial Instruments USD Functional Currency EUR Notional $ 63,500 $ 23,423 $ — $ — $ — $ 86,923 $ 4,447 $ (5,565) Weighted Average Exchange Rate 1.21 1.21 1.21 GBP Notional 170,773 30,657 — — — 201,430 3,270 (6,634) Weighted Average Exchange Rate 1.37 1.40 1.37 JPY Notional 9,873 3,151 — — — 13,024 495 (126) Weighted Average Exchange Rate 110.38 109.73 110.23 CNY Functional Currency USD Notional 113,045 27,935 — — — 140,980 (6,090) (5,414) Weighted Average Exchange Rate 6.75 6.74 6.74 CAD Functional Currency USD Notional 52,761 18,062 — — — 70,823 (343) (3,824) Weighted Average Exchange Rate 1.29 1.23 1.27 MXN Functional Currency USD Notional 35,068 8,234 — — — 43,302 (237) (739) Weighted Average Exchange Rate 21.32 22.20 21.48 We currently generate a majority of our consolidated net revenues in the United States, and the reporting currency for our Consolidated Financial Statements is the U.S. dollar.
Biggest changeThe table below provides information about our foreign currency forward exchange agreements for the currencies listed above and presents the notional amounts and weighted average exchange rates by contractual maturity dates: Fiscal year ending March 31, Fair Value as of (In thousands) 2024 2025 2026 2027 2028 and There-after Total March 31, 2023 March 31, 2022 December 31, 2021 On-Balance Sheet Financial Instruments USD Functional Currency EUR Notional $ 91,046 $ 22,218 $ — $ — $ — $ 113,264 $ (3,263) $ 2,238 $ 4,447 Weighted Average Exchange Rate 1.07 1.05 1.07 GBP Notional 213,437 43,741 — — — 257,178 6,024 8,764 3,270 Weighted Average Exchange Rate 1.29 1.19 1.27 CNY Functional Currency USD Notional 121,935 35,842 — — — 157,777 2,461 (7,691) (6,090) Weighted Average Exchange Rate 6.65 6.75 6.67 CAD Functional Currency USD Notional 71,318 32,491 — — — 103,809 3,538 (775) (343) Weighted Average Exchange Rate 1.29 1.32 1.30 MXN Functional Currency USD Notional 75,527 15,568 — — — 91,095 (15,271) (2,917) (237) Weighted Average Exchange Rate 22.00 22.58 22.10 KRW Functional Currency USD Notional 25,561 16,714 — — — 42,275 646 (1,790) — Weighted Average Exchange Rate 1,234.64 1,310.96 1,264.82 We currently generate a majority of our consolidated net revenues in the United States, and the reporting currency for our Consolidated Financial Statements is the U.S. dollar.
We use derivative instruments to manage financial exposures that occur in the normal course of business and do not hold or issue derivatives for trading or speculative purposes. We may elect to designate certain derivatives as hedging instruments under U.S. GAAP.
We use derivative instruments to manage financial exposures that occur in the normal course of business and do not hold or issue derivatives for trading or speculative purposes. 43 Table of Contents We may elect to designate certain derivatives as hedging instruments under U.S. GAAP.
See our "Risk Factors—Economic and Industry Risks— Our business depends on consumer purchases of discretionary items, which can be negatively impacted during an economic downturn or periods of inflation. This could materially harm our sales, profitability and financial condition " included in Item 1A of this Annual Report on Form 10-K. 48 Table of Contents
See our "Risk Factors—Economic and Industry Risks— Our business depends on consumer purchases of discretionary items, which can be negatively impacted during an economic downturn or periods of inflation. This could materially impact our sales, profitability and financial condition " included in Item 1A of this Annual Report on Form 10-K. 45 Table of Contents
We believe that our allowance for doubtful accounts is sufficient to cover customer credit risks as of December 31, 2021. Refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates - Allowance for Doubtful Accounts" for a further discussion on our policies.
We believe that our allowance for doubtful accounts is sufficient to cover customer credit risks as of March 31, 2023. Refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates - Allowance for Doubtful Accounts" for a further discussion on our policies.
However, we monitor the credit quality of these 47 Table of Contents financial institutions and consider the risk of counterparty default to be minimal.
However, we monitor the credit quality of these financial institutions and consider the risk of counterparty default to be minimal.
For contracts designated as cash flow hedges, the changes in fair value are reported as other comprehensive income and are recognized in current earnings in the period or periods during which the hedged transaction affects current earnings.
Our interest rate swap contracts are accounted for as cash flow hedges. For contracts designated as cash flow hedges, the changes in fair value are reported as other comprehensive income and are recognized in current earnings in the period or periods during which the hedged transaction affects current earnings.
Our foreign exchange risk management program consists of designated cash flow hedges and undesignated hedges. As of December 31, 2021, we had hedge instruments, primarily for British Pound/U.S. Dollar, U.S. Dollar/Chinese Renminbi, Euro/U.S. Dollar, U.S. Dollar/Canadian Dollar, U.S. Dollar/Japanese Yen and U.S. Dollar/Mexican Peso currency pairs.
Our foreign exchange risk management program consists of designated cash flow hedges and undesignated hedges. As of March 31, 2023, we had hedge instruments, primarily for British Pound/U.S. Dollar, U.S. Dollar/Chinese Renminbi, Euro/U.S. Dollar, U.S. Dollar/Canadian Dollar, U.S. Dollar/Mexican Peso and U.S. Dollar/South Korean Won currency pairs.
As of December 31, 2021, the aggregate notional value of our outstanding cash flow hedges wa s $556.5 million , wi th contract maturities ranging from one to twenty-four months.
As of March 31, 2023, the aggregate notional value of our outstanding cash flow hedges wa s $799.7 million, w i th contract maturities ranging from one to twenty-four months.
In order to maintain liquidity and fund business operations, we may 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.
In order to maintain liquidity and fund business operations, we may enter into long term debt arrangements with various lenders which bear a range of fixed and variable rates of interest.
We may elect to enter into interest rate swap contracts to reduce the impact associated with interest rate fluctuations from time to time. Our interest rate swap contracts are accounted for as cash flow hedges.
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. 44 Table of Contents We may elect to enter into interest rate swap contracts to reduce the impact associated with interest rate fluctuations from time to time.
Removed
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, our business could be impacted by continued or increasing inflation in future periods.
Added
Inflation Inflationary pressures have and may continue to adversely affect our operating results. We continue to monitor these factors and the potential impacts they may have on our financial results, including product input costs, freight costs and consumer discretionary spending and therefore consumer demand on our products.

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