SecProbe.io

CORRESP
1
filename1.htm

Correspondence

 June 1, 2011

 VIA EDGAR

 Mr. John Reynolds

 Assistant Director

 Securities and Exchange Commission

Division of Corporation Finance

 100 F Street,
N.E.

 Washington, D.C. 20549

Re:
Under Armour, Inc.

Form 10-K for Fiscal Year End December 31, 2010

 Filed February 24, 2011

 File No. 001-33202

Dear Mr. Reynolds:

 Under
Armour, Inc. (“we”, “our” or the “Company”) is responding to the comments of the Staff of the Securities and Exchange Commission (the “Commission”) in its letter dated May 4, 2011. To assist in your
review, we have included the Staff’s comments below prior to our responses.

 Form 10-K for the Fiscal Year Ended December 31,
2010

 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 26

Comment 1.
Please also provide a separate discussion in your Management’s Discussion and Analysis of the reasons for changes in the operating results of each of your
segments. In addition, where there is more than one reason for a change between periods, please quantify the extent to which each reason contributed to the overall change. See Item 303(A)(3) of Regulation S-K. Please provide us the text of your
proposed disclosures to be included in future filings based on the December 31, 2010 results.

 Response

 In future filings, we will provide a separate discussion in our Management’s Discussion & Analysis (“MD&A”) of
the reasons for changes in the operating results of each of our segments, and, consistent with Regulation S-K Item 303(a), we will discuss items that materially affected the operating results.

 Securities and Exchange Commission

 June 1, 2011

  Page
 2

 As requested, below is an example of this proposed separate discussion based on our MD&A in our
Annual Report on Form 10-K for the year ended December 31, 2010 (“2010 10-K”). The proposed separate discussion is a new section titled “Segment Results of Operations” included at the end of the Consolidated Results of
Operations sections.

 Segment Results of Operations

 Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

 Net revenues by geographic region are summarized below:

Year Ended December 31,

2010

2009

$ Change

% Change

 (In thousands)

 North America

$
997,816

$
808,020

$
189,796

23.5
%

 Other foreign countries

66,111

48,391

17,720

36.6

 Total net revenues

$
1,063,927

$
856,411

$
207,516

24.2
%

 Net revenues in North America increased $189.8 million to $997.8 million in 2010 from $808.0 million in 2009
primarily due to increased net sales in apparel as discussed above in Consolidated Results of Operations. Net revenues in other foreign countries increased by $17.7 million to $66.1 million in 2010 from $48.4 million in 2009 primarily due to
increased apparel sales in our Europe, Middle East and Africa (“EMEA”) operating segment and increased product distribution by our licensee in Japan.

 Operating income by geographic region is summarized below:

Year Ended December 31,

 (In thousands)

2010

2009

$ Change

% Change

 North America

$
102,806

$
83,239

$
19,567

23.5
%

 Other foreign countries

9,549

2,034

7,515

369.5

 Total operating income

$
112,355

$
85,273

$
27,082

31.8
%

 Operating income in North America increased $19.6 million to $102.8 million in 2010 from $83.2 million in
2009 primarily due to the items discussed above in Consolidated Results of Operations. Operating income in other foreign countries increased by $7.5 million to $9.5 million in 2010 from $2.0 million in 2009 primarily due to increased apparel sales
and lower selling, general and administrative expenses as a percentage of net revenues in our EMEA operating segment, along with increased product distribution by our licensee in Japan as discussed above.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Net revenues by geographic region are summarized below:

 Securities and Exchange Commission

 June 1, 2011

  Page
 3

Year Ended December 31,

2009

2008

$ Change

% Change

 (In thousands)

 North America

$
808,020

$
692,388

$
115,632

16.7
%

 Other foreign countries

48,391

32,856

15,535

47.3

 Total net revenues

$
856,411

$
725,244

$
131,167

18.1
%

 Net revenues in North America increased $115.6 million to $808.0 million in 2009 from $692.4 million in 2008
primarily due to increased net sales in apparel and footwear as discussed above in Consolidated Results of Operations. Net revenues in other foreign countries increased by $15.5 million to $48.4 million in 2009 from $32.9 million in 2008 primarily
due to increased apparel sales in our EMEA operating segment.

 Operating income by geographic region is summarized
below:

Year Ended December 31,

 (In thousands)

2009

2008

$ Change

% Change

 North America

$
83,239

$
76,326

$
6,913

9.1
%

 Other foreign countries

2,034

599

1,435

239.6

 Total operating income

$
85,273

$
76,925

$
8,348

10.9
%

 Operating income in North America increased $6.9 million to $83.2 million in 2009 from $76.3 million in 2008
primarily due to the items discussed above in Consolidated Results of Operations. Operating income in other foreign countries increased by $1.4 million to $2.0 million in 2009 from $0.6 million in 2008 primarily due to increased product distribution
by our licensee in Japan.

 Year Ended December 31, 2010 Compared to Year Ended December 31, 2009, page 29

Comment 2.
We note that your allowance for doubtful accounts decreased to 4.8% of accounts receivable as of December 31, 2010 from 6.5% of accounts receivable in 2009.
Schedule II on page 77 shows that $190,000 was charged to the expense for the allowance for doubtful accounts in the year ended December 31, 2010 compared to $1.6 million in 2009. Please explain the reasons for the decrease in the reserve and
any changes in your policy for estimating collectability of accounts receivable. Include a discussion of known trends that are having a material effect on your results and explain management’s view of the significant underlying factors causing
these trends so that readers can ascertain the likelihood that past performance is indicative of future performance. See Section III of our Release 33-8350.

 Response

 As stated in Note 2 to the Audited Consolidated Financial Statements - Summary of
Significant Accounting Policies - Allowance for Doubtful Accounts, page 49 included in our 2010 10-K,

 Securities and Exchange Commission

 June 1, 2011

  Page
 4

the Company considers historical levels of credit losses and significant economic developments within the retail environment in order to estimate its allowance for doubtful accounts. We did not
make any changes to this policy during 2008, 2009 or 2010. Due to the economic downturn and heightened credit risk environment during 2008 and 2009, we experienced customer bankruptcies and delays in receivable collections from certain customers. As
a result, we increased the allowance for doubtful accounts and incurred additional bad debt expense during those years. However, we decreased the allowance for doubtful accounts during 2010 due to the improvement in collection patterns and the
general financial health of our retail customers. In addition, we experienced recoveries of some previously reserved receivable balances and the resolution of certain customer bankruptcies which were originally filed and reserved for in 2008 and
2009. We believe the allowance for doubtful accounts as of December 31, 2010 adequately provided for our bad debt exposure at that time.

With respect to the allowance for doubtful accounts at December 31, 2010, we did not believe there were any known trends that could have a material
effect on our results of operations in future periods as our bad debt experience was significantly decreasing in 2010. Thus the 2008 and 2009 performance was not considered to be indicative of future results. In future filings, we will include a
discussion of any such known trends.

 Notes to Consolidated Financial Statements, page 49

16. Segment Data and related Information, page 67

 We believe the following summary will provide context for Comments 3 through 7 made by the Staff:

The Company develops, markets and distributes branded performance apparel, footwear and accessories for men, women and youth. The Company currently
operates primarily in the United States, but has selling operations in Europe and Canada. In addition, the Company has distribution and license agreements with third-parties located in other foreign countries.

While the Company primarily sells its products to third party retailers, the Company also sells its products directly to the consumer through its factory
house and specialty stores, website and catalog. The factory house stores primarily liquidate excess inventory. As of December 31, 2010, the Company had 54 factory house stores in the United States. The Company has 4 specialty stores in the
United States which were opened in 2007 and 2008 and sell the Company’s products at full price.

 The Company has ten business units which
are a mix of geographies, products and distribution channels: US Wholesale Apparel; US Wholesale Footwear; US Wholesale Accessories; US Wholesale Outdoor; US Retail (including specialty and factory house stores); US E-Commerce; Canada; Europe,
Middle East and Africa (“EMEA”); Latin America; and Asia. The US Wholesale Apparel, US Wholesale Footwear, US Wholesale Accessories, US Wholesale Outdoor, US Retail, US E-Commerce and Canada business units are collectively referred to as

 Securities and Exchange Commission

 June 1, 2011

  Page
 5

the North America business unit, and the business units outside of North America are referred to as the International business unit.

 According to ASC 280-10-50, operating segments are components of a public entity which has all of the following characteristics:

•

 It engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with
other components of the same public entity);

•

 Its operating results are regularly reviewed by the public entity’s Chief Operating Decision Maker (“CODM”) to make decisions about
resources to be allocated to the segment and assess its performance; and

•

 Its discrete financial information is available.

 The CODM identifies a function, not necessarily a manager with a specific title. That function is to allocate resources to and assess the performance of the segments of a public entity. As the
Company’s founder and majority stockholder, the Company’s Chief Executive Officer (“CEO”) has the overriding decision making power. It is the responsibility of the senior executives of the Company to carry out decisions made by
the CEO. Therefore, based on the decision dynamics within the Company, the CEO is considered the CODM for purposes of determining operating segments.

 Since the Company’s initial public offering and through the first quarter of 2010, the CEO considered the key indicator of performance to be gross revenues and consolidated operating income
profitability. Therefore, the CODM package revolved around this information and included disaggregated gross revenue information by product category, distribution channel and geography, and any remaining financial information beyond revenues in the
CODM package was on a consolidated basis only. Due to the continued global growth and expected global expansion of the Company, beginning in the second quarter of 2010, the CODM was provided two financial packages (actual results and current
forecast) on a quarterly basis which were expanded to include gross profit and contribution margin (which is defined by the Company as operating income less bonus and stock-based compensation expense) for the North America and each of the
International geographic regions. In general, the CODM views net revenues and contribution margin by these geographic regions as the primary indicators of performance.

 The CEO reviews and provides public comments from time to time on specific product and distribution channel revenue growth drivers. However, as stated above, he is not regularly provided with operating
results by product or distribution, and thus we do not deem these revenue categories as operating segments. Discrete financial information is not regularly available or reviewed by the CODM below the net revenue line other than the geographic
regions discussed above.

 In line with the shift to geographic focus noted above in early 2010, the Company’s organization structure was
arranged to have one direct report to the CEO which would oversee the North

 Securities and Exchange Commission

 June 1, 2011

  Page
 6

America business unit and one direct report to the CEO which would oversee the International business units. This is the planned long term structure; however, the Company has been experiencing
some transition relative to the individuals serving in these roles. David McCreight, President from July 2008 to August 2010, was given responsibility for the North America business unit, and Wayne Marino, Chief Operating Officer (“COO”),
was given responsibility for all International business units. Both reported directly to our CEO. After David McCreight’s departure in August 2010, the Company has for the time being assigned joint responsibility for the North America business
unit to Kip Fulks, the Executive Vice President of Product (“EVP Product”), and Scott Plank, the Executive Vice President of Business Development (“EVPBD”).

 Currently, the CEO’s direct reports include:

•

 EVP Product;

•

 EVPBD; and

•

 COO.

 The next levels of
management include:

•

 EVP Product

•

 Senior Vice President of Footwear;

•

 Senior Vice President of Apparel;

•

 Vice President of Accessories and Licensing; and

•

 Vice President of Outdoor.

•

 EVPBD

•

 Vice President of Retail; and

•

 Vice President and General Manager of E-Commerce.

•

 COO

•

 Managing Director/General Manager, EMEA; and

•

 Vice President/General Manager, America’s.

 Each of the individuals reporting to the EVP Product is in charge of the design of the Company’s products, as well as their respective US Wholesale business units noted above. The US Retail and US
E-Commerce business units are collectively referred to as our Direct-to-Consumer sales channel.

 In addition to salary, the major components
of our senior executives’ compensation include an annual bonus and an annual performance stock grant. For the COO, EVP Product and EVPBD, the annual bonus is based on consolidated corporate performance (as is the annual bonus for the CEO).
Corporate performance is currently measured on consolidated net revenues and consolidated operating income. For the business unit leaders below the COO, EVP Product and EVPBD, the annual bonus is first determined based on consolidated corporate
performance as described above. If the minimum thresholds for consolidated corporate performance are not achieved, the business unit leaders are not eligible for an annual bonus. If the minimum

 Securities and Exchange Commission

 June 1, 2011

  Page
 7

thresholds are achieved, then half of the annual bonus is based on corporate performance and half is based on the individual business unit performance. Similar to corporate performance, business
unit performance currently includes business unit net revenues and business unit operating income. The CEO assists in setting the consolidated revenue targets, but he is not provided with discrete financial information below the net revenue line
other than for the geographic regions previously discussed, and he is not involved in setting any business unit targets. The annual performance stock grant is currently based on combined consolidated operating income for the next two years. The
consolidated performance targets for the annual bonus and annual performance stock grant are