| Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements include the accounts of Under Armour, Inc. and its wholly owned subsidiaries (the “Company”). All intercompany balances and transactions have been eliminated in consolidation. The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). During the first quarter of 2021, the Company's Board of Directors approved a change in fiscal year end to March 31 from December 31, effective for the fiscal year beginning after April 1, 2022. Accordingly, the Company’s 2021 fiscal year will end on December 31, 2021, followed by a three-month transition period from January 1, 2022 through March 31, 2022. The Company’s 2023 fiscal year will run from April 1, 2022 through March 31, 2023. On March 2, 2020, the Company acquired, on a cash free, debt free basis, 100% of Triple Pte. Ltd. ("Triple"), a distributor of the Company's products in Southeast Asia. The results of operations of this acquisition have been consolidated with those of the Company beginning on March 2, 2020. Refer to Note 5 for a discussion of the acquisition. On December 18, 2020, the Company completed the previously announced sale of its MyFitnessPal platform to an entity affiliated with Francisco Partners Management, L.P. and recognized a gain of approximately $179.3 million , which is included within Other income (expenses), net in the Consolidated Statements of Operations. Refer to Note 4 for a discussion of the sale. During the year ended December 31, 2019 ("Fiscal 2019"), the Company recorded an adjustment related to prior periods to correct unrecorded consulting expenses incurred primarily in connection with the 2018 restructuring plan. Selling, general and administrative expenses for Fiscal 2019 includes $5.5 million of expense that was understated in prior periods. The Company concluded that the error was not material to any prior or interim periods presented. During the year ended December 31, 2018 ("Fiscal 2018"), the Company identified an immaterial error in the presentation of premium subscriptions in its Connected Fitness reporting segment. Subscription revenue was previously recorded net of any related commission. Beginning in the first quarter of Fiscal 2018, subscription revenue is recorded on a gross basis and the related commission cost is included in selling, general and administrative expense in the Consolidated Statements of Operations. The Company concluded that the error was not material to any of its previously issued financial statements. COVID-19 In March 2020, a novel strain of coronavirus (COVID-19) was declared a global pandemic by the World Health Organization. This pandemic has negatively affected the U.S. and global economies, disrupted global supply chains and financial markets, and led to significant travel and transportation restrictions, including mandatory closures and orders to “shelter-in-place”. The Company has been focused on protecting the health and safety of its teammates, athletes and consumers, working with its customers and suppliers to minimize potential disruptions and supporting the community to address challenges posed by the global pandemic, while managing the Company's business in response to a changing dynamic. The Company's business operations and financial performance for the year ended December 31, 2020 ("Fiscal 2020") were materially impacted by COVID-19. These impacts are discussed within these notes to the consolidated financial statements, including but not limited to discussions related to long-lived asset and goodwill impairment, leases, long-term debt, and income taxes. In response to the pandemic, global legislation, including the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, was announced. The Company recognized certain incentives totaling $9 million during Fiscal 2020. The incentives were recorded as a reduction of the associated costs which the Company incurred within selling, general and administrative expenses in the Consolidated Statements of Operations. Further, the CARES Act includes modification to income tax provisions. Refer to Note 13 for discussion of the impacts of modifications to income tax provisions under the CARES Act. Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments with an original maturity of three months or less at date of inception to be cash and cash equivalents. The Company's restricted cash is reserved for payments related to claims for its captive insurance program, which is included in prepaid expenses and other current assets on the Company's Consolidated Balance Sheet. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets to the Consolidated Statements of Cash Flows. December 31, 2020 December 31, 2019 Cash and cash equivalents $ 1,517,361 $ 788,072 Restricted cash 11,154 7,936 Total cash, cash equivalents and restricted cash $ 1,528,515 $ 796,008 Concentration of Credit Risk Financial instruments that subject the Company to significant concentration of credit risk consist primarily of accounts receivable. The majority of the Company’s accounts receivable is due from its large wholesale customers. Credit is extended based on an evaluation of the customer’s financial condition and collateral is not required. None of the Company's customers accounted for more than 10% of accounts receivable for Fiscal 2020 and Fiscal 2019, respectively. For Fiscal 2020, Fiscal 2019 and Fiscal 2018, no customer accounted for more than 10% of net revenues. Given the current global economic environment and impacts of COVID-19, the Company regularly evaluates the credit risk of its large wholesale customers which make up the majority of the Company's accounts receivable. Refer to "Credit Losses - Allowance for Doubtful Accounts" for a discussion of the evaluation of credit losses. Sale of Accounts Receivable The Company has an agreement with a financial institution to sell selected accounts receivable on a recurring, non-recourse basis. Under the agreement, at any time and from time to time the balance of up to $140 million of the Company's accounts receivable may be sold to the financial institution. The Company's ability to utilize this agreement, however, may be limited by the credit ratings of the Company's customers. The Company removes the sold accounts receivable from the Consolidated Balance Sheets at the time of sale. The Company does not retain any interests in the sold accounts receivable. The Company acts as the collection agent for the outstanding accounts receivable on behalf of the financial institution. For Fiscal 2020 and Fiscal 2019, there were no amounts outstanding in connection with these arrangements. The funding fee charged by the financial institutions is included in the other income (expense), net line item in the Consolidated Statements of Operations. Credit Losses - Allowance for Doubtful Accounts Credit losses are the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company is exposed to credit losses primarily through customer receivables associated with the sales of product within the Company's wholesale and Connected Fitness channels, which are recorded in accounts receivable, net on the Company's Consolidated Balance Sheet. The Company also has other receivables, including receivables from licensing arrangements, which are recorded in prepaid expenses and other current assets on the Company's Consolidated Balance Sheet. Credit is extended to customers based on a credit review. The credit review considers each customer’s financial condition, including the customer's established credit rating or the Company's assessment of the customer’s creditworthiness based on their financial statements absent a credit rating, local industry practices, and business strategy. A credit limit and terms are established for each customer based on the outcome of this review. The Company actively monitors ongoing credit exposure through continuous review of customer balances against terms and payments against due dates. To mitigate credit risk, the Company may require customers to provide security in the form of guarantees, letters of credit, or prepayment. The Company is also exposed to credit losses through credit card receivables associated with the sales of products within the Company's direct to consumer channel. The allowance for doubtful accounts is based on the Company’s assessment of the collectibility of customer accounts. The Company makes ongoing estimates relating to the collectibility of accounts receivable and records an allowance for estimated losses resulting from the inability of its customers to make required payments. The Company establishes expected credit losses by evaluating historical levels of credit losses, current economic conditions that may affect a customer’s ability to pay, and creditworthiness of significant customers. These inputs are used to determine a range of expected credit losses and an allowance is recorded within the range. Accounts receivable are written off when there is no reasonable expectation of recovery. (In thousands) Balance as of December 31, 2019 Charged to Write-Offs Balance as of Allowance for doubtful accounts - $ 15,083 $ 10,456 $ (5,188) $ 20,350 Allowance for doubtful accounts - $ — $ 7,029 $ — $ 7,029 (1) This balance includes an allowance pertaining to a royalty receivable. As of the end of Fiscal 2019, the allowance for doubtful accounts was $15.1 million. For Fiscal 2020, the increase in the reserve is primarily due to the evaluation of certain account balances in connection with negative developments that represent a higher risk of credit default. The allowance for doubtful accounts was established with information available, including reasonable and supportable estimates of future risk to the Company as of the end of Fiscal 2020. There may be further impacts due to COVID-19. Inventories Inventories consist primarily of finished goods. Costs of finished goods inventories include all costs incurred to bring inventory to its current condition, including inbound freight, duties and other costs. The Company values its inventory at standard cost which approximates landed cost, using the first-in, first-out method of cost determination. Net realizable value is estimated based upon assumptions made about future demand and retail market conditions. If the Company determines that the estimated net realizable value of its inventory is less than the carrying value of such inventory, it records a charge to cost of goods sold to reflect the lower of cost or net realizable value. If actual market conditions are less favorable than those projected by the Company, further adjustments may be required that would increase the cost of goods sold in the period in which such a determination was made. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities at tax rates expected to be in effect when such assets or liabilities are realized or settled. Deferred income tax assets are reduced by valuation allowances when necessary. The Company has made the policy election to record any liability associated with Global Intangible Low Tax Income (“GILTI”) in the period in which it is incurred. Assessing whether deferred tax assets are realizable requires significant judgment. The Company considers all available positive and negative evidence, including historical operating performance and expectations of future operating performance. The ultimate realization of deferred tax assets is often dependent upon future taxable income and therefore can be uncertain. To the extent the Company believes it is more likely than not that all or some portion of the asset will not be realized, valuation allowances are established against the Company’s deferred tax assets, which increase income tax expense in the period when such a determination is made. 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. Settlements with tax authorities, the expiration of statutes of limitations for particular tax positions or obtaining new information on particular tax positions may cause a change to the effective tax rate. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes on the Consolidated Statements of Operations. Goodwill, Intangible Assets and Long-Lived Assets Goodwill and intangible assets are recorded at their estimated fair values at the date of acquisition and are allocated to the reporting units that are expected to receive the related benefits. 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. In conducting an annual impairment test, the Company first reviews qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If factors indicate that is the case, the Company performs the goodwill impairment test. The Company compares the fair value of the reporting unit with its carrying amount. The Company estimates fair value using the discounted cash flows model, under the income approach, which indicates the fair value of the reporting unit based on the present value of the cash flows that the Company expects the reporting unit to generate in the future. The Company's significant estimates in the discounted cash flows model include: the Company's weighted average cost of capital, long-term rate of growth and profitability of the reporting unit’s business, and working capital effects. If the carrying amount of a reporting unit exceeds its fair value, goodwill is impaired to the extent that the carrying value exceeds the fair value of the reporting unit. The Company performs its annual impairment testing in the fourth quarter of each year. As a result of the impacts of COVID-19, the Company determined that sufficient indicators existed to trigger an interim goodwill impairment analysis for all of the Company’s reporting units as of March 31, 2020. During Fiscal 2020, the Company recognized goodwill impairment charges of $51.6 million for the Latin America reporting unit and the Canada reporting unit, within the North America operating segment. Further, as a result of the impacts of COVID-19, the Company determined that sufficient indicators existed to trigger the performance of an interim long-lived asset impairment analysis. As a result, the Company recognized $89.7 million of long-lived asset impairment charges for Fiscal 2020. Refer to Note 7 to the consolidated financial statements for a further discussion of goodwill. The Company continually evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets may warrant revision or that the remaining balance may not be recoverable. These factors may include a significant deterioration of operating results, changes in business plans, or changes in anticipated cash flows. When factors indicate that an asset should be evaluated for possible impairment, the Company reviews long-lived assets to assess recoverability from future operations using undiscounted cash flows. If future undiscounted cash flows are less than the carrying value, an impairment is recognized in earnings to the extent that the carrying value exceeds fair value. Accrued Expenses For Fiscal 2020, accrued expenses primarily included $77.9 million (Fiscal 2019: $118.7 million) and $45.9 million (Fiscal 2019: $63.2 million) of accrued compensation and benefits, and marketing expenses, respectively. Foreign Currency Translation and Transactions The functional currency for each of the Company’s wholly owned foreign subsidiaries is generally the applicable local currency. The translation of foreign currencies into U.S. dollars is performed for assets and liabilities using current foreign currency exchange rates in effect at the balance sheet date and for revenue and expense accounts using average foreign currency exchange rates during the period. Capital accounts are translated at historical foreign currency exchange rates. Translation gains and losses are included in stockholders’ equity as a component of accumulated other comprehensive income. Adjustments that arise from foreign currency exchange rate changes on transactions, primarily driven by intercompany transactions, denominated in a currency other than the functional currency are included in other expense, net on the Consolidated Statements of Operations. Derivatives and Hedging Activities The Company uses derivative financial instruments in the form of foreign currency and interest rate swap contracts to minimize the risk associated with foreign currency exchange rate and interest rate fluctuations. The Company accounts for derivative financial instruments pursuant to applicable accounting guidance. This guidance establishes accounting and reporting standards for derivative financial instruments and requires all derivatives to be recognized as either assets or liabilities on the balance sheet and to be measured at fair value. Unrealized derivative gain positions are recorded as other current assets or other long term assets, and unrealized derivative loss positions are recorded as other current liabilities or other long term liabilities, depending on the derivative financial instrument’s maturity date. 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. One of the criteria for this accounting treatment is the notional value of these derivative contracts should not be in excess of specifically identified anticipated transactions. By their very nature, the Company's estimates of the anticipated transactions may fluctuate over time and may ultimately vary from actual transactions. When anticipated transaction estimates or actual transaction amounts decline below hedged levels, or if it is no longer probable a forecasted transaction will occur by the end of the originally specified time period or within an additional two-month period of time, the Company is required to reclassify the cumulative change in fair value of the over-hedged portion of the related hedge contract from Other comprehensive income (loss) to Other expense, net during the period in which the decrease occurs. The Company does not enter into derivative financial instruments for speculative or trading purposes. Revenue Recognition The Company recognizes revenue pursuant to Accounting Standards Codification 606 ("ASC 606"). Net revenues consist of net sales of apparel, footwear and accessories, license and Connected Fitness revenue. The Company recognizes revenue when it satisfies its performance obligations by transferring control of promised products or services to its customers, which occurs either at a point in time or over time, depending on when the customer obtains the ability to direct the use of and obtain substantially all of the remaining benefits from the products or services. The amount of revenue recognized considers terms of sale that create variability in the amount of consideration that the Company ultimately expects to be entitled to in exchange for the products or services and is subject to an overall constraint that a significant revenue reversal will not occur in future periods. Sales taxes imposed on the Company’s revenues from product sales are presented on a net basis on the Consolidated Statements of Operations, and therefore do not impact net revenues or costs of goods sold. Revenue transactions associated with the sale of apparel, footwear, and accessories, comprise a single performance obligation, which consists of the sale of products to customers either through wholesale or direct-to-consumer channels. The Company satisfies the performance obligation and records revenues when transfer of control has passed to the customer, based on the terms of sale. In the Company’s wholesale channel, transfer of control is based upon shipment under free on board shipping point for most goods or upon receipt by the customer depending on the country of the sale and the agreement with the customer. The Company may also ship product directly from its supplier to wholesale customers and recognize revenue when the product is delivered to and accepted by the customer. In the Company’s direct-to-consumer channel, transfer of control takes place at the point of sale for brand and factory house customers and upon shipment to substantially all e-commerce customers. Payment terms for wholesale transactions are established in accordance with local and industry practices. Payment is generally required within 30 to 60 days of shipment to or receipt by the wholesale customer in the United States, and generally within 60 to 90 days of shipment to or receipt by the wholesale customer internationally. Payment is generally due at the time of sale for direct-to-consumer transactions. Gift cards issued to customers by the Company are recorded as contract liabilities until they are redeemed, at which point revenue is recognized. The Company also estimates and recognizes revenue for gift card balances not expected to ever be redeemed ("breakage") to the extent that it does not have a legal obligation to remit the value of such unredeemed gift cards to the relevant jurisdiction as unclaimed or abandoned property. Such estimates are based upon historical redemption trends, with breakage income recognized in proportion to the pattern of actual customer redemptions Revenue from the Company's licensing arrangements is recognized over time during the period that licensees are provided access to the Company's trademarks and benefit from such access through their sales of licensed products. These arrangements require licensees to pay a sales-based royalty, which for most arrangements may be subject to a contractually guaranteed minimum royalty amount. Payments are generally due quarterly. The Company recognizes revenue for sales-based royalty arrangements (including those for which the royalty exceeds any contractually guaranteed minimum royalty amount) as licensed products are sold by the licensee. If a sales-based royalty is not ultimately expected to exceed a contractually guaranteed minimum royalty amount, the minimum is recognized as revenue over the contractual period. This sales-based output measure of progress and pattern of recognition best represents the value transferred to the licensee over the term of the arrangement, as well as the amount of consideration that the Company is entitled to receive in exchange for providing access to its trademarks. Revenue from Connected Fitness subscriptions is recognized on a gross basis and is recognized over the term of the subscription. The Company receives payments in advance of revenue recognition for subscriptions and are recorded as contract liabilities in the Company's Consolidated Balance Sheet. Related commission cost is included in selling, general and administrative expense in the Consolidated Statements of Operations. Revenue from Connected Fitness digital advertising is recognized as the Company satisfies performance obligations pursuant to customer insertion orders. The Company records reductions to revenue for estimated customer returns, allowances, markdowns and discounts. The Company bases its estimates on historical rates of customer returns and allowances as well as the specific identification of outstanding returns, markdowns and allowances that have not yet been received by the Company. The actual amount of customer returns and allowances, which is inherently uncertain, may differ from the Company’s estimates. If the Company determines that actual or expected returns or allowances are significantly higher or lower than the reserves it established, it would record a reduction or increase, as appropriate, to net sales in the period in which it makes such a determination. Provisions for customer specific discounts are based on negotiated arrangements with certain major customers. Reserves for returns, allowances, markdowns and discounts are included within customer refund liability and the value of inventory associated with reserves for sales returns are included within prepaid expenses and other current assets on the Consolidated Balance Sheet. The Company reviews and refines these estimates on at least a quarterly basis. For Fiscal 2020 and Fiscal 2019, there were $203.4 million and $219.4 million, respectively, in reserves for returns, allowances, markdowns and discounts within customer refund liability and $57.9 million and $61.1 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 Sheet. Refer to Note 19 to the Consolidated Financial Statements for a further discussion of disaggregated revenues. Contract Liability Contract liabilities are recorded when a customer pays consideration, or the Company has a right to an amount of consideration that is unconditional, before the transfer of a good or service to the customer and thus represent the Company's obligation to transfer the good or service to the customer at a future date. The Company's contract liabilities consist of payments received in advance of revenue recognition for subscriptions for the Company's Connected Fitness applications, gift cards and royalty arrangements. Contract liabilities are included in other liabilities on the Company's Consolidated Balance Sheet. For Fiscal 2020 and Fiscal 2019, contract liability was $26.7 million and $60.4 million, respectively. For Fiscal 2020, the Company recognized $16.1 million of revenue that was previously included in contract liability as of the end of Fiscal 2019. For Fiscal 2019, the Company recognized $48.5 million of revenue that was previously included in contract liability as of the end of Fiscal 2018. The change in the contract liability balance primarily results from the timing differences between the Company's satisfaction of performance obligations and the customer's payment. Commissions related to subscription revenue are capitalized and recognized over the subscription period. Practical Expedients and Policy Elections The Company has made a policy election to account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfillment cost rather than an additional promised service. Additionally, the Company has elected not to disclose certain information related to unsatisfied performance obligations for subscriptions for its Connected Fitness applications as they have an original expected length of one year or less. Advertising Costs Advertising costs are charged to selling, general and administrative expenses. Advertising production costs are expensed the first time an advertisement related to such production costs is run. Media (television, print and radio) placement costs are expensed in the month during which the advertisement appears, and costs related to event sponsorships are expensed when the event occurs. In addition, advertising costs include sponsorship expenses. Accounting for sponsorship payments is based upon specific contract provisions and the payments are generally expensed uniformly over the term of the contract after recording expense related to specific performance incentives once they are deemed probable. Advertising expense, including amortization of in-store marketing fixtures and displays, was $550.4 million, $578.9 million and $543.8 million for Fiscal 2020, Fiscal 2019 and Fiscal 2018, respectively. For Fiscal 2020, prepaid advertising costs were $15.2 million ( Fiscal 2019: $26.9 million). Shipping and Handling Costs The Company charges certain customers shipping and handling fees. These fees are recorded in net revenues. The Company includes the majority of outbound handling costs as a component of selling, general and administrative expenses. Outbound handling costs include costs associated with preparing goods to ship to customers and certain costs to operate the Company’s distribution facilities. These outbound handling costs, included within selling, general and administrative expenses, were $80.5 million, $81.0 million and $91.8 million for Fiscal 2020, Fiscal 2019 and Fiscal 2018, respectively. The Company includes outbound freight costs associated with shipping goods to customers as a component of cost of goods sold. Equity Method Investment The Company has a common stock investment of 29.5% in Dome Corporation ("Dome"), the Company's Japanese li censee. The Company accounts for its investment in Dome under the equity method, given it has the ability to exercise significant influence, but not control, over Dome. During Fiscal 2020, the Company recorded its allocable share of Dome's net income of $3.5 million (Fiscal 2019: net loss of $8.7 million; Fiscal 2018: net income of $1 million), within income (loss) from equity method investment on the Consolidated Statements of Operations and as an adjustment to the investment balance within other long term assets on the Consolidated Balance Sheet. The Company performed a qualitative assessment of potential impairment indicators for its investment in Dome and determined that indicators of impairment existed due to impacts from COVID-19. Accordingly, the Company performed a valuatio n of its investment in Dome and determined that the fair value of its investment was less than its carrying value by $8.6 million. The Company determined this decline in value to be other-than-temporary considering Dome's near and long-term financial forecast. Accordingly, the Company's results for Fiscal 2020 include the impact of recording a $8.6 million impairment of the Company's equity method investment in Dome, which reduced the carrying value to zero.The i mpairment charge was recorded within income (loss) from equity method investment on the Consolidated Statements of Operations and as a reduction to the investment balance within other long term assets on the Consolidated Balance Sheets. The Company calculated fair value using the discounted cash flows model, which indicates the fair value of the investment based on the present value of the cash flows that it expects the investment to generate in the future. For Fiscal 2020 there was no carrying value associated with the Company's equity investment in Dome (Fiscal 2019: $5.1 million). In addition to the investment in Dome, the Company has a license agreement with Dome. The Company recorded license revenues from Dome of $40.1 million and $37.8 million for Fiscal 2020 and Fiscal 2019, respectively. For Fiscal 2020, the Company had $22.9 million (Fiscal 2019: $15.6 million) in licensing receivables outstanding recorded in the prepaid expenses and other current assets line item within the Company's Consolidated Balance Sheet. On March 2, 2020, as part of the Company's acquisition of Triple, the Company assumed 49.5% of common stock ownership in UA Sports (Thailand) Co., Ltd. (“UA Sports Thailand”). The Company accounts for its investment in UA Sports Thailand under the equity method, given it has the ability to exercise significant influence, but not control, over UA Sports Thailand. For Fiscal 2020, the Company recorded the allocable share of UA Sports Thailand’s net loss of $1.1 million within income (loss) from equity method investment on the Consolidated Statements of Operations and as an adjustment to the investment balance within other long term assets on the Consolidated Balance Sheets. As of the end of Fiscal 2020 , the carrying value of the Company’s total investment in UA Sports Thailand was $4.5 million. Refer to Note 5 for a discussion of the acquisition. |
