UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

For the quarterly period ended September 30, 2009March 31, 2010

or

For the transition period from                      to                     

Commission File No. 001-33202

UNDER ARMOUR, INC.

(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ

Class A Common Stock, $.0003 ¹/3 par value, 37,667,95438,193,958 shares outstanding as of October 31, 2009April 30, 2010 and Class B Convertible Common Stock, $.0003 ¹/3 par value, 12,500,000 shares outstanding as of October 31, 2009.April 30, 2010.

UNDER ARMOUR, INC.

September 30, 2009March 31, 2010

INDEX TO FORM 10-Q

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Under Armour, Inc. and Subsidiaries

Unaudited Consolidated Balance Sheets

(In thousands, except share data)

See accompanying notes.

1

Under Armour, Inc. and Subsidiaries

Unaudited Consolidated Statements of Income

(In thousands, except per share amounts)

See accompanying notes.

2

Under Armour, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity and Comprehensive Income

(In thousands; unaudited)

See accompanying notes.

3

Under Armour, Inc. and Subsidiaries

Unaudited Consolidated Statements of Cash Flows

(In thousands)

See accompanying notes.

4

Under Armour, Inc. and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements

1. Description of the Business

Under Armour, Inc. is a developer, marketer and distributor of branded performance apparel, footwear and accessories. These products are sold worldwide and worn by athletes at all levels, from youth to professional on playing fields around the globe, as well as by consumers with active lifestyles.

2. 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 inter-company balances and transactions have been eliminated. The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America.

Interim Financial Data

The results for the three and nine months ended September 30, 2009March 31, 2010 are not necessarily indicative of the results to be expected for the year ending December 31, 20092010 or any other portions thereof. Certain information in footnote disclosures normally included in annual financial statements has been condensed or omitted for the interim periods presented in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim consolidated financial statements.

These financial statements do not contain all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, all adjustments consisting of normal, recurring adjustments considered necessary for a fair presentation of the financial position and results of operations have been included.

The consolidated balance sheet as of December 31, 20082009 is derived from the audited financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 20082009 (the “2008“2009 Form 10-K”), which should be read in conjunction with these consolidated financial statements.

Concentration of Credit Risk

Financial instruments that subject the Company to a significant concentration of credit risk consist primarily of accounts receivable. The majority of the Company’s accounts receivable isare due from large sporting goods retailers. Credit is extended based on an evaluation of the customer’s financial condition and generally collateral is not required. The most significant customers that accounted for a large portion of net revenues and accounts receivable arewere as follows:

Allowance for Doubtful Accounts Receivable

Accounts receivable are recorded at the invoice price net of an allowance for doubtful accounts and reserves for returns and certain sales allowances, and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in accounts receivable. As of September 30,March 31, 2010, December 31, 2009 and DecemberMarch 31, 2008,2009, the allowance for doubtful accounts was $5.5$5.0 million, $5.2 million and $4.2$4.7 million, respectively. In determining

Sales Returns, Allowances, Markdowns and Discounts

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 and markdowns. The actual amount of customer returns and allowances, which is inherently uncertain,

may differ from the allowance for doubtful accounts,Company’s estimates. If the Company considers its historical level of credit losses and significant economic developmentsdetermined that could impactactual or expected returns or allowances were significantly greater or lower than the ability of its customersreserves it had established, it would record a reduction or increase, as appropriate, to pay outstanding balances and makes judgments aboutnet sales in the creditworthiness of significant customersperiod in which the Company made such a determination. Provisions for customer specific discounts based on ongoing credit evaluations. Receivable balancescontractual obligations with certain major customers are written off against the allowance when management believes it is probable the receivable will not be recovered.recorded as reductions to net sales.

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Reserves for returns allowances, certain markdowns and certain discountsallowances are recorded as an offsetoffsets to accounts receivable as settlements are made through offsets to outstanding customer invoices. The majorityBeginning in the first quarter of 2010, reserves for markdowns and discounts earned by customers in the period arewere recorded as liabilities withinoffsets to accounts receivable as settlements were made through offsets to outstanding customer invoices. Historically, the majority of these amounts were recorded as accrued expenses as they stipulate settlements to bewere made through Company cash disbursements. In addition, certainAs of March 31, 2010, there were $6.9 million in customer markdowns expected to be paid to customers through cash disbursements areand discounts recorded as liabilities withinoffsets to accounts receivable, and no amounts were recorded as accrued expenses. The Company does not have any off-balance-sheet credit exposure relatedAs of December 31, 2009 and March 31, 2009, there were no significant customer markdowns or discounts recorded as offsets to its customers.accounts receivable, and $6.9 million and $4.8 million were recorded as accrued expenses, respectively.

Income Taxes

The Company recorded $20.5$5.2 million and $19.1$3.1 million of income tax expense for the three months ended September 30,March 31, 2010 and 2009, and 2008, respectively, and $24.6 million and $22.1 million of income tax expense for the nine months ended September 30, 2009 and 2008, respectively. The effective rates for income taxes were 43.8%42.0% and 42.5%43.8% for the ninethree months ended September 30,March 31, 2010 and 2009, and 2008, respectively. The effective tax rate for the ninethree months ended September 30, 2009March 31, 2010 was higherlower than the comparable period in 2008effective tax rate for the three months ended March 31, 2009 primarily due to an increasedecreased losses in projected non-deductible expensesforeign subsidiaries and certain tax strategies implemented by the Company in the current year.2010. The Company’s annual 20092010 effective tax rate is expected to be approximately 44.3%, which is lower thanimproved from the 20082009 annual effective tax rate of 45.3%43.2% due to certain sourcing and tax strategies implemented by the Company in 2009.

Accrued Expenses

At September 30, 2009, accrued expenses primarily included $14.8 million, $7.3 million and $6.4 million, of accrued compensation and benefits, marketing expenses, and certain customer markdowns and discounts, respectively. At December 31, 2008, accrued expenses primarily included $6.8 million, $6.0 million and $5.1 million of accrued marketing expense, compensation and benefits, and customer discounts, respectively.drivers for the quarter noted above.

Shipping and Handling Costs

The Company charges certain customers shipping and handling fees. These fees are recorded in net revenues. Outbound freight costs associated with shipping goods to customers are recorded as cost of goods sold. The Company includes the majority of outbound shipping and handling costs as a component of selling, general and administrative expenses. Outbound shipping and handling costs include internal costs associated with shippingpreparing goods to ship to customers and certain costs to operate the Company’s distribution facilities. These costs, included within selling, general and administrative expenses, were $5.5$3.6 million and $5.0$2.4 million for the three months ended September 30,March 31, 2010 and 2009, and 2008, respectively, and $15.0 million and $12.5 million for the nine months ended September 30, 2009 and 2008, respectively.

Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, including estimates relating to assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Recently IssuedAdopted Accounting Standards

In June 2009, the Financial Accounting Standards Board (“FASB”) issued an amendment to the accounting and disclosure requirements for the consolidation of variable interest entities (“VIEs”). This amendment requires an enterprise to perform a qualitative analysis when determining whether or not it must consolidate a VIE. The amendment also requires an enterprise to continuously reassess whether it must consolidate a VIE. Finally, an enterprise will be required to disclose significant judgments and assumptions used to determine whether or not to consolidate a VIE. This amendment is effective for financial statements issued for annual periods beginning after November 15, 2009, and for interim periods within the first annual period. The Company is currently evaluating the impactadoption of this amendment on its consolidated financial statements.

Recently Adopted Accounting Standards

In June 2009, the FASB issued the FASB Accounting Standards Codification (“Codification”). The Codification has become the single source of authoritative generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The Codification was effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification is non-authoritative. The adoption of the Codification did not have anyhad no impact on the Company’s consolidated financial statements.

Reclassifications

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In MayOutbound shipping costs of $2.7 million included in selling, general and administrative expenses for the three months ended March 31, 2009 were reclassified to cost of goods sold to conform to the FASB issued accounting guidance that establishes accounting and reporting standardspresentation for events that occur after the balance sheet date but before financial statements are issued or are available to be issued.three months ended March 31, 2010. In addition, entities must disclosecosts of $1.4 million associated with the date through which subsequent eventsCompany’s sourcing offices and Special Make-Up Shop included in cost of goods sold for the three months ended March 31, 2009 have been evaluatedreclassified to selling, general and administrative expenses to conform to the basispresentation for selecting that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. This guidance was effective for fiscal years and interim periods ending after June 15, 2009. The adoption of this guidance did not have any impact on the Company’s consolidated financial statements.three months ended March 31, 2010. The Company has performed an evaluationbelieves these changes reflect its view that cost of subsequent events through November 4, 2009,goods sold should primarily include product costs which isare variable in nature. In addition, these reclassifications will more closely align with the dayway the financial statements were issued.

In June 2008, the FASB issued accounting guidance requiring that unvested stock-based compensation awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) should be classified as participating securities and should be included in the computation of earnings per share pursuant to the two-class method. The provisions of this guidance were required for fiscal years beginning after December 15, 2008. The Company has adopted this guidance for current period computations of earnings per share, and has updated prior period computations of earnings per share. The adoption of this guidance in the first quarter of 2009 did not have a material impact on the Company’s computation of earnings per share. Refer to Note 9 for further discussion.

In June 2008, the FASB issued accounting guidance addressing the determination of whether provisions that introduce adjustment features (including contingent adjustment features) would prevent treating a derivative contract or an embedded derivative on a company’s own stock as indexed solely to the company’s stock. This guidance was effective for fiscal years beginning after December 15, 2008. The adoption of this guidance in the first quarter of 2009 did not have any impact on the Company’s consolidated financial statements.

In March 2008, the FASB issued accounting guidance intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. This guidance was effective for the fiscal years and interim periods beginning after November 15, 2008. The adoption of this guidance in the first quarter of 2009 did not have any impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued replacement guidance that requires the acquirer of a business to recognize and measure the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquired entity at fair value. This replacement guidance also requires transaction costs related to the business combination to be expensed as incurred. It was effective for business combinations for which the acquisition date is on or after the start of the fiscal year beginning after December 15, 2008. The adoption of this guidance in the first quarter of 2009 did not have any impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued accounting guidance that establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This guidance was effective for fiscal years beginning after December 15, 2008. The adoption of this guidance in the first quarter of 2009 did not have any impact on the Company’s consolidated financial statements.

In September 2006, the FASB issued accounting guidance which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. This guidance was effective for fiscal years beginning after November 15, 2007, however the FASB delayed the effective date to fiscal years beginning after November 15, 2008 for nonfinancial assets and nonfinancial liabilities, except those items recognized or disclosed at fair value on an annual or more frequent basis. The adoption of this guidance for nonfinancial assets and liabilities in the first quarter of 2009 did not have any impact on the Company’s consolidated financial statements.

7manages its business.

3. Inventories, Net

Inventories consisted of the following:

4. Revolving Credit Facility and Long Term Debt

Revolving Credit Facility

In January 2009, theThe Company entered intohas a new revolving credit facility with certain lending institutions, and terminated its prior revolving credit facility in order to increase the Company’s available financing and to expand its lending syndicate. In conjunction with the termination of the prior revolving credit facility, the Company repaid the then outstanding balance of $25.0 million and did not borrow under the new revolving credit facility through October 31, 2009.

institutions. The revolving credit facility has a term of three years, expiring in January 2012, and provides for a committed revolving credit line of up to $200.0 million based on the Company’s qualified domestic inventory and accounts receivable balances. The commitment amount under the revolving credit facility may be increased by an additional $50.0 million, subject to certain conditions and approvals per the credit agreement. The Company incurred and capitalized $1.4 million in deferred financing costs in connection with the revolving credit facility. The borrowing capacity, defined as the product of the remaining term and the maximum available credit of a financing agreement, of the new revolving credit facility is greater than the prior facility. In addition, certain lenders included in the prior revolving credit facility are also included in the new revolving credit facility. Thus, unamortized deferred financing costs of $0.4 million relating to the Company’s prior revolving credit facility were expensed during the nine months ended September 30, 2009 and $0.1 million of deferred financing costs was added to the deferred financing costs of the new revolving credit facility and will be amortized over the life of the new revolving credit facility.

The revolving credit facility may be used for working capital and general corporate purposes. It is collateralized by substantially all of the assets of the Company and its domestic subsidiaries (other than the Company’s trademarks), and by a pledge of 65% of the equity interests of substantially all of the Company’s foreign subsidiaries. Up to $5.0 million of the revolving credit facility may be used to support letters of credit, of which $3.5 million was outstanding as of September 30, 2009.March 31, 2010. The Company must maintain a certain leverage ratio and fixed charge coverage ratio as defined in the credit agreement. As of September 30, 2009,March 31, 2010, the Company was in compliance with these financial covenants. The revolving credit facility also provides the lenders with the ability to reduce the borrowing base, even if the Company is in compliance with all conditions of the revolving credit facility, upon a material adverse change to the business, properties, assets, financial condition or results of operations of the Company. The revolving credit facility contains a number of restrictions that limit the Company’s ability, among other things, and subject to certain limited exceptions, to incur additional indebtedness, pledge its assets as security, guaranty obligations of third parties, make investments, undergo a merger or consolidation, dispose of assets, or materially change its line of business. In addition, the revolving credit facility includes a cross default provision whereby an event of default under other debt obligations, as defined in the credit agreement, will be considered an event of default under this credit agreement.

Borrowings under the revolving credit facility bear interest based on the daily balance outstanding at LIBOR (with LIBOR subject to a rate floor of 1.25%) plus an applicable margin (varying from 2.0% to 2.5%) or, in certain cases at the Company’s option, a base rate (based on the prime rate or as otherwise specified in the credit agreement, with the base rate subject to a rate floor of 2.25%) plus an applicable margin (varying from 1.0% to 1.5%). The revolving credit facility also carries a commitment fee varying from 0.38% to 0.5% of the committed line amount less outstanding borrowings and letters of credit. The applicable margins are calculated quarterly and vary based on the Company’s leverage ratio as defined in the credit agreement.

Prior to entering into the revolving credit facility in January 2009, the Company terminated its prior $100.0 million revolving credit facility. In conjunction with the termination of the prior revolving credit facility, the Company repaid the then outstanding balance of $25.0 million. The prior revolving credit facility was also collateralized by substantially all of the Company’s assets, other than its trademarks, and included covenants, conditions and other terms similar to the Company’s newcurrent revolving credit facility.

8

As of September 30, 2009,March 31, 2010, the Company’s net availability was $158.7$123.9 million based on its eligible domestic inventory and accounts receivable balances. The weighted average interest rate on the balances outstanding under the prior revolving credit facility was 3.5% for1.4% during the three months ended September 30, 2008, and 1.4% and 3.5%March 31, 2009. No balances were outstanding under the current revolving credit facility during the ninethree months ended September 30, 2009March 31, 2010 and 2008, respectively.2009.

Long Term Debt

In March 2005, theThe Company entered into an agreementhas long term debt agreements with various lenders to finance the acquisition or lease of up to $17.0 million in qualifying capital investments. Loans under this agreementthese agreements are collateralized by a first lien on the related assets acquired. The agreement isAs these agreements are not a committed facility, withfacilities, each advance under the agreementis subject to approval by the lender’s approval. In March 2008, the lender agreed to increase the maximum financing under the agreement to $37.0 million.

In May 2008, the Company entered into an additional agreement to finance the acquisition or lease of up to $40.0 million in qualifying capital investments. Loans under this additional agreement are collateralized by a first lien on the assets acquired. This additional agreement is not a committed facility, with each advance under the agreement subject to the lender’s approval.

Theselenders. Additionally, these agreements include a cross default provision whereby an event of default under other debt obligations, including the Company’s revolving credit facility, agreement, iswill be considered an event of default under these agreements. In addition, theseThese agreements require a prepayment fee if the Company pays outstanding amounts ahead of the scheduled term. Through September 30, 2009, the Company has financed $36.6 million of property and equipment under these agreements.terms. The terms of the Company’s revolving credit facility limit the total amount of additional financing available under these agreements to $35.0 million, of which $31.4$27.4 million was available as of September 30, 2009.

As of September 30,March 31, 2010. At March 31, 2010, December 31, 2009 and DecemberMarch 31, 2008,2009, the outstanding principal balances were $18.1balance under these agreements was $17.9 million, $20.1 million and $20.1$18.3 million, respectively, under these agreements. Advancesrespectively. Currently, advances under these agreements bear interest rates which are fixed at the time of each advance. The weighted average interest ratesrate on outstanding borrowings was 6.0% and 5.9% for each of the three months ended September 30, 2009March 31, 2010 and 2008, respectively, and 6.0% and 6.1% for the nine months ended September 30, 2009 and 2008, respectively.2009.

The Company monitors the financial health and stability of its lenders under the revolving credit and long term debt facilities; however, current significant instability in the credit markets could negatively impact lenders and their ability to perform under their facilities.

Interest expense was $0.5$0.6 million and $0.2$0.9 million for the three months ended September 30,March 31, 2010 and 2009, and 2008, respectively, and $2.0 million and $0.9 million for the nine months ended September 30, 2009 and 2008, respectively. Interest expense includes the amortization of deferred financing costs and interest expense under the revolving credit facility and long term debt.debt facilities.

5. Commitments and Contingencies

The Company is, from time to time, involved in routine legal matters incidental to its business. Management believes that the ultimate resolution of any such current proceedings and claims will notThere have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

In connection with various contracts and agreements, the Company has agreed to indemnify counterparties against certain third party claims relatingbeen no significant changes to the infringement of intellectual property rights and other items. Based oncontractual obligations reported in the Company’s historical experience and the estimated probability of future loss, the Company has determined that the fair value of such indemnifications is not material to its consolidated financial position or results of operations.

Certain key executives are party to agreements with the Company that include severance benefits upon involuntary termination of employment without cause or for good reason, including following a change in control of the Company.2009 Form 10-K.

6. Fair Value Measurements

On January 1, 2008, the Company adopted fair value accounting guidance for its financial assets and liabilities. On January 1, 2009, the Company adopted fair value accounting guidance for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The adoption in 2009 had no impact on the Company’s consolidated financial statements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). ThisThe fair value accounting guidance outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures and prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

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Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

Financial assets and (liabilities) measured at fair value as of September 30, 2009March 31, 2010 are set forth in the table below:

Fair values of the financial assets and liabilities listed above are determined using inputs that use as their basis readily observable market data that are actively quoted and are validated through external sources, including third-party pricing services and brokers. The foreign currency forward contracts represent gains and losses on derivative contracts, which are the net difference between the U.S. dollars to be received or paid at each contract’s settlement date and the U.S. dollar value of the foreign currency to be sold or purchased at the current forward exchange rate. The fair value of the TOLI held by the Rabbi Trust is based on the cash-surrender value of the life insurance policies, which are invested primarily in mutual funds and a separately managed fixed income fund. These investments are in the same funds and purchased in substantially the same amounts as the participants’ selected investments of participants, which represent the underlying liabilities to participants in the Deferred Compensation Plan. LiabilitiesObligations under the Deferred Compensation Plan are recorded at amounts due to participants, based on the fair value of participants’ selected investments.

7. Stock-Based Compensation

The Under Armour, Inc. 2005 Omnibus Long-Term Incentive Plan (the “2005 Plan”) provides for the issuanceIn March 2010, 72.5 thousand shares of stock options, restricted stock restricted stock units and other equity awards to officers, directors, key employees and other persons. In March 2009, the Company’s Board of Directors approved, subject to stockholder approval, an amended and restated 2005 Plan that includes an increase in the maximum number of shares available under the 2005 Plan from 2.7 million to 10.0 million. The amended and restated 2005 Plan was approved by stockholders in May 2009. As of September 30, 2009, 6.9 million shares were available for future grants of awards under the 2005 Plan.

In March 2009, 1.2 million performance-based131.5 thousand stock options were awarded to certain officers and key employees under the Company’sUnder Armour, Inc. Amended and Restated 2005 Plan. TheseOmnibus Long-Term Incentive Plan

(“the 2005 Plan”). The restricted stock and stock options have a vesting term of four years. The stock options have a term of ten years from the grant date with vesting tied to the achievement of a combined annual operating income target for 2009 and 2010. Upon the achievement of the combined annual operating income target, 50% of the stock options (or 45% in certain cases) will vest and the remaining 50% of the stock options (or 45% in certain cases) will vest one year later. Thean exercise price of the performance-based stock options is $13.71,$28.41, which was the closing price of the Company’s Class A Common Stock on the date of grant. The weighted average fair value of each of the performance-based stock optionsoption was $7.33$15.76 and was estimated using the Black-ScholesBlack-Sholes option-pricing model consistent with the weighted average assumptions included inwithin the 20082009 Form 10-K.

In July 2008, the Company granted 185.8 thousandaddition, in March 2010, 1.1 million performance-based stock options were awarded to certain officers and key employees under the 2005 Plan to the Company’s President upon his hiring.Plan. The performance-based stock options have vesting of the award was subjectthat is tied to the achievement of four separate annual operating income targets. In March 2009, the operating income targets were reduced to more closely align the targets with the operating income targets for the performance-based stock options discussed above. These performance-based stock options will vest in four equal installments subject to the achievement ofa certain combined annual operating income targets beginning with 2010target for 2011 and 2011.2012. Upon the achievement of each of the combined annual operating income targets,target, 50% of the tranche (or 45% in certain cases)options will vest and the remaining 50% of the tranche (or 45% in certain cases) will vest one year later. The termIf certain lower levels of these performance-basedcombined operating income for 2011 and 2012 are achieved, fewer or no options will vest at that time, a portion one year later, and the remaining stock options is ten years from the July 2008 grant date and the exercise price is $28.93, which was the closing price of the Company’s Class A Stock on the grant date.will be forfeited. The weighted average fair value of each performance-based stock option was modified to $5.15$16.38 and was estimated using modification date valuation inputs similar to the Black-Sholes option-pricing model consistent with the weighted average assumptions included inwithin the 20082009 Form 10-K.

Through September 30, 2009, As of March 31, 2010, the Company didhad not record stock-basedrecorded stock based compensation expense for any of thethese performance-based stock options as the Company was unable to predict with certainty whether the combined operating income targets willwould be reached. The Company will assess the probability of the achievement of the operating income targets at the end of each reporting period. When it becomes probable that athe performance targettargets related to these performance-based stock options will be achieved, a cumulative adjustment will be recorded as if ratable stock-based compensation expense had been recorded since the grant date. A cumulative adjustment of $2.1$0.4 million would have been recorded at September 30, 2009March 31, 2010 had the achievement of the operating income targets been probable.

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8. Foreign Currency Risk Management and Derivatives

The Company is exposed to gains and losses resulting from fluctuations in foreign currency exchange rates mainly relating to transactions generated by its international subsidiaries in currencies other than their local currencies. These gains and losses are primarily driven by inter-company transactions. InSince August 2007, the Company has entered into foreign currency forward contracts to reduce the risk associated with foreign currency exchange rate fluctuations on inter-company transactions and projected inventory purchases for its Canadian subsidiary. Beginning inSince December 2008, the Company began usinghas entered into foreign currency forward contracts in order to reduce the risk associated with foreign currency exchange rate fluctuations on inter-company transactions for its European subsidiary.

As of September 30, 2009,March 31, 2010, the notional value of the Company’s outstanding foreign currency forward contracts used to mitigate the foreign currency exchange rate fluctuations on its Canadian subsidiary’s inter-company transactions and projected inventory purchases was $20.7$15.4 million with contract maturities of 1 to 2 months.month. As of September 30, 2009,March 31, 2010, the notional value of the Company’s outstanding foreign currency forward contracts used to mitigate the foreign currency exchange rate fluctuations on its European’s subsidiary’s inter-company transactions was $45.0$58.6 million with contract maturities of 1 month. The foreign currency forward contracts are not designated as cash flow hedges, and accordingly, changes in their fair value are recorded in earnings. TheAs of March 31, 2010, the fair value of the Company’s foreign currency forward contracts was $0.5a liability of $0.4 million, as of September 30, 2009, and was included in accrued expenses on the consolidated balance sheet. TheAs of December 31, 2009 and March 31, 2009, the fair value of the Company’s foreign currency forward contracts was $1.2an asset of $0.3 million as of December 31, 2008,and $1.4 million, respectively, and was included in prepaid expenses and other current assets on the consolidated balance sheet. Refer to Note 6 for a discussion of the fair value measurements. Included in other income (expense), net were the following amounts related to changes in foreign currency exchange rates and derivative foreign currency forward contracts:

The Company enters into foreign currency forward contracts with major financial institutions with investment grade credit ratings and is exposed to credit losses in the event of non-performance by these financial institutions. This credit risk is generally limited to the unrealized gains in the foreign currency forward contracts. The Company monitors the credit quality of these financial institutions and considers the risk of counterparty default to be minimal.

9. Earnings per Share

The Company adopted accounting guidance during the three months ended March 31, 2009 requiring any stock-based compensation awards that entitle their holders to receive dividends prior to vesting to be considered participating securities and to be included in the calculation offollowing represents a reconciliation from basic earnings per share using the two class method. Historically, these stock-based compensation awards were included in the calculation ofto diluted earnings per share using the treasury stock method. The Company determined that all outstanding restricted stock awards meet the definition of participating securities and should be included in basic earnings per share using the two class method. The Company included outstanding restricted stock awards in the calculation of basic earnings per share for the three and nine months ended September 30, 2009 and adjusted prior period earnings per share calculations. The application of this accounting guidance for the three months ended September 30, 2008 had no impact on the Company’s diluted earnings per share, but decreased diluted earnings per share presented for the nine months ended September 30, 2008 by $0.01. In addition, the application of this accounting guidance decreased basic earnings per share presented for each of the three and nine months ended September 30, 2008 by $0.01. The calculation of earnings per share for common stock shown below excludes the income attributable to outstanding restricted stock awards from the numerator and excludes the impact of these awards from the denominator.

11share:

Effects of potentially dilutive securities are presented only in periods in which they are dilutive. Stock options, restricted stock units, and warrants representing 1.11.3 million and 1.2 million shares of common stock outstanding for each of the three months ended September 30,March 31, 2010 and 2009, and 2008, respectively, and 1.2 million and 0.9 million shares of common stock outstanding for the nine months ended September 30, 2009 and 2008, respectively, were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive.

10. Segment Data and Related Information

Operating segments are defined as components of an enterprise in which separate financial information is available and is evaluated regularly by the chief operating decision maker in assessing performance and in deciding how to allocate resources. The Company operates exclusively in the consumer products industry in which the Company develops, markets, and distributes branded performance apparel, footwear and accessories. Based on the nature of the financial information that is received by the chief operating decision maker, the Company operates within one operating and reportable segment in accordance with applicable guidance. Although the Company operates within one reportable segment, it hassells products from several product categories for which thecategories. The table below summarizes net revenues attributable to eachby product category are as follows:category:

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The table below summarizes product net revenues by geographic regions attributed by customer location:

As of September 30, 2009During the three months ended March 31, 2010 and December 31, 2008,2009, substantially all of the Company’s long-lived assets were located in the United States.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Some of the statements contained in this Form 10-Q and the documents incorporated herein by reference (if any) constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, the development and introduction of new products, and the implementation of our marketing and branding strategies. In many cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “intends,” “estimates,” “predicts,” “potential,” or the negative of these terms or other comparable terminology.

The forward-looking statements contained in this Form 10-Q and the documents incorporated herein by reference (if any) reflect our current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated by thethese forward-looking statements, including, but not limited to, those factors described in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) (our “2008“2009 Form 10-K”) or in this Form 10-Q under “Risk Factors”, if included herein, under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”). These factors include without limitation:

The forward-looking statements contained in this Form 10-Q reflect our views and assumptions only as of the date of this Form 10-Q. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

Overview

We are a leading developer, marketer and distributor of branded performance apparel, footwear and accessories. The brand’s moisture-wicking synthetic fabrications are engineered in many different designs and styles for wear in nearly every

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climate to provide a performance alternative to traditional natural fiber products. Our products are sold worldwide and worn by athletes at all levels, from youth to professional, on playing fields around the globe, as well as by consumers with active lifestyles.

Our

We are a growth company as evidenced by the increase in net revenues grew to $725.2$856.4 million in 20082009 from $205.2$281.1 million in 2004.2005. We reported net revenues of $634.2$229.4 million for the first ninethree months of 2009,2010, which represented a 16.2%14.7% increase from the first ninethree months of 2008.2009. We believe that our growth in net revenues has been driven by a growing interest in performance products and the strength of the Under Armour brand in the marketplace relative to our competitors, as evidenced by the increases in our sales of apparel and footwear.many of our products. We plan to continue to increase our net revenues over the long term by building uponincreased sales of our relationships with existing customers, expandingproducts, expansion of our product offerings, offering new and innovative products, expandingwholesale distribution, growth in our direct to consumer sales channel and other distribution and building our brand internationally.expansion of international markets. Our direct to consumer sales channel includes sales through our website and factory house outlet and specialty stores, website,stores. We are currently developing new products and catalog. New product offerings include thecategories, including basketball footwear, for introduction of performance running footwear, which we began shipping in the first quarter of 2009 and soccer cleats which had a limited introduction at soccer specialty stores in the United States and Europe during the second quarter of 2009. In addition, we have strategic agreements with third party licensees and distributors to further reinforce our brand identity and increase our net revenues.future.

Our products are currently offered in over 20,000approximately twenty thousand retail stores worldwide. A large majority of our products are sold in North America; however, we believe that our products appeal to athletes and consumers with active lifestyles around the globe. Internationally, our products are offered primarily in Austria, France, Germany, Ireland and the United Kingdom, France and Germany, as well as in Japan through a third-party licensee and through distributors located in other foreign countries.

General

Net revenues comprise both net sales and license revenues. Net sales includecomprise sales offrom our primary product categories, which are apparel, footwear and accessories. Our license revenues consist of fees paid to us by our licensees in exchange for the use of our trademarks on core products such as socks, hats,headwear, bags, eyewear, custom-molded mouth guards, other accessories and team uniforms, as well as the distribution of our products in Japan. We are currently developing our own headwear and bags, and beginning in 2011, these products will be sold by us rather than by one of our licensees.

Cost of goods sold consists primarily of product costs, inbound freight and duty costs, outbound freight costs, handling costs to make products floor-ready to customer specifications, royalty payments to endorsers based on a predetermined percentage of sales of selected products and write downs for inventory obsolescence. The fabrics in many of our products are made of petroleum-based synthetic materials. Therefore our product costs, as well as our inbound and outbound freight costs, could be affected by long term pricing trends of oil. In general, as a percentage of net revenues, we expect cost of goods sold associated with our footwear to be higher than the cost of goods sold associated with our apparel. In addition, cost of goods sold includes overhead costs associated with our Special Make-Up Shop located at one of our distribution facilities where we manufacture a limited number of products, and costs relating to our Hong Kong, Guangzhou, China, and Jakarta, Indonesia offices which help support manufacturing, quality assurance and sourcing efforts. No cost of goods sold is associated with license revenues.

We include aoutbound freight costs associated with shipping goods to customers as cost of goods sold; however, we include the majority of our outbound shipping and handling costs as a component of selling, general and administrative expenses. As a result, our gross profit may not be comparable to that of other companies that include outbound shipping and handling costs in the calculation of their cost of goods sold. Outbound shipping and handling costs include costs associated with shippingpreparing goods to ship to customers and certain costs to operate our distribution facilities. These costs were $5.5$3.6 million and $5.0$2.4 million for the three months ended September 30,March 31, 2010 and 2009, and 2008, respectively, and $15.0 million and $12.5 million for the nine months ended September 30, 2009 and 2008, respectively.

Our selling, general and administrative expenses consist of costs related to marketing, selling, product innovation and supply chain and corporate services. Personnel costs are included in these categories based on the employees’ function. Personnel costs include salaries, benefits and incentive and stock-based compensation expense related to the employee. Our marketing costs are an important driver of our growth. For the full year 2009,2010, we expect to invest in marketing in the range of 12% to 13% of net revenues. Marketing costs consist primarily of commercials, print ads, league, team, player and event sponsorships, amortization of footwear promotional rights and depreciation expense specific to our in-store fixture programprogram. In addition, marketing costs include costs associated with our Special Make-Up Shop (“SMU Shop”) located at one of our distribution facilities where we manufacture a limited number of products primarily for our league, team, player and marketing related payroll.event sponsorships. Selling costs consist primarily of payroll and other costs relating to sales through our wholesale sales channel, and the majority of our direct to consumer sales channel costs, along with commissions paid to third parties. Product innovation and supply chain costs include our apparel, footwear and footwearaccessories product creation and development costs, distribution facility operating costs, and related payroll.costs relating to our Hong Kong and Guangzhou, China offices which help support manufacturing, quality assurance and sourcing efforts. Corporate services primarily consist of corporate facility operating costs related payroll and company-wide administrative and stock-based compensation expenses.

Other income (expense), net consists of unrealized and realized gains and losses on our 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.

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Reclassifications

Lastly, prior period stock-based compensation expense historically included in the corporate services selling, general and administrative expense category was reclassified among the appropriate selling, general and administrative expense categories based on the category in which the stock-based compensation award recipient was included to conform to the presentation for the three months ended March 31, 2010.

Results of Operations

The following table sets forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of net revenues:

Three Months Ended September 30, 2009March 31, 2010 Compared to Three Months Ended September 30, 2008March 31, 2009

Net revenues increased $37.6$29.4 million, or 16.2%14.7%, to $269.5$229.4 million for the three months ended September 30, 2009March 31, 2010 from $231.9$200.0 million for the same period in 2008.2009. This increase was primarily the result of an increase in our footwear and apparel net sales as noted in the product category table below:

Net sales increased $36.2$28.2 million, or 16.2%14.4%, to $259.2$223.1 million for the three months ended September 30, 2009March 31, 2010 from $223.0$194.9 million during the same period in 20082009 as noted in the table above. The increase in net sales primarily reflects:

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License revenues increased $1.4 million, or 15.9%, to $10.3 million for the three months ended September 30, 2009 from $8.9 million during the same period in 2008. This increase was the result of additional sales by certain licensees due to increased distribution, new product offerings and unit volume growth, as well as new licensing agreements for team uniforms and custom-molded mouth guards.

Gross profit increased $15.8 million to $134.1 million for the three months ended September 30, 2009 from $118.3 million for the same period in 2008. Gross profit as a percentage of net revenues, or gross margin, decreased 130 basis points to 49.7% for the three months ended September 30, 2009 compared to 51.0% during the same period in 2008. The decrease in gross margin percentage was primarily driven by the following:

Selling, general and administrative expenses increased $15.2 million to $87.0 million for the three months ended September 30, 2009 from $71.8 million for the same period in 2008. As a percentage of net revenues, selling, general and administrative expenses increased to 32.2% for the three months ended September 30, 2009 from 31.0% for the same period in 2008. These changes were primarily attributable to the following:

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Income from operations increased $0.6 million, or 1.3%, to $47.1 million for the three months ended September 30, 2009 from $46.5 million for the same period in 2008. Income from operations as a percentage of net revenues decreased to 17.5% for the three months ended September 30, 2009 from 20.0% for the same period in 2008. This decrease was a result of an increase in selling, general and administrative expenses, and a decrease in gross profit as a percentage of net revenues as discussed above.

Interest expense, netincreased $0.4 million to $0.5 million for the three months ended September 30, 2009 from $0.1 million for the same period in 2008. This increase was primarily due to increased fees related to our new revolving credit facility during the three months ended September 30, 2009.

Other income (expense), net increased $1.7 million to $0.1 million for the three months ended September 30, 2009 from ($1.6) million for the same period in 2008. This increase was primarily due to gains on foreign currency exchange rate changes on transactions denominated in the Euro and Canadian Dollar, largely offset by losses on our derivative financial instruments for the three months ended September 30, 2009 as compared to foreign currency exchange rate losses, partially offset by derivative financial instrument gains for the same period in 2008.

Provision for income taxes increased $1.4 million to $20.5 million during the three months ended September 30, 2009 from $19.1 million during the same period in 2008. Our effective tax rate was 43.9% for the three months ended September 30, 2009 compared to 42.6% during the same period in 2008. The effective tax rate for the three months ended September 30, 2009 was higher than the effective tax rate for the three months ended September 30, 2008 primarily due to an increase in the projected non-deductible expenses in the current year. Our annual 2009 effective rate is expected to be approximately 44.3%, which is lower than the 2008 annual effective tax rate of 45.3% due to certain sourcing and tax strategies implemented in 2009.

Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

Net revenues increased $88.2 million, or 16.2%, to $634.2 million for the nine months ended September 30, 2009 from $546.0 million for the same period in 2008. This increase was primarily the result of an increase in our footwear and apparel net sales as noted in the product category table below: