UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

For the quarterly period ended March 31,June 30, 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  ¨þ    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

As of July 31, 2010, there were 38,403,673 shares of Class A Common Stock $.0003 ¹/3 par value, 38,193,958and 12,500,000 shares outstanding as of April 30, 2010 and Class B Convertible Common Stock $.0003 ¹/3 par value, 12,500,000 shares outstanding as of April 30, 2010.outstanding.

UNDER ARMOUR, INC.

March 31,June 30, 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

Unaudited Consolidated Statements of Cash Flows

(In thousands)

See accompanying notes.

3

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 months ended March 31, 2010 are not necessarily indicative of the results to be expected for the year ending December 31, 2010 or any other portions thereof. Certain information in footnote disclosures normally included in annual financial statements has beenwas condensed or omitted for the interim periods presented in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and accounting principles generally accepted in the United States of America 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 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 beenwere included.

All intercompany balances and transactions were eliminated. The consolidated balance sheet as of December 31, 2009 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, 2009 (the “2009 Form 10-K”), which should be read in conjunction with these consolidated financial statements. The results for the three and six months ended June 30, 2010 are not necessarily indicative of the results to be expected for the year ending December 31, 2010 or any other portions thereof.

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 are 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 were as follows:

Allowance for Doubtful Accounts

As of March 31,June 30, 2010, December 31, 2009 and March 31,June 30, 2009, the allowance for doubtful accounts was $5.0$4.8 million, $5.2 million and $4.7$4.8 million, respectively.

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 Company’s estimates. If the Company determined that actual or expected returns or allowances were significantly greater or lower than the reserves it had established, it would record a reductiondecrease or an increase, as appropriate, to net sales in the period in which the Company made such a determination. Provisions for customer specific discounts based on contractual obligations with certain major customers are recorded as reductions to net sales.

Reserves for returns and allowances are recorded as offsets to accounts receivable as settlements are made through offsets to outstanding customer invoices. Beginning in the first quarter of 2010, reserves for markdowns and discounts earned by customers in the period werehave been recorded as offsets to accounts receivable as settlements wereare made through

offsets to outstanding customer invoices. Historically,In prior periods, the majority of these amounts were recorded as accrued expenses as settlements were made through cash disbursements. As of March 31,June 30, 2010, there were $6.9$7.7 million in customer markdowns and discounts recorded as offsets to accounts receivable, and no amounts were recorded as accrued expenses. As of December 31, 2009 and March 31,June 30, 2009, there were no significant customer markdowns or discounts recorded as offsets to accounts receivable, and $6.9 million and $4.8$7.4 million were recorded as accrued expenses, respectively.

Income Taxes

The Company recorded $5.2$2.6 million and $3.1$1.0 million of income tax expense for the three months ended March 31,June 30, 2010 and 2009, respectively, and $7.8 million and $4.1 million of income tax expense for the six months ended June 30, 2010 and 2009, respectively. The effective rates for income taxes were 42.0%42.3% and 43.8%43.1% for the threesix months ended March 31,June 30, 2010 and 2009, respectively. The effective tax rate for the threesix months ended March 31,June 30, 2010 was lower than the effective tax rate for the threesix months ended March 31,June 30, 2009 primarily due to decreased losses in foreign subsidiaries and certain tax strategies implemented by the Company in 2010. The Company’s annual 2010 effective tax rate is expected to be improved from theits 2009 annual effective tax rate of 43.2% due to the 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 handling costs as a component of selling, general and administrative expenses. Outbound handling costs include internal costs associated with preparing 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 $3.6$3.4 million and $2.4 million for the three months ended March 31,June 30, 2010 and 2009, respectively, and $7.0 million and $4.8 million for the six months ended June 30, 2010 and 2009, 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 Adopted 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 adoption of this amendment had noin the first quarter of 2010 did not have any impact on the Company’s consolidated financial statements.

Reclassifications

Outbound freight costs associated with shipping costsgoods of $2.7$2.0 million and $4.7 million included in selling, general and administrative expenses for the three and six months ended March 31,June 30, 2009, respectively, were reclassified to cost of goods sold to conform to the presentation for the three and six months ended March 31,June 30, 2010. In addition, costs of $1.4 million and $2.8 million associated with the Company’s sourcing offices and Special Make-Up Shop included in cost of goods sold for the three and six months ended March 31,June 30, 2009, have beenrespectively, were reclassified to selling, general and administrative expenses to conform to the presentation for the three and six months ended March 31,June 30, 2010. The Company began reclassifying these amounts in the first quarter of 2010 and believes these changes reflectwere appropriate given its view that cost of goods sold should primarily include product costs which are variable in nature. In addition, these reclassifications will more closely align with the way the Company manages its business.

3. Inventories, Net

Inventories consisted of the following:

4. Revolving Credit Facility and Long Term Debt

Revolving Credit Facility

The Company has a revolving credit facility with certain lending 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 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 allcertain 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 March 31,June 30, 2010. The Company must maintain a certain leverage ratio and fixed charge coverage ratio as defined in the credit agreement. As of March 31,June 30, 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 a LIBOR rate option (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,discretion, a base rate option (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 current revolving credit facility.

As of March 31,June 30, 2010, borrowings under the Company’s net availability was $123.9$200 million revolving credit facility were limited to approximately $130.0 million based on itsthe Company’s eligible domestic inventory and accounts receivable balances. The weighted average interest rate on the balances outstanding under the prior revolving credit facility was 1.4% during the threesix months ended March 31,June 30, 2009. No balances were outstanding under the current revolving credit facility during the three months ended March 31, 2010June 30, 2009 and 2009.six months ended June 30, 2010.

Long Term Debt

The Company has long term debt agreements with various lenders to finance the acquisition or lease of qualifying capital investments. Loans under these agreements are collateralized by a first lien on the related assets acquired. As these agreements are not committed facilities, each advance is subject to approval by the lenders. Additionally, these agreements include a cross default provision whereby an event of default under other debt obligations, including the Company’s revolving credit facility, will be considered an event of default under these agreements. These agreements require a prepayment fee if the Company pays outstanding amounts ahead of the scheduled terms. The terms of the revolving credit facility limit the total amount of additional financing under these agreements to $35.0 million, of which $27.4 million was available as of March 31,June 30, 2010. At March 31,June 30, 2010, December 31, 2009 and March 31,June 30, 2009, the outstanding principal balance under these agreements was $17.9$15.6 million, $20.1 million and $18.3$20.1 million, respectively. Currently, advances under these agreements bear interest rates which are fixed at the time of each advance. The weighted average interest raterates on outstanding borrowings waswere 5.9% and 6.0% for the three months ended June 30, 2010 and 2009, respectively, and 5.9% for each of the threesix months ended March 31,June 30, 2010 and 2009.

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

Interest expense was $0.6 million and $0.9 million for each of the three months ended March 31,June 30, 2010 and 2009, and $1.1 million and $1.5 million for the six months ended June 30, 2010 and 2009, respectively. Interest expense includes the amortization of deferred financing costs and interest expense under the revolving credit and long term debt facilities.

5. Commitments and Contingencies

There have beenwere no significant changes to the contractual obligations reported in the 2009 Form 10-K.

6. Fair Value Measurements

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). The 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;

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 March 31,June 30, 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 selected investments of participants, which represent the underlying liabilities to participants in the Deferred Compensation Plan. Obligations 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

In MarchDuring the six months ended June 30, 2010, 72.5127.5 thousand shares of restricted stock and 131.5234.0 thousand stock options were awarded to certain officers and key employees under the Under Armour, Inc. Amended and Restated 2005 Omnibus 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 and ana weighted average exercise price of $28.41, which was$30.24, based on the closing price of the Company’s Class A Common Stock on the date of grant. The weighted average fair value of eachthe stock optionoptions was $15.76$16.71 and was estimated using the Black-Sholes option-pricing model consistent with the weighted average assumptions included within the 2009 Form 10-K.

In addition, in March 2010, 1.1 million performance-based stock options were awarded to certain officers and key employees under the 2005 Plan. The performance-based stock options have vesting that is tied to the achievement of a certain combined annual operating income target for 2011 and 2012. Upon the achievement of the combined operating income target, 50% of the options will vest and the remaining 50% will vest one year later. If certain lower levels of combined operating income for 2011 and 2012 are achieved, fewer or no options will vest at that time a portionand one year later, and the remaining stock options will be forfeited. The weighted average fair value of eachthe performance-based stock optionoptions was $16.38 and was estimated using the Black-Sholes option-pricing model consistent with the weighted average assumptions included within the 2009 Form 10-K. As of March 31,June 30, 2010, the Company had not recorded stock based compensation expense for these performance-based stock options as the Company was unable to predict with certainty whether the combined operating income targets would 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 the performance targets 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 $0.4$1.8 million would have been recorded at March 31,June 30, 2010 had the achievement of the operating income targets been probable.

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-companyintercompany transactions. Since August 2007, the Company has entered into foreign currency forward contracts to reduce the risk associated with foreign currency exchange rate fluctuations on inter-companyintercompany transactions and projected inventory purchases for its Canadian subsidiary. Since December 2008, the Company has entered into foreign currency forward contracts to reduce the risk associated with foreign currency exchange rate fluctuations on inter-companyintercompany transactions for its European subsidiary.

As of March 31,June 30, 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-companyintercompany transactions was $15.4$16.3 million with contract maturities of 1 month. As of March 31,June 30, 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’sEuropean subsidiary’s inter-companyintercompany transactions was $58.6$51.2 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.other expense, net. As of MarchJune 30, 2010, December 31, 2010,2009 and June 30, 2009, the fair valuevalues of the Company’s foreign currency forward contracts was a liabilitywere assets of $0.4$0.6 million, and was included in accrued expenses on the consolidated balance sheet. As of December 31, 2009 and March 31, 2009, the fair value of the Company’s foreign currency forward contracts was an asset of $0.3 million and $1.4$0.2 million, respectively, and waswere 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),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. Comprehensive Income

Comprehensive income by period is stated below:

10. Earnings per Share

The following represents a reconciliation from basic earnings per share to diluted earnings per share:

Effects of potentially dilutive securities are presented only in periods in which they are dilutive. Stock options, restricted stock units, and warrants representing 1.3 million and 1.1 million shares of common stock outstanding for the three months ended June 30, 2010 and 2009, respectively, and 1.3 million and 1.2 million shares of common stock outstanding for each of the threesix months ended March 31,June 30, 2010 and 2009, respectively, were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive.

10.11. Segment Data and Related Information

The Company has historically operated within one operating and reportable segment based on how the Chief Operating Decision Maker (“CODM”) manages the business. Beginning with the second quarter of 2010, the Company’s operating segments changed to reflect how the CODM makes decisions about allocating resources and assessing performance. In order to make these decisions, the CODM now receives discrete financial information by geographic region based on the Company’s strategy to become a global brand. These geographic regions include North America; Latin America; Europe, the Middle East and Africa (“EMEA”); and Asia. The Company’s new 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 Companybased on these geographic regions. Each geographic segment operates exclusively in one industry: the consumer products industry in which the Company develops, markets,development, marketing and distributesdistribution of branded performance apparel, footwear and accessories. BasedAs the Latin America, EMEA and Asia operating segments do not meet the quantitative thresholds for individual disclosure as reportable segments, they were combined into other foreign countries.

The geographic distribution of the Company’s net revenues, operating income and total assets are summarized in the following tables based on the naturelocation of theits customers and operations. Net revenues represent sales to external customers for each segment. In addition to net revenues, operating income is a primary financial information that is receivedmeasure used by the chief operating decision maker,Company to evaluate performance of each segment. Intercompany balances were eliminated for separate disclosure. Prior period data included below was reclassified to conform to the Company operates within one operating and reportable segment in accordance with applicable guidance. Although the Company operates within one reportable segment, it sells products from several product categories. The table below summarizes netcurrent period presentation.

Net revenues by product category:category are as follows:

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

		Three Months Ended March 31,
(In thousands)		2010			2009
United States		$	204,089		$	182,199
Canada			11,669			10,343
Subtotal			215,758			192,542
Other foreign countries			13,649			7,458
Total net revenues		$	229,407		$	200,000

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

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,” “outlook,” “potential,” 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 these 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 “2009 Form 10-K”) or in this Form 10-Q under “Risk Factors”, if included herein, 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 climate to provide a performance alternative to traditional products. Our products are sold worldwide and worn by athletes at all levels, from youth to professional, on playing fields around the globe, as well as by consumers with active lifestyles.

We are a growth company as evidenced by the increase in net revenues to $856.4 million in 2009 from $281.1 million in 2005. We reported net revenues of $229.4$434.2 million for the first threesix months of 2010, which represented a 14.7%19.1% increase from the first threesix months of 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 sales of many of our products. We plan to continue to increase our net revenues over the long term by increased sales of our products, expansion of our wholesale distribution, growth in our direct to consumer sales channel and expansion of international markets. Our direct to consumer sales channel includes sales through our website and factory house and specialty stores. We are currently developing new products and product categories, including basketball footwear, for introduction in the future.

Our products are currently offered in approximately 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, 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 comprise sales from 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, 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. No cost of goods sold is associated with license revenues.

We include outbound freight costs associated with shipping goods to customers as cost of goods sold; however, we include the majority of outbound 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 handling costs in their cost of goods sold. Outbound handling costs include costs associated with preparing goods to ship to customers and certain costs to operate our distribution facilities. These costs were $3.6$3.4 million and $2.4 million for the three months ended March 31,June 30, 2010 and 2009, respectively, and $7.0 million and $4.8 million for the six months ended June 30, 2010 and 2009, 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 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 program. 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 event sponsorships. Selling costs consist primarily of costs relating to sales through our wholesale channel, 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 accessories product creationinnovation, sourcing and development costs, distribution facility operating costs, and 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 and company-wide administrative expenses.

Other income (expense),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.

Reclassifications

Outbound freight costs associated with shipping costsgoods of $2.7$2.0 million and $4.7 million included in selling, general and administrative expenses for the three and six months ended March 31,June 30, 2009, respectively, were reclassified to cost of goods

sold to conform to the presentation for the three and six months ended March 31,June 30, 2010. In addition, costs of $1.4 million and $2.8 million associated with our sourcing offices and SMU Shop included in cost of goods sold for the three and six months ended March 31,June 30, 2009, have beenrespectively, were reclassified to selling, general and administrative expenses to conform to the presentation for the three and six months ended March 31,June 30, 2010. We began reclassifying these amounts in the first quarter of 2010 and believe these changes reflectwere appropriate given our view that cost of goods sold should primarily include product costs which are variable in nature. In addition, these reclassifications will more closely align with the way we manage our business and will allow us to gain better visibility.business.

Lastly, prior period stock-based compensation expense historically included in the corporate services selling, general and administrative expense category for the three and six months ended June 30, 2009 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 and six months ended March 31,June 30, 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 March 31,June 30, 2010 Compared to Three Months Ended March 31,June 30, 2009

Net revenues increased $29.4$40.2 million, or 14.7%24.4%, to $229.4$204.8 million for the three months ended March 31,June 30, 2010 from $200.0$164.6 million for the same period in 2009. This increase was primarily the result of an increase in our apparel net sales as noted in the product category table below:following tables.

		Three Months Ended March 31,
(In thousands)		2010			2009			$ Change				% Change
Apparel		$	172,636		$	132,239		$	40,397			30.5	%
Footwear			42,958			56,931			(13,973	)		(24.5	)
Accessories			7,518			5,776			1,742			30.2
Total net sales			223,112			194,946			28,166			14.4
License revenues			6,295			5,054			1,241			24.6
Total net revenues		$	229,407		$	200,000		$	29,407			14.7	%

Net salesrevenues by geographic region are summarized below:

Net revenues in North America increased $28.2$38.0 million or 14.4%, to $223.1$196.0 million for the three months ended March 31,June 30, 2010 from $158.0 million for the same period in 2009 primarily due to increased net sales in apparel. Refer below for further information. Net revenues in other foreign countries increased by $2.1 million to $8.8 million for the three months ended June 30, 2010 from $6.7 million for the same period in 2009 primarily due to increased product distribution by our licensee in Japan.

Net revenues by product category are summarized below:

Net sales increased $38.4 million, or 24.5%, to $194.9 million for the three months ended June 30, 2010 from $156.5 million during the same period in 2009 as noted in the table above.2009. The increase in net sales primarily reflects:

License revenues increased $1.8 million, or 22.3%, to $9.9 million for the three months ended June 30, 2010 from $8.1 million during the same period in 2009. This increase in license revenues was a result of increased sales by our licensees due to increased distribution and continued unit volume growth.

Gross profit increased $26.2 million to $99.9 million for the three months ended June 30, 2010 from $73.7 million for the same period in 2009. Gross profit as a percentage of net revenues, or gross margin, increased 400 basis points to 48.8% for the three months ended June 30, 2010 compared to 44.8% during the same period in 2009. The increase in gross margin percentage was primarily driven by the following:

Selling, general and administrative expenses increased $22.7 million to $93.0 million for the three months ended June 30, 2010 from $70.3 million for the same period in 2009. As a percentage of net revenues, selling, general and administrative expenses increased to 45.4% for the three months ended June 30, 2010 from 42.7% for the same period in 2009. These changes were primarily attributable to the following:

revenues, marketing costs increased slightly to 13.4% for the three months ended June 30, 2010 from 13.3% for the same period in 2009.

Income from operations increased $3.5 million, or 103.8%, to $6.9 million for the three months ended June 30, 2010 from $3.4 million for the same period in 2009. Income from operations as a percentage of net revenues increased to 3.4% for the three months ended June 30, 2010 from 2.1% for the same period in 2009. This increase was a result of the items discussed above.

Interest expense, netremained unchanged at $0.6 million for the three months ended June 30, 2010 and 2009.

Other expense, net decreased $0.2 million to $0.2 million for the three months ended June 30, 2010 from $0.4 million for the same period in 2009. The decrease was due to lower net losses on the combined foreign currency exchange rate changes on transactions denominated in the Euro and Canadian dollar and our derivative financial instruments as compared to the 2009 period.

Provision for income taxes increased $1.6 million to $2.6 million during the three months ended June 30, 2010 from $1.0 million during the same period in 2009. For the three months ended June 30, 2010, our effective tax rate was 43.0% compared to 40.9% for the same period in 2009. The effective tax rate for the three months ended June 30, 2010 was higher than the effective tax rate for the three months ended June 30, 2009 primarily due to discrete items recorded during the second quarter of 2009 that reduced the effective tax rate for the period. Our annual 2010 effective tax rate is expected to be improved from our 2009 annual effective tax rate of 43.2% due to decreased losses in foreign subsidiaries and certain tax strategies implemented in 2010.

Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009

Net revenues increased $69.6 million, or 19.1%, to $434.2 million for the six months ended June 30, 2010 from $364.6 million for the same period in 2009. This increase was primarily the result of an increase in our apparel net sales as noted in the following tables.

Net revenues by geographic region are summarized below:

Net revenues in North America increased $61.3 million to $411.8 million for the six months ended June 30, 2010 from $350.5 million for the same period in 2009 primarily due to increased net sales in apparel. Refer below for further information. Net revenues in other foreign countries increased by $8.2 million to $22.4 million for the six months ended

June 30, 2010 from $14.2 million for the same period in 2009 primarily due to increased product sales in our EMEA operating segment.

Net revenues by product categoryare summarized below:

Net sales increased $66.5 million, or 18.9%, to $418.0 million for the six months ended June 30, 2010 from $351.5 million during the same period in 2009. The increase in net sales primarily reflects:

License revenues increased $1.2$3.0 million, or 24.6%23.1%, to $6.3$16.2 million for the threesix months ended March 31,June 30, 2010 from $5.1$13.2 million during the same period in 2009. This increase in license revenues was a result of increased sales by our licensees due to increased distribution and continued unit volume growth, along with new license agreements for team uniforms and mouth guards.agreements.

Gross profit increased $18.4$44.6 million to $107.6$207.6 million for the threesix months ended March 31,June 30, 2010 from $89.2$163.0 million for the same period in 2009. Gross profit as a percentage of net revenues, or gross margin, increased 230310 basis points to 46.9%47.8% for the threesix months ended March 31,June 30, 2010 compared to 44.6%44.7% during the same period in 2009. The increase in gross margin percentage was primarily driven by the following:

Selling, general and administrative expenses increased $12.7$35.4 million to $94.0$187.1 million for the threesix months ended March 31,June 30, 2010 from $81.3$151.7 million for the same period in 2009. As a percentage of net revenues, selling, general and administrative expenses increased to 41.0%43.1% for the threesix months ended March 31,June 30, 2010 from 40.6%41.6% for the same period in 2009. These changes were primarily attributable to the following:

Income from operations increased $5.7$9.2 million, or 72.0%81.6%, to $13.6$20.5 million for the threesix months ended March 31,June 30, 2010 from $7.9$11.3 million for the same period in 2009. Income from operations as a percentage of net revenues increased to 5.9%4.7% for the threesix months ended March 31,June 30, 2010 from 4.0%3.1% for the same period in 2009. This increase was a result of the items discussed above.

Interest expense, netdecreased $0.4$0.3 million to $0.5$1.1 million for the threesix months ended March 31,June 30, 2010 from $0.9$1.4 million for the same period in 2009. This decrease was primarily due to the write off of deferred financing costs related to the termination of our prior revolving credit facility during the threesix months ended March 31,June 30, 2009.

Other income (expense),expense, net decreased $0.7increased $0.6 million to ($0.7)$0.9 million for the threesix months ended March 31,June 30, 2010 from $12.5 thousand$0.3 million for the same period in 2009. This decreaseThe increase was primarily due to higher net losses on the combined foreign currency exchange rate changes on transactions denominated in the Euro and Canadian Dollar, partially offset by gains ondollar and our derivative financial instruments for the three months ended March 31, 2010 as compared to the same period in 2009.2009 period.

Provision for income taxes increased $2.1$3.7 million to $5.2$7.8 million during the quartersix months ended March 31,June 30, 2010 from $3.1$4.1 million during the same period in 2009. For the threesix months ended March 31,June 30, 2010, our effective tax rate was 42.0%42.3% compared to 43.8%43.1% for the same period in 2009. The effective tax rate for the threesix months ended March 31,June 30, 2010 was lower than the effective tax rate for the threesix months ended March 31,June 30, 2009 primarily due to decreased losses in foreign subsidiaries and certain tax strategies implemented in 2010. Our annual 2010 effective tax rate is expected to be improved from our 2009 annual effective tax rate of 43.2% due to the drivers for the quarter noted above.

Seasonality

Historically, we have recognized a significant portion of our income from operations in the last two quarters of the year, driven by increased sales volume of our products during the fall selling season, reflecting our historical strength in fall sports, and the seasonality of our higher priced COLDGEAR^® line. The majority of our net revenues were generated during the last two quarters in each of 2009 and 2008. The level of our working capital generally reflects the seasonality and growth in our business. We generally expect inventory, accounts payable and certain accrued expenses to be higher in the second and third quarters in preparation for the fall selling season.

Financial Position, Capital Resources and Liquidity

Our cash requirements have principally been for working capital and capital expenditures. Working capital is primarily funded from cash flows provided by operating activities and cash and cash equivalents on hand. Our working capital requirements generally reflect the seasonality and growth in our business as we recognize a significant increasethe majority of our net revenues in sales leading up to the third quarter.back half of the year. We fund our working capital, primarily inventory, and capital investments from cash flows provided by operating activities, cash and cash equivalents on hand and borrowings available primarily under our revolving credit and long term debt facilities. Our capital investments have included expanding our in-store fixture and branded concept shop program, improvements and expansion of our distribution and corporate facilities to support our growth, leasehold improvements to our new factory house and specialty stores and investment and improvements in information technology systems.

While ourOur focus remains on inventory management including improving our planning capabilities, managing our inventory purchases, reducing our production lead times and selling excess inventory through our factory house stores and other liquidation channels,channels. However, we do expect several factors to contribute to inventory growth in excess of sales growth during the last two quarters of 2010. We will concentrate on improving our service levels in order to better meet consumer demand while alsobe increasing our safety stock in core product offerings.offerings to better meet consumer demand. Core product offerings are products that we generally plan to have

available for sale over the next twelve months and beyond at full price. We strive for improvedIn addition, beginning in 2011, headwear and bags will be sold by us rather than by one of our licensees, which will also contribute to our expected inventory turns over the long term.growth.

We believe that our cash and cash equivalents on hand, cash from operations and borrowings available to us under our revolving credit and long term debt facilities will be adequate to meet our liquidity needs and capital expenditure

requirements for at least the next twelve months. We may require additional capital to meet our longer term liquidity and future growth needs. Although we believe that we have adequate sources of liquidity over the long term, a prolonged economic recession or a slow recovery could adversely affect our business and liquidity. In addition, instability in the capital markets could adversely affect our ability to obtain additional capital to grow our business and will affect the cost and terms of such capital.

Cash Flows

The following table presents the major components of net cash flows provided by and used in operating, investing and financing activities for the periods presented: