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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________
Form 10-Q
______________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File No. 001-33202
______________________________________
UNDER ARMOUR, INC.
(Exact name of registrant as specified in its charter)
______________________________________
Maryland 52-1990078
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
1020 Hull Street
Baltimore, Maryland 21230
 
(410) 454-6428
(Address of principal executive offices) (Zip Code) (Registrant’s telephone number, including area code)
 ______________________________________
Securities registered pursuant to Section 12(b) of the Act:
Class A Common StockUAANew York Stock Exchange
Class C Common StockUANew York Stock Exchange
(Title of each class)(Trading Symbols)(Name of each exchange on which registered)
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      No  
Indicate by check mark whether the registrant has submitted electronically 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 such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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  
As of April 30, 2021 there were 188,622,016 shares of Class A Common Stock, 34,450,000 shares of Class B Convertible Common Stock and 233,919,099 shares of Class C Common Stock outstanding.


Table of Contents
UNDER ARMOUR, INC.
March 31, 2021
INDEX TO FORM 10-Q
 
PART I.
Item 1.




Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 6.



Table of Contents
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Under Armour, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except share data)

March 31,
2021
December 31,
2020
March 31,
2020
Assets
Current assets
Cash and cash equivalents$1,348,737 $1,517,361 $959,318 
Accounts receivable, net696,287 527,340 668,409 
Inventories851,829 895,974 940,236 
Prepaid expenses and other current assets, net260,865 282,300 300,044 
Total current assets3,157,718 3,222,975 2,868,007 
Property and equipment, net632,307 658,678 726,568 
Operating lease right-of-use assets511,130 536,660 583,418 
Goodwill497,970 502,214 485,672 
Intangible assets, net12,548 13,295 40,490 
Deferred income taxes23,796 23,930 39,576 
Other long term assets78,827 72,876 93,844 
Total assets$4,914,296 $5,030,628 $4,837,575 
Liabilities and Stockholders’ Equity
Current liabilities
Revolving credit facility, current$ $ $600,000 
Accounts payable490,860 575,954 417,397 
Accrued expenses311,905 378,859 267,115 
Customer refund liabilities191,979 203,399 208,172 
Operating lease liabilities160,918 162,561 129,758 
Other current liabilities78,655 92,503 69,060 
Total current liabilities1,234,317 1,413,276 1,691,502 
Long term debt, net of current maturities1,009,951 1,003,556 593,281 
Operating lease liabilities, non-current801,292 839,414 913,754 
Other long term liabilities98,537 98,389 88,858 
Total liabilities3,144,097 3,354,635 3,287,395 
Stockholders’ equity
Class A Common Stock, $0.0003 1/3 par value; 400,000,000 shares authorized as of March 31, 2021, December 31, 2020 and March 31, 2020; 188,622,010 shares issued and outstanding as of March 31, 2021, December 31, 2020: 188,603,686, March 31, 2020: 188,450,989
62 62 62 
Class B Convertible Common Stock, $0.0003 1/3 par value; 34,450,000 shares authorized, issued and outstanding as of March 31, 2021, December 31, 2020 and March 31, 2020.
11 11 11 
Class C Common Stock, $0.0003 1/3 par value; 400,000,000 shares authorized as of March 31, 2021, December 31, 2020 and March 31, 2020; 233,934,560 shares issued and outstanding as of March 31, 2021, December 31, 2020: 231,953,667, March 31, 2020: 231,150,002
78 77 77 
Additional paid-in capital1,072,401 1,061,173 985,831 
Retained earnings747,231 673,855 634,452 
Accumulated other comprehensive loss(49,584)(59,185)(70,253)
Total stockholders’ equity1,770,199 1,675,993 1,550,180 
Total liabilities and stockholders’ equity$4,914,296 $5,030,628 $4,837,575 

Commitments and contingencies (Note 6)
See accompanying notes.
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Under Armour, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
 
 Three Months Ended March 31,
 20212020
Net revenues$1,257,195 $930,240 
Cost of goods sold628,554 499,256 
Gross profit628,641 430,984 
Selling, general and administrative expenses514,638 552,701 
Restructuring and impairment charges7,113 436,463 
Income (loss) from operations106,890 (558,180)
Interest expense, net(14,137)(5,960)
Other income (expense), net(7,180)1,534 
Income (loss) before income taxes85,573 (562,606)
Income tax expense9,881 21,547 
Income (loss) from equity method investments2,060 (5,528)
Net income (loss)$77,752 $(589,681)
Basic net income (loss) per share of Class A, B and C common stock$0.17 $(1.30)
Diluted net income (loss) per share of Class A, B and C common stock$0.17 $(1.30)
Weighted average common shares outstanding Class A, B and C common stock
Basic456,014 452,871 
Diluted459,226 452,871 
See accompanying notes.
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Under Armour, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
 
 Three Months Ended March 31,
 20212020
Net income (loss)$77,752 $(589,681)
Other comprehensive income (loss):
Foreign currency translation adjustment3,318 (47,679)
Unrealized gain on cash flow hedges, net of tax benefit (expense) of ($1,232) and $11,435 for the three months ended March 31, 2021 and 2020, respectively
8,798 32,545 
Loss on intra-entity foreign currency transactions(2,515)(4,354)
Total other comprehensive income (loss)9,601 (19,488)
Comprehensive income (loss)$87,353 $(609,169)
See accompanying notes.
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Under Armour, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Stockholders' Equity
(In thousands)

Class A
Common Stock
Class B
Convertible
Common Stock
Class C
Common Stock
Additional Paid-in-CapitalRetained
Earnings
Accumulated Other Comprehensive Income (Loss)Total
Equity
SharesAmountSharesAmountSharesAmount
Balance as of December 31, 2019188,290 $62 34,450 $11 229,028 $76 $973,717 $1,226,986 $(50,765)$2,150,087 
Exercise of stock options143 — — — 131 — 484 — — 484 
Shares withheld in consideration of employee tax obligations relative to stock-based compensation arrangements(1)— — — (176)— — (2,853)— (2,853)
Issuance of Class A Common Stock, net of forfeitures19 — — — — — — — — — 
Issuance of Class C Common Stock, net of forfeitures— — — — 2,167 1 1,165 — — 1,166 
Stock-based compensation expense— — — — — — 10,465 — — 10,465 
Comprehensive income— — — — — — — (589,681)(19,488)(609,169)
Balance as of March 31, 2020188,451 $62 34,450 $11 231,150 $77 $985,831 $634,452 $(70,253)$1,550,180 
Balance as of December 31, 2020188,603 $62 34,450 $11 231,954 $77 $1,061,173 $673,855 $(59,185)$1,675,993 
Exercise of stock options3 — — — 3 — 6 — — 6 
Shares withheld in consideration of employee tax obligations relative to stock-based compensation arrangements — — — (228)— — (4,376)— (4,376)
Issuance of Class A Common Stock, net of forfeitures16 — — — — — — — — — 
Issuance of Class C Common Stock, net of forfeitures— — — — 2,206 1 850 — — 851 
Stock-based compensation expense— — — — — — 10,372 — — 10,372 
Comprehensive income— — — — — — — 77,752 9,601 87,353 
Balance as of March 31, 2021188,622 $62 34,450 $11 233,935 $78 $1,072,401 $747,231 $(49,584)$1,770,199 
See accompanying notes.









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Under Armour, Inc. and Subsidiaries`
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)

 Three Months Ended March 31,
 20212020
Cash flows from operating activities
Net income (loss)$77,752 $(589,681)
Adjustments to reconcile net income (loss) to net cash used in operating activities
Depreciation and amortization35,512 48,565 
Unrealized foreign currency exchange rate gain (loss)14,702 12,976 
Loss on disposal of property and equipment575 129 
Impairment charges5,601 437,517 
Amortization of bond premium5,273 63 
Stock-based compensation10,372 10,465 
Deferred income taxes(9)23,253 
Changes in reserves and allowances(9,262)10,130 
Changes in operating assets and liabilities:
Accounts receivable(170,493)27,596 
Inventories49,246 (59,701)
Prepaid expenses and other assets22,295 27,153 
Other non-current assets19,467 (336,357)
Accounts payable(80,092)(192,651)
Accrued expenses and other liabilities(121,841)226,315 
Customer refund liability(10,949)(8,334)
Income taxes payable and receivable1,263 (4,150)
Net cash provided by (used in) operating activities(150,588)(366,712)
Cash flows from investing activities
Purchases of property and equipment(8,465)(31,498)
Sale of property and equipment561  
Purchase of businesses (37,343)
Net cash used in investing activities(7,904)(68,841)
Cash flows from financing activities
Proceeds from long term debt and revolving credit facility 700,000 
Payments on long term debt and revolving credit facility (100,000)
Employee taxes paid for shares withheld for income taxes(4,301)(2,732)
Proceeds from exercise of stock options and other stock issuances858 1,649 
Other financing fees 35 
Net cash provided by (used in) financing activities(3,443)598,952 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(6,900)8,761 
Net increase in (decrease in) cash, cash equivalents and restricted cash(168,835)172,160 
Cash, cash equivalents and restricted cash
Beginning of period1,528,515 796,008 
End of period$1,359,680 $968,168 
Non-cash investing and financing activities
Change in accrual for property and equipment$(40)$(13,081)
See accompanying notes.
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Under Armour, Inc. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Business
Under Armour, Inc. (together with its wholly owned subsidiaries, the "Company") is a developer, marketer and distributor of branded athletic performance apparel, footwear, and accessories. The Company creates products engineered to solve problems and make athletes better, as well as digital health and fitness apps built to connect people and drive performance. The Company's products are made, sold and worn worldwide.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Under Armour Inc. and its wholly owned subsidiaries. Certain information in footnote disclosures normally included in annual financial statements was 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 ("U.S. GAAP") for interim consolidated financial statements. These unaudited condensed consolidated financial statements are presented in U.S. Dollars. In the opinion of management, all adjustments consisting of normal, recurring adjustments considered necessary for a fair statement of the financial position and results of operations were included. Intercompany balances and transactions were eliminated upon consolidation. The unaudited condensed consolidated balance sheet as of March 31, 2021 is derived from the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 ("Fiscal 2020"), filed with the SEC on February 24, 2021 ("Annual Report on Form 10-K for Fiscal 2020"), which should be read in conjunction with these unaudited condensed consolidated financial statements. The unaudited results for the three months ended March 31, 2021, are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2021 ("Fiscal 2021"), or any other portions thereof.
Connected Fitness
Prior to January 1, 2021, the Company's previously reported "Connected Fitness" segment was composed of digital subscription and advertising conducted through various platforms, predominantly the MyFitnessPal, MapMyFitness, consisting of applications such as MapMyRun and MapMyRide (collectively "MMR"), and Endomondo platforms. While the Company continues to operate the MMR platforms, MyFitnessPal was sold in December 2020 and Endomondo was wound down in December 2020 as part of the Company's 2020 restructuring plan. As a result of these changes, starting in the first quarter of Fiscal 2021 the Company no longer reports Connected Fitness as a discrete reportable segment. The operating results of MMR are now included within the Company’s Corporate Other segment. Where applicable, all prior period balances that used to reflect Connected Fitness discretely have been recast to be included within the Corporate Other reportable segment, to conform with current period presentation. Such reclassifications did not affect total consolidated net revenues, consolidated income from operations or consolidated net income.
Management Estimates and COVID-19 Update
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates, judgments and assumptions are evaluated on an on-going basis. The Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable at that time; however, actual results could differ from these estimates.
Further, COVID-19 continues to significantly impact the global economy. As the impacts of the pandemic continue to evolve, estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require increased judgment. The extent to which the evolving pandemic impacts the Company's financial statements will depend on a number of factors including, but not limited to, any new information that may emerge concerning the severity of COVID-19 and the actions that governments may take to contain the virus or treat its impact. While the Company believes it has made appropriate accounting estimates and assumptions based on the facts and circumstances available as of this reporting date, the Company may experience further impacts based on long-term effects on the Company's customers and the countries in which the
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Company operates. Please see the risk factors discussed in Part I, Item 1A "Risk Factors" in the Company's Annual Report on Form 10-K for Fiscal 2020.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash and cash equivalents. The Company's restricted cash is reserved for payments related to claims for its captive insurance program, which is included in prepaid expenses and other current assets on the Company's unaudited condensed consolidated balance sheets.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets to the unaudited condensed consolidated statements of cash flows:
(In thousands)March 31, 2021December 31, 2020March 31, 2020
Cash and cash equivalents$1,348,737 $1,517,361 $959,318 
Restricted cash10,943 11,154 8,850 
Total Cash, cash equivalents and restricted cash$1,359,680 $1,528,515 $968,168 
Concentration of Credit Risk
Financial instruments that subject the Company to significant concentration of credit risk consist primarily of accounts receivable. The majority of the Company’s accounts receivable is due from large wholesale customers. None of the Company's customers accounted for more than 10% of accounts receivable as of March 31, 2021, December 31, 2020 and March 31, 2020, respectively. For the three months ended March 31, 2021 and 2020, no customer accounted for more than 10% of the Company's net revenues. The Company regularly evaluates the credit risk of the large wholesale customers which make up the majority of the Company's accounts receivable. Refer to the "Credit Losses - Allowance for Doubtful Accounts" below for a discussion of the evaluation of credit losses.
Credit Losses - Allowance for Doubtful Accounts
Credit losses are the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company is exposed to credit losses primarily through customer receivables associated with the sale of products within the Company's wholesale channels, recorded within accounts receivable, net on the Company's unaudited condensed consolidated balance sheet. The Company also has other receivables, including receivables from licensing arrangements recorded in prepaid expenses and other current assets on the Company's unaudited condensed consolidated balance sheet.
Credit is extended to customers based on a credit review. The credit review considers each customer’s financial condition, including a review of the customers established credit rating or, if an established customer rating is not available, then the Company's assessment of the customer’s creditworthiness is based on their financial statements, local industry practices, and business strategy. A credit limit and terms of credit are established for each customer based on the outcome of this review. The Company actively monitors ongoing credit exposure through review of customer balances against terms and payments against due dates. To mitigate credit risk, the Company may require customers to provide security in the form of guarantees, letters of credit, or prepayment. The Company is also exposed to credit losses through credit card receivables associated with the sale of products within the Company's direct to consumer channel.
The allowance for doubtful accounts is based on the Company’s assessment of the collectibility of customer accounts. The Company makes ongoing estimates relating to the collectibility of accounts receivable and records an allowance for estimated losses expected from the inability of its customers to make required payments. The Company establishes expected credit losses by evaluating historical levels of credit losses, current economic conditions that may affect a customer’s ability to pay, and creditworthiness of significant customers. These inputs are used to determine a range of expected credit losses and an allowance is recorded within the range. Accounts receivable are written off when there is no reasonable expectation of recovery.


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The following table illustrates the activity in the Company's allowance for doubtful accounts:
(In thousands)Balance as of
December 31, 2020
Increases (decreases) to
Costs and
Expenses
Write-Offs
Net of
Recoveries
Balance as of
March 31, 2021
Allowance for doubtful accounts -
within accounts receivable, net
$20,350 $(1,316)$(45)$18,989 
Allowance for doubtful accounts -
within prepaid expenses and other current assets
$7,029 $ $ $7,029 

The allowance for doubtful accounts was established with information available as of March 31, 2021, including reasonable and supportable estimates of future risk.
For the three months ended March 31, 2021, the decrease in the reserve is primarily due to the collection of account balances that were previously reserved for.
Revenue Recognition
The Company recognizes revenue pursuant to Accounting Standards Codification 606 ("ASC 606"). Net revenues consist of net sales of apparel, footwear and accessories, license revenues and revenues from digital subscriptions and advertising.
The Company recognizes revenue when it satisfies its performance obligations by transferring control of promised products or services to its customers, which occurs either at a point in time or over time, depending on when the customer obtains the ability to direct the use of and obtain substantially all of the remaining benefits from the products or services. The amount of revenue recognized considers terms of sale that create variability in the amount of consideration that the Company ultimately expects to be entitled to in exchange for the products or services and is subject to an overall constraint that a significant revenue reversal will not occur in future periods. Sales taxes imposed on the Company’s revenues from product sales are presented on a net basis on the unaudited condensed consolidated statements of operations, and therefore do not impact net revenues or costs of goods sold.
Revenue transactions associated with the sale of apparel, footwear, and accessories, comprise a single performance obligation, which consists of the sale of products to customers either through wholesale or direct to consumer channels. The Company satisfies the performance obligation and records revenues when transfer of control has passed to the customer, based on the terms of sale. In the Company’s wholesale channel, transfer of control is based upon shipment under free on board shipping point for most goods or upon receipt by the customer depending on the country of the sale and the agreement with the customer. The Company may also ship product directly from its supplier to wholesale customers and recognize revenue when the product is delivered to and accepted by the customer. In the Company’s direct to consumer channel, transfer of control takes place at the point of sale for brand and factory house customers and upon shipment to substantially all e-commerce customers. Payment terms for wholesale transactions are established in accordance with local and industry practices. Payment is generally required within 30 to 60 days of shipment to or receipt by the wholesale customer in the United States, and generally within 60 to 90 days of shipment to or receipt by the wholesale customer internationally. Payment is generally due at the time of sale for direct to consumer transactions.
Gift cards issued to customers by the Company are recorded as contract liabilities until they are redeemed, at which point revenue is recognized. The Company also estimates and recognizes revenue for gift card balances not expected to ever be redeemed ("breakage") to the extent that it does not have a legal obligation to remit the value of such unredeemed gift cards to the relevant jurisdiction as unclaimed or abandoned property. Such estimates are based upon historical redemption trends, with breakage income recognized in proportion to the pattern of actual customer redemptions.
Revenue from the Company's licensing arrangements is recognized over time during the period that licensees are provided access to the Company's trademarks and benefit from such access through their sales of licensed products. These arrangements require licensees to pay a sales-based royalty, which for most arrangements may be subject to a contractually guaranteed minimum royalty amount. Payments are generally due quarterly. The Company recognizes revenue for sales-based royalty arrangements (including those for which the royalty exceeds any contractually guaranteed minimum royalty amount) as licensed products are sold by the licensee. If a sales-based royalty is not ultimately expected to exceed a contractually guaranteed minimum royalty
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amount, the minimum is recognized as revenue over the contractual period, if all other criteria of revenue recognition have been met. This sales-based output measure of progress and pattern of recognition best represents the value transferred to the licensee over the term of the arrangement, as well as the amount of consideration that the Company is entitled to receive in exchange for providing access to its trademarks.
Revenue from digital subscriptions is recognized on a gross basis and is recognized over the term of the subscription. The Company receives payments in advance of revenue recognition for subscriptions and these payments are recorded as contract liabilities in the Company's unaudited condensed consolidated balance sheet. Related commission cost is included in selling, general and administrative expense in the unaudited condensed consolidated statement of operations. Revenue from digital advertising is recognized as the Company satisfies performance obligations pursuant to customer insertion orders.
The Company records reductions to revenue for estimated customer returns, allowances, markdowns and discounts. The Company bases its estimates on historical rates of customer returns and allowances as well as the specific identification of outstanding returns, markdowns and allowances that have not yet been received by the Company. The actual amount of customer returns and allowances, which is inherently uncertain, may differ from the Company’s estimates. If the Company determines that actual or expected returns or allowances are significantly higher or lower than the reserves it established, it would record a reduction or increase, as appropriate, to net sales in the period in which it makes such a determination. Provisions for customer specific discounts are based on negotiated arrangements with certain major customers. Reserves for returns, allowances, markdowns and discounts are included within customer refund liability and the value of inventory associated with reserves for sales returns are included within prepaid expenses and other current assets on the unaudited condensed consolidated balance sheet. At a minimum, the Company reviews and refines these estimates on a quarterly basis.
The following table presents the customer refund liability, as well as the associated value of inventory for the periods indicated:
(In thousands)Balance as of
March 31, 2021
Balance as of
December 31, 2020
Balance as of
March 31, 2020
Customer refund liability$191,979 $203,399 $208,172 
Inventory associated with the reserves$54,540 $57,867 $63,339 

Contract Liabilities
Contract liabilities are recorded when a customer pays consideration, or the Company has a right to an amount of consideration that is unconditional, before the transfer of a good or service to the customer, and thus represent the Company's obligation to transfer the good or service to the customer at a future date. The Company's contract liabilities primarily consist of payments received in advance of revenue recognition for subscriptions for the Company's digital fitness applications and royalty arrangements, included in other current liabilities, and gift cards, included in accrued expenses, on the Company's unaudited condensed consolidated balance sheets. As of March 31, 2021, December 31, 2020, and March 31, 2020, contract liabilities were $25.5 million, $26.7 million and $58.5 million, respectively.
For the three months ended March 31, 2021, the Company recognized $4.3 million of revenue that was previously included in contract liabilities as of December 31, 2020. For the three months ended March 31, 2020, the Company recognized $20.3 million of revenue that was previously included in contract liabilities as of December 31, 2019. The change in the contract liabilities balance primarily results from the timing differences between the Company's satisfaction of performance obligations and the customer's payment. Commissions related to subscription revenue are capitalized and recognized over the subscription period.
Shipping and Handling Costs
The Company charges customers shipping and handling fees based on contractual terms, which are recorded in net revenues. The Company incurs freight costs associated with shipping goods to customers. These costs are recorded as a component of cost of goods sold.
The Company also incurs outbound handling costs associated with preparing goods to ship to customers and certain costs to operate the Company’s distribution facilities. These costs are recorded as a component of selling, general and administrative expenses and were $23.3 million and $14.9 million for the three months ended March 31, 2021 and 2020, respectively.
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Equity Method Investment
The Company has a common stock investment of 29.5% in Dome Corporation ("Dome"), the Company's Japanese licensee. The Company accounts for its investment in Dome under the equity method, given it has the ability to exercise significant influence, but not control, over Dome. The Company recorded its allocable share of Dome’s net income (loss) of $1.8 million and $(1.4) million for the three months ended March 31, 2021 and 2020, respectively, within income (loss) from equity method investment on the unaudited condensed consolidated statements of operations and as an adjustment to the invested balance within other long term assets on the unaudited condensed consolidated balance sheets. As of March 31, 2021, the carrying value of the Company's investment in Dome was $1.8 million.
In addition to the investment in Dome, the Company has a license agreement with Dome. The Company recorded license revenues from Dome of $6.8 million and $6.7 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, December 31, 2020, and March 31, 2020, the Company had $5.4 million, $22.9 million, and $7.0 million, respectively, in licensing receivables outstanding, recorded in the prepaid expenses and other current assets line item within the Company's unaudited condensed consolidated balance sheets.
On March 2, 2020, as part of the Company's acquisition of Triple Pte. Ltd., the Company assumed 49.5% of common stock ownership in UA Sports (Thailand) Co., Ltd. (“UA Sports Thailand”). The Company accounts for its investment in UA Sports Thailand under the equity method, given it has the ability to exercise significant influence, but not control, over UA Sports Thailand. For the three months ended March 31, 2021 and 2020, respectively, the Company recorded the allocable share of UA Sports Thailand’s net income of $0.2 million and net loss of $0.4 million, respectively, within income (loss) from equity method investment on the unaudited condensed consolidated statements of operations and as an adjustment to the invested balance within other long term assets on the unaudited condensed consolidated balance sheets. As of March 31, 2021, the carrying value of the Company’s investment in UA Sports Thailand was $5.2 million.
Recently Issued Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-06 "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)" ("ASU 2020-06"). The amendment in this update simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock. This update also amends the guidance for the derivatives scope exception for contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions and requires the application of the if-converted method for calculating diluted earnings per share. The update also requires entities to provide expanded disclosures about the terms and features of convertible instruments, how the instruments have been reported in the entity’s financial statements, and information about events, conditions, and circumstances that can affect how to assess the amount or timing of an entity’s future cash flows related to those instruments. The guidance is effective for interim and annual periods beginning after December 15, 2021. The Company is currently evaluating this guidance to determine the impact it may have on its unaudited condensed consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting and then issued a subsequent amendment to the initial guidance under ASU 2021-01 (collectively Topic 848). Topic 848 provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, derivatives and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments in this update apply only to contracts, hedging relationships, derivatives and other transactions that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform. Topic 848 is currently effective and upon adoption may be applied prospectively to contract modifications and hedging relationships made on or before December 31, 2022. The Company is currently evaluating this guidance to determine the impact it may have on its unaudited condensed consolidated financial statements.
NOTE 3. RESTRUCTURING AND RELATED IMPAIRMENT CHARGES
During Fiscal 2020, the Company's Board of Directors approved a restructuring plan ranging between $550 million to $600 million in costs ("2020 restructuring plan") designed to rebalance the Company’s cost base to further improve profitability and cash flow generation.
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The restructuring and related charges primarily consist of approximately:
$219 million of cash restructuring charges, comprised of approximately: $61 million in facility and lease termination costs, $30 million in employee severance and benefit costs, and $128 million in contract termination and other restructuring costs; and
$381 million of non-cash charges comprised of an impairment charge of $291 million related to the Company’s New York City flagship store and $90 million related to intangibles and other asset related impairments.
The Company recorded $7.1 million and $301.1 million of restructuring and related impairment charges for the three months ended March 31, 2021 and 2020, respectively under the 2020 restructuring plan. As of March 31, 2021, $479.8 million of restructuring and related impairment charges under the 2020 restructuring plan have been recorded to date.
Restructuring and related impairment charges and recoveries require the Company to make certain judgments and estimates regarding the amount and timing as to when these charges or recoveries occur. The estimated liability could change subsequent to its recognition, requiring adjustments to the expense and the liability recorded. On a quarterly basis, the Company conducts an evaluation of the related liabilities and expenses and revises its assumptions and estimates as appropriate, as new or updated information becomes available.
The following table illustrates the costs recorded during the three months ended March 31, 2021, as well as the Company's current estimates of the amount expected to be incurred in connection with the 2020 restructuring plan:
Restructuring and Impairment Charges Recorded Estimated Restructuring and Impairment Charges (1)
(In thousands)Three months ended March 31, 2020Three months ended March 31, 2021Remaining to be IncurredTotal to be Incurred under plan
Costs recorded in cost of goods sold:
Contract-based royalties$$$$11,608
Inventory write-offs4,5005,268
Total costs recorded in cost of goods sold4,50016,876
Net costs (recoveries) recorded in restructuring and related impairment charges:
Property and equipment impairment7,094  8,342 37,622 
Intangible asset impairment   4,351 
Right-of-use asset impairment290,813   293,495 
Employee related costs (584)2,005 30,000 
Contract exit costs (2) 434 86,242 165,684 
Other asset write off 1,298 16,300 30,672 
Other restructuring costs3,182 5,965 2,771 21,300 
Total costs recorded in restructuring and impairment charges301,089 7,113 115,660 583,124 
Total restructuring and impairment charges$301,089 $7,113 $120,160 $600,000 
(1) Estimated restructuring and impairment charges reflect the high-end of the range of the estimated charges expected by the Company in connection with the 2020 restructuring plan.
(2) Contract exit costs are primarily comprised of proposed lease exits of certain brand and factory house stores and office facilities, and proposed marketing and other contract exits.
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All restructuring and related impairment charges are included in the Company's Corporate Other segment.
For the three months ended March 31, 2021, approximately $2.6 million of the charges are North America related, $4.2 million are Latin America related, and $0.2 million are Asia-Pacific related.
For the three months ended March 31, 2020, the charges were primarily North America related.
A summary of the activity in the restructuring reserve related to the Company's 2020 restructuring plan, as well as prior restructuring plans in 2018 and 2017 are as follows:
(In thousands)Employee Related CostsContract Exit CostsOther Restructuring Related Costs
Balance at January 1, 2021$12,868 $61,642 $6,098 
Net additions (recoveries) charged to expense(584)3,581 520 
Cash payments charged against reserve(2,922)(22,789)(3,005)
Foreign exchange and other155 735 77 
Balance at March 31, 2021$9,517 $43,169 $3,690 
During the three months ended March 31, 2021, the Company also incurred net costs of $3.6 million associated with abandoned facilities and the write off of fixed assets under the 2020 restructuring plan.

NOTE 4. LEASES
The Company enters into operating leases both domestically and internationally, to lease certain warehouse space, office facilities, space for its brand and factory house stores and certain equipment under non-cancelable operating leases. The leases expire at various dates through 2035, excluding extensions at the Company's option, and include provisions for rental adjustments.
The Company accounts for a contract as a lease when it has the right to direct the use of the asset for a period of time while obtaining substantially all of the asset’s economic benefits. The Company determines the initial classification and measurement of its right-of-use ("ROU") assets and lease liabilities at the lease commencement date and thereafter if modified. ROU assets represent the Company’s right to control the underlying assets under lease, over the contractual term. ROU assets and lease liabilities are recognized on the unaudited condensed consolidated balance sheets based on the present value of future minimum lease payments to be made over the lease term. ROU assets and lease liabilities are established on the unaudited condensed consolidated balance sheets for leases with an expected term greater than one year. Short-term lease payments were not material for the three months ended March 31, 2021 and 2020.
As the rate implicit in a lease is not readily determinable, the Company uses its secured incremental borrowing rate to determine the present value of the lease payments. The Company calculates the incremental borrowing rate based on the current market yield curve and adjusts for foreign currency impacts for international leases.
Fixed lease costs are included in the recognition of ROU assets and lease liabilities. Variable lease costs are not included in the measurement of the lease liability. These variable lease payments are recognized in the unaudited condensed consolidated statements of operations in the period in which the obligation for those payments is incurred. Variable lease payments primarily consist of payments dependent on sales in brand and factory house stores. The Company has elected to combine lease and non-lease components in the determination of lease costs for its leases. The lease liability includes lease payments related to options to extend or renew the lease term only if the Company is reasonably certain to exercise those options.
As a result of the impacts of COVID-19, the Company sought concessions from landlords for certain leases of brand and factory house stores in the form of rent deferrals or rent waivers. Consistent with updated guidance from the FASB in April 2020, the Company elected to account for treating these concessions as though the enforceable rights and obligations to the deferrals existed in the respective contracts at lease inception and will not account for the concessions as lease modifications, unless the concession results in a substantial change in the Company's obligations.
The Company's rent deferrals had no impact to rent expense during the three months ended March 31, 2021 and amounts deferred and payable in future periods have been included in short term lease liability on the Company's unaudited condensed consolidated balance sheet as of March 31, 2021. The Company's rent waivers,
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which were recorded as a reduction of rent expense, were not material for the three months ended March 31, 2021 and 2020, respectively.

Lease Costs and Other Information
The Company recognizes lease expense on a straight-line basis over the lease term.
The following table illustrates operating and variable lease costs, included in selling, general and administrative expenses within the Company's unaudited condensed consolidated statement of operations, for the periods indicated:
Three months ended March 31,
(In thousands)20212020
Operating lease costs$34,935 $37,872 
Variable lease costs$2,920 $1,986 
There are no residual value guarantees that exist, and there are no restrictions or covenants imposed by leases. The Company rents or subleases excess office facilities and warehouse space to third parties. Sublease income is not material.
The weighted average remaining lease term and discount rate for the periods indicated below were as follows:
March 31, 2021December 31, 2020March 31, 2020
Weighted average remaining lease term (in years)9.059.129.64
Weighted average discount rate3.82 %3.83 %3.99 %
Supplemental Cash Flow Information
The following table presents supplemental information relating to cash flow arising from lease transactions:
Three months ended March 31,
(In thousands)20212020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash outflows from operating leases$45,909 $36,547 
Leased assets obtained in exchange for new operating lease liabilities$4,074 $72,963 
Maturity of Lease Liabilities
The following table presents the future minimum lease payments under our operating lease liabilities as of March 31, 2021:
(In thousands)
2021$150,290 
2022163,805 
2023143,554 
2024124,776 
202596,576 
2026 and thereafter467,029 
Total lease payments$1,146,030 
Less: Interest183,820 
Total present value of lease liabilities (1)$962,210 
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(1) Amounts above reflect lease liabilities associated with the Company's New York City flagship store, in which the lease commenced on March 1, 2020. See Note 3 to the Company's Annual Report on Form 10-K for Fiscal 2020 for a discussion of the impairment associated with this ROU lease asset.
As of March 31, 2021, the Company has additional operating lease obligations that have not yet commenced of approximately $5.5 million which are not reflected in the table above.

NOTE 5. CREDIT FACILITY AND OTHER LONG TERM DEBT
Credit Facility
On March 8, 2019, the Company entered into an amended and restated credit agreement by and among the Company, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders and arrangers party thereto (the “credit agreement”). The credit agreement has a term of five years, maturing in March 2024, with permitted extensions under certain circumstances. In May 2020, the Company entered into an amendment to the credit agreement (the “amendment” and, the credit agreement as amended, the “amended credit agreement” or the “revolving credit facility”), pursuant to which the prior revolving credit commitments were reduced from $1.25 billion to $1.1 billion of borrowings. As of March 31, 2021 and December 31, 2020, there were no amounts outstanding under the revolving credit facility, respectively. As of March 31, 2020, there was $600.0 million outstanding under the revolving credit facility (prior to its amendment), which the Company had borrowed as a precautionary measure in connection with the uncertain conditions created by COVID-19 in early calendar year 2020.
Except during the covenant suspension period (as defined below), at the Company's request and the lender's consent, commitments under the amended credit agreement may be increased by up to $300.0 million in aggregate, subject to certain conditions as set forth in the amended credit agreement. Incremental borrowings are uncommitted and the availability thereof will depend on market conditions at the time the Company seeks to incur such borrowings.
Borrowings, if any, under the revolving credit facility have maturities of less than one year. Up to $50.0 million of the facility may be used for the issuance of letters of credit. As of March 31, 2021, there was $4.3 million of letters of credit outstanding. (December 31, 2020 and March 31, 2020 had $4.3 million and $5.0 million, respectively).
The obligations of the Company under the amended credit agreement are guaranteed by certain domestic significant subsidiaries of Under Armour, Inc., subject to customary exceptions (the “subsidiary guarantors”) and primarily secured by a first-priority security interest in substantially all of the assets of Under Armour, Inc. and the subsidiary guarantors, excluding real property, capital stock in and debt of subsidiaries of Under Armour Inc. holding certain real property and other customary exceptions.
The amended credit agreement contains negative covenants that, subject to significant exceptions, limit the Company's ability to, among other things: incur additional secured and unsecured indebtedness; pledge the assets as security; make investments, loans, advances, guarantees and acquisitions, (including investments in and loans to non-guarantor subsidiaries); undergo fundamental changes; sell assets outside the ordinary course of business; enter into transactions with affiliates; and make restricted payments (including a temporary suspension of certain voluntary restricted payments during the covenant suspension period (as defined below)).
The Company is also required to comply with specific consolidated leverage and interest coverage ratios during specified periods. Under the amended credit agreement, the Company is required to maintain a ratio of consolidated EBITDA, to consolidated interest expense of not less than 3.50 to 1.0 (the "interest coverage covenant") and the Company is not permitted to allow the ratio of consolidated total indebtedness to consolidated EBITDA to be greater than 3.25 to 1.0 (the "leverage covenant"), as described in more detail in the amended credit agreement. However, the amended credit agreement provides for suspensions of and adjustments to the leverage covenant (including definitional changes impacting the calculation of the ratio) and the interest coverage covenant beginning with the quarter ended June 30, 2020, and ending on the date on which financial statements for the quarter ended June 30, 2022 are delivered to lenders under the amended credit agreement (the "covenant suspension period"), as summarized below and described in more detail in the amended credit agreement:
For the fiscal quarters ending March 31, 2021 and June 30, 2021, compliance with the interest coverage covenant and the leverage covenant are both suspended. Beginning on September 30, 2020 through and including December 31, 2021, the Company must instead maintain minimum liquidity of $550.0 million (the “liquidity covenant”) (with liquidity being the sum of certain cash and cash equivalents held by the Company and its subsidiaries and available borrowing capacity under the amended credit agreement).
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For the fiscal quarter ending September 30, 2021, the interest coverage covenant is suspended, the leverage covenant will require that the ratio of consolidated total indebtedness to consolidated EBITDA be less than or equal to 4.5 to 1.0 and the Company must comply with the liquidity covenant.
For the fiscal quarter ending December 31, 2021, the interest coverage covenant is suspended, the leverage covenant will require that the ratio of consolidated total indebtedness to consolidated EBITDA be less than or equal to 4.0 to 1.0 and the Company must comply with the liquidity covenant.
Beginning on January 1, 2022, the liquidity covenant is terminated. For the fiscal quarter ending March 31, 2022, the leverage covenant will require that the ratio of consolidated total indebtedness to consolidated EBITDA be less than or equal to 3.5 to 1.0 and the interest coverage covenant will require that the ratio of consolidated EBITDA to consolidated interest expense be greater than or equal to 3.5 to 1.0.
As of March 31, 2021, the Company was in compliance with the applicable covenants.
In addition, the amended credit agreement contains events of default that are customary for a facility of this nature and similar to the prior credit agreement, and includes a cross default provision whereby an event of default under other material indebtedness, as defined in the amended credit agreement, will be considered an event of default under the amended credit agreement.
During the covenant suspension period, the applicable margin for loans is 2.00% for adjusted LIBOR loans and 1.00% for alternate base rate loans. Otherwise, borrowings under the amended credit agreement bear interest at a rate per annum equal to, at the Company’s option, either (a) an alternate base rate, or (b) a rate based on the rates applicable for deposits in the interbank market for U.S. Dollars or the applicable currency in which the loans are made (“adjusted LIBOR”), plus in each case an applicable margin. The applicable margin for loans will be adjusted by reference to a grid (the “pricing grid”) based on the consolidated leverage ratio and ranges between 1.25% to 1.75% for adjusted LIBOR loans and 0.25% to 0.75% for alternate base rate loans. During the covenant suspension period, the commitment fee rate is 0.40% per annum. Otherwise, the Company pays a commitment fee determined in accordance with the pricing grid on the average daily unused amount of the revolving credit facility and certain fees with respect to letters of credit. For the three months ended March 31, 2021 and 2020, the weighted average interest rate under the revolving credit facility borrowings was nil and 3.2%, respectively. As of March 31, 2021, the commitment fee was 15.0 basis points. The Company incurred and deferred $7.2 million in financing costs in connection with the amended credit agreement.
1.50% Convertible Senior Notes
In May 2020, the Company issued $500.0 million aggregate principal amount of 1.50% convertible senior notes due 2024 (the “Convertible Senior Notes”). The Convertible Senior Notes bear interest at the rate of 1.50% per annum, payable semiannually in arrears on June 1 and December 1 of each year, beginning December 1, 2020. The Convertible Senior Notes will mature on June 1, 2024, unless earlier converted in accordance with their terms, redeemed in accordance with their terms or repurchased.
The net proceeds from the offering (including the net proceeds from the exercise of the over-allotment option) was $488.8 million, after deducting the initial purchasers’ discount and estimated offering expenses paid by the Company, of which the Company used $47.9 million to pay the cost of the capped call transactions described below. The Company utilized $439.9 million to repay indebtedness that was outstanding under its revolving credit facility at the time, and to pay related fees and expenses.
The Convertible Senior Notes are not secured and are not guaranteed by any of the Company’s subsidiaries. The indenture governing the Convertible Senior Notes does not contain any financial or operating covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by the Company or any of its subsidiaries.
The Convertible Senior Notes are convertible into cash, shares of the Company’s Class C common stock or a combination of cash and shares of Class C common stock, at the Company’s election, as described further below. The initial conversion rate is 101.8589 shares of the Company’s Class C common stock per $1,000 principal amount of Convertible Senior Notes (equivalent to an initial conversion price of approximately $9.82 per share of Class C common stock), subject to adjustment if certain events occur. Prior to the close of business on the business day immediately preceding January 1, 2024, holders may (at their option) convert their Convertible Senior Notes only upon satisfaction of one or more of the following conditions:
during any calendar quarter commencing after the calendar quarter ended on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s Class C common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days
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ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Convertible Senior Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s Class C common stock and the conversion rate on each such trading day;
upon the occurrence of specified corporate events or distributions on the Company’s Class C common stock; or
if the Company calls any Convertible Senior Notes for redemption prior to the close of business on the business day immediately preceding January 1, 2024.
On or after January 1, 2024, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Convertible Senior Notes at the conversion rate at any time irrespective of the foregoing conditions.
On or after December 6, 2022, the Company may redeem for cash all or any part of the Convertible Senior Notes, at its option, if the last reported sale price of the Company’s Class C common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the aggregate principal amount of the Convertible Senior Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
If the Company undergoes a fundamental change (as defined in the indenture governing the Convertible Senior Notes) prior to the maturity date, subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their Convertible Senior Notes in principal amounts of $1,000 or an integral multiple thereof at a price which will be equal to 100% of the aggregate principal amount of the Convertible Senior Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
Concurrently with the offering of the Convertible Senior Notes, the Company entered into privately negotiated capped call transactions with JPMorgan Chase Bank, National Association, HSBC Bank USA, National Association and Citibank, N.A. (the “option counterparties”). The capped call transactions are expected generally to reduce potential dilution to the Company’s Class C common stock upon any conversion of Convertible Senior Notes and/or offset any cash payments the Company is required to make in excess of the aggregate principal amount of converted Convertible Senior Notes upon any conversion thereof, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The cap price of the capped call transactions is initially $13.4750 per share of the Company’s Class C common stock, representing a premium of 75% above the last reported sale price of the Company’s Class C common stock on May 21, 2020, and is subject to certain adjustments under the terms of the capped call transactions.
The Convertible Senior Notes contain a cash conversion feature, and as a result, the Company has separated it into liability and equity components. The Company valued the liability component based on its borrowing rate for a similar debt instrument that does not contain a conversion feature. The equity component, which is recognized as a debt discount, was valued as the difference between the face value of the Convertible Senior Notes and the fair value of the liability component.
In connection with the Convertible Senior Notes issuance, the Company incurred deferred financing costs of $12.3 million, primarily related to fees paid to the initial purchasers of the offering, as well as legal and accounting fees. These costs were allocated on a pro rata basis, with $10.0 million allocated to the debt component and $2.2 million allocated to the equity component.
The debt discount and the debt portion of the deferred financing costs are being amortized to interest expense over the term of the Convertible Senior Notes using the effective interest rate method. The effective interest rate for the three months ended March 31, 2021 was 6.8%.
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The following table illustrates the components of the Convertible Senior Notes for the periods indicated:
Balance As of
(In thousands)March 31, 2021December 31, 2020
Liability component
Principal$500,000 $500,000 
Unamortized debt discount(73,821)(79,031)
Unamortized issuance costs(7,879)(8,501)
Net carrying amount$418,300 $412,468 
Equity component, net of issuance costs$71,646 $88,672 

The following table illustrates the components of interest expense relating to the Convertible Senior Notes. There was no such comparable interest expense recorded for the same period in the prior fiscal year as the Convertible Senior Notes were not yet outstanding.
Three months ended March 31,
(In thousands)2021
Coupon interest$1,875 
Non-cash amortization of debt discount5,210 
Amortization of deferred financing costs622 
Convertible senior notes interest expense$7,707

3.250% Senior Notes
In June 2016, the Company issued $600 million aggregate principal amount of 3.250% senior unsecured notes due June 15, 2026 (the “Senior Notes”). Interest is payable semi-annually on June 15 and December 15 beginning December 15, 2016. The Company may redeem some or all of the Senior Notes at any time, or from time to time, at redemption prices described in the indenture governing the Senior Notes. The indenture governing the Senior Notes contains negative covenants that limit the Company’s ability to engage in certain transactions and are subject to material exceptions described in the indenture. The Company incurred and deferred $5.4 million in financing costs in connection with the Senior Notes.
Interest Expense
Interest expense, net, was $14.1 million and $6.0 million for the three months ended March 31, 2021 and 2020, respectively, inclusive of amounts related to the Senior Convertible Notes, as detailed above. Interest expense includes amortization of deferred financing costs, bank fees, capital and built-to-suit lease interest and interest expense under the credit and other long term debt facilities.
The Company monitors the financial health and stability of its lenders under the credit and other long term debt facilities, however during any period of significant instability in the credit markets, lenders could be negatively impacted in their ability to perform under these facilities.
NOTE 6. COMMITMENTS AND CONTINGENCIES
From time to time, the Company is involved in litigation and other proceedings, including matters related to commercial and intellectual property disputes, as well as trade, regulatory and other claims related to its business. Other than as described below, the Company believes that all current proceedings are routine in nature and incidental to the conduct of its business, and that the ultimate resolution of any such proceedings will not have a material adverse effect on its consolidated financial position, results of operations or cash flows.
Under Armour Securities Litigation
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On March 23, 2017, three separate securities cases previously filed against the Company in the United States District Court for the District of Maryland (the “District Court”) were consolidated under the caption In re Under Armour Securities Litigation, Case No. 17-cv-00388-RDB (the “Consolidated Securities Action”). On August 4, 2017, the lead plaintiff in the Consolidated Securities Action, Aberdeen City Council as Administrating Authority for the North East Scotland Pension Fund (“Aberdeen”), joined by named plaintiff Bucks County Employees Retirement Fund (“Bucks County”), filed a consolidated amended complaint (the “Amended Complaint”) against the Company, the Company’s then-Chief Executive Officer, Kevin Plank, and former Chief Financial Officers Lawrence Molloy and Brad Dickerson. The Amended Complaint alleged violations of Section 10(b) (and Rule 10b-5) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 20(a) control person liability under the Exchange Act against the officers named in the Amended Complaint, claiming that the defendants made material misstatements and omissions regarding, among other things, the Company's growth and consumer demand for certain of the Company's products. The class period identified in the Amended Complaint is September 16, 2015 through January 30, 2017. The Amended Complaint also asserted claims under Sections 11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”), in connection with the Company’s public offering of senior unsecured notes in June 2016. The Securities Act claims were asserted against the Company, Mr. Plank, Mr. Molloy, the Company’s directors who signed the registration statement pursuant to which the offering was made and the underwriters that participated in the offering. The Amended Complaint alleged that the offering materials utilized in connection with the offering contained false and/or misleading statements and omissions regarding, among other things, the Company’s growth and consumer demand for certain of the Company’s products.
On November 9, 2017, the Company and the other defendants filed motions to dismiss the Amended Complaint. On September 19, 2018, the District Court dismissed the Securities Act claims with prejudice and the Exchange Act claims without prejudice. Lead plaintiff Aberdeen, joined by named plaintiff Monroe County Employees’ Retirement Fund (“Monroe”), filed a Second Amended Complaint on November 16, 2018, asserting claims under the Exchange Act and naming the Company and Mr. Plank as the remaining defendants. The remaining defendants filed a motion to dismiss the Second Amended Complaint on January 17, 2019. On August 19, 2019, the District Court dismissed the Second Amended Complaint with prejudice.
In September 2019, plaintiffs Aberdeen and Bucks County filed an appeal in the United States Court of Appeals for the Fourth Circuit challenging the decisions by the District Court on September 19, 2018 and August 19, 2019 (the “Appeal”). The Appeal was fully briefed as of January 16, 2020.

On November 6 and December 17, 2019, two purported shareholders of the Company filed putative securities class actions in the District Court against the Company and certain of its current and former executives (captioned Patel v. Under Armour, Inc., No. 1:19-cv-03209-RDB (“Patel”), and Waronker v. Under Armour, Inc., No. 1:19-cv-03581-RDB (“Waronker”), respectively). The complaints in Patel and Waronker alleged violations of Section 10(b) (and Rule 10b-5) of the Exchange Act, against all defendants, and Section 20(a) control person liability under the Exchange Act against the current and former officers named in the complaints. The complaints claimed that the defendants’ disclosures and statements supposedly misrepresented or omitted that the Company was purportedly shifting sales between quarterly periods allegedly to appear healthier and that the Company was under investigation by and cooperating with the United States Department of Justice (“DOJ”) and the United States Securities and Exchange Commission (“SEC”) since July 2017.

On November 18, 2019, Aberdeen, the lead plaintiff in the Consolidated Securities Action, filed in the District Court a motion for an indicative ruling under Federal Rule of Civil Procedure 62.1 (the “Rule 62.1 Motion”) seeking relief from the final judgment pursuant to Federal Rule of Civil Procedure 60(b). The Rule 62.1 Motion alleged that purported newly discovered evidence entitled Aberdeen to relief from the District Court’s final judgment. Aberdeen also filed motions seeking (i) to consolidate the Patel and Waronker cases with the Consolidated Securities Action, and (ii) to be appointed lead plaintiff over the consolidated cases.

On January 22, 2020, the District Court granted Aberdeen’s Rule 62.1 motion and indicated that it would grant a motion for relief from the final judgment and provide Aberdeen with the opportunity to file a third amended complaint if the Fourth Circuit remanded for that purpose. The District Court further stated that it would, upon remand, consolidate the Patel and Waronker cases with the Consolidated Securities Action and appoint Aberdeen as the lead plaintiff over the consolidated cases.

On August 13, 2020, the Fourth Circuit remanded the Appeal to the District Court for the limited purpose of allowing the District Court to rule on Aberdeen’s motion seeking relief from the final judgment pursuant to Federal Rule of Civil Procedure 60(b). On September 14, 2020, the District Court issued an order granting that relief. The
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District Court’s order also consolidated the Patel and Waronker cases into the Consolidated Securities Action and appointed Aberdeen as lead plaintiff over the Consolidated Securities Action.

    On October 14, 2020, Aberdeen, along with named plaintiffs Monroe and KBC Asset Management NV, filed a third amended complaint (the “TAC”) in the Consolidated Securities Action, asserting claims under Sections 10(b) and 20(a) of the Exchange Act against the Company and Mr. Plank and under Section 20A of the Exchange Act against Mr. Plank. The TAC alleges that the defendants supposedly concealed purportedly declining consumer demand for certain of the Company's products between the third quarter of 2015 and the fourth quarter of 2016 by making allegedly false and misleading statements regarding the Company’s performance and future prospects and by engaging in undisclosed and allegedly improper sales and accounting practices, including shifting sales between quarterly periods allegedly to appear healthier. The TAC also alleges that the defendants purportedly failed to disclose that the Company was under investigation by and cooperating with DOJ and the SEC since July 2017. The class period identified in the TAC is September 16, 2015 through November 1, 2019.

On December 4, 2020, the Company and Mr. Plank filed a motion to dismiss the TAC for failure to state a claim. That motion is currently pending.

    The Company continues to believe that the claims asserted in the Consolidated Securities Action are without merit and intends to defend the lawsuit vigorously. However, because of the inherent uncertainty as to the outcome of this proceeding, the Company is unable at this time to estimate the possible impact of this matter.
State Court Derivative Complaints
In June and July 2018, two purported stockholder derivative complaints were filed in Maryland state court (in cases captioned Kenney v. Plank, et al. (filed June 29, 2018) and Luger v. Plank, et al. (filed July 26, 2018), respectively). The cases were consolidated on October 19, 2018 under the caption Kenney v. Plank, et. al. The consolidated complaint in the Kenney matter names Mr. Plank, certain other current and former members of the Company’s Board of Directors, certain former Company executives, and Sagamore Development Company, LLC (“Sagamore”) as defendants, and names the Company as a nominal defendant. The consolidated complaint asserts breach of fiduciary duty, unjust enrichment, and corporate waste claims against the individual defendants and asserts a claim against Sagamore for aiding and abetting certain of the alleged breaches of fiduciary duty. The consolidated complaint seeks damages on behalf of the Company and certain corporate governance related actions.
The consolidated complaint includes allegations similar to those in the Amended Complaint in the Consolidated Securities Action matter discussed above, challenging, among other things, the Company’s disclosures related to growth and consumer demand for certain of the Company’s products, as well as stock sales by certain individual defendants. The consolidated complaint also makes allegations related to the Company’s purchase of certain parcels of land from entities controlled by Mr. Plank (through Sagamore). Sagamore purchased the parcels in 2014. Its total investment in the parcels was approximately $72.0 million, which included the initial $35.0 million purchase price for the property, an additional $30.6 million to terminate a lease encumbering the property and approximately $6.4 million of development costs. As previously disclosed, in June 2016, the Company purchased the unencumbered parcels for $70.3 million in order to further expand the Company’s corporate headquarters to accommodate its growth needs. The Company negotiated a purchase price for the parcels that it determined represented the fair market value of the parcels and approximated the cost to the seller to purchase and develop the parcels. In connection with its evaluation of the potential purchase, the Company engaged an independent third-party to appraise the fair market value of the parcels, and the Audit Committee of the Company’s Board of Directors engaged its own independent appraisal firm to assess the parcels. The Audit Committee determined that the terms of the purchase were reasonable and fair, and the transaction was approved by the Audit Committee in accordance with the Company’s policy on transactions with related persons.
On March 29, 2019, the court in the consolidated Kenney action granted the Company’s and the defendants’ motion to stay that case pending the outcome of both the Consolidated Securities Action and an earlier-filed derivative action asserting similar claims relating to the Company’s purchase of parcels in Port Covington (which action has since been dismissed in its entirety). The court ordered stay in the consolidated Kenney action remains in effect at this time.
Prior to the filing of the derivative complaints in Kenney v. Plank, et al. and Luger v. Plank, et al., both of the purported stockholders had sent the Company’s Board of Directors a letter demanding that the Company pursue claims similar to the claims asserted in the derivative complaints. Following an investigation, a majority of
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disinterested and independent directors of the Company determined that the claims should not be pursued by the Company and informed both of these purported stockholders of that determination.
Between August 11, 2020 and October 21, 2020, three additional purported shareholder derivative complaints were filed in Maryland state court (in cases captioned Cordell v. Plank, et al. (filed August 11, 2020), Klein v. Plank, et al. (filed October 2, 2020), and Salo v. Plank, et al. (filed October 21, 2020), respectively).
The complaints in these cases name Mr. Plank, certain other current and former members of the Company’s Board of Directors, and certain current and former Company executives as defendants, and name the Company as a nominal defendant. The complaints in these actions assert allegations similar to those in the TAC filed in the Consolidated Securities Action matter discussed above, including allegations challenging (i) the Company’s disclosures related to growth and consumer demand for certain of the Company’s products; (ii) the Company’s practice of shifting sales between quarterly periods supposedly to appear healthier and its purported failure to disclose that practice; (iii) the Company’s internal controls with respect to revenue recognition and inventory management; (iv) the Company’s supposed failure to timely disclose investigations by the SEC and DOJ; (v) the compensation paid to the Company’s directors and executives while the alleged wrongdoing was occurring; and/or (vi) stock sales by certain individual defendants. The complaints assert breach of fiduciary duty, unjust enrichment, and corporate waste claims against the individual defendants. These complaints seek damages on behalf of the Company and certain corporate governance related actions.
Prior to the filing of the derivative complaints in these three actions, none of the purported stockholders made a demand that the Company’s Board of Directors pursue the claims asserted in the complaints.
In February 2021, the court issued notices of contemplated dismissal for lack of jurisdiction without prejudice pursuant to Maryland Rule 2-507 in the Klein matter (as to the individual defendants and Under Armour) and in the Cordell matter (as to the individual defendants). Consistent with these notices, in March 2021, the court issued (i) an order dismissing the Klein matter as to the individual defendants and Under Armour for lack of jurisdiction without prejudice; and (ii) an order dismissing the Cordell matter as to the individual defendants for lack of jurisdiction without prejudice. On March 16, 2021, the court issued a notice of contemplated dismissal for lack of jurisdiction without prejudice pursuant to Maryland Rule 2-507 in the Salo matter (as to the individual defendants and Under Armour). On March 23, 2021, the plaintiff in the Salo matter filed a motion to defer entry of an order of dismissal. That motion is currently pending.
The Company believes that the claims asserted in the derivative complaints filed in Maryland state court are without merit and intends to defend these matters vigorously. However, because of the inherent uncertainty as to the outcome of these proceedings, the Company is unable at this time to estimate the possible impact of the outcome of these matters.
Federal Court Derivative Complaints
In July 2018, a stockholder derivative complaint was filed in the United States District Court for the District of Maryland, in a case captioned Andersen v. Plank, et al. The complaint in the Andersen matter names Mr. Plank, certain other current and former members of the Company’s Board of Directors and certain former Company executives as defendants, and names the Company as a nominal defendant. The complaint asserts breach of fiduciary duty and unjust enrichment claims against the individual defendants, and seeks damages on behalf of the Company and certain corporate governance related actions. The complaint includes allegations similar to those in the Amended Complaint in the Consolidated Securities Action matter discussed above, challenging, among other things, the Company’s disclosures related to growth and consumer demand for certain of the Company’s products and stock sales by certain individual defendants.
The Andersen action was stayed from December 2018 to August 2019 and again from September 2019 to September 2020 (the “2019 Stay Order”). Pursuant to a series of court ordered stipulations, the terms of the 2019 Stay Order remained in effect through and including January 19, 2021. The stay expired on January 19, 2021.
Prior to the filing of the complaint in the Andersen action, the plaintiff had sent the Company’s Board of Directors a letter demanding that the Company pursue claims similar to the claims asserted in the complaint. Following an investigation, a majority of disinterested and independent directors of the Company determined that the claims should not be pursued by the Company and informed the plaintiff of that determination. During the pendency of the Andersen action, the plaintiff sent the Company’s Board of Directors a second letter demanding that the Company pursue claims similar to the claims asserted in the TAC in the Consolidated Securities Action. Following an investigation, a majority of disinterested and independent directors of the Company determined that the claims should not be pursued by the Company and informed the plaintiff of that determination.
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In September 2020, two additional derivative complaints were filed in the United States District Court for the District of Maryland (in cases captioned Olin v. Plank, et al. (filed September 1, 2020), and Smith v. Plank, et al. (filed September 8, 2020), respectively). Prior to the filing of the derivative complaints in these two actions, neither of the purported stockholders made a demand that the Company’s Board of Directors pursue the claims asserted in the complaints. On November 20, 2020, another derivative complaint was filed in the United States District Court for the District of Maryland, in a case captioned Viskovich v. Plank, et al. Prior to filing his derivative complaint, the plaintiff in the Viskovich matter made a demand that the Company’s Board of Directors pursue the claims asserted in the complaint but filed suit before the Board had responded to the demand.
The complaints in the Olin, Smith, and Viskovich cases name Mr. Plank, certain other current and former members of the Company’s Board of Directors, and certain current and former Company executives as defendants, and name the Company as a nominal defendant. The complaints in these actions assert allegations similar to those in the TAC filed in the Consolidated Securities Action matter discussed above, including allegations challenging (i) the Company’s disclosures related to growth and consumer demand for certain of the Company’s products; (ii) the Company’s practice of shifting sales between quarterly periods supposedly to appear healthier and its purported failure to disclose that practice; (iii) the Company’s internal controls with respect to revenue recognition and inventory management; (iv) the Company’s supposed failure to timely disclose investigations by the SEC and DOJ; and/or (v) the compensation paid to the Company’s directors and executives while the alleged wrongdoing was occurring. The complaints assert breach of fiduciary duty, unjust enrichment, gross mismanagement, and/or corporate waste claims against the individual defendants. The Viskovich complaint also asserts a contribution claim against certain defendants under the federal securities laws. These complaints seek damages on behalf of the Company and certain corporate governance related actions.
On January 27, 2021, the court entered an order consolidating for all purposes the Andersen, Olin, Smith and Viskovich actions into a single action under the caption Andersen v. Plank, et al. (the “Federal Court Derivative Action”). In February 2021, counsel for the Smith and Olin plaintiffs, on the one hand, and counsel for the Andersen and Viskovich plaintiffs, on the other hand, filed motions seeking to be appointed as lead counsel in the Federal Court Derivative Action. These motions are currently pending.
The Company believes that the claims asserted in the Federal Court Derivative Action are without merit and intends to defend this matter vigorously. However, because of the inherent uncertainty as to the outcome of this proceeding, the Company is unable at this time to estimate the possible impact of the outcome of this matter.
Wells Notices
On May3, 2021, the Company announced that it entered into a settlement with the SEC resolving the previously announced SEC investigation related to disclosure and the impact of certain “pull forward” sales for the third quarter of 2015 through the fourth quarter of 2016. The Company agreed to pay a civil monetary penalty of $9.0 million and to cease and desist from committing or causing any violations and any future violations of Section 17(a)(2) and (a)(3) of the Securities Act and Sections 13(a) or the Exchange Act and specific rules thereunder while neither admitting nor denying the SEC’s findings. The SEC Staff has confirmed that it does not intend to recommend that any enforcement action be taken against the Company’s Executive Chairman, Chief Financial Officer or any other member of management in connection with this investigation.This settlement resolves all outstanding SEC claims with respect to the investigation that was the subject of the previously disclosed Wells Notices received by the Company and its Executive Chairman and Chief Financial Officer.
As previously announced, the Company had also received requests for documents and information from the U.S. Department of Justice (the “DOJ”) arising out of substantially the same matters. The Company has not received any requests from the DOJ since the second quarter of 2020, and although there can be no assurance, absent new information, the Company does not currently anticipate additional engagement with the DOJ relating to this matter.
NOTE 7. 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, 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:
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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.

Our financial assets (liabilities) measured at fair value on a recurring basis consisted of the following types of instruments as of March 31, 2021, December 31, 2020 and March 31, 2020:

March 31, 2021December 31, 2020March 31, 2020
(In thousands)Level 1Level 2Level 3Level 1Level 2Level 3Level 1Level 2Level 3
Derivative foreign currency contracts (see Note 8)$ $(13,173)$ $ $(22,122)$ $ $35,971 $ 
TOLI policies held by the Rabbi Trust$ $8,001 $ $ $7,697 $ $ $5,471 $ 
Deferred Compensation Plan obligations$ $(14,641)$ $ $(14,314)$ $ $(10,443)$ 
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 contracts represent unrealized gains and losses on derivative contracts, which is the net difference between the U.S. dollar value to be received or paid at the contracts’ settlement date and the U.S. dollar value of the foreign currency to be sold or purchased at the current market exchange rate. The fair value of the trust owned life insurance (“TOLI”) policies held by the Rabbi Trust are 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 initially made in the same funds and purchased in substantially the same amounts as the selected investments of participants in the Under Armour, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”), which represent the underlying liabilities to participants in the Deferred Compensation Plan. Liabilities under the Deferred Compensation Plan are recorded at amounts due to participants, based on the fair value of participants’ selected investments.
As of March 31, 2021 and December 31, 2020 the fair value of the Company's Convertible Senior Notes was $982.9 million and $828.2 million, respectively. The Company did not have Convertible Senior Notes as of March 31, 2020.
As of March 31, 2021, December 31, 2020, and March 31, 2020, the fair value of the Company's Senior Notes was $602.2 million, $602.6 million and $551.5 million, respectively.
The carrying value of the Company's other long term debt approximated its fair value as of March 31, 2021, December 31, 2020 and March 31, 2020, respectively. The fair value of long term debt is estimated based upon quoted prices for similar instruments or quoted prices for identical instruments in inactive markets (Level 2).
Some assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. These assets can include long-lived assets and goodwill that have been reduced to fair value when impaired. Assets that are written down to fair value when impaired are not subsequently adjusted to fair value unless further impairment occurs.

NOTE 8. RISK MANAGEMENT AND DERIVATIVES
The Company is exposed to global market risks, including the effects of changes in foreign currency and interest rates. The Company uses derivative instruments to manage financial exposures that occur in the normal course of business and does not hold or issue derivatives for trading or speculative purposes.
The Company may elect to designate certain derivatives as hedging instruments under U.S. GAAP. The Company formally documents all relationships between designated hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking hedge transactions. This process includes linking all derivatives designated as hedges to forecasted cash flows and assessing, both at inception and on an ongoing basis, the effectiveness of the hedging relationships.
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The Company's foreign exchange risk management program consists of designated cash flow hedges and undesignated hedges. As of March 31, 2021, the Company has hedge instruments primarily for:
British Pound/U.S. Dollar;
Euro/U.S. Dollar;
U.S. Dollar/Chinese Renminbi;
U.S. Dollar/Canadian Dollar;
U.S. Dollar/Mexican Peso; and
U.S. Dollar/Japanese Yen currency pairs.
All derivatives are recognized on the unaudited condensed consolidated balance sheets at fair value and classified based on the instrument’s maturity date.
The following table presents the fair values of derivative instruments within the unaudited condensed consolidated balance sheets. Refer to Note 7 of the unaudited condensed consolidated financial statements for a discussion of the fair value measurements.

(In thousands)Balance Sheet ClassificationMarch 31, 2021December 31, 2020March 31, 2020
Derivatives designated as hedging instruments under ASC 815
Foreign currency contractsOther current assets$1,759 $ $35,087 
Foreign currency contractsOther long term assets727  4,791 
Total derivative assets designated as hedging instruments$2,486 $ $39,878 
Foreign currency contractsOther current liabilities$13,021 $17,601 $789 
Foreign currency contractsOther long term liabilities3,331 6,469  
Total derivative liabilities designated as hedging instruments$16,352 $24,070 $789 
Derivatives not designated as hedging instruments under ASC 815
Foreign currency contractsOther current assets$5,114 $2,384 $8,582 
Total derivative assets not designated as hedging instruments$