What changed in this filing

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Item 1. Financial Statements

2020-11-09 compared with 2020-08-10 · 219 added, 149 removed, 458 unchanged (45% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

June 30, 2020

September 30, 2020

December 31, 2019

22 unchanged sentences

Preferred stock, $.

0001 par value;

0001 par value per share;

shares authorized;

Common stock, $.0001 par value;

Common stock, $.0001 par value per share;

100,000 shares authorized;

3 unchanged sentences

Treasury stock, at cost

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Total stockholders'

2 unchanged sentences

CLARUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share amounts)

Three Months Ended

June 30, 2020

June 30, 2019

September 30, 2020

September 30, 2019

Domestic sales

5 unchanged sentences

Total operating expenses

Operating loss

Operating income

Other income (expense)

1 unchanged sentence

Total other income (expense), net

Loss before income tax

Income tax benefit

Other comprehensive loss, net of tax:

Income before income tax

Income tax expense (benefit)

Other comprehensive income, net of tax:

Foreign currency translation adjustment

Unrealized loss on hedging activities

Other comprehensive loss

Comprehensive loss

Net loss per share:

Unrealized (loss) gain on hedging activities

Other comprehensive income

Comprehensive income

Net income per share:

Weighted average shares outstanding:

See accompanying notes to condensed consolidated financial statements.

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CLARUS CORPORATION

1 unchanged sentence

(In thousands, except per share amounts)

Six Months Ended

June 30, 2020

June 30, 2019

Nine Months Ended

September 30, 2020

September 30, 2019

Domestic sales

15 unchanged sentences

Foreign currency translation adjustment

Unrealized gain (loss) on hedging activities

Unrealized (loss) gain on hedging activities

Other comprehensive income (loss)

6 unchanged sentences

(In thousands)

Six Months Ended

June 30, 2020

June 30, 2019

Nine Months Ended

September 30, 2020

September 30, 2019

Cash Flows From Operating Activities:

2 unchanged sentences

Depreciation of property and equipment

Amortization of intangible assets

Amortization of other intangible assets

Amortization of debt issuance costs

(Gain) loss on disposition of property and equipment

Loss on disposition of property and equipment

Noncash lease expense

7 unchanged sentences

Cash Flows From Investing Activities:

Deposit for business acquisition

Proceeds from disposition of property and equipment

10 unchanged sentences

Cash dividends paid

Proceeds from the sale of common stock

Common stock issuance costs

Net cash provided by (used in) financing activities

9 unchanged sentences

Lease liabilities arising from obtaining right of use assets

Unpaid debt issuance costs

Stock dividends

18 unchanged sentences

Balance, June 30, 2019

Other comprehensive income

Cash dividends ($ 0.025 per share)

Purchase of treasury stock

Stock-based compensation expense

Proceeds from exercise of options

Balance, September 30, 2019

CLARUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'

(In thousands, except per share amounts)

Treasury Stock

13 unchanged sentences

Balance, June 30, 2020

Other comprehensive income

Stock dividends ($ 0.025 per share)

Purchase of treasury stock

Stock-based compensation expense

Proceeds from exercise of options

Issuance of common stock, net of issuance costs

Balance, September 30, 2020

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements of Clarus Corporation and subsidiaries (which may be referred to as the “Company,” “Clarus,” “we,” “us” or “our”) as of June 30, 2020 and December 31, 2019 and for the three and six months ended June 30, 2020 and 2019, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X.

The accompanying unaudited condensed consolidated financial statements of Clarus Corporation and subsidiaries (which may be referred to as the “Company,” “Clarus,” “we,” “us” or “our”) as of September 30, 2020 and December 31, 2019 and for the three and nine months ended September 30, 2020 and 2019, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X.

Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements.

In the opinion of management, all adjustments (consisting only of normal recurring adjustments, except otherwise disclosed) necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included.

The results for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be obtained for the year ending December 31, 2020.

The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be obtained for the year ending December 31, 2020.

These interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the Securities and Exchange Commission (the “SEC”) on March 9, 2020.

8 unchanged sentences

(“SKINourishment”).

On October 2, 2020, the Company completed the acquisition of certain assets and liabilities relating to the Barnes brand of bullets (“Barnes”) for a purchase price of $ 30,500 .

See Note 15 for a more detailed explanation of the acquisition.

On August 6, 2018 , the Company announced that its Board of Directors approved the initiation of a quarterly cash dividend program of $ 0.025 per share of the Company’s common stock (the “Quarterly Cash Dividend”) or $ 0.10 per share on an annualized basis.

The declaration and payment of future Quarterly Cash Dividends is subject to the discretion of and approval of the Company’s Board of Directors.

On May 1, 2020 , the Company announced that, in light of the COVID-19 pandemic, its Board of Directors had temporarily replaced its Quarterly Cash Dividend with a stock dividend and on July 31, 2020, the Company announced that the stock dividend will continue for the quarter ending September 30, 2020.

Each record holder of shares of the Company’s common stock as of the close of business on August 10, 2020 (the “Record Date”) will be entitled to receive 0.0021 of a share of the Company’s common stock for each share of common stock held on the Record Date.

The Company will distribute the stock dividend on August 21, 2020 , the distribution date.

No fractional shares will be issued, and stockholders will receive cash for such fractional interests based on the closing market price of the Company’s common stock on the Record Date.

The quarterly stock dividend will have a value of $ 0.025 per share, based on the closing market price on July 30, 2020.

The dividend reflects an aggregate distribution of approximately 63 shares with a market value of approximately $ 747 .

On May 1, 2020 , the Company announced that, in light of the operational impact of the COVID-19 pandemic, its Board of Directors temporarily replaced its Quarterly Cash Dividend with a stock dividend (the “Quarterly Stock Dividend”).

On October 19, 2020, the Company announced that its Board of Directors approved the reinstatement of its Quarterly Cash Dividend.

The reinstated Quarterly Cash Dividend will be paid on November 20, 2020 to the shareholders of record of the Company’s common stock as of the close of business on November 9, 2020.

Nature of Business

16 unchanged sentences

The global outbreak of COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S.

government in March 2020, with governments world-wide implementing safety measures restricting travel and requiring citizen

government in March 2020, with governments world-wide implementing safety measures restricting travel and requiring citizen lockdowns and self-confinements for quarantining purposes.

This has negatively affected the U.S.

and global economy, disrupted global

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

lockdowns and self-confinements for quarantining purposes.

This has negatively affected the U.S.

and global economy, disrupted global supply chains, and resulted in significant transport restrictions and disruption of financial markets.

supply chains, and resulted in significant transport restrictions and disruption of financial markets.

The impact of this pandemic has created significant uncertainty in the global economy and has affected our business, employees, retail and distribution partners, suppliers, and customers.

The decline in retail demand within our Black Diamond segment over the second half of March 2020 and during the three months ended June 30, 2020, negatively impacted our sales and profitability for the first and second quarters of 2020.

We also expect an adverse impact on the Company’s sales and profitability in future periods.

The decline in retail demand within our Black Diamond segment over the second half of March 2020 and during the three months ended June 30, 2020 and September 30, 2020, negatively impacted our sales and profitability for the first, second and third quarters of 2020.

We also expect an impact on the Company’s sales and profitability in future periods.

The duration of these trends and the magnitude of such impacts cannot be precisely estimated at this time, as they are affected by a number of factors (some of which are outside management’s control), including those presented in Item 1A.

Risk Factors of our Quarterly Report for the quarterly period ended March 31, 2020.

We are mitigating some of the negative impacts to our operating results by taking significant actions to improve our current operating results and liquidity position, including drawing on the credit facility, suspending share repurchases and cash dividends, postponing non-essential capital expenditures, reducing operating costs, modulating production in line with demand, initiating workforce reductions and furloughs, and substantially reducing discretionary spending.

We are mitigating some of the negative impacts to our operating results by taking significant actions to improve our current operating results and liquidity position, including drawing on the credit facility, suspending share repurchases and temporarily suspending cash dividends, postponing non-essential capital expenditures, reducing operating costs, modulating production in line with demand, initiating workforce reductions and furloughs, and substantially reducing discretionary spending.

We will continue to adjust mitigation measures as needed related to health and safety.

2 unchanged sentences

As the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess the impact on the Company and respond accordingly.

Sustained adverse impacts to the Company, certain suppliers, dealers or customers may also affect the Company’s future cash flows, liquidity, and valuation of certain assets and therefore may increase the likelihood of an impairment charge, write-off, or reserve associated with such assets, including goodwill, indefinite and finite-lived intangible assets, property and equipment, inventories, accounts receivable, tax assets, and other assets.

Sustained adverse impacts to the Company, certain of its suppliers, dealers or customers may also affect the Company’s future cash flows, liquidity, and valuation of certain assets and therefore may increase the likelihood of an impairment charge, write-off, or reserve associated with such assets, including goodwill, indefinite and finite-lived intangible assets, property and equipment, inventories, accounts receivable, net deferred tax assets, and other assets.

Use of Estimates

8 unchanged sentences

This ASU provides temporary optional expedients and exceptions to existing guidance on contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as the London Inter-Bank Offered Rate ( “ LIBOR ” ) which is being phased out in 2021, to alternate reference rates, such as the Secured Overnight Financing Rate ( “ SOFR ” ).

The standard was effective upon issuance and allowed application to contract changes as early as January 1, 2020.

The standard is currently effective and upon adoption may be applied prospectively to contract modifications made on or before December 31, 2022.

The provisions have impact as contract modifications and other changes occur while LIBOR is phased out.

1 unchanged sentence

Management will continue its assessment and monitor regulatory developments during the LIBOR transition period.

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CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

Inventories, as of June 30, 2020 and December 31, 2019, were as follows:

June 30, 2020

Inventories, as of September 30, 2020 and December 31, 2019, were as follows:

September 30, 2020

December 31, 2019

3 unchanged sentences

PROPERTY AND EQUIPMENT

Property and equipment, net, as of June 30, 2020 and December 31, 2019, were as follows:

June 30, 2020

Property and equipment, net, as of September 30, 2020 and December 31, 2019, were as follows:

September 30, 2020

December 31, 2019

9 unchanged sentences

Balance at December 31, 2019

Balance at June 30, 2020

Balance at September 30, 2020

Indefinite Lived Intangible Assets

2 unchanged sentences

Impact of foreign currency exchange rates

Balance at June 30, 2020

Balance at September 30, 2020

CLARUS CORPORATION

5 unchanged sentences

Impact of foreign currency exchange rates

Gross balance at June 30, 2020

Other intangible assets, net of amortization as of June 30, 2020 and December 31, 2019, were as follows:

June 30, 2020

Gross balance at September 30, 2020

Other intangible assets, net of amortization as of September 30, 2020 and December 31, 2019, were as follows:

September 30, 2020

December 31, 2019

5 unchanged sentences

LONG-TERM DEBT

Long-term debt as of June 30, 2020 and December 31, 2019, was as follows:

June 30, 2020

Long-term debt as of September 30, 2020 and December 31, 2019, was as follows:

September 30, 2020

December 31, 2019

3 unchanged sentences

Less current portion

(a) As of June 30, 2020, the Company had drawn $ 9,566 on the $ 60,000 revolving commitment that was available under the credit agreement with JPMorgan Chase Bank, N.A., with a maturity date of May 3, 2024.

(a) As of September 30, 2020, the Company had drawn $ 21,066 on the $ 60,000 revolving commitment that was available under the credit agreement with JPMorgan Chase Bank, N.A., with a maturity date of May 3, 2024.

The Company pays interest monthly on any borrowings on the Credit Agreement.

As of June 30, 2020 and December 31, 2019, the rate was 1.7500 % and 3.3125 %, respectively.

As of September 30, 2020 and December 31, 2019, the rate was 1.6875 % and 3.3125 %, respectively.

The Credit Agreement contains restrictions on the Company’s ability to pay dividends or make distributions or other restricted payments if certain conditions in the Credit Agreement are not fulfilled .

The Credit Agreement also includes other customary affirmative and negative covenants, including financial covenants relating to the Company’s consolidated total leverage ratio and fixed charge coverage ratio.

The Company was in compliance with the debt covenants set forth in the Credit Agreement as of June 30, 2020.

The Company was in compliance with the debt covenants set forth in the Credit Agreement as of September 30, 2020.

(b) A foreign subsidiary of the Company has a revolving credit facility with a financial institution which matures on March 31, 2022.

The foreign subsidiary pays interest monthly on any borrowings on the credit facility.

As of June 30, 2020, the rate was 1.3864 %.

(c) Under the Credit Agreement, the Company had access to a term loan facility that would be available for drawdown until May 3,

As of September 30, 2020, the rate was 1.3387 %.

(c) Under the Credit Agreement, the Company had access to a term loan facility that was available for drawdown until May 3,

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

On April 30, 2020, the Company borrowed $ 20,000 under such term loan facility and used the proceeds to pay down amounts outstanding under the revolving portion of the Credit Agreement.

On April 30, 2020, the Company borrowed $ 20,000 under such term loan facility.

The Company is required to repay the term loan through quarterly payments of $ 1,000 each beginning with September 30, 2020, and any remaining obligations will be repaid in full on the maturity date of the Credit Agreement of May 3, 2024.

The Company pays interest monthly on any borrowings on the Credit Agreement.

As of June 30, 2020, the rate was 1.6875 %.

As of September 30, 2020, the rate was 1.6875 %.

DERIVATIVE FINANCIAL INSTRUMENTS

4 unchanged sentences

The Company accounts for these contracts as cash flow hedges and tests effectiveness by determining whether changes in the expected cash flow of the derivative offset, within a range, changes in the expected cash flow of the hedged item.

At June 30, 2020, the Company’s derivative contracts had remaining maturities of less than one and one-half years.

At September 30, 2020, the Company’s derivative contracts had remaining maturities of less than one and one-half years.

The counterparties to these transactions had both long-term and short-term investment grade credit ratings.

The maximum net exposure of the Company’s credit risk to the counterparties is generally limited to the aggregate unrealized loss of all contracts with that counterparty.

At June 30, 2020, there was no such exposure to the counterparties.

The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain of $ 458 on all contracts at June 30, 2020.

The maximum net exposure of the Company’s credit risk to the counterparties is generally limited to the aggregate unrealized loss of all contracts with that counterparty, which is $ 688 as of September 30, 2020.

The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain on all contracts.

At September 30, 2020, there was no such exposure to the counterparties.

The Company’s derivative counterparties have strong credit ratings and as a result, the Company does not require collateral to facilitate transactions.

The Company held the following contracts designated as hedging instruments as of June 30, 2020 and December 31, 2019:

June 30, 2020

The Company held the following contracts designated as hedging instruments as of September 30, 2020 and December 31, 2019:

September 30, 2020

Foreign exchange contracts - Canadian Dollars

February 2021

Foreign exchange contracts - Euros

Foreign exchange contracts - Swiss Francs

February 2022

December 31, 2019

4 unchanged sentences

Foreign exchange contracts - Swiss Francs

For contracts that qualify as effective hedge instruments, the effective portion of gains and losses resulting from changes in fair value of the instruments are included in accumulated other comprehensive (loss) income and reclassified to sales in the period the underlying hedged transaction is recognized in earnings.

Gains of $ 294 and $ 302 were reclassified to sales during the three months ended June 30, 2020 and 2019, respectively, and $ 582 and $ 583 were reclassified to sales during the six months ended June 30, 2020 and 2019, respectively.

For contracts that qualify as effective hedge instruments, the effective portion of gains and losses resulting from changes in fair value of the instruments are included in accumulated other comprehensive income (loss) and reclassified to sales in the period the underlying hedged transaction is recognized in earnings.

Gains (losses) of $( 376 ) and $ 261 were reclassified to sales during the three months ended September 30, 2020 and 2019, respectively, and $ 206 and $ 844 were reclassified to sales during the nine months ended September 30, 2020 and 2019, respectively.

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

The following table presents the balance sheet classification and fair value of derivative instruments as of June 30, 2020 and December 31, 2019:

The following table presents the balance sheet classification and fair value of derivative instruments as of September 30, 2020 and December 31, 2019:

Classification

June 30, 2020

September 30, 2020

December 31, 2019

9 unchanged sentences

Other long-term liabilities

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

Accumulated other comprehensive (loss) income (“AOCI”) primarily consists of foreign currency translation adjustments and changes in our forward foreign exchange contracts.

The following table sets forth the changes in AOCI, net of tax, for the three months ended June 30, 2020:

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) (“AOCI”) primarily consists of foreign currency translation adjustments and changes in our forward foreign exchange contracts.

The following table sets forth the changes in AOCI, net of tax, for the three months ended September 30, 2020:

Foreign Currency Translation Adjustments

Unrealized Gains (Losses) on Cash Flow Hedges

Balance as of March 31, 2020

Balance as of June 30, 2020

Other comprehensive income (loss) before reclassifications

1 unchanged sentence

Net current period other comprehensive income (loss)

Balance as of June 30, 2020

The following table sets forth the changes in AOCI, net of tax, for the three months ended June 30, 2019:

Balance as of September 30, 2020

The following table sets forth the changes in AOCI, net of tax, for the three months ended September 30, 2019:

Foreign Currency Translation Adjustments

Unrealized Gains (Losses) on Cash Flow Hedges

Balance as of March 31, 2019

Other comprehensive income (loss) before reclassifications

Amounts reclassified from other comprehensive income (loss)

Net current period other comprehensive income (loss)

Balance as of June 30, 2019

Other comprehensive (loss) income before reclassifications

Amounts reclassified from other comprehensive (loss) income

Net current period other comprehensive (loss) income

Balance as of September 30, 2019

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

The following table sets forth the changes in AOCI, net of tax, for the six months ended June 30, 2020:

The following table sets forth the changes in AOCI, net of tax, for the nine months ended September 30, 2020:

Foreign Currency Translation Adjustments

1 unchanged sentence

Balance as of December 31, 2019

Other comprehensive (loss) income before reclassifications

Amounts reclassified from other comprehensive (loss) income

Net current period other comprehensive (loss) income

Balance as of June 30, 2020

The following table sets forth the changes in AOCI, net of tax, for the six months ended June 30, 2019:

Other comprehensive income (loss) before reclassifications

Amounts reclassified from other comprehensive income (loss)

Net current period other comprehensive income (loss)

Balance as of September 30, 2020

The following table sets forth the changes in AOCI, net of tax, for the nine months ended September 30, 2019:

Foreign Currency Translation Adjustments

1 unchanged sentence

Balance as of December 31, 2018

Other comprehensive loss before reclassifications

Amounts reclassified from other comprehensive loss

Net current period other comprehensive loss

Balance as of June 30, 2019

The effects on net income of amounts reclassified from unrealized gains on cash flow hedges for foreign exchange contracts for the three and six months ended June 30, 2020 and 2019, were as follows:

Other comprehensive (loss) income before reclassifications

Amounts reclassified from other comprehensive (loss) income

Net current period other comprehensive (loss) income

Balance as of September 30, 2019

The effects on net income of amounts reclassified from unrealized gains on cash flow hedges for foreign exchange contracts for the three and nine months ended September 30, 2020 and 2019, were as follows:

Gains reclassified from AOCI to the Consolidated Statements of Comprehensive Income (Loss)

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

Statements of Comprehensive Income (Loss)

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Foreign exchange contracts:

Income tax expense

Income tax (benefit) expense

Amount reclassified, net of tax

10 unchanged sentences

(in thousands, except per share amounts)

Assets and liabilities measured at fair value on a recurring basis at June 30, 2020 and December 31, 2019 were as follows:

June 30, 2020

Assets and liabilities measured at fair value on a recurring basis at September 30, 2020 and December 31, 2019 were as follows:

September 30, 2020

Forward exchange contracts

4 unchanged sentences

Derivative financial instruments are recorded at fair value based on current market pricing models.

No nonrecurring fair value measurements existed at June 30, 2020 and December 31, 2019.

No nonrecurring fair value measurements existed at September 30, 2020 and December 31, 2019.

EARNINGS (LOSS) PER SHARE

4 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Weighted average shares outstanding - basic

1 unchanged sentence

Weighted average shares outstanding - diluted

Net (loss) income per share:

For the three months ended June 30, 2020 and 2019, equity awards of 4,633 and 4,395 , respectively, and for the six months ended June 30, 2020 and 2019, equity awards of 4,590 and 605 , respectively, were anti-dilutive and therefore not included in the calculation of earnings (loss) per share for these periods.

Net income (loss) per share:

For the three months ended September 30, 2020 and 2019, equity awards of 927 and 798 , respectively, and for the nine months ended September 30, 2020 and 2019, equity awards of 4,384 and 669 , respectively, were anti-dilutive and therefore not included in the calculation of earnings (loss) per share for these periods.

CLARUS CORPORATION

6 unchanged sentences

The 2015 Plan will continue in effect until December 2025 unless terminated sooner.

During the six months ended June 30, 2020, the Company issued stock options for an aggregate of 263 shares under the 2015 Plan to directors and employees of the Company.

Options Granted:

During the nine months ended September 30, 2020, the Company issued stock options for an aggregate of 613 shares under the 2015 Plan to directors and employees of the Company.

Of the 613 options issued, 38 options vest in four equal consecutive quarterly tranches from the date of grant.

1 unchanged sentence

50 options issued vest in five equal annual tranches beginning December 31, 2020.

The remaining 30 options issued vest in three equal annual tranches beginning December 31, 2020.

30 options issued vest in three equal annual tranches beginning December 31, 2020.

The remaining 350 options issued vest in three equal annual tranches beginning August 27, 2021.

For computing the fair value of the stock-based awards, the fair value of each option grant has been estimated as of the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Options Granted During the Six Months Ended June 30, 2020

Number of options

Option vesting period

Grant price (per share)

$ 9.99 - $ 15.00

6 unchanged sentences

Expected life (years) (b)

Weighted average fair value

Weighted average fair value (per share)

$ 3.72 - $ 4.35

1 unchanged sentence

(b) The expected term was determined based upon the underlying terms of the awards and the category and employment history of employee award recipient.

The grant date fair value of the stock options granted during the six months ended June 30, 2020 was $ 1,067 , which will be recognized over the vesting period of the options.

The total non-cash stock compensation expense related to restricted stock, stock options and stock awards recorded by the Company for the three months ended June 30, 2020 and 2019 was $ 616 and $ 783 , respectively, and for the six months ended June 30, 2020 and 2019 was $ 1,229 and $ 1,568 , respectively.

For the three and six months ended June 30, 2020 and 2019, the majority of stock-based compensation costs were classified as selling, general and administrative expenses.

As of June 30, 2020, there were 1,403 unvested stock options and unrecognized compensation cost of $ 4,340 related to unvested stock options, as well as 600 unvested restricted stock awards and unrecognized compensation costs of $ 2,518 related to unvested restricted stock awards.

The grant date fair value of the stock options granted during the nine months ended September 30, 2020 was $ 2,581 , which will be recognized over the vesting period of the options.

Stock Award Granted:

On September 14, 2020, the Company issued and granted to the Executive Chairman a stock award of 244 shares under the 2015 Plan which vested immediately.

The fair value of the stock award was calculated as of the date of grant using the closing market price.

The grant date fair value of the stock award granted during the nine months ended September 30, 2020 was $ 3,314 , which was recognized immediately.

Market Condition Restricted Shares Granted:

On August 27, 2020, the Company issued and granted to an employee a restricted stock award of 100 restricted shares under the 2015 Plan, of which 100 restricted shares will vest if, on or before August 27, 2023, the Fair Market Value (as defined in the Plan) of the Company’s common stock shall have equaled or exceeded $ 15.00 per share for twenty consecutive trading days.

For computing the fair value of the 100 restricted shares with a market condition, the fair value of the restricted stock award grant has been estimated as of the date of grant using the Monte-Carlo pricing model with the assumptions below.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

August 27, 2020

Number issued

Vesting period

$ 15.00 stock price target

Grant price (per share)

Dividend yield

Expected volatility

Risk-free interest rate

Expected term (years)

Weighted average fair value (per share)

Using these assumptions, the fair value of the market condition restricted stock award granted on August 27, 2020 was $ 991 .

The total non-cash stock compensation expense related to restricted stock, stock options and stock awards recorded by the Company for the three months ended September 30, 2020 and 2019 was $ 4,204 and $ 678 , respectively, and for the nine months ended September 30, 2020 and 2019 was $ 5,433 and $ 2,246 , respectively.

For the three and nine months ended September 30, 2020 and 2019, the majority of stock-based compensation costs were classified as selling, general and administrative expenses.

As of September 30, 2020, there were 1,744 unvested stock options and unrecognized compensation cost of $ 5,354 related to unvested stock options, as well as 600 unvested restricted stock awards and unrecognized compensation costs of $ 3,119 related to unvested restricted stock awards.

COMMITMENTS AND CONTINGENCIES

As a consumer goods manufacturer and distributor, the Company faces the risk of product liability and related lawsuits involving claims for substantial money damages, product recall actions and higher than anticipated rates of warranty returns or other returns of goods.

The Company is therefore vulnerable to various personal injury and property damage lawsuits relating to its products and incidental to its business.

The Company is involved in various legal disputes and other legal proceedings that arise from time to time in the ordinary course of business.

3 unchanged sentences

It is possible that, as additional information becomes available, the impact on the Company could have a different effect.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The Company’s U.S.

federal statutory tax rate of 21 % and its foreign operations that are considered to be permanently reinvested have statutory tax rates of approximately 25 %.

The difference between the Company’s estimated effective tax rate and the U.S.

federal statutory tax rate of 21 % for the three and nine months ended September 30, 2020, was due to permanent book to tax differences primarily related to incentive stock options.

As of December 31, 2019, the Company’s gross deferred tax asset was $ 43,945 .

The Company had recorded a valuation allowance of $ 28,632 , resulting in a net deferred tax asset of $ 15,313 , before deferred tax liabilities of $ 8,633 .

The Company has provided a valuation allowance against a portion of the deferred tax assets as of June 30, 2020 and December 31, 2019, because the ultimate realization of those assets did not meet the more likely than not criteria.

The Company has provided a valuation allowance against a portion of the deferred tax assets as of September 30, 2020 and December 31, 2019, because the ultimate realization of those assets did not meet the more likely than not criteria.

The majority of the Company’s deferred tax assets consist of net operating loss (“NOL”) carryforwards for federal tax purposes.

1 unchanged sentence

In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and net operating loss and credit carryforwards expire.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

carryforwards expire.

The estimates and judgments associated with the Company’s valuation allowance on deferred tax assets are considered critical due to the amount of deferred tax assets recorded by the Company on its consolidated balance sheet and the judgment required in determining the Company’s future taxable income.

27 unchanged sentences

We also offer advanced skis, ski poles, ski skins, and snow safety products, including avalanche airbag systems, avalanche transceivers, shovels, and probes.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

 Our Sierra segment, which includes Sierra, is an iconic American manufacturer of a wide range of high-performance bullets and ammunition for both rifles and pistols.

5 unchanged sentences

Revenue by category as a percentage of total consolidated revenues is as follows:

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Contract liabilities are recorded as a component of accounts payable and accrued liabilities when customers remit contractual cash payments in advance of us satisfying performance obligations which are satisfied at a future point of time.

Contract liabilities were not material at June 30, 2020 and December 31, 2019.

Contract liabilities were not material at September 30, 2020 and December 31, 2019.

Contract liabilities are derecognized when the performance obligation is satisfied.

Revenue recognized from satisfaction of performance obligations relating to the advanced payments during the three and six months ended June 30, 2020 and 2019 were not material.

No other material remaining performance obligations exist at June 30, 2020.

Revenue recognized from satisfaction of performance obligations relating to the advanced payments during the three and nine months ended September 30, 2020 and 2019 were not material.

No other material remaining performance obligations exist at September 30, 2020.

Financial information for our segments is as follows:

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Sales to external customers:

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Total sales to external customers

Segment operating (loss) income:

Segment operating income:

Black Diamond

Total segment operating (loss) income

Total segment operating income

Restructuring charge

2 unchanged sentences

Interest expense, net

(Loss) income before income tax

Income (loss) before income tax

There were no intercompany sales between the Black Diamond and Sierra segments for the periods presented.

3 unchanged sentences

(in thousands, except per share amounts)

Total assets by segment, as of June 30, 2020 and December 31, 2019, were as follows:

June 30, 2020

Total assets by segment, as of September 30, 2020 and December 31, 2019, were as follows:

September 30, 2020

December 31, 2019

2 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Capital expenditures:

7 unchanged sentences

Total amortization

RELATED PARTY TRANSACTIONS

During the three months ended September 30, 2020, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with three existing stockholders of the Company.

Pursuant to the Purchase Agreement, the Company sold its common stock in a registered direct offering (the “Offering”).

Upon the Company’s closing of the Offering, the Company paid a fee in the amount of $ 250 to Kanders & Company, Inc.

(“Kanders & Company”), which were deducted from the net proceeds, in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, and negotiating the Offering.

Kanders, the Company’s Executive Chairman of the Board of Directors is a member of the Board of Directors and sole stockholder of Kanders & Company.

Additionally, as of September 30, 2020, the Company recorded a liability in the amount of $ 500 owed to Kanders & Company, which is included in transaction costs, in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, performing due diligence and negotiating the acquisition of Barnes.

SUBSEQUENT EVENT

Barnes Acquisition

On September 30, 2020, Sierra entered into an Asset Purchase Agreement (the “Barnes Asset Purchase Agreement”) with Remington Outdoor Company, Inc.

and certain of its subsidiaries (the “Seller”), pursuant to which Sierra agreed to (i) acquire certain assets of the Seller relating to the Barnes brand of bullets (“Barnes”), including equipment, inventory, intellectual property (including exclusive use of Barnes’ intellectual property in the all-copper and powdered metallurgy ammunition fields as well as its trademarks) and a leasehold interest in certain real property located in Mona, Utah (collectively, the “Barnes Purchased Assets”) and (ii) assume certain liabilities related to the Barnes Purchased Assets in a transaction to be effected in Seller’s bankruptcy proceeding under Chapter 11 of title 11 of the United States Code, §§ 101 et seq.

(the “Bankruptcy Code”) which commenced on July 27, 2020 in the United States Bankruptcy

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Court for the Northern District of Alabama (the “Bankruptcy Court”).

Pursuant to the Barnes Asset Purchase Agreement, the purchase price to be paid for the Barnes Purchased Assets is $ 30,500 (the “Barnes Purchase Price”).

Sierra paid to Seller a $ 30,500 deposit to be applied to the Barnes Purchase Price which was recorded in Other long-term assets as of September 30, 2020.

The acquisition of the Barnes Purchased Assets (the “Barnes Acquisition”) contemplated by the Barnes Asset Purchase Agreement was subject to a number of closing conditions, including, among others (i) the Sale Order entered on September 30, 2020 by the Bankruptcy Court in the Seller’s Chapter 11 case being in effect as of the closing of the Acquisition, and (ii) compliance with the obligations of each party set forth in the Asset Purchase Agreement.

The Seller and Sierra have each made representations, warranties and covenants in the Asset Purchase Agreement customary for transactions of this type under the Bankruptcy Code.

On October 2, 2020, Sierra completed the acquisition of the Barnes Purchased Assets.

Based upon the timing of the Barnes Acquisition, the initial accounting is not yet complete as the Company gathers additional information related to the Barnes Purchased Assets.

The Company is in the process of obtaining third-party valuations of certain intangible assets.

The preliminary application of acquisition accounting to the Barnes Purchased Assets, as well as the results of operations of Barnes, will first be reflected in the Company's consolidated financial results as of and for the three and twelve months ending December 31, 2020.

The operating results of Barnes are expected to be included within the Sierra segment.

Acquisition-related costs for the Barnes Acquisition, which were included in transaction costs during the three and nine months ended September 30, 2020 were $ 850 .

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements