What changed in this filing

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Item 1. Financial Statements

2021-05-10 compared with 2020-11-09 · 181 added, 314 removed, 363 unchanged (58% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

September 30, 2020

March 31, 2021

December 31, 2020

21 unchanged sentences

Stockholders'

Preferred stock, $.

0001 par value per share;

Preferred stock, $ 0.0001 par value per share;

shares authorized;

5 unchanged sentences

Treasury stock, at cost

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Total stockholders'

5 unchanged sentences

Three Months Ended

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Domestic sales

6 unchanged sentences

Operating income

Other income (expense)

Other expense

Interest expense, net

Total other income (expense), net

Total other expense, net

Income before income tax

Income tax expense (benefit)

Other comprehensive income, net of tax:

Income tax (benefit) expense

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustment

Unrealized (loss) gain on hedging activities

Other comprehensive income

Unrealized gain on hedging activities

Other comprehensive (loss) income

Comprehensive income

3 unchanged sentences

CLARUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands, except per share amounts)

Nine Months Ended

September 30, 2020

September 30, 2019

Domestic sales

International sales

Cost of goods sold

Operating expenses

Selling, general and administrative

Restructuring charge

Transaction costs

Total operating expenses

Operating (loss) income

Other expense

Interest expense, net

Total other expense, net

(Loss) income before income tax

Income tax benefit

Net (loss) income

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment

Unrealized (loss) gain on hedging activities

Other comprehensive income (loss)

Comprehensive (loss) income

Net (loss) income per share:

Weighted average shares outstanding:

See accompanying notes to condensed consolidated financial statements.

CLARUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Nine Months Ended

September 30, 2020

September 30, 2019

Three Months Ended

March 31, 2021

March 31, 2020

Cash Flows From Operating Activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation of property and equipment

9 unchanged sentences

Accounts payable and accrued liabilities

Net cash provided by operating activities

Net cash (used in) provided by operating activities

Cash Flows From Investing Activities:

Deposit for business acquisition

Proceeds from disposition of property and equipment

4 unchanged sentences

Repayments on revolving credit facilities

Repayments of financing and capital leases

Proceeds from issuance of long-term debt

Payment of debt issuance costs

Repayments of term note

Purchase of treasury stock

1 unchanged sentence

Cash dividends paid

Proceeds from the sale of common stock

Common stock issuance costs

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Effect of foreign exchange rates on cash

Change in cash

Cash, beginning of period

Cash, beginning of year

Cash, end of period

5 unchanged sentences

Lease liabilities arising from obtaining right of use assets

Unpaid debt issuance costs

Stock dividends

See accompanying notes to condensed consolidated financial statements.

7 unchanged sentences

Balance, December 31, 2019

Other comprehensive loss

Cash dividends ($ 0.025 per share)

Stock-based compensation expense

Balance, March 31, 2019

Other comprehensive loss

Cash dividends ($ 0.025 per share)

Purchase of treasury stock

Stock-based compensation expense

Proceeds from exercise of options

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)

Balance, March 31, 2020

Treasury Stock

3 unchanged sentences

Balance, December 31, 2020

Other comprehensive income

Cash dividends ($ 0.025 per share)

Stock-based compensation expense

Balance, March 31, 2020

Other comprehensive loss

Stock dividends ($ 0.025 per share)

Purchase of treasury stock

Stock-based compensation expense

Proceeds from exercise of options

Balance, June 30, 2020

Other comprehensive income

Stock dividends ($ 0.025 per share)

Cash dividends ($ 0.025 per share)

Purchase of treasury stock

1 unchanged sentence

Proceeds from exercise of options

Issuance of common stock, net of issuance costs

Balance, September 30, 2020

Balance, March 31, 2021

See accompanying notes to condensed consolidated financial statements.

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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 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.

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 March 31, 2021 and December 31, 2020 and for the three months ended March 31, 2021 and 2020, 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 nine months ended September 30, 2020 are not necessarily indicative of the results to be obtained for the year ending December 31, 2020.

The results for the three months ended March 31, 2021 are not necessarily indicative of the results to be obtained for the year ending December 31, 2021.

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, 2020, filed with the Securities and Exchange Commission (the “SEC”) on March 8, 2021.

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(“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 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.

On October 2, 2020, the Company completed the acquisition of certain assets and liabilities constituting the Barnes business (“Barnes”).

Nature of Business

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Clarus’ primary business is as a leading designer, developer, manufacturer and distributor of outdoor equipment and lifestyle products focused on the climb, ski, mountain, sport and skincare markets.

The Company’s products are principally sold under the Black Diamond®, Sierra®, PIEPS® and SKINourishment® brand names through outdoor specialty and online retailers, distributors and original equipment manufacturers throughout the U.S.

The Company’s products are principally sold under the Black Diamond®, Sierra®, Barnes®, PIEPS® and SKINourishment® brand names through outdoor specialty and online retailers, distributors and original equipment manufacturers throughout the U.S.

and internationally.

8 unchanged sentences

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

Through our Sierra brand, we manufacture a wide range of high-performance bullets and ammunition for both rifles and pistols that are used for precision target shooting, hunting and military and law enforcement purposes.

Impact of COVID-19

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 lockdowns and self-confinements for quarantining purposes.

This has negatively affected the U.S.

and global economy, disrupted global

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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 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 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.

Those measures have and might continue to include temporarily suspending manufacturing or retail operations, modifying workspaces, continuing social distancing policies, implementing new personal protective equipment or health screening policies at our facilities, or such other industry best practices needed to continue maintain a healthy and safe environment for our employees amidst the pandemic.

These countermeasures are expected to partially mitigate the impacts of COVID-19 on our full year 2020 financial results.

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 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.

Through our Sierra and Barnes brands, we manufacture a wide range of high-performance bullets and ammunition for both rifles and pistols that are used for precision target shooting, hunting and military and law enforcement purposes.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

Estimates are used to record the allowance for credit losses and doubtful accounts, liabilities for product warranties, excess or obsolete inventory, valuation of deferred tax assets, and valuation of long-lived assets, goodwill and other intangible assets.

We base our estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances.

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

The more significant estimates relate to the fair value of assets acquired in business combinations, excess or obsolete inventory, allowance for credit losses and doubtful accounts, and valuation of deferred tax assets.

We base our estimates on historical experience, projected future cash flows, and other assumptions that are believed to be reasonable under the circumstances.

Actual results could differ from these estimates.

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Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

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 ” ).

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

alternate reference rates, such as the Secured Overnight Financing Rate (“SOFR”).

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

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

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 constituting the Barnes business (“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 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”).

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

The acquisition was accounted for as a business combination.

The Company believes the acquisition of Barnes is expected to provide the Company with a greater combined global revenue base, increased gross margins, profitability and free cash flows, and access to increased liquidity to further acquire and grow businesses.

The following table is a reconciliation to the fair value of the purchase consideration and how the purchase consideration is allocated to assets acquired and liabilities assumed which have been estimated at their fair values.

The excess of purchase consideration over the assets acquired and liabilities assumed is recorded as goodwill.

Goodwill is included in the Sierra segment.

Estimated Fair Value

Total Purchase Consideration

Assets Acquired and Liabilities Assumed

Prepaid and other current assets

Property and equipment

Other intangible assets

Indefinite-lived intangible assets

Other long-term assets

Accounts payable and accrued liabilities

Other long-term liabilities

Total Liabilities

Net Book Value Acquired

The estimated fair value of inventory was recorded at expected sales price less cost to sell plus a reasonable profit margin for selling efforts.

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

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

September 30, 2020

In connection with the acquisition, the Company acquired exclusive rights to Barnes’ trademarks, customer relationships, and product technologies.

The amounts assigned to each class of intangible asset, other than goodwill acquired, and the related average useful lives are as follows:

Intangibles subject to amortization

Customer relationships

Product technologies

Intangibles not subject to amortization

The goodwill consists largely of the synergies expected from combining operations.

The acquisition of Barnes is treated as a purchase of assets for tax purposes.

As such, the basis in the assets of Barnes is equal for both book and tax, which results in no initial recognition of deferred tax assets or liabilities.

Furthermore, the full amount of goodwill recorded of $ 8,625 is expected to be deductible for tax purposes.

No pre-existing relationships existed between the Company and the Sellers prior to the acquisition.

Barnes revenue and operating income were included in the Sierra segment.

The following unaudited pro forma results are based on the individual historical results of the Company and Barnes, with adjustments to give effect as if the acquisition and borrowings used to finance the acquisition had occurred on January 1, 2019, after giving effect to certain adjustments including the amortization of intangible assets, depreciation of fixed assets, interest expense and taxes and assumes the purchase price was allocated to the assets purchased and liabilities assumed based on their fair market values at the date of purchase.

Three Months Ended

March 31, 2020

Net income per share - basic

Net income per share - diluted

The unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred had the transaction been consummated as of January 1, 2019.

Furthermore, such pro forma information is not necessarily indicative of future operating results of the combined companies and should not be construed as representative of the operating results of the combined companies for any future dates or periods.

Inventories, as of March 31, 2021 and December 31, 2020, were as follows:

March 31, 2021

December 31, 2020

2 unchanged sentences

Raw materials and supplies

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

PROPERTY AND EQUIPMENT

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

September 30, 2020

Property and equipment, net, as of March 31, 2021 and December 31, 2020, were as follows:

March 31, 2021

December 31, 2020

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Balance at December 31, 2020

Balance at September 30, 2020

Balance at March 31, 2021

Indefinite Lived Intangible Assets

2 unchanged sentences

Impact of foreign currency exchange rates

Balance at September 30, 2020

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Balance at March 31, 2021

Other Intangible Assets, net

2 unchanged sentences

Impact of foreign currency exchange rates

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

Gross balance at March 31, 2021

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Other intangible assets, net of amortization as of March 31, 2021 and December 31, 2020, were as follows:

March 31, 2021

December 31, 2020

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LONG-TERM DEBT

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

September 30, 2020

Long-term debt as of March 31, 2021 and December 31, 2020, was as follows:

March 31, 2021

December 31, 2020

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Less current portion

(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.

(a) As of March 31, 2021, the Company had drawn $ 10,651 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 September 30, 2020 and December 31, 2019, the rate was 1.6875 % and 3.3125 %, respectively.

As of March 31, 2021 and December 31, 2020, the rate was 1.6250 % and 2.0625 %, respectively.

All obligations under the Credit Agreement are secured by 100 % of our domestic, and 65 % of our foreign, subsidiary equity interests, as well as accounts receivable, inventory, intellectual property and certain other assets owned by the Company.

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 September 30, 2020.

The Company was in compliance with the debt covenants set forth in the Credit Agreement as of March 31, 2021.

(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 September 30, 2020, the rate was 1.3387 %.

As of March 31, 2021 and December 31, 2020, the rate was 1.3387 % and 1.3387 %, respectively.

(c) Under the Credit Agreement, the Company had access to a term loan facility that was available for drawdown until May 3, 2020.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

1 unchanged sentence

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

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

As of March 31, 2021 and December 31, 2020, the rate was 1.6250 % and 2.0625 %, respectively.

DERIVATIVE FINANCIAL INSTRUMENTS

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If the anticipated transactions are deemed probable, the resulting relationships are formally designated as cash flow hedges.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

At March 31, 2021, the Company’s derivative contracts had remaining maturities of less than one year.

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, 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 exposure of counterparty credit risk is limited to the aggregate unrealized gain on all contracts, which is $ 106 as of March 31, 2021.

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 September 30, 2020 and December 31, 2019:

September 30, 2020

The Company held the following contracts designated as hedging instruments as of March 31, 2021 and December 31, 2020:

March 31, 2021

Foreign exchange contracts - Canadian Dollars

February 2022

Foreign exchange contracts - Euros

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February 2022

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 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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

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 and reclassified to sales in the period the underlying hedged transaction is recognized in earnings.

Gains (losses) of $( 321 ) and $ 288 were reclassified to sales during the three months ended March 31, 2021 and 2020, respectively.

The following table presents the balance sheet classification and fair value of derivative instruments as of March 31, 2021 and December 31, 2020:

Classification

September 30, 2020

March 31, 2021

December 31, 2020

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Prepaid and other current assets

Forward exchange contracts

Other long-term assets

Derivative instruments in liability positions:

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Other long-term liabilities

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 June 30, 2020

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 three months ended September 30, 2019:

Foreign Currency Translation Adjustments

Unrealized Gains (Losses) on Cash Flow Hedges

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 nine months ended September 30, 2020:

ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive 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 March 31, 2021:

Foreign Currency Translation Adjustments

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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:

Balance as of March 31, 2021

The following table sets forth the changes in AOCI, net of tax, for the three months ended March 31, 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 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)

Other comprehensive income (loss) before reclassifications

Amounts reclassified from other comprehensive income (loss)

Net current period other comprehensive loss

Balance as of March 31, 2020

The effects on net income of amounts reclassified from unrealized gains on cash flow hedges for foreign exchange contracts for the three months ended March 31, 2021 and 2020, were as follows:

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

Affected line item in the Consolidated

Three Months Ended

Nine Months Ended

Statements of Comprehensive Income (Loss)

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Statements of Comprehensive Income

March 31, 2021

March 31, 2020

Foreign exchange contracts:

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(in thousands, except per share amounts)

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

Assets and liabilities measured at fair value on a recurring basis at March 31, 2021 and December 31, 2020 were as follows:

March 31, 2021

Forward exchange contracts

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

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

EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing earnings (loss) by the weighted average number of common shares outstanding during each period.

Diluted earnings (loss) per share is computed by dividing earnings (loss) by the total of the weighted average number of shares of common stock outstanding during each period, plus the effect of dilutive outstanding stock options and unvested restricted stock grants.

Potentially dilutive securities are excluded from the computation of diluted earnings (loss) per share if their effect is anti-dilutive to the loss from continuing operations.

The following table is a reconciliation of basic and diluted shares of common stock outstanding used in the calculation of earnings (loss) per share:

No nonrecurring fair value measurements existed at March 31, 2021 and December 31, 2020.

STOCKHOLDERS’ EQUITY

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 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.

On April 30, 2021 , the Company announced that its Board of Directors approved the payment on May 21, 2021 of the Quarterly Cash Dividend of $ 0.025 to the record holders of shares of the Company’s common stock as of the close of business on May 10, 2021 .

EARNINGS PER SHARE

Basic earnings per share is computed by dividing earnings by the weighted average number of common shares outstanding during each period.

Diluted earnings per share is computed by dividing earnings by the total of the weighted average number of shares of common stock outstanding during each period, plus the effect of dilutive outstanding stock options and unvested restricted stock grants.

Potentially dilutive securities are excluded from the computation of diluted earnings per share if their effect is anti-dilutive to the loss from continuing operations.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The following table is a reconciliation of basic and diluted shares of common stock outstanding used in the calculation of earnings per share:

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Weighted average shares outstanding - basic

1 unchanged sentence

Weighted average shares outstanding - diluted

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Net income per share:

For the three months ended March 31, 2021 and 2020, equity awards of 500 and 798 , respectively, were anti-dilutive and therefore not included in the calculation of earnings per share for these periods.

STOCK-BASED COMPENSATION PLAN

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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.

145 options issued vest in four equal annual tranches beginning December 31, 2020.

50 options issued vest in five 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.

During the three months ended March 31, 2021, the Company issued stock options for an aggregate of 400 shares under the 2015 Plan to an employee of the Company.

The options issued during the three months ended March 31, 2021 generally vest and become exercisable over a period of three years and expire ten years from the date of the grant.

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:

2 unchanged sentences

Grant price (per share)

$ 9.99 - $ 15.00

Dividend yield

0.79 % - 1.00 %

Expected volatility (a)

40.9 % - 44.2 %

Risk-free interest rate

0.41 % - 0.65 %

Expected life (years) (b)

Weighted average fair value (per share)

$ 3.72 - $ 4.35

(a) Expected volatility is based upon the Company’s historical volatility.

(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 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.

The grant date fair value of the stock options granted during the three months ended March 31, 2021 was $ 2,352 , 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 March 31, 2021 and 2020 was $ 1,524 and $ 613 , respectively.

For the three months ended March 31, 2021 and 2020, the majority of stock-based compensation costs were classified as selling, general and administrative expenses.

CLARUS CORPORATION

1 unchanged sentence

(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.

As of March 31, 2021, there were 2,166 unvested stock options and unrecognized compensation cost of $ 8,619 related to unvested stock options, as well as 500 unvested restricted stock awards and unrecognized compensation costs of $ 1,898 related to unvested restricted stock awards.

COMMITMENTS AND CONTINGENCIES

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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.

federal statutory tax rate of 21 % for the three months ended March 31, 2021, was due to a release of valuation allowance for the current year utilization of net operating loss carryforwards (“NOLs”) and a stock compensation tax windfall, which were partially offset by permanent book to tax differences related to incentive stock options and officer compensation limitations.

As of December 31, 2020, the Company’s gross deferred tax asset was $ 40,538 .

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 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.

The Company has recorded a valuation allowance of $ 22,348 , resulting in a net deferred tax asset of $ 18,190 , before deferred tax liabilities of $ 8,304 .

The Company has provided a valuation allowance against a portion of the deferred tax assets as of March 31, 2021 and December 31, 2020, 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 NOLs for federal tax purposes.

If a change in control were to occur, these could be limited under Section 382 of the Internal Revenue Code of 1986 (“Code”), as amended.

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

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.

The need for a valuation allowance is reassessed at each interim reporting period.

As of December 31, 2019, the Company had NOL and research and experimentation credit for U.S.

As of December 31, 2020, the Company had NOLs and research and experimentation credit for U.S.

federal income tax purposes of $ 120,309 and $ 1,889 , respectively.

The Company believes its NOL will offset some of its future U.S.

federal income taxes.

The Company believes its U.S.

Federal NOLs will substantially offset its future U.S.

Federal income taxes until expiration.

The majority of the Company’s pre-tax income is currently earned and expected to be earned in the U.S., or taxed in the U.S.

as Subpart F income and will be offset with the NOL.

as Subpart F income and will be offset with the NOLs.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

NOLs available to offset taxable income, subject to compliance with Section 382 of the Code, begin to expire based upon the following schedule:

6 unchanged sentences

We operate our business structure within two segments.

These segments are defined based on the internal financial reporting used by management.

These segments are defined based on the internal financial reporting used by our chief operating decision maker to allocate resources and assess performance .

Certain significant selling and general and administrative expenses are not allocated to the segments including non-cash stock compensation expense.

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

 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.

These bullets and ammunition are used for precision target shooting, hunting and military and law enforcement purposes.

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

These bullets are used for precision target shooting, hunting and military and law enforcement purposes .

As noted above, the Company has a wide variety of technical outdoor equipment and lifestyle products focused on the climb, ski, mountain and sport product categories that are sold to a variety of customers in multiple end markets.

3 unchanged sentences

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

Three Months Ended

March 31, 2021

March 31, 2020

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

Three Months Ended

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 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 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

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Sales to external customers:

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Total segment operating income

Restructuring charge

Transaction costs

1 unchanged sentence

Interest expense, net

Income (loss) before income tax

Income before income tax

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

Restructuring charges for the periods presented relate to the Black Diamond segment.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

September 30, 2020

Total assets by segment, as of March 31, 2021 and December 31, 2020, were as follows:

March 31, 2021

December 31, 2020

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

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