What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-08 compared with 2021-08-02 · 167 added, 122 removed, 199 unchanged (59% of the section changed)

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the ability of the Company to execute and integrate acquisitions;

changes in governmental regulation, legislation or public opinion relating to the manufacture and sale of bullets and ammunition by our Sierra segment, and the possession and use of firearms and ammunition by our customers;

changes in governmental regulation, legislation or public opinion relating to the manufacture and sale of bullets and ammunition, and the possession and use of firearms and ammunition by our customers;

the Company’s exposure to product liability or product warranty claims and other loss contingencies;

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fluctuations in the price, availability and quality of raw materials and contracted products as well as foreign currency fluctuations;

ongoing disruptions and delays in the shipping and transportation of our products due to port congestion, container ship availability and/or other logistical challenges;

our ability to utilize our net operating loss carryforwards;

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We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

Headquartered in Salt Lake City, Utah, Clarus, a company focused on the outdoor and consumer industries, is seeking opportunities to acquire and grow businesses that can generate attractive shareholder returns.

The Company has net operating tax loss carryforwards which it is seeking to redeploy to maximize shareholder value.

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®, Barnes®, PIEPS® and SKINourishment® brand names through outdoor specialty and online retailers, distributors and original equipment manufacturers throughout the U.S.

and internationally.

Headquartered in Salt Lake City, Utah, we are a global leading designer, developer, manufacturer and distributor of best-in-class outdoor equipment and lifestyle products focused on the outdoor and consumer enthusiast markets.

Our mission is to identify, acquire and grow outdoor “super fan” brands through our unique “innovate and accelerate” strategy.

We define a “super fan” brand as a brand that creates the world’s pre-eminent, performance-defining product that the best-in-class user cannot live without.

Each of our brands has a long history of continuous product innovation for core and everyday users alike.

The Company’s products are principally sold globally under the Black Diamond®, Sierra®, Barnes® and Rhino-Rack® brand names through outdoor specialty and online retailers, our own websites, distributors and original equipment manufacturers.

Our portfolio of iconic brands is well-positioned for sustainable, long-term growth underpinned by powerful industry trends across the outdoor and adventure sport end markets.

Through our Black Diamond, PIEPS, and SKINourishment brands, we offer a broad range of products including:

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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.

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.

Through our Sierra and Barnes brands, we manufacture a wide range of high-performance bullets and ammunition for both rifles and

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

pistols that are used for precision target shooting, hunting and military and law enforcement purposes.

Rhino-Rack is a leading manufacturer of highly-engineered automotive roof racks, trays, mounting systems, luggage boxes, carriers and accessories with leading market share in Australia and New Zealand and a growing presence in the United States.

Clarus, incorporated in Delaware in 1991, acquired Black Diamond Equipment, Ltd.

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

On July 30, 2021, the Company announced that its Board of Directors approved the payment on August 20, 2021 of the Quarterly Cash Dividend to the record holders of shares of the Company’s common stock as of the close of business on August 9, 2021.

On October 29, 2021, the Company announced that its Board of Directors approved the payment on November 19, 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 November 8, 2021.

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 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 global outbreak of COVID-19 was declared a global pandemic by the World Health Organization and a national emergency by each of the U.S., European, and Australian governments 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., European, Australian and global economies, disrupted global supply chains, and resulted in significant transport restrictions and disruption of financial markets.

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

We experienced a decline in retail demand within our Black Diamond segment beginning in the second half of March 2020 through December 2020, which negatively impacted our sales and profitability during this period.

This continued during the six months ended June 30, 2021, although to a lesser extent, as certain countries began to ease restrictions.

This continued during the nine months ended September 30, 2021, although to a lesser extent, as certain countries began to ease restrictions.

During the third quarter of 2021, the Australian government instituted a mandatory lockdown for its citizens.

This caused a decline in retail demand and a disruption in operations within our Rhino-Rack segment, which negatively impacted our sales and profitability for the third quarter of 2021.

We expect a continued impact on the Company’s sales and profitability in future periods.

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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.

The COVID-19 pandemic has significantly impacted the global supply chain, with restrictions and limitations on related activities causing disruption and delay, along with increased raw material, storage, and shipping costs.

These disruptions and delays have strained domestic and international supply chains, which have affected and could continue to negatively affect the flow or availability of certain products.

Furthermore, significantly increased demand from online sales channels, including our website, has impacted our logistical operations, including our fulfillment and shipping functions, which has resulted in periodic delays in the delivery of our products.

The further spread of COVID-19, and the requirements to take action to help limit the spread of the illness, could impact our ability to carry out our business as usual and may materially adversely impact global economic conditions, our business, results of operations, cash flows, and financial condition.

For example, travel restrictions imposed as a result of the COVID-19 pandemic negatively impacted

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

certain of our product development initiatives, as we were unable to visit certain third-party manufacturers to review processes and procedures for new products and product enhancements.

The extent of the impact of COVID-19 on our business and financial results will depend on future developments, including the duration and severity of the outbreak (including the severity and transmission rates of new variants of the coronavirus) within the markets in which we and our manufacturers and suppliers operate, the timing, distribution, and efficacy of vaccines and other treatments, the related impact on consumer confidence and spending, and the effect of governmental regulations imposed in response to the pandemic, all of which are highly uncertain and ever-changing.

While we have experienced an increase in demand for our products due to the impact that the COVID-19 pandemic has had on consumer behaviors, including due to various stay-at-home orders and restrictions on dining options and restaurant closures, this increased demand may not be sustained following the pandemic, or if economic conditions worsen, which would negatively impact consumer spending.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law.

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Actual results could differ from these estimates.

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

There have been no significant changes to our critical accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2020.

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Results of Operations

Condensed Consolidated Three Months Ended June 30, 2021 Compared to Condensed Consolidated Three Months Ended June 30, 2020

The following presents a discussion of condensed consolidated operations for the three months ended June 30, 2021, compared with the condensed consolidated three months ended June 30, 2020.

Condensed Consolidated Three Months Ended September 30, 2021 Compared to Condensed Consolidated Three Months Ended September 30, 2020

The following presents a discussion of condensed consolidated operations for the three months ended September 30, 2021, compared with the condensed consolidated three months ended September 30, 2020.

Three Months Ended

June 30, 2021

June 30, 2020

September 30, 2021

September 30, 2020

Domestic sales

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Total operating expenses

Operating income (loss)

Operating (loss) income

Other (expense) income

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Total other (expense) income, net

Income (loss) before income tax

Income tax expense (benefit)

Net income (loss)

Consolidated sales increased $43,295, or 144.2%, to $73,309, during the three months ended June 30, 2021, compared to consolidated sales of $30,014 during the three months ended June 30, 2020.

(Loss) income before income tax

Income tax (benefit) expense

Consolidated sales increased $44,480, or 69.0%, to $108,971, during the three months ended September 30, 2021, compared to consolidated sales of $64,491 during the three months ended September 30, 2020.

The increase in sales was attributable to the increase in the quantity of new and existing climb, mountain, and ski products sold during the period of $8,665.

The remaining increase was driven by an increase in the quantity of new and existing sport products sold by Sierra of $6,936 and the inclusion of Barnes, which contributed $11,669.

Additionally, there was an increase in the quantity of new and existing sport products sold by Sierra of $2,028 and the inclusion of Barnes, which contributed $13,162.

The increase was also driven by the inclusion of adventure products sold by Rhino-Rack of $19,625.

We experienced an increase in sales of $1,000 due to the weakening of the U.S.

dollar against foreign currencies during the three months ended June 30, 2021, compared to the prior period.

Consolidated domestic sales increased $31,617, or 156.1%, to $51,876 during the three months ended June 30, 2021, compared to consolidated domestic sales of $20,259 during the three months ended June 30, 2020.

dollar against foreign currencies during the three months ended September 30, 2021, compared to the prior period.

Consolidated domestic sales increased $26,573, or 76.6%, to $61,259 during the three months ended September 30, 2021, compared to consolidated domestic sales of $34,686 during the three months ended September 30, 2020.

The increase in sales was attributable to the increase in the quantity of new and existing climb, mountain, and ski products sold during the period of $4,820.

The remaining increase was driven by the increase in the quantity of new and existing sport products sold by Sierra of $7,124 and the inclusion of Barnes, which contributed $11,001.

Consolidated international sales increased $11,678, or 119.7%, to $21,433 during the three months ended June 30, 2021, compared to consolidated international sales of $9,755 during the three months ended June 30, 2020.

The increase in sales was primarily attributable to the increase in the quantity of new and existing climb, mountain, and ski products of $10,072 and the inclusion of Barnes, which contributed $668.

We experienced an increase in sales of $1,126 due to the weakening of the U.S.

dollar against foreign currencies during the three months ended June 30, 2021 compared to the prior period.

The increase was partially offset by a decrease in the quantity

Additionally, there was an increase in the quantity of new and existing sport products sold by Sierra of $2,496 and the inclusion of Barnes, which contributed $12,134.

The remaining increase was driven by the inclusion of adventure products sold by Rhino-Rack of $7,123.

Consolidated international sales increased $17,907, or 60.1%, to $47,712 during the three months ended September 30, 2021, compared to consolidated international sales of $29,805 during the three months ended September 30, 2020.

The increase in sales was primarily attributable to the increase in the quantity of new and existing climb, mountain, and ski products of $3,845 and the inclusion of Barnes,

CLARUS CORPORATION

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(in thousands, except per share amounts)

of new and existing sport products sold by Sierra of $188.

which contributed $1,028.

The increase was also driven by the inclusion of adventure products sold by Rhino-Rack of $12,502.

We experienced an increase in sales of $1,000 due to the weakening of the U.S.

dollar against foreign currencies during the three months ended September 30, 2021 compared to the prior period.

The increase was partially offset by a decrease in the quantity of new and existing sport products sold by Sierra of $468.

Cost of Goods Sold

Consolidated cost of goods sold increased $25,910 or 133.7%, to $45,288 during the three months ended June 30, 2021, compared to consolidated cost of goods sold of $19,378 during the three months ended June 30, 2020.

Consolidated cost of goods sold increased $26,970 or 63.0%, to $69,792 during the three months ended September 30, 2021, compared to consolidated cost of goods sold of $42,822 during the three months ended September 30, 2020.

The increase in cost of goods sold was primarily attributable to an increase in the number of units sold.

Consolidated gross profit increased $17,385 or 163.5%, to $28,021 during the three months ended June 30, 2021, compared to consolidated gross profit of $10,636 during the three months ended June 30, 2020.

Consolidated gross margin was 38.2% during the three months ended June 30, 2021, compared to a consolidated gross margin of 35.4% during the three months ended June 30, 2020.

Consolidated gross margin during the three months ended June 30, 2021, increased compared to the prior year due to a favorable product mix in higher margin products and the favorable impacts related to foreign currency.

Gross margin also benefited from the inclusion of Barnes.

Consolidated gross profit increased $17,510 or 80.8%, to $39,179 during the three months ended September 30, 2021, compared to consolidated gross profit of $21,669 during the three months ended September 30, 2020.

Consolidated gross margin was 36.0% during the three months ended September 30, 2021, compared to a consolidated gross margin of 33.6% during the three months ended September 30, 2020.

Consolidated gross margin during the three months ended September 30, 2021, increased compared to the prior year due to a favorable product mix in higher margin products and the favorable impacts related to foreign currency.

Gross margin also benefited from the inclusion of Barnes and Rhino-Rack.

However, the benefit from Rhino-Rack was offset by a decrease in gross margin of 2.8% due to the sale of Rhino-Rack inventory that was recorded at its fair value in purchase accounting during the three months ended September 30, 2021.

Selling, General and Administrative

Consolidated selling, general, and administrative expenses increased $6,211, or 42.9%, to $20,704 during the three months ended June 30, 2021, compared to consolidated selling, general and administrative expenses of $14,493 during the three months ended June 30, 2020.

The increase in selling, general and administrative expenses is due to the inclusion of Barnes, which contributed $1,478, and an increase of stock compensation of $1,210 during the three months ended June 30, 2021 compared to the prior year.

Consolidated selling, general, and administrative expenses increased $12,640, or 67.7%, to $31,314 during the three months ended September 30, 2021, compared to consolidated selling, general and administrative expenses of $18,674 during the three months ended September 30, 2020.

The increase in selling, general and administrative expenses is due to the inclusion of Barnes and Rhino-Rack, which contributed $1,678 and $7,722, respectively.

The remaining increase was attributable to the Company’s investments in the brand related activities of sales, direct-to-consumer, marketing, and warehousing and logistics, focused on supporting its strategic initiatives around expanding distribution, elevating brand awareness and being easier to do business with.

The increase was partially offset by a decrease of stock compensation of $1,140 during the three months ended September 30, 2021 compared to the prior year.

Transaction Costs

Consolidated transaction expense increased to $649 during the three months ended June 30, 2021, compared to consolidated transaction costs of $180 during the three months ended June 30, 2020, which consisted of expenses related to the Company’s various acquisition efforts.

Consolidated transaction expense increased to $8,147 during the three months ended September 30, 2021, compared to consolidated transaction costs of $1,440 during the three months ended September 30, 2020, which consisted of expenses related to the Company’s various acquisition efforts.

Interest Expense, net

Consolidated interest expense, net during the three months ended June 30, 2021 remained relatively consistent with consolidated interest expense, net, during the three months ended June 30, 2020.

Consolidated other, net expense changed by $4,867, or 1,198.8%, to $4,461 during the three months ended June 30, 2021, compared to consolidated other, net income of $406 during the three months ended June 30, 2020.

The decrease in other, net, was primarily attributable to changes on mark-to-market adjustments on non-hedged foreign currency contracts, including contracts associated with the purchase price of Rhino Rack, and a decrease in remeasurement gains recognized on the Company’s foreign denominated accounts receivable and accounts payable.

Consolidated income tax increased $1,300, or 113.5%, to an expense of $155 during the three months ended June 30, 2021, compared to income tax benefit of $1,145 during the same period in 2020.

Our effective income tax rate was an expense of 7.8% for the three months ended June 30, 2021, and differed compared to the statutory tax rates due to a release of a partial valuation allowance of the deferred tax assets .

For the three months ended June 30, 2020, our effective income tax rate was a benefit of 29.4% and was higher compared to the statutory tax rates due to permanent book to tax differences primarily related to incentive stock options.

Consolidated interest expense, net increased to $1,476 during the three months ended September 30, 2021, compared to consolidated interest expense, net of $232 during the three months ended September 30, 2020.

The increase in interest expense recognized during the three months ended September 30, 2021 was primarily associated with the increase in average outstanding debt amounts during the period compared to the prior year and the recording of certain debt issuance costs.

Consolidated other, net income changed by $111, or 24.7%, to $338 during the three months ended September 30, 2021, compared to consolidated other, net income of $449 during the three months ended September 30, 2020.

The decrease in other, net, was primarily attributable to a decrease in remeasurement gains recognized on the Company’s foreign denominated accounts receivable and accounts payable.

The decrease was partially offset by changes on mark-to-market adjustments on non-hedged foreign currency contracts.

Consolidated income tax changed by $6,539, or 1,110.2%, to a benefit of $5,950 during the three months ended September 30, 2021, compared to income tax expense of $589 during the same period in 2020.

Our effective income tax rate was a benefit of 419.0% for the three months ended September 30, 2021, and differed compared to the statutory tax rates due to a release of a partial valuation allowance of the deferred tax assets .

This release is primarily due to a change in accounting method which increased taxable income and the ability

CLARUS CORPORATION

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(in thousands, except per share amounts)

Condensed Consolidated Six Months Ended June 30, 2021 Compared to Condensed Consolidated Six Months Ended June 30, 2020

The following presents a discussion of condensed consolidated operations for the six months ended June 30, 2021, compared with the condensed consolidated six months ended June 30, 2020.

Six Months Ended

June 30, 2021

June 30, 2020

to utilize NOLs (defined below).

For the three months ended September 30, 2020, our effective income tax rate was an expense of 33.2% and was higher compared to the statutory tax rates due to permanent book to tax differences primarily related to incentive stock options.

Condensed Consolidated Nine Months Ended September 30, 2021 Compared to Condensed Consolidated Nine Months Ended September 30, 2020

The following presents a discussion of condensed consolidated operations for the nine months ended September 30, 2021, compared with the condensed consolidated nine months ended September 30, 2020.

Nine Months Ended

September 30, 2021

September 30, 2020

Domestic sales

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Net income (loss)

Consolidated sales increased $65,071, or 77.9%, to $148,640, during the six months ended June 30, 2021, compared to consolidated sales of $83,569 during the six months ended June 30, 2020.

Consolidated sales increased $109,551, or 74.0%, to $257,611, during the nine months ended September 30, 2021, compared to consolidated sales of $148,060 during the nine months ended September 30, 2020.

The increase in sales was attributable to the increase in the quantity of new and existing climb, mountain, and ski products sold during the period of $37,083.

The remaining increase in sales was driven by the increase in the quantity of new and existing sport products sold by Sierra of $14,226 and the inclusion of Barnes, which contributed $20,154.

Additionally, there was an increase in the quantity of new and existing sport products sold by Sierra of $16,254 and the inclusion of Barnes, which contributed $33,316.

The increase was also driven by the inclusion of adventure products sold by Rhino-Rack of $19,625.

We experienced an increase in sales of $3,273 due to the weakening of the U.S.

dollar against foreign currencies during the six months ended June 30, 2021, compared to the prior period.

Consolidated domestic sales increased $50,642, or 103.8%, to $99,449 during the six months ended June 30, 2021, compared to consolidated domestic sales of $48,807 during the six months ended June 30, 2020.

dollar against foreign currencies during the nine months ended September 30, 2021, compared to the prior period.

Consolidated domestic sales increased $77,215, or 92.5%, to $160,708 during the nine months ended September 30, 2021, compared to consolidated domestic sales of $83,493 during the nine months ended September 30, 2020.

The increase in sales was attributable to the increase in the quantity of new and existing climb, mountain, and ski products sold during the period of $21,384.

The remaining increase was driven by the increase in the quantity of new and existing sport products sold by Sierra of $15,365 and the inclusion of Barnes, which contributed $18,713.

Consolidated international sales increased $14,429, or 41.5%, to $49,191 during the six months ended June 30, 2021, compared to consolidated international sales of $34,762 during the six months ended June 30, 2020.

The increase in sales was primarily attributable to the increase in the quantity of new and existing climb, mountain, and ski products of $11,854 and the inclusion of Barnes, which contributed $1,441.

We experienced an increase in sales of $2,273 due to the weakening of the U.S.

dollar against foreign currencies during the six months ended June 30, 2021 compared to the prior period.

The increase was partially offset by a decrease in the quantity of new and existing sport products sold by Sierra of $1,139.

Additionally, there was an increase in the quantity of new and existing sport products sold by Sierra of $17,861 and the inclusion of Barnes, which contributed $30,847.

The remaining increase was driven by the inclusion of adventure products sold by Rhino-Rack of $7,123.

CLARUS CORPORATION

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(in thousands, except per share amounts)

Consolidated international sales increased $32,336, or 50.1%, to $96,903 during the nine months ended September 30, 2021, compared to consolidated international sales of $64,567 during the nine months ended September 30, 2020.

The increase in sales was primarily attributable to the increase in the quantity of new and existing climb, mountain, and ski products of $15,699 and the inclusion of Barnes, which contributed $2,469.

The increase was also driven by the inclusion of adventure products sold by Rhino-Rack of $12,502.

We experienced an increase in sales of $3,273 due to the weakening of the U.S.

dollar against foreign currencies during the nine months ended September 30, 2021 compared to the prior period.

The increase was partially offset by a decrease in the quantity of new and existing sport products sold by Sierra of $1,607.

Cost of Goods Sold

Consolidated cost of goods sold increased $39,148 or 71.9%, to $93,569 during the six months ended June 30, 2021, compared to consolidated cost of goods sold of $54,421 during the six months ended June 30, 2020.

Consolidated cost of goods sold increased $66,118 or 68.0%, to $163,361 during the nine months ended September 30, 2021, compared to consolidated cost of goods sold of $97,243 during the nine months ended September 30, 2020.

The increase in cost of goods sold was primarily attributable to an increase in the number of units sold.

Consolidated gross profit increased $25,923 or 88.9%, to $55,071 during the six months ended June 30, 2021, compared to consolidated gross profit of $29,148 during the six months ended June 30, 2020.

Consolidated gross margin was 37.0% during the six months ended June 30, 2021, compared to a consolidated gross margin of 34.9% during the six months ended June 30, 2020.

Consolidated gross margin during the six months ended June 30, 2021, increased compared to the prior year due to a favorable product mix in higher margin products and the favorable impacts related to foreign currency.

Gross margin also benefited from the inclusion of Barnes;

however, this benefit was offset by a decrease in gross margin of 0.2% due to the sale of Barnes inventory that was recorded at its fair value in purchase accounting during the year ended December 31, 2020.

Consolidated gross profit increased $43,433 or 85.5%, to $94,250 during the nine months ended September 30, 2021, compared to consolidated gross profit of $50,817 during the nine months ended September 30, 2020.

Consolidated gross margin was 36.6% during the nine months ended September 30, 2021, compared to a consolidated gross margin of 34.3% during the nine months ended September 30, 2020.

Consolidated gross margin during the nine months ended September 30, 2021, increased compared to the prior year due to a favorable product mix in higher margin products and the favorable impacts related to foreign currency.

Gross margin also benefited from the inclusion of Barnes and Rhino-Rack;

however, this benefit was offset by a decrease in gross margin of 1.3% due to the sale of Barnes and Rhino-Rack inventory that was recorded at its fair value in purchase accounting during the year ended December 31, 2020 and three months ended September 30, 2021, respectively.

Selling, General and Administrative

Consolidated selling, general, and administrative expenses increased $9,726, or 30.5%, to $41,589 during the six months ended June 30, 2021, compared to consolidated selling, general and administrative expenses of $31,863 during the six months ended June 30, 2020.

The increase in selling, general and administrative expenses is due to the inclusion of Barnes, which contributed $3,330, and an increase of stock compensation of $2,121 during the six months ended June 30, 2021 compared to the prior year.

Consolidated selling, general, and administrative expenses increased $22,366, or 44.3%, to $72,903 during the nine months ended September 30, 2021, compared to consolidated selling, general and administrative expenses of $50,537 during the nine months ended September 30, 2020.

The increase in selling, general and administrative expenses is due to the inclusion of Barnes and Rhino-Rack, which contributed $5,008 and $7,722, respectively, and an increase of stock compensation of $981 during the nine months ended September 30, 2021 compared to the prior year.

Transaction Costs

Consolidated transaction expense increased to $1,125 during the six months ended June 30, 2021, compared to consolidated transaction costs of $430 during the six months ended June 30, 2020, which consisted of expenses related to the Company’s various acquisition efforts.

Consolidated transaction expense increased to $9,272 during the nine months ended September 30, 2021, compared to consolidated transaction costs of $1,870 during the nine months ended September 30, 2020, which consisted of expenses related to the Company’s various acquisition efforts.

Interest Expense, net

Consolidated interest expense, net during the six months ended June 30, 2021 remained relatively consistent with consolidated interest expense, net, during the six months ended June 30, 2020.

Consolidated other, net expense increased $4,476, or 3,580.8%, to $4,601 during the six months ended June 30, 2021, compared to consolidated other, net expense of $125 during the six months ended June 30, 2020.

This decrease was partially offset by a decrease in remeasurement losses recognized on the Company’s foreign denominated accounts receivable and accounts payable.

Consolidated income tax benefit decreased $920, or 81.3%, to a benefit of $211 during the six months ended June 30, 2021, compared to income tax benefit of $1,131 during the same period in 2020.

Our effective income tax rate was a benefit of 2.9% for the six months ended June 30, 2021, and differed compared to the statutory tax rates due to a release of a partial valuation allowance of the deferred tax assets and a discrete charge recorded during the period.

For the six months ended June 30, 2020, our effective income tax rate was a benefit of 29.5% and was higher compared to the statutory tax rates due to permanent book to tax differences primarily related to incentive stock options.

Consolidated interest expense, net increased to $1,926 during the nine months ended September 30, 2021, compared to consolidated interest expense, net of $800 during the nine months ended September 30, 2020.

The increase in interest expense recognized during the nine months ended September 30, 2021 was primarily associated with the increase in average outstanding debt amounts during the period compared to the prior year and the recording of certain debt issuance costs.

Consolidated other, net expense changed $4,587, or 1,415.7%, to $4,263 during the nine months ended September 30, 2021, compared to consolidated other, net income of $324 during the nine months ended September 30, 2020.

The change in other, net, was primarily attributable to changes on mark-to-market adjustments on non-hedged foreign currency contracts, including contracts associated with the purchase price of Rhino-Rack, as well as a decrease in remeasurement losses recognized on the Company’s foreign denominated accounts receivable and accounts payable.

CLARUS CORPORATION

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(in thousands, except per share amounts)

Consolidated income tax benefit increased $5,619, or 1,036.7%, to a benefit of $6,161 during the nine months ended September 30, 2021, compared to income tax benefit of $542 during the same period in 2020.

Our effective income tax rate was a benefit of 104.7% for the nine months ended September 30, 2021, differed compared to the statutory tax rates due to a release of a partial valuation allowance of the deferred tax assets.

This release is primarily due to a change in accounting method which increased taxable income and the ability to utilize NOLs (defined below).

For the nine months ended September 30, 2020, our effective income tax rate was a benefit of 26.2% and was higher compared to the statutory tax rates due to permanent book to tax differences primarily related to incentive stock options.

Liquidity and Capital Resources

Condensed Consolidated Six Months Ended June 30, 2021 Compared to Condensed Consolidated Six Months Ended June 30, 2020

Condensed Consolidated Nine Months Ended September 30, 2021 Compared to Condensed Consolidated Nine Months Ended September 30, 2020

Our primary ongoing funding requirements are for working capital, expansion of our operations (both organically and through acquisitions) and general corporate needs, as well as investing activities associated with the expansion into new product categories.

We plan to fund these activities through a combination of our future operating cash flows and revolving credit facility which had approximately $49,900 available to borrow at June 30, 2021.

We plan to fund these activities through a combination of our future operating cash flows and revolving credit facility which had approximately $34,600 available to borrow at September 30, 2021.

We believe that our liquidity requirements for at least the next 12 months will be adequately covered by cash provided by operations and our existing revolving credit facility.

However, as the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs.

The COVID-19 pandemic has negatively affected the U.S.

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

The COVID-19 pandemic has negatively affected the U.S., European, Australian and global economies, disrupted global supply chains, and resulted in significant travel and transport restrictions and disruption of financial markets.

An extended period of global supply chain and economic disruption could materially affect our business, results of operations, ability to meet debt covenants, access to sources of liquidity and financial condition.

Given the economic uncertainty as a result of the pandemic, we have taken actions to improve our current liquidity position, including drawing on the credit facility, suspending share repurchases and cash dividends, postponing nonessential capital expenditures, reducing operating costs, modulating production in line with demand, initiating workforce reductions and furloughs, and substantially reducing discretionary spending.

Further, subsequent to the balance sheet date, the Company and certain of its direct and indirect subsidiaries (each, a “Loan Party” and, collectively, the “Loan Parties”) entered into Amendment No.

Further, the Company and certain of its direct and indirect subsidiaries (each, a “Loan Party” and, collectively, the “Loan Parties”) entered into Amendment No.

3 (“Amendment No.

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3 also removed the previously agreed upon ability of the Company to issue debt securities that may be convertible into equity interests of the Company in an aggregate principal amount of up to $125,000 and also increased the maximum consolidated total leverage ratio permitted under the Credit Agreement to 4.25:1.00.

At June 30, 2021, we had total cash of $6,782, compared to a cash balance of $17,789 at December 31, 2020, which was substantially controlled by the Company’s U.S.

At June 30, 2021, the Company had $1,949 of the $6,782 in cash held by foreign entities, of which $399 is considered permanently reinvested.

The following presents a discussion of cash flows for the condensed consolidated six months ended June 30, 2021 compared with the condensed consolidated six months ended June 30, 2020.

Six Months Ended

June 30, 2021

June 30, 2020

Net cash provided by operating activities

Subsequent to the balance sheet date, the Company entered into an underwriting agreement relating to the public offer and sale of 2,750 shares of the Company’s common stock as well as a 30-day option to purchase up to 413 additional shares of common stock.

The closing of the offering of 2,750 shares of common stock as well as the 413 additional shares of common stock occurred on October 29, 2021 and November 2, 2021, respectively.

The net proceeds to the Company from the offering were approximately $80,264 before expenses and after deducting the applicable underwriting discounts and commissions.

The Company intends to use a portion of the net proceeds of the offering for the repayment in full of approximately $65,000 in aggregate principal amount under the revolving loan facility available pursuant to the Credit Agreement and the remaining portion of the net proceeds from the offering for general corporate purposes, including capital expenditures and potential acquisitions.

At September 30, 2021, we had total cash of $10,170, compared to a cash balance of $17,789 at December 31, 2020, which was substantially controlled by the Company’s U.S.

At September 30, 2021, the Company had $4,888 of the $10,170 in cash held by foreign entities, of which $2,995 is considered permanently reinvested.

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

The following presents a discussion of cash flows for the condensed consolidated nine months ended September 30, 2021 compared with the condensed consolidated nine months ended September 30, 2020.

Nine Months Ended

September 30, 2021

September 30, 2020

Net cash (used in) provided by operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Net cash provided by financing activities

Effect of foreign exchange rates on cash

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Net Cash From Operating Activities

Consolidated net cash provided by operating activities was $362 during the six months ended June 30, 2021, compared to consolidated net cash provided by operating activities of $14,442 during the six months ended June 30, 2020.

The decrease in net cash provided by operating activities during 2021 is primarily due to an increase in net operating assets, or non-cash working capital, of $28,428, partially offset by an increase in net income during the six months ended June 30, 2021, compared to the same period in 2020.

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

Free cash flow, defined as net cash provided by operating activities less capital expenditures, of ($2,863) was used during the six months ended June 30, 2021 compared to $12,421 generated during the same period in 2020.

Consolidated net cash used in operating activities was $17,101 during the nine months ended September 30, 2021, compared to consolidated net cash provided by operating activities of $21,048 during the nine months ended September 30, 2020.

The change in net cash used in operating activities during 2021 is primarily due to an increase in net operating assets, or non-cash working capital, of $52,207, partially offset by an increase in net income during the nine months ended September 30, 2021, compared to the same period in 2020.

Free cash flow, defined as net cash (used in) provided by operating activities less capital expenditures, of ($22,680) was used during the nine months ended September 30, 2021 compared to $17,442 generated during the same period in 2020.

The Company believes that the non-GAAP measure, free cash flow, provides an understanding of the capital required by the Company to expand its asset base.

A reconciliation of free cash flows to comparable GAAP financial measures is set forth below:

Six Months Ended

June 30, 2021

June 30, 2020

Net cash provided by operating activities

Nine Months Ended

September 30, 2021

September 30, 2020

Net cash (used in) provided by operating activities

Purchase of property and equipment

1 unchanged sentence

Net Cash From Investing Activities

Consolidated net cash used in investing activities was $3,200 during the six months ended June 30, 2021, compared to $2,018 during the six months ended June 30, 2020.

The increase in cash used during the six months ended June 30, 2021 is due to an increase in purchases of property and equipment, compared to the same period in 2020.

Consolidated net cash used in investing activities was $141,181 during the nine months ended September 30, 2021, compared to $33,779 during the nine months ended September 30, 2020.

The increase in cash used during the nine months ended September 30, 2021 is due to the acquisition of Rhino-Rack and an increase in purchases of property and equipment, compared to the same period in 2020.

Net Cash From Financing Activities

Consolidated net cash used in financing activities was $8,031 during the six months ended June 30, 2021, compared to net cash provided of $7,397 during the six months ended June 30, 2020.

The increase in cash used during the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to the net repayments to the revolving line of credit and repayments of the term loan.

Cash provided by financing activities during the six months ended June 30, 2020 was primarily due to the proceeds of $20,000 borrowed under the term loan offset by net repayment to the revolving line of credit.

Consolidated net cash provided by financing activities was $151,041 during the nine months ended September 30, 2021, compared to net cash provided of $27,956 during the nine months ended September 30, 2020.

The increase in cash used during the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to the net proceeds to the revolving line of credit and draws of the term loan under Amendment No.3 described below.

Cash provided by financing activities during the nine months ended September 30, 2020 was primarily due to the proceeds of $20,000 borrowed under the term loan and net proceeds from the sale of common stock, offset by net repayment to the revolving line of credit.

Net Operating Loss

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

$120,309 of net operating losses available to offset taxable income does not expire until 2022 or later, subject to compliance with Section 382 of the Internal Revenue Code of 1986, as amended.

$120,309 of net operating

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

losses available to offset taxable income does not expire until 2022 or later, subject to compliance with Section 382 of the Internal Revenue Code of 1986, as amended.

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

13 unchanged sentences

2 permits, among other things, the issuance by the Company of debt securities, that may be convertible into equity interests of the Company, in an aggregate principal amount of up to $125,000, and eliminates the requirement that the proceeds therefrom be used to prepay any revolving loans or term loans under the Credit Agreement.

The Borrowers may elect to have the revolving and term loans under the Credit Agreement bear interest at an alternate base rate or a

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

Eurodollar rate plus an applicable rate.

The applicable rate for these borrowings will range from 0.50% to 1.25% per annum, in the case of alternate base rate borrowings, and 1.50% to 2.25% per annum, in the case of Eurodollar borrowings.

The applicable rate was initially 0.875% per annum, in the case of alternate base rate borrowings, and 1.875% per annum, in the case of Eurodollar borrowings;

On July 1, 2021, the Borrowers entered into Amendment No.

3 of the Credit Agreement.

Amendment No.

3 increased the aggregate amount of the term loan facility thereunder to $125,000 and increased the maximum amount of the revolving loan facility thereunder to $100,000.

The term loan facility was fully borrowed at the closing of Amendment No.

3 on July 1, 2021 in connection with the Rhino-Rack Acquisition.

The Credit Agreement continues to permit the Borrowers, subject to certain requirements, to arrange with lenders for an aggregate of up to $50,000 of additional revolving and/or term loan commitments (both of which are currently uncommitted), for potential aggregate revolving and term loan commitments under the Credit Agreement of up to $275,000.

Amendment No.

3 provides for additional subsidiaries of the Company to guarantee and provide collateral for the loans under the Credit Agreement, including certain of its newly formed or newly acquired Australian subsidiaries in connection with the Rhino-Rack Acquisition.

Amendment No.

3 did not change the maturity date which remains May 3, 2024.

The Borrowers may elect to have the revolving and term loans under the Credit Agreement bear interest at an alternate base rate or a Term Benchmark rate plus an applicable rate.

The applicable rate for these borrowings will range from 0.50% to 1.625% per annum, in the case of alternate base rate borrowings, and 1.50% to 2.625% per annum, in the case of Term Benchmark borrowings.

The applicable rate was initially 0.875% per annum, in the case of alternate base rate borrowings, and 1.875% per annum, in the case of Term Benchmark borrowings;

however, it may be adjusted from time to time based upon the level of the Company’s consolidated total leverage ratio.

4 unchanged sentences

The Credit Agreement includes 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, 2021.

As of June 31, 2021, the Company had drawn approximately $10,112 of the $60,000 revolving loan commitment that was available for borrowing under the Credit Agreement, and $16,000 outstanding under the term loan commitment.

As of June 30, 2021, the interest rate for each loan was 1.6250% .

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

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 was in compliance with the debt covenants set forth in the Credit Agreement as of September 30, 2021.

As of September 30, 2021, the Company had drawn approximately $65,412 of the $100,000 revolving loan commitment that was available for borrowing under the Credit Agreement, and $123,437 outstanding under the term loan commitment.

As of September 30, 2021, the interest rate for each loan was 1.6250% .

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

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

used the proceeds to pay down amounts outstanding under the revolving portion of the Credit Agreement.

On July 1, 2021, the term loan facility was fully borrowed at the closing of Amendment No.

The Company is required to repay the term loan through quarterly payments of $1,563 each beginning with September 30, 2021, increasing to $3,125 beginning September 30, 2022, and any remaining obligations will be repaid in full on the maturity date of the Credit Agreement of May 3, 2024.

Off-Balance Sheet Arrangements

5 unchanged sentences

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 2. Management’s Discussion and Analysis