What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-07 compared with 2021-03-08 · 381 added, 336 removed, 752 unchanged (49% of the section changed)

2 unchanged sentences

Index to Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets - December 31, 2021 and 2020

22 unchanged sentences

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Acquisitions — Refer to Note 2 to the financial statements

Critical Audit Matter Description

On October 2, 2020, the Company completed the acquisition of certain assets and liabilities constituting the Barnes business (“Barnes”) for $30.5 million.

The Company accounted for this acquisition as a business combination.

Accordingly, the purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values, including trademarks of $5.6 million and customer relationships of $5.7 million.

The Company utilized a relief-from-royalty valuation methodology for trademarks and a multi-period excess earnings valuation methodology for customer relationships.

On July 1, 2021, the Company acquired Rhino-Rack Holdings Pty Ltd (“Rhino-Rack”), and on December 1, 2021, the Company acquired MaxTrax Australia Pty Ltd (“MAXTRAX”).

The Company accounted for each acquisition as a business combination.

Accordingly, the purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values, including Rhino-Rack trademarks of $72.8 million, customer relationships of $40.4 million, and product technologies of $15 million, and MAXTRAX trademarks of $10.6 million and customer relationships of $9.0 million.

Product technology and trademarks are valued using the relief-from-royalty method, and customer relationships are valued using the multi-period excess earnings model.

The determination of the fair value of these intangible assets required management to make significant estimates and assumptions related to forecasted sales growth rates, cash flows, market-based royalty rates, and estimated discount rates.

We identified the valuation of the trademarks and customer relationships acquired as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of these assets.

We identified the valuation of the Rhino-Rack trademarks, customer relationships, and product technologies and MAXTRAX trademarks and customer relationships as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of these intangible assets.

This required a high degree of auditor judgment and an increased extent of effort, including the involvement of our fair value specialists, when performing audit procedures to evaluate the reasonableness of forecasted sales growth rates, cash flows, market-based royalty rates, and estimated discount rates.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasted future sales growth rates, cash flows, market-based royalty rates, and estimated discount rates for the acquired Barnes trademarks and customer relationships included the following, among others:

Our audit procedures related to the forecasted future sales growth rates, cash flows, market-based royalty rates, and estimated discount rates for the acquired Rhino-Rack trademarks, customer relationships, and product technologies and MAXTRAX trademarks and customer relationships included the following, among others:

• We tested the effectiveness of internal controls over the valuation of the intangible assets, including those over forecasted sales growth rates and cash flows, and the selection of market-based royalty rates and estimated discount rates.

 We assessed the reasonableness of management’s forecasted sales growth rates and cash flows by comparing the forecasts to historical results of Barnes, industry publications, and external data.

• We assessed the reasonableness of management’s forecasted sales growth rates and cash flows by comparing the forecasts to historical results of Rhino-Rack and MAXTRAX, industry publications, and external data.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the relief-from-royalty and multi-period excess earnings valuation methodologies, and the market-based royalty rates and estimated discount rates by:

2 unchanged sentences

– Developing a range of independent estimates for the discount rates and comparing those to the estimated discount rates selected by management.

– Comparing the selected market-based royalty rate to comparable licensing agreements.

– Comparing the selected market-based royalty rates to comparable licensing agreements.

• We evaluated whether the forecasted sales growth rates and cash flows were consistent with evidence obtained in other areas of the audit, including a retrospective review of actual post-acquisition financial results.

• We compared the estimated weighted average return on assets, internal rate of return, and the discount rates used in the valuation models and evaluated whether they were consistent with each other.

Income Taxes — Refer to Notes 1 and 15 to the financial statements

Critical Audit Matter Description

The Company accounts for income taxes using the asset and liability method.

The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards.

The majority of the Company’s deferred tax assets consist of net operating loss carryforwards (“NOLs”) for U.S.

Federal tax purposes, totaling $120.3 million as of December 31, 2020.

Valuation allowances are used to reduce deferred tax assets to amounts considered more-likely-than-not to be realized.

The Company believes its U.S.

Federal NOLs will substantially offset its future U.S.

Federal income taxes until their expiration, which begins in 2022.

The Company has provided a valuation allowance against its deferred tax assets as of December 31, 2020, primarily because the Company believes that a portion of U.S.

Federal NOLs will expire before their utilization.

The Company’s valuation allowance recorded on deferred tax assets as of December 31, 2020 was $22.3 million.

We identified the Company’s determination of the need for and amount of valuation allowance recorded on U.S.

Federal NOL deferred tax assets as a critical audit matter because of the significant estimates and judgments made by the Company to assess the realizability of its U.S.

Federal NOL deferred tax assets prior to expiration.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our income tax specialists, to evaluate the reasonableness of management’s estimates of future taxable income and the determination of whether it is more likely than not that the U.S.

Federal NOL deferred tax assets will be realized.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the valuation allowance for income taxes and the determination of whether it is more likely than not that the U.S.

Federal NOL deferred tax assets will be realized prior to expiration included the following, among others:

 We tested the effectiveness of controls over the valuation allowance for income taxes, including management’s controls over the estimates of future taxable income and the determination of whether it is more likely than not that the U.S.

Federal NOL deferred tax assets will be realized.

 With the assistance of income tax specialists, we evaluated the reasonableness of the methods, assumptions, and judgments used by management to determine whether a valuation allowance was necessary.

 We evaluated management’s ability to accurately estimate future taxable income available to realize its U.S.

Federal NOL deferred tax assets by comparing actual results to management’s historical estimates and evaluating whether there have been any changes that would affect management’s ability to accurately estimate future taxable income.

 We evaluated the reasonableness of management’s estimates of future taxable income available to realize U.S.

Federal NOL deferred tax assets by comparing the estimates to historical taxable income as adjusted for nonrecurring items.

 We evaluated whether the estimates of future taxable income were consistent with evidence obtained in other areas of the audit.

/s/ Deloitte & Touche LLP

17 unchanged sentences

Current liabilities

Accounts payable and accrued liabilities

Accounts payable

Accrued liabilities

Income tax payable

1 unchanged sentence

Total current liabilities

Long-term debt

Long-term debt, net

Deferred income taxes

10 unchanged sentences

Treasury stock, at cost

Accumulated other comprehensive income (loss)

Accumulated other comprehensive (loss) income

Total stockholders'

12 unchanged sentences

Transaction costs

Contingent consideration benefit

Total operating expenses

Operating income

Other (expense) income

Other income (expense)

Interest expense, net

2 unchanged sentences

Income tax benefit

Other comprehensive income (loss), net of tax:

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustment

Unrealized (loss) gain on hedging activities

Other comprehensive income (loss)

Unrealized gain (loss) on hedging activities

Other comprehensive (loss) income

Comprehensive income

7 unchanged sentences

Cash Flows From Operating Activities:

Adjustments to reconcile net 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

1 unchanged sentence

Amortization of debt issuance costs

Loss on disposition of property and equipment

(Gain) loss on disposition of property and equipment

Noncash lease expense

Loss from removal of accumulated translation adjustment

Contingent consideration benefit

Stock-based compensation

Deferred income taxes

Changes in operating assets and liabilities, net of acquisition:

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

Prepaid and other assets

Accounts payable and accrued liabilities

Net cash provided by operating activities

Accounts payable

Accrued liabilities

Net cash (used in) provided by operating activities

Cash Flows From Investing Activities:

Purchase of business, net of cash received

Purchase of businesses, net of cash received

Proceeds from disposition of property and equipment

Purchase of property and equipment

Purchases of property and equipment

Net cash used in investing activities

2 unchanged sentences

Repayments on revolving credit facilities

Repayments of long-term debt

Proceeds from issuance of long-term debt

Repayments on term loans

Proceeds from issuance of term loans

Payment of debt issuance costs

8 unchanged sentences

Cash, beginning of year

Cash, end of year

Cash, end of period

Supplemental Disclosure of Cash Flow Information:

2 unchanged sentences

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Stock issued for business acquisitions

Deferred stock consideration for business acquisition

Contingent consideration for business acquisitions

Property and equipment purchased with accounts payable

Property and equipment acquired through a capital lease

Lease liabilities arising from obtaining right of use assets

Gain on transfer of entity under common control

Stock dividends

11 unchanged sentences

Purchase of treasury stock

Stock compensation expense

Stock-based compensation expense

Proceeds from exercise of options

Balance, December 31, 2019

Other comprehensive loss

Other comprehensive income

Cash dividends ($ 0.05 per share)

Stock dividends ($ 0.05 per share)

Purchase of treasury stock

Stock compensation expense

Stock-based compensation expense

Proceeds from exercise of options

Issuance of common stock, net of issuance costs

Balance, December 31, 2020

Other comprehensive income

Other comprehensive loss

Cash dividends ($ 0.10 per share)

Stock dividends ($ 0.05 per share)

Purchase of treasury stock

Gain on transfer of entity under common control

Stock-based compensation expense

1 unchanged sentence

Issuance of common stock, net of issuance costs

Shares issued in business acquisitions

Balance, December 31, 2021

6 unchanged sentences

Nature of Business

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.

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

high-performance, activity-based apparel (such as shells, insulation, midlayers, pants and logowear);

rock-climbing footwear and equipment (such as carabiners, protection devices, harnesses, belay devices, helmets, and ice-climbing gear);

technical backpacks and high-end day packs;

trekking poles;

headlamps and lanterns;

gloves and mittens;

and skincare and other sport-enhancing products.

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.

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

Headquartered in Salt Lake City, Utah, Clarus is 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® and MAXTRAX® brand names through outdoor specialty and online retailers, our own websites, distributors and original equipment manufacturers.

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

(“Black Diamond Equipment”) in May 2010 and changed its name to Black Diamond, Inc.

6 unchanged sentences

(“SKINourishment”).

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

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.

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.

We also expect a continued 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.

We have mitigated 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, temporarily suspending cash dividends, postponing non-essential capital expenditures, reducing operating costs, modulating production in line with demand, 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.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

These countermeasures partially mitigated 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.

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

The CARES Act established a program with provisions to allow U.S.

companies to defer the employer’s portion of social security taxes between March 27, 2020 and December 31, 2020 and pay such taxes in two installments in 2021 and 2022.

As permitted by the CARES Act, we have deferred payment of the employer’s portion of social security payroll tax payments.

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

On July 1, 2021, the Company completed the acquisition of Australia-based Rhino-Rack Holdings Pty Ltd (“Rhino-Rack”).

On December 1, 2021, the Company completed the acquisition of Australia-based MaxTrax Australia Pty Ltd (“MAXTRAX”).

Use of Estimates

1 unchanged sentence

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.

The more significant estimates relate to the fair value of net assets acquired in business combinations, excess or obsolete inventory, allowance for credit losses, contingent consideration liabilities, 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.

9 unchanged sentences

Foreign currency translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss).

Foreign currency transaction gains and losses are included in other (expense) income in the consolidated statements of comprehensive income.

Foreign currency transaction gains and losses are included in other income (expense) in the consolidated statements of comprehensive income.

Cash Equivalents

1 unchanged sentence

At December 31, 2021 and 2020, the Company did not hold any amounts that were considered to be cash equivalents.

Accounts Receivable and Allowance for Credit Losses and Doubtful Accounts

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Accounts Receivable and Allowance for Credit Losses

The Company records its trade receivables at sales value.

1 unchanged sentence

The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information.

The Company evaluates the collectability of its accounts receivable and determines the appropriate allowance for credit losses and doubtful accounts based on a combination of factors.

A non-specific allowance for estimated doubtful accounts is recorded based on historical experience of collectability.

The Company evaluates the collectability of its accounts receivable and determines the appropriate allowance for credit losses based on a combination of factors.

A non-specific allowance for estimated credit losses is recorded based on historical experience of collectability.

In addition, specific allowances are established for customer accounts as known collection problems occur due to insolvency, disputes or other collection issues.

The amounts of these specific allowances are estimated by management based on the customer’s financial position, the age of the customer’s receivables and the reasons for any disputes.

The allowance for credit losses and doubtful accounts is reduced by subsequent collections of the specific allowances or by any write-off of customer accounts that are deemed uncollectible.

The allowance for credit losses and doubtful accounts was $ 1,433 and $ 494 at December 31, 2020 and 2019, respectively.

The allowance for credit losses is reduced by subsequent collections of the specific allowances or by any write-off of customer accounts that are deemed uncollectible.

The allowance for credit losses was $ 811 and $ 1,433 at December 31, 2021 and 2020, respectively.

There were no significant write-offs during the years ended December 31, 2021, 2020, and 2019.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Inventories are stated at the lower of cost (using the first-in, first-out method “FIFO”) or net realizable value.

10 unchanged sentences

Leasehold improvements are amortized over the lesser of the estimated useful life of the improvement or the life of the lease.

Equipment under finance leases are stated at the present value of minimum lease payments.

Major replacements, which extend the useful lives of equipment, are capitalized and depreciated over the remaining useful life.

1 unchanged sentence

Property and equipment are reviewed for impairment whenever events or changes in circumstances exist that indicate the carrying amount of an asset may not be recoverable.

Long-lived assets located outside of the United States are not considered material.

Lease Accounting (Right-of-Use Assets)

Property and equipment located outside of the United States are not considered material.

Lease assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists.

3 unchanged sentences

Variable lease payments are generally expensed as incurred and include certain non-lease components, such as common area maintenance and other services provided by the lessor, and other charges such as utilities, insurance and property taxes included in the lease.

Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the expense for these short-term leases and for operating leases is recognized on a straight-line basis over the lease term.

Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the expense for these short-term leases and for leases is recognized on a straight-line basis over the lease term.

Non-lease components are excluded from the right-of-use (“ROU”) asset and lease liability present value computations.

3 unchanged sentences

The Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

Some of these qualitative factors may include macroeconomic conditions, industry and market considerations, a change in financial performance, entity-specific events, a sustained decrease in share price, and consideration of the difference between the fair value and carrying amount of a reporting unit as determined in the most recent quantitative assessment.

If, through this qualitative assessment, the conclusion is made that it is more likely than not that a reporting unit's fair value is less than its carrying amount, a quantitative impairment analysis is performed.

The quantitative impairment analysis involves estimating the fair value of the reporting unit based upon an acceptable valuation method under Accounting Standards Codification (“ASC”) 820, Fair Value Measurement .

If the fair value of the reporting unit is less than its carrying amount, an impairment loss is recognized for the excess carrying amount over the fair value computation.

1 unchanged sentence

No impairment was recorded during the years ended December 31, 2021, 2020, and 2019.

Intangible Assets

Intangible assets represent other intangible assets and indefinite-lived intangible assets acquired.

The Company’s other intangible assets, such as certain customer lists and relationships, product technologies, tradenames, trademarks and core technologies are amortized over their estimated useful lives.

Other intangible assets are reviewed for impairment whenever events or changes in circumstances exist that indicate the carrying amount of an asset may not be recoverable.

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

The Company’s indefinite-lived intangible assets consists of certain tradenames and trademarks that provide Black Diamond Equipment, PIEPS, Sierra and Barnes with the exclusive and perpetual rights to manufacture and sell their respective products.

Intangible Assets

Intangible assets represent other intangible assets and indefinite-lived intangible assets acquired.

The Company’s other intangible assets, such as certain customer relationships, product technologies, tradenames, trademarks and core technologies are amortized over their estimated useful lives.

Other intangible assets are reviewed for impairment whenever events or changes in circumstances exist that indicate the carrying amount of an asset may not be recoverable or annually as of December 31 st of each year.

The Company’s indefinite-lived intangible assets consists of certain tradenames and trademarks that provide Black Diamond Equipment, PIEPS, Sierra, Barnes, Rhino-Rack, and MAXTRAX with the exclusive and perpetual rights to manufacture and sell their respective products.

Indefinite-lived intangible assets are not amortized;

5 unchanged sentences

Based on the results of the Company’s annual impairment tests during the years ended December 31, 2021, 2020, and 2019, no impairment of indefinite-lived intangible assets was recorded.

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities include, but are not limited to, vendor trade payables, accrued payrolls, accrued interest, derivative instruments and other estimated expenses.

Accrued liabilities as of December 31, 2020 and 2019 were $ 13,182 and $ 9,559 , respectively.

Derivative Financial Instruments

1 unchanged sentence

The Company enters into forward contracts, option contracts and non-deliverable forwards to manage the impact of foreign currency fluctuations on a portion of its forecasted foreign currency exposure.

These derivatives are carried at fair value on the Company’s consolidated balance sheets in prepaid and other current assets, other long-term assets, accounts payable and accrued liabilities, and other long-term liabilities.

These derivatives are carried at fair value on the Company’s consolidated balance sheets in prepaid and other current assets, other long-term assets, accrued liabilities, and other long-term liabilities.

Changes in fair value of the derivatives not designated as hedge instruments are included in the determination of net income.

For derivative contracts designated as 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 item is recognized in earnings.

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

For all hedging relationships, the Company formally documents the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the hedged transaction, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method used to measure ineffectiveness.

11 unchanged sentences

Stock options granted have contractual terms of up to ten years .

Upon exercise of stock options or vesting of restricted stock awards, the Company issues shares from those authorized and reserved for issuance.

Upon exercise of stock options or vesting of restricted stock awards, the Company issues shares from new shares authorized and reserved for issuance.

CLARUS CORPORATION

18 unchanged sentences

Sales commissions are expensed as incurred.

These costs are recorded in selling, general and administrative.

These costs are recorded in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income.

Taxes collected from customers and remitted to government authorities are reported on the net basis and are excluded from sales.

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

Deferred revenue was not material at December 31, 2020 and totaled $ 141 at 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 year ended December 31, 2020 were not material and were $ 90 during the year ended December 31, 2019.

Cost of Sales

The expenses that are included in cost of sales include all direct product costs and costs related to shipping, certain warehousing or handling, duties and importation fees.

Product warranty costs and specific provisions for excess, close-out, or slow-moving inventory are also included in cost of sales.

Certain warehousing or handling costs which are not associated with the manufacturing of goods for sale are excluded from cost of sales.

Cost of Goods Sold

The expenses that are included in cost of goods sold include all direct product costs and costs related to shipping, certain warehousing or handling, duties and importation fees.

Product warranty costs and specific provisions for excess, close-out, or slow-moving inventory are also included in cost of goods sold.

Certain warehousing or handling costs which are not associated with the manufacturing of goods for sale are excluded from cost of goods sold.

Selling, General and Administrative Expense

Selling, general and administrative expense includes personnel-related costs, product development, selling, advertising, visual merchandise, depreciation and amortization, and other general operating expenses.

Selling, general and administrative expense includes personnel-related costs, including stock-based compensation, product development, selling, advertising, visual merchandise, depreciation and amortization, and other general operating expenses.

Advertising costs are expensed in the period incurred.

1 unchanged sentence

Through cooperative advertising programs, the Company reimburses its wholesale customers for some of their costs of advertising the Company’s products based on various criteria, including the value of purchases from the Company and various advertising specifications.

Cooperative advertising costs were not material for the year ended December 31, 2020.

Cooperative advertising costs were $ 287 , and $ 338 for the years ended December 31, 2019 and 2018, respectively, and were included in selling, general, and administrative expense because the Company receives an identifiable benefit in exchange for the cost, the advertising may be obtained from a party other than the customer, and the fair value of the advertising benefit can be reasonably estimated.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Cooperative advertising costs were not material for the years ended December 31, 2021 and 2020.

Cooperative advertising costs were $ 287 for the year ended December 31, 2019 and were included in selling, general, and administrative expense because the Company receives an identifiable benefit in exchange for the cost, the advertising may be obtained from a party other than the customer, and the fair value of the advertising benefit can be reasonably estimated.

Product Warranty

Some of the Company’s products carry warranty provisions for defects in quality and workmanship.

Warranty repairs and replacements are recorded in cost of sales and a warranty liability is established at the time of sale to cover estimated costs based on the Company’s history of warranty repairs and replacements.

The Company recorded a liability for product warranties totaling $ 1,354 and $ 1,155 as of December 31, 2020 and 2019, respectively.

Warranty repairs and replacements are recorded in cost of goods sold and a warranty liability is established at the time of sale to cover estimated costs based on the Company’s history of warranty repairs and replacements.

For the years ended December 31, 2021, 2020, and 2019, the Company experienced warranty claims on its products of $ 1,863 , $ 1,201 , and $ 1,123 , respectively.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Research and Development

2 unchanged sentences

Transaction Costs

Transaction costs consists of expenses related to the Company’s various acquisition efforts and capital-raising activities, including acquiring Sierra and Barnes and completing a registered direct offering (the “Offering”).

Transaction costs consists of expenses related to the Company’s various acquisition efforts and capital-raising activities associated with acquiring Sierra, Barnes, Rhino-Rack and MAXTRAX.

Income taxes are accounted for under the asset and liability method.

6 unchanged sentences

deferred income taxes are not provided on undistributed income of foreign subsidiaries where such earnings are considered to be permanently invested.

The Company releases residual tax effects in accumulated other comprehensive income (loss) through continuing operations as the underlying asset matures or expires.

The Company recognizes interest expense and penalties related to income tax matters in income tax benefit.

Unremitted taxes on undistributed foreign earnings are not material for the years ended December 31, 2021, 2020, and 2019

The Company releases residual tax effects in accumulated other comprehensive (loss) income through continuing operations as the underlying asset matures or expires.

The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position.

2 unchanged sentences

Unrecognized tax benefits that reduce a net operating loss, similar tax loss or tax credit carryforward, are presented as a reduction to deferred income taxes.

The Company recognizes interest expense and penalties related to uncertain tax positions in income tax expense (benefit).

Concentration of Credit Risk and Sales

4 unchanged sentences

During the years ended December 31, 2021, 2020 and 2019, Recreational Equipment, Inc.

(“REI”) accounted for approximately 10 %, 14 % and 12 %, respectively, of the Company’s sales and is included in the Black Diamond segment.

(“REI”) accounted for approximately 10 %, 10 % and 14 %, respectively, of the Company’s sales and is included in the Outdoor segment.

No other single customer contributed more than 10% of our sales during those periods.

As of December 31, 2021 and 2020, REI accounted for approximately 11 % and 11 % of the Company’s accounts receivable, respectively.

Fair Value Measurements

The carrying value of cash, accounts receivable, accrued liabilities approximate their respective fair values due to the short-term nature and liquidity of these financial instruments.

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

The Company estimates that, due to the variable interest rates reflecting current market rates, the fair value of its long-term debt obligations under its revolving credit facility and term loan approximate the carrying value at December 31, 2021 and 2020.

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

Fair Value Measurements

The carrying value of cash, accounts receivable, accounts payable and accrued liabilities approximate their respective fair values due to the short-term nature and liquidity of these financial instruments.

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

The Company estimates that, due to the variable interest rates reflecting current market rates, the fair value of its long-term debt obligations under its revolving credit facility and term note approximate the carrying value at December 31, 2020 and 2019.

Contingent Consideration Liabilities

Contingent consideration liabilities are required to be recognized at fair value as of the acquisition date.

We estimate the fair value of these liabilities based on financial projections of the acquired company, such as sales-based milestones, and estimated probabilities of achievement.

Based on updated estimates and projections, the contingent consideration liabilities are adjusted at each reporting date to their estimated fair value.

Changes in fair value subsequent to the acquisition date are reported in contingent consideration benefit in the accompanying consolidated statements of comprehensive income.

Variations in the fair value of contingent consideration liabilities may result from changes in discount periods or rates, changes in the timing and amount of sales estimates, and changes in probability assumptions with respect to the likelihood of achieving sales milestones.

Segment Information

We operate our business structure within two segments.

We operate our business structure within three segments.

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.

The accounting policies of the segments are the same as those described above .

Reclassifications

Certain reclassifications have been made to prior period financial statements to conform to the current period presentation.

Specifically, accounts payable and accrued liabilities, which were combined and disclosed as one amount, are now presented separately.

Recent Accounting Pronouncements

7 unchanged sentences

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.

Currently, management does not believe that the impact of transitioning from LIBOR to SOFR will have a material effect on the interest rates of the company.

On November 26, 2021, Clarus, through Oscar Aluminium Pty Ltd (“Oscar Aluminium”), an indirect wholly-owned Australian subsidiary of the Company, entered into a Share and Unit Purchase Agreement (the “MAXTRAX Purchase Agreement”) to acquire Australia-based MaxTrax Australia Pty Ltd (“MAXTRAX”).

On December 1, 2021, the transaction contemplated by the MAXTRAX Purchase Agreement was consummated.

All United States dollar amounts contained herein are based on the exchange rates in effect for Australian dollars ($AUD) and the market value of the Company’s common stock at the time of closing of the acquisition of MAXTRAX (the “MAXTRAX Acquisition”).

Under the terms of the MAXTRAX Purchase Agreement, Oscar Aluminium acquired MAXTRAX for an aggregate purchase price of $AUD 49,744 (approximately $ 35,475 ), subject to a post-closing adjustment.

The purchase price was comprised of $AUD 37,551 (approximately $ 26,780 ) cash, 107 shares of the Company’s common stock valued at $ 2,594 , and additional consideration described below.

The shares of the Company’s common stock issued are subject to a lock-up agreement restricting sales for 180 days from the closing of the MAXTRAX Acquisition.

The MAXTRAX Purchase Agreement also provides for the payment of additional consideration in the form of shares of the Company’s common stock valued at $AUD 6,250 (approximately $ 4,457 ) split equally on June 30, 2022 and 2023.

The MAXTRAX Purchase Agreement provides for the payment of additional contingent consideration up to $AUD 6,250 (approximately $ 4,457 ) in cash if certain future net sales thresholds are met during 2022 and 2023 (the “MAXTRAX Contingent Consideration”).

The Company estimated the fair value of the MAXTRAX Contingent Consideration to be $AUD 2,307 (approximately $ 1,644 ) and has recorded this liability within accrued liabilities and other long-term liabilities.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The acquisition was accounted for as a business combination.

Acquisition-related costs for the MAXTRAX Acquisition, which were included in transaction costs during the year ended December 31, 2021 were $ 446 .

On May 30, 2021, Clarus, through Oscar Aluminium, an indirect wholly-owned Australian subsidiary of the Company, entered into a Share Sale and Purchase Agreement (the “Rhino-Rack Purchase Agreement”) to acquire Australia-based Rhino-Rack Holdings Pty Ltd (“Rhino-Rack”).

On July 1, 2021, the transaction contemplated by the Rhino-Rack Purchase Agreement was consummated.

Under the terms of the Rhino-Rack Purchase Agreement, Oscar Aluminium acquired Rhino-Rack for an aggregate purchase price of $AUD 269,696 (approximately $ 202,488 ), subject to a post-closing adjustment.

The purchase price was comprised of $AUD 191,249 (approximately $ 143,590 ) cash, 2,315 shares of the Company’s common stock valued at $ 55,333 , and additional contingent consideration described below.

The shares of the Company’s common stock issued were subject to a lock-up agreement restricting sales for 180 days from the closing of the Acquisition.

The Purchase Agreement also provides for the payment of additional contingent consideration up to $AUD 10,000 (approximately $ 7,508 ) in cash if certain future net sales thresholds are met during 2022 (the “Contingent Consideration”).

The Company estimated the fair value of the Contingent Consideration to be $AUD 4,747 (approximately $ 3,565 ) and has recorded this liability within accrued liabilities.

The acquisition was accounted for as a business combination.

Acquisition-related costs for the Rhino-Rack Acquisition, which were included in transaction costs during the year ended December 31, 2021 were $ 10,975 .

On September 30, 2020, the Company 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 the Company 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”).

1 unchanged sentence

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

Acquisition-related costs for the Barnes acquisition, which were included in transaction costs during the year ended December 31, 2020 were $ 922 .

Acquisition-related costs for the Barnes acquisition, which were included in transaction costs during the years ended December 31, 2021 and 2020 were $ 273 and $ 922 respectively.

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 Company believes the acquisitions of MAXTRAX, Rhino-Rack and Barnes are 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.

CLARUS CORPORATION

2 unchanged sentences

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 fair value estimates for the purchase price allocation for MAXTRAX and Rhino-Rack are based on the Company’s best estimates and assumptions as of the reporting date and are considered preliminary.

The fair value measurements of identifiable assets and liabilities, and the resulting goodwill related to the MAXTRAX and Rhino-Rack Acquisitions are subject to change and the final purchase price allocations could be different from the amounts presented below.

We expect to finalize the valuations as soon as practicable, but not later than one year from the date of the acquisitions.

The fair value measurements for the acquisition of Barnes have been completed.

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

Goodwill is included in the Sierra segment.

Goodwill for MAXTRAX and Rhino-Rack is included in the Adventure segment and goodwill for Barnes is included in the Precision Sport segment.

The goodwill consists largely of the growth and profitability expected from these acquisitions.

December 1, 2021

October 2, 2020

Number of Shares

Estimated Fair Value

Number of Shares

Estimated Fair Value

Issuance of shares of Clarus Corporation

Future issuance of shares of Clarus Corporation

Contingent consideration

Total purchase consideration

Assets acquired and liabilities assumed

Accounts receivable

Prepaid and other current assets

4 unchanged sentences

Accounts payable and accrued liabilities

Income tax payable

Current portion of long-term debt

Long-term debt

Deferred income taxes

Other long-term liabilities

2 unchanged sentences

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

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

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

In connection with the acquisitions, the Company acquired exclusive rights to MAXTRAX’s, Rhino-Rack’s, and 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:

3 unchanged sentences

Intangibles not subject to amortization

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

The full amount of goodwill of $ 14,458 at MAXTRAX and $ 78,347 at Rhino-Rack is expected to be non-deductible for tax purposes.

No pre-existing relationships existed between the Company and MAXTRAX and Rhino-Rack or their sellers prior to the acquisition.

MAXTRAX and Rhino-Rack revenue and operating income are included in the Adventure segment.

Total revenue of $ 1,728 and net income of $ 183 of MAXTRAX were included in the Company’s consolidated statements of comprehensive income from the date of acquisition to December 31, 2021.

Total revenue of $ 43,411 and net loss of $ 7,310 of Rhino-Rack were included in the Company’s consolidated statements of comprehensive income from the date of acquisition to December 31, 2021.

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

1 unchanged sentence

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.

Total revenue of $ 6,556 and net income of $ 871 of Barnes were included in the Company’s consolidated statements of comprehensive income from the date of acquisition to December 31, 2020.

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

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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.

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

Barnes revenue and operating income were included in the Precision Sport segment.

The following unaudited pro forma results are based on the individual historical results of the Company, MAXTRAX, Rhino-Rack, and Barnes, with adjustments to give effect as if the acquisition and borrowings used to finance the acquisition had occurred on January 1, 2020 for MAXTRAX and Rhino-Rack and January 1, 2019 for Barnes, 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.

Year Ended December 31,

1 unchanged sentence

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.

Material nonrecurring adjustments excluded from the unaudited pro forma financial information above consists of $ 922 transaction costs and the $ 721 step up of Barnes’ inventory to its preliminary fair value, which is expected to be recorded as an unfavorable adjustment to cost of goods sold during the six months following the acquisition date.

SKINourishment

On November 6, 2018, the Company purchased the assets of SKINourishment and was accounted for as a business combination.

The assets purchased were not significant to the consolidated financial statements.

Pro forma results of SKINourishment have not been presented as the results are insignificant to our consolidated financial statements.

Additionally, revenues and earnings of SKINourishment, since the acquisition date, are insignificant to our consolidated financial statements .

Material nonrecurring adjustments excluded from the unaudited pro forma financial information above consists of $ 12,616 transaction costs and $ 5,399 step up of inventory to its preliminary fair value, which is expected to be recorded as an unfavorable adjustment to cost of goods sold .

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

15 unchanged sentences

Depreciation expense was $ 5,985 , $ 4,801 , and $ 4,550 for the years ended December 31, 2021, 2020, and 2019, respectively.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

GOODWILL AND OTHER INTANGIBLE ASSETS

The following table summarizes the changes in goodwill by segment:

Black Diamond

Balance at December 31, 2018

Precision Sport

Balance at December 31, 2019

1 unchanged sentence

Balance at December 31, 2020

Increase due to acquisitions of Rhino-Rack and MAXTRAX

Impact of foreign currency exchange rates

Balance at December 31, 2021

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Indefinite-Lived Intangible Assets

1 unchanged sentence

Balance at December 31, 2020

Increase due to acquisition of Barnes

Increase due to acquisitions of Rhino-Rack and MAXTRAX

Impact of foreign currency exchange rates

Balance at December 31, 2021

Trademarks classified as indefinite-lived intangible assets by brand as of December 31, 2021 and 2020, were as follows:

December 31, 2021

December 31, 2020

Black Diamond

Other Intangible Assets, net

1 unchanged sentence

Gross balance at December 31, 2020

Increase due to acquisition of Barnes

Increase due to acquisitions of Rhino-Rack and MAXTRAX

Impact of foreign currency exchange rates

23 unchanged sentences

Amortization Expense

LONG-TERM DEBT

ACCRUED LIABILITIES AND OTHER LONG-TERM LIABILITIES

Accrued liabilities as of December 31, 2021 and 2020, were as follows:

December 31, 2021

December 31, 2020

Accrued payroll and related items

Accrued bonus

Designated forward exchange contracts

Accrued warranty

Current lease liabilities

Accrued commissions

Contingent consideration liabilities

Accrued excise tax

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Other long-term liabilities as of December 31, 2021 and 2020, were as follows:

December 31, 2021

December 31, 2020

Long-term lease liability

Deferred stock consideration for business acquisition

Contingent consideration liability

LONG-TERM DEBT, NET

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

2 unchanged sentences

Revolving credit facility (a)

Foreign credit facilities (b)

Term note (c)

Other debt (b)

Term loan (c)

Debt issuance costs

Less current portion

On July 1, 2021, 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.

3”) to that certain Credit Agreement, dated May 3, 2019, as amended by Amendment No.

1 dated May 28, 2019 and Amendment No.

2 dated November 12, 2020, with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto (collectively, the “Credit Agreement”).

The Credit Agreement as amended by Amendment No.

3, increased 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 Credit Agreement continues to permit the Loan Parties, 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 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.

Amendment No.

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

All obligations under the Credit Agreement are secured by our 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 December 31, 2021.

(a) As of December 31, 2021, the Company had drawn $ 18,501 on the $ 100,000 revolving commitment that was available under the credit agreement with JPMorgan Chase Bank, N.A., with a maturity date of May 3, 2024 .

4 unchanged sentences

(in thousands, except per share amounts)

On November 12, 2020, the Borrowers entered into Amendment No.

2 (the “Amendment No.

2”) to that certain Credit Agreement, dated May 3, 2019 and as amended by Amendment No.

1 dated May 28, 2019 (the “Amendment No.

1”), with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto (collectively, the “Credit Agreement”).

The Credit Agreement as amended by Amendment No.

2, increased the maximum consolidated total leverage ratio permitted under the Credit Agreement to 4.00 :1.00 from 3.00 :1.00.

In addition, Amendment No.

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 (the “Notes”), and eliminates the requirement that the proceeds therefrom be used to prepay any revolving loans or term loans under the Credit Agreement.

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 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 December 31, 2020.

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

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

As of December 31, 2020, the rate was 1.3387 %.

(b) Foreign subsidiaries of the Company have a revolving credit facility and term debt with financial institutions which mature between February 21, 2022 and August 8, 2024 .

The foreign subsidiaries pay interest monthly on any borrowings on the credit facilities as well as monthly payments on the term debt.

As of December 31, 2021, the interest rates ranged between 1.3387 % and 5.1651 % and as of December 31, 2020, the rate was 1.3387 %.

The credit facilities are secured by certain assets of the foreign subsidiaries.

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

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

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

On July 1, 2021, under Amendment No.

3, the aggregate amount of the term loan facility was increased to $ 125,000 and the term loan 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 each beginning with September 30, 2022 , and any remaining obligations will be repaid in full on the maturity date of the Credit Agreement of May 3, 2024 .

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

As of December 31, 2021, the rate was 2.3752 %.

As part of the Rhino-Rack Acquisition, the Company assumed certain current and long-term debt of approximately $ 2,252 which was settled during the year ended December 31, 2021.

The aggregate maturities of the revolving credit facility for the years subsequent to December 31, 2021 are as follows:

Total future long-term debt payments

Less amount representing debt discounts

Total carrying amount of long-term debt

Less current portion

6 unchanged sentences

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

During the year ended December 31, 2021, the Company held currency forward contracts to mitigate currency fluctuations related to the estimated cash purchase price of Rhino-Rack totaling $AUD 193,650 with a maturity date of July 1, 2021.

These contracts were not designated as accounting hedges and the changes in fair value of the instruments are recognized in earnings.

During the year ended December 31, 2021, losses of $ 4,281 were recorded in other, net expense.

At December 31, 2021, the Company’s derivative contracts had remaining maturities of less than one and one-half years .

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

The maximum net exposure of the Company’s credit risk to the counterparties is generally limited to the aggregate unrealized loss of all contracts with that counterparty, which is $ 1,629 as of December 31, 2020.

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

At December 31, 2020, there was no such exposure to the counterparties.

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.

As of December 31, 2021, there was no such exposure to the counterparties.

The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain of $ 487 on all contracts as of December 31, 2021.

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

13 unchanged sentences

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.

Gains (losses) of $( 139 ) and $ 1,017 were reclassified to sales during the years ended December 31, 2020 and 2019, respectively.

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

Losses of $ 223 and $ 139 were reclassified to sales during the years ended December 31, 2021 and 2020, respectively.

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

3 unchanged sentences

Derivative instruments in asset positions:

Forward exchange contracts

Designated forward exchange contracts

Prepaid and other current assets

Derivative instruments in liability positions:

Forward exchange contracts

Accounts payable and accrued liabilities

Forward exchange contracts

Other long-term assets

Derivative instruments in liability positions:

Designated forward exchange contracts

Accrued liabilities

Designated forward exchange contracts

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.

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

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

The components of AOCI, net of tax, were as follows:

2 unchanged sentences

Balance as of December 31, 2020

Other comprehensive income (loss) before reclassifications

Amounts reclassified from other comprehensive income (loss)

Net current period other comprehensive income (loss)

Other comprehensive (loss) income before reclassifications

Amounts reclassified from other comprehensive (loss) income

Net current period other comprehensive (loss) income

Balance as of December 31, 2021

6 unchanged sentences

Other comprehensive income (loss) before reclassifications

Amounts reclassified from other comprehensive income (loss)

Net current period other comprehensive loss

Amounts reclassified from other comprehensive (loss) income

Net current period other comprehensive income (loss)

Balance as of December 31, 2020

The effects on net income of amounts reclassified from unrealized gains (losses) on cash flow hedges for foreign exchange contracts and foreign currency translation adjustments for the years ended December 31, 2021 and 2020 were as follows:

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

Losses reclassified from AOCI to the Consolidated Statements of Comprehensive Income

Affected line item in the Consolidated

4 unchanged sentences

Foreign exchange contracts:

Income tax (benefit) expense

Income tax benefit

Amount reclassified, net of tax

13 unchanged sentences

December 31, 2021

Forward exchange contracts

Designated forward exchange contracts

Contingent consideration liabilities

December 31, 2020

Forward exchange contracts

Designated forward exchange contracts

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

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

The Company estimated the fair value of the Contingent Consideration liabilities using a series of call options.

Significant unobservable inputs used in the valuation include a discount rates ranging from 4.8 % to 8.0 %.

The Contingent Consideration liabilities are remeasured at the estimated fair value at the end of each reporting period with the change in fair value recognized in contingent consideration benefit in the accompanying consolidated statements of comprehensive income for such period.

We measure the initial liability and remeasure the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fair value measurements.

Detail of the Contingent Consideration for the year ended December 31, 2021:

Increase due to acquisition of Rhino-Rack

Increase due to acquisition of MAXTRAX

Fair value adjustments

Impact of foreign currency exchange rates

Balance at December 31, 2021

As the Contingent Consideration liabilities are remeasured to fair value each reporting period, significant increases or decreases in projected sales, discount rates or the time until payment is made would have resulted in a significantly lower or higher fair value measurement.

Our determination of fair value of the Contingent Consideration liabilities could change in future periods based on our ongoing evaluation of these significant unobservable inputs.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

STOCKHOLDERS’ EQUITY

3 unchanged sentences

In 2021, 2020 and 2019 our total Quarterly Cash Dividends were $ 3,335 , $ 1,520 and $ 2,987 , respectively.

In 2020, our total Quarterly Stock Dividends were $ 1,533 .

On January 29, 2021 , the Company announced that its Board of Directors approved the payment on February 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 February 8, 2021 .

During the year ended December 31, 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 900,000 shares of its common stock in a registered direct offering (the “Offering”).

The proceeds to the Company from the Offering were $ 11,476 .

On May 7, 2018, the Company announced a “modified Dutch auction” tender offer for Clarus’ common stock, as well as the preferred share purchase rights associated with such shares (collectively, the “Shares”).

On July 11, 2018, the tender offer expired, following which the Company announced it would accept 417,237 Shares for purchase at a price of $ 8.00 per Share, for an aggregate cost of approximately $ 3,338 , excluding fees and expenses.

The Company purchased shares of the Company’s common stock for $ 4,167 and $ 2,349 under the Company’s authorized stock repurchase program during the years ended December 31, 2019 and 2018, respectively.

In 2020, our total Quarterly Stock Dividends were $ 1,533 , which combined with our cash dividend in 2020 of $ 1,520 , resulted in total dividends in 2020 of $ 3,053 .

On February 25, 2022 , the Company announced that its Board of Directors approved the payment on March 18, 2022 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 March 7, 2022 .

On October 25, 2021, the Company entered into an underwriting agreement with BofA Securities, Inc., as representative of the several underwriters named therein (the “Underwriters”), relating to the public offer and sale of 2,750 shares of the Company’s common stock at a price to the public of $ 27.00 per share.

The Underwriters received an underwriting discount of 6 %, or $ 1.62 per share, in connection with the sale of the shares of Common Stock in the offering.

In addition, the Company granted the Underwriters a 30-day option to purchase up to 413 additional shares of common stock on the same terms and conditions which was fully exercised.

The net proceeds to the Company from the offering, including the Underwriters’ exercise of their 30-day option but before expenses and after deducting the applicable underwriting discounts and commissions, were $ 80,264 .

On September 25, 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 900 shares of its common stock in a registered direct offering.

The proceeds to the Company from this offering were $ 11,476 .

EARNINGS PER SHARE

2 unchanged sentences

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 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:

2 unchanged sentences

Effect of dilutive stock awards

Effect of dilutive deferred stock consideration for business acquisition

Weighted average shares outstanding - diluted

5 unchanged sentences

The aggregate number of shares of common stock that may be granted through awards under the 2015 Plan to any employee in any calendar year may not exceed 500 shares.

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

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

As of December 31, 2021, the number of shares authorized and reserved for issuance under the 2015 Plan is 7,400 shares, subject to automatic annual increase equal to 5 % of the total number of shares of the Company’s outstanding common stock.

1 unchanged sentence

During the year ended December 31, 2021, the Company issued stock options for an aggregate of 500 shares under the 2015 Plan to directors and employees of the Company.

The options issued during the year ended December 31, 2020 generally vest and become exercisable over a period of one year to five years and expire ten years from the date of the grant.

The options issued during the year ended December 31, 2021 generally vest and become exercisable over a period of one to 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:

21 unchanged sentences

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

(b) Because the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term for these grants, the Company utilized the simplified method in developing an estimate of the expected term of these options .

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

Using these assumptions, the fair value of the stock options granted during the years ended December 31, 2021, 2020, and 2019 was $ 3,239 , $ 5,310 , and $ 952 , respectively, which will be amortized as stock-based compensation expense over the vesting period of the options.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Stock Award Granted:

3 unchanged sentences

Market Condition Restricted Shares Granted:

On May 28, 2021, the Company issued and granted to the Executive Chairman a restricted stock award of 500 restricted shares under the 2015 Plan, of which 500 restricted shares will vest if, on or before May 28, 2024, the Fair Market Value (as defined in the Plan) of the Company’s common stock shall have equaled or exceeded $ 35.00 per share for twenty consecutive trading days.

For computing the fair value of the 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.

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.

Subsequent to year end, the market-based condition was met and the restricted shares became fully vested.

During the year ended December 31, 2021, the market-based condition was met and the restricted shares became fully vested.

On January 7, 2019, the Company issued and granted to an employee a restricted stock award of 350 restricted shares under the 2015 Plan, that will vest as follows:

(A) the stock award will vest and become nonforfeitable if, on or before January 7, 2024, the closing price of the Company’s common stock shall have equaled or exceeded $ 15.00 per share for twenty consecutive trading days (such 20th day being the “Price Trigger Date”);

(A) the stock award will vest and become nonforfeitable if, on or before January 7, 2024, the closing

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

price of the Company’s common stock shall have equaled or exceeded $ 15.00 per share for twenty consecutive trading days (such 20th day being the “Price Trigger Date”);

and (B) once the Price Trigger Date occurs, (i) 117 shares of the Company’s common stock shall vest on each of the first and second anniversary of the Price Trigger Date;

1 unchanged sentence

For computing the fair value of the 350 restricted shares with a market condition, the fair value of each restricted stock award grant has been estimated as of the date of grant using the Monte-Carlo pricing model with the assumptions below.

Subsequent to year end, the market-based condition was met and the Price Trigger Date occurred.

During the year ended December 31, 2021, the market-based condition was met and the Price Trigger Date occurred.

On January 7, 2019, the Company issued and granted to an employee a restricted stock award of 150 restricted shares under the 2015 Plan, that will vest as follows:

2 unchanged sentences

For computing the fair value of the 150 restricted shares with a market condition, the fair value of each restricted stock award grant has been estimated as of the date of grant using the Monte-Carlo pricing model with the assumptions below.

Subsequent to year end, the market-based condition was met and the Price Trigger Date occurred.

During the year ended December 31, 2021, the market-based condition was met and the Price Trigger Date occurred.

August 27, 2020

4 unchanged sentences

$ 15.00 stock price target

Grant price (per share)

4 unchanged sentences

Weighted average fair value (per share)

Using these assumptions, the fair value of the market condition restricted stock awards granted on August 27, 2020 was approximately $ 991 and January 7, 2019 was approximately $ 3,753 .

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Using these assumptions, the fair value of the market condition restricted stock awards granted on May 28, 2021, August 27, 2020, and January 7, 2019 were approximately $ 7,230 , $ 991 , and $ 3,753 , respectively.

The total non-cash stock compensation expense related to stock options and restricted stock awards recorded by the Company was as follows:

2 unchanged sentences

Stock options

For the years ended December 31, 2020, 2019, and 2018, the majority of stock-based compensation costs were classified as selling, general and administrative expense.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

For the years ended December 31, 2021, 2020, and 2019, stock-based compensation costs were classified as selling, general and administrative expense.

A summary of changes in outstanding options and restricted stock awards during the year ended December 31, 2021 is as follows:

20 unchanged sentences

Unrecognized compensation cost of unvested stock options and restricted stock awards are expected to be recognized over the weighted average period of 1.8 years and 0.8 years, respectively.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

RESTRUCTURING

As part of the conclusion of the Company’s review of strategic alternatives, the Company initiated restructuring activities in efforts to further realign resources within the organization (the “2015 Restructuring Plan”) and completed the plan in 2018 with a final payment in 2019.

During the year ended December 31, 2019 and 2018, we incurred $ 13 and $ 137 , respectively, of restructuring charges related to the 2015 Restructuring Plan.

During the year ended December 31, 2019 we incurred $ 13 of restructuring charges related to the 2015 Restructuring Plan.

We have incurred $ 2,694 of cumulative restructuring charges since the commencement of the 2015 Restructuring Plan.

3 unchanged sentences

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

Based on currently available information, the Company does not believe that it is reasonably possible that the disposition of any of the legal disputes the Company or its subsidiaries is currently involved in will have a material adverse effect upon the Company’s consolidated financial condition, results of operations or cash flows.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

consolidated financial condition, results of operations or cash flows.

There is a reasonable possibility of loss from contingencies in excess of the amounts accrued by the Company in the accompanying consolidated balance sheets;

11 unchanged sentences

Income tax benefit

The Company’s foreign operations that are considered to be permanently reinvested have statutory tax rates of approximately 25 %.

The Company’s foreign operations that are considered to be permanently reinvested have statutory tax rates of approximately 25 % to 30 %.

CLARUS CORPORATION

13 unchanged sentences

Change in valuation allowance

Research and development expenditure

Fair value inventory step-up

Transactions costs

Income tax benefit

14 unchanged sentences

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 income tax assets will not be realized.

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

The estimates and judgments associated with the Company’s valuation allowance on deferred tax assets

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

are considered critical due to the amount of deferred tax assets recorded by the Company on its consolidated balance sheets and the judgment required in determining the Company’s potential for future taxable income.

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 income tax assets will not be realized.

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 sheets and the judgment required in determining the Company’s potential for future taxable income.

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

13 unchanged sentences

income and will be offset with the NOLs.

There are $ 39,507 of NOLs that expire on December 31, 2022, which the Company expects to realize in their entirety in 2022.

Therefore, the Company has eliminated any remaining valuation allowance associated with these NOLs during the year ended December 31, 2021.

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

8 unchanged sentences

federal jurisdiction and various state and foreign jurisdictions and are subject to examination for the open tax years in the U.S.

federal and state jurisdictions of 2015-2019 and in the foreign jurisdictions of 2007-2019.

federal and state jurisdictions of 2015 through 2019 and in the foreign jurisdictions of 2007 through 2019.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense.

A reconciliation of the beginning and ending amount of total unrecognized tax benefits for the years ended December 31, 2020, 2019 and 2018 are follows:

A reconciliation of the beginning and ending amount of total unrecognized tax benefits for the years ended December 31, 2021, 2020 and 2019 is as follows:

Balance, beginning of year

3 unchanged sentences

Balance, end of year

Included in the balance of total unrecognized tax benefits at December 31, 2020 and 2019, are potential benefits of $ 427 and $ 561 , respectively, that if recognized, would affect the effective rate, subject to impact of valuation allowance, on income from continuing operations.

Unrecognized tax benefits that reduce a net operating loss, similar tax loss or tax credit carryforward are presented as a reduction to deferred income taxes.

As a result, the Company classified $ 292 and $ 462 of its unrecognized tax benefit as a reduction to deferred tax assets as of December 31, 2020 and 2019, respectively.

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

Included in the balance of total unrecognized tax benefits at December 31, 2021 and 2020, are potential benefits of $ 696 and $ 427 , respectively, that if recognized, would affect the effective rate, subject to impact of valuation allowance, on income from continuing operations.

Unrecognized tax benefits that reduce a net operating loss, similar tax loss or tax credit carryforward are presented as a reduction to deferred income taxes.

As a result, the Company classified $ 250 and $ 292 of its unrecognized tax benefit as a reduction to deferred tax assets as of December 31, 2021 and 2020, respectively.

Interest and penalty expense recognized related to uncertain tax positions were not significant during the years ending December 31, 2021, 2020, and 2019, respectively.

Total accrued interest and penalties as of December 31, 2020 were not significant and $ 4 as of December 31, 2019 and were included in accounts payable and accrued liabilities.

Total accrued interest and penalties as of December 31, 2021 and 2020, were not significant.

SEGMENT INFORMATION

We operate our business structure within two segments.

We operate our business structure within three segments.

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

1 unchanged sentence

Each segment is described below:

 Our Black Diamond segment, which includes Black Diamond Equipment, PIEPS, and SKINourishment, is a global leader in designing, manufacturing, and marketing innovative outdoor engineered equipment and apparel for climbing, mountaineering, trail running, backpacking, skiing, and a wide range of other year-round outdoor recreation activities.

Our Black Diamond segment offers a broad range of products including:

 Our Outdoor segment, formerly known as our Black Diamond segment, which includes Black Diamond Equipment, PIEPS, and SKINourishment, is a global leader in designing, manufacturing, and marketing innovative outdoor engineered equipment and apparel for climbing, mountaineering, trail running, backpacking, skiing, and a wide range of other year-round outdoor recreation activities.

Our Outdoor segment offers a broad range of products including:

high-performance, activity-based apparel (such as shells, insulation, midlayers, pants and logowear);

6 unchanged sentences

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

 Our Precision Sport segment, formerly known as 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.

 Our Adventure segment, formerly known as our Rhino-Rack segment, which includes Rhino-Rack and MAXTRAX, is a manufacturer of highly-engineered automotive roof racks, trays, mounting systems, luggage boxes, carriers, recovery boards and accessories in Australia and New Zealand and a growing presence in the United States.

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

While there are multiple products sold, the terms and nature of revenue recognition policy is similar for all segments.

The sport product category represents the Sierra segment revenue.

We divide our product offerings into four primary categories of climb, mountain, ski and sport.

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

Year Ended December 31,

The precision sport product category represents the Precision Sport segment revenue and the adventure product category represents the Adventure segment revenue.

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

Financial information for our segments is as follows:

Financial information for our segments, as well as revenue by geography, which the Company believes provides a meaningful depiction how the nature, timing and uncertainty of revenue are affected by economic factors, is as follows:

Year Ended December 31,

Sales to external customers:

Black Diamond

Domestic sales

International sales

Total Black Diamond

Total Outdoor

Precision Sport

Domestic sales

International sales

Total Precision Sport

Domestic sales

International sales

Total Adventure

Total sales to external customers

Segment operating income:

Black Diamond

Precision Sport

Total segment operating income

1 unchanged sentence

Transaction costs

Contingent consideration benefit

Corporate and other expenses

1 unchanged sentence

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.

There were no intercompany sales between the Outdoor, Precision Sport, and Adventure segments for the periods presented.

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

Black Diamond

Precision Sport

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Capital expenditures, depreciation and amortization by segment is as follows.

1 unchanged sentence

Capital expenditures:

Black Diamond

Precision Sport

Total capital expenditures

Depreciation:

Black Diamond

Precision Sport

Total depreciation

Amortization:

Black Diamond

Precision Sport

Total amortization

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The Company has entered into leases for certain facilities, vehicles and other equipment.

Our operating leases have remaining contractual terms of up to nine years , some of which include options to extend the leases for up to ten years .

Our operating lease costs are primarily related to facility leases for inventory warehousing, administration offices and vehicles.

Our leases have remaining contractual terms of up to nine years , some of which include options to extend the leases for up to five years .

Our lease costs are primarily related to facility leases for inventory warehousing, administration offices and vehicles.

The Company’s finance leases are immaterial.

Operating lease ROU assets and liabilities as of December 31, 2020 and 2019, were as follows:

Lease ROU assets and liabilities as of December 31, 2021 and 2020, were as follows:

Balance Sheet Classification

1 unchanged sentence

December 31, 2020

Operating lease ROU assets

Lease ROU assets

Other long-term assets

Current operating lease liabilities

Accounts payable and accrued liabilities

Noncurrent operating lease liabilities

Current lease liabilities

Accrued liabilities

Noncurrent lease liabilities

Other long-term liabilities

Operating lease costs were as follows:

Lease costs were as follows:

Affected line item in the Consolidated

7 unchanged sentences

Cost of goods sold, Selling, general and administrative

The maturity of operating lease liabilities as of December 31, 2020 are as follows:

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The maturity of lease liabilities as of December 31, 2021 are as follows:

Years Ending December 31,

Operating Lease Payments

2025 and thereafter

Lease Payments

Total future lease payments

3 unchanged sentences

Long-term lease obligations

As of December 31, 2020, our operating leases have a weighted-average remaining lease term of 4.32 years and a weighted-average discount rate of 2.24 %.

Total rent expense of the Company for the year ended December 31, 2018 was $ 838 , as determined prior to the adoption of ASC 842.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

As of December 31, 2021, our leases have a weighted-average remaining lease term of 6.59 years and a weighted-average discount rate of 2.81 %.

RELATED PARTY TRANSACTIONS

During the year ended December 31, 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.

As part of the Rhino-Rack Acquisition, on July 1, 2021, the Company paid a fee in the amount of $ 1,750 to Kanders & Company, Inc.

(“Kanders & Company”) in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, performing due diligence and negotiating the Rhino-Rack Acquisition.

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, at closing of Amendment No.

3 on July 1, 2021, the Company paid a fee in the amount of $ 250 to Kanders & Company in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, and negotiating Amendment No.

On October 25, 2021 , the Company paid a fee in the amount of $ 500 to Kanders & Company in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, and negotiating the public offer and sale of the Company’s common stock.

On September 25, 2020, the Company paid a fee in the amount of $ 250 to Kanders & Company in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, and negotiating the sale of the Company’s common stock in a registered direct offering .

Upon the Company’s acquisition of Barnes, on October 2, 2020, the Company paid a fee in the amount of $ 500 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.

SUPPLEMENTARY DATA – QUARTERLY FINANCIAL DATA (Unaudited)

The following table sets forth selected quarterly data for the years ended December 31, 2020 and 2019.

The operating results are not indicative of results for any future period.

Year Ended December 31, 2020

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

(in thousands, except per share amounts)

Operating income (loss)

Net income (loss)

Net income (loss) per share:

Year Ended December 31, 2019

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

(in thousands, except per share amounts)

Operating income (loss)

Net income (loss)

Net income (loss) per share:

Basic and diluted net income (loss) per share are computed independently for each of the quarters presented.

Therefore, the sum of the quarterly amounts may not equal the total computed for the year.

SUBSEQUENT EVENT

On January 3, 2022, the Company entered into Amendment No.

4 to the Credit Agreement (“Amendment No.

Amendment No.

4, among other things, permits (i) the Company to borrow in Australian Dollars and New Zealand Dollars in order to support the operations of the Company in Australia and New Zealand and (ii) provides for addbacks to EBITDA, for debt covenant purposes, (as defined in the Credit Agreement) under the Credit Agreement for expenses relating to activities in respect of acquisitions, dispositions, investments and financings (whether or not these transactions are actually consummated).

CLARUS CORPORATION

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-K

Item 8. Financial Statements and Supplementary Data