What changed in this filing

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Item 1. Financial Statements

2022-05-09 compared with 2021-11-08 · 257 added, 380 removed, 405 unchanged (61% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

September 30, 2021

March 31, 2022

December 31, 2021

Current assets

Accounts receivable, less allowance for credit losses and

doubtful accounts of $ 709 and $ 1,433 , respectively

Accounts receivable, less allowance for

credit losses of $ 1,283 and $ 811

Prepaid and other current assets

8 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 (loss) income

Accumulated other comprehensive income (loss)

Total stockholders'

2 unchanged sentences

CLARUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share amounts)

Three Months Ended

September 30, 2021

September 30, 2020

Domestic sales

International sales

Cost of goods sold

Operating expenses

Selling, general and administrative

Transaction costs

Total operating expenses

Operating (loss) income

Other (expense) income

Interest expense, net

Total other (expense) income, net

(Loss) income before income tax

Income tax (benefit) expense

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustment

Unrealized gain (loss) on hedging activities

Other comprehensive (loss) income

Comprehensive (loss) income

Net income per share:

Weighted average shares outstanding:

See accompanying notes to condensed consolidated financial statements.

CLARUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts)

Nine Months Ended

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

Domestic sales

4 unchanged sentences

Transaction costs

Contingent consideration expense

Total operating expenses

Operating income (loss)

Operating income

Other expense

1 unchanged sentence

Total other expense, net

Income (loss) before income tax

Income tax benefit

Net income (loss)

Other comprehensive (loss) income, net of tax:

Income before income tax

Income tax expense (benefit)

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment

Unrealized gain (loss) on hedging activities

Other comprehensive (loss) income

Comprehensive income (loss)

Net income (loss) per share:

Unrealized gain on hedging activities

Other comprehensive income (loss)

Comprehensive income

Net income per share:

Weighted average shares outstanding:

3 unchanged sentences

(In thousands)

Nine Months Ended

September 30, 2021

September 30, 2020

Three Months Ended

March 31, 2022

March 31, 2021

Cash Flows From Operating Activities:

Net income (loss)

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

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation of property and equipment

1 unchanged sentence

Amortization of debt issuance costs

Gain on disposition of property and equipment

Loss on disposition of property and equipment

Noncash lease expense

Contingent consideration expense

Stock-based compensation

Deferred income taxes

Changes in operating assets and liabilities, net of acquisition:

Changes in operating assets and liabilities:

Accounts receivable

Prepaid and other assets

Accounts payable and accrued liabilities

Net cash (used in) provided by operating activities

Accounts payable

Accrued liabilities

Net cash used in operating activities

Cash Flows From Investing Activities:

Purchase of business, net of cash received

Deposit for business acquisition

Proceeds from disposition of property and equipment

Purchases of property and equipment

3 unchanged sentences

Repayments on revolving credit facilities

Repayments on term notes

Proceeds from issuance of term notes

Payment of debt issuance costs

Repayments on term loans

Purchase of treasury stock

1 unchanged sentence

Cash dividends paid

Proceeds from the sale of common stock

Common stock issuance costs

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Effect of foreign exchange rates on cash

6 unchanged sentences

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Stock issued for business acquisition

Contingent consideration for business acquisition

Property and equipment purchased with accounts payable

Lease liabilities arising from obtaining right of use assets

Unpaid debt issuance costs

Stock dividends

See accompanying notes to condensed consolidated financial statements.

7 unchanged sentences

Balance, December 31, 2020

Other comprehensive income

Cash dividends ($ 0.025 per share)

Stock-based compensation expense

Balance, March 31, 2020

Other comprehensive loss

Stock dividends ($ 0.025 per share)

Purchase of treasury stock

Stock-based compensation expense

Proceeds from exercise of options

Balance, June 30, 2020

Other comprehensive income

Stock dividends ($ 0.025 per share)

Cash dividends ($ 0.025 per share)

Purchase of treasury stock

1 unchanged sentence

Proceeds from exercise of options

Issuance of common stock, net of issuance costs

Balance, September 30, 2020

Balance, March 31, 2021

Treasury Stock

3 unchanged sentences

Balance, December 31, 2021

Other comprehensive loss

Other comprehensive income

Cash dividends ($ 0.025 per share)

3 unchanged sentences

Balance, March 31, 2022

Other comprehensive income

Cash dividends ($ 0.025 per share)

Stock-based compensation expense

Proceeds from exercise of options

Balance, June 30, 2021

Other comprehensive income

Cash dividends ($ 0.025 per share)

Stock-based compensation expense

Shares issued in business acquisition

Balance, September 30, 2021

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements of Clarus Corporation and subsidiaries (which may be referred to as the “Company,” “Clarus,” “we,” “us” or “our”) as of September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X.

The accompanying unaudited condensed consolidated financial statements of Clarus Corporation and subsidiaries (which may be referred to as the “Company,” “Clarus,” “we,” “us” or “our”) as of March 31, 2022 and December 31, 2021, and for the three months ended March 31, 2022 and 2021, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X.

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

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

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

The results for the three months ended March 31, 2022, are not necessarily indicative of the results to be obtained for the year ending December 31 , 2022.

These interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on March 7, 2022.

10 unchanged sentences

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”).

Nature of Business

3 unchanged sentences

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

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

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

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

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.

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

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.

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.

Actual results could differ from these estimates.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Significant Accounting Policies

4 unchanged sentences

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

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

The Company is in the process of evaluating the optional relief guidance provided within this ASU.

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

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

On July 1, 2021, the transactions contemplated by the Purchase Agreement were 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 Rhino-Rack (the “Rhino-Rack Acquisition”).

Under the terms of the Purchase Agreement, the Buyer acquired Rhino-Rack for an aggregate purchase price of approximately $AUD 269,097 (approximately $ 202,038 ), subject to a post-closing adjustment.

The purchase price was comprised of approximately $AUD 190,650 (approximately $ 143,140 ) cash, 2,315,121 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 are 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 approximately $AUD 10,000 (approximately $ 7,508 ) if certain future net sales thresholds are met (the “Contingent Consideration”).

The Company estimated the fair value of the Contingent Consideration to be approximately $AUD 4,747 (approximately $ 3,565 ).

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 three and nine months ended September 30, 2021 were $ 7,866 and $ 8,643 , respectively.

The Company believes the acquisition of Rhino-Rack 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.

On September 30, 2020, Sierra entered into an Asset Purchase Agreement (the “Barnes Asset Purchase Agreement”) to acquire certain assets and assume certain liabilities constituting the Barnes business (“Barnes”).

Pursuant to the Barnes Asset Purchase Agreement, the purchase price to be paid for Barnes is $ 30,500 .

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

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.

Management will continue to evaluate the impact of the adoption and implementation of this standard, but 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 .

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

On November 26, 2021, Clarus entered into a Share and Unit Purchase Agreement (the “MAXTRAX Purchase Agreement”) to acquire Australia-based MaxTrax Australia Pty Ltd (“MAXTRAX”), which subsequently closed on December 1, 2021.

The Company acquired MAXTRAX for an aggregate purchase price of $AUD 49,744 (approximately $ 35,475 ), subject to a post-closing adjustment, 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 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 initial 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.

The acquisition was accounted for as a business combination.

On May 30, 2021, Clarus entered into a Share Sale and Purchase Agreement (the “Purchase Agreement”) to acquire Australia-based Rhino-Rack Holdings Pty Ltd (“Rhino-Rack”), which subsequently closed on July 1, 2021.

The Company acquired Rhino-Rack for an aggregate purchase price of approximately $AUD 269,696 (approximately $ 202,488 ), subject to a post-closing adjustment, comprised of approximately $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 Company estimated the initial fair value of the Rhino-Rack Contingent Consideration to be approximately $AUD 4,747 (approximately $ 3,565 ) and has recorded this liability within accrued liabilities.

The acquisition was accounted for as a business combination.

The Company believes the acquisitions of MAXTRAX and Rhino-Rack 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 seek to acquire and grow businesses.

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

The fair value estimates for the purchase price allocation for 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 Rhino-Rack Acquisition are subject to change and the final purchase price allocation could be different from the amounts presented below.

We expect to finalize the valuation as soon as practicable, but not later than one year from the date of the Rhino-Rack Acquisition.

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

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.

Since our initial purchase price allocation for the MAXTRAX acquisition, we have increased the fair value of accrued liabilities assumed and goodwill by $ 741 .

These adjustments were made after receiving certain information, which existed as of the date of acquisition, related to the fair value of assumed liabilities and such amounts were recorded during the first quarter of 2022.

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

Goodwill for Rhino-Rack is included in the Rhino-Rack segment and goodwill for Barnes is included in the Sierra segment.

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

October 2, 2020

Goodwill for MAXTRAX and Rhino-Rack is included in the Adventure segment.

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

December 1, 2021

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

1 unchanged sentence

Assets acquired and liabilities assumed

Accounts receivable, net

Accounts receivable

Prepaid and other current assets

15 unchanged sentences

(in thousands, except per share amounts)

In connection with the acquisitions, the Company acquired exclusive rights to 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:

In connection with the acquisitions, the Company acquired exclusive rights to MAXTRAX’s and Rhino-Rack’s 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 as of the acquisition dates, are as follows:

Intangibles subject to amortization

2 unchanged sentences

Intangibles not subject to amortization

Although the Company is electing to treat the acquisition of Rhino-Rack as a purchase of assets for tax purposes, from an income tax perspective, there is no tax deduction provided for intangibles in Australia.

As a result, deferred tax liabilities have been set up for the finite and indefinite-lived assets.

From a capital base perspective, deferred tax assets established through purchase accounting have been fully offset by a corresponding valuation allowance.

Furthermore, the full amount of goodwill of $ 85,127 is expected to be non-deductible for tax purposes.

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

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

Total revenue of $ 19,625 and net income of $ 5,453 of Rhino-Rack were included in the Company’s condensed consolidated statements of comprehensive income (loss) from the date of acquisition to September 30, 2021.

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

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

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

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

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

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

The full amount of goodwill of $ 15,199 for MAXTRAX and $ 78,347 for 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.

The following unaudited pro forma results are based on the individual historical results of the Company, MAXTRAX and Rhino-Rack, with adjustments to give effect as if the acquisitions and borrowings used to finance the acquisitions had occurred on January 1, 2020, after giving effect to certain adjustments, including the amortization of intangible assets, depreciation of fixed assets, interest expense and taxes and assumes the purchase price was allocated to the assets purchased and liabilities assumed based on their fair market values at the date of purchase.

Three Months Ended

Nine Months Ended

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

March 31, 2021

Net income per share - basic

Net income per share - diluted

The unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred had the transactions been consummated as of January 1, 2020 for Rhino-Rack or January 1, 2019 for Barnes.

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.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Inventories, as of September 30, 2021 and December 31, 2020, were as follows:

September 30, 2021

Inventories, as of March 31, 2022 and December 31, 2021, were as follows:

March 31, 2022

December 31, 2021

2 unchanged sentences

Raw materials and supplies

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

PROPERTY AND EQUIPMENT

Property and equipment, net, as of September 30, 2021 and December 31, 2020, were as follows:

September 30, 2021

Property and equipment, net, as of March 31, 2022 and December 31, 2021, were as follows:

March 31, 2022

December 31, 2021

5 unchanged sentences

Less accumulated depreciation

Depreciation expense for the three months ended September 30, 2021 and 2020 was $ 1,631 and $ 1,140 , respectively, and for the nine months ended September 30, 2021 and 2020 was $ 4,336 and $ 3,405 , respectively.

Depreciation expense for the three months ended March 31, 2022 and 2021 was $ 1,832 and $ 1,356 , respectively.

GOODWILL AND INTANGIBLE ASSETS

The following table summarizes the balances in goodwill by segment:

Black Diamond

Precision Sport

Balance at December 31, 2021

Increase due to acquisition of Rhino-Rack

Acquisition adjustment

Impact of foreign currency exchange rates

Balance at September 30, 2021

Balance at March 31, 2022

Indefinite Lived Intangible Assets

1 unchanged sentence

Balance at December 31, 2021

Increase due to acquisition of Rhino-Rack

Impact of foreign currency exchange rates

Balance at September 30, 2021

Balance at March 31, 2022

Trademarks classified as indefinite-lived intangible assets by brand as of March 31, 2022 and December 31, 2021, were as follows:

March 31, 2022

December 31, 2021

Black Diamond

CLARUS CORPORATION

4 unchanged sentences

Gross balance at December 31, 2021

Increase due to acquisition of Rhino-Rack

Impact of foreign currency exchange rates

Gross balance at September 30, 2021

Other intangible assets, net of amortization as of September 30, 2021 and December 31, 2020, were as follows:

September 30, 2021

Gross balance at March 31, 2022

Other intangible assets, net of amortization as of March 31, 2022 and December 31, 2021, were as follows:

March 31, 2022

Accumulated Amortization

12 unchanged sentences

Core technologies

Amortization expense for the three months ended September 30, 2021 and 2020 was $ 3,577 and $ 753 , respectively, and for the nine months ended September 30, 2021 and 2020 was $ 5,971 and $ 2,290 , respectively.

Future amortization expense for other intangible assets as of September 30, 2021 is as follows:

Amortization expense for the three months ended March 31, 2022 and 2021, was $ 4,120 and $ 1,197 , respectively.

Future amortization expense for other intangible assets as of March 31, 2021 is as follows:

Years Ending December 31,

Amortization Expense

2021 (excluding the nine months ended September 30, 2021)

LONG-TERM DEBT

Long-term debt as of September 30, 2021 and December 31, 2020, was as follows:

2022 (excluding the three months ended March 31, 2022)

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

September 30, 2021

ACCRUED LIABILITIES AND OTHER LONG-TERM LIABILITIES

Accrued liabilities as of March 31, 2022 and December 31, 2021, were as follows:

March 31, 2022

December 31, 2021

Accrued payroll and related items

Accrued bonus

Designated forward exchange contracts

Accrued warranty

Current lease liabilities

Accrued commissions

Contingent consideration liabilities

Accrued excise tax

Other long-term liabilities as of March 31, 2022 and December 31, 2021, were as follows:

March 31, 2022

December 31, 2021

Long-term lease liability

Deferred stock consideration for business acquisition

Contingent consideration liability

LONG-TERM DEBT

Long-term debt as of March 31, 2022 and December 31, 2021, was as follows:

March 31, 2022

December 31, 2021

Revolving credit facility (a)

Other debt (b)

Term note (c)

Term loan (c)

Debt issuance costs

Less current portion

(a) As of September 30, 2021, the Company had drawn $ 65,412 on the $ 100,000 revolving commitment that was available under the credit agreement, as amended, with JPMorgan Chase Bank, N.A., with a maturity date of May 3, 2024.

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

As of September 30, 2021 and December 31, 2020, the rate was 1.6250 % and 2.0625 %, respectively.

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.

On January 3, 2022, the Company and certain of its direct and indirect subsidiaries (each, a “Loan Party” and, collectively, the “Loan Parties”) entered into Amendment No.

4 to the Credit Agreement (“Amendment No.

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

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

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).

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 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.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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 September 30, 2021.

(b) Foreign subsidiaries of the Company have a revolving credit facility and term debt with financial institutions which mature between October 16, 2021 and July 27, 2024.

The Company was in compliance with the debt covenants set forth in the Credit Agreement as of March 31, 2022.

(a) As of March 31, 2022, the Company had drawn $ 30,481 on the $ 100,000 revolving commitment that was available under the credit agreement, as amended, with JPMorgan Chase Bank, N.A., with a maturity date of May 3, 2024.

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

As of March 31, 2022 and December 31, 2021, the rate was 2.3750 %.

(b) Foreign subsidiaries of the Company have a revolving credit facility and term debt with financial institutions which mature between August 22, 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 September 30, 2021, the interest rates ranged between 1.3387 % and 5.1651 % and as of December 31, 2020 was 1.3387 %.

As of March 31, 2022 the interest rates ranged between 1.3387 % and 4.9500 % and as of December 31, 2021 the interest rates ranged between 1.3387 % and 5.1651 %.

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.

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.

(c) 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 September 30, 2021 and December 31, 2020, the rate was 1.6250 % and 2.0625 %, respectively.

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 three months ended September 30, 2021.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

As of March 31, 2022 and December 31, 2021, the rate was 2.3750 % and 2.3750 %, respectively.

DERIVATIVE FINANCIAL INSTRUMENTS

4 unchanged sentences

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

During the nine months ending September 30, 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 three and nine months ended September 30, 2021, gains (losses) of $ 232 and $( 4,281 ) were recorded in other, net expense, respectively.

At September 30, 2021, the Company’s derivative contracts had remaining maturities of less than one year.

At March 31, 2022, the Company’s derivative contracts had remaining maturities of less than one year.

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

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

At September 30, 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 $ 639 on all contracts at September 30, 2021.

At March 31, 2022, there was no such exposure to the counterparties.

The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain of $ 534 on all contracts at March 31, 2022.

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

The Company held the following contracts designated as hedging instruments as of September 30, 2021 and December 31, 2020:

September 30, 2021

The Company held the following contracts designated as hedging instruments as of March 31, 2022 and December 31, 2021:

March 31, 2022

Foreign exchange contracts - Canadian Dollars

February 2023

Foreign exchange contracts - Euros

February 2023

Foreign exchange contracts - Australian Dollars

December 31, 2021

3 unchanged sentences

February 2023

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

Gains (losses) of $ 201 and $( 376 ) were reclassified to sales during the three months ended September 30, 2021 and 2020, respectively, and $( 542 ) and $ 206 were reclassified to sales during the nine months ended September 30, 2021 and 2020, respectively.

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

The following table presents the balance sheet classification and fair value of derivative instruments as of September 30, 2021 and December 31, 2020:

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

Gains (losses) of $ 253 and $( 321 ) were reclassified to sales during the three months ended March 31, 2022 and 2021, respectively.

The following table presents the balance sheet classification and fair value of derivative instruments as of March 31, 2022 and December 31, 2021:

Classification

September 30, 2021

March 31, 2022

December 31, 2021

2 unchanged sentences

Prepaid and other current assets

Designated forward exchange contracts

Other long-term assets

Derivative instruments in liability positions:

Designated forward exchange contracts

Accounts payable and accrued liabilities

Accrued liabilities

Designated forward exchange contracts

2 unchanged sentences

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

The following table sets forth the changes in AOCI, net of tax, for the three months ended September 30, 2021:

The following table sets forth the changes in AOCI, net of tax, for the three months ended March 31, 2022:

Foreign Currency Translation Adjustments

Unrealized Gains (Losses) on Cash Flow Hedges

Balance as of June 30, 2021

Other comprehensive (loss) income before reclassifications

Balance as of December 31, 2021

Other comprehensive income before reclassifications

Amounts reclassified from other comprehensive income

Net current period other comprehensive (loss) income

Balance as of September 30, 2021

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

Net current period other comprehensive income

Balance as of March 31, 2022

The following table sets forth the changes in AOCI, net of tax, for the three months ended March 31, 2021:

Foreign Currency Translation Adjustments

Unrealized Gains (Losses) on Cash Flow Hedges

Balance as of June 30, 2020

Balance as of December 31, 2020

Other comprehensive income (loss) before reclassifications

Amounts reclassified from other comprehensive loss

Amounts reclassified from other comprehensive income (loss)

Net current period other comprehensive income (loss)

Balance as of September 30, 2020

The following table sets forth the changes in AOCI, net of tax, for the nine months ended September 30, 2021:

Foreign Currency Translation Adjustments

Unrealized Gains (Losses) on Cash Flow Hedges

Balance as of December 31, 2020

Other comprehensive (loss) income before reclassifications

Amounts reclassified from other comprehensive income

Net current period other comprehensive (loss) income

Balance as of September 30, 2021

Balance as of March 31, 2021

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

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

Foreign Currency Translation Adjustments

Unrealized Gains (Losses) on Cash Flow Hedges

Balance as of December 31, 2019

Other comprehensive income (loss) before reclassifications

Amounts reclassified from other comprehensive loss

Net current period other comprehensive income (loss)

Balance as of September 30, 2020

The effects on net income of amounts reclassified from unrealized gains on cash flow hedges for foreign exchange contracts for the three and nine months ended September 30, 2021 and 2020, were as follows:

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

Affected line item in the Consolidated

The effects on net income of amounts reclassified from unrealized gains on cash flow hedges for foreign exchange contracts for the three months ended March 31, 2022 and 2021, were as follows:

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

Affected line item in the Condensed Consolidated

Three Months Ended

Nine Months Ended

Statements of Comprehensive Income (Loss)

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Statements of Comprehensive Income

March 31, 2022

March 31, 2021

Foreign exchange contracts:

9 unchanged sentences

Level 3 - inputs to the valuation methodology are based on prices or valuation techniques that are unobservable.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Assets and liabilities measured at fair value on a recurring basis at September 30, 2021 and December 31, 2020 were as follows:

September 30, 2021

Assets and liabilities measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021 were as follows:

March 31, 2022

Designated forward exchange contracts

Contingent consideration liability

Contingent consideration liabilities

December 31, 2021

1 unchanged sentence

Designated forward exchange contracts

Contingent consideration liabilities

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

No nonrecurring fair value measurements existed at September 30, 2021 and December 31, 2020.

As part of the Rhino-Rack Acquisition, the Purchase Agreement provided for the payment of Contingent Consideration of approximately $ 7,508 if certain future net sales thresholds are met through June 30, 2022.

Using a series of call options, the Company estimated the fair value of the Contingent Consideration to be approximately $ 3,565 as of July 1, 2021.

Significant unobservable inputs used in the valuation include a discount rate of 4.8 %.

The Contingent Consideration liability is remeasured at the estimated fair value at the end of each reporting period with the change in fair value recognized within operating income (loss) in the accompanying condensed consolidated statements of comprehensive income (loss) for such period.

No nonrecurring fair value

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

measurements existed at March 31, 2022 and December 31, 2021.

The Company estimated the fair value of contingent consideration liabilities using a series of call options.

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

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 expense in the accompanying condensed 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.

There were no impacts to operating income (loss) for the three and nine months ended September 30, 2021 related to the remeasurement of the Contingent Consideration liability as there were no significant changes to the fair value.

The Contingent Consideration liability changed due to the effect of foreign exchange by $ 155 resulting in an ending balance as of September 30, 2021 of $ 3,410 which is recorded in accounts payable and accrued liabilities in the accompanying condensed consolidated balance sheets.

As the Contingent Consideration liability is remeasured to fair value each reporting period, significant increases or decreases in projected revenue, 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 liability could change in future periods based up our ongoing evaluation of these significant unobservable inputs.

Any such change will be recorded to operating income (loss) in our consolidated statements of income (loss).

The following table summarizes the changes in contingent consideration liabilities:

Balance at December 31, 2021

Fair value adjustments

Impact of foreign currency exchange rates

Balance at March 31, 2022

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.

STOCKHOLDERS’ EQUITY

1 unchanged sentence

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

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

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

On October 29, 2021 , the Company announced that its Board of Directors approved the payment on November 19, 2021 of the Quarterly Cash Dividend of $ 0.025 to the record holders of shares of the Company’s common stock as of the close of business on November 8, 2021 .

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

EARNINGS (LOSS) PER SHARE

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

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

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

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

On April 29, 2022 , the Company announced that its Board of Directors approved the payment on May 20, 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 May 9, 2022 .

EARNINGS PER SHARE

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

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

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

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

Three Months Ended

Nine Months Ended

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

Weighted average shares outstanding - basic

Effect of dilutive stock awards

Effect of dilutive deferred stock consideration for business acquisition

Weighted average shares outstanding - diluted

Net income (loss) per share:

For the three months ended September 30, 2021 and 2020, equity awards of 1,000 and 927 , respectively, and for the nine months ended September 30, 2021 and 2020, equity awards of 1,011 and 4,384 , respectively, were excluded from the calculation of earnings (loss) per share for these periods as they were anti-dilutive.

Net income per share:

For the three months ended March 31, 2022 and 2021, equity awards of 1,329 and 500 , respectively, were excluded from the calculation of earnings per share for these periods as they were anti-dilutive.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

STOCK-BASED COMPENSATION PLAN

4 unchanged sentences

Options Granted:

During the nine months ended September 30, 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 nine months ended September 30, 2021 generally vest and become exercisable over a period of one to three years and expire ten years from the date of the grant.

During the three months ended March 31, 2022, the Company issued stock options for an aggregate of 353 shares under the 2015 Plan to directors and employees of the Company.

Of the 353 options, 343 vest and become exercisable over a period of three years , and the remaining 10 vest immediately.

All of the issued stock options 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:

Options Granted During the Three Months Ended March 31, 2022

Number of options

12 unchanged sentences

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

The grant date fair value of the stock options granted during the nine months ended September 30, 2021 was $ 3,239 , which will be recognized over the vesting period of the options.

The grant date fair value of the stock options granted during the three months ended March 31, 2022, was $ 2,967 , which will be recognized over the vesting period of the options.

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.

On March 4, 2022, the Company issued and granted to certain employees restricted stock awards of 700 restricted shares under the 2015 Plan, of which 700 restricted shares will vest if, on or before March 4, 2032, the Fair Market Value (as defined in the Plan) of the Company’s common stock shall have equaled or exceeded $ 50.00 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 following assumptions:

March 4, 2022

Number issued

Vesting period

Market condition vesting requirement

$ 50.00 stock price target

3 unchanged sentences

Risk-free interest rate

Expected term (years)

Weighted average fair value (per share)

Using these assumptions, the fair value of the market condition restricted stock awards granted on May 28, 2021 was approximately $ 7,230 .

The total non-cash stock compensation expense related to restricted stock, stock options and stock awards recorded by the Company for the three months ended September 30, 2021 and 2020 was $ 3,064 and $ 4,204 , respectively, and for the nine months ended September 30, 2021 and 2020 was $ 6,414 and $ 5,433 , respectively.

For the three and nine months ended September 30, 2021 and 2020, the majority of stock-based compensation costs were classified as selling, general and administrative expenses.

As of September 30, 2021, there were 2,014 unvested stock options and unrecognized compensation cost of $ 7,384 related to unvested stock options, as well as 1,000 unvested restricted stock awards and unrecognized compensation costs of $ 6,359 related to unvested restricted stock awards.

CLARUS CORPORATION

NOTES TO CONDENSED 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 March 4, 2022, was approximately $ 10,761 and the expected term was 4.15 years.

The total non-cash stock compensation expense related to restricted stock, stock options and stock awards recorded by the Company for the three months ended March 31, 2022 and 2021 was $ 3,367 and $ 1,524 , respectively.

For the three months ended March 31, 2022 and 2021, the majority of stock-based compensation costs were classified as selling, general and administrative expenses.

As of March 31, 2022, there were 1,701 unvested stock options and unrecognized compensation cost of $ 7,904 related to unvested stock options, as well as 1,546 unvested restricted stock awards and unrecognized compensation costs of $ 13,083 related to unvested restricted stock awards.

COMMITMENTS AND CONTINGENCIES

8 unchanged sentences

federal statutory tax rate of 21 % and its foreign operations have statutory tax rates of approximately 25 % in Austria, 28 % in New Zealand, and 30 % in Australia.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The differences between the Company’s estimated effective tax rates of ( 419.0 )% and ( 104.7 )% for the three and nine months ended September 30, 2021 and the U.S.

federal statutory tax rate of 21 % were due to a release of valuation allowance of net operating loss carryforwards (“NOLs”), which was partially offset by permanent book to tax differences related to incentive stock options and officer compensation limitations.

The difference between the Company’s estimated effective tax rate of 23.4 % for the three months ended March 31, 2022, and the U.S.

federal statutory tax rate of 21 % were due to the impact of foreign earnings taxed at applicable statutory rates and permanent book to tax differences related to incentive stock options and officer compensation limitations.

As of December 31, 2021, the Company’s gross deferred tax asset was $ 38,184 .

The Company has recorded a valuation allowance of $ 4,378 , resulting in a net deferred tax asset of $ 33,806 , before deferred tax liabilities of $ 46,653 .

The Company has provided a valuation allowance against a portion of the deferred tax assets as of September 30, 2021 and December 31, 2020, because the ultimate realization of those assets did not meet the more-likely-than-not criteria.

The Company has provided a valuation allowance against a portion of the deferred tax assets as of March 31, 2022 and December 31, 2021, because the ultimate realization of those assets did not meet the more-likely-than-not criteria.

The majority of the Company’s deferred tax assets consist of NOLs for federal tax purposes.

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

During the three months ended September 30, 2021, the Company filed a change in accounting method which increased taxable income and the ability to utilize NOLs.

As a result, an additional valuation allowance of $ 6,003 was released increasing the income tax benefit for the three and nine months ended September 30, 2021.

This method change resulted in decreasing the NOLs available to offset taxable income as of December 31, 2020 by $ 10,317 .

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

7 unchanged sentences

Federal income taxes until expiration.

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

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

9 unchanged sentences

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, 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 Precision Sport 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.

 Our Adventure 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 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.

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

 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 .

 Our Rhino-Rack segment, which includes Rhino-Rack, is a manufacturer of highly-engineered automotive roof racks, trays, mounting systems, luggage boxes, carriers 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, 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 and the adventure product category represents the Rhino-Rack segment revenue.

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

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

Three Months Ended

Nine Months Ended

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

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:

Three Months Ended

Nine Months Ended

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

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 Rhino-Rack

Total Adventure

Total sales to external customers

Segment operating income:

Black Diamond

Precision Sport

Total segment operating income

Transaction costs

Contingent consideration expense

Corporate and other expenses

Interest expense, net

(Loss) income before income tax

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

Income before income tax

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

Total assets by segment, as of March 31, 2022 and December 31, 2021, were as follows:

March 31, 2022

December 31, 2021

Precision Sport

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

Total assets by segment, as of September 30, 2021 and December 31, 2020, were as follows:

September 30, 2021

December 31, 2020

Black Diamond

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

Three Months Ended

Nine Months Ended

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

Capital expenditures:

Black Diamond

Precision Sport

Total capital expenditures

Depreciation:

Black Diamond

Precision Sport

Total depreciation

Amortization:

Black Diamond

Precision Sport

Total amortization

RELATED PARTY TRANSACTIONS

As part of the Rhino-Rack Acquisition, on July 1, 2021, the Company recorded a liability in the amount of $ 1,750 owed 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.

This amount was paid during the three months ended September 30, 2021.

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 recorded a liability in the amount of $ 250 owed to Kanders & Company in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, and negotiating Amendment No.

This amount was paid during the three months ended September 30, 2021.

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

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

Upon the Company’s closing of the Offering, the Company paid a fee in the amount of $ 250 to Kanders & Company, 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 of September 30, 2020, the Company recorded a liability in the amount of $ 500 owed to Kanders & Company, which is included in transaction costs, in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, performing due diligence and negotiating the acquisition of Barnes.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

SUBSEQUENT EVENTS

Public Offering of Common Stock

On October 26, 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.

On October 29, 2021, the Underwriters exercised that option in full.

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 approximately $ 80,264 .

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

The closing of the offering of 2,750 shares of common stock occurred on October 29, 2021, and the closing of the Underwriters’ 30-day option to purchase 413 shares of common stock occurred on November 2, 2021.

On October 29, 2021, the Company recorded a liability in the amount of $ 500 owed to Kanders & Company in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, and negotiating the offering.

On April 18, 2022 (the “Effective Date”), the Company entered into an Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A.

(the “Restated Credit Agreement”).

The Restated Credit Agreement provides for borrowings of up to $ 300,000 under a secured revolving credit facility (the “Revolving Loans”) (including up to $ 5,000 for letters of credit), and borrowings of up to $ 125,000 under a secured term loan facility (the “Term Loans”).

The Restated Credit Agreement also permits the Company, subject to certain requirements, to arrange with lenders for an aggregate of up to $ 175,000 of additional revolving and/or term loan commitments (both of which are currently uncommitted), for potential aggregate revolving and term loan commitments under the Restated Credit Agreement of up to $ 600,000 .

The Restated Credit Agreement matures on April 18, 2027 (the “Maturity Date”), at which time the revolving commitments thereunder will terminate and all outstanding Revolving Loans and Term Loans, together with all accrued and unpaid interest thereon, must be repaid.

The Term Loans were fully drawn on the Effective Date and cannot be reborrowed.

The Restated Credit Agreement provides for quarterly amortization payments of the Term Loans on the last business day of each March, June, September and December, commencing on June 30, 2022.

Through and including the payment due on March 31, 2023, the scheduled amortization payment is $ 1,563 per quarter, and each scheduled amortization payment due thereafter through the Maturity Date is $ 3,125 per quarter.

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

The applicable rate was initially 0.875 % per annum, in the case of alternate base rate borrowings, and 1.875 % per annum, in the case of term benchmark borrowings, however, these initial applicable rates may be adjusted from time to time based upon the level of the Company’s consolidated total leverage ratio.

CLARUS CORPORATION

2 unchanged sentences

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What changed 10-Q

Item 1. Financial Statements