What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-02-27 compared with 2022-03-07 · 50 added, 63 removed, 258 unchanged (30% of the section changed)

37 unchanged sentences

According to Outdoor Foundation, over the past decade, many outdoor activities have experienced a consistent rise in participation rates.

This heightened participation has grown in tandem with increasing consumer focus on health and wellness with many consumers acutely aware of the myriad of physical and mental health benefits associated with outdoor activity.

Outdoor participation experienced an uplift following the emergence of the COVID-19 pandemic.

Growing Demand for SUVs as “Staycations,” Road Trips and Short Breaks Increase in Popularity .

As consumers actively search out activities that conform to local social distancing guidelines, there has been a significant increase in more localized vacations, trips

and activities that avoid air and rail travel.

Following the emergence of the COVID-19 pandemic, we believe that outdoor participation and the desire for more localized vacation trips experienced an uplift as consumers actively sought activities that conform to local social distancing guidelines, and avoided air and rail travel.

We anticipate

that the continuing impact of rising energy costs and inflation, along with positive memories consumers have from their previous pandemic “staycations”, will continue this trend of localized travel.

In addition, the popularity of pickups and, more recently, their sibling sport utility vehicles (“SUVs”) and crossover utility vehicles (“CUVs”) continues to rise.

1 unchanged sentence

Per the 2022 issue of “SEMA Light-Truck Snapshot,” the light-truck segment — which includes pickups, vans, SUVs and CUVs — is forecast to account for 80% of all new passenger vehicle sales by 2028.

From 2019-2025, new light truck sales are estimated to rise approximately 14% overall.

By contrast, sales of passenger cars are forecast to decline by approximately 34% over the same period.

The demand for vehicles geared towards local travel is driving demand for extra luggage space and the automotive rack market, which is expected to directly benefit our Rhino-Rack and MAXTRAX brands.

2 unchanged sentences

Per SEMA, overlanding, loosely defined, is the practice of exploring the backcountry in a purpose-built vehicle — generally, a high-clearance four-wheel drive — that is equipped to allow its occupants to remain self-sufficient for periods of time ranging from a few days to several weeks.

The activity originated in Australia, with popularity in South America and sub-Saharan Africa, but its popularity in North America has grown significantly over the past decade.

Overlanding originated in Australia, with popularity in South America and sub-Saharan Africa, but its popularity in North America has grown over the past decade.

Due to its overlap with numerous outdoor lifestyle activities, overlanding’s market growth is difficult to precisely measure, but we believe that the global adventure tourism market — which includes camping, hiking, mountain biking, kayaking, rafting and other pursuits that are closely associated with overlanding — reflects this growing trend and is expected to continue to grow in the coming years.

2 unchanged sentences

Furthermore, the 2020 Tokyo Olympics marked the first time that sport climbing debuted in an Olympic stadium, bringing the thrills of high-skill rock climbing to the living rooms of people across the globe.

The 2024 Paris Summer Olympics will also include sport climbing events.

Resurgence in Popularity of Hunting .

After several years of falling participation, hunting has experienced a strong resurgence in activity over the past two years, as participants have found comfort in an outdoor activity conforming to social distancing guidelines.

After several years of falling participation, we believe that hunting continues to experience a resurgence as a popular outdoor activity.

Additionally, the sport of hunting has experienced more diversity in participants, specifically women and younger people.

The investment in hunting equipment and required training courses is expected to drive sustained activity in the sport.

As the variety of outdoor sports activities continues to proliferate, and existing outdoor sports evolve and become more specialized, we believe there is a need in the marketplace to address the unique technical and performance needs of enthusiasts involved in such activities.

We believe we have been able to help address this void in the marketplace by seeking to leverage our intimate knowledge of what the customer needs to perform at the highest level.

We continue to seek to improve on our existing product lines by expanding our offerings into new niche categories, and by incorporating innovative industrial design and engineering and performance tolerances into our products.

We believe the credibility and authenticity of our brands expands our potential market beyond committed outdoor athletes to those outdoor generalist consumers who desire to lead active, outdoor-focused lifestyles.

As the variety of outdoor sports activities continues to proliferate, and existing outdoor sports evolve and become more specialized, we believe there is demand in the marketplace to address the unique technical and performance needs of such enthusiasts.

We believe we have been able to help address this opportunity by seeking to leverage our intimate knowledge of what the customer needs to perform at the highest level.

We continue to seek to improve on our existing product lines by expanding our offerings into new niche categories, and by incorporating innovative industrial design, engineering and performance tolerances into our products.

We believe the credibility and authenticity of our brands expands our potential market beyond committed outdoor athletes to outdoor generalists who desire to lead active, outdoor-focused lifestyles.

Growth Strategies

12 unchanged sentences

We have been able to gain market share by emphasizing our Black Diamond brand, positioning it as a global brand with American roots.

We believe there is also a significant opportunity to expand our Sierra and Barnes brands more extensively outside the U.S.

market through additional sales and marketing investments.

The acquisition of Rhino-Rack adds a leading market position in Australia and New Zealand, with significant whitespace to grow our presence in U.S., currently less than 1% market

share, through key partnerships with brick-and-mortar and online retailers alike, and enhanced brand awareness.

Our most recent acquisition of MAXTRAX has a leading market position in Australia as well and we believe it has a significant opportunity to grow in the U.S market.

We believe there is also a significant opportunity to expand our Sierra and Barnes brands outside the U.S.

market through additional sales and marketing commitments.

The acquisition of Rhino-Rack adds a leading market position in Australia and New Zealand, with an opportunity to grow our presence in the U.S., currently less than 1% market share, through key partnerships with brick-and-mortar and online retailers alike, and enhanced brand awareness.

Our most recent acquisition, MAXTRAX,

has a leading market position in Australia and we believe it has a significant opportunity to grow in the U.S.

Acquisition of Complementary Businesses.

We expect to target acquisitions as a viable opportunity to gain access to new product groups, customer channels, and increase penetration of existing markets.

We expect to target acquisitions as a viable opportunity to gain access to new product group and customer channels, and increase penetration of existing markets.

We may also pursue acquisitions that diversify the Company within the outdoor and consumer enthusiast markets.

To the extent we pursue future acquisitions, we intend to focus on super-fan brands with recurring revenue, sustainable margins and strong cash flow generation.

We anticipate financing future acquisitions prudently through a combination of cash on hand, operating cash flow, bank financings, private placements and new capital markets offerings.

We anticipate financing future acquisitions prudently through a combination of cash on hand, operating cash flow, bank financings, and capital markets offerings.

Competitive Strengths

13 unchanged sentences

Headquartered in Salt Lake City at the base of the Wasatch Mountains, Black Diamond products are created and tested locally on its alpine peaks, slopes, crags and trails.

Continuously recognized as an industry-leading innovator, Black Diamond has received 418 industry awards over five years, including over 110 product awards in 2021 alone.

Continuously recognized as an industry-leading innovator, Black Diamond has received over 500 industry awards over five years, including over 189 product awards in 2022 alone.

Precision Sport

3 unchanged sentences

Sierra’s bullets and ammunition are used for precision target shooting, hunting and defense purposes.

Sierra's products have cultivated a significant consumer following recognized by its iconic “green box” packaging and include globally recognized bullet brands such as Sierra® MatchKing®, Sierra® GameKing® and Sierra® BlitzKing® and ammunition brands such as GameChanger®, Prairie Enemy TM , Outdoor Master® and Sport Master®.

Sierra's products have cultivated a significant consumer following recognized by iconic “green box” packaging and include globally recognized bullet brands such as Sierra® MatchKing®, Sierra® GameKing® and Sierra® BlitzKing® and ammunition brands such as GameChanger®, Prairie Enemy TM , Outdoor Master® and Sport Master®.

Barnes Bullets is an industry leader in all-copper bullet technology and innovation .

2 unchanged sentences

This reputation is defined by innovative design, advanced manufacturing techniques and a core focus on the end-user.

As a result, Barnes has generated a strong consumer following

supported by its globally recognized bullet brands such as Barnes® TSX®, X Bullet®, Varmint Grenade® and Expander® and ammunition brands VOR-TX® and TAC-XPD®.

With its products being sold through its online store, a variety of retailers and international distributors, Barnes’s customers include hunters, range shooters, military and law enforcement professionals around the world.

As a result, Barnes has generated a strong consumer following supported by its globally recognized bullet brands such as Barnes® TSX®, X Bullet®, Varmint Grenade® and Expander® and

ammunition brands VOR-TX® and TAC-XPD®.

With its products being sold through its online store, a variety of retailers and international distributors, Barnes’ customers include hunters, range shooters, military and law enforcement professionals around the world.

Headquartered in Sydney, Australia, Rhino-Rack has been a widely recognized, premier aftermarket automotive roof rack and accessories brand since 1992 with a leading market position in Australia.

Best known for its “north/south” roof rack design, Rhino-Rack’s product offering includes roof racks, luggage carriers, shade awnings, kayak carriers, bike carriers and load-securing accessories.

Employing 16 engineers, Rhino-Rack has a long track record of launching new, innovative products with state-of-the-art engineering serving and enhancing the outdoor enthusiast’s overlanding experience.

Employing approximately 20 engineers, Rhino-Rack has a long track record of launching new, innovative products with state-of-the-art engineering serving and enhancing the outdoor enthusiast’s overlanding experience.

Rhino-Rack has a clearly defined growth strategy, underpinned by access to Clarus’ go-to-market playbook and key customer relationships.

4 unchanged sentences

MAXTRAX currently sells its products around the world to distributors, retailers, government agencies, third-party e-commerce sites and through its own website.

Product Innovation and Development Capabilities .

We have a long history of technical innovation and product development, with over 400 patents and patents pending worldwide.

Product Innovation and Development Capabilities at Clarus .

We have a long history of technical innovation and product development, with over 300 patents and over 100 patents pending worldwide.

Our employees’ passion and intimacy with our core outdoor activities generates new and boundary-pushing concepts and products, which we believe provides a significant advantage that will drive our Company to new levels.

5 unchanged sentences

The members of our Board of Directors and our executive officers, including Mr.

Warren Kanders, are substantial stockholders of the Company, and beneficially own approximately 24.2% of our outstanding common stock as of March 2, 2022, which we believe aligns the interests of our Board of Directors and our executive officers with that of our stockholders.

Warren Kanders, are substantial stockholders of the Company, and beneficially own approximately 24.3% of our outstanding common stock as of February 22, 2023, which we believe aligns the interests of our Board of Directors and our executive officers with that of our stockholders.

Growth-oriented Capital Structure.

Our capital structure provides us with the capacity to fund future growth and our net operating loss and tax credit carryforwards are expected to substantially offset our net taxable income through 2022, which is expected to allow us to retain cash flow for future growth.

Our capital structure provides us with the capacity to fund future growth.

Operating Segments

1 unchanged sentence

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

The Company’s direct costs included in selling and general and administrative expenses are not allocated to the segments.

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

Each segment is described below:

 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, 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);

rock-climbing footwear and equipment (such as carabiners,

protection devices, harnesses, belay devices, helmets, and ice-climbing gear);

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;

1 unchanged sentence

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.

 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.

 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, formerly known as our Rhino-Rack segment, includes Rhino-Rack and MAXTRAX brands.

The Rhino-Rack brand 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.

Our MAXTRAX brand offers high-quality overlanding and off-road vehicle recovery and extraction tracks for the overland and the off-road market.

 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.

See Note 16 to our consolidated financial statements for financial information regarding our segments.

1 unchanged sentence

We design many of our products for extreme applications, such as high-altitude mountaineering, ice and rock climbing, as well as backcountry skiing and alpine touring.

We also manufacturer high-quality bullets and ammunition with the tightest tolerances in the industry that enhance the performance of competitive shooters and hunters.

We also manufacture high-quality bullets and ammunition with the tightest tolerances in the industry that enhance the performance of competitive shooters and hunters.

We manufacture highly-engineered automotive roof racks, trays, mounting systems, luggage boxes, carriers, recovery tracks and accessories.

2 unchanged sentences

Our outdoor line consists of apparel, footwear, headlamps, lights, trekking poles, gloves, packs, avalanche airbags, poles, avalanche safety devices, and equipment such as carabiners, harnesses, protection devices, and various other climbing, mountaineering, hiking, and backcountry accessories and products.

Our outdoor line represented approximately 50% of our sales on a pro forma basis during the year ended December 31, 2021.

Our outdoor line represented approximately 50% of our sales during the year ended December 31, 2022.

 Precision Sport:

Our precision sport line consists of premium quality high-precision bullets and ammunition used in competitive shooting, hunting and other applications and environments.

Our precision sport line represented approximately 25% of our sales on a pro forma basis during the year ended December 31, 2021.

Our precision sport line represented approximately 29% of our sales during the year ended December 31, 2022.

Our adventure line consists of highly-engineered automotive roof racks, trays, mounting systems, luggage boxes, carriers, recovery tracks and accessories.

Our adventure line represented approximately 25% of our sales on a pro-form basis during the year ended December 31, 2021.

Our adventure line represented approximately 21% of our sales during the year ended December 31, 2022.

Product Design and Development

30 unchanged sentences

Sierra and Barnes are members of the Sporting Arms & Ammunition Manufacturers’ Institute and employ best-in-class proprietary manufacturing processes with respect to each one of its products.

These processes are performed in-house and includes control of bullet jacket wall concentricity utilizing strict quality control standards overseen by experienced employees, yielding what we believe to be the tightest tolerances in the industry.

These processes are performed in-house and include control of bullet jacket wall concentricity utilizing strict quality control standards overseen by experienced employees, yielding what we believe to be the tightest tolerances in the industry.

We manufacture approximately 25% to 30% of our products, including nearly all protection devices for climbing and all bullets, in our facilities in the United States.

21 unchanged sentences

The popularity of various outdoor activities and changing design trends affect the desirability of our products.

Therefore, we seek to anticipate and respond to trends and shifts in consumer preferences by adjusting the mix of available product offerings by developing

new products with innovative performance features and designs, and by marketing our products in a persuasive and memorable fashion to drive consumer awareness and demand.

Therefore, we seek to anticipate and respond to trends and shifts in consumer preferences by adjusting the mix of available product offerings by developing new products with innovative performance features and designs, and by marketing our products in a persuasive and memorable fashion to drive consumer awareness and demand.

Failure to anticipate or respond to consumer needs and preferences in a timely and adequate manner could have a material adverse effect on our sales and profitability.

11 unchanged sentences

We believe our brands have an established reputation for innovation, style, quality, design, safety, and durability, and accordingly, we actively monitor and police our brands against infringement to ensure their viability and enforceability.

In addition to trademarks, we hold over 400 patents and patents pending worldwide for a wide variety of technologies across our product lines.

In addition to trademarks, we hold over 300 patents and over 100 patents pending worldwide for a wide variety of technologies across our product lines.

Our success with our proprietary products is generally derived from our “first mover” advantage in the market as well as our commitment to protecting our current and future proprietary technologies and products, which acts as a deterrent to infringement of our intellectual property rights.

5 unchanged sentences

The Company’s products are outdoor activity-based, however, there are not significant seasonal variations in sales and profitability.

On a pro forma basis in 2021, approximately 47% of our sales were in the first half of the year while approximately 53% of our sales occurred in the second half of the year.

In 2022, approximately 51% of our sales were in the first half of the year while approximately 49% of our sales occurred in the second half of the year.

Working capital requirements vary throughout the year.

Working capital generally increases to support peak manufacturing and shipping periods and then decreases as accounts receivable are collected.

However, throughout 2021, the Company has leveraged our balance sheet to secure additional inventory across all of our brands to ensure the right inventory is available to meet customer demand.

However, throughout 2022, the Company leveraged our balance sheet to secure additional inventory across all of our brands to ensure the right inventory is available to meet customer demand.

Environmental Matters

24 unchanged sentences

Should such a mandatory database be established, the cost to us, our distributors, and our customers could be significant, depending on the type of firearms and ballistic information included in the database.

Bills have been introduced in Congress in the past several years that would affect the manufacture and sale of ammunition, including bills to regulate the manufacture, importation, and sale.

Bills have been introduced in Congress in the past several years that would affect the manufacture and sale of ammunition, including bills to regulate its manufacture, importation, and sale.

We believe that existing federal, state, and local legislation relating to the regulation of firearms and ammunition have not had a material adverse effect on our sales of these products.

5 unchanged sentences

As of December 31, 2022 , we had a total of over 900 employees worldwide.

Of these employees, 400 were engaged in manufacturing, 320 in sales, marketing, product management and customer support, 80 in corporate functions (IT, Finance, HR, Legal and Compliance, etc.), 110 in R&D, engineering technicians, manufacturing engineers and project managers, 40 retail store associates and 20 in various executive and administrative functions.

None of our employees are represented by a union in collective

bargaining with us.

Of these employees, 380 were engaged in manufacturing, 280 in sales, marketing, product management and customer support, 80 in administrative functions (IT, Finance, HR, Legal and Compliance, etc.), 110 in R&D, engineering technology, manufacturing engineering and project management, 50 retail store associates and 20 in various executive and corporate functions.

None of our employees are represented by a union in collective bargaining with us.

We believe that our employee relations are good.

3 unchanged sentences

The global outbreak of COVID-19 was declared a pandemic by the World Health Organization and a national emergency by each of the U.S., European, and Australian governments in March 2020, with governments world-wide implementing safety measures restricting travel and requiring citizen lockdowns and self-confinements for quarantining purposes.

This has negatively affected the U.S., European, Australian and global economies, disrupted global supply chains, and resulted in significant transport restrictions and disruption of global financial markets.

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

These disruptions and delays have strained domestic and international supply chains, which have affected and could continue to negatively affect the flow or availability of certain critical raw materials and finished good products that the Company relies upon.

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

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

During 2021, our Outdoor segment continued to be impacted by the pandemic due to disruptions in the global supply chains;

however, the Outdoor segment experienced an increase in overall sales as participation in outdoor recreation has increased as certain countries began to ease restrictions.

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

This caused a decline in retail demand and a disruption in operations within our Adventure segment, which negatively impacted our sales and profitability for the third quarter of 2021 and to a lesser extent during the fourth quarter of 2021.

Our Precision Sport segment has experienced higher demand which has positively impacted our sales and profitability since the beginning of the pandemic.

We expect a continued impact on the Company’s sales and profitability in future periods due to the ongoing impact of the pandemic.

During the years ended December 31, 2020, 2021, and 2022, this had negatively affected the U.S., European, Australian and global economies, disrupted global supply chains, and resulted in significant transport restrictions and disruption of global financial markets.

An outbreak of disease or similar public health threat, such as the COVID-19 pandemic, could have, and in the case of the COVID-19 pandemic has had and may continue to have, a significant impact on the global supply chain, with restrictions and limitations on related activities causing disruption and delay, along with increased raw material, storage, and shipping costs.

Any of these disruptions and delays may strain domestic and international supply chains, which could negatively affect the flow or availability of certain critical raw materials and finished good products that the Company relies upon.

Furthermore, the foregoing impacts may significantly increase demand from online sales channels, including our website, and could impact our logistical operations, including our fulfillment and shipping functions, which may result in periodic delays in the delivery of our products.

We expect that an outbreak of disease or similar public health threat, such as the COVID-19 pandemic, could have, and in the case of the COVID-19 pandemic may continue to have, an impact on the Company’s sales and profitability in future periods.

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

10 unchanged sentences

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

What changed 10-K

Item 1. Business