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Item 7. Management’s Discussion and Analysis

2023-02-27 compared with 2022-03-07 · 145 added, 192 removed, 198 unchanged (63% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis reviews significant factors affecting the Company’s consolidated results of operations, financial condition and liquidity.

This discussion should be read in conjunction with our financial statements and the accompanying notes to the financial statements.

A discussion of changes in our financial condition and the results of operations from the year ended December 31, 2021 to December 31, 2020 can be found in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 7, 2022.

Forward-Looking Statements

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

disruptions and other impacts to the Company’s business, as a result of the COVID-19 global pandemic and government actions and restrictive measures implemented in response;

disruptions and other impacts to the Company’s business, as a result of an outbreak of disease or similar public health threat, such as the COVID-19 global pandemic, and government actions and restrictive measures implemented in response;

stability of the Company’s manufacturing facilities and suppliers, as well as consumer demand for our products, in light of disease epidemics and health-related concerns such as the COVID-19 global pandemic;

the impact that global climate change trends may have on the Company and its suppliers and customers, increased focus on sustainability issues as a result of global climate change, the Company's ability to protect patents, trademarks and other intellectual property rights;

the impact that global climate change trends may have on the Company and its suppliers and customers, increased focus on sustainability issues as a result of global climate change;

regulatory or market responses to global climate change;

the Company's ability to protect patents, trademarks and other intellectual property rights;

any breaches of, or interruptions in, our information systems;

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the Company’s ability to maintain a quarterly dividend ;

and any material differences in the actual financial results of the Rhino-Rack acquisition as compared with expectations, including the impact of the acquisition on the Company’s future earnings per share.

and any material differences in the actual financial results of the Company’s past and future acquisitions, including, without limitation, its previous acquisition of Rhino-Rack as compared with expectations, including the impact of acquisitions and any recognition of impairment or other charges relating to any such acquisitions on the Company’s future earnings per share.

More information on potential factors that could affect the Company’s financial results can be found under Item 1A.

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In 2022, 2021 and 2020, our total Quarterly Cash Dividends were $3,721,000, $3,335,000, and $1,520,000 respectively.

In 2020, our total Quarterly Stock Dividends were $1,533,000.

In 2020, our total Quarterly Stock Dividends were $1,533,000, which combined with our cash dividend in 2020 of $1,520,000, resulted in total dividends in 2020 of $3,053,000.

In 2020, our total Quarterly Stock Dividends were $1,533,000, which combined with our cash dividend of $1,520,000, resulted in total dividends of $3,053,000.

On February 24, 2023, the Company announced that its Board of Directors approved the payment on March 17, 2023 of the Quarterly Cash Dividend to the record holders of shares of the Company’s common stock as of the close of business on March 7, 2023.

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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.

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generally accepted accounting principles (“GAAP”).

The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements.

The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements.

Estimates also affect the reported amounts of revenues and expenses during the reporting periods.

We continually evaluate our estimates and assumptions including those related to derivatives, revenue recognition, income taxes and valuation of long-lived assets, goodwill and other intangible assets.

We continually evaluate our estimates and assumptions including those related to revenue recognition, income taxes and valuation of long-lived assets, goodwill and indefinite-lived intangible assets, and other intangible assets.

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

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Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets.

Different valuations approaches are used to value different types of intangible assets.

Different valuation approaches are used to value different types of intangible assets.

The income approach is a valuation technique that capitalizes anticipated income associated with the asset being valued.

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Changes in any of the assumptions, judgments and estimates mentioned above related to the realizability of deferred tax assets, could materially affect our financial position and results of operations.

 Goodwill and intangible assets – We assess the recoverability of our reporting unit’s carrying value of goodwill by performing a qualitative assessment and/or a quantitative goodwill impairment test.

At a minimum, we perform an annual assessment of possible

goodwill impairment as of each December 31.

 Goodwill and indefinite-lived intangible assets – We assess the recoverability of our reporting unit’s carrying value of goodwill by performing a qualitative assessment and/or a quantitative goodwill impairment test.

At a minimum, we perform an annual assessment of possible goodwill impairment as of each December 31.

Management may perform an interim goodwill impairment assessment whenever events or circumstances make it more likely than not that an impairment may have occurred, such as a significant adverse change in the business climate or a decision to sell or dispose of the reporting unit.

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Otherwise, we are required to perform the quantitative goodwill impairment test which compares the reporting unit’s carrying value including goodwill to its estimated fair value.

We estimate the reporting unit’s fair value using either the income approach based upon projected discounted cash flows of the reporting unit or the market approach based upon comparable market acquisition transactions.

We estimate the reporting unit’s fair value using a combination of the income approach based upon projected discounted cash flows of the reporting unit and the market approach based upon the market multiple of comparable publicly traded companies.

If the estimated fair value of the reporting entity exceeds the carrying value, the goodwill is not impaired, and no further review is required.

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Our discounted cash flow estimates use discount rates that correspond to a weighted-average cost of capital consistent with a market-participant view.

The discount rates are consistent with those used for investment decisions and take into account our operating plans and strategies.

Certain other key assumptions utilized, including revenue projections, costs of goods sold, operating expenses and effective tax rates, are based on estimates consistent with those utilized in our annual budgeting and planning process that we believe are reasonable.

The discount rates are consistent with those used for investment decisions and take into account our future operating plans and strategies.

Certain other key assumptions utilized, including revenue and cash flow projections, are based on estimates consistent with those utilized in our annual budgeting and planning process that we believe are reasonable.

However, if we do not achieve the results reflected in the assumptions and estimates, our goodwill impairment evaluations could be adversely affected, and we may impair a portion or all of our goodwill, which would adversely affect our operating results in the period of impairment.

The market approach identifies the EBITDA multiples of recent industry and competitor acquisitions.

The reporting unit’s current EBITDA is multiplied by the median industry and competitor acquisition market multiple to estimate its current estimated fair value.

The market approach identifies the EBITDA multiples of comparable publicly traded companies.

The reporting unit’s current EBITDA is multiplied by the market multiple to estimate its current estimated fair value.

Key assumptions utilized in estimating the reporting unit’s EBITDA include revenue and cash flow projections.

If the market multiples or EBITDA value assumptions are incorrect, our goodwill impairment evaluation could also be adversely affected, and we may impair a portion or all of our goodwill, which would adversely affect our operating results in the period of impairment.

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

During the first quarter of 2019, we early adopted Accounting Standards Update 2017-04, Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment, which removed the requirement to perform the previous two-step goodwill impairment test.

We also test indefinite-lived intangible assets for impairment at least annually during the fourth quarter, generally on December 31.

We also test indefinite-lived intangible assets for impairment annually during the fourth quarter, generally as of December 31 st of each year.

Management may perform an interim indefinite-lived intangible asset impairment assessment whenever events or circumstances make it more likely than not that an impairment may have occurred, such as a significant adverse change in the business climate or a decision to sell or dispose of the reporting unit.

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The key uncertainties in these calculations are the assumptions used in determining the revenue associated with each indefinite-lived intangible asset and the royalty rate.

If we do not achieve the results reflected in the assumptions and estimates, our indefinite-lived intangibles impairment evaluations could be adversely affected, and we may impair a portion or all of their carrying values, which would adversely affect our operating results in the period of impairment.

If we do not achieve the results reflected in the market assumptions and forecasted estimates, our indefinite-lived intangibles impairment evaluations could be adversely affected, and we may impair a portion or all of their carrying values, which would adversely affect our operating results in the period of impairment.

During the year ended December 31, 2022, we recorded $92,311,000 of impairment of goodwill and indefinite-lived intangible assets, specifically the Rhino-Rack trademark, in our Adventure reporting unit.

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

Recent Accounting Pronouncements

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Results of Operations (In Thousands)

Consolidated Year Ended December 31, 2021 Compared to Consolidated Year Ended December 31, 2020

The following presents a discussion of consolidated operations for the year ended December 31, 2021, compared with the consolidated year ended December 31, 2020:

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

The following presents a discussion of operations for the year ended December 31, 2022, compared with the year ended December 31, 2021:

Year Ended December 31,

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Transaction costs

Contingent consideration benefit

Contingent consideration expense (benefit)

Impairment of goodwill and indefinite-lived intangible assets

Total operating expenses

Operating income

Operating (loss) income

Other income (expense)

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Total other expense, net

Income before income tax

(Loss) income before income tax

Income tax benefit

Consolidated sales increased $151,787, or 67.8%, to $375,794 during the year ended December 31, 2021, compared to consolidated sales of $224,007 during the year ended December 31, 2020.

The increase in sales was attributable to the increase in the quantity of new and existing outdoor products sold during the period of $46,394.

Additionally, there was an increase in the quantity of new and existing precision sport products sold by Sierra of $18,543 and the inclusion of Barnes, which contributed $38,504.

The increase was also driven by the inclusion of adventure products sold by Rhino-Rack of $43,411 and MAXTRAX of $1,728.

We experienced an increase in sales of $3,207 due to the weakening of the U.S.

Net (loss) income

Sales increased $72,312, or 19.2%, to $448,106 during the year ended December 31, 2022, compared to sales of $375,794 during the year ended December 31, 2021.

The increase in sales was primarily attributable to an increase in sales at the Adventure, Precision Sport, and Outdoor segments of $50,095, $23,032, and $8,126, respectively.

The increase at the Adventure segment is due to the full year ownership of the Adventure brands during the year ended December 31, 2022, compared to the partial year of ownership in the prior period.

Sales increases in the Outdoor and Adventure segments were partially offset by a decrease in sales of $6,613 and $2,328, respectively, due to the strengthening of the U.S.

dollar against foreign currencies during the year ended December 31, 2022, compared to the prior period.

Consolidated domestic sales increased $93,652, or 70.8%, to $225,878 during the year ended December 31, 2021, compared to consolidated domestic sales of $132,226 during the year ended December 31, 2020.

The increase in sales was attributable to the increase in the quantity of new and existing outdoor products sold during the period of $26,058.

Additionally, there was an increase in the quantity of new and existing precision sport products sold by Sierra of $20,323 and the inclusion of Barnes, which contributed $35,227.

The remaining increase was driven by the inclusion of adventure products sold by Rhino-Rack and MAXTRAX of $12,044.

Consolidated international sales increased $58,135, or 63.3%, to $149,916 during the year ended December 31, 2021, compared to consolidated international sales of $91,781 during the year ended December 31, 2020.

The increase in sales was primarily attributable to the increase in the quantity of new and existing outdoor products of $20,336 and the inclusion of Barnes, which contributed $3,277.

The increase was also driven by the inclusion of adventure products sold by Rhino-Rack of $31,392 and MAXTRAX of $1,703.

We experienced an increase in sales of $3,207 due to the weakening of the U.S.

Domestic sales increased $12,266, or 5.4%, to $238,144 during the year ended December 31, 2022, compared to domestic sales of $225,878 during the year ended December 31, 2021.

The increase in sales was primarily attributable to an increase in sales at the Adventure and Precision Sport segments of $12,470 and $4,267, respectively.

The increase at the Adventure segment is due to the full year ownership of the Adventure brands during the year ended December 31, 2022, compared to the partial year of ownership in the prior period.

This increase was partially offset by a decrease in sales at the Outdoor segment of $4,471.

International sales increased $60,046, or 40.1%, to $209,962 during the year ended December 31, 2022, compared to international sales of $149,916 during the year ended December 31, 2021.

The increase in sales was primarily attributable to an increase in sales at Adventure, Precision Sport, and Outdoor segments of $37,625, $18,765, and $12,597, respectively.

The increase at the Adventure segment is due to the full year ownership of the Adventure brands during the year ended December 31, 2022, compared to the partial year of ownership in the prior period.

Sales increases in the Outdoor and Adventure segments were partially offset by a decrease in sales

of $6,613 and $2,328, respectively, due to the strengthening of the U.S.

dollar against foreign currencies during the year ended December 31, 2022, compared to the prior period.

The increase was partially offset by a decrease in the quantity of new and existing precision sport products sold by Sierra of $1,780.

Cost of Goods Sold

Consolidated cost of goods sold increased $92,650, or 63.4%, to $238,862 during the year ended December 31, 2021, compared to consolidated cost of goods sold of $146,212 during the year ended December 31, 2020.

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

Consolidated gross profit increased $59,137 or 76.0%, to $136,932 during the year ended December 31, 2021, compared to consolidated gross profit of $77,795 during the year ended December 31, 2020.

Consolidated gross margin was 36.4% during the year ended December 31, 2021, compared to a consolidated gross margin of 34.7% during the year ended December 31, 2020.

Consolidated gross margin during the year ended December 31, 2021, increased compared to the prior year due to favorable product mix in higher margin products and the favorable impacts related to foreign currency.

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

however, the benefit was offset by a decrease in gross margin of $4,769, or 1.3%, due to the sale of Barnes, Rhino-Rack and MAXTRAX inventory that was recorded at its fair value in purchase accounting during the year ended December 31, 2021.

Cost of goods sold increased $45,828, or 19.2%, to $284,690 during the year ended December 31, 2022, compared to cost of goods sold of $238,862 during the year ended December 31, 2021.

The increase in cost of goods sold was primarily attributable to an increase in the number of units sold and a full year of ownership of the Adventure brands during the year ended December 31, 2022.

Gross profit increased $26,484 or 19.3%, to $163,416 during the year ended December 31, 2022, compared to gross profit of $136,932 during the year ended December 31, 2021.

Gross margin was 36.5% during the year ended December 31, 2022, compared to a gross margin of 36.4% during the year ended December 31, 2021.

Gross margin during the year ended December 31, 2022, increased compared to the prior year as gross margin was negatively impacted by $4,769 due to the sale of Barnes, Rhino-Rack, and MAXTRAX inventory that was recorded at its fair value in purchase accounting during the year ended December 31, 2021.

The 2022 increase was partially offset by the $269 MAXTRAX fair value inventory charge due to purchase accounting during the year ended December 31, 2022, as well as unfavorable foreign exchange impacts due to a strong U.S.

dollar against foreign currencies and abnormally high freight costs.

Selling, General and Administrative

Consolidated selling, general, and administrative expenses increased $34,066, or 47.7%, to $105,494 during the year ended December 31, 2021, compared to consolidated selling, general and administrative expenses of $71,428 during the year ended December 31, 2020.

The increase in selling, general and administrative expenses is due to the inclusion of Barnes, Rhino-Rack, and MAXTRAX which contributed $6,702, $14,885, and $400, respectively.

Additionally, there was an increase of stock compensation of $2,686 during the year ended December 31, 2021, compared to the prior year.

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

Selling, general, and administrative expenses increased $29,545, or 28.0%, to $135,039 during the year ended December 31, 2022, compared to selling, general and administrative expenses of $105,494 during the year ended December 31, 2021.

The increase in selling, general and administrative expenses is primarily due to the inclusion of Rhino-Rack and MAXTRAX for the full year in 2022, which included incremental expenditure of $16,634 and $4,526 in 2022 for Rhino-Rack and MAXTRAX, respectively.

Additionally, the Company incurred higher Corporate costs of $4,083 primarily related to increased payroll and stock compensation of $3,546 during the year ended December 31, 2022, compared to the prior year.

The remaining increase was primarily attributable to the Company’s investments in retail and direct-to-consumer initiatives at the Outdoor segment.

Transaction Costs

Consolidated transaction expense increased to $11,843 during the year ended December 31, 2021, compared to consolidated transaction costs of $2,433 during the year ended December 31, 2020, which consisted of expenses related to the Company’s financing and acquisition efforts in 2021.

Contingent Consideration Benefit

Consolidated contingent consideration increased to $1,605 during the year ended December 31, 2021, compared to $0 consolidated contingent consideration during the year ended December 31, 2020, which consisted of changes in estimated fair value of Contingent Consideration liabilities.

Transaction expense decreased to $2,967 during the year ended December 31, 2022, compared to transaction costs of $11,843 during the year ended December 31, 2021, which consisted of expenses related to the Company’s various acquisition efforts.

Contingent Consideration Expense (Benefit)

Contingent consideration expense was $493 during the year ended December 31, 2022, compared to a $1,605 contingent consideration benefit during the year ended December 31, 2021, which consisted of changes in estimated fair value of contingent consideration liabilities.

Impairment of Goodwill and Indefinite-Lived Intangible Assets

Impairment of goodwill and indefinite-lived intangible assets increased to $92,311 during the year ended December 31, 2022, compared to impairment of goodwill and indefinite-lived intangible assets of $0 during the year ended December 31, 2021.

Based on the results of the Company’s impairment analysis completed as of December 31, 2022, the Company determined that goodwill at the Adventure reporting unit and certain indefinite-lived intangible assets, specifically the Rhino-Rack trademark, were impaired and recognized a charge of $52,071 and $40,240, respectively.

Interest Expense, net

Consolidated interest expense, net increased to $2,939 during the year ended December 31, 2021, compared to consolidated interest expense, net of $1,261 during the year ended December 31, 2020.

The increase in interest expense recognized during the year ended December 31, 2021 was primarily associated with the increase in average outstanding debt amounts during the period compared to the prior year and the recording of certain debt issuance costs.

Consolidated other, net expense changed $5,294, or 580.5% to $4,382 during the year ended December 31, 2021, compared to consolidated other, net income of $912 during the year ended December 31, 2020.

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

Consolidated income tax benefit increased $10,254, or 523.2%, to $12,214 during the year ended December 31, 2021, compared to a consolidated income tax benefit of $1,960 during the same period in 2020.

Interest expense, net increased to $7,895 during the year ended December 31, 2022, compared to interest expense, net of $2,939 during the year ended December 31, 2021.

The increase in interest expense recognized during the year ended December 31, 2022, was primarily associated with the increase in the average outstanding debt amounts during the period compared to the prior year, higher interest rates, and the recording of certain debt issuance costs.

Other, net expense decreased by $2,540, or 58.0%, to $1,842 during the year ended December 31, 2022, compared to other, net expense of $4,382 during the year ended December 31, 2021.

The decrease in other, net was primarily attributable to losses from non-hedged foreign currency contracts during the year ended December 31, 2021, not repeating in the current period.

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

Income tax benefit decreased $4,863, or 39.8%, to $7,351 during the year ended December 31, 2022, compared to an income tax benefit of $12,214 during the same period in 2021.

Our effective income tax rate was a benefit of 9.5% for the year ended December 31, 2022, and differed compared to the statutory tax rates primarily due to the impact of impairment of goodwill as well as officer compensation limitations, partially offset by the impact of foreign earnings taxed at applicable statutory rates, tax credits, and permanent book to tax differences related to incentive stock options.

Our effective income tax rate was a benefit of 88% for the year ended December 31, 2021, and differed compared to the statutory tax rates due to the partial release of a valuation allowance offsetting deferred tax assets and discrete charges recorded during the period.

This release of the valuation allowance is primarily due to a change in accounting method which increased taxable income and the ability to utilize NOLs.

For the year ended December 31, 2020, our effective income tax rate was a benefit of 54.7% and differed compared to the statutory tax rates due to a release of certain valuation allowances and a discrete benefit associated with stock compensation windfall .

Factors that could cause our annual effective tax rate to differ materially from our quarterly effective tax rates include changes in the geographic mix of taxable income and discrete events that may occur.

Consolidated Year Ended December 31, 2020 Compared to Consolidated Year Ended December 31, 2019

The following presents a discussion of consolidated operations for the year ended December 31, 2020, compared with the consolidated year ended December 31, 2019:

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

The following presents the Company’s results of operations for the year ended December 31, 2021, compared with the year ended December 31, 2020:

Year Ended December 31,

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Selling, general and administrative

Restructuring charge

Contingent consideration benefit

Transaction costs

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Operating income

Other expense

Other income (expense)

Interest expense, net

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Income tax benefit

Consolidated sales decreased $5,430, or 2.4%, to $224,007 during the year ended December 31, 2020, compared to consolidated sales of $229,437 during the year ended December 31, 2019.

We believe lower consumer demand related to the COVID-19 pandemic drove a decrease in the quantity of new and existing climb, mountain, and ski products sold during the period.

These decreases were partially offset by an increase in the quantity of new and existing precision sport products sold by Sierra of $16,729 and the inclusion of Barnes, which contributed $6,556.

We also experienced an increase in sales of $606 due to the weakening of the U.S.

dollar against foreign currencies during the year ended December 31, 2020 compared to the prior period.

Consolidated domestic sales increased $10,475, or 8.6%, to $132,226 during the year ended December 31, 2020, compared to consolidated domestic sales of $121,751 during the year ended December 31, 2019.

The increase in sales was attributable to the increase in the quantity of new and existing precision sport products sold by Sierra of $17,873 and the inclusion of Barnes, which contributed $6,179.

We believe this increase was partially offset by a decrease in domestic sales due to lower consumer demand related to the

COVID-19 pandemic, which drove a decrease in the quantity of new and existing climb, mountain, and ski products sold during the period.

Consolidated international sales decreased $15,905, or 14.8%, to $91,781 during the year ended December 31, 2020, compared to consolidated international sales of $107,686 during the year ended December 31, 2019.

We believe the decrease in international sales was attributable to lower consumer demand related to the COVID-19 pandemic, which drove a decrease in the quantity of new and existing climb, mountain, and ski products sold during the period.

We also experienced a decrease in the quantity of new and existing precision sport products sold by Sierra of $1,143.

These decreases were partially offset by the inclusion of Barnes, which contributed $376.

We also experienced an increase in sales of $606 due to the weakening of the U.S.

dollar against foreign currencies during the year ended December 31, 2020 compared to the prior period.

Cost of Goods Sold

Consolidated cost of goods sold decreased $2,934, or 2.0%, to $146,212 during the year ended December 31, 2020, compared to consolidated cost of goods sold of $149,146 during the year ended December 31, 2019.

The decrease in cost of goods sold was primarily attributable to a decrease in the number of units sold due to lower consumer demand related to the COVID-19 pandemic.

Consolidated gross profit decreased $2,496 or 3.1%, to $77,795 during the year ended December 31, 2020, compared to consolidated gross profit of $80,291 during the year ended December 31, 2019.

Consolidated gross margin was 34.7% during the year ended December 31, 2020, compared to a consolidated gross margin of 35.0% during the year ended December 31, 2019.

Consolidated gross margin during the year ended December 31, 2020, decreased compared to the prior year due to unfavorable impacts on our supply chain and logistic activities due to the COVID-19 pandemic.

Gross margin benefited from the inclusion of Barnes;

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

Selling, General and Administrative

Consolidated selling, general, and administrative expenses increased $2,748, or 4.0%, to $71,428 during the year ended December 31, 2020, compared to consolidated selling, general and administrative expenses of $68,680 during the year ended December 31, 2019.

The increase in selling, general and administrative expenses is due to the inclusion of Barnes, which contributed $1,698, and an increase of stock compensation of $3,842 during the year ended December 31, 2020 compared to the prior year.

The increase was partially offset by the cost-saving initiatives implemented in response to the COVID-19 pandemic, primarily related to reductions within sales, marketing, and logistics.

Restructuring Charges

Consolidated restructuring expense decreased to $0 during the year ended December 31, 2020, compared to consolidated restructuring expense of $13 during the year ended December 31, 2019.

Restructuring expenses incurred during the year ended December 31, 2019, related to costs associated with the formal closure and liquidation of the Company’s Black Diamond Equipment manufacturing operations in Zhuhai, China.

Transaction Costs

Consolidated transaction expense increased to $2,433 during the year ended December 31, 2020, compared to consolidated transaction costs of $166 during the year ended December 31, 2019, which consisted of expenses related to the Company’s various acquisition efforts and capital-raising activities, including acquiring Barnes and completing a registered direct offering (the “Offering”).

Interest Expense, net

Consolidated interest expense, net during the year ended December 31, 2020 remained relatively consistent with consolidated interest expense, net, during the year ended December 31, 2019.

Consolidated other, net, increased $1,005, or 1,080.6%, to income of $912 during the year ended December 31, 2020, compared to consolidated other, net expense of $93 during the year ended December 31, 2019.

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

This increase was partially offset by losses on mark-to-market adjustments on non-hedged foreign currency contracts.

Consolidated income tax benefit decreased $7,031, or 78.2%, to $1,960 during the year ended December 31, 2020, compared to a consolidated income tax benefit of $8,991 during the same period in 2019.

Our effective income tax rate was a benefit of 54.7% for the year ended December 31, 2020, and differed compared to the statutory tax rates due to a release of a partial valuation allowance of the deferred tax assets and discrete charges recorded during the period .

For the year ended December 31, 2019, our effective income tax rate was a benefit of 90.1% and differed compared to the statutory tax rates due to a release of certain valuation allowances and a discrete benefit associated with stock compensation windfall .

Liquidity and Capital Resources (In Thousands)

Consolidated Year ended December 31, 2021 Compared to Consolidated Year ended December 31, 2020

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

We plan to fund these activities through a combination of our future operating cash flows and revolving credit facility which had approximately $81,499 available to borrow at December 31, 2021.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

We plan to fund these activities through a combination of our future operating cash flows and borrowings on our revolving credit facility which had approximately $98,000 available to borrow at December 31, 2022, while currently maintaining compliance with the consolidated total leverage ratio per the Restated Credit Agreement of 3.75 to 1.

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

Additionally, long-term contractual obligations are also currently expected to be funded from cash from operations and availability under our existing credit facilities.

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

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

3 (“Amendment No.

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”).

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

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

3 on July 1, 2021.

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

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.

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

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

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

The Company used a portion of the net proceeds of the offering for the repayment of principal 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 the MAXTRAX acquisition.

At December 31, 2021, we had total cash of $19,465, compared to cash of $17,789 at December 31, 2020, which was substantially controlled by the Company’s U.S.

For additional information regarding the Company’s existing credit facilities, see the section titled “Credit Agreement” below.

At December 31, 2022, we had total cash of $12,061, compared to cash of $19,465 at December 31, 2021.

At December 31, 2022, the Company had $7,921 of the $12,061 in cash held by foreign entities, of which $5,719 is considered permanently reinvested.

The following presents a discussion of cash flows for the consolidated year ended December 31, 2021 compared with the consolidated year ended December 31, 2020.

The following presents a discussion of cash flows for the year ended December 31, 2022 compared with the year ended December 31, 2021.

Year Ended December 31,

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net cash (used in) provided by financing activities

Effect of foreign exchange rates on cash

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Net Cash From Operating Activities

Consolidated net cash used in operating activities was $304 during the year ended December 31, 2021 compared to consolidated net cash provided by operating activities of $29,696 during the year ended December 31, 2020.

The change in net cash used in operating activities during 2021 is primarily due to an increase in net operating assets, or non-cash working capital, of $48,494, and deferred income taxes, partially offset by an increase in net income, depreciation and amortization and stock compensation during the year ended December 31, 2021, compared to the same period in 2020.

Free cash flow, defined as net cash used in operating activities less capital expenditures, of ($17,687) was used during the year ended December 31, 2021 compared to $23,981 generated during the same period in 2020.

Net cash provided by operating activities was $14,610 during the year ended December 31, 2022, compared to net cash used in operating activities of $304 during the year ended December 31, 2021.

The change in net cash provided by (used in) operating activities during 2022 is primarily due to increases in depreciation and amortization expenses, as well as improvements in working capital and increases in stock compensation and contingent consideration expense during the year ended December 31, 2022, compared to the same period in 2021.

Free cash flow, defined as net cash provided by (used in) operating activities less capital expenditures, of $6,360 was generated during the year ended December 31, 2022 compared to ($17,687) of negative free cash flow during the same period in 2021.

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

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Year Ended December 31,

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Purchase of property and equipment

1 unchanged sentence

Net Cash From Investing Activities

Consolidated net cash used in investing activities was $ 178,142 during the year ended December 31, 2021 compared to consolidated net cash used in investing activities of $ 35,582 during the year ended December 31, 2020 .

The increase in cash used during the year ended December 31, 2021 is primarily due to the $160,988 used for the purchase of Rhino-Rack and MAXTRAX, net of cash acquired as well as an increase in purchases of property and equipment, primarily due to the purchase of the Barnes facility.

During the year ended December 31, 2020, consolidated net cash used in investing activities included $30,498 used for the purchase of the Barnes Purchased Assets, net of cash acquired.

Net cash used in investing activities was $7,751 during the year ended December 31, 2022 compared to net cash used in investing activities of $178,142 during the year ended December 31, 2021 .

The decrease in cash used during the year ended December 31, 2022 is due to the acquisition of Rhino-Rack and MAXTRAX during the year ended December 31, 2021, as well as a decrease in purchases of property and equipment, primarily due to the purchase of the Barnes facility during the year ended December 31, 2021.

Net Cash From Financing Activities

Consolidated net cash provided by financing activities was $ 180,677 during the year ended December 31, 2021 , compared to consolidated net cash used in financing activities of $ 22,254 during the year ended December 31, 2020 .

The increase in cash provided during the year ended December 31, 2021, compared to the same period in 2020 was primarily due to the net proceeds to the revolving line of credit and draws of the term loan under Amendment No.

3 described below and the net proceeds from the sale of the Company’s common stock of $79,232.

Cash provided by financing activities during the year ended December 31, 2020, was primarily due to the proceeds of $20,000 borrowed under the term loan and net proceeds from the sale of the Company’s common stock of $11,151, offset by net repayments to the revolving line of credit.

Net cash used in financing activities was $13,858 during the year ended December 31, 2022 , compared to net cash provided by financing activities of $180,677 during the year ended December 31, 2021 .

The decrease in cash provided during the year ended December 31, 2022, compared to the same period in 2021 was primarily due to a decrease in net proceeds to the revolving line of credit and term loan, a decrease in proceeds from the sale of common stock, and an increase in purchases of treasury stock.

Net Operating Loss

6 unchanged sentences

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

The Company has $60,712

of NOLs, of which, $39,507 expire on December 31, 2022.

The Company has $17,663 of NOLs, of which, $1,851 expire on December 31, 2023.

These NOLs are subject to compliance with Section 382 of the Internal Revenue Code of 1986, as amended.

5 unchanged sentences

Credit Agreement

On May 3, 2019, the Company, Borrowers and the other loan parties party thereto entered into the Credit Agreement for borrowings of up to $60,000 under a revolving credit facility (including up to $5,000 for letters of credit), and borrowings of up to $40,000 under a term loan facility that is available to be drawn until May 3, 2020.

The Credit Agreement also permits the Borrowers, subject to certain requirements, to arrange with lenders for an aggregate of up to $50,000 of additional revolving and/or term loan commitments (both of which are currently uncommitted), for potential aggregate revolving and term loan commitments under the Credit Agreement of up to $150,000.

The Credit Agreement matures on May 3, 2024.

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

2 of the Credit Agreement.

Amendment No.

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

In addition, Amendment No.

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

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

3 of the Credit Agreement.

Amendment No.

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

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

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

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

Amendment No.

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

Amendment No.

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

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

4 to the Credit Agreement (“Amendment No.

Amendment No.

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

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

As of December 31, 2022, the Company had drawn approximately $18,049 of the approximately $98,000 available to borrow on the revolving loan commitment at December 31, 2022, while maintaining compliance with the consolidated total leverage ratio per the Restated Credit Agreement (as defined below) of 3.75 to 1, and $120,311 was outstanding under the term loan commitment.

As of December 31, 2022, the interest rates on the revolving loan and term loan commitments were approximately 6.3%.

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

On April 18, 2022 (the “Effective Date”), the Company, Black Diamond Retail, Inc., Black Diamond Retail – Alaska, LLC, Sierra Bullets, L.L.C., SKINourishment, LLC, Black Diamond Retail – Colorado, LLC, Black Diamond Retail – Montana, LLC, Black Diamond Retail – Wyoming, LLC, Barnes Bullets-Mona, LLC, Black Diamond Retail – Oregon, LLC, Black Diamond Retail – Vermont, LLC (collectively with the Company, the “Borrowers”) and the other loan parties party thereto (together with the Borrowers, each a “Loan Party”, and collectively, the “Loan Parties”) entered into an Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”) and the lenders party thereto (the “Restated Credit Agreement”) pursuant to which the existing Credit Agreement, dated as of May 3, 2019 (as amended prior to the Effective Date, the “Existing Credit Agreement”) by and among the Company, the lenders and loan parties from time to time party thereto and the Administrative Agent was amended and restated in its entirety.

Each of the Loan Parties, other than the Company, is a direct or indirect subsidiary of the Company.

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 Borrowers, 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 proceeds of loans made under the Restated Credit Agreement may be used for working capital and general corporate purposes, including acquisitions permitted under the Restated Credit Agreement.

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 Borrowers may elect to have the Revolving Loans and Term Loans under the Restated Credit Agreement bear interest at an applicable rate plus either:

(i) in the case of alternate base rate borrowings, a rate per annum generally equal to the greatest of:

the prime rate in effect on such day;

0.50% plus the greater of the Federal Reserve Bank of New York’s effective federal funds rate or the Federal Reserve Bank of New York’s overnight bank funding rate in effect on such day;

1.00% plus the adjusted term SOFR rate for a 1-month interest period;

provided that, in certain circumstances where the alternate base rate is being used as an alternate rate of interest, the alternate base rate shall be determined only according to (a) and (b), and shall be subject to a 1.00% floor;

(ii) in the case of term benchmark borrowings, a rate per annum as follows:

for borrowings denominated in U.S.

Dollars, the term SOFR rate (based on one, three or six-month interest periods) plus 0.10%, subject to a 0.00% floor;

for borrowings denominated in a Foreign Currency, the applicable rate for such Foreign Currency set forth in the Restated Credit Agreement.

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

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

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

The Credit Agreement also requires the Borrowers to pay a commitment fee on the unused portion of the revolving and term loan commitments.

Such commitment fee will range between 0.15% and 0.30% per annum, and is also based upon the level of the Company’s consolidated total leverage ratio.

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 includes customary affirmative and negative covenants, including financial covenants relating to the Company’s consolidated total leverage ratio and fixed charge coverage ratio.

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

As of December 31, 2021, the Company had drawn approximately $18,501 of the $100,000 revolving loan commitment that was available for borrowing under the Credit Agreement, and $121,874 outstanding under the term loan commitment.

As of December 31, 2021, the interest rates for the revolving loan and term loan were 2.3750% and 2.3750% respectively.

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

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

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, which is more fully discussed in the Restated Credit Agreement.

If one or more of the above interest rates are not determinable, or under certain other circumstances set forth in the Restated Credit Agreement, a substitute or alternative interest rate may apply under the Restated Credit Agreement.

The Restated Credit Agreement also requires the Borrowers to pay a commitment fee on the unused portion of the revolving loan commitments.

Such commitment fee will range between 0.15% and 0.30% per annum, and is also based upon the level of the Company’s consolidated total leverage ratio, which is more fully discussed in the Restated Credit Agreement.

The Company is also obligated to pay other customary closing fees, arrangement fees, administration fees and letter of credit fees for a credit facility of this size and type.

The Restated Credit Agreement contains customary affirmative and negative covenants, including limitations on the ability of the Company and its subsidiaries to perform the following, subject to certain customary exceptions, qualifications and “baskets”:

(i) incur additional debt;

(ii) create liens;

(iii) engage in mergers, consolidations, certain divisions, liquidations or dissolutions other than in certain permitted instances as described in the Restated Credit Agreement;

(iv) substantially change the business conducted by the Company and its subsidiaries;

(v) make certain investments, loans, advances, guarantees and acquisitions other than in certain permitted instances as described in the Restated Credit Agreement;

(vi) sell assets;

(vii) pay dividends or make distributions or other restricted payments if certain conditions in the Restated Credit Agreement are not fulfilled;

(viii) prepay other indebtedness;

(ix) engage in certain transactions with affiliates;

(x) enter into agreements that restrict dividends from subsidiaries or the ability of subsidiaries to grant liens upon their assets;

(xi) amend certain charter documents and material agreements governing subordinated indebtedness;

(xii) permit the consolidated total leverage ratio, which is to be determined for each quarter end on a trailing twelve month basis, from exceeding a limit of 3.75 to 1, provided, that, subject to certain terms and conditions set forth in the Restated Credit Agreement, so long as no Event of Default (as defined in the Restated Credit Agreement) exists at such time or would result therefrom, the Company may elect to increase the maximum consolidated total leverage ratio permitted under the Restated Credit Agreement to 4.25:1.00 for a period of four consecutive fiscal quarters in connection with any acquisition permitted under the Restated Credit Agreement for which the aggregate consideration is greater than or equal to $60,000;

and (xiii) permit the consolidated fixed charge coverage ratio, which is to be determined for each quarter end on a trailing twelve month basis, to be less than 1.25 to 1.

The Restated Credit Agreement also contains customary events of default, including, but not limited to:

(i) failure to pay amounts due under the Restated Credit Agreement;

(ii) materially incorrect representations and warranties;

(iii) failure to comply with covenants;

(iv) change of control;

and (v) default under other indebtedness aggregating at least $3,000.

The obligations of each Loan Party under the Restated Credit Agreement are guaranteed by each other Loan Party.

All obligations under the Restated Credit Agreement, and the guarantees of those obligations (as well as banking services obligations and certain swap agreements), are secured by pledges and liens on 100% of the equity interests of domestic subsidiaries, either 100% or 65% of the equity interests of certain foreign subsidiaries, and the accounts receivable, inventory, intellectual property and certain real property or other

assets of the Loan Parties pursuant to (i) a Pledge and Security Agreement, dated as of May 3, 2019, by and among certain of the Loan Parties and the Administrative Agent (as amended from time to time prior to the Effective Date, the “PSA”), (ii) a General Security Deed, dated as of August 30, 2021, by and among certain of the Loan Parties and the Administrative Agent (the “Oscar GSD”), (iii) a General Security Deed, dated as of January 31, 2022, by and among certain of the Loan Parties and the Administrative Agent (the “Simpson GSD”) or (iv) a mortgage or other applicable security agreement or instrument.

Each of the PSA, the Oscar GSD and the Simpson GSD was reaffirmed by the Loan Parties on the Effective Date pursuant to a Reaffirmation Agreement dated as of the Effective Date by and among the Administrative Agent and the Loan Parties pursuant to which each Loan Party ratified and reaffirmed its obligations to the Lenders in connection with entering into the Restated Credit Agreement.

Off-Balance Sheet Arrangements

3 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 7. Management’s Discussion and Analysis