What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-27 compared with 2022-03-07 · 247 added, 251 removed, 882 unchanged (36% of the section changed)

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Consolidated Balance Sheets - December 31, 2022 and 2021

Consolidated Statements of Comprehensive Income - Years Ended December 31, 2021, 2020 and 2019

Consolidated Statements of Comprehensive (Loss) Income - Years Ended December 31, 2022, 2021 and 2020

Consolidated Statements of Cash Flows - Years Ended December 31, 2022, 2021 and 2020

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Clarus Corporation and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of comprehensive income, stockholders'

We have audited the accompanying consolidated balance sheets of Clarus Corporation and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of comprehensive (loss) income, stockholders'

equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 7, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical Audit Matter

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

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

Acquisitions — Refer to Note 2 to the financial statements

Goodwill and Intangible Assets — Adventure reporting unit and Rhino-Rack trademark — Refer to Notes 1 and 5 to the financial statements

Critical Audit Matter Description

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

The Company accounted for each acquisition as a business combination.

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

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

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

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

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

The Company's evaluation of goodwill and indefinite-lived intangible assets for impairment involves the comparison of the estimated fair value of a reporting unit or indefinite-lived intangible asset to its carrying value.

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

The determination of the fair value using the income approach requires management to make significant estimates and assumptions related to revenue and cash flow projections and discount rates.

The determination of the fair value using the market approach also requires management to make significant estimates and assumptions related to revenue and cash flow projections used to determine earnings before interest, taxes, depreciation, and amortization (EBITDA) as well as the market multiple of comparable publicly traded companies.

The Company estimates the fair value of its indefinite-lived intangible assets using the relief-from-royalty method.

The relief-from-royalty method requires management to make significant estimates and assumptions related to revenue projections, discount rates, and royalty rates.

During the year ended December 31, 2022, the Company recognized a goodwill impairment in its Adventure reporting unit of $52 million and $40 million related to the Rhino-Rack indefinite-lived trademark in its Adventure reporting unit.

We identified the valuation of the Adventure reporting unit and Rhino-Rack trademark as a critical audit matter because of the significant estimates and assumptions management made to determine their fair values.

The audit of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when

performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to revenue and cash flow projections, and the selection of EBITDA multiples, discount rates, and royalty rates.

How the Critical Audit Matter Was Addressed in the Audit

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

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

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

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

– Evaluating whether the valuation methodologies are appropriate in the circumstances and in accordance with generally accepted valuation principles.

– Comparing the source information underlying the determination of the estimated discount rates to external data and testing the mathematical accuracy of the calculation.

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

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

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

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

Our audit procedures related to the revenue and cash flow projections (“projections”), and the selection of EBITDA multiples, discount rates, and royalty rates for the valuation of the Adventure reporting unit and Rhino-Rack trademark included the following, among others:

• We tested the effectiveness of internal controls over the goodwill and indefinite-lived intangible asset impairment analyses, including those over revenue and cash flow projections and the selection of EBITDA multiples, discount rates, and royalty rates.

• We evaluated the reasonableness of management’s projections by comparing the projections to:

– Historical revenues and cash flows.

– Internal communications to management and the Board of Directors.

– Projected information included in industry reports and certain of its peer companies.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodologies, EBITDA multiples, discount rates, and royalty rates by:

– Testing the source information underlying the determination of the discount rates and royalty rates and the mathematical accuracy of the calculations.

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

– Evaluating EBITDA multiples, including testing the underlying source information and mathematical accuracy of the calculations, and comparing the multiples selected by management to its comparable publicly traded companies.

/s/ Deloitte & Touche LLP

Salt Lake City, Utah

March 7, 2022

February 27, 2023

We have served as the Company's auditor since 2018.

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Treasury stock, at cost

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss

Total stockholders'

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CLARUS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands, except per share amounts)

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Selling, general and administrative

Restructuring charge

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

Net (loss) income

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustment

Unrealized gain (loss) on hedging activities

Unrealized (loss) gain on hedging activities

Other comprehensive (loss) income

Comprehensive income

Net income per share:

Comprehensive (loss) income

Net (loss) income per share:

Weighted average shares outstanding:

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Cash Flows From Operating Activities:

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

Net (loss) income

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

Depreciation of property and equipment

Amortization of other intangible assets

Impairment of goodwill and indefinite-lived intangible assets

Amortization of debt issuance costs

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Noncash lease expense

Contingent consideration benefit

Contingent consideration expense (benefit)

Stock-based compensation

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Accrued liabilities

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Cash Flows From Investing Activities:

Purchase of businesses, net of cash received

Purchase of businesses, net of cash acquired

Proceeds from disposition of property and equipment

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Purchase of treasury stock

Proceeds from exercise of stock options

Proceeds from exercise of options

Cash dividends paid

Payment of contingent consideration

Proceeds from the sale of common stock

Common stock issuance costs

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Effect of foreign exchange rates on cash

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Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Stock issued for business acquisitions

Shares issued for business acquisitions

Deferred stock consideration for business acquisition

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Balance, December 31, 2019

Other comprehensive loss

Other comprehensive income

Cash dividends ($ 0.05 per share)

Stock dividends ($ 0.05 per share)

Purchase of treasury stock

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Proceeds from exercise of options

Issuance of common stock, net of issuance costs

Balance, December 31, 2020

Other comprehensive income

Other comprehensive loss

Cash dividends ($ 0.10 per share)

Stock dividends ($ 0.05 per share)

Purchase of treasury stock

Gain on transfer of entity under common control

Stock-based compensation expense

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Issuance of common stock, net of issuance costs

Shares issued for business acquisitions

Balance, December 31, 2021

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Purchase of treasury stock

Gain on transfer of entity under common control

Stock-based compensation expense

Proceeds from exercise of options

Issuance of common stock, net of issuance costs

Shares issued in business acquisitions

Shares issued for business acquisitions

Balance, December 31, 2022

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Nature of Business

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

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

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

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

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

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

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

in January 2011.

In October 2012, we acquired PIEPS Holding GmbH and its subsidiaries (collectively, “PIEPS”).

On August 14, 2017, the Company changed its name from Black Diamond, Inc.

to Clarus Corporation and its stock ticker symbol from “BDE” to “CLAR” on the NASDAQ stock exchange.

On August 21, 2017, the Company acquired Sierra Bullets, L.L.C.

On November 6, 2018, the Company acquired the assets of SKINourishment, Inc.

(“SKINourishment”).

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

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

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

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

Use of Estimates

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

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

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

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

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dollars using the exchange rate at the balance sheet dates for assets and liabilities and average exchange rates for the periods for revenues, expenses, gains and losses.

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

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

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

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

Cash Equivalents

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At December 31, 2022 and 2021, the Company did not hold any amounts that were considered to be cash equivalents.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Accounts Receivable and Allowance for Credit Losses

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There were no significant write-offs during the years ended December 31, 2022, 2021, and 2020.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

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building improvements, 20 years;

computer hardware and software and machinery and equipment, 3 - 15 years;

machinery and equipment, 3 - 10 years;

computer hardware and software, 3 - 5 years;

furniture and fixtures, 5 years.

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Goodwill represents the excess of the purchase price over the fair market value of identifiable net assets of acquired companies.

Goodwill is not amortized, but rather is tested at the reporting unit level at least annually for impairment or more frequently if triggering events or changes in circumstances indicate impairment.

Goodwill is not amortized, but rather is tested for impairment at the reporting unit level annually as of December 31 st of each year or more frequently if triggering events or changes in circumstances indicate impairment, such as a significant adverse change in business climate.

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

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

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

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

Based on the results of the Company’s annual impairment tests completed during the fourth quarter, the Company determined that goodwill was not impaired.

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

Based on the results of the Company’s annual impairment tests completed as of December 31, 2022, the Company recognized goodwill impairment in our Adventure reporting unit of $ 52,071 .

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

Intangible Assets

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

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

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

CLARUS CORPORATION

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(in thousands, except per share amounts)

Intangible Assets

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

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

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

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

Indefinite-lived intangible assets are not amortized;

however, they are tested at least annually for impairment or more frequently if events or changes in circumstances exist that may indicate impairment.

however, they are tested for impairment annually as of December 31 st of each year or more frequently if events or changes in circumstances exist that may indicate impairment.

The Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount.

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The amount of any impairment is measured as the difference between the carrying amount and the fair value of the impaired asset.

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

Based on the results of the Company’s annual impairment tests completed as of December 31, 2022, the Company recognized an impairment of indefinite-lived intangible assets in our Adventure reporting unit, specifically the Rhino-Rack trademark, of $ 40,240 during the year ended December 31, 2022.

No impairment of indefinite-lived intangible assets was recorded during the years ended December 31, 2021 and 2020.

Derivative Financial Instruments

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

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

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

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

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

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

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The Company uses operating budgets and cash flow forecasts to estimate future foreign currency cash flow exposures and to determine the level and timing of derivative transactions intended to mitigate such exposures in accordance with its risk management policies.

The Company discontinues hedge accounting prospectively when it determines that the derivative is no longer effective in offsetting cash flows attributable to the hedged risk, the derivative expires or is sold, terminated, or exercised, the cash flow hedge is dedesignated because a forecasted transaction is not probable of occurring, or management determines to remove the designation of the cash flow hedge.

The Company does not enter into derivative instruments for any purpose other than cash flow hedging.

The Company discontinues hedge accounting prospectively when it determines that the derivative is no longer effective in offsetting cash flows attributable to the hedged risk, the derivative expires or is sold, terminated, or exercised, the cash flow hedge is de-designated because a forecasted transaction is not probable of occurring, or management determines to remove the designation of the cash flow hedge.

The Company does not enter into material derivative instruments for any purpose other than cash flow hedging.

The Company does not speculate using derivative instruments.

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Sales commissions are expensed as incurred.

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

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

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

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Cooperative advertising costs were not material for the years ended December 31, 2022, 2021, and 2020.

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

Product Warranty

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Research and Development

Research and development costs are charged to expense as incurred, and are included in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income.

Total research and development costs were $ 14,645 , $ 11,857 , and $ 10,159 for the years ended December 31, 2022, 2021, and 2020, respectively.

Transaction Costs

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

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

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

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Unremitted taxes on undistributed foreign earnings are not material for the years ended December 31, 2022, 2021, and 2020.

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

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

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

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

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

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

Concentration of Credit Risk and Sales

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The Company performs ongoing credit evaluations of its customers and maintains allowances for possible losses as considered necessary by management.

During the year ended December 31, 2022, no single customer contributed more than 10% of the Company’s sales.

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

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

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

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

(“REI”) accounted for approximately 10 % of the Company’s sales each year.

These sales are included in the Outdoor segment.

No other single customer contributed more than 10% of the Company’s sales during those periods.

As of December 31, 2022, no single customer contributed more than 10% of the Company's accounts receivable.

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

Fair Value Measurements

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

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

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

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

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

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

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

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

Certain significant selling and general and administrative expenses are not allocated to the segments.

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

Reclassifications

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

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

Specifically, accounts payable and accrued liabilities, which were combined and disclosed as one amount, and certain deferred tax assets, which were combined and disclosed as one amount within Note 15, are now presented separately.

Recent Accounting Pronouncements

Accounting Pronouncements not yet adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848):

Accounting Pronouncements adopted during 2022

During the year ended December 31, 2022, the Company adopted Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

This ASU provides temporary optional expedients and exceptions to existing guidance on contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as the London Inter-Bank Offered Rate (“LIBOR”) which is being phased out in 2021, to alternate reference rates, such as the Secured Overnight Financing Rate (“SOFR”).

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

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

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

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

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

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

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

The ASU was adopted on a prospective basis.

This ASU provides temporary optional expedients and exceptions to existing guidance on contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as the London Inter-Bank Offered Rate (“LIBOR”), to alternate reference rates, such as the Secured Overnight Financing Rate (“SOFR”).

The adoption of this standard did not have a material effect on the Company’s consolidated financial statements and related disclosures.

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

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

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

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

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

The Company acquired MAXTRAX for an aggregate purchase price of $AUD 49,744 (approximately $ 35,475 ), subject to a post-closing adjustment, comprised of $AUD 37,551 (approximately $ 26,780 ) cash, 107 shares of the Company’s common stock valued at $ 2,594 , and additional consideration described below.

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

During the year ended December 31, 2022, approximately 108 shares of the Company’s common stock were issued in accordance with the MAXTRAX Purchase Agreement as additional consideration.

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

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

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

The net sales threshold required for the cash payment of the 2022 portion of the MAXTRAX Contingent Consideration was met during the 2022 measurement period ended June 30, 2022.

See Note 10 for discussion regarding the valuation of the MAXTRAX Contingent Consideration as of December 31, 2022.

The acquisition was accounted for as a business combination.

Acquisition-related costs for the MAXTRAX Acquisition, which were included in transaction costs during the year ended December 31, 2022 and 2021 were $ 382 and $ 446 , respectively.

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

The acquisition was accounted for as a business combination.

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

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

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

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

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

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

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

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

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

The Company acquired Rhino-Rack for an aggregate purchase price of $AUD 269,696 (approximately $ 202,488 ), subject to a post-closing adjustment, comprised of approximately $AUD 191,249 (approximately $ 143,590 ) cash, 2,315 shares of the Company’s common stock valued at $ 55,333 , and additional contingent consideration described below.

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

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

The net sales threshold required for the payment of the Rhino-Rack Contingent Consideration was not met during the measurement period ended June 30, 2022.

As of December 31, 2022, no remaining contingent consideration liability existed related to the Rhino-Rack Acquisition.

The acquisition was accounted for as a business combination.

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

Acquisition-related costs for the Rhino-Rack Acquisition, which were included in transaction costs during the year ended December 31, 2022 and 2021 were $ 1,799 and $ 10,975 , respectively.

On September 30, 2020, the Company entered into an Asset Purchase Agreement (the “Barnes Asset Purchase Agreement”) with Remington Outdoor Company, Inc.

5 unchanged sentences

The acquisition was accounted for as a business combination.

The Company believes the acquisitions of MAXTRAX, Rhino-Rack and Barnes are expected to provide the Company with a greater combined global revenue base, increased gross margins, profitability and free cash flows, and access to increased liquidity to further acquire and grow businesses.

The Company believes the acquisitions of MAXTRAX, Rhino-Rack, and Barnes will provide the Company with a greater combined global revenue base, increased gross margins, profitability and free cash flows, and access to increased liquidity to further acquire and grow businesses.

CLARUS CORPORATION

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

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

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

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

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

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

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

The fair value measurements for the acquisitions of MAXTRAX, Rhino-Rack, and Barnes have been completed.

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

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

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

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

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

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

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

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Furthermore, such pro forma information is not necessarily indicative of future operating results of the combined companies and should not be construed as representative of the operating results of the combined companies for any future dates or periods.

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

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

CLARUS CORPORATION

18 unchanged sentences

Depreciation expense was $ 7,626 , $ 5,985 , and $ 4,801 for the years ended December 31, 2022, 2021, and 2020, respectively.

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

The following table summarizes the changes in goodwill by segment:

Precision Sport

Balance at December 31, 2019

Increase due to acquisition of Barnes

Accumulated goodwill impairment losses

Balance at December 31, 2020

2 unchanged sentences

Balance at December 31, 2021

Decrease due to impairment

Acquisition adjustment

Impact of foreign currency exchange rates

Balance at December 31, 2022

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

Due to a weakening global economy, driven by higher inflation and interest rates, and other factors affecting the market for our Adventure reporting unit products, we experienced significant declining revenue and profitability in our Adventure reporting unit and a decline in stock price during the year ended December 31, 2022.

Revenues continued to decline unexpectedly during the three months ended December 31, 2022, due to a lack of product demand in what is typically the highest selling season for the product in Australia, in addition to a continued increase in interest rates.

As a result, we reduced our sales forecasts for 2023 and beyond in our Adventure reporting unit.

As part of our annual impairment test as of December 31, 2022, we performed a quantitative assessment using income-based and market-based approaches.

As a result of this assessment, the carrying value of our Adventure reporting unit exceeded the related estimated fair value, thus an impairment of goodwill of $ 52,071 was recorded.

Indefinite-Lived Intangible Assets

1 unchanged sentence

Balance at December 31, 2021

Increase due to acquisitions of Rhino-Rack and MAXTRAX

Decrease due to impairment of Rhino-Rack trademark

Impact of foreign currency exchange rates

Balance at December 31, 2022

As part of our annual impairment test as of December 31, 2022, we performed a quantitative assessment using the relief-from-royalty method.

As described above, we reduced our sales forecasts for 2023 and beyond in our Adventure reporting unit.

As a result of this assessment, the carrying value of the Rhino-Rack trademark recorded within our Adventure reporting unit exceeded the estimated related fair value, thus an impairment of the Rhino-Rack trademark of $ 40,240 was recorded.

If we do not achieve the results reflected in the forecasts utilized in our impairment assessments, or if there are changes to market assumptions, all of which require significant estimates and assumptions, our valuation of the reporting unit, including related indefinite-lived intangible assets, could be adversely affected, and we may be required to impair an additional portion or all of the related goodwill, indefinite-lived intangibles, and other long-lived assets which could adversely affect our operating results in the period of impairment.

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

5 unchanged sentences

Gross balance at December 31, 2021

Increase due to acquisitions of Rhino-Rack and MAXTRAX

Impact of foreign currency exchange rates

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Accrued bonus

Designated forward exchange contracts

Accrued warranty

21 unchanged sentences

Less current portion

On July 1, 2021, the Company and certain of its direct and indirect subsidiaries (each, a “Loan Party” and, collectively, the “Loan Parties”) entered into Amendment No.

3 (“Amendment No.

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

1 dated May 28, 2019 and Amendment No.

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

The Credit Agreement as amended by Amendment No.

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

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

Amendment No.

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

On January 3, 2022, the Company and certain of its direct and indirect subsidiaries entered into Amendment No.

4 (“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.

4”) to the credit agreement, dated as of May 3, 2019 (the “Existing Credit Agreement”) by and among the Company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto.

Amendment No.

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

All obligations under the Credit Agreement are secured by our subsidiary equity interests, as well as accounts receivable, inventory, intellectual property and certain other assets owned by the Company.

The Credit Agreement contains restrictions on the Company’s ability to pay dividends or make distributions or other restricted payments if certain conditions in the Credit Agreement are not fulfilled .

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

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

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

The Company pays interest monthly on any borrowings on the Credit Agreement (as defined below).

As of December 31, 2021 and 2020, the interest rate was 2.3750 % and 2.0625 %, respectively.

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 Existing Credit Agreement), under the Existing Credit Agreement for expenses relating to activities in respect of acquisitions, dispositions, investments and financings (whether or not these transactions are actually consummated).

On April 18, 2022 (the “Effective Date”), the Company and certain of its direct and indirect subsidiaries entered into an Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent and the lenders party thereto (the “Restated Credit Agreement”) pursuant to which the Existing Credit Agreement was amended and restated in its entirety.

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

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

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

All obligations under the Restated 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 Restated Credit Agreement contains restrictions on the Company’s ability to pay dividends or make distributions or other restricted payments if certain conditions in the Restated Credit Agreement are not fulfilled .

The Restated Credit Agreement also includes other customary affirmative and negative covenants, including financial covenants relating to the Company’s consolidated total leverage ratio and fixed charge coverage ratio.

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

(a) As of December 31, 2022, the Company had drawn $ 18,049 of the approximately $ 98,000 available to borrow on the revolving commitment at December 31, 2022, while maintaining compliance with the consolidated total leverage ratio per the Restated Credit Agreement of 3.75 to 1, with a maturity date of April 18, 2027 .

The Company pays interest monthly on any borrowings

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

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

on the Restated Credit Agreement.

As of December 31, 2022 and 2021, the rates were approximately 6.3 % and 2.4 %, respectively.

(b) Foreign subsidiaries of the Company have a revolving credit facility and term debt with financial institutions which mature between August 22, 2022 and August 8, 2024 .

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

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

As of December 31, 2022, the interest rates ranged between approximately 1.3 % and 4.0 % and as of December 31, 2021, the interest rates ranged between approximately 1.3 % and 5.2 %.

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

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

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

On July 1, 2021, under Amendment No.

3, the aggregate amount of the term loan facility was increased to $ 125,000 and the term loan was fully borrowed at the closing of Amendment No.

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

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

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

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

There were no additional amounts available to borrow under the revolving credit facility as of December 31, 2022.

(c) The Company is required to repay the term loan through quarterly payments of $ 1,563 beginning with the quarter ended June 30, 2022 , increasing to $ 3,125 each quarter beginning with the quarter ended June 30, 2023 , and any remaining obligations will be repaid in full on the maturity date of the Restated Credit Agreement of April 18, 2027 .

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

As of December 31, 2022 and 2021, the rates were approximately 6.3 % and 2.4 %, respectively.

The aggregate maturities of the revolving credit facility for the years subsequent to December 31, 2022 are as follows:

Total future long-term debt payments

Less amount representing debt discounts

Less amount representing debt issuance costs

Total carrying amount of long-term debt

7 unchanged sentences

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

During the twelve months ended December 31, 2022, the Company held commodity derivative contracts to mitigate the risk of commodity price fluctuations associated with raw material costs.

The Company held no outstanding commodity derivative contracts as of December 31, 2022.

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

During the twelve months ended December 31, 2022, losses of $( 795 ) were recorded in Other, net.

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

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

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

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

At December 31, 2022, the Company’s derivative contracts had remaining maturities of less than one and one-half years .

18 unchanged sentences

February 2023

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

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

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

Gains (losses) of $ 3,124 and ($ 223 ) were reclassified to sales during the years ended December 31, 2022 and 2021, respectively.

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

5 unchanged sentences

Prepaid and other current assets

Forward exchange contracts

Designated forward exchange contracts

Other long-term assets

1 unchanged sentence

Designated forward exchange contracts

Accrued liabilities

Designated forward exchange contracts

Other long-term liabilities

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

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

ACCUMULATED OTHER COMPREHENSIVE LOSS

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

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

3 unchanged sentences

Other comprehensive (loss) income before reclassifications

Amounts reclassified from other comprehensive (loss) income

Net current period other comprehensive (loss) income

Amounts reclassified from other comprehensive loss

Net current period other comprehensive loss

Balance as of December 31, 2022

5 unchanged sentences

Balance as of December 31, 2020

Other comprehensive income (loss) before reclassifications

Other comprehensive (loss) income before reclassifications

Amounts reclassified from other comprehensive (loss) income

Net current period other comprehensive income (loss)

Net current period other comprehensive (loss) income

Balance as of December 31, 2021

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

Losses reclassified from AOCI to the Consolidated Statements of Comprehensive Income

The effects on net (loss) income of amounts reclassified from unrealized gains (losses) on cash flow hedges for foreign exchange contracts and foreign currency translation adjustments for the years ended December 31, 2022 and 2021 were as follows:

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

Affected line item in the Consolidated

Twelve Months Ended

Statements of Comprehensive Income

Statements of Comprehensive (Loss) Income

December 31, 2022

1 unchanged sentence

Foreign exchange contracts:

Income tax benefit

Income tax expense (benefit)

Amount reclassified, net of tax

11 unchanged sentences

(in thousands, except per share amounts)

Items Measured at Fair Value on a Recurring Basis

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

6 unchanged sentences

Designated forward exchange contracts

Contingent consideration liabilities

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

No nonrecurring fair value measurements existed at December 31, 2022 and 2021.

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

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

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

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

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

Contingent consideration liabilities are subsequently remeasured at the estimated fair value at the end of each reporting period using financial projections of the acquired company, such as sales-based milestones and estimated probabilities of achievement, with the change in fair value recognized in contingent consideration benefit in the accompanying consolidated statements of comprehensive (loss) income for such period.

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

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

Increase due to acquisition of Rhino-Rack

Increase due to acquisition of MAXTRAX

The net sales threshold required for the payment of the Rhino-Rack Contingent Consideration was not met during the measurement period ended June 30, 2022.

The net sales threshold required for the payment of the 2022 portion of the MAXTRAX Contingent Consideration was met during the 2022 measurement period ended June 30, 2022.

During the year ended December 31, 2022, $AUD 3,125 was paid in cash in accordance with the MAXTRAX Purchase Agreement.

The following table summarizes the changes in contingent consideration liabilities :

Balance at December 31, 2021

Fair value adjustments

Contingent consideration payments

Impact of foreign currency exchange rates

Balance at December 31, 2022

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

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

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

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

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

Items Measured at Fair Value on a Non-Recurring Basis

In assessing the recoverability of goodwill and indefinite-lived intangible assets, management estimates the fair value of each reporting unit using Level 3 inputs through a combination of the income approach based upon projected discounted cash flows of the reporting unit and the market approach.

The fair value of indefinite-lived intangible assets is estimated using Level 3 inputs through the income approach, specifically the relief-from-royalty method.

The fair values are based on revenue and cash flow projections, royalty rates, and discount rates.

Impairment of goodwill and indefinite-lived intangible assets was $ 92,311 , $ 0 , and $ 0 during the years ended December 31, 2022, 2021, and 2020, respectively.

See Note 5 for additional information.

STOCKHOLDERS’ EQUITY

3 unchanged sentences

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

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

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

On February 24, 2023 , the Company announced that its Board of Directors approved the payment on March 17, 2023 of the Quarterly Cash Dividend of $ 0.025 to the record holders of shares of the Company’s common stock as of the close of business on March 7, 2023 .

6 unchanged sentences

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

EARNINGS PER SHARE

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

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

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

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

EARNINGS (LOSS) PER SHARE

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

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

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

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

Year Ended December 31,

3 unchanged sentences

Weighted average shares outstanding - diluted

Net income per share:

For the years ended December 31, 2021, 2020, and 2019, equity awards of 509 , 868 , and 702 , respectively, were outstanding and anti-dilutive and therefore not included in the calculation of net income per share for these periods.

Net (loss) income per share:

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

For the years ended December 31, 2022, 2021, and 2020, equity awards of 6,060 , 509 , and 868 , respectively, were outstanding and anti-dilutive and therefore not included in the calculation of net (loss) income per share for these periods.

STOCK-BASED COMPENSATION PLAN

2 unchanged sentences

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

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

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

As of December 31, 2022, the number of shares authorized and reserved for issuance under the 2015 Plan is 8,142 shares, subject to automatic annual increase equal to 5 % of the total number of shares of the Company’s outstanding common stock.

1 unchanged sentence

During the year ended December 31, 2022, the Company issued stock options for an aggregate of 440 shares under the 2015 Plan to directors and employees of the Company.

The options issued during the year ended December 31, 2021 generally vest and become exercisable over a period of one to three years and expire ten years from the date of the grant.

Of the 440 options, 355 vest and become exercisable over a period of three years , 75 vest in four equal consecutive quarterly tranches from the date of grant and the remaining 10 vest immediately.

All of the issued stock options expire ten years from the date of the grant.

For computing the fair value of the stock-based awards, the fair value of each option grant has been estimated as of the date of grant using the Black-Scholes option-pricing model with the following assumptions:

4 unchanged sentences

$ 15.15 - $ 24.43

$ 9.99 - $ 16.93

Dividend yield

1 unchanged sentence

0.41 % - 0.66 %

0.59 % - 1.00 %

Expected volatility (a)

19 unchanged sentences

Market Condition Restricted Shares Granted:

On March 4, 2022, the Company issued and granted to the Executive Chairman and certain employees restricted stock awards of 700 restricted shares under the 2015 Plan, of which 700 restricted shares will vest if, on or before March 4, 2032, the Fair Market Value (as defined in the Plan) of the Company’s common stock shall have equaled or exceeded $ 50.00 per share for twenty consecutive trading days.

For computing the fair value of the restricted shares with a market condition, the fair value of the restricted stock award grant has

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

been estimated as of the date of grant using the Monte-Carlo pricing model with the assumptions below.

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

3 unchanged sentences

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

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

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

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

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

and (ii) 116 shares of the Company’s common stock shall vest on the third anniversary of the Price Trigger Date.

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

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

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

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

and (B) once the Price Trigger Date occurs, the shares shall equally vest on each of the first, second, third and fourth anniversary of the Price Trigger Date.

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

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

March 4, 2022

August 27, 2020

January 7, 2019

Number issued

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Weighted average fair value (per share)

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

Using these assumptions, the fair value of the market condition restricted stock awards granted on March 4, 2022, May 28, 2021, and August 27, 2020 were approximately $ 10,761 , $ 7,230 , and $ 991 , respectively.

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

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Unrecognized compensation cost of unvested stock options and restricted stock awards are expected to be recognized over the weighted average period of 1.5 years and 3.2 years, respectively.

RESTRUCTURING

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

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

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

COMMITMENTS AND CONTINGENCIES

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

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

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

consolidated financial condition, results of operations or cash flows.

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

1 unchanged sentence

It is possible that, as additional information becomes available, the impact on the Company could have a different effect.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Consolidated income before income taxes consists of the following:

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Foreign operations

Income before income tax

(Loss) income before income tax

The components of the benefit for income taxes consist of the following:

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Year Ended December 31,

Statutory income tax expense

Statutory income tax (benefit) expense

Increase (decrease) in income taxes resulting from:

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Income tax credits

Incentive stock options

Stock options

Change in effective state rate

2 unchanged sentences

Change in valuation allowance

Impairment of goodwill

Research and development expenditure

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Net operating loss, capital loss amount and research & experimentation credit carryforwards

Capitalized research and development costs

Capitalized costs to self-constructed property

Non-cash compensation

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

The majority of the Company’s deferred tax assets consist of net operating loss carryforwards for federal tax purposes.

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

The majority of the Company’s deferred tax assets consist of

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

net operating loss carryforwards for federal tax purposes.

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

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

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There are $ 1,851 of NOLs that expire on December 31, 2023, which the Company expects to realize in their entirety in 2023.

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

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

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

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

A reconciliation of the beginning and ending amount of total unrecognized tax benefits for the years ended December 31, 2022, 2021 and 2020 is as follows:

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Balance, end of year

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Included in the balance of total unrecognized tax benefits at December 31, 2022 and 2021, are potential benefits of $ 813 and $ 696 , respectively, that if recognized, would affect the effective rate, subject to impact of valuation allowance, on income from continuing operations.

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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:

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We also offer advanced skis, ski poles, ski skins, and snow safety products, including avalanche airbag systems, avalanche transceivers, shovels, and probes.

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

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

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

As noted above, the Company has a wide variety of technical outdoor equipment and lifestyle products that are sold to a variety of customers in multiple end markets.

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

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

CLARUS CORPORATION

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Total sales to external customers

Segment operating income:

Segment operating income (loss):

Precision Sport

Total segment operating income

Restructuring charge

Total segment operating (loss) income

Transaction costs

Contingent consideration benefit

Contingent consideration (expense) benefit

Corporate and other expenses

Interest expense, net

Income before income tax

(Loss) income before income tax

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

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

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

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

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

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Affected line item in the Consolidated

Statements of Comprehensive Income

Statements of Comprehensive (Loss) Income

December 31, 2022

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Upon the Company’s acquisition of Barnes, on October 2, 2020, the Company paid a fee in the amount of $ 500 to Kanders & Company, which is included in transaction costs, in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, performing due diligence and negotiating the acquisition of Barnes.

SUBSEQUENT EVENT

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

4 to the Credit Agreement (“Amendment No.

Amendment No.

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

CLARUS CORPORATION

1 unchanged sentence

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data