What changed in this filing

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Item 1. Financial Statements

2023-11-07 compared with 2023-08-07 · 200 added, 151 removed, 504 unchanged (41% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

June 30, 2023

September 30, 2023

December 31, 2022

38 unchanged sentences

Three Months Ended

June 30, 2023

June 30, 2022

September 30, 2023

September 30, 2022

Domestic sales

5 unchanged sentences

Transaction costs

Contingent consideration benefit

Contingent consideration expense

Total operating expenses

Operating (loss) income

Other income (expense)

Operating income

Other expense

Interest expense, net

1 unchanged sentence

(Loss) income before income tax

Income tax (benefit) expense

Income tax benefit

Net (loss) income

10 unchanged sentences

(In thousands, except per share amounts)

Six Months Ended

June 30, 2023

June 30, 2022

Nine Months Ended

September 30, 2023

September 30, 2022

Domestic sales

8 unchanged sentences

Operating income

Other income (expense)

Other expense

Interest expense, net

5 unchanged sentences

Foreign currency translation adjustment

Unrealized (loss) gain on hedging activities

Unrealized gain on hedging activities

Other comprehensive loss

6 unchanged sentences

(In thousands)

Six Months Ended

June 30, 2023

June 30, 2022

Nine Months Ended

September 30, 2023

September 30, 2022

Cash Flows From Operating Activities:

Net (loss) income

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

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

Depreciation of property and equipment

1 unchanged sentence

Amortization of debt issuance costs

(Gain) loss on disposition of property and equipment

Gain on disposition of property and equipment

Noncash lease expense

10 unchanged sentences

Proceeds from disposition of property and equipment

Purchase of intangible assets

Purchases of property and equipment

9 unchanged sentences

Cash dividends paid

Payment of contingent consideration

Net cash (used in) provided by financing activities

7 unchanged sentences

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Shares issued for business acquisitions

Property and equipment purchased with accounts payable

Intangible assets purchased with accounts payable

Lease liabilities arising from obtaining right of use assets

Unpaid debt issuance costs

See accompanying notes to condensed consolidated financial statements.

18 unchanged sentences

Balance, June 30, 2022

Other comprehensive loss

Cash dividends ($ 0.025 per share)

Purchase of treasury stock

Stock-based compensation expense

Proceeds from exercise of options

Shares issued in business acquisition

Balance, September 30, 2022

Treasury Stock

14 unchanged sentences

Balance, June 30, 2023

Other comprehensive loss

Cash dividends ($ 0.025 per share)

Stock-based compensation expense

Proceeds from exercise of options

Shares issued in business acquisition

Balance, September 30, 2023

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements of Clarus Corporation and subsidiaries (which may be referred to as the “Company,” “Clarus,” “we,” “us” or “our”) as of June 30, 2023 and December 31, 2022 and for the three and six months ended June 30, 2023 and 2022, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), instructions to the Quarterly Report on Form 10-Q, and Article 10 of Regulation S-X.

The accompanying unaudited condensed consolidated financial statements of Clarus Corporation and subsidiaries (which may be referred to as the “Company,” “Clarus,” “we,” “us” or “our”) as of September 30, 2023 and December 31, 2022 and for the three and nine months ended September 30, 2023 and 2022, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), instructions to the Quarterly Report on Form 10-Q, and Article 10 of Regulation S-X.

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

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

The results for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be obtained for the year ending December 31, 2023.

The results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be obtained for the year ending December 31, 2023.

These interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2023.

8 unchanged sentences

GAAP requires management to make estimates and assumptions that effect 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.

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, long-lived assets, goodwill and indefinite-lived intangible assets, and other intangible assets.

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

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

Actual results could differ from these estimates.

Inventories, as of June 30, 2023 and December 31, 2022, were as follows:

June 30, 2023

Inventories, as of September 30, 2023 and December 31, 2022, were as follows:

September 30, 2023

December 31, 2022

6 unchanged sentences

PROPERTY AND EQUIPMENT

Property and equipment, net, as of June 30, 2023 and December 31, 2022, were as follows:

June 30, 2023

Property and equipment, net, as of September 30, 2023 and December 31, 2022, were as follows:

September 30, 2023

December 31, 2022

5 unchanged sentences

Less accumulated depreciation

Depreciation expense for the three months ended June 30, 2023 and 2022 was $ 1,941 and $ 1,877 , respectively, and for the six months ended June 30, 2023 and 2022 was $ 3,732 and $ 3,709 , respectively.

Depreciation expense for the three months ended September 30, 2023 and 2022 was $ 1,943 and $ 2,091 , respectively, and for the nine months ended September 30, 2023 and 2022 was $ 5,675 and $ 5,800 , respectively.

GOODWILL AND INTANGIBLE ASSETS

4 unchanged sentences

Impact of foreign currency exchange rates

Balance at June 30, 2023

Balance at September 30, 2023

Indefinite-Lived Intangible Assets

2 unchanged sentences

Impact of foreign currency exchange rates

Balance at June 30, 2023

Balance at September 30, 2023

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

Trademarks classified as indefinite-lived intangible assets by brand as of June 30, 2023 and December 31, 2022, were as follows:

June 30, 2023

Trademarks classified as indefinite-lived intangible assets by brand as of September 30, 2023 and December 31, 2022, were as follows:

September 30, 2023

December 31, 2022

3 unchanged sentences

Gross balance at December 31, 2022

Increase due to purchase of intangible assets

Impact of foreign currency exchange rates

Gross balance at June 30, 2023

Other intangible assets, net of amortization as of June 30, 2023 and December 31, 2022, were as follows:

June 30, 2023

Gross balance at September 30, 2023

Other intangible assets, net of amortization as of September 30, 2023 and December 31, 2022, were as follows:

September 30, 2023

Accumulated Amortization

15 unchanged sentences

(in thousands, except per share amounts)

Amortization expense for the three months ended June 30, 2023 and 2022, was $ 3,223 and $ 3,937 , respectively, and for the six months ended June 30 2023 and 2022 was $ 6,499 and $ 8,057 .

Future amortization expense for other intangible assets as of June 30, 2023 is as follows:

Amortization expense for the three months ended September 30, 2023 and 2022, was $ 3,061 and $ 3,683 , respectively, and for the nine months ended September 30, 2023 and 2022 was $ 9,560 and $ 11,740 .

Future amortization expense for other intangible assets as of September 30, 2023 is as follows:

Years Ending December 31,

Amortization Expense

2023 (excluding the six months ended June 30, 2023)

2023 (excluding the nine months ended September 30, 2023)

ACCRUED LIABILITIES AND OTHER LONG-TERM LIABILITIES

Accrued liabilities as of June 30, 2023 and December 31, 2022, were as follows:

June 30, 2023

Accrued liabilities as of September 30, 2023 and December 31, 2022, were as follows:

September 30, 2023

December 31, 2022

1 unchanged sentence

Accrued bonus

Designated forward exchange contracts

Accrued warranty

3 unchanged sentences

Accrued excise tax

Other long-term liabilities as of June 30, 2023 and December 31, 2022, were as follows:

June 30, 2023

Other long-term liabilities as of September 30, 2023 and December 31, 2022, were as follows:

September 30, 2023

December 31, 2022

5 unchanged sentences

LONG-TERM DEBT

Long-term debt as of June 30, 2023 and December 31, 2022, was as follows:

June 30, 2023

Long-term debt as of September 30, 2023 and December 31, 2022, was as follows:

September 30, 2023

December 31, 2022

11 unchanged sentences

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 Credit Agreement as of June 30, 2023.

(a) As of June 30, 2023, the Company had drawn $ 11,884 on the revolving loan, with a maturity date of April 18, 2027 .

Approximately $ 32,000 in additional funds were available to borrow on the revolving loan at June 30, 2023, while maintaining compliance with the consolidated total leverage ratio per the Restated Credit Agreement of 3.75 to 1.

The Company was in compliance with the debt covenants set forth in the Credit Agreement as of September 30, 2023.

(a) As of September 30, 2023, the Company had drawn $ 10,380 on the revolving loan, with a maturity date of April 18, 2027 .

Approximately $ 17,000 in additional funds were available to borrow on the revolving loan at September 30, 2023, while maintaining compliance with the consolidated total leverage ratio per the Restated Credit Agreement of 3.75 to 1.

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

As of June 30, 2023 and December 31, 2022, the rates were approximately 7.5 % and 6.3 % , respectively.

(b) Foreign subsidiaries of the Company have a revolving credit facility and term debt with financial institutions which mature between November 16, 2023 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 June 30, 2023, the interest rates ranged between approximately 3.1 % and 3.2 % and as of December 31, 2022, the interest rates ranged between approximately 1.3 % and 4.0 % .

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

As of September 30, 2023 and December 31, 2022, the rates were approximately 7.7 % and 6.3 % , respectively.

(b) Foreign subsidiaries of the Company had a revolving credit facility, which matured on March 31, 2023, and term debt with financial institutions, which mature between November 16, 2023 and August 8, 2024 .

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

As of September 30, 2023, the interest rates ranged between approximately 3.1 % and 3.2 % and as of December 31, 2022, the interest rates ranged between approximately 1.3 % and 4.0 % .

The credit facility was secured by certain assets of the foreign subsidiaries.

The revolving credit facility was settled and closed as of March 31, 2023 and had no amounts outstanding.

4 unchanged sentences

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

As of June 30, 2023 and December 31, 2022, the rates were approximately 7.5 % and 6.3 % , respectively.

As of September 30, 2023 and December 31, 2022, the rates were approximately 7.7 % and 6.3 % , respectively.

DERIVATIVE FINANCIAL INSTRUMENTS

4 unchanged sentences

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

At June 30, 2023, the Company’s derivative contracts had remaining maturities of less than one year .

At September 30, 2023, the Company’s derivative contracts had remaining maturities of less than one year .

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

The maximum net exposure of the Company’s credit risk to the counterparties is generally limited to the aggregate unrealized loss of $ 180 on all contracts at June 30, 2023.

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

At June 30, 2023, there was no such exposure to the counterparties.

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

As of September 30, 2023, there was no such exposure to the counterparties.

The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain of $ 730 on all contracts as of September 30, 2023.

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

The Company held the following contracts designated as hedging instruments as of June 30, 2023 and December 31, 2022:

June 30, 2023

The Company held the following contracts designated as hedging instruments as of September 30, 2023 and December 31, 2022:

September 30, 2023

Foreign exchange contracts - Canadian Dollars

8 unchanged sentences

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 $( 43 ) and $ 610 were reclassified to sales during the three months ended June 30, 2023 and 2022, respectively, and $( 59 ) and $ 863 were reclassified to sales during the six months ended June 30, 2023 and 2022, respectively.

Gains of $ 226 and $ 1,218 were reclassified to sales during the three months ended September 30, 2023 and 2022, respectively, and $ 167 and $ 2,081 were reclassified to sales during the nine months ended September 30, 2023 and 2022, respectively.

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

The following table presents the balance sheet classification and fair value of derivative instruments as of June 30, 2023 and December 31, 2022:

The following table presents the balance sheet classification and fair value of derivative instruments as of September 30, 2023 and December 31, 2022:

Classification

June 30, 2023

September 30, 2023

December 31, 2022

4 unchanged sentences

Designated forward exchange contracts

Accrued liabilities

Designated forward exchange contracts

Other long-term liabilities

1 unchanged sentence

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

The following table sets forth the changes in AOCI, net of tax, for the three months ended June 30, 2023:

The following table sets forth the changes in AOCI, net of tax, for the three months ended September 30, 2023:

Foreign Currency Translation Adjustments

Unrealized Gains (Losses) on Cash Flow Hedges

Balance as of March 31, 2023

Other comprehensive loss before reclassifications

Balance as of June 30, 2023

Other comprehensive (loss) income before reclassifications

Amounts reclassified from other comprehensive loss

Net current period other comprehensive (loss) income

Balance as of June 30, 2023

The following table sets forth the changes in AOCI, net of tax, for the three months ended June 30, 2022:

Balance as of September 30, 2023

The following table sets forth the changes in AOCI, net of tax, for the three months ended September 30, 2022:

Foreign Currency Translation Adjustments

Unrealized Gains (Losses) on Cash Flow Hedges

Balance as of March 31, 2022

Balance as of June 30, 2022

Other comprehensive (loss) income before reclassifications

1 unchanged sentence

Net current period other comprehensive (loss) income

Balance as of June 30, 2022

Balance as of September 30, 2022

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

The following table sets forth the changes in AOCI, net of tax, for the six months ended June 30, 2023:

The following table sets forth the changes in AOCI, net of tax, for the nine months ended September 30, 2023:

Foreign Currency Translation Adjustments

1 unchanged sentence

Balance as of December 31, 2022

Other comprehensive loss before reclassifications

Other comprehensive (loss) income before reclassifications

Amounts reclassified from other comprehensive loss

Net current period other comprehensive loss

Balance as of June 30, 2023

The following table sets forth the changes in AOCI, net of tax, for the six months ended June 30, 2022:

Net current period other comprehensive (loss) income

Balance as of September 30, 2023

The following table sets forth the changes in AOCI, net of tax, for the nine months ended September 30, 2022:

Foreign Currency Translation Adjustments

4 unchanged sentences

Net current period other comprehensive (loss) income

Balance as of June 30, 2022

The effects on net income of amounts reclassified from unrealized gains (losses) on cash flow hedges for foreign exchange contracts for the three and six months ended June 30, 2023 and 2022, were as follows:

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

Balance as of September 30, 2022

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The effects on net income of amounts reclassified from unrealized gains (losses) on cash flow hedges for foreign exchange contracts for the three and nine months ended September 30, 2023 and 2022, were as follows:

Gains reclassified from AOCI to the Consolidated Statements of Comprehensive Loss

Affected line item in the Consolidated

Three Months Ended

Six Months Ended

Nine Months Ended

Statements of Comprehensive Loss

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

Foreign exchange contracts:

Income tax (benefit) expense

Income tax expense

Amount reclassified, net of tax

Total reclassifications from AOCI

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

FAIR VALUE MEASUREMENTS

4 unchanged sentences

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Items Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis at June 30, 2023 and December 31, 2022 were as follows:

June 30, 2023

Assets and liabilities measured at fair value on a recurring basis at September 30, 2023 and December 31, 2022 were as follows:

September 30, 2023

Designated forward exchange contracts

5 unchanged sentences

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

No nonrecurring fair value measurements existed at June 30, 2023 and December 31, 2022.

No nonrecurring fair value measurements existed at September 30, 2023 and December 31, 2022.

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

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

achievement, with the change in fair value recognized in contingent consideration benefit in the accompanying consolidated statements of comprehensive (loss) income for such period.

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.

4 unchanged sentences

Impact of foreign currency exchange rates

Balance at June 30, 2023

Balance at September 30, 2023

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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 measurement.

3 unchanged sentences

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

On August 3, 2023 , the Company announced that its Board of Directors approved the payment on August 25, 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 August 14, 2023 .

On November 3, 2023 , the Company announced that its Board of Directors approved the payment on November 24, 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 November 14, 2023 .

EARNINGS (LOSS) PER SHARE

2 unchanged sentences

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.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

Three Months Ended

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

Nine Months Ended

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

Weighted average shares outstanding - basic

3 unchanged sentences

Net (loss) income per share:

For the three months ended June 30, 2023 and 2022, equity awards of 6,082 and 1,638 , respectively, and for the six months ended June 30, 2023 and 2022, equity awards of 6,058 and 1,484 , respectively, were excluded from the calculation of earnings (loss) per share for these periods as they were anti-dilutive.

For the three months ended September 30, 2023 and 2022, equity awards of 4,922 and 1,713 , respectively, and for the nine months ended September 30, 2023 and 2022, equity awards of 5,613 and 1,560 , respectively, were excluded from the calculation of earnings (loss) per share for these periods as they were anti-dilutive.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

STOCK-BASED COMPENSATION PLAN

4 unchanged sentences

Options Granted:

During the six months ended June 30, 2023, the Company issued stock options for an aggregate of 75 shares under the 2015 Plan to directors of the Company.

During the nine months ended September 30, 2023, the Company issued stock options for an aggregate of 75 shares under the 2015 Plan to directors of the Company.

All 75 options vest and become exercisable over a period of one year .

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

Options Granted During the Six Months Ended June 30, 2023

Options Granted During the Nine Months Ended September 30, 2023

Number of options

8 unchanged sentences

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

The grant date fair value of the stock options granted during the six months ended June 30, 2023 was $ 186 , which will be recognized over the vesting period of the options.

The grant date fair value of the stock options granted during the nine months ended September 30, 2023 was $ 186 , which will be recognized over the vesting period of the options.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Market Condition Restricted Shares Granted:

13 unchanged sentences

Using these assumptions, the grant date fair value of the restricted stock awards was approximately $ 4,046 and the expected term was between 2.56 and 3.22 years.

The total non-cash stock compensation expense related to restricted stock, stock options and stock awards recorded by the Company for the three months ended June 30, 2023 and 2022 was $ 1,535 and $ 3,555 , respectively, and for the six months ended June 30, 2023 and 2022 was $ 2,869 and $ 6,922 , respectively.

For the three and six months ended June 30, 2023 and 2022, the majority of stock-based compensation costs were classified as selling, general and administrative expenses.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

As of June 30, 2023, there were 535 unvested stock options and unrecognized compensation cost of $ 2,145 related to unvested stock options, as well as 1,717 unvested restricted stock awards and unrecognized compensation costs of $ 9,905 related to unvested restricted stock awards.

The total non-cash stock compensation expense related to restricted stock, stock options and stock awards recorded by the Company for the three months ended September 30, 2023 and 2022 was $ 1,168 and $ 2,220 , respectively, and for the nine months ended September 30, 2023 and 2022 was $ 4,037 and $ 9,142 , respectively.

For the three and nine months ended September 30, 2023 and 2022, the majority of stock-based compensation costs were classified as selling, general and administrative expenses.

As of September 30, 2023, there were 388 unvested stock options and unrecognized compensation cost of $ 1,517 related to unvested stock options, as well as 1,617 unvested restricted stock awards and unrecognized compensation costs of $ 8,033 related to unvested restricted stock awards.

RESTRUCTURING

From time to time, the Company incurs expenses to facilitate long-term sustainable growth through cost reduction actions, consisting of employee reductions, facility rationalization and contract termination costs.

These costs include severance costs, exit costs and inventory write-offs and are included in Restructuring charges in the Condensed Consolidated Statements of Comprehensive Loss.

These costs include severance costs, exit costs and other restructuring costs and are included in Restructuring charges in the Condensed Consolidated Statements of Comprehensive Loss.

Severance costs primarily consist of severance benefits through payroll continuation, conditional separation costs and employer tax liabilities, while exit costs primarily consist of lease exit and contract termination costs.

Write-offs of inventory were distinguishable and directly attributable to the Company’s restructuring initiative and not a result of external market factors associated with the ongoing business.

Pre-tax restructuring charges by segment for the three and six months ended June 30, 2023 were as follows:

Three and Six Months Ended June 30, 2023

Other costs consisted primarily of costs related to the discontinuance of certain product lines and were distinguishable and directly attributable to the Company’s restructuring initiative and not a result of external market factors associated with the ongoing business.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Pre-tax restructuring charges by segment for the three months ended September 30, 2023 were as follows:

Three Months Ended September 30, 2023

Precision Sport

Employee termination benefits

Inventory write-offs

Total restructuring charges

There were no significant accruals recorded as of June 30, 2023 related to the Company’s restructuring initiatives.

Pre-tax restructuring charges by segment for the nine months ended September 30, 2023 were as follows:

Nine Months Ended September 30, 2023

Precision Sport

Employee termination benefits

Total restructuring charges

There were no significant accruals recorded as of September 30, 2023 related to the Company’s restructuring initiatives.

COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

Anticipated costs related to litigation matters are accrued when it is both probable that a liability has been incurred and the amount can be reasonably estimated.

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

Consumer Product Safety Commission (“CPSC”) matter discussed below.

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

however, the actual amounts of such possible losses cannot currently be reasonably estimated by the Company at this time.

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

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

See Part II, Item 1.

“Legal Proceedings.” and Part II, Item 1A.

“Risk Factors.”

By letter dated October 12, 2023, Black Diamond Equipment, Ltd.

(“BDEL”) was notified by the CPSC that the agency staff concluded the Company failed to timely meet its statutory reporting obligations under the Consumer Product Safety Act with respect to certain models of BDEL’s avalanche transceivers switching unexpectedly out of “send” mode, that we made a material misrepresentation in a report to the CPSC, and that the agency staff intends to recommend that the CPSC impose substantial civil monetary penalties.

We disagree with the agency staff and intend to submit a comprehensive refutation of its findings and conclusions in addition to discussing the amount of a potential penalty;

however, the CPSC may ultimately disagree with us, and we cannot assure on what terms this matter will be resolved.

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

Based on currently available information, the Company cannot estimate the amount of the loss (or range of loss) in connection with this matter.

We believe it is reasonably possible that a change in our ability to estimate the amount of loss could occur in the near term and that the change in the estimate could be material.

In addition, as this matter is ongoing, the Company is currently unable to predict its duration, resources required or outcome, or the impact it may have on the Company’s liquidity, financial condition, results of operations and/or cash flows.

A penalty imposed by the CPSC or other regulators could be costly to us and could damage our business and reputation as well as have a material adverse effect on the Company’s compliance with the covenants contained in the Company’s Restated Credit Agreement, liquidity, stock price, consolidated financial position, results of operations and/or cash flows.

The Company’s U.S.

federal statutory tax rate of 21 % and its foreign operations have statutory tax rates of approximately 24 % in Austria, 28 % in New Zealand, and 30 % in Australia.

The difference between the Company’s estimated effective tax rates of 27.2 % for the three months ended June 30, 2023, and the U.S.

federal statutory tax rate of 21 % was primarily due to the impact of stock compensation, research and experimentation expenditures and credits, and discrete stock option windfall benefits in the second quarter of 2023.

The difference between the Company’s estimated effective tax rates of 41.4 % for the six months ended June 30, 2023, and the U.S.

The difference between the Company’s estimated effective tax rate benefit of 13.9 % for the three months ended September 30, 2023, and the U.S.

federal statutory tax rate of 21 % was primarily due to the impact of stock compensation, research and experimentation expenditures and credits, transaction costs, and discrete stock option shortfalls in the third quarter of 2023.

The difference between the Company’s estimated effective tax rate benefit of 23.9 % for the nine months ended September 30, 2023, and the U.S.

federal statutory tax rate of 21 % was primarily due to the impact of stock compensation, research and experimentation expenditures and credits, and discrete stock option shortfalls in the first three quarters of 2023.

As of December 31, 2022, the Company’s gross deferred tax asset was $ 32,972 .

The Company has recorded a valuation allowance of $ 3,323 , resulting in a net deferred tax asset of $ 29,649 , before deferred tax liabilities of $ 30,243 .

The Company has provided a valuation allowance against a portion of the deferred tax assets as of June 30, 2023 and December 31, 2022, because the ultimate realization of those assets did not meet the more-likely-than-not criteria.

The Company has provided a valuation allowance against a portion of the deferred tax assets as of September 30, 2023 and December 31, 2022, because the ultimate realization of those assets did not meet the more-likely-than-not criteria.

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

4 unchanged sentences

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

As of December 31, 2022, the Company had NOLs and research and experimentation credit for U.S.

As of September 30, 2023, the Company had NOLs and research and experimentation credit for U.S.

federal income tax purposes of $ 18,908 and $ 2,629 , respectively.

2 unchanged sentences

Federal income taxes until expiration.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

Net Operating Loss Carryforward Expiration Dates

December 31, 2022

September 30, 2023

Expiration Dates December 31,

1 unchanged sentence

2026 and beyond

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

SEGMENT INFORMATION

23 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

Nine Months Ended

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

Sales to external customers:

10 unchanged sentences

Total sales to external customers

Segment operating (loss) income:

Segment operating income:

Precision Sport

7 unchanged sentences

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

Total assets by segment, as of June 30, 2023 and December 31, 2022, were as follows:

June 30, 2023

December 31, 2022

Precision Sport

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

Total assets by segment, as of September 30, 2023 and December 31, 2022, were as follows:

September 30, 2023

December 31, 2022

Precision Sport

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

Three Months Ended

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

Nine Months Ended

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

Capital expenditures:

7 unchanged sentences

Total amortization

SUBSEQUENT EVENT

TRED Acquisition

On September 13, 2023, Clarus, through Oscar Aluminium Pty Ltd (“Oscar Aluminium”), an indirect wholly-owned Australian subsidiary of the Company, entered into a Share Purchase Agreement (the “TRED Purchase Agreement”) by and among the Oscar Aluminium, Clarus, and Venlo Holdings Pty Ltd (the “Seller”) to acquire Australian-based TRED Outdoors Pty Ltd.

On October 9, 2023, the transaction contemplated by the TRED Purchase Agreement was consummated.

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

Under the terms of the TRED Purchase Agreement, Oscar Aluminium acquired TRED for an aggregate purchase price of approximately $AUD 11,765 (approximately $ 7,500 ), subject to a post-closing adjustment.

The purchase price consideration was comprised of approximately $AUD 9,000 (approximately $ 5,740 ) cash, and approximately 179 shares of the Company’s common stock.

The TRED Purchase Agreement also provides for the payment of additional contingent consideration of up to approximately $AUD 1,000 (approximately $ 640 ) cash upon the satisfaction of certain net sales

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The shares of the Company’s common stock issued to the Seller are subject to a lock-up agreement restricting sales for 90 days from the closing of the TRED Acquisition.

Based upon the timing of the TRED Acquisition, the initial accounting is not yet complete as the Company gathers additional information related to the assets acquired and liabilities assumed.

The Company is in the process of obtaining third-party valuations of certain intangible assets.

The preliminary application of acquisition accounting to the assets acquired and liabilities assumed, as well as the results of operations of TRED, will first be reflected in the Company's consolidated financial results as of the year ended December 31, 2023.

The operating results of TRED are expected to be included within the Adventure segment.

Acquisition-related costs for the TRED Acquisition, which were included in transaction costs during the three and nine months ended September 30, 2023, were $ 360 .

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

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-Q

Item 1. Financial Statements