What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-07 compared with 2023-08-07 · 126 added, 114 removed, 244 unchanged (50% of the section changed)

11 unchanged sentences

changes in governmental regulation, legislation or public opinion relating to the manufacture and sale of bullets and ammunition, and the possession and use of firearms and ammunition by our customers;

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

the Company’s exposure to product liability or product warranty claims and other loss contingencies, including, without limitation, recalls and liability claims relating to our avalanche beacon transceivers;

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

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our ability to properly maintain, protect, repair or upgrade our information technology systems or information security systems, or problems with our transitioning to upgraded or replacement systems;

the impact of adverse publicity about the Company and/or its brands, including without limitation, through social media or in connection with brand damaging events and/or public perception;

the impact of adverse publicity about the Company and/or its brands and products, including without limitation, through social media or in connection with brand damaging events and/or public perception;

the potential impact of the Consumer Products Safety Commission’s investigation related to the Company’s reporting obligations under the Consumer Product Safety Act in connection with the Company’s recall of certain models of its avalanche transceivers on our business, results of operations, and financial condition;

fluctuations in the price, availability and quality of raw materials and contracted products as well as foreign currency fluctuations;

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the Company’s ability to maintain a quarterly dividend;

and any material differences in the actual financial results of the Company’s past and future acquisitions, including the impact of acquisitions and any recognition of impairment or other charges relating to any such acquisitions on the Company’s future earnings per share.

More information on potential factors that could affect the Company’s financial results is included from time to time in the Company’s public reports filed with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

All forward-looking statements included in this Quarterly Report on Form 10-Q are based upon information available to the Company as of the date of this Quarterly Report on Form 10-Q, and speak only as of the date hereof.

We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

any material differences in the actual financial results of the Company’s past and future acquisitions, including the impact of acquisitions and any recognition of impairment or other charges relating to any such acquisitions on the Company’s future earnings per share;

the Company’s potential responses to the non-binding indication of interest received from Warren B.

Kanders, the Company’s Executive Chairman, to acquire the Company’s Precision Sport segment (the “Precision Sport Proposal”), the exploration of strategic alternatives by the Company in response to the Precision Sport Proposal, and the potential impact of the Precision Sport Proposal on our business, results of operations, and financial condition.

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

Headquartered in Salt Lake City, Utah, Clarus Corporation (which may be referred to as the “Company,” “Clarus,” “we,” “our” or “us”) 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.

29 unchanged sentences

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

On August 6, 2018, the Company announced that its Board of Directors approved the initiation of a quarterly cash dividend program of $0.025 per share of the Company’s common stock (the “Quarterly Cash Dividend”) or $0.10 per share on an annualized basis.

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.

CLARUS CORPORATION

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(in thousands, except per share amounts)

annualized basis.

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 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.

Impact of COVID-19

21 unchanged sentences

Results of Operations

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

The following presents a discussion of operations for the three months ended June 30, 2023, compared with the three months ended June 30, 2022.

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

The following presents a discussion of operations for the three months ended September 30, 2023, compared with the three months ended September 30, 2022.

Three Months Ended

June 30, 2023

June 30, 2022

September 30, 2023

September 30, 2022

Domestic sales

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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

Total sales decreased $31,205, or 27.2%, to $83,728 during the three months ended June 30, 2023, compared to total sales of $114,933 during the three months ended June 30, 2022.

The decrease in sales was primarily attributable to a decrease in sales at the Outdoor, Precision Sport, and Adventure segments of $12,537, $9,396, and $9,272, respectively.

Sales in the Adventure and Outdoor segments were reduced by $955 and $541, respectively, due to foreign exchange impact from the strengthening of the U.S.

dollar against foreign currencies during the three months ended June 30, 2023, compared to the prior period.

Sales in the Outdoor segment decreased due to continued weakness at key North American retail accounts, compounded by weakness in the European and international markets.

This weakness was partially offset by growth in the direct-to-consumer channel.

Sales in the Precision Sport segment decreased due to challenging market conditions, including lower consumer demand for ammunition and bullets.

Sales in the Adventure segment decreased due

Total sales decreased $15,640, or 13.5%, to $100,075 during the three months ended September 30, 2023, compared to total sales of $115,715 during the three months ended September 30, 2022.

The decrease in sales was primarily attributable to a decrease in sales at the Precision Sport and Outdoor segments of $15,434 and $1,800, respectively, partially offset by an increase in sales at the Adventure segment of $1,594.

Sales in the Adventure segment were reduced by $709 due to foreign exchange impact from the strengthening of the U.S.

dollar against the Australian dollar during the three months ended September 30, 2023, compared to the prior period.

Sales in the Outdoor segment were increased by $302 due to foreign exchange impact from the weakening of the U.S.

dollar primarily against the euro during the three months ended September 30, 2023, compared to the prior period.

Sales in the Outdoor segment decreased due to continued weakness at key North American retail accounts, compounded by weakness

CLARUS CORPORATION

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(in thousands, except per share amounts)

to lower consumer demand given the challenging market conditions and the difficult macro-environment in both Australia and North America.

Domestic sales decreased $17,417, or 27.2%, to $46,656 during the three months ended June 30, 2023, compared to domestic sales of $64,073 during the three months ended June 30, 2022.

The decrease in sales was primarily attributable to a decrease in sales at the Precision Sport, Adventure, and Outdoor segments of $6,462, $5,531, and $5,424, respectively.

International sales decreased $13,788, or 27.1%, to $37,072 during the three months ended June 30, 2023, compared to international sales of $50,860 during the three months ended June 30, 2022.

The decrease in sales was primarily attributable to a decrease in sales at the Outdoor, Precision Sport, and Adventure segments of $6,572, $2,934, and $2,786, respectively.

in the European and international markets.

This weakness was partially offset by growth in the direct-to-consumer channel.

Sales in the Precision Sport segment decreased due to challenging market conditions, primarily as a result of significantly lower ammunition sales, as well as decreases in OEM and component product sales.

Sales in the Adventure segment increased primarily due to higher OEM sales in the Australian market.

Domestic sales decreased $11,388, or 20.5%, to $44,152 during the three months ended September 30, 2023, compared to domestic sales of $55,540 during the three months ended September 30, 2022.

The decrease in sales was primarily attributable to a decrease in sales at the Precision Sport, Outdoor, and Adventure segments of $10,883, $489, and $16, respectively.

International sales decreased $4,252, or 7.1%, to $55,923 during the three months ended September 30, 2023, compared to international sales of $60,175 during the three months ended September 30, 2022.

The decrease in sales was primarily attributable to a decrease in sales at the Precision Sport and Outdoor segments of $4,551 and $1,311, respectively, partially offset by an increase in sales at the Adventure segment of $1,610.

Cost of Goods Sold

Cost of goods sold decreased $18,277, or 25.7%, to $52,974 during the three months ended June 30, 2023, compared to cost of goods sold of $71,251 during the three months ended June 30, 2022.

Cost of goods sold decreased $11,764, or 15.4%, to $64,527 during the three months ended September 30, 2023, compared to cost of goods sold of $76,291 during the three months ended September 30, 2022.

The decrease in cost of goods sold was primarily attributable to a decrease in the number of units sold.

Gross profit decreased $12,928, or 29.6%, to $30,754 during the three months ended June 30, 2023, compared to gross profit of $43,682 during the three months ended June 30, 2022.

Gross margin was 36.7% during the three months ended June 30, 2023, compared to a gross margin of 38.0% during the three months ended June 30, 2022.

Gross margin during the three months ended June 30, 2023, decreased compared to the prior year due to changes in channel and product mix of 1.6% and unfavorable foreign currency exchange movement of 1.1%.

Channel and product mix were primarily impacted by discounting of ammunition in the Precision Sport segment given the more promotional environment which negatively impacted gross margin.

These decreases were partially offset by easing freight costs in the Outdoor and Adventure segments which positively impacted gross margin by 1.4%.

Gross profit decreased $3,876, or 9.8%, to $35,548 during the three months ended September 30, 2023, compared to gross profit of $39,424 during the three months ended September 30, 2022.

Gross margin was 35.5% during the three months ended September 30, 2023, compared to a gross margin of 34.1% during the three months ended September 30, 2022.

Gross margin during the three months ended September 30, 2023, increased compared to the prior year due to changes in channel and product mix of 0.8% and favorable variances, primarily related to easing freight costs, of 0.9%.

These increases were partially offset by unfavorable foreign currency exchange movement of 0.3%.

Selling, General and Administrative

Selling, general, and administrative expenses decreased $5,244, or 14.8%, to $30,200 during the three months ended June 30, 2023, compared to selling, general and administrative expenses of $35,444 during the three months ended June 30, 2022.

The decrease is primarily due to a decrease in stock compensation of $2,020 during the three months ended June 30, 2023, compared to the prior year.

The decrease was also driven by expense reduction initiatives and lower sales commissions due to decreased revenue.

Selling, general, and administrative expenses decreased $550, or 1.7%, to $31,790 during the three months ended September 30, 2023, compared to selling, general and administrative expenses of $32,340 during the three months ended September 30, 2022.

The decrease is primarily due to a decrease in stock compensation of $1,052, lower intangible amortization expense, and lower sales commissions during the three months ended September 30, 2023, compared to the prior year.

The decrease was partially offset by investment in e-com initiatives in the Outdoor segment and higher legal costs.

Restructuring Charges

Restructuring charges increased to $736 during the three months ended June 30, 2023, compared to restructuring charges of $0 during the three months ended June 30, 2022, which consisted of severance costs, exit costs, and inventory write-offs related to the Company’s restructuring initiatives.

Restructuring charges increased to $1,099 during the three months ended September 30, 2023, compared to restructuring charges of $0 during the three months ended September 30, 2022, which consisted of severance costs, exit costs, and other costs related to the Company’s restructuring initiatives.

Transaction Costs

Transaction expense decreased to $59 during the three months ended June 30, 2023, compared to transaction costs of $821 during the three months ended June 30, 2022, which consisted of expenses related to the Company’s various acquisition efforts.

Transaction costs decreased to $842 during the three months ended September 30, 2023, compared to transaction costs of $858 during the three months ended September 30, 2022.

The 2023 transaction costs related to the TRED Outdoor acquisition and costs related to the ongoing process undertaken by the Special Committee of the Board of Directors in connection with its evaluation of the potential sale of the Precision Sport segment.

CLARUS CORPORATION

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(in thousands, except per share amounts)

Contingent Consideration Benefit

Contingent consideration benefit decreased to $0 during the three months ended June 30, 2023, compared to a contingent consideration benefit of $374 during the three months ended June 30, 2022, which consisted of changes in the estimated fair value of contingent consideration liabilities associated with our acquisition of MAXTRAX in 2021.

Contingent Consideration Expense

Contingent consideration expense decreased to $0 during the three months ended September 30, 2023, compared to a contingent consideration expense of $104 during the three months ended September 30, 2022, which consisted of changes in the estimated fair value of contingent consideration liabilities associated with our acquisition of MAXTRAX in 2021.

Interest Expense, net

Interest expense, net increased to $2,857 during the three months ended June 30, 2023, compared to interest expense, net of $1,728 during the three months ended June 30, 2022.

The increase in interest expense recognized during the three months ended June 30, 2023 was primarily associated with the increase in interest rates during the period compared to the prior year.

Other, net, increased by $1,567, or 116.7%, to income of $224 during the three months ended June 30, 2023, compared to other, net loss of $(1,343) during the three months ended June 30, 2022.

The change in other, net, was primarily attributable to a decrease in remeasurement losses recognized on the Company’s foreign denominated accounts receivable and accounts payable and changes in mark-to-market adjustments on non-hedged foreign currency contracts during the three months ended June 30, 2023.

Income tax expense changed by $1,739, or 181.9%, to a benefit of $783 during the three months ended June 30, 2023, compared to income tax expense of $956 during the same period in 2022.

Our effective income tax rate was a benefit of 27.2% for the three months ended June 30, 2023, and differed compared to the statutory tax rates primarily due to the impact of stock compensation, research and experimentation expenditures and credits, and discrete stock option windfall benefits.

For the three months ended June 30, 2022, our effective income tax rate was 20.3% and differed compared to the statutory tax rates due to the impact of foreign tax credits.

Interest expense, net increased to $2,842 during the three months ended September 30, 2023, compared to interest expense, net of $2,216 during the three months ended September 30, 2022.

The increase in interest expense recognized during the three months ended September 30, 2023 was primarily associated with the increase in interest rates during the period compared to the prior year.

Other, net, changed by $795, or 64.2%, to ($443) during the three months ended September 30, 2023, compared to other, net of ($1,238) during the three months ended September 30, 2022.

Income tax benefit changed by $121, or 145.8%, to $204 during the three months ended September 30, 2023, compared to a benefit of $83 during the same period in 2022.

Our effective income tax rate was a benefit of 13.9% for the three months ended September 30, 2023, and differed compared to the statutory tax rates primarily due to the impact of stock compensation, research and experimentation expenditures and credits, transaction costs, and discrete stock option shortfalls.

For the three months ended September 30, 2022, our effective income tax rate was a benefit of 3.1% and differed compared to the statutory tax rates due to the impact of discrete stock option windfall benefits.

CLARUS CORPORATION

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(in thousands, except per share amounts)

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

The following presents a discussion of operations for the six months ended June 30, 2023, compared with the six months ended June 30, 2022.

Six Months Ended

June 30, 2023

June 30, 2022

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

The following presents a discussion of operations for the nine months ended September 30, 2023, compared with the nine months ended September 30, 2022.

Nine Months Ended

September 30, 2023

September 30, 2022

Domestic sales

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Operating income

Other income (expense)

Other expense

Interest expense, net

3 unchanged sentences

Net (loss) income

Total sales decreased $47,097, or 20.6%, to $181,112 during the six months ended June 30, 2023, compared to total sales of $228,209 during the six months ended June 30, 2022.

The decrease in sales was primarily attributable to a decrease in sales at the Adventure, Precision Sport, and Outdoor segments of $20,405, $15,408, and $11,284, respectively.

Sales in the Outdoor and Adventure segments were reduced by $1,932 and $1,923, respectively, due to foreign exchange impact from the strengthening of the U.S.

dollar against foreign currencies during the six months ended June 30, 2023, compared to the prior period.

Total sales decreased $62,737, or 18.2%, to $281,187 during the nine months ended September 30, 2023, compared to total sales of $343,924 during the nine months ended September 30, 2022.

The decrease in sales was primarily attributable to a decrease in sales at the Precision Sport, Adventure, and Outdoor segments of $30,842, $18,811, and $13,084, respectively.

Sales in the Adventure and Outdoor segments were reduced by $2,593 and $1,630, respectively, due to foreign exchange impact from the strengthening of the U.S.

dollar against foreign currencies during the nine months ended September 30, 2023, compared to the prior period.

Sales in the Outdoor segment decreased due to continued weakness at key North American retail accounts, compounded by weakness in the European market.

This weakness was partially offset by growth in the direct-to-consumer channel.

Sales in the Precision Sport segment decreased due to challenging market conditions, including lower consumer demand for ammunition and bullets.

Sales in the Adventure segment decreased due to lower consumer demand given the challenging market conditions and the difficult macro-environment in both Australia and North America.

CLARUS CORPORATION

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(in thousands, except per share amounts)

Domestic sales decreased $34,808, or 27.5%, to $91,572 during the six months ended June 30, 2023, compared to domestic sales of $126,380 during the six months ended June 30, 2022.

Sales in the Adventure segment decreased due to lower demand from our wholesale partners in both Australia and the United States.

Domestic sales decreased $46,196, or 25.4%, to $135,724 during the nine months ended September 30, 2023, compared to domestic sales of $181,920 during the nine months ended September 30, 2022.

The decrease in sales was primarily attributable to a decrease in sales at the Precision Sport, Adventure, and Outdoor segments of $24,069, $12,150, and $9,977, respectively.

International sales decreased $12,289, or 12.1%, to $89,540 during the six months ended June 30, 2023, compared to international sales of $101,829 during the six months ended June 30, 2022.

The decrease in sales was primarily attributable to a decrease in sales at the Adventure and Precision Sport segments of $6,348 and $2,222, respectively, partially offset by an increase in sales at the Outdoor segment of $136.

International sales decreased $16,541, or 10.2%, to $145,463 during the nine months ended September 30, 2023, compared to international sales of $162,004 during the nine months ended September 30, 2022.

The decrease in sales was primarily attributable to a decrease in sales at the Precision Sport, Adventure, and Outdoor segments of $6,773, $6,661, and $3,107, respectively.

Cost of Goods Sold

Cost of goods sold decreased $25,938, or 18.5%, to $114,337 during the six months ended June 30, 2023, compared to cost of goods sold of $140,275 during the six months ended June 30, 2022.

Cost of goods sold decreased $37,702, or 17.4%, to $178,864 during the nine months ended September 30, 2023, compared to cost of goods sold of $216,566 during the nine months ended September 30, 2022.

The decrease in cost of goods sold was primarily attributable to a decrease in the number of units sold.

Gross profit decreased $21,159, or 24.1%, to $66,775 during the six months ended June 30, 2023, compared to gross profit of $87,934 during the six months ended June 30, 2022.

Gross margin was 36.9% during the six months ended June 30, 2023, compared to a gross margin of 38.5% during the six months ended June 30, 2022.

Gross margin during the six months ended June 30, 2023, decreased compared to the prior year due to changes in channel and product mix of 1.9% and unfavorable foreign currency exchange movement of 1.3%.

Channel and product mix were primarily impacted by discounting of ammunition in the Precision Sport segment given the more promotional environment which negatively impacted gross margin.

These decreases were partially offset by easing freight costs in the Outdoor and Adventure segments which positively impacted gross margin by 1.6%.

Gross profit decreased $25,035, or 19.7%, to $102,323 during the nine months ended September 30, 2023, compared to gross profit of $127,358 during the nine months ended September 30, 2022.

Gross margin was 36.4% during the nine months ended September 30, 2023, compared to a gross margin of 37.0% during the nine months ended September 30, 2022.

Gross margin during the nine months ended September 30, 2023, decreased compared to the prior year due to changes in channel and product mix of 1.1% and unfavorable foreign currency exchange movement of 0.9%.

Channel and product mix were primarily impacted by discounting of ammunition in the Precision Sport segment, as well as promotional pricing in the Outdoor segment, which negatively impacted gross margin.

These decreases were partially offset by favorable variances, primarily related to easing freight costs, of 1.4%.

Selling, General and Administrative

Selling, general, and administrative expenses decreased $6,600, or 9.5%, to $63,019 during the six months ended June 30, 2023, compared to selling, general and administrative expenses of $69,619 during the six months ended June 30, 2022.

The decrease is primarily due to a decrease in stock compensation of $4,054 during the six months ended June 30, 2023, compared to the prior year.

The decrease was also driven by expense reduction initiatives and lower sales commissions due to decreased revenue.

Selling, general, and administrative expenses decreased $7,150, or 7.0%, to $94,809 during the nine months ended September 30, 2023, compared to selling, general and administrative expenses of $101,959 during the nine months ended September 30, 2022.

The decrease is primarily due to a decrease in stock compensation of $5,106 during the nine months ended September 30, 2023, compared to the prior year.

The decrease was also driven by expense reduction initiatives to offset challenging market conditions, lower intangible amortization expense, and lower sales commissions due to decreased revenue.

The decrease was partially offset by higher investment in e-com initiatives in the Outdoor segment and higher legal costs.

Restructuring Charges

Restructuring charges increased to $736 during the six months ended June 30, 2023, compared to restructuring charges of $0 during the six months ended June 30, 2022, which consisted of severance costs, exit costs, and inventory write-offs related to the Company’s restructuring initiatives.

Restructuring charges increased to $1,835 during the nine months ended September 30, 2023, compared to restructuring charges of $0 during the nine months ended September 30, 2022, which consisted of severance costs, exit costs, and other costs related to the Company’s restructuring initiatives.

Transaction Costs

Transaction expense decreased to $133 during the six months ended June 30, 2023, compared to transaction costs of $2,022 during the six months ended June 30, 2022, which consisted of expenses related to the Company’s various acquisition efforts.

Contingent Consideration (Benefit) Expense

Contingent consideration changed to a benefit of $1,565 during the six months ended June 30, 2023, compared to $389 contingent consideration expense during the six months ended June 30, 2022, which consisted of changes in the estimated fair value of contingent consideration liabilities associated with our acquisition of MAXTRAX in 2021.

Transaction costs decreased to $975 during the nine months ended September 30, 2023, compared to transaction costs of $2,880 during the nine months ended September 30, 2022.

The 2023 transaction costs related to the TRED Outdoor

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

acquisition and costs related to the ongoing process undertaken by the Special Committee of the Board of Directors in connection with its evaluation of the potential sale of the Precision Sport segment.

Contingent Consideration (Benefit) Expense

Contingent consideration changed to a benefit of $1,565 during the nine months ended September 30, 2023, compared to $493 contingent consideration expense during the nine months ended September 30, 2022, which consisted of changes in the estimated fair value of contingent consideration liabilities associated with our acquisition of MAXTRAX in 2021.

Interest Expense, net

Interest expense, net increased to $5,603 during the six months ended June 30, 2023, compared to interest expense, net of $2,844 during the six months ended June 30, 2022.

The increase in interest expense recognized during the six months ended June 30, 2023 was primarily associated with the increase in interest rates during the period compared to the prior year.

Other, net, increased by $1,719, or 121.9%, to income of $309 during the six months ended June 30, 2023, compared to other, net loss of $(1,410) during the six months ended June 30, 2022.

Income tax expense changed by $2,926, or 113.5%, to a benefit of $349 during the six months ended June 30, 2023, compared to income tax expense of $2,577 during the same period in 2022.

Our effective income tax rate was a benefit of 41.4% for the six months ended June 30, 2023, and differed compared to the statutory tax rates primarily due to the impact of stock compensation, research and experimentation expenditures and credits, and discrete stock option windfall benefits.

For the six months ended June 30, 2022, our effective income tax rate was 22.1% and differed compared to the statutory tax rates due to the impact of foreign earnings taxed at applicable statutory rates and permanent book to tax differences related to incentive stock options and officer compensation limitations.

Interest expense, net increased to $8,445 during the nine months ended September 30, 2023, compared to interest expense, net of $5,060 during the nine months ended September 30, 2022.

The increase in interest expense recognized during the nine months ended September 30, 2023 was primarily associated with the increase in interest rates during the period compared to the prior year.

Other, net, changed by $2,514, or 94.9%, to ($134) during the nine months ended September 30, 2023, compared to other, net of ($2,648) during the nine months ended September 30, 2022.

Income tax (benefit) expense changed by $3,047, or 122.2%, to a benefit of $553 during the nine months ended September 30, 2023, compared to income tax expense of $2,494 during the same period in 2022.

Our effective income tax rate was a benefit of 23.9% for the nine months ended September 30, 2023, and differed compared to the statutory tax rates primarily due to the impact of stock compensation, research and experimentation expenditures and credits, and discrete stock option shortfalls.

For the nine months ended September 30, 2022, our effective income tax rate was 17.4% and differed compared to the statutory tax rates due to the impact of discrete stock option windfall benefits in the third quarter, partially offset by the impact of foreign earnings taxed at applicable statutory rates and permanent book to tax differences related to incentive stock options and officer compensation limitations.

Liquidity and Capital Resources

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

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

We plan to fund these activities through a combination of our future operating cash flows and borrowings on our revolving credit facility which had approximately $32,000 available to borrow at June 30, 2023, while currently maintaining compliance with the consolidated total leverage ratio per the Restated Credit Agreement of 3.75 to 1.

We plan to fund these activities through a combination of our future operating cash flows and borrowings on our revolving credit facility which had approximately $17,000 available to borrow at September 30, 2023, while currently maintaining compliance with the consolidated total leverage ratio per the Restated Credit Agreement of 3.75 to 1.

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

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

At June 30, 2023, we had total cash of $11,315, compared to a cash balance of $12,061 at December 31, 2022.

At June 30, 2023, the Company had $5,097 of the $11,315 in cash held by foreign entities, of which $3,583 is considered permanently reinvested.

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

The following presents a discussion of cash flows for the condensed consolidated six months ended June 30, 2023 compared with the condensed consolidated six months ended June 30, 2022.

Six Months Ended

June 30, 2023

June 30, 2022

At September 30, 2023, we had total cash of $8,024, compared to a cash balance of $12,061 at December 31, 2022.

At September 30, 2023, the Company had $5,062 of the $8,024 in cash held by foreign entities, of which $3,325 is considered permanently reinvested.

The following presents a discussion of cash flows for the condensed consolidated nine months ended September 30, 2023 compared with the condensed consolidated nine months ended September 30, 2022.

Nine Months Ended

September 30, 2023

September 30, 2022

Net cash provided by (used in) operating activities

6 unchanged sentences

Net Cash From Operating Activities

Net cash provided by operating activities was $17,286 during the six months ended June 30, 2023, compared to net cash used in operating activities of $6,276 during the six months ended June 30, 2022.

The change in net cash provided by (used in) operating activities during 2023 is primarily due to a decrease in cash outflows related to working capital of $42,627, partially offset by an increase in contingent consideration benefit, and a decrease in stock compensation during the six months ended June 30, 2023, compared to the same period in 2022.

Free cash flow, defined as net cash provided by (used in) operating activities less capital expenditures, of $14,034 was generated during the six months ended June 30, 2023 compared to ($10,348) used during the same period in 2022.

Net cash provided by operating activities was $17,428 during the nine months ended September 30, 2023, compared to net cash used in operating activities of $17,746 during the nine months ended September 30, 2022.

The change in net cash provided by (used in) operating activities during 2023 is primarily due to a decrease in cash outflows related to working capital of $60,318, partially offset by a decrease in stock compensation and amortization of other intangible assets, and an increase in contingent consideration benefit during the nine months ended September 30, 2023, compared to the same period in 2022.

Free cash flow, defined as net cash provided by (used in) operating activities less capital expenditures, of $12,933 was generated during the nine months ended September 30, 2023 compared to ($23,962) used during the same period in 2022.

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

A reconciliation of free cash flows to the nearest comparable GAAP financial measure is set forth below:

Six Months Ended

June 30, 2023

June 30, 2022

Nine Months Ended

September 30, 2023

September 30, 2022

Net cash provided by (used in) operating activities

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Net Cash From Investing Activities

Net cash used in investing activities was $3,083 during the six months ended June 30, 2023, compared to $3,774 during the six months ended June 30, 2022.

The decrease in cash used during the six months ended June 30, 2023 is primarily due to a decrease in purchases of property and equipment, compared to the same period in 2022.

Net cash used in investing activities was $4,549 during the nine months ended September 30, 2023, compared to $5,778 during the nine months ended September 30, 2022.

The decrease in cash used during the nine months ended September 30, 2023 is primarily due to a decrease in purchases of property and equipment, compared to the same period in 2022.

Net Cash From Financing Activities

Net cash used in financing activities was $13,962 during the six months ended June 30, 2023, compared to net cash provided by financing activities of $4,930 during the six months ended June 30, 2022.

The change in net cash (used in) provided by financing activities during the six months ended June 30, 2023, compared to the same period in 2022 was primarily due to a decrease in net proceeds from the revolving line of credit and term loan.

Net cash used in financing activities was $16,191 during the nine months ended September 30, 2023, compared to net cash provided by financing activities of $15,327 during the nine months ended September 30, 2022.

The change in net cash

CLARUS CORPORATION

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(in thousands, except per share amounts)

(used in) provided by financing activities during the nine months ended September 30, 2023, compared to the same period in 2022 was primarily due to a decrease in net proceeds from the revolving line of credit and term loan, partially offset by a decrease in purchases of treasury stock.

Net Operating Loss

As of December 31, 2022, the Company had net operating loss carryforwards (“NOLs”) and research and experimentation credit for U.S.

As of September 30, 2023, the Company had net operating loss carryforwards (“NOLs”) and research and experimentation credit for U.S.

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

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Credit Agreement

As of June 30, 2023, the Company had drawn $11,884 on the revolving loan and $115,625 was outstanding under the term loan.

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 (as defined below) of 3.75 to 1.

As of June 30, 2023, the interest rates on the revolving loan and term loan commitments were approximately 7.5%.

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

As of September 30, 2023, the Company had drawn $10,380 on the revolving loan and $112,500 was outstanding under the term loan.

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 (as defined below) of 3.75 to 1.

As of September 30, 2023, the interest rates on the revolving loan and term loan commitments were approximately 7.7%.

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

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

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

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

The Restated Credit Agreement matures on April 18, 2027 (the “Maturity Date”), at which time the revolving

CLARUS CORPORATION

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(in thousands, except per share amounts)

commitments thereunder will terminate and all outstanding Revolving Loans and Term Loans, together with all accrued and unpaid interest thereon, must be repaid.

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

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

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

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

(vi) sell assets;

(vii) pay dividends or make distributions or other restricted payments if certain conditions in the Restated

(iv) substantially

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

Credit Agreement are not fulfilled;

change the business conducted by the Company and its subsidiaries;

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

(vi) sell assets;

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

(viii) prepay other indebtedness;

23 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis