What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-03-07 compared with 2023-02-27 · 405 added, 284 removed, 845 unchanged (45% of the section changed)

11 unchanged sentences

Opinion on the Financial Statements

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").

We have audited the accompanying consolidated balance sheets of Clarus Corporation and subsidiaries (the "Company") as of December 31, 2023 and 2022, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, 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, 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.

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, 2023, 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, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

6 unchanged sentences

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

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.

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

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate 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 matters below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

Goodwill — Adventure reporting unit goodwill — Refer to Notes 1 and 6 to the financial statements

Critical Audit Matter Description

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 Company's evaluation of goodwill for impairment involves the comparison of the estimated fair value of a reporting unit to its carrying value.

The Company estimates the reporting unit’s fair value using a combination of the income approach, which uses projected discounted cash flows, and the market approach, which uses earnings before interest, taxes, depreciation, and amortization (EBITDA) market multiples 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.

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 EBITDA as well as the market multiples of comparable publicly traded companies.

The goodwill balance allocated to the Adventure reporting unit was $39,320,000 as of December 31, 2023.

The fair value of the reporting unit exceeded its carrying value and therefore, no impairment was recognized for the year ended December 31, 2023.

We identified the valuation of the Adventure reporting unit as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value.

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 and discount rate.

How the Critical Audit Matter Was Addressed in the Audit

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.

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

● We tested the effectiveness of internal controls over the goodwill impairment analysis, including those over revenue and cash flow projections, and the selection of EBITDA multiples and discount rate.

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

2 unchanged sentences

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.

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

Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculations.

Developing a range of independent estimates and comparing those estimates 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.

Discontinued Operations — Refer to Notes 1 and 3 to the financial statements

Critical Audit Matter Description

On February 29, 2024, the Company completed the sale of the Precision Sport segment pursuant to a Purchase and Sale Agreement dated December 29, 2023.

Management determined that the planned sale met the criteria for the Precision Sport segment to be classified as held for sale and the results of its operations are presented as discontinued operations for all periods presented in accordance with Accounting Standard Codification 205-20, Discontinued Operations (“ASC 205-20”).

We identified the presentation and disclosure of the discontinued operations as a critical audit matter given the discontinued operations are material to the financial statements and the significance of judgments made by management in its application of ASC 205-20, and the increased extent of auditor effort and judgment required to assess management's identification, segregation, and presentation and disclosure related to the planned sale of the Precision Sport segment.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures performed over the Company's discontinued operations presentation and disclosure related to the planned sale of the Company’s Precision Sport segment included the following, among others:

● We tested the effectiveness of internal controls over the Company's discontinued operations assessment process, including controls related to management's identification, segregation, and presentation and disclosure in the Company’s financial statements;

● We obtained and evaluated the Company's memorandum that documented management's presentation and disclosure conclusions with respect of relevant accounting standards;

● We tested the classification of amounts included in discontinued operations by agreeing such amounts to the Company's historical accounting records.

/s/ Deloitte & Touche LLP

Salt Lake City, Utah

February 27, 2023

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

March 7, 2024

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

CLARUS CORPORATION

5 unchanged sentences

Income tax receivable

Assets held for sale

Total current assets

4 unchanged sentences

Other long-term assets

Liabilities and Stockholders'

Non-current assets held for sale

Liabilities and Stockholders’ Equity

Current liabilities

3 unchanged sentences

Current portion of long-term debt

Liabilities held for sale

Total current liabilities

3 unchanged sentences

Total liabilities

Stockholders'

Stockholders’ Equity

Preferred stock, $ 0.0001 par value per share;

7 unchanged sentences

Accumulated other comprehensive loss

Total stockholders'

Total liabilities and stockholders'

Total stockholders’ equity

Total liabilities and stockholders’ equity

See accompanying notes to consolidated financial statements.

8 unchanged sentences

Selling, general and administrative

Restructuring charges

Transaction costs

Contingent consideration expense (benefit)

Contingent consideration (benefit) expense

Impairment of goodwill and indefinite-lived intangible assets

Total operating expenses

Operating (loss) income

Operating loss

Other income (expense)

Interest expense, net

Total other expense, net

(Loss) income before income tax

Interest income (expense), net

Total other income (expense), net

Loss before income tax

Income tax benefit

(Loss) income from continuing operations

Discontinued operations, net of tax

Net (loss) income

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment

Unrealized (loss) gain on hedging activities

Other comprehensive (loss) income

Other comprehensive income (loss)

Comprehensive (loss) income

(Loss) income from continuing operations per share:

Net (loss) income per share:

12 unchanged sentences

Amortization of debt issuance costs

(Gain) loss on disposition of property and equipment

Loss (gain) on disposition of property and equipment

Noncash lease expense

Contingent consideration expense (benefit)

Contingent consideration (benefit) expense

Stock-based compensation

9 unchanged sentences

Proceeds from disposition of property and equipment

Purchase of intangible assets

Purchases of property and equipment

18 unchanged sentences

Supplemental Disclosure of Cash Flow Information:

Cash paid for income taxes

Cash (received) paid for income taxes

Cash paid for interest

4 unchanged sentences

Property and equipment purchased with accounts payable

Intangible assets purchased with accounts payable

Lease liabilities arising from obtaining right-of-use assets

Gain on transfer of entity under common control

Stock dividends

See accompanying notes to consolidated financial statements.

CLARUS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS'

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except per share amounts)

1 unchanged sentence

Comprehensive

Stockholders'

Income (Loss)

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

1 unchanged sentence

Issuance of common stock, net of issuance costs

Shares issued for business acquisitions

Balance, December 31, 2021

2 unchanged sentences

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 for business acquisitions

Balance, December 31, 2022

Other comprehensive loss

Other comprehensive income

Cash dividends ($ 0.10 per share)

11 unchanged sentences

Nature of Business

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.

We define a “super fan” brand as a brand that creates the world’s pre-eminent, performance-defining product that the best-in-class user cannot live without.

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®, Rhino-Rack® and MAXTRAX® brand names through outdoor specialty and online retailers, our own websites, distributors and original equipment manufacturers.

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

Use of Estimates

1 unchanged sentence

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.

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.

1 unchanged sentence

Significant Accounting Policies

Principles of Consolidation

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of Clarus Corporation and its wholly owned subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

Unless otherwise specified, disclosures in these consolidated financial statements reflect continuing operations only.

Certain prior period financial information, related to discontinued operations, have been reclassified and separately presented in the consolidated financial statements and accompanying notes to conform to the current period presentation.

See Note 3 to our consolidated financial statements for further information.

Foreign Currency Transactions and Translation

10 unchanged sentences

The trade receivables do not bear interest.

The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information.

The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

determined by the review of their current credit information.

The Company evaluates the collectability of its accounts receivable and determines the appropriate allowance for credit losses based on a combination of factors.

5 unchanged sentences

There were no significant write-offs during the years ended December 31, 2023, 2022, and 2021.

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.

15 unchanged sentences

Property and equipment located outside of the United States are not considered material.

Lease assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists.

Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease.

Right-of-use (“ROU”) assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists.

ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease.

These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our incremental borrowing rate.

2 unchanged sentences

Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the expense for these short-term leases and for leases is recognized on a straight-line basis over the lease term.

Non-lease components are excluded from the right-of-use (“ROU”) asset and lease liability present value computations.

Non-lease components are excluded from the ROU asset and lease liability present value computations.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

2 unchanged sentences

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, 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, 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

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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 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, 2023 and 2021.

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 during the year ended December 31, 2022.

Intangible Assets

2 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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.

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

Indefinite-lived intangible assets are not amortized;

1 unchanged sentence

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.

If, through this qualitative assessment, the conclusion is made that it is more likely than not that an indefinite-lived intangible asset's fair value is less than its carrying amount, or the Company elects to bypass the qualitative assessment, a quantitative impairment analysis is performed by comparing the indefinite-lived intangible asset's book value to its estimated fair value.

If, through this qualitative assessment, the conclusion is made that it is more likely than not that an indefinite-lived intangible asset’s fair value is less than its carrying amount, or the Company elects to bypass the qualitative assessment, a quantitative impairment analysis is performed by comparing the indefinite-lived intangible asset’s book value to its estimated fair value.

The fair value for indefinite-lived intangible assets is determined through an income approach using the relief-from-royalty method.

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 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, 2023 and 2021.

Derivative Financial Instruments

10 unchanged sentences

The Company does not speculate using derivative instruments.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Stock-Based Compensation

6 unchanged sentences

Upon exercise of stock options or vesting of restricted stock awards, the Company issues shares from new shares authorized and reserved for issuance.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Revenue Recognition

13 unchanged sentences

The Company accrues for such estimated returns and claims with an estimated accrual and associated reduction of revenue.

Additionally, the Company records inventory that it expects to be returned as an other current asset, with a corresponding reduction of cost of goods sold.

Additionally, the Company records inventory that it expects to be returned as part of inventories, with a corresponding reduction of cost of goods sold.

Sales commissions are expensed as incurred.

5 unchanged sentences

Certain warehousing or handling costs which are not associated with the manufacturing of goods for sale are excluded from cost of goods sold.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Selling, General and Administrative Expense

1 unchanged sentence

Advertising costs are expensed in the period incurred.

Total advertising expense, including cooperative advertising costs, were $ 8,280 , $ 5,945 , and $ 3,833 for the years ended December 31, 2022, 2021, and 2020, respectively.

Total advertising expense for continuing operations, including cooperative advertising costs, were $ 8,385 , $ 7,789 , and $ 5,824 for the years ended December 31, 2023, 2022, and 2021, respectively.

Through cooperative advertising programs, the Company reimburses its wholesale customers for some of their costs of advertising the Company’s products based on various criteria, including the value of purchases from the Company and various advertising specifications.

3 unchanged sentences

Warranty repairs and replacements are recorded in cost of goods sold and a warranty liability is established at the time of sale to cover estimated costs based on the Company’s history of warranty repairs and replacements.

For the years ended December 31, 2022, 2021, and 2020, the Company experienced warranty claims on its products of $ 1,221 , $ 1,863 , and $ 1,201 , respectively.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

For the years ended December 31, 2023, 2022, and 2021, the Company experienced warranty claims on its products related to continuing operations of $ 1,007 , $ 1,221 , and $ 1,863 , respectively.

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 (loss) 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.

Total research and development costs for continuing operations were $ 12,740 , $ 13,029 , and $ 10,406 for the years ended December 31, 2023, 2022, and 2021, respectively.

Transaction Costs

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.

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

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

11 unchanged sentences

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

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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.

5 unchanged sentences

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 year ended December 31, 2023, no single customer contributed more than 10% of the Company’s sales from continuing operations.

During the years ended December 31, 2022 and 2021, Recreational Equipment, Inc.

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

(“REI”) accounted for approximately 10 % and 14 %, respectively, of the Company’s sales from continuing operations.

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.

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

As of December 31, 2023, INEOS Automotive accounted for approximately 13 % of the Company’s accounts receivable.

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

Fair Value Measurements

1 unchanged sentence

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

The Company estimates that, due to the variable interest rates reflecting current market rates, the fair value of its long-term debt obligations under its revolving credit facility and term loan approximate the carrying value at December 31, 2022 and 2021.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The Company estimates that, due to the variable interest rates reflecting current market rates, the fair value of its debt obligations under its revolving credit facility and term loan approximate the carrying value at December 31, 2023.

Contingent Consideration Liabilities

2 unchanged sentences

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 (loss) income.

Changes in fair value subsequent to the acquisition date are reported in contingent consideration (benefit) expense 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.

Segment Information

We operate our business structure within three segments.

We operate our business structure within two segments.

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, 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, 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 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 .

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.

Accounting Pronouncements issued and not yet adopted

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.

The amendments in ASU 2023-07 are effective for all public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Company is currently evaluating the enhanced disclosure requirements, however it does not anticipate a material change to the consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which requires a public entity to disclose in its rate reconciliation table additional categories of information about federal, state and foreign income taxes and provide more details about the reconciling items in some categories if items meet a quantitative threshold.

The guidance will require all entities to disclose income taxes paid, net of refunds, disaggregated by federal (national), state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold.

The guidance makes several other changes to the disclosure requirements.

All entities are required to apply the guidance prospectively, with the option to apply it retrospectively.

The guidance is effective for public business entities for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is currently evaluating the enhanced disclosure requirements, however it does not anticipate a material change to the consolidated financial statements.

On September 13, 2023, Clarus entered into a Share Purchase Agreement (the “TRED Purchase Agreement”) to acquire TRED Outdoors Pty Ltd.

(“TRED”), which subsequently closed on October 9, 2023.

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”).

The Company acquired TRED for an aggregate purchase price of $AUD 10,741 (approximately $ 6,849 ), subject to a post-closing adjustment, comprised of $AUD 8,875 (approximately $ 5,659 ) cash, 179 shares of the Company’s common stock valued at $ 1,069 , and additional consideration described below.

The TRED Purchase Agreement provides for the payment of additional contingent consideration of up to $AUD 1,000 (approximately $ 638 ) in cash upon the satisfaction of certain net sales targets (the “TRED Contingent Consideration”).

The Company estimated the initial fair value of the TRED Contingent Consideration to be $AUD 189 (approximately $ 121 ) and has recorded this liability within accrued liabilities.

See Note 11 for discussion regarding the valuation of the TRED Contingent Consideration as of December 31, 2023.

The acquisition was accounted for as a business combination.

Acquisition-related costs for the TRED Acquisition, which were included in transaction costs during the year ended December 31, 2023, were $ 456 .

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 and the market value of the Company’s common stock at the time of closing of the acquisition of MAXTRAX (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.

During the years ended December 31, 2023 and 2022, approximately 250 and 108 shares, respectively, 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 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.

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

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

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

ended June 30, 2022.

The net sales threshold required for the final payment of the MAXTRAX Contingent Consideration was not met during the measurement period ended June 30, 2023.

As of December 31, 2023, no remaining contingent consideration liability existed related to the MAXTRAX Acquisition.

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.

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.

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 Company estimated the initial fair value of the Rhino-Rack Contingent Consideration to be $AUD 4,747 (approximately $ 3,565 ) and 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.

2 unchanged sentences

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.

and certain of its subsidiaries (the “Seller”), pursuant to which the Company agreed to (i) acquire certain assets of the Seller constituting the Barnes business (“Barnes”), including equipment, inventory, intellectual property (including exclusive use of Barnes’ intellectual property in the all-copper and powdered metallurgy ammunition fields as well as its trademarks) and a leasehold interest in certain real property located in Mona, Utah (collectively, the “Barnes Purchased Assets”) and (ii) assume certain liabilities related to the Barnes Purchased Assets in a transaction to be effected in Seller’s bankruptcy proceeding under Chapter 11 of title 11 of the United States Code, §§ 101 et seq.

(the “Bankruptcy Code”) which commenced on July 27, 2020 in the United States Bankruptcy Court for the Northern District of Alabama (the “Bankruptcy Court”).

Pursuant to the Barnes Asset Purchase Agreement, the purchase price to be paid for the Barnes Purchased Assets is $ 30,500 (the “Barnes Purchase Price”).

On October 2, 2020, Sierra completed the acquisition of the Barnes Purchased Assets.

Acquisition-related costs for the Barnes acquisition, which were included in transaction costs during the years ended December 31, 2022, 2021, and 2020 were $ 0 , $ 273 , and $ 922 , respectively.

The acquisition was accounted for as a business combination.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The Company believes the acquisitions of TRED, MAXTRAX, and Rhino-Rack 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.

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 TRED 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 TRED Acquisition 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 acquisition.

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

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

Goodwill for MAXTRAX and Rhino-Rack is included in the Adventure segment and goodwill for Barnes is included in the Precision Sport segment.

Goodwill for TRED, MAXTRAX, and Rhino-Rack is included in the Adventure segment.

The goodwill consists largely of the growth and profitability expected from these acquisitions.

December 1, 2021

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

October 9, 2023

December 1, 2021

Number of Shares

2 unchanged sentences

Estimated Fair Value

Number of Shares

Estimated Fair Value

18 unchanged sentences

Net Book Value Acquired

The estimated fair value of inventory was recorded at expected sales price less cost to sell plus a reasonable profit margin for selling efforts.

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

In connection with the acquisitions, the Company acquired exclusive rights to MAXTRAX’s, Rhino-Rack’s, and Barnes’ trademarks, customer relationships, and product technologies.

The estimated fair value of inventory was recorded at expected sales price less cost to sell plus a reasonable profit margin for selling efforts.

In connection with the acquisitions, the Company acquired exclusive rights to TRED’s, MAXTRAX’s, and Rhino-Rack’s trademarks, customer relationships, product technologies, and tradenames.

The amounts assigned to each class of intangible asset, other than goodwill acquired, and the related average useful lives are as follows:

3 unchanged sentences

Intangibles not subject to amortization

The full amount of goodwill of $ 15,199 at MAXTRAX and $ 78,347 at Rhino-Rack is expected to be non-deductible for tax purposes.

No pre-existing relationships existed between the Company and MAXTRAX and Rhino-Rack or their sellers prior to the acquisition.

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

The full amount of goodwill of $ 2,832 at TRED, $ 15,199 at MAXTRAX, and $ 78,347 at Rhino-Rack is expected to be non-deductible for tax purposes.

No pre-existing relationships existed between the Company and TRED, MAXTRAX, and Rhino-Rack or their sellers prior to the acquisition.

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

Total revenue and net income of TRED from the date of acquisition to December 31, 2023 were not material to the Company’s consolidated financial statements.

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.

As such, the basis in the assets of Barnes is equal for both book and tax, which results in no initial recognition of deferred tax assets or liabilities.

Furthermore, the full amount of goodwill recorded of $ 8,625 is expected to be deductible for tax purposes.

No pre-existing relationships existed between the Company and the Barnes sellers prior to the acquisition.

Barnes revenue and operating income were included in the Precision Sport segment.

The following unaudited pro forma results are based on the individual historical results of the Company, MAXTRAX, Rhino-Rack, and Barnes, with adjustments to give effect as if the acquisition and borrowings used to finance the acquisition had occurred on January 1, 2020 for MAXTRAX and Rhino-Rack and January 1, 2019 for Barnes, after giving effect to certain adjustments including the amortization of intangible assets, depreciation of fixed assets, interest expense and taxes and assumes the purchase price was allocated to the assets purchased and liabilities assumed based on their fair market values at the date of purchase.

The following unaudited pro forma results are based on the individual historical results of the Company, MAXTRAX, and Rhino-Rack, with adjustments to give effect as if the acquisition and borrowings used to finance the acquisition had occurred on January 1, 2020 for MAXTRAX and Rhino-Rack, after giving effect to certain adjustments including the amortization of intangible assets, depreciation of fixed assets, interest expense and taxes and assumes the purchase price was allocated to the assets purchased and liabilities assumed based on their fair market values at the date of purchase.

Year Ended December 31,

1 unchanged sentence

Net income per share - diluted

The unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred had the transactions been consummated as of January 1, 2020 for MAXTRAX and Rhino-Rack or January 1, 2019 for Barnes.

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.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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.

DISCONTINUED OPERATIONS

On February 29, 2024, the Company and Everest/Sapphire Acquisition, LLC, its wholly-owned subsidiary, completed the sale to Bullseye Acquisitions, LLC, an affiliate of JDH Capital Company, of all of the equity associated with the Company’s Precision Sport segment, which is comprised of the Company’s subsidiaries Sierra and Barnes Bullets – Mona, LLC (“Barnes”), pursuant to a Purchase and Sale Agreement dated as of December 29, 2023, by and among, Bullseye Acquisitions, LLC, Everest/Sapphire Acquisition, LLC and the Company (the “Precision Sport Purchase Agreement”).

The Precision Sport segment is engaged in the business of designing, developing, manufacturing, and marketing bullets and ammunition to the military, law enforcement, and commercial/consumer markets.

Under the terms of the Precision Sport Purchase Agreement, the Buyer agreed to pay $ 175,000 in cash, which is subject to a customary working capital adjustment.

The Company received net proceeds of approximately $ 37,871 in cash, after payment of certain fees and settlement of the Restated Credit Agreement, for all of the equity associated with the Company’s Precision Sport segment.

As the disposition was completed during our first fiscal quarter of 2024, we expect to recognize a gain on the disposition during the three months ending March 31, 2024.

The activities of the Precision Sport segment have been segregated and reported as discontinued operations for all periods presented.

The carrying amounts of the assets and liabilities of the Precision Sport segment were classified as held for sale in our consolidated balance sheets as of December 31, 2023 and 2022.

The asset and liability balances as of December 31, 2023 were classified as current as we anticipated the sale of these assets and liabilities within a one year period.

The carrying amounts were as follows:

December 31, 2023

December 31, 2022

Accounts receivable, net

Prepaid and other current assets

Total current assets held for sale

Property and equipment, net

Other intangible assets, net

Indefinite-lived intangible assets

Other long-term assets

Total assets held for sale

Accounts payable

Accrued liabilities

Current portion of long-term debt

Total current liabilities held for sale

Total liabilities held for sale

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

Summarized results of discontinued operations for the Precision Sport segment are as follows:

Year Ended December 31,

Cost of goods sold

Selling, general and administrative

Restructuring charges

Transaction costs

Interest expense, net

Income from discontinued operations before taxes

Income tax expense

Income from discontinued operations, net of tax

In connection with the sale of the Precision Sport segment, all interest expense related to outstanding debt that was required to be repaid with the proceeds received from the sale pursuant to the terms of the Company’s credit facility is allocated to discontinued operations in our consolidated financial statements for the years ended December 31, 2023, 2022, and 2021.

Summarized cash flow information for the Precision Sport segment discontinued operations are as follows:

Year Ended December 31,

Depreciation of property and equipment

Amortization of intangible assets

Stock-based compensation

Purchase of property and equipment

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

4 unchanged sentences

Raw materials and supplies

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

PROPERTY AND EQUIPMENT

8 unchanged sentences

Less accumulated depreciation

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

Depreciation expense for continuing operations was $ 4,150 , $ 4,388 , and $ 3,352 for the years ended December 31, 2023, 2022, and 2021, respectively.

GOODWILL AND INTANGIBLE ASSETS

The following table summarizes the changes in goodwill by segment:

Precision Sport

Accumulated goodwill impairment losses

Accumulated goodwill impairments

Balance at December 31, 2021

Increase due to acquisitions of Rhino-Rack and MAXTRAX

Acquisition adjustment

Impact of foreign currency exchange rates

Balance at December 31, 2022

Decrease due to impairment

Acquisition adjustment

Increase due to acquisition of TRED

Impact of foreign currency exchange rates

Balance at December 31, 2023

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, in the fourth quarter of 2022, 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

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

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.

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.

2 unchanged sentences

Balance at December 31, 2022

Decrease due to impairment of Rhino-Rack trademark

Impact of foreign currency exchange rates

11 unchanged sentences

Gross balance at December 31, 2022

Increase due to acquisitions

Impact of foreign currency exchange rates

10 unchanged sentences

Product technologies

Tradename / trademark

Core technologies

4 unchanged sentences

Product technologies

Tradename / trademark

Core technologies

Amortization expense for the years ended December 31, 2022, 2021, and 2020, was $ 15,326 , $ 9,834 , and $ 4,070 , respectively.

Amortization expense for continuing operations for the years ended December 31, 2023, 2022, and 2021, was $ 10,715 , $ 12,557 , and $ 6,081 , respectively.

Future amortization expense for other intangible assets as of December 31, 2023 is as follows:

1 unchanged sentence

Amortization Expense

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

ACCRUED LIABILITIES AND OTHER LONG-TERM LIABILITIES

4 unchanged sentences

Accrued bonus

Designated forward exchange contracts

Accrued warranty

2 unchanged sentences

Contingent consideration liabilities

Accrued excise tax

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Restructuring liabilities

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

3 unchanged sentences

Deferred stock consideration for business acquisition

Contingent consideration liability

LONG-TERM DEBT, NET

13 unchanged sentences

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.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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”).

4 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 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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, 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.

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 .

In conjunction with the Precision Sport Purchase Agreement dated December 29, 2023, all balances owing the lenders and the Administrative Agent were required to be paid off contemporaneously with the closing of the disposition of the Precision Sport segment which occurred on February 29, 2024.

Accordingly, all debt obligations were classified as current as of December 31, 2023.

(a) As of December 31, 2023, the Company had drawn $ 10,375 on the revolving commitment.

On February 29, 2024, upon the closing of the disposition of the Precision Sport segment, the Company terminated and paid off amounts outstanding under the revolving credit facility in full.

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

As of December 31, 2023 the interest rates ranged between approximately 7.7 % and 9.8 % , and as of December 31, 2022, the interest rate was approximately 6.3 % .

(b) Foreign subsidiaries of the Company had a revolving credit facility, which matured on March 31, 2023, and term debt with financial institutions, which matures on 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 December 31, 2023, the interest rate was approximately 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.

(c) On February 29, 2024, upon the closing of the disposition of the Precision Sport segment, the Company terminated and paid off amounts outstanding under the term loan in full.

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

As of December 31, 2023 and 2022, the rates were approximately 7.7 % and 6.3 % , 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 issuance costs

Total carrying amount of long-term debt

Less current portion

Long-term debt obligations

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.

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.

At December 31, 2023, the Company’s derivative contracts had remaining maturities of less than one and one-half years .

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 all contracts with that counterparty.

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, which was $ 256 as of December 31, 2023 .

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

As of December 31, 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 $ 351 on all contracts as of December 31, 2022.

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

14 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 $ 3,124 and ($ 223 ) were reclassified to sales during the years ended December 31, 2022 and 2021, respectively.

Gains of $ 393 and $ 3,124 were reclassified to sales during the years ended December 31, 2023 and 2022, respectively.

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

5 unchanged sentences

Prepaid and other current assets

Designated forward exchange contracts

Other long-term assets

Derivative instruments in liability positions:

Designated forward exchange contracts

Accrued liabilities

Designated forward exchange contracts

Other long-term liabilities

5 unchanged sentences

Balance as of December 31, 2022

Other comprehensive (loss) income before reclassifications

Amounts reclassified from other comprehensive loss

Net current period other comprehensive loss

Other comprehensive income before reclassifications

Amounts reclassified from other comprehensive income

Net current period other comprehensive income (loss)

Balance as of December 31, 2023

7 unchanged sentences

Amounts reclassified from other comprehensive (loss) income

Net current period other comprehensive (loss) income

Net current period other comprehensive loss

Balance as of December 31, 2022

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, 2023 and 2022 were as follows:

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

Gains reclassified from AOCI to the Consolidated Statements of Comprehensive Loss

Affected line item in the Consolidated

Twelve Months Ended

Statements of Comprehensive (Loss) Income

Statements of Comprehensive Loss

December 31, 2023

1 unchanged sentence

Foreign exchange contracts:

Income tax expense (benefit)

Income tax expense

Amount reclassified, net of tax

Total reclassifications from AOCI

The Company’s policy is to classify reclassifications of cumulative foreign currency translation from AOCI to Other, net.

The Company’s policy is to classify reclassifications of cumulative foreign currency translation associated with continuing operations from AOCI to Other, net.

FAIR VALUE MEASUREMENTS

1 unchanged sentence

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, under a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1- inputs to the valuation methodology are quoted market prices for identical assets or liabilities in active markets.

Level 2- inputs to the valuation methodology include quoted prices in markets that are not active or model inputs that are

observable either directly or indirectly for substantially the full term of the asset or liability.

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

inputs to the valuation methodology are quoted market prices for identical assets or liabilities in active markets.

inputs to the valuation methodology include quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.

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

CLARUS CORPORATION

13 unchanged sentences

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

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.

The Company estimated the initial fair value of the contingent consideration liabilities primarily using the Monte-Carlo pricing model.

Significant unobservable inputs used in the valuation included a discount rate of 11.5 %.

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) expense 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.

1 unchanged sentence

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.

The net sales threshold required for the final payment of the MAXTRAX Contingent Consideration was not met during the measurement period ended June 30, 2023.

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

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The following table summarizes the changes in contingent consideration liabilities:

4 unchanged sentences

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 could have resulted in a significantly lower or higher fair value

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Increase due to acquisition of TRED

Fair value adjustments

Impact of foreign currency exchange rates

Balance at December 31, 2023

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.

8 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 May 1, 2020, the Company announced that, in light of the operational impact of the COVID-19 pandemic, its Board of Directors temporarily replaced its Quarterly Cash Dividend with a stock dividend (the “Quarterly Stock Dividend”).

In 2023, 2022 and 2021 our total Quarterly Cash Dividends were $ 3,750 , $ 3,721 and $ 3,335 , respectively.

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 .

On March 5, 2024 , the Company announced that its Board of Directors approved the payment on March 18, 2024 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 28, 2024 .

On October 25, 2021, the Company entered into an underwriting agreement with BofA Securities, Inc., as representative of the several underwriters named therein (the “Underwriters”), relating to the public offer and sale of 2,750 shares of the Company’s common stock at a price to the public of $ 27.00 per share.

2 unchanged sentences

The net proceeds to the Company from the offering, including the Underwriters’ exercise of their 30-day option but before expenses and after deducting the applicable underwriting discounts and commissions, were $ 80,264 .

On September 25, 2020, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with three existing stockholders of the Company.

Pursuant to the Purchase Agreement, the Company sold 900 shares of its common stock in a registered direct offering.

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

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

EARNINGS (LOSS) PER SHARE

8 unchanged sentences

Weighted average shares outstanding - diluted

(Loss) income from continuing operations per share:

Income from discontinued operations per share:

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, 2023, 2022, and 2021, equity awards of 5,424 , 6,060 , and 509 , respectively, were outstanding and anti-dilutive and therefore not included in the calculation of net (loss) income per share for these periods.

6 unchanged sentences

Options Granted:

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.

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.

During the year ended December 31, 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 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:

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)

1 unchanged sentence

39.1 % - 43.6 %

40.9 % - 44.2 %

Risk-free interest rate

1 unchanged sentence

0.50 % - 1.02 %

0.41 % - 0.65 %

Expected life (years) (b)

2 unchanged sentences

$ 5.88 - $ 9.23

$ 3.72 - $ 6.89

(a) Expected volatility is based upon the Company’s historical volatility.

1 unchanged sentence

Using these assumptions, the fair value of the stock options granted during the years ended December 31, 2023, 2022, and 2021 was $ 186 , $ 3,661 , and $ 3,239 , respectively, which will be amortized as stock-based compensation expense over the vesting period of the options.

Stock Award Granted:

On September 14, 2020, the Company issued and granted to the Executive Chairman a stock award of 244 shares under the 2015 Plan, which vested immediately.

The fair value of the stock award was calculated as of the date of grant using the closing market price.

The grant date fair value of the stock award granted during the year ended December 31, 2020 was $ 3,314 , which was immediately recognized to selling, general and administrative expenses.

Market Condition Restricted Shares Granted:

On March 14, 2023, the Company awarded the Executive Chairman 500 restricted shares under the 2015 Plan, of which 250 and 250 shares will vest if, on or before March 14, 2033, the Fair Market Value (as defined in the Plan) of the Company’s common stock shall have equaled or exceeded $ 15.00 and $ 18.00 per share for twenty consecutive trading days, respectively.

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

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

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.

CLARUS CORPORATION

1 unchanged sentence

(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 August 27, 2020, the Company issued and granted to an employee a restricted stock award of 100 restricted shares under the 2015 Plan, of which 100 restricted shares will vest if, on or before August 27, 2023, the Fair Market Value (as defined in the Plan) of the Company’s common stock shall have equaled or exceeded $ 15.00 per share for twenty consecutive trading days.

For computing the fair value of the 100 restricted shares with a market condition, the fair value of the 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 restricted shares became fully vested.

March 14, 2023

August 27, 2020

March 4, 2022

Number issued

9 unchanged sentences

Weighted average fair value (per share)

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:

$ 7.84 - $ 8.34

Using these assumptions, the fair value of the market condition restricted stock awards granted on March 14, 2023, March 4, 2022, and May 28, 2021 were approximately $ 4,046 , $ 10,761 , and $ 7,230 , respectively.

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

Year Ended December 31,

1 unchanged sentence

Stock options

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

For the years ended December 31, 2023, 2022, and 2021, stock-based compensation costs were classified as selling, general and administrative expense.

7 unchanged sentences

Options exercisable at December 31, 2023

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The following table summarizes the exercise price range, weighted average exercise price, and remaining contractual lives by significant ranges for options outstanding and exercisable as of December 31, 2023:

12 unchanged sentences

Unrecognized compensation cost of unvested stock options and restricted stock awards are expected to be recognized over the weighted average period of 1.0 years and 2.2 years, respectively.

RESTRUCTURING

Starting in 2023, the Company began incurring expenses to facilitate long-term sustainable growth through cost reduction actions, consisting of employee reductions, facility rationalization and contract termination costs.

During the year ended December 31, 2023, the Company incurred $ 3,223 of restructuring charges related to these actions.

The Company accrues for restructuring costs when they are probable and reasonably estimable.

These costs include severance costs, exit costs, and other restructuring costs and are included in Restructuring charges in the consolidated statements of comprehensive (loss) income.

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.

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

We estimate that we will incur restructuring costs related to employee-related costs and facility exit costs during the year 2024;

however, the Company cannot estimate the total amount expected to be incurred as cost reduction actions continue to be evaluated.

The Company anticipates completing these restructuring activities in 2024.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The following table summarizes the restructuring charges, payments and the remaining liabilities related to restructuring costs at December 31, 2023, which are included within accrued liabilities in the consolidated balance sheets.

Balance at December 31, 2022

Charges to expense:

Employee termination benefits

Total restructuring charges

Cash payments and non-cash charges:

Cash payments

Product discontinuance

Asset impairments

Balance at December 31, 2023

COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

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 consolidated financial condition, results of operations or cash flows.

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.

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 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.

“Legal Proceedings.” and Item 1A.

“Risk Factors.”

Consumer Product Safety Commission

In January 2021, Black Diamond Equipment, Ltd.

(“BDEL”) wrote to the U.S.

Consumer Product Safety Commission (“CPSC”) outlining its new cradle solution for certain models of its avalanche beacon transceivers to prevent such transceivers from switching unexpectedly out of “send” mode.

The proposed new cradle solution was designed to improve transceiver safety by locking the transceiver into “send” mode prior to use so that it would not switch unexpectedly out of “send” mode.

BDEL also requested approval for the CPSC Fast-Track Program for a voluntary product recall to implement this cradle solution.

The CPSC approved the recall and entered into a Corrective Action Plan agreement with BDEL in March 2021.

BDEL received a letter from the CPSC, dated October 28, 2021, stating that the CPSC is investigating whether BDEL has timely complied with the reporting requirements of Section 15(b) of the Consumer Protection Safety Act and related regulations regarding certain models of avalanche transceivers switching unexpectedly out of “send” mode.

Separately, on April 21, 2022, BDEL filed a Section 15(b) report and applied for Fast-Track consideration for a voluntary recall, consisting of free repair or replacement of such malfunctioning models of avalanche transceivers, which would not switch from “send” mode to “search” mode due to an electronic malfunction in the reed switch or foil.

The CPSC approved the recall and entered into a Corrective Action Plan agreement with BDEL in August 2022.

BDEL received a letter from the CPSC, dated January 17, 2023, stating that the CPSC is investigating whether BDEL has timely complied with the reporting requirements of Section 15(b) of the Consumer

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

Consolidated income before income taxes consists of the following:

Protection Safety Act and related regulations regarding the malfunction in the reed switch or foil in certain models of avalanche transceivers switching out of “search” mode.

BDEL responded to the CPSC’s investigation by letter dated March 31, 2023, accompanied with documents responsive to the CPSC’s requests.

The CPSC asked for further clarification and documents, and BDEL sent a responsive letter accompanied by additional documents on June 23, 2023.

On September 6, 2023, the CPSC requested further clarification and information regarding the reed switch issue, to which BDEL responded on October 6 and 13, 2023.

By letters dated October 12, 2023 and December 18, 2023, BDEL was notified by the CPSC that the agency staff has concluded we failed to timely meet our 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 and certain models of BDEL’s avalanche transceivers not switching from “send” mode into “search” 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.

On November 20, 2023 and February 8, 2024, respectively, we submitted a comprehensive response disputing the CPSC’s findings and conclusions in the October 12, 2023 and December 18, 2023 letters, including the amount of any potential penalties.

The CPSC may ultimately disagree with our position and the agency staff has recommended substantial civil monetary penalties which the Company intends to strongly contest and vigorously defend against.

We cannot assure on what terms this matter will be resolved.

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 liquidity, stock price, consolidated financial position, results of operations and/or cash flows.

Consolidated (loss) income from continuing operations before income taxes consists of the following:

Year Ended December 31,

Foreign operations

(Loss) income before income tax

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

Loss from continuing operations before income tax

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The components of the benefit for income taxes attributable to continuing operations consist of the following:

Year Ended December 31,

3 unchanged sentences

Income tax benefit

The allocation of income tax expense (benefit) between continuing and discontinued operations was as follows:

Year Ended December 31,

Continuing operations

Discontinued operations

The Company’s foreign operations that are considered to be permanently reinvested have statutory tax rates of approximately 24 % to 30 %.

17 unchanged sentences

Fair value inventory step-up

Transactions costs

Income tax benefit

The deferred tax asset write-offs relate to historical research and development tax credits and certain investments that were fully offset by a release in the valuation allowance.

Transaction costs

Income tax (benefit) expense

The deferred tax asset write-offs relate to NOLs that were fully offset by a release in the valuation allowance.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Deferred income tax assets and liabilities are determined based on the difference between the financial reporting carrying amounts and tax bases of existing assets and liabilities and operating loss and tax credit carryforwards.

1 unchanged sentence

Deferred tax assets:

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

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

Capitalized research and development costs

3 unchanged sentences

Reserves and other

Lease liabilities

Valuation allowance

1 unchanged sentence

Deferred tax liabilities:

Right-of-use assets

Certain deferred income tax balances are not netted as they represent deferred amounts applicable to different taxing jurisdictions.

The Company has provided a valuation allowance against a portion of the deferred tax assets as of December 31, 2023, 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

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

net operating loss carryforwards for federal tax purposes.

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.

3 unchanged sentences

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

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The net change in the valuation allowance for deferred income tax assets was ($ 2,609 ), ($ 1,055 ), and ($ 17,970 ) during the years ended December 31, 2023, 2022, and 2021, respectively.

12 unchanged sentences

income and will be offset with the NOLs.

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

There are no NOLs that expire on December 31, 2024.

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

10 unchanged sentences

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, 2023, 2022 and 2021 is as follows:

3 unchanged sentences

Reductions for prior year tax positions

Reductions due to statute expirations

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, 2023 and 2022, are potential benefits of $ 930 and $ 813 , respectively, that if recognized, would affect the effective rate, subject to impact of valuation allowance, on income from continuing operations.

4 unchanged sentences

SEGMENT INFORMATION

We operate our business structure within three segments.

We operate our business structure within two segments.

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

1 unchanged sentence

Each segment is described below:

 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, which includes Black Diamond Equipment and PIEPS, 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:

4 unchanged sentences

headlamps and lanterns;

gloves and mittens;

and skincare and other sport-enhancing products.

and gloves and mittens.

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, 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, 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.

● Our Adventure segment, which includes Rhino-Rack, MAXTRAX, and TRED, 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.

9 unchanged sentences

Total Outdoor

Precision Sport

Domestic sales

International sales

Total Precision Sport

Domestic sales

International sales

Total Adventure

Total sales to external customers

Segment operating income (loss):

Precision Sport

Segment operating (loss) income:

Total segment operating (loss) income

Restructuring charges

Transaction costs

Contingent consideration (expense) benefit

Contingent consideration benefit (expense)

Corporate and other expenses

Interest expense, net

(Loss) income before income tax

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

Interest income (expense), net

Loss before income tax

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

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

Precision Sport

CLARUS CORPORATION

4 unchanged sentences

Capital expenditures:

Precision Sport

Total capital expenditures

Depreciation:

Precision Sport

Total depreciation

Amortization:

Precision Sport

Total amortization

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

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 leases have remaining contractual terms of up to seven 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.

33 unchanged sentences

RELATED PARTY TRANSACTIONS

As part of the Rhino-Rack Acquisition, on July 1, 2021, the Company paid a fee in the amount of $ 1,750 to Kanders & Company, Inc.

(“Kanders & Company”) in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, performing due diligence and negotiating the Rhino-Rack Acquisition.

As part of the TRED Acquisition, on October 9, 2023, the Company paid a fee in the amount of $ 150 to Kanders & Company, Inc.

As part of the Rhino-Rack Acquisition, on July 1, 2021, the Company paid a fee in the amount of $ 1,750 to Kanders & Company in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, performing due diligence and negotiating the Rhino-Rack Acquisition.

Kanders, the Company’s Executive Chairman of the Board of Directors, is a member of the Board of Directors and sole stockholder of Kanders & Company.

Additionally, at closing of Amendment No.

3 on July 1, 2021, the Company paid a fee in the amount of $ 250 to Kanders & Company in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, and negotiating Amendment No.

Additionally, on July 1, 2021, the Company paid a fee in the amount of $ 250 to Kanders & Company in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, and negotiating an amendment to the Company’s credit agreement.

On October 25, 2021, the Company paid a fee in the amount of $ 500 to Kanders & Company in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, and negotiating the public offer and sale of the Company’s common stock.

On September 25, 2020, the Company paid a fee in the amount of $ 250 to Kanders & Company in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, and negotiating the sale of the Company’s common stock in a registered direct offering .

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 EVENTS

Disposal of Precision Sport Segment

The Precision Sport segment is engaged in the business of designing, developing, manufacturing, and marketing bullets and ammunition to the military, law enforcement, and commercial/consumer markets.

Under the terms of the Precision Sport Purchase Agreement, the Buyer paid $ 175,000 in cash, which is subject to a customary working capital adjustment.

As the disposition was

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

completed during our first fiscal quarter of 2024, we expect to recognize a gain on the disposition during the three months ending March 31, 2024.

The activities of the Precision Sport segment have been segregated and reported as discontinued operations for all periods presented.

See Note 3 to our consolidated financial statements for financial information regarding discontinued operations.

Termination of Restated Credit Agreement

Contemporaneous with the closing of the sale of the Precision Sport segment, the Company directed $ 135,013 of the proceeds from the closing of the sale to pay off any and all outstanding borrowings under the Restated Credit Agreement, dated April 18, 2022, by and among the Company and JPMorgan Chase Bank, N.A., as administrative agent and the lenders party thereto (the “Restated Credit Agreement”).

Accordingly, on February 29, 2024, all balances owing the lenders and the Administrative Agent thereunder were paid off, and the Restated Credit Agreement was terminated, together with the Pledge and Security Agreement, effective as of May 3, 2019, by and among the Company and the Administrative Agent, as well as any and all of the other loan documentation associated therewith (including but not limited to the UCC-1 financing statements and the deeds of trust in respect of owned real property in Utah and Missouri evidencing the liens in favor of the Administrative Agent and the lenders).

CLARUS CORPORATION

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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