What changed in this filing

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Item 1. Financial Statements

2024-05-02 compared with 2023-11-07 · 344 added, 337 removed, 367 unchanged (65% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

September 30, 2023

March 31, 2024

December 31, 2023

4 unchanged sentences

Income tax receivable

Assets held for sale

Total current assets

10 unchanged sentences

Current portion of long-term debt

Liabilities held for sale

Total current liabilities

17 unchanged sentences

CLARUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share amounts)

Three Months Ended

September 30, 2023

September 30, 2022

March 31, 2024

March 31, 2023

Domestic sales

5 unchanged sentences

Transaction costs

Contingent consideration expense

Contingent consideration benefit

Legal costs and regulatory matter expenses

Total operating expenses

Operating income

Other expense

Interest expense, net

Total other expense, net

(Loss) income before income tax

Operating loss

Other (expense) income

Interest income, net

Total other (expense) income, net

Loss before income tax

Income tax benefit

Net (loss) income

Other comprehensive loss, net of tax:

Foreign currency translation adjustment

Unrealized gain on hedging activities

Other comprehensive loss

Comprehensive loss

Net (loss) income per share:

Weighted average shares outstanding:

See accompanying notes to condensed consolidated financial statements.

CLARUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except per share amounts)

Nine Months Ended

September 30, 2023

September 30, 2022

Domestic sales

International sales

Cost of goods sold

Operating expenses

Selling, general and administrative

Restructuring charges

Transaction costs

Contingent consideration (benefit) expense

Total operating expenses

Operating income

Other expense

Interest expense, net

Total other expense, net

(Loss) income before income tax

Income tax (benefit) expense

Net (loss) income

Loss from continuing operations

Discontinued operations, net of tax

Other comprehensive loss, net of tax:

Foreign currency translation adjustment

Unrealized gain on hedging activities

Unrealized gain (loss) on hedging activities

Other comprehensive loss

Comprehensive loss

Net (loss) income per share:

Comprehensive income

Loss from continuing operations per share:

Net income per share:

Weighted average shares outstanding:

3 unchanged sentences

(In thousands)

Nine Months Ended

September 30, 2023

September 30, 2022

Three Months Ended

March 31, 2024

March 31, 2023

Cash Flows From Operating Activities:

Net (loss) income

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

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

Depreciation of property and equipment

Amortization of other intangible assets

Gain on sale of business

Amortization of debt issuance costs

Gain on disposition of property and equipment

(Gain) loss on disposition of property and equipment

Noncash lease expense

Contingent consideration (benefit) expense

Contingent consideration benefit

Stock-based compensation

Deferred income taxes

Changes in operating assets and liabilities:

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

2 unchanged sentences

Accrued liabilities

Net cash provided by (used in) operating activities

Net cash (used in) provided by operating activities

Cash Flows From Investing Activities:

Proceeds from the sale of business, net of cash

Proceeds from disposition of property and equipment

1 unchanged sentence

Purchases of property and equipment

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash Flows From Financing Activities:

1 unchanged sentence

Repayments on revolving credit facilities

Repayments on term loans

Proceeds from issuance of term loans

Payment of debt issuance costs

Repayments on term loans and other debt

Proceeds from issuance of other debt

Purchase of treasury stock

Proceeds from exercise of options

Cash dividends paid

Payment of contingent consideration

Net cash (used in) provided by financing activities

Net cash used in financing activities

Effect of foreign exchange rates on cash

6 unchanged sentences

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Shares issued for business acquisitions

Property and equipment purchased with accounts payable

Intangible assets purchased with accounts payable

Lease liabilities arising from obtaining right-of-use assets

6 unchanged sentences

Stockholders’

Income (Loss)

Balance, December 31, 2022

Other comprehensive income

Cash dividends ($ 0.025 per share)

Purchase of treasury stock

Stock-based compensation expense

Proceeds from exercise of options

Balance, March 31, 2022

Other comprehensive loss

Cash dividends ($ 0.025 per share)

Stock-based compensation expense

Proceeds from exercise of options

Balance, June 30, 2022

Other comprehensive loss

Cash dividends ($ 0.025 per share)

Purchase of treasury stock

1 unchanged sentence

Proceeds from exercise of options

Shares issued in business acquisition

Balance, September 30, 2022

Balance, March 31, 2023

Treasury Stock

8 unchanged sentences

Balance, March 31, 2024

Other comprehensive loss

Cash dividends ($ 0.025 per share)

Purchase of treasury stock

Stock-based compensation expense

Proceeds from exercise of options

Balance, June 30, 2023

Other comprehensive loss

Cash dividends ($ 0.025 per share)

Stock-based compensation expense

Proceeds from exercise of options

Shares issued in business acquisition

Balance, September 30, 2023

See accompanying notes to condensed consolidated financial statements .

3 unchanged sentences

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The accompanying unaudited condensed consolidated financial statements of Clarus Corporation and subsidiaries (which may be referred to as the “Company,” “Clarus,” “we,” “us” or “our”) as of March 31, 2024 and December 31, 2023 and for the three months ended March 31, 2024 and 2023, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), instructions to the Quarterly Report on Form 10-Q, and Article 10 of Regulation S-X.

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

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

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

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

The results for the three months ended March 31, 2024 are not necessarily indicative of the results to be obtained for the year ending December 31, 2024.

These interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on March 7, 2024.

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

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

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

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, 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.

1 unchanged sentence

Actual results could differ from these estimates.

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

September 30, 2023

Reclassifications

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

Specifically, legal costs associated with specific legal matters which were recorded in selling, general, and administrative expenses are now presented in legal costs and regulatory matter expenses in the consolidated statements of comprehensive income.

See Note 16 for discussion regarding legal matters.

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”).

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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 March 31, 2024.

The acquisition was accounted for as a business combination.

The Company believes the acquisition of TRED 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.

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

Goodwill for TRED is included in the Adventure segment.

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

October 9, 2023

Number of Shares

Estimated Fair Value

Issuance of shares of Clarus Corporation

Contingent consideration

Total purchase consideration

Assets acquired and liabilities assumed

Accounts receivable

Prepaid and other current assets

Property and equipment

Other intangible assets

Accounts payable and accrued liabilities

Deferred income taxes

Total liabilities

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

In connection with the acquisitions, the Company acquired exclusive rights to TRED’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:

Intangibles subject to amortization

Customer relationships

Product technologies

Intangibles not subject to amortization

The full amount of goodwill of $ 2,832 at TRED is expected to be non-deductible for tax purposes.

No pre-existing relationships existed between the Company and TRED or its sellers prior to the acquisition.

TRED 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 condensed consolidated financial statements.

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 $ 175,674 in cash under the terms of the Precision Sport Purchase Agreement, which included a preliminary working capital adjustment.

As of March 31, 2024, the working capital adjustment had not been finalized.

The Company recognized a pre-tax gain on such sale of $ 40,585 .

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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.

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

Finished goods

Work-in-process

Raw materials and supplies

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

Total current liabilities held for sale

Total liabilities held for sale

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

Three Months Ended

March 31, 2024

March 31, 2023

Cost of goods sold

Selling, general and administrative

Restructuring charges

Transaction costs

Interest expense, net

(Loss) income from operations of discontinued operations

Gain on sale of discontinued operations

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

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

discontinued operations in our condensed consolidated financial statements for the three months ended March 31, 2024 and 2023.

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

Three Months Ended

March 31, 2024

March 31, 2023

Depreciation of property and equipment

Amortization of intangible assets

Stock-based compensation

Purchase of property and equipment

Inventories, as of March 31, 2024 and December 31, 2023, were as follows:

March 31, 2024

December 31, 2023

Finished goods

Work-in-process

Raw materials and supplies

PROPERTY AND EQUIPMENT

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

September 30, 2023

Property and equipment, net, as of March 31, 2024 and December 31, 2023, were as follows:

March 31, 2024

December 31, 2023

5 unchanged sentences

Less accumulated depreciation

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

Depreciation expense for continuing operations for the three months ended March 31, 2024 and 2023 was $ 1,026 and $ 939 , respectively.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

GOODWILL AND INTANGIBLE ASSETS

The following table summarizes the balances in goodwill by segment:

Precision Sport

Accumulated goodwill impairment losses

Accumulated goodwill impairments

Balance at December 31, 2023

Impact of foreign currency exchange rates

Balance at September 30, 2023

Balance at March 31, 2024

Indefinite-Lived Intangible Assets

2 unchanged sentences

Impact of foreign currency exchange rates

Balance at September 30, 2023

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

September 30, 2023

Balance at March 31, 2024

Trademarks classified as indefinite-lived intangible assets by brand as of March 31, 2024 and December 31, 2023, were as follows:

March 31, 2024

December 31, 2023

3 unchanged sentences

Gross balance at December 31, 2023

Increase due to purchase of intangible assets

Impact of foreign currency exchange rates

Gross balance at September 30, 2023

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

September 30, 2023

Gross balance at March 31, 2024

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Other intangible assets, net of amortization as of March 31, 2024 and December 31, 2023, were as follows:

March 31, 2024

Accumulated Amortization

3 unchanged sentences

Product technologies

Tradename / trademark

Core technologies

4 unchanged sentences

Product technologies

Tradename / trademark

Core technologies

Amortization expense for continuing operations for the three months ended March 31, 2024 and 2023, was $ 2,449 and $ 2,768 , respectively.

Future amortization expense for other intangible assets as of March 31, 2024 is as follows:

Years Ending December 31,

Amortization Expense

2024 (excluding the three months ended March 31, 2024)

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

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

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

Years Ending December 31,

Amortization Expense

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

ACCRUED LIABILITIES AND OTHER LONG-TERM LIABILITIES

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

September 30, 2023

Accrued liabilities as of March 31, 2024 and December 31, 2023, were as follows:

March 31, 2024

December 31, 2023

1 unchanged sentence

Accrued bonus

Designated forward exchange contracts

Accrued warranty

2 unchanged sentences

Contingent consideration liabilities

Accrued excise tax

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

September 30, 2023

Restructuring liabilities

Other long-term liabilities as of March 31, 2024 and December 31, 2023, were as follows:

March 31, 2024

December 31, 2023

Long-term lease liability

Deferred stock consideration for business acquisition

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

LONG-TERM DEBT

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

September 30, 2023

Long-term debt as of March 31, 2024 and December 31, 2023, was as follows:

March 31, 2024

December 31, 2023

6 unchanged sentences

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

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

The Restated Credit Agreement also permits the Company, subject to certain requirements, to arrange with lenders for an aggregate of up to $ 175,000 of additional revolving and/or term loan

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

commitments (both of which are currently uncommitted), for potential aggregate revolving and term loan commitments under the Restated Credit Agreement of up to $ 600,000 .

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

2 unchanged sentences

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

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

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

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

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 and were settled on February 29, 2024.

(a) 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 September 30, 2023 and December 31, 2022, the rates were approximately 7.7 % and 6.3 % , respectively.

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

As of December 31, 2023, the interest rates ranged between approximately 7.7 % and 9.8 % .

(b) Foreign subsidiaries of the Company term debt with financial institutions, which mature between August 8, 2024 and February 27, 2027.

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

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

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

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

(c) The Company is required to repay the term loan through quarterly payments of $ 1,563 each beginning with June 30, 2022 , increasing to $ 3,125 each beginning with 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 .

As of March 31, 2024, the interest rates ranged between approximately 3.2 % and 7.0 % and as of December 31, 2023, the interest rate was approximately 3.2 % .

The term debt is secured by certain assets of the foreign subsidiaries.

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

As of December 31, 2023, the rate was approximately 7.7 % .

DERIVATIVE FINANCIAL INSTRUMENTS

4 unchanged sentences

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

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

At March 31, 2024, the Company’s derivative contracts had remaining maturities of less than one year .

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

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

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

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

As of March 31, 2024, there was no such exposure to the counterparties.

The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain of $ 300 on all contracts as of March 31, 2024.

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

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

September 30, 2023

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The Company held the following contracts designated as hedging instruments as of March 31, 2024 and December 31, 2023:

March 31, 2024

Foreign exchange contracts - Canadian Dollars

8 unchanged sentences

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

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

Gains (losses) of $ 81 and $( 16 ) were reclassified to sales during the three months ended March 31, 2024 and 2023, respectively.

The following table presents the balance sheet classification and fair value of derivative instruments as of March 31, 2024 and December 31, 2023:

Classification

September 30, 2023

March 31, 2024

December 31, 2023

4 unchanged sentences

Designated forward exchange contracts

Accrued liabilities

Designated forward exchange contracts

Other long-term liabilities

ACCUMULATED OTHER COMPREHENSIVE LOSS

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

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

Foreign Currency Translation Adjustments

Unrealized Gains (Losses) on Cash Flow Hedges

Balance as of June 30, 2023

Other comprehensive (loss) income before reclassifications

Amounts reclassified from other comprehensive loss

Net current period other comprehensive (loss) income

Balance as of September 30, 2023

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

Foreign Currency Translation Adjustments

Unrealized Gains (Losses) on Cash Flow Hedges

Balance as of June 30, 2022

Other comprehensive (loss) income before reclassifications

Amounts reclassified from other comprehensive income

Net current period other comprehensive (loss) income

Balance as of September 30, 2022

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

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

ACCUMULATED OTHER COMPREHENSIVE LOSS

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

The following table sets forth the changes in AOCI, net of tax, for the three months ended March 31, 2024:

Foreign Currency Translation Adjustments

2 unchanged sentences

Other comprehensive (loss) income before reclassifications

Amounts reclassified from other comprehensive loss

Amounts reclassified from other comprehensive (loss) income

Net current period other comprehensive (loss) income

Balance as of September 30, 2023

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

Balance as of March 31, 2024

The following table sets forth the changes in AOCI, net of tax, for the three months ended March 31, 2023:

Foreign Currency Translation Adjustments

1 unchanged sentence

Balance as of December 31, 2022

Other comprehensive (loss) income before reclassifications

Other comprehensive loss before reclassifications

Amounts reclassified from other comprehensive loss

Net current period other comprehensive (loss) income

Balance as of September 30, 2022

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

Gains reclassified from AOCI to the Consolidated Statements of Comprehensive Loss

Net current period other comprehensive loss

Balance as of March 31, 2023

The effects on net income of amounts reclassified from unrealized gains (losses) on cash flow hedges for foreign exchange contracts for the three months ended March 31, 2024 and 2023, were as follows:

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

Affected line item in the Consolidated

Three Months Ended

Nine Months Ended

Statements of Comprehensive Loss

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

Statements of Comprehensive Income

March 31, 2024

March 31, 2023

Foreign exchange contracts:

Income tax expense

Income tax expense (benefit)

Amount reclassified, net of tax

Total reclassifications from AOCI

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

FAIR VALUE MEASUREMENTS

4 unchanged sentences

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Items Measured at Fair Value on a Recurring Basis

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

September 30, 2023

Assets and liabilities measured at fair value on a recurring basis at March 31, 2024 and December 31, 2023 were as follows:

March 31, 2024

Designated forward exchange contracts

Contingent consideration liabilities

December 31, 2023

3 unchanged sentences

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

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

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

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

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.

No nonrecurring fair value measurements existed at March 31, 2024 and December 31, 2023.

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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 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

Balance at December 31, 2023

Fair value adjustments

Contingent consideration payments

Impact of foreign currency exchange rates

Balance at September 30, 2023

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Balance at March 31, 2024

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

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.

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.

STOCKHOLDERS’ EQUITY

1 unchanged sentence

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

On November 3, 2023 , the Company announced that its Board of Directors approved the payment on November 24, 2023 of the Quarterly Cash Dividend of $ 0.025 to the record holders of shares of the Company’s common stock as of the close of business on November 14, 2023 .

On April 30, 2024 , the Company announced that its Board of Directors approved the payment on May 20, 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 May 10, 2024 .

EARNINGS (LOSS) PER SHARE

2 unchanged sentences

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

Three Months Ended

Nine Months Ended

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

March 31, 2024

March 31, 2023

Weighted average shares outstanding - basic

Effect of dilutive stock awards

Effect of dilutive deferred stock consideration for business acquisition

Weighted average shares outstanding - diluted

Net (loss) income per share:

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Loss from continuing operations per share:

Income from discontinued operations per share:

Net income per share:

For the three months ended March 31, 2024 and 2023, equity awards of 5,047 and 3,713 , respectively, were excluded from the calculation of earnings (loss) per share for these periods as they were anti-dilutive.

STOCK-BASED COMPENSATION PLAN

4 unchanged sentences

Options Granted:

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

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

During the three months ended March 31, 2024, the Company issued stock options for an aggregate of 1,140 shares under the 2015 Plan to directors and employees of the Company.

All 1,140 options vest and become exercisable over a period of two years .

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

Options Granted During the Nine Months Ended September 30, 2023

Options Granted During the Three Months Ended March 31, 2024

Number of options

8 unchanged sentences

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

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Market Condition Restricted Shares Granted:

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.

As the vesting terms of the restricted shares include a market condition, the fair value of the restricted stock was estimated as of the date of grant using the Monte-Carlo pricing model with the following assumptions:

March 14, 2023

Number issued

Vesting period

$ 15.00 - $ 18.00 stock price target

Grant price (per share)

Dividend yield

Expected volatility

Risk-free interest rate

Expected term (years)

Weighted average fair value (per share)

$ 7.84 - $ 8.34

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

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

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

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

The grant date fair value of the stock options granted during the three months ended March 31, 2024 was $ 3,486 , which will be recognized over the vesting period of the options.

Restricted Stock Awards Granted:

On March 11, 2024, the Company issued and granted employees restricted stock awards of 100 restricted shares under the 2015 Plan, of which 50 and 50 shares will vest and become nonforfeitable on each March 11, 2025 and March 11, 2026, respectively.

As these restricted stock awards vest over time, the fair value of the restricted stock was estimated as of the date of grant using the grant price of $ 6.75 per share.

The grant date fair value of the restricted stock awards was approximately $ 675 which will be amortized over the expected term of 2 years .

The total non-cash stock compensation expense for continuing operations related to restricted stock, stock options and stock awards recorded by the Company for the three months ended March 31, 2024 and 2023 was $ 1,178 and $ 1,286 , respectively.

For the three months ended March 31, 2024 and 2023, the majority of stock-based compensation costs were classified as selling, general and administrative expenses.

As of March 31, 2024, there were 1,152 unvested stock options and unrecognized compensation cost of $ 3,997 related to unvested stock options, as well as 1,600 unvested restricted stock awards and unrecognized compensation costs of $ 7,059 related to unvested restricted stock awards.

RESTRUCTURING

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

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

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

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

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 three months ended March 31, 2024 and 2023, the Company incurred $ 370 and $ 0 , respectively, of restructuring charges related to these actions.

The Company has incurred $ 3,593 of cumulative restructuring charges since the commencement of restructuring actions in 2023.

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 condensed consolidated statements of comprehensive income.

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

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

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

Three Months Ended September 30, 2023

Precision Sport

Employee termination benefits

Total restructuring charges

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

Nine Months Ended September 30, 2023

Precision Sport

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 continue to 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.

The following table summarizes the restructuring charges, payments and the remaining liabilities related to restructuring costs at March 31, 2024, which are included within accrued liabilities in the condensed consolidated balance sheets:

Balance at December 31, 2023

Charges to expense:

Employee termination benefits

Total restructuring charges

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

COMMITMENTS AND CONTINGENCIES

Cash payments and non-cash charges:

Cash payments

Asset impairments

Balance at March 31, 2024

COMMITMENTS, CONTINGENCIES AND LEGAL MATTERS

As a consumer goods manufacturer and distributor, the Company faces the risk of product liability and related lawsuits involving claims for substantial money damages, product recall actions and higher than anticipated rates of warranty returns or other returns of goods.

5 unchanged sentences

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

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

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

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

It is possible that, as additional information becomes available, the Company may subsequently determine that it may incur losses from such contingencies materially in excess of the amounts initially accrued by the Company which could have a material adverse effect on the Company’s liquidity, stock price, consolidated financial position, results of operations and/or cash flows.

Legal expenses incurred in the ordinary course of business are included in selling, general, and administrative expenses in the consolidated statements of comprehensive income except as described below.

See Part II, Item 1.

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

“Risk Factors.”

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

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

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

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

“Legal Proceedings.”

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

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

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

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 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 civil monetary penalties of $ 16,135 and $ 9,000 , respectively, for the two matters described above.

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 ultimately disagreed with our position and the agency staff has restated their recommendation for the monetary penalties which the Company intends to strongly contest and vigorously defend against.

Based on currently available information, the Company believes an unfavorable outcome is probable, however, we cannot reasonably estimate on what terms or if this matter will be resolved.

During the three months ended March 31, 2024, the Company recorded a liability of $ 2,500 representing the low end of the range of our estimated exposure.

The Company does not have a better estimate of the loss therefore the low-end of the range was recorded as an accrued liability during the first quarter of 2024 and a corresponding expense is included in legal costs and regulatory matter expenses in the consolidated statements of comprehensive income.

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

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

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

Any penalties 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.

During the three months ended March 31, 2024 and 2023, the Company incurred legal expenses of $ 205 and $ 55 , respectively, in efforts to resolve this matter.

These legal expenses are included in legal costs and regulatory matter expenses in the consolidated statements of comprehensive income.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Clarus Corporation against HAP Trading, LLC and Harsh A.

On September 23, 2022, the Company filed a lawsuit in the United States District Court for the Southern District of New York against HAP Trading, LLC and Harsh A.

Padia (“HAP Trading”), seeking disgorgement of profits from transactions in the Company’s common stock and related derivative securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended.

Clarus Corporation v.

Caption Management, LLC, et al.

On March 8, 2024, the Company filed a lawsuit in the United States District Court for the Southern District of New York against Caption Management, LLC, Caption Partners II LP, Caption GP, LLC, William Cooper and Jason Strasser (“Caption Management”), seeking disgorgement of profits from transactions in the Company’s stock and related derivative securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended.

During the three months ended March 31, 2024, and 2023, the Company incurred legal expenses of $ 297 and $ 73 , respectively, in the efforts to bring the cases against HAP Trading and Caption Management to trial.

These legal expenses are included in legal costs and regulatory matter expenses in the consolidated statements of comprehensive income.

The Company’s U.S.

federal statutory tax rate of 21 % and its foreign operations have statutory tax rates of approximately 23 % in Austria, 28 % in New Zealand, and 30 % in Australia.

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

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

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

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

The difference between the Company’s estimated effective tax rate of 11.6 % for the three months ended March 31, 2024, and the U.S.

As of December 31, 2023, the Company’s gross deferred tax asset was $ 39,893 .

The Company has recorded a valuation allowance of $ 714 , resulting in a net deferred tax asset of $ 39,179 , before deferred tax liabilities of $ 34,434 .

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

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

The Company has provided a valuation allowance against a portion of the deferred tax assets as of March 31, 2024 and December 31, 2023, because the ultimate realization of those assets did not meet the more-likely-than-not criteria.

Part of the Company’s deferred tax assets consist of net operating loss carryforwards (“NOLs”) 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 interim reporting period.

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

As of December 31, 2023, the Company had NOLs and research and experimentation credit for U.S.

federal income tax purposes of $ 7,699 and $ 2,997 , respectively.

The Company believes its U.S.

Federal NOLs will substantially offset its future U.S.

Federal income taxes until expiration.

Federal NOLs will offset a portion of its future U.S.

Federal income taxes.

CLARUS CORPORATION

3 unchanged sentences

Net Operating Loss Carryforward Expiration Dates

September 30, 2023

December 31, 2023

Expiration Dates December 31,

2 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.

5 unchanged sentences

Three Months Ended

Nine Months Ended

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

March 31, 2024

March 31, 2023

Sales to external customers:

2 unchanged sentences

Total Outdoor

Precision Sport

Domestic sales

International sales

Total Precision Sport

Domestic sales

International sales

Total Adventure

1 unchanged sentence

Segment operating income:

Precision Sport

Total segment operating income

Restructuring charges

Transaction costs

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.

Corporate costs

Interest income, 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 March 31, 2024 and December 31, 2023, were as follows:

March 31, 2024

December 31, 2023

CLARUS CORPORATION

1 unchanged sentence

(in thousands, except per share amounts)

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

September 30, 2023

December 31, 2022

Precision Sport

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

Three Months Ended

Nine Months Ended

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

March 31, 2024

March 31, 2023

Capital expenditures:

Precision Sport

Total capital expenditures

Depreciation:

Precision Sport

Total depreciation

Amortization:

Precision Sport

Total amortization

SUBSEQUENT EVENT

TRED Acquisition

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

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

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

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

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

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

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

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

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

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

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

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

1 unchanged sentence

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

What changed 10-Q

Item 1. Financial Statements