UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: ~~September~~June 30, ~~2021~~2022

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _________ to _________

Commission File Number: 001-34767

CLARUS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

58-1972600

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

2084 East 3900 South

Salt Lake City, Utah

84124

(Address of principal executive offices)

(Zip code)

(801) 278-5552

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $.0001 per share	CLAR	NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	¨	Non-accelerated filer	¨

Accelerated filer	x	Smaller reporting company	¨

		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

~~Securities registered pursuant to Section 12(b) of the Act:~~



~~Title of each class~~	~~Trading Symbol~~	~~Name of each exchange on which registered~~
~~Common Stock, par value $.0001 per share~~	~~CLAR~~	~~NASDAQ Global Select Market~~

As of ~~November 3, 2021,~~July 27, 2022, there were ~~36,987,552~~37,374,595 shares of common stock, par value $0.0001, outstanding.

INDEX

CLARUS CORPORATION


PART I	FINANCIAL INFORMATION	Page
Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets – ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021	3
	Condensed Consolidated Statements of Comprehensive (Loss) Income – Three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	4
	Condensed ~~Consolidated~~Consolidation Statements of Comprehensive (Loss) Income ~~(Loss)~~ – ~~Nine~~Six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	5
	Condensed Consolidated Statements of Cash Flows – ~~Nine~~Six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	6
	Condensed Consolidated Statements of Stockholders’ Equity – Three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2627
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3637
Item 4.	Controls and Procedures	3637

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	3738
Item 1A.	Risk Factors	3738
Item 6.	Exhibits	3839
Signature Page	39	40

PART I. FINANCIAL INFORMATION

~~ITEM~~ITEM 1. FINANCIAL STATEMENTS


CLARUS CORPORATION	CLARUS CORPORATION				CLARUS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS	CONDENSED CONSOLIDATED BALANCE SHEETS				CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)	(Unaudited)				(Unaudited)
(In thousands, except per share amounts)	(In thousands, except per share amounts)				(In thousands, except per share amounts)

	September 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
Assets
Current assets
Cash	$	10,170	$	17,789	$	13,888	$	19,465
Accounts receivable, less allowance for credit losses and
doubtful accounts of $709 and $1,433, respectively		68,045		50,475
Accounts receivable, less allowance for
credit losses of $1,288 and $811						70,560		66,180
Inventories		118,706		68,356		153,056		129,354
Prepaid and other current assets		13,478		5,385		12,733		11,831
Income tax receivable		285		117		624		116
Total current assets		210,684		142,122		250,861		226,946

Property and equipment, net		32,444		26,956		42,916		42,826
Other intangible assets, net		62,672		19,416		63,029		73,683
Indefinite-lived intangible assets		116,997		47,523		123,851		128,271
Goodwill		108,174		26,715		115,658		118,090
Deferred income taxes		17,156		11,113		22,367		22,433
Other long-term assets		23,616		6,846		19,329		19,578
Total assets	$	571,743	$	280,691	$	638,011	$	631,827

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities	$	54,389	$	34,665
Accounts payable					$	31,476	$	31,488
Accrued liabilities						27,103		27,473
Income tax payable		4,250		956		1,723		4,437
Current portion of long-term debt		8,990		4,000		8,871		9,585
Total current liabilities		67,629		39,621		69,173		72,983

Long-term debt		181,042		30,621
Long-term debt, net						140,739		131,948
Deferred income taxes		35,025		1,227		33,445		35,280
Other long-term liabilities		19,450		4,628		21,628		21,448
Total liabilities		303,146		76,097		264,985		261,659

Stockholders' Equity
Preferred stock, $0.0001 par value per share; 5,000
shares authorized; NaN issued		-		-		-		-
Common stock, $0.0001 par value per share; 100,000 shares authorized;
37,811 and 35,198 issued and 33,800 and 31,228 outstanding, respectively		4		4
41,328 and 41,105 issued and 37,266 and 37,094 outstanding, respectively						4		4
Additional paid in capital		577,378		513,979		670,586		662,996
Accumulated deficit		(276,463)		(286,100)		(256,130)		(263,342)
Treasury stock, at cost		(24,440)		(23,789)		(25,537)		(24,440)
Accumulated other comprehensive (loss) income		(7,882)		500
Accumulated other comprehensive loss						(15,897)		(5,050)
Total stockholders' equity		268,597		204,594		373,026		370,168
Total liabilities and stockholders' equity	$	571,743	$	280,691	$	638,011	$	631,827

See accompanying notes to condensed consolidated financial statements.	See accompanying notes to condensed consolidated financial statements.				See accompanying notes to condensed consolidated financial statements.

‎


CLARUS CORPORATION	CLARUS CORPORATION				CLARUS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME				CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)	(Unaudited)				(Unaudited)
(In thousands, except per share amounts)	(In thousands, except per share amounts)				(In thousands, except per share amounts)

	Three Months Ended				Three Months Ended
	September 30, 2021		September 30, 2020		June 30, 2022		June 30, 2021

Sales
Domestic sales	$	61,259	$	34,686	$	64,073	$	51,876
International sales		47,712		29,805		50,860		21,433
Total sales		108,971		64,491		114,933		73,309

Cost of goods sold		69,792		42,822		71,251		45,288
Gross profit		39,179		21,669		43,682		28,021

Operating expenses
Selling, general and administrative		31,314		18,674		35,444		20,704
Transaction costs		8,147		1,440		821		649
Contingent consideration benefit						(374)		-

Total operating expenses		39,461		20,114		35,891		21,353

Operating (loss) income		(282)		1,555
Operating income						7,791		6,668

Other (expense) income
Other expense
Interest expense, net		(1,476)		(232)		(1,728)		(212)
Other, net		338		449		(1,343)		(4,461)

Total other (expense) income, net		(1,138)		217
Total other expense, net						(3,071)		(4,673)

(Loss) income before income tax		(1,420)		1,772
Income tax (benefit) expense		(5,950)		589
Income before income tax						4,720		1,995
Income tax expense						956		155
Net income		4,530		1,183		3,764		1,840

Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment		(8,933)		807		(17,632)		295
Unrealized gain (loss) on hedging activities		268		(600)
Unrealized gain on hedging activities						622		108
Other comprehensive (loss) income		(8,665)		207		(17,010)		403
Comprehensive (loss) income	$	(4,135)	$	1,390	$	(13,246)	$	2,243

Net income per share:
Basic	$	0.13	$	0.04	$	0.10	$	0.06
Diluted		0.13		0.04		0.09		0.06

Weighted average shares outstanding:
Basic		33,800		29,983		37,235		31,367
Diluted		36,164		30,986		39,697		33,190

See accompanying notes to condensed consolidated financial statements.

‎


CLARUS CORPORATION	CLARUS CORPORATION				CLARUS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME					CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)	(Unaudited)				(Unaudited)
(In thousands, except per share amounts)	(In thousands, except per share amounts)				(In thousands, except per share amounts)

	Nine Months Ended				Six Months Ended
	September 30, 2021		September 30, 2020		June 30, 2022		June 30, 2021

Sales
Domestic sales	$	160,708	$	83,493	$	126,380	$	99,449
International sales		96,903		64,567		101,829		49,191
Total sales		257,611		148,060		228,209		148,640

Cost of goods sold		163,361		97,243		140,275		93,569
Gross profit		94,250		50,817		87,934		55,071

Operating expenses
Selling, general and administrative		72,903		50,537		69,619		41,589
Transaction costs		9,272		1,870		2,022		1,125
Contingent consideration expense						389		-

Total operating expenses		82,175		52,407		72,030		42,714

Operating income (loss)		12,075		(1,590)
Operating income						15,904		12,357

Other expense
Interest expense, net		(1,926)		(800)		(2,844)		(450)
Other, net		(4,263)		324		(1,410)		(4,601)

Total other expense, net		(6,189)		(476)		(4,254)		(5,051)

Income (loss) before income tax		5,886		(2,066)
Income tax benefit		(6,161)		(542)
Net income (loss)		12,047		(1,524)
Income before income tax						11,650		7,306
Income tax expense (benefit)						2,577		(211)
Net income						9,073		7,517

Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment		(9,654)		773		(11,555)		(721)
Unrealized gain (loss) on hedging activities		1,272		(336)
Unrealized gain on hedging activities						708		1,004
Other comprehensive (loss) income		(8,382)		437		(10,847)		283
Comprehensive income (loss)	$	3,665	$	(1,087)
Comprehensive (loss) income					$	(1,774)	$	7,800

Net income (loss) per share:
Net income per share:
Basic	$	0.37	$	(0.05)	$	0.24	$	0.24
Diluted		0.35		(0.05)		0.23		0.23

Weighted average shares outstanding:
Basic		32,159		29,854		37,199		31,325
Diluted		34,044		29,854		39,751		32,970

See accompanying notes to condensed consolidated financial statements.	See accompanying notes to condensed consolidated financial statements.				See accompanying notes to condensed consolidated financial statements.

‎


CLARUS CORPORATION	CLARUS CORPORATION					CLARUS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS					CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)	(Unaudited)					(Unaudited)
(In thousands)	(In thousands)					(In thousands)

		Nine Months Ended					Six Months Ended
		September 30, 2021		September 30, 2020			June 30, 2022		June 30, 2021
	Cash Flows From Operating Activities:					Cash Flows From Operating Activities:
	Net income (loss)	$	12,047	$	(1,524)	Net income	$	9,073	$	7,517
	Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:					Adjustments to reconcile net income to net cash (used in) provided by operating activities:
	Depreciation of property and equipment		4,336		3,405	Depreciation of property and equipment		3,709		2,705
	Amortization of other intangible assets		5,971		2,290	Amortization of other intangible assets		8,057		2,394
	Amortization of debt issuance costs		335		230	Amortization of debt issuance costs		361		162
	Gain on disposition of property and equipment		(2)		32	Loss (gain) on disposition of property and equipment		18		(8)
	Noncash lease expense		1,507		563	Noncash lease expense		1,652		698
	Stock-based compensation		6,414		5,433	Contingent consideration expense		365		-
	Deferred income taxes		(7,006)		(885)	Stock-based compensation		6,922		3,350
	Changes in operating assets and liabilities, net of acquisition:					Deferred income taxes		276		(710)
	Accounts receivable		(13,079)		(541)	Changes in operating assets and liabilities:
	Inventories		(25,181)		9,477	Accounts receivable		(11,825)		(1,243)
	Prepaid and other assets		(5,912)		(971)	Inventories		(26,237)		(14,874)
	Accounts payable and accrued liabilities		3,558		3,530	Prepaid and other assets		(380)		(6,575)
	Income taxes		(89)		9	Accounts payable		5,288		2,434
	Net cash (used in) provided by operating activities		(17,101)		21,048	Accrued liabilities		(443)		4,375
						Income taxes		(3,112)		137
	Cash Flows From Investing Activities:					Net cash (used in) provided by operating activities		(6,276)		362
	Purchase of business, net of cash received		(135,627)		-
	Deposit for business acquisition		-		(30,500)	Cash Flows From Investing Activities:
	Proceeds from disposition of property and equipment		25		327	Proceeds from disposition of property and equipment		298		25
	Purchases of property and equipment		(5,579)		(3,606)	Purchases of property and equipment		(4,072)		(3,225)
	Net cash used in investing activities		(141,181)		(33,779)	Net cash used in investing activities		(3,774)		(3,200)

	Cash Flows From Financing Activities:					Cash Flows From Financing Activities:
	Proceeds from revolving credit facilities		87,703		49,265	Proceeds from revolving credit facilities		61,933		15,217
	Repayments on revolving credit facilities		(37,871)		(50,014)	Repayments on revolving credit facilities		(54,961)		(20,684)
	Repayments on term notes		(5,814)		(1,000)	Repayments on term loans		(123,542)		(2,000)
	Proceeds from issuance of term notes		109,154		20,000	Proceeds from issuance of term loans		125,000		-
	Payment of debt issuance costs		(722)		(44)	Payment of debt issuance costs		(1,210)		-
	Purchase of treasury stock		(651)		(1,520)	Purchase of treasury stock		(1,097)		(651)
	Proceeds from exercise of stock options		1,652		862	Proceeds from exercise of stock options		668		1,652
	Cash dividends paid		(2,410)		(744)	Cash dividends paid		(1,861)		(1,565)
	Proceeds from the sale of common stock		-		11,476	Net cash provided by (used in) financing activities		4,930		(8,031)
	Common stock issuance costs		-		(325)
	Net cash provided by financing activities		151,041		27,956	Effect of foreign exchange rates on cash		(457)		(138)

	Effect of foreign exchange rates on cash		(378)		99	Change in cash		(5,577)		(11,007)
						Cash, beginning of year		19,465		17,789
	Change in cash		(7,619)		15,324	Cash, end of period	$	13,888	$	6,782
	Cash, beginning of year		17,789		1,703
	Cash, end of period	$	10,170	$	17,027	Supplemental Disclosure of Cash Flow Information:
						Cash paid for income taxes	$	5,492	$	353
	Supplemental Disclosure of Cash Flow Information:					Cash paid for interest	$	2,339	$	309
	Cash paid for income taxes	$	353	$	418	Supplemental Disclosures of Non-Cash Investing and Financing Activities:
	Cash paid for interest	$	1,389	$	624	Property and equipment purchased with accounts payable	$	607	$	236
	Supplemental Disclosures of Non-Cash Investing and Financing Activities:					Lease liabilities arising from obtaining right of use assets	$	1,324	$	3,933
	Stock issued for business acquisition	$	55,333	$	-	Unpaid debt issuance costs	$	175	$	217
	Contingent consideration for business acquisition	$	3,564	$	-
	Property and equipment purchased with accounts payable	$	57	$	286
	Lease liabilities arising from obtaining right of use assets	$	6,421	$	499
	Unpaid debt issuance costs	$	270	$	150
	Stock dividends	$	-	$	1,533

See accompanying notes to condensed consolidated financial statements.	See accompanying notes to condensed consolidated financial statements.					See accompanying notes to condensed consolidated financial statements.

‎


CLARUS CORPORATION	CLARUS CORPORATION																CLARUS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY	CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY																CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)	(Unaudited)																(Unaudited)
(In thousands, except per share amounts)	(In thousands, except per share amounts)																(In thousands, except per share amounts)

													Accumulated																Accumulated
					Additional								Other		Total						Additional								Other		Total
	Common Stock				Paid-In		Accumulated		Treasury Stock				Comprehensive		Stockholders'		Common Stock				Paid-In		Accumulated		Treasury Stock				Comprehensive		Stockholders'
	Shares		Amount		Capital		Deficit		Shares		Amount		Income (Loss)		Equity		Shares		Amount		Capital		Deficit		Shares		Amount		Income (Loss)		Equity

Balance, December 31, 2019		33,615	$	3	$	492,353	$	(288,592)		(3,855)	$	(22,269)	$	(303)	$	181,192
Balance, December 31, 2020																		35,198	$	4	$	513,979	$	(286,100)		(3,970)	$	(23,789)	$	500	$	204,594
Net income																		-		-		-		5,677		-		-		-		5,677
Other comprehensive loss																		-		-		-		-		-		-		(120)		(120)
Cash dividends ($0.025 per share)																		-		-		-		(783)		-		-		-		(783)
Purchase of treasury stock																		-		-		-		-		(41)		(651)		-		(651)
Stock-based compensation expense																		-		-		1,524		-		-		-		-		1,524
Proceeds from exercise of options																		127		-		246		-		-		-		-		246
Balance, March 31, 2021																		35,325	$	4	$	515,749	$	(281,206)		(4,011)	$	(24,440)	$	380	$	210,487
Net income		-		-		-		36		-		-		-		36		-		-		-		1,840		-		-		-		1,840
Other comprehensive income		-		-		-		-		-		-		412		412		-		-		-		-		-		-		403		403
Cash dividends ($0.025 per share)		-		-		-		(744)		-		-		-		(744)		-		-		-		(782)		-		-		-		(782)
Stock-based compensation expense		-		-		613		-		-		-		-		613		-		-		1,826		-		-		-		-		1,826
Balance, March 31, 2020		33,615	$	3	$	492,966	$	(289,300)		(3,855)	$	(22,269)	$	109	$	181,509
Net loss		-		-		-		(2,743)		-		-		-		(2,743)
Other comprehensive loss		-		-		-		-		-		-		(182)		(182)
Stock dividends ($0.025 per share)		70		-		714		(714)		-		-		-		-
Purchase of treasury stock		-		-		-		-		(14)		(137)		-		(137)
Stock-based compensation expense		-		-		616		-		-		-		-		616
Proceeds from exercise of options		72		-		497		-		-		-		-		497		171		-		1,406		-		-		-		-		1,406
Balance, June 30, 2020		33,757	$	3	$	494,793	$	(292,757)		(3,869)	$	(22,406)	$	(73)	$	179,560
Net income		-		-		-		1,183		-		-		-		1,183
Other comprehensive income		-		-		-		-		-		-		207		207
Stock dividends ($0.025 per share)		63		-		819		(819)		-		-		-		-
Purchase of treasury stock		-		-		-		-		(101)		(1,383)		-		(1,383)
Stock-based compensation expense		244		-		4,204		-		-		-		-		4,204
Proceeds from exercise of options		57		-		365		-		-		-		-		365
Issuance of common stock, net of issuance costs		900		1		11,150		-		-		-		-		11,151
Balance, September 30, 2020		35,021	$	4	$	511,331	$	(292,393)		(3,970)	$	(23,789)	$	134	$	195,287
Balance, June 30, 2021																		35,496	$	4	$	518,981	$	(280,148)		(4,011)	$	(24,440)	$	783	$	215,180

‎

																													Accumulated
													Accumulated								Additional								Other		Total
					Additional								Other		Total		Common Stock				Paid-In		Accumulated		Treasury Stock				Comprehensive		Stockholders'
	Common Stock				Paid-In		Accumulated		Treasury Stock				Comprehensive		Stockholders'		Shares		Amount		Capital		Deficit		Shares		Amount		Income (Loss)		Equity
	Shares		Amount		Capital		Deficit		Shares		Amount		Income (Loss)		Equity

Balance, December 31, 2020		35,198	$	4	$	513,979	$	(286,100)		(3,970)	$	(23,789)	$	500	$	204,594
Balance, December 31, 2021																		41,105	$	4	$	662,996	$	(263,342)		(4,011)	$	(24,440)	$	(5,050)	$	370,168
Net income		-		-		-		5,677		-		-		-		5,677		-		-		-		5,309		-		-		-		5,309
Other comprehensive loss		-		-		-		-		-		-		(120)		(120)
Other comprehensive income																		-		-		-		-		-		-		6,163		6,163
Cash dividends ($0.025 per share)		-		-		-		(783)		-		-		-		(783)		-		-		-		(930)		-		-		-		(930)
Purchase of treasury stock		-		-		-		-		(41)		(651)		-		(651)		-		-		-		-		(51)		(1,097)		-		(1,097)
Stock-based compensation expense		-		-		1,524		-		-		-		-		1,524		-		-		3,367		-		-		-		-		3,367
Proceeds from exercise of options		127		-		246		-		-		-		-		246		167		-		126		-		-		-		-		126
Balance, March 31, 2021		35,325	$	4	$	515,749	$	(281,206)		(4,011)	$	(24,440)	$	380	$	210,487
Balance, March 31, 2022																		41,272	$	4	$	666,489	$	(258,963)		(4,062)	$	(25,537)	$	1,113	$	383,106
Net income		-		-		-		1,840		-		-		-		1,840		-		-		-		3,764		-		-		-		3,764
Other comprehensive income		-		-		-		-		-		-		403		403
Other comprehensive loss																		-		-		-		-		-		-		(17,010)		(17,010)
Cash dividends ($0.025 per share)		-		-		-		(782)		-		-		-		(782)		-		-		-		(931)		-		-		-		(931)
Stock-based compensation expense		-		-		1,826		-		-		-		-		1,826		-		-		3,555		-		-		-		-		3,555
Proceeds from exercise of options		171		-		1,406		-		-		-		-		1,406		56		-		542		-		-		-		-		542
Balance, June 30, 2021		35,496	$	4	$	518,981	$	(280,148)		(4,011)	$	(24,440)	$	783	$	215,180
Net income		-		-		-		4,530		-		-		-		4,530
Other comprehensive income		-		-		-		-		-		-		(8,665)		(8,665)
Cash dividends ($0.025 per share)		-		-		-		(845)		-		-		-		(845)
Stock-based compensation expense		-		-		3,064		-		-		-		-		3,064
Shares issued in business acquisition		2,315		-		55,333		-		-		-		-		55,333
Balance, September 30, 2021		37,811	$	4	$	577,378	$	(276,463)		(4,011)	$	(24,440)	$	(7,882)	$	268,597
Balance, June 30, 2022																		41,328	$	4	$	670,586	$	(256,130)		(4,062)	$	(25,537)	$	(15,897)	$	373,026

See accompanying notes to condensed consolidated financial statements.	See accompanying notes to condensed consolidated financial statements.																See accompanying notes to condensed consolidated financial statements.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(in thousands, except per share amounts)

NOTE 1. 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~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, 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~~six months ended ~~September~~June 30, ~~2021~~2022 are not necessarily indicative of the results to be obtained for the year ending December 31, ~~2021.~~2022. 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, ~~2020,~~2021, filed with the Securities and Exchange Commission (the “SEC”) on March ~~8, 2021.~~

Clarus, incorporated in Delaware in 1991, acquired Black Diamond Equipment, Ltd. (“Black Diamond Equipment”) in May 2010 and changed its name to Black Diamond, Inc. in January 2011. In October 2012, we acquired PIEPS Holding GmbH and its subsidiaries (collectively, “PIEPS”).

On August 14, 2017, the Company changed its name from Black Diamond, Inc. to Clarus Corporation and its stock ticker symbol from “BDE” to “CLAR” on the NASDAQ stock exchange. On August 21, 2017, the Company acquired Sierra Bullets, L.L.C. (“Sierra”). On November 6, 2018, the Company acquired the assets of SKINourishment, Inc. (“SKINourishment”).

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

~~On July 1, 2021, the Company completed the acquisition of Australia-based Rhino-Rack Holdings Pty Ltd (“Rhino-Rack”).~~7, 2022.

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 ~~Rhino-Rack®~~MAXTRAX® brand names through outdoor specialty and online retailers, our own websites, distributors and original equipment manufacturers. ~~Our portfolio of iconic brands is well-positioned for sustainable, long-term growth underpinned by powerful industry trends across the outdoor and adventure sport end markets.~~

Through our Black Diamond, PIEPS, and SKINourishment brands, we offer a broad range of products including: high-performance, activity-based apparel (such as shells, insulation, midlayers, pants and logowear); rock-climbing footwear and equipment (such as carabiners, protection devices, harnesses, belay devices, helmets, and ice-climbing gear); technical backpacks and high-end day packs; trekking poles; headlamps and lanterns; gloves and mittens; and skincare and other sport-enhancing products. We also offer advanced skis, ski poles, ski skins, and snow safety products, including avalanche airbag systems, avalanche transceivers, shovels, and probes. Through our Sierra and Barnes brands, we manufacture a wide range of high-performance bullets and ammunition for both rifles and pistols that are used for precision target shooting, hunting and military and law enforcement purposes. Rhino-Rack is a leading manufacturer of highly-engineered automotive roof racks, trays, mounting systems, luggage boxes, carriers and accessories with leading market share in Australia and New Zealand and a growing presence in the United States.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The more significant estimates relate to the fair value of net assets acquired in business combinations, excess or obsolete inventory, allowance for credit losses, ~~and doubtful accounts,~~contingent consideration liabilities, and valuation of deferred tax assets. We base our estimates on historical experience, projected future cash flows, and other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.

Significant Accounting Policies

Accounting Pronouncements adopted during 2022

During the three months and six months ended June 30, 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”) which was phased out in 2021, 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.

NOTE 2. ACQUISITIONS

MAXTRAX

On November 26, 2021, Clarus entered into a Share and Unit Purchase Agreement (the “MAXTRAX Purchase Agreement”) to acquire MaxTrax Australia Pty Ltd (“MAXTRAX”), which subsequently closed on December 1, 2021. All United States dollar amounts contained herein are based on the exchange rates in effect for Australian dollars ($AUD) and the market value of the Company’s common stock at the time of closing of the acquisition of MAXTRAX (the “MAXTRAX Acquisition”).

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

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

~~Significant Accounting Policies~~

~~Accounting Pronouncements not yet adopted~~

~~In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation~~June 30, 2022 and 2023. Subsequent to June 30, 2022, approximately 108 shares of the ~~Effects~~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 ~~Reference Rate Reform on Financial Reporting. This ASU provides temporary optional expedients~~additional contingent consideration up to $AUD 6,250 (approximately $4,457) in cash if certain future net sales thresholds are met during 2022 and exceptions to existing guidance on contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as the London Inter-Bank Offered Rate (“LIBOR”) which is being phased out in 2021, to alternate reference rates, such as the Secured Overnight Financing Rate (“SOFR”2023 (the “MAXTRAX Contingent Consideration”). The ~~standard is currently effective~~Company estimated the initial fair value of the MAXTRAX Contingent Consideration to be $AUD 2,307 (approximately $1,644) and ~~upon adoption may be applied prospectively to contract modifications made on or before December 31, 2022. The provisions have impact as contract modifications~~has recorded this liability within accrued liabilities and other ~~changes occur while LIBOR is phased out.~~long-term liabilities. The ~~Company is in~~net sales threshold required for the ~~process~~payment of ~~evaluating~~ the ~~optional relief guidance provided within this ASU. Management will continue its assessment and monitor regulatory developments~~2022 portion of the MAXTRAX Contingent Consideration was met during the ~~LIBOR transition period.~~2022 measurement period ended June 30, 2022. See Note 10 for discussion regarding the valuation of the MAXTRAX Contingent Consideration as of June 30, 2022.

~~NOTE 2. ACQUISITIONS~~The acquisition was accounted for as a business combination.

Rhino-Rack

On May 30, 2021, Clarus ~~through Oscar Aluminium Pty Ltd (the “Buyer”), an indirect wholly-owned Australian subsidiary of the Company,~~ entered into a Share Sale and Purchase Agreement (the “Purchase Agreement”) to acquire ~~Australia-based~~ Rhino-Rack Holdings Pty Ltd (“Rhino-Rack”)~~. On~~, which subsequently closed on July 1, ~~2021, the transactions contemplated by the Purchase Agreement were consummated.~~2021. All United States dollar amounts contained herein are based on the exchange rates in effect for Australian dollars ($AUD) and the market value of the Company’s common stock at the time of closing of the acquisition of Rhino-Rack (the “Rhino-Rack Acquisition”).

~~Under the terms of the Purchase Agreement, the Buyer~~The Company acquired Rhino-Rack for an aggregate purchase price of approximately $AUD ~~269,097~~269,696 (approximately ~~$202,038)~~$202,488), subject to a post-closing ~~adjustment. The purchase price was~~adjustment, comprised of approximately $AUD ~~190,650~~191,249 (approximately ~~$143,140)~~$143,590) cash, ~~2,315,121~~2,315 shares of the Company’s common stock valued at $55,333, and additional contingent consideration described below. ~~The shares of the Company’s common stock issued are subject to a lock-up agreement restricting sales for 180 days from the closing of the Acquisition.~~ The Purchase Agreement also provides for the payment of additional contingent consideration up to approximately $AUD 10,000 (approximately $7,508) if certain future net sales thresholds are met (the ~~“Contingent~~“Rhino-Rack Contingent Consideration”). The Company estimated the initial fair value of the Rhino-Rack Contingent Consideration to be approximately $AUD 4,747 (approximately $3,565). and has recorded this liability within accrued liabilities. 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. See Note 10 for discussion regarding the valuation of the Rhino-Rack Contingent Consideration as of June 30, 2022.

The acquisition was accounted for as a business combination. ~~Acquisition-related costs for the Rhino-Rack Acquisition, which were included in transaction costs during the three and nine months ended September 30, 2021 were $7,866 and $8,643, respectively.~~

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

~~Barnes~~

On September 30, 2020, Sierra entered into an Asset Purchase Agreement (the “Barnes Asset Purchase Agreement”) to acquire certain assets and assume certain liabilities constituting the Barnes business (“Barnes”). Pursuant to the Barnes Asset Purchase Agreement, the purchase price to be paid for Barnes is $30,500. On October 2, 2020, Sierra completed the acquisition of Barnes. The acquisition was accounted for as a business combination.

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

~~CLARUS CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(Unaudited)~~

~~(in thousands, except per share amounts)~~

The following table is a reconciliation to the fair value of the purchase consideration and how the purchase consideration is allocated to assets acquired and liabilities assumed which have been estimated at their fair values. The fair value estimates for the purchase price allocation for MAXTRAX and Rhino-Rack are based on the Company’s best estimates and assumptions as of the reporting date and are considered preliminary. 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, which existed as of the date of acquisition, related to the fair value of assumed liabilities and such amounts were recorded during the first quarter of 2022. The fair value measurements of identifiable assets and liabilities, and the resulting goodwill related to the ~~Rhino-Rack~~MAXTRAX Acquisition are subject to change and the final purchase price ~~allocation~~allocations could be different from the amounts presented below. We expect to finalize the valuation of MAXTRAX as soon as practicable, but not later than one year from the date of the ~~Rhino-Rack Acquisition.~~acquisition. The fair value measurements for the acquisition of ~~Barnes~~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 ~~Rhino-Rack segment and goodwill for Barnes is included in the Sierra~~Adventure segment. The goodwill consists largely of the ~~synergies~~growth and profitability expected from ~~combining operations of both~~these acquisitions.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)


	Rhino-Rack			Barnes		MAXTRAX			Rhino-Rack
	July 1, 2021			October 2, 2020		December 1, 2021			July 1, 2021
	Number of Shares	Estimated Fair Value		Estimated Fair Value		Number of Shares	Estimated Fair Value		Number of Shares	Estimated Fair Value

Cash paid	-	$	143,140	$	30,500	-	$	26,780	-	$	143,590

Issuance of shares of Clarus Corporation	2,315		55,333		-	107		2,594	2,315		55,333

Future issuance of shares of Clarus Corporation						-		4,457	-		-

Contingent consideration	-		3,565		-	-		1,644	-		3,565

Total purchase consideration	2,315	$	202,038	$	30,500	107	$	35,475	2,315	$	202,488

Assets acquired and liabilities assumed
Assets
Cash		$	7,513	$	2		$	1,869		$	7,513
Accounts receivable, net			10,769		-
Accounts receivable								2,791			10,769
Inventories			27,046		4,535			1,819			27,046
Prepaid and other current assets			644		612			883			644
Property and equipment			4,619		4,036			139			4,619
Other intangible assets			51,500		7,500			10,341			55,400
Indefinite-lived intangible assets			72,800		5,600			10,555			72,800
Goodwill			85,127		8,625			15,199			78,347
Other long-term assets			11,796		4,355			979			11,468
Total assets			271,814		35,265			44,575			268,606

Liabilities
Accounts payable and accrued liabilities			16,572		842			2,176			16,511
Income tax payable			3,413		-			251			3,413
Current portion of long-term debt			607		-			-			607
Long-term debt			2,107		-			-			2,107
Deferred income taxes			35,781		-			5,863			32,451
Other long-term liabilities			11,296		3,923			810			11,029
Total liabilities			69,776		4,765			9,100			66,118

Net Book Value Acquired		$	202,038	$	30,500		$	35,475		$	202,488

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

(Unaudited)

(in thousands, except per share amounts)

In connection with the acquisitions, the Company acquired exclusive rights to ~~Rhino-Rack’s~~MAXTRAX’s and ~~Barnes’~~Rhino-Rack’s trademarks, customer relationships, and product technologies. The amounts assigned to each class of intangible asset, other than goodwill acquired, and the related average useful lives as of the acquisition dates, are as follows:

Rhino-Rack

Barnes

MAXTRAX

Rhino-Rack

Average

Gross

Useful Life

Gross

Useful Life

Gross

Useful Life

Gross

Useful Life

Intangibles subject to amortization

Customer relationships

36,500

11.5 years

5,700

10.0 years

8,986

13.5 years

40,400

13.5 years

Product technologies

15,000

10.0 years

1,800

10.0 years

1,355

7.0 years

15,000

10.0 years

Intangibles not subject to amortization

Trademarks

72,800

N/A

5,600

N/A

10,555

N/A

72,800

N/A

124,300

11.1 years

13,100

10.0 years

20,896

12.6 years

128,200

12.6 years

Although the Company is electing to treat the acquisition of Rhino-Rack as a purchase of assets for tax purposes, from an income tax perspective, there is no tax deduction provided for intangibles in Australia. As a result, deferred tax liabilities have been set up for the finite and indefinite-lived assets. From a capital base perspective, deferred tax assets established through purchase accounting have been fully offset by a corresponding valuation allowance. Furthermore, theThe full amount of goodwill of ~~$85,127~~$15,199 for MAXTRAX and $78,347 for Rhino-Rack is expected to be non-deductible for tax purposes. No pre-existing relationships existed between the Company and ~~the~~MAXTRAX and Rhino-Rack or their sellers prior to the acquisition. MAXTRAX and Rhino-Rack revenue and operating income are included in the Rhino-Rack segment. Total revenue of $19,625 and net income of $5,453 of Rhino-Rack were included in the Company’s condensed consolidated statements of comprehensive income (loss) from the date of acquisition to September 30, 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 SierraAdventure segment.

The following unaudited pro forma results are based on the individual historical results of the Company, ~~Rhino-Rack~~MAXTRAX and ~~Barnes,~~Rhino-Rack, with adjustments to give effect as if the acquisitions and borrowings used to finance the acquisitions had occurred on January 1, 2020, ~~for 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.


	Three Months Ended				Nine Months Ended				Three Months Ended		Six Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		June 30, 2021		June 30, 2021
Sales	$	108,971	$	93,259	$	308,142	$	213,076	$	99,083	$	206,092
Net income	$	15,739	$	3,938	$	25,258	$	832	$	1,046	$	11,031
Net income per share - basic	$	0.47	$	0.13	$	0.79	$	0.03	$	0.03	$	0.35
Net income per share - diluted	$	0.44	$	0.13	$	0.74	$	0.03	$	0.03	$	0.33

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 Rhino-Rack or January 1, 2019 for Barnes.~~2020. 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.

NOTE 3. INVENTORIES

Inventories, as of June 30, 2022 and December 31, 2021, were as follows:



	June 30, 2022		December 31, 2021
Finished goods	$	106,055	$	86,647
Work-in-process		9,721		10,336
Raw materials and supplies		37,280		32,371
	$	153,056	$	129,354

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

~~NOTE 3. INVENTORIES~~

~~Inventories, as of September 30, 2021 and December 31, 2020, were as follows:~~

September 30, 2021
December 31, 2020
Finished goods
$
78,601
$
50,132
Work-in-process
9,168
6,429
Raw materials and supplies
30,937
11,795
$
118,706
$
68,356

NOTE 4. PROPERTY AND EQUIPMENT

Property and equipment, net, as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, were as follows:


	September 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021

Land	$	3,160	$	3,160	$	4,160	$	4,160
Building and improvements		7,650		7,324		17,059		16,403
Furniture and fixtures		6,183		5,715		7,335		6,677
Computer hardware and software		7,266		5,707		8,314		7,512
Machinery and equipment		31,603		26,848		34,620		33,581
Construction in progress		5,495		3,042		4,579		4,312
		61,357		51,796		76,067		72,645
Less accumulated depreciation		(28,913)		(24,840)		(33,151)		(29,819)
	$	32,444	$	26,956	$	42,916	$	42,826

Depreciation expense for the three months ended ~~September~~June 30, 2022 and 2021 was $1,877 and ~~2020 was $1,631 and $1,140,~~$1,349, respectively, and for the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021 was $3,709 and ~~2020 was $4,336 and $3,405,~~$2,705, respectively.

NOTE 5. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following table summarizes the balances in goodwill by segment:

Black Diamond
Sierra
Rhino-Rack
Total
Balance at December 31, 2020
$
-
$
26,715
$
-
$
26,715
Increase due to acquisition of Rhino-Rack
-
-
85,127
85,127
Impact of foreign currency exchange rates
-
-
(3,668)
(3,668)
Balance at September 30, 2021
$
-
$
26,715
$
81,459
$
108,174


	Outdoor		Precision Sport		Adventure		Total

Balance at December 31, 2021	$	-	$	26,715	$	91,375	$	118,090

Acquisition adjustment		-		-		741		741
Impact of foreign currency exchange rates		-		-		(3,173)		(3,173)

Balance at June 30, 2022	$	-	$	26,715	$	88,943	$	115,658

Indefinite Lived Intangible Assets

The following table summarizes the changes in indefinite lived intangible assets:


Balance at December 31, ~~2020~~2021	$	~~47,523~~128,271

~~Increase due to acquisition of Rhino-Rack~~		~~72,800~~
Impact of foreign currency exchange rates		~~(3,326)~~(4,420)

Balance at ~~September~~June 30, ~~2021~~2022	$	~~116,997~~123,851

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

Trademarks classified as indefinite-lived intangible assets by brand as of June 30, 2022 and December 31, 2021, were as follows:


	June 30, 2022		December 31, 2021
Black Diamond	$	19,600	$	19,600
PIEPS		2,917		3,166
Sierra		18,900		18,900
Barnes		5,600		5,600
Rhino-Rack		66,659		70,278
MAXTRAX		10,175		10,727
	$	123,851	$	128,271

Other Intangible Assets, net

The following table summarizes the changes in gross other intangible assets:


Gross balance at December 31, ~~2020~~2021	$	~~40,840~~104,681

~~Increase due to acquisition of Rhino-Rack~~		~~51,500~~
Impact of foreign currency exchange rates		~~(2,492)~~(3,337)

Gross balance at ~~September~~June 30, ~~2021~~2022	$	~~89,848~~101,344

Other intangible assets, net of amortization as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, were as follows:

September 30, 2021
Gross
Accumulated Amortization
Net
Weighted Average Useful Life
Intangibles subject to amortization
Customer relationships
$
66,705
$
(21,036)
$
45,669
12.8 years
Product technologies
20,933
(4,540)
16,393
10.4 years
Tradename / trademark
1,263
(653)
610
9.4 years
Core technologies
947
(947)
-
10.0 years
$
89,848
$
(27,176)
$
62,672
12.2 years
December 31, 2020
Gross
Accumulated Amortization
Net
Weighted Average Useful Life
Customer relationships
$
31,930
$
(16,783)
$
15,147
14.2 years
Product technologies
6,700
(3,151)
3,549
11.5 years
Tradename / trademark
1,263
(543)
720
9.4 years
Core technologies
947
(947)
-
10.0 years
$
40,840
$
(21,424)
$
19,416
13.5 years

Amortization expense for the three months ended September 30, 2021 and 2020 was $3,577 and $753, respectively, and for the nine months ended September 30, 2021 and 2020 was $5,971 and $2,290, respectively. Future amortization expense for other intangible assets as of September 30, 2021 is as follows:

Years Ending December 31,
Amortization Expense
2021 (excluding the nine months ended September 30, 2021)
$
3,529
2022
12,729
2023
11,148
2024
9,731
2025
8,035
Thereafter
17,500
$
62,672

~~NOTE 6. LONG-TERM DEBT~~

~~Long-term debt as of September 30, 2021 and December 31, 2020, was as follows:~~


	June 30, 2022
	Gross		Accumulated Amortization		Net		Weighted Average Useful Life
Intangibles subject to amortization
Customer relationships	$	77,717	$	(29,290)	$	48,427		13.8 years
Product technologies		21,417		(7,320)		14,097		10.2 years
Tradename / trademark		1,263		(758)		505		9.4 years
Core technologies		947		(947)		-		10.0 years
	$	101,344	$	(38,315)	$	63,029		13.0 years

	December 31, 2021
	Gross		Accumulated Amortization		Net		Weighted Average Useful Life

Customer relationships	$	80,078	$	(23,804)	$	56,274		13.8 years
Product technologies		22,393		(5,557)		16,836		10.2 years
Tradename / trademark		1,263		(690)		573		9.4 years
Core technologies		947		(947)		-		10.0 years
	$	104,681	$	(30,998)	$	73,683		12.9 years

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

September 30, 2021
December 31, 2020
Revolving credit facility (a)
$
65,412
$
15,579
Other debt (b)
1,525
1,042
Term note (c)
123,437
18,000
Debt issuance costs
(342)
-
190,032
34,621
Less current portion
(8,990)
(4,000)
$
181,042
$
30,621

~~(a)~~AsAmortization expense for the three months ended June 30, 2022 and 2021, was $3,937 and $1,197, respectively, and for the six months ended June 30, 2022 and 2021 was $8,057 and $2,394, respectively. Future amortization expense for other intangible assets as of ~~September~~June 30, ~~2021, the Company had drawn $65,412 on the $100,000 revolving commitment that was available under the credit agreement,~~2022 is as amended, with JPMorgan Chase Bank, N.A., with a maturity date of May 3, 2024. The Company pays interest monthly on any borrowings on the Credit Agreement. As of September 30, 2021 and December 31, 2020, the rate was 1.6250% and 2.0625%, respectively.follows:


Years Ending December 31,	Amortization Expense
2022 (excluding the six months ended June 30, 2022)	$	7,398
2023		12,882
2024		10,840
2025		8,769
2026		6,732
2027		4,917
Thereafter		11,491
	$	63,029

NOTE 6. ACCRUED LIABILITIES AND OTHER LONG-TERM LIABILITIES

Accrued liabilities as of June 30, 2022 and December 31, 2021, were as follows:


	June 30, 2022		December 31, 2021

Accrued payroll and related items	$	4,835	$	5,029
Accrued bonus		4,350		3,615
Accrued warranty		1,604		1,529
Current lease liabilities		2,842		2,824
Accrued commissions		692		811
Contingent consideration liabilities		2,148		2,791
Accrued excise tax		980		724
Other		9,652		10,150
	$	27,103	$	27,473

Other long-term liabilities as of June 30, 2022 and December 31, 2021, were as follows:


	June 30, 2022		December 31, 2021

Long-term lease liability	$	14,316	$	15,111
Deferred stock consideration for business acquisition		4,703		4,530
Contingent consideration liability		1,504		694
Other		1,105		1,113
	$	21,628	$	21,448

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

NOTE 7. LONG-TERM DEBT

Long-term debt as of June 30, 2022 and December 31, 2021, was as follows:


	June 30, 2022		December 31, 2021

Revolving credit facility (a)	$	25,472	$	18,501
Other debt (b)		1,266		1,467
Term loan (c)		123,438		121,874
Debt issuance costs		(566)		(309)
		149,610		141,533
Less current portion		(8,871)		(9,585)
	$	140,739	$	131,948

On ~~July 1, 2021,~~January 3, 2022, the Company and certain of its direct and indirect subsidiaries ~~(each, a “Loan Party” and, collectively, the “Loan Parties”)~~ entered into Amendment No. 34 (“Amendment No. 3”4”) to ~~that certain Credit Agreement,~~the existing credit agreement, dated as of May 3, 2019 (the “Existing Credit Agreement”) by and among the Company, JPMorgan Chase Bank, N.A., as ~~amended by~~administrative agent, and the lenders party thereto. Amendment No. ~~1 dated May 28, 2019~~4, among other things, permits (i) the Company to borrow in Australian Dollars and ~~Amendment No. 2 dated November 12, 2020,~~New Zealand Dollars in order to support the operations of the Company in Australia and New Zealand and (ii) provides for addbacks to EBITDA, for debt covenant purposes, (as defined in the Existing Credit Agreement) under the Existing Credit Agreement for expenses relating to activities in respect of acquisitions, dispositions, investments and financings (whether or not these transactions are actually consummated).

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

The Restated Credit Agreement ~~as amended by Amendment No. 3 increased the aggregate amount~~provides for borrowings of ~~the~~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 ~~thereunder to $125,000 and increased the maximum amount of the revolving loan facility thereunder to $100,000.~~(the “Term Loans”). The Restated Credit Agreement ~~continues to permit~~also permits the ~~Loan Parties,~~Company, subject to certain requirements, to arrange with lenders for an aggregate of up to ~~$50,000~~$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 ~~$275,000.~~$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.

~~Amendment No. 3~~The Term Loans were fully drawn on the Effective Date and cannot be reborrowed. The Restated Credit Agreement provides for ~~additional subsidiaries~~quarterly amortization payments of the ~~Company~~Term Loans on the last business day of each March, June, September and December, commencing on June 30, 2022. Through and including the payment due on March 31, 2023, the scheduled amortization payment is $1,563 per quarter, and each scheduled amortization payment due thereafter through the Maturity Date is $3,125 per quarter.

The applicable rate for these borrowings will range from 0.50% to ~~guarantee~~1.625% per annum, in the case of alternate base rate borrowings, and ~~provide collateral for~~1.50% to 2.625% per annum, in the ~~loans under~~case of term benchmark borrowings. The applicable rate was initially 0.875% per annum, in the ~~Credit Agreement, including certain~~case of ~~its newly formed or newly acquired Australian subsidiaries~~alternate base rate borrowings, and 1.875% per annum, in ~~connection with~~ the ~~Rhino-Rack Acquisition. Amendment No. 3 also removed~~case of term benchmark borrowings, however, these initial applicable rates may be adjusted from time to time based upon the ~~previously agreed upon ability~~level of the ~~Company to issue debt securities that may be convertible into equity interests of the Company in an aggregate principal amount of up to $125,000 and also increased the maximum~~Company’s consolidated total leverage ~~ratio permitted under the Credit Agreement to 4.25:1.00. Amendment No. 3 did not change the maturity date which remains May 3, 2024.~~ratio.

All obligations under the Restated Credit Agreement are secured by ~~100% of~~ our ~~domestic, and 65% of our foreign,~~ subsidiary equity interests, as well as accounts receivable, inventory, intellectual property and certain other assets owned by the Company. The Restated Credit Agreement contains restrictions on the Company’s ability to pay dividends or make distributions or other restricted payments if certain conditions in the Restated Credit Agreement are not fulfilled. The Restated Credit Agreement also includes other customary affirmative and negative covenants, including financial covenants relating to the Company’s consolidated total leverage ratio and fixed charge coverage ratio. The Company was in compliance with the debt covenants set forth in the Credit Agreement as of ~~September~~June 30, ~~2021.~~2022.

(a)As of June 30, 2022, the Company had drawn $25,472 on the $300,000 revolving commitment that was available under the Restated Credit Agreement, with a maturity date of April 18, 2027. The Company pays interest monthly on any borrowings on the Restated Credit Agreement. As of June 30, 2022 and December 31, 2021, the rates were approximately 3.5% and 2.4%, respectively.

(b)Foreign subsidiaries of the Company have a revolving credit facility and term debt with financial institutions which mature between October 16, 2021 and July 27, 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 September 30, 2021, the interest rates ranged between 1.3387% and 5.1651% and as of December 31, 2020 was 1.3387%. The credit facilities are secured by certain assets of the foreign subsidiaries.

~~(c)~~Under the Credit Agreement, the Company had access to a term loan facility that was available for drawdown until May 3, 2020. On April 30, 2020, the Company borrowed $20,000 under such term loan facility. On July 1, 2021, under Amendment No. 3, the aggregate amount of the term loan facility was increased to $125,000 and the term loan was fully borrowed at the closing of Amendment No. 3. The Company is required to repay the term loan through quarterly payments of $1,563 each beginning with September 30, 2021, increasing to $3,125 each beginning with September 30, 2022, and any remaining obligations will be repaid in full on the maturity date of the Credit Agreement of May 3, 2024. The Company pays interest monthly on any borrowings on the Credit Agreement. As of September 30, 2021 and December 31, 2020, the rate was 1.6250% and 2.0625%, respectively. As part of the Rhino-Rack Acquisition, the Company assumed certain current and long-term debt of approximately $2,252 which was settled during the three months ended September 30, 2021.

1516

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

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 June 30, 2022, the interest rates ranged between approximately 1.3% and 5.0% and as of December 31, 2021, the interest rates ranged between approximately 1.3% and 5.2%. The credit facilities are secured by certain assets of the foreign subsidiaries.

(c)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. The Company pays interest monthly on any borrowings on the Restated Credit Agreement. As of June 30, 2022 and December 31, 2021, the rates were approximately 3.5% and 2.4%, respectively.

NOTE 7.8. DERIVATIVE FINANCIAL INSTRUMENTS

The Company’s primary exchange rate risk management objective is to mitigate the uncertainty of anticipated cash flows attributable to changes in foreign currency exchange rates. The Company primarily focuses on mitigating changes in cash flows resulting from sales denominated in currencies other than the U.S. dollar. The Company manages this risk primarily by using currency forward and option contracts. If the anticipated transactions are deemed probable, the resulting relationships are formally designated as cash flow hedges. 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.

As of June 30, 2022, the Company held commodity derivative contracts, with remaining maturities of less than one year, to mitigate the risk of commodity price fluctuations associated with raw material costs. The notional amount of the commodity derivative contracts as of June 30, 2022 was 1,264 pounds. These contracts are not designated as accounting hedges and the changes in fair value of the instruments are recognized in earnings. During the ~~nine~~three and six months ~~ending September~~ended June 30, 2022, losses of $(553) were recorded in other, net expense.

As of June 30, 2021, the Company held currency forward contracts to mitigate currency fluctuations related to the ~~estimated~~ cash purchase price of Rhino-Rack totaling ~~AUD~~$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~~were recognized in earnings. During the three and ~~nine~~six months ended ~~September~~June 30, 2021, ~~gains (losses)~~losses of ~~$232 and $(4,281)~~$(4,513) were recorded in other, net ~~expense, respectively.~~expense.

At ~~September~~June 30, ~~2021,~~2022, 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. At ~~September~~June 30, ~~2021,~~2022, there was no such exposure to the counterparties. The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain of ~~$639~~$1,052 on all contracts at ~~September~~June 30, ~~2021.~~2022. 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~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


	~~September~~June 30, 2022
	Notional	Latest
	Amount	Maturity

Foreign exchange contracts - Canadian Dollars	$12,516	February 2023
Foreign exchange contracts - Euros	€ 18,370	February 2023


	December 31, 2021
	Notional	Latest
	Amount	Maturity

Foreign exchange contracts - Canadian Dollars	$~~9,224~~14,850	~~August 2022~~February 2023
Foreign exchange contracts - Euros	€ ~~16,512~~20,104	~~August 2022~~


	~~December 31, 2020~~
	~~Notional~~	~~Latest~~
	~~Amount~~	~~Maturity~~

~~Foreign exchange contracts - Canadian Dollars~~	~~$14,587~~	February ~~2022~~2023
~~Foreign exchange contracts - Euros~~	~~€ 24,481~~	~~February 2022~~

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 ~~income~~loss and reclassified to sales in the period the underlying hedged transaction is recognized in earnings. Gains (losses) of $201 and $(376) were reclassified to sales during the three months ended September 30, 2021 and 2020, respectively, and $(542) and $206 were reclassified to sales during the nine months ended September 30, 2021 and 2020, respectively.

1617

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

transaction is recognized in earnings. Gains (losses) of $610 and $(422) were reclassified to sales during the three months ended June 30, 2022 and 2021, respectively, and $863 and $(743) were reclassified to sales during the six months ended June 30, 2022 and 2021, respectively.

The following table presents the balance sheet classification and fair value of derivative instruments as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


	Classification	September 30, 2021		December 31, 2020		Classification	June 30, 2022		December 31, 2021

Derivative instruments in asset positions:
Designated forward exchange contracts	Prepaid and other current assets	$	721	$	-	Prepaid and other current assets	$	1,605	$	491
Designated forward exchange contracts						Other long-term assets	$	-	$	20

Derivative instruments in liability positions:
Undesignated commodity derivative contracts						Accrued liabilities	$	553	$	-
Designated forward exchange contracts	Accounts payable and accrued liabilities	$	82	$	1,539	Other long-term liabilities	$	-	$	24
Designated forward exchange contracts	Other long-term liabilities	$	-	$	90

NOTE 8.9. ACCUMULATED OTHER COMPREHENSIVE ~~INCOME (LOSS)~~LOSS

Accumulated other comprehensive ~~income (loss)~~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~~June 30, ~~2021:~~2022:


	Foreign Currency Translation Adjustments		Unrealized Gains (Losses) on Cash Flow Hedges		Total		Foreign Currency Translation Adjustments		Unrealized Gains (Losses) on Cash Flow Hedges		Total

Balance as of June 30, 2021	$	759	$	24	$	783
Balance as of March 31, 2022							$	836	$	277	$	1,113
Other comprehensive (loss) income before reclassifications		(8,933)		422		(8,511)		(17,632)		1,091		(16,541)
Amounts reclassified from other comprehensive income		-		(154)		(154)		-		(469)		(469)
Net current period other comprehensive (loss) income		(8,933)		268		(8,665)		(17,632)		622		(17,010)
Balance as of September 30, 2021	$	(8,174)	$	292	$	(7,882)
Balance as of June 30, 2022							$	(16,796)	$	899	$	(15,897)

The following table sets forth the changes in AOCI, net of tax, for the three months ended ~~September 30, 2020:~~

Foreign Currency Translation Adjustments
Unrealized Gains (Losses) on Cash Flow Hedges
Total
Balance as of June 30, 2020
$
(320)
$
247
$
(73)
Other comprehensive income (loss) before reclassifications
807
(886)
(79)
Amounts reclassified from other comprehensive loss
-
286
286
Net current period other comprehensive income (loss)
807
(600)
207
Balance as of September 30, 2020
$
487
$
(353)
$
134

~~The following table sets forth the changes in AOCI, net of tax, for the nine months ended September~~June 30, 2021:

Foreign Currency Translation Adjustments
Unrealized Gains (Losses) on Cash Flow Hedges
Total
Balance as of December 31, 2020
$
1,480
$
(980)
$
500
Other comprehensive (loss) income before reclassifications
(9,654)
857
(8,797)
Amounts reclassified from other comprehensive income
-
415
415
Net current period other comprehensive (loss) income
(9,654)
1,272
(8,382)
Balance as of September 30, 2021
$
(8,174)
$
292
$
(7,882)


	Foreign Currency Translation Adjustments		Unrealized Gains (Losses) on Cash Flow Hedges		Total

Balance as of March 31, 2021	$	464	$	(84)	$	380
Other comprehensive income (loss) before reclassifications		295		(215)		80
Amounts reclassified from other comprehensive income		-		323		323
Net current period other comprehensive income		295		108		403
Balance as of June 30, 2021	$	759	$	24	$	783

1718

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

The following table sets forth the changes in AOCI, net of tax, for the ~~nine~~six months ended ~~September~~June 30, ~~2020:~~2022:

Foreign Currency Translation Adjustments
Unrealized Gains (Losses) on Cash Flow Hedges
Total
Balance as of December 31, 2019
$
(286)
$
(17)
$
(303)
Other comprehensive income (loss) before reclassifications
773
(180)
593
Amounts reclassified from other comprehensive loss
-
(156)
(156)
Net current period other comprehensive income (loss)
773
(336)
437
Balance as of September 30, 2020
$
487
$
(353)
$
134


	Foreign Currency Translation Adjustments		Unrealized Gains (Losses) on Cash Flow Hedges		Total

Balance as of December 31, 2021	$	(5,241)	$	191	$	(5,050)
Other comprehensive (loss) income before reclassifications		(11,555)		1,371		(10,184)
Amounts reclassified from other comprehensive loss		-		(663)		(663)
Net current period other comprehensive (loss) income		(11,555)		708		(10,847)
Balance as of June 30, 2022	$	(16,796)	$	899	$	(15,897)

The following table sets forth the changes in AOCI, net of tax, for the six months ended June 30, 2021:


	Foreign Currency Translation Adjustments		Unrealized Gains (Losses) on Cash Flow Hedges		Total

Balance as of December 31, 2020	$	1,480	$	(980)	$	500
Other comprehensive (loss) income before reclassifications		(721)		435		(286)
Amounts reclassified from other comprehensive income		-		569		569
Net current period other comprehensive (loss) income		(721)		1,004		283
Balance as of June 30, 2021	$	759	$	24	$	783

The effects on net income of amounts reclassified from unrealized gains on cash flow hedges for foreign exchange contracts for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, were as follows:


	Gains (losses) reclassified from AOCI to the Consolidated Statements of Comprehensive Income (Loss)								Gains (losses) reclassified from AOCI to the Condensed Consolidated Statements of Comprehensive (Loss) Income
Affected line item in the Consolidated	Three Months Ended				Nine Months Ended
Statements of Comprehensive Income (Loss)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Affected line item in the Condensed Consolidated									Three Months Ended				Six Months Ended
Statements of Comprehensive (Loss) Income									June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Foreign exchange contracts:
Sales	$	201	$	(376)	$	(542)	$	206	$	610	$	(422)	$	863	$	(743)
Less: Income tax expense (benefit)		47		(90)		(127)		50		141		(99)		200		(174)
Amount reclassified, net of tax	$	154	$	(286)	$	(415)	$	156	$	469	$	(323)	$	663	$	(569)

Total reclassifications from AOCI	$	154	$	(286)	$	(415)	$	156	$	469	$	(323)	$	663	$	(569)

NOTE 9.10. FAIR VALUE MEASUREMENTS

We measure certain financial assets and liabilities at fair value on a recurring basis. 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 that 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.

1819

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

Assets and liabilities measured at fair value on a recurring basis at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 were as follows:


	September 30, 2021								June 30, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total

Assets
Designated forward exchange contracts	$	-	$	721	$	-	$	721	$	-	$	1,605	$	-	$	1,605
	$	-	$	721	$	-	$	721	$	-	$	1,605	$	-	$	1,605

Liabilities
Designated forward exchange contracts	$	-	$	82	$	-	$	82
Contingent consideration liability		-		-		3,410		3,410
Undesignated commodity derivative contracts									$	553	$	-	$	-	$	553
Contingent consideration liabilities										-		-		3,652		3,652
	$	-	$	82	$	3,410	$	3,492	$	553	$	-	$	3,652	$	4,205

	December 31, 2020								December 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total

Assets
Designated forward exchange contracts	$	-	$	-	$	-	$	-	$	-	$	511	$	-	$	511
	$	-	$	-	$	-	$	-	$	-	$	511	$	-	$	511

Liabilities
Designated forward exchange contracts	$	-	$	1,629	$	-	$	1,629	$	-	$	24	$	-	$	24
Contingent consideration liabilities										-		-		3,485		3,485
	$	-	$	1,629	$	-	$	1,629	$	-	$	24	$	3,485	$	3,509

Derivative financial instruments are recorded at fair value based on current market pricing models. No nonrecurring fair value measurements existed at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

As part of the Rhino-Rack Acquisition, the Purchase Agreement provided for the payment of Contingent Consideration of approximately $7,508 if certain future net sales thresholds are met through June 30, 2022. Using a series of call options, theThe Company estimated the fair value of ~~the Contingent Consideration to be approximately $3,565 as~~contingent consideration liabilities primarily using a series of ~~July 1, 2021.~~call options or other valuation methodologies. Significant unobservable inputs used in the valuation include a discount ~~rate of~~rates ranging from 4.8% to 8.0%. ~~The~~ Contingent ~~Consideration liability is~~consideration liabilities are remeasured at the estimated fair value at the end of each reporting period with the change in fair value recognized ~~within operating income (loss)~~in contingent consideration expense (benefit) in the accompanying condensed consolidated statements of comprehensive income ~~(loss)~~ 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. ~~There were no impacts to operating income (loss)~~

The net sales threshold required for the ~~three and nine months ended September 30, 2021 related to the remeasurement~~payment of the Rhino-Rack Contingent Consideration ~~liability as there were no significant changes to~~was not met during the ~~fair value.~~measurement period ended June 30, 2022. The net sales threshold required for the payment of the 2022 portion of the MAXTRAX Contingent Consideration ~~liability changed due~~was met during the 2022 measurement period ended June 30, 2022. Subsequent to June 30, 2022, $AUD 3,125 (approximately $2,148) was paid in cash in accordance with the ~~effect of foreign exchange by $155 resulting~~MAXTRAX Purchase Agreement.

The following table summarizes the changes in ~~an ending balance as of September 30, 2021 of $3,410 which is recorded in accounts payable and accrued liabilities in the accompanying condensed consolidated balance sheets.~~contingent consideration liabilities:


	Rhino-Rack		MAXTRAX		Total

Balance at December 31, 2021	$	1,813	$	1,672	$	3,485
Fair value adjustments		(1,810)		2,199		389
Impact of foreign currency exchange rates		(3)		(219)		(222)
Balance at June 30, 2022	$	-	$	3,652	$	3,652

As the ~~Contingent Consideration liability is~~contingent consideration liabilities are remeasured to fair value each reporting period, significant increases or decreases in projected ~~revenue,~~sales, discount rates or the time until payment is made would have resulted in a significantly lower or higher fair value measurement. Our determination of fair value of the ~~Contingent Consideration liability~~contingent consideration liabilities could change in future periods based upon our ongoing evaluation of these significant unobservable inputs. ~~Any such change will be recorded to operating income (loss)~~

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in ~~our consolidated statements of income (loss).~~ thousands, except per share amounts)

NOTE ~~10.~~11. STOCKHOLDERS’ EQUITY

On August 6, 2018, the Company announced that its Board of Directors approved the initiation of a quarterly cash dividend program of $0.025 per share of the Company’s common stock (the “Quarterly Cash Dividend”) or $0.10 per share on an annualized basis. The declaration and payment of future Quarterly Cash Dividends is subject to the discretion of and approval of the Company’s Board of Directors. On 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”). On October 19, 2020, the Company announced that its Board of Directors approved the reinstatement of its Quarterly Cash Dividend. On OctoberJuly 29, ~~2021,~~2022, the Company announced that its Board of Directors approved the payment on ~~November~~August 19, ~~2021~~2022 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~~August 8, ~~2021.~~2022.

~~CLARUS CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(Unaudited)~~

~~(in thousands, except per share amounts)~~

NOTE ~~11.~~12. EARNINGS ~~(LOSS)~~ PER SHARE

Basic earnings ~~(loss)~~ per share is computed by dividing earnings ~~(loss)~~ by the weighted average number of common shares outstanding during each period. Diluted earnings ~~(loss)~~ per share is computed by dividing earnings ~~(loss)~~ by the total of the weighted average number of shares of common stock outstanding during each period, plus the effect of dilutive outstanding stock options and unvested restricted stock grants. Potentially dilutive securities are excluded from the computation of diluted earnings ~~(loss)~~ per share if their effect is anti-dilutive to the loss from continuing operations.

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


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021

Weighted average shares outstanding - basic		33,800		29,983		32,159		29,854		37,235		31,367		37,199		31,325
Effect of dilutive stock awards		2,364		1,003		1,885		-		2,241		1,823		2,338		1,645
Effect of dilutive deferred stock consideration for business acquisition										221		-		214		-
Weighted average shares outstanding - diluted		36,164		30,986		34,044		29,854		39,697		33,190		39,751		32,970

Net income (loss) per share:
Net income per share:
Basic	$	0.13	$	0.04	$	0.37	$	(0.05)	$	0.10	$	0.06	$	0.24	$	0.24
Diluted		0.13		0.04		0.35		(0.05)		0.09		0.06		0.23		0.23

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, equity awards of ~~1,000~~1,638 and ~~927,~~1,034, respectively, and for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, equity awards of ~~1,011~~1,484 and ~~4,384,~~1,017, respectively, were excluded from the calculation of earnings ~~(loss)~~ per share for these periods as they were anti-dilutive.

NOTE ~~12.~~13. STOCK-BASED COMPENSATION PLAN

Under the Company’s current 2015 Stock Incentive Plan (the “2015 Plan”), the Company’s Board of Directors has flexibility to determine the type and amount of awards to be granted to eligible participants, who must be employees, directors, officers or consultants of the Company or its subsidiaries. The 2015 Plan allows for grants of incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation rights, and restricted units. The aggregate number of shares of common stock that may be granted through awards under the 2015 Plan to any employee in any calendar year may not exceed 500 shares. The 2015 Plan will continue in effect until December 2025 unless terminated sooner.

Options Granted:

During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the Company issued stock options for an aggregate of ~~500~~428 shares under the 2015 Plan to directors and employees of the Company. ~~The~~Of the 428 options, ~~issued during the nine months ended September 30, 2021 generally~~343 vest and become exercisable over a period of ~~one to~~ three years, 75 vest in four equal consecutive quarterly tranches from the date of grant and the remaining 10 vest immediately. All of the issued stock options expire ten years from the date of the grant.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

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

Options Granted During the Six Months Ended June 30, 2022


~~Number of options~~		~~500~~
~~Option vesting period~~		~~1 - 3 Years~~
~~Grant price (per share)~~		~~$15.15 - $24.43~~
~~Dividend yield~~		~~0.41% - 0.66%~~
~~Expected volatility (a)~~		~~39.1% - 43.6%~~
~~Risk-free interest rate~~		~~0.50% - 1.02%~~
~~Expected life (years) (b)~~		~~5.31 - 6.00~~
~~Weighted average fair value (per share)~~		~~$5.88 - $9.23~~


Number of options	418	10
Option vesting period	1 - 3 Years	Immediate
Grant price (per share)	$20.21 - $27.65	$21.83
Dividend yield	0.36% - 0.49%	0.46%
Expected volatility (a)	38.6% - 40.8%	39.4%
Risk-free interest rate	1.46% - 2.95%	1.66%
Expected life (years) (b)	5.31 - 6.00	5.50
Weighted average fair value (per share)	$7.95 - $10.41	$8.03

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

~~CLARUS CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(Unaudited)~~

~~(in thousands, except per share amounts)~~

(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~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$3,239,~~$3,564, which will be recognized over the vesting period of the options.

Market Condition Restricted Shares Granted:

On ~~May 28, 2021,~~March 4, 2022, the Company issued and granted to ~~the Executive Chairman a~~certain employees restricted stock ~~award~~awards of ~~500~~700 restricted shares under the 2015 Plan, of which ~~500~~700 restricted shares will vest if, on or before ~~May 28, 2024,~~March 4, 2032, the Fair Market Value (as defined in the Plan) of the Company’s common stock shall have equaled or exceeded ~~$35.00~~$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 been estimated as of the date of grant using the Monte-Carlo pricing model with the following assumptions:


	~~May 28, 2021~~	March 4, 2022

Number issued	~~500~~	700
~~Vesting period~~Market condition vesting requirement	$~~35.00~~50.00 stock price target
~~Grant price~~Price on date of grant (per share)	$~~23.69~~	21.83
Dividend yield	~~0.42%~~	0.46%
Expected volatility	~~42.3%~~	41.0%
Risk-free interest rate	~~0.30%~~
~~Expected term (years)~~	~~1.05~~	1.74%
Weighted average fair value (per share)	$~~14.46~~	15.37

Using these assumptions, the fair value of the market condition restricted stock awards granted on ~~May 28, 2021~~March 4, 2022, was approximately ~~$7,230.~~$10,761 and the expected term was 4.15 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~~June 30, 2022 and 2021 was $3,555 and ~~2020 was $3,064 and $4,204,~~$1,826, respectively, and for the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021 was $6,922 and ~~2020 was $6,414 and $5,433,~~$3,350, respectively. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, the majority of stock-based compensation costs were classified as selling, general and administrative expenses.

As of ~~September~~June 30, ~~2021,~~2022, there were ~~2,014~~1,615 unvested stock options and unrecognized compensation cost of ~~$7,384~~$7,123 related to unvested stock options, as well as ~~1,000~~1,546 unvested restricted stock awards and unrecognized compensation costs of ~~$6,359~~$10,781 related to unvested restricted stock awards.

NOTE ~~13.~~14. COMMITMENTS AND CONTINGENCIES

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. The Company is therefore vulnerable to various personal injury and property damage lawsuits relating to its products and incidental to

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

its business.

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. There is a reasonable possibility of loss from contingencies in excess of the amounts accrued by the Company in the accompanying condensed consolidated balance sheets; however, the actual amounts of such possible losses cannot currently be reasonably estimated by the Company at this time. It is possible that, as additional information becomes available, the impact on the Company could have a different effect.

NOTE ~~14.~~15. INCOME TAXES

The Company’s U.S. federal statutory tax rate of 21% and its foreign operations have statutory tax rates of approximately 25% in Austria, 28% in New Zealand, and 30% in Australia.

~~CLARUS CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(Unaudited)~~

~~(in thousands, except per share amounts)~~

The ~~differences~~difference between the Company’s estimated effective tax rates of ~~(419.0)% and (104.7)%~~20.3% for the three ~~and nine~~ months ended ~~September~~June 30, ~~2021~~2022, and the U.S. federal statutory tax rate of 21% ~~were~~was due to ~~a release~~the impact of ~~valuation allowance~~foreign tax credits. The difference between the Company’s estimated effective tax rates of ~~net operating loss carryforwards (“NOLs”), which~~22.1% for the six months ended June 30, 2022, and the U.S. federal statutory tax rate of 21% was ~~partially offset by~~due to the impact of foreign earnings taxed at applicable statutory rates and permanent book to tax differences related to incentive stock options and officer compensation limitations.

As of December 31, ~~2020,~~2021, the Company’s gross deferred tax asset was ~~$40,538.~~$38,184. The Company has recorded a valuation allowance of ~~$22,348,~~$4,378, resulting in a net deferred tax asset of ~~$18,190,~~$33,806, before deferred tax liabilities of ~~$8,304.~~$46,653. The Company has provided a valuation allowance against a portion of the deferred tax assets as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, 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 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. During the three months ended September 30, 2021, the Company filed a change in accounting method which increased taxable income and the ability to utilize NOLs. As a result, an additional valuation allowance of $6,003 was released increasing the income tax benefit for the three and nine months ended September 30, 2021. This method change resulted in decreasing the NOLs available to offset taxable income as of December 31, 2020 by $10,317.

In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and net operating loss and credit carryforwards expire. The estimates and judgments associated with the Company’s valuation allowance on deferred tax assets are considered critical due to the amount of deferred tax assets recorded by the Company on its consolidated balance sheet and the judgment required in determining the Company’s future taxable income. The need for a valuation allowance is reassessed at each interim reporting period.

As of December 31, ~~2020,~~2021, the Company had NOLs and research and experimentation credit for U.S. federal income tax purposes of ~~$120,309~~$60,712 and ~~$1,889,~~$2,289, respectively. The Company believes its U.S. Federal NOLs will substantially offset its future U.S. Federal income taxes until expiration. ~~The majority of the Company’s pre-tax income is currently earned and expected to be earned in the U.S., or taxed in the U.S. as Subpart F income and will be offset with the NOLs.~~

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


Net Operating Loss Carryforward Expiration Dates	Net Operating Loss Carryforward Expiration Dates			Net Operating Loss Carryforward Expiration Dates
December 31, 2020
December 31, 2021				December 31, 2021

Expiration Dates December 31,		Net Operating Loss Amount			Net Operating Loss Amount
2022		$	99,596		$	39,507
2023			5,853			5,712
2024			3,566			3,566
2025 and beyond			11,294			11,927
Total		$	120,309		$	60,712

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

NOTE ~~15.~~16. SEGMENT INFORMATION

We operate our business structure within 3 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 and general and administrative expenses are not allocated to the segments including non-cash stock compensation expense. Each segment is described below:

Our ~~Black Diamond~~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 ~~Black Diamond~~Outdoor segment offers a broad range of products including: high-performance, activity-based apparel (such as shells, insulation, midlayers, pants and logowear); rock-climbing footwear and equipment (such as carabiners, protection devices, harnesses, belay devices, helmets, and ice-climbing gear); technical backpacks and high-end day packs; trekking poles; headlamps and lanterns; gloves and mittens; and skincare and other sport-enhancing products. We also offer advanced skis, ski poles, ski skins, and snow safety products, including avalanche airbag systems, avalanche transceivers, shovels, and probes.

~~CLARUS CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(Unaudited)~~

~~(in thousands, except per share amounts)~~

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

As noted above, the Company has a wide variety of technical outdoor equipment and lifestyle products ~~focused on the climb, ski, mountain, sport and adventure product categories~~ that are sold to a variety of customers in multiple end markets. While there are multiple products sold, the terms and nature of revenue recognition policy is similar for all segments. ~~The sport product category represents the Sierra segment revenue and the adventure product category represents the Rhino-Rack segment revenue.~~

~~We divide our product offerings into five primary categories of climb, mountain, ski, sport and adventure. Revenue by category as a percentage of total consolidated revenues is as follows:~~

Three Months Ended
Nine Months Ended
September 30, 2021
September 30, 2020
September 30, 2021
September 30, 2020
Climb
19
%
27
%
25
%
33
%
Mountain
23
%
33
%
24
%
30
%
Ski
12
%
17
%
11
%
15
%
Sport
28
%
23
%
32
%
22
%
Adventure
18
%
-
%
8
%
-
%

~~Financial information for our segments is as follows:~~

Three Months Ended
Nine Months Ended
September 30, 2021
September 30, 2020
September 30, 2021
September 30, 2020
Sales to external customers:
Black Diamond
Domestic sales
$
26,773
$
21,953
$
77,765
$
56,381
International sales
32,256
27,411
77,952
58,980
Total Black Diamond
59,029
49,364
155,717
115,361
Sierra
Domestic sales
27,363
12,733
75,820
27,112
International sales
2,954
2,394
6,449
5,587
Total Sierra
30,317
15,127
82,269
32,699
Rhino-Rack
Domestic sales
7,123
-
7,123
-
International sales
12,502
-
12,502
-
Total Rhino-Rack
19,625
-
19,625
-
Total sales to external customers
108,971
64,491
257,611
148,060
Segment operating income:
Black Diamond
5,939
4,035
10,041
1,709
Sierra
10,441
4,393
26,420
8,211
Rhino-Rack
(3,014)
-
(3,014)
-
Total segment operating income
13,366
8,428
33,447
9,920
Transaction costs
(8,147)
(1,440)
(9,272)
(1,870)
Corporate and other expenses
(5,163)
(4,984)
(16,363)
(9,316)
Interest expense, net
(1,476)
(232)
(1,926)
(800)
(Loss) income before income tax
$
(1,420)
$
1,772
$
5,886
$
(2,066)

~~There were no intercompany sales between the Black Diamond, Sierra and Rhino-Rack segments for the periods presented.~~

~~CLARUS CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(Unaudited)~~

~~(in thousands, except per share amounts)~~

~~Total assets by segment, as of September 30, 2021 and December 31, 2020, were as follows:~~

September 30, 2021
December 31, 2020
Black Diamond
$
157,163
$
141,746
Sierra
136,509
113,430
Rhino-Rack
254,585
-
Corporate
23,486
25,515
$
571,743
$
280,691

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

Three Months Ended
Nine Months Ended
September 30, 2021
September 30, 2020
September 30, 2021
September 30, 2020
Capital expenditures:
Black Diamond
$
819
$
583
$
2,091
$
1,888
Sierra
957
1,002
2,910
1,718
Rhino-Rack
578
-
578
-
Total capital expenditures
$
2,354
$
1,585
$
5,579
$
3,606
Depreciation:
Black Diamond
$
727
$
685
$
2,134
$
2,073
Sierra
669
455
1,967
1,332
Rhino-Rack
235
-
235
-
Total depreciation
$
1,631
$
1,140
$
4,336
$
3,405
Amortization:
Black Diamond
$
259
$
258
$
776
$
803
Sierra
938
495
2,815
1,487
Rhino-Rack
2,380
-
2,380
-
Total amortization
$
3,577
$
753
$
5,971
$
2,290

~~NOTE 16. RELATED PARTY TRANSACTIONS~~

As part of the Rhino-Rack Acquisition, on July 1, 2021, the Company recorded a liability in the amount of $1,750 owed 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. This amount was paid during the three months ended September 30, 2021. Mr. Warren B. 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 recorded a liability in the amount of $250 owed to Kanders & Company in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, and negotiating Amendment No. 3. This amount was paid during the three months ended September 30, 2021.

During the three months ended September 30, 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 its common stock in a registered direct offering (the “Offering”). Upon the Company’s closing of the Offering, the Company paid a fee in the amount of $250 to Kanders & Company, which were deducted from the net proceeds, in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, and negotiating the Offering.

As of September 30, 2020, the Company recorded a liability in the amount of $500 owed 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.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

~~NOTE 17. SUBSEQUENT EVENTS~~

Financial information for our segments, as well as revenue by geography, which the Company believes provides a meaningful depiction how the nature, timing and uncertainty of revenue are affected by economic factors, is as follows:


	Three Months Ended				Six Months Ended
	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Sales to external customers:
Outdoor
Domestic sales	$	27,293	$	25,232	$	52,922	$	50,992
International sales		25,311		19,660		51,204		45,696
Total Outdoor		52,604		44,892		104,126		96,688
Precision Sport
Domestic sales		27,193		26,644		54,636		48,457
International sales		7,994		1,773		13,669		3,495
Total Precision Sport		35,187		28,417		68,305		51,952
Adventure
Domestic sales		9,587		-		18,822		-
International sales		17,555		-		36,956		-
Total Adventure		27,142		-		55,778		-
Total sales to external customers		114,933		73,309		228,209		148,640
Segment operating income:
Outdoor		1,471		657		3,359		4,102
Precision Sport		12,235		10,017		24,015		15,979
Adventure		644		-		2,768		-
Total segment operating income		14,350		10,674		30,142		20,081
Transaction costs		(821)		(649)		(2,022)		(1,125)
Contingent consideration benefit (expense)		374		-		(389)		-
Corporate and other expenses		(7,455)		(7,818)		(13,237)		(11,200)
Interest expense, net		(1,728)		(212)		(2,844)		(450)
Income before income tax	$	4,720	$	1,995	$	11,650	$	7,306

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

~~Public Offering~~Total assets by segment, as of ~~Common Stock~~June 30, 2022 and December 31, 2021, were as follows:



	June 30, 2022		December 31, 2021

Outdoor	$	168,811	$	166,751
Precision Sport		153,361		142,549
Adventure		287,934		298,364
Corporate		27,905		24,163
	$	638,011	$	631,827

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

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

On October 26, 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. The Underwriters received an underwriting discount of 6%, or $1.62 per share, in connection with the sale of the shares of Common Stock in the offering. In addition, the Company granted the Underwriters a 30-day option to purchase up to 413 additional shares of common stock on the same terms and conditions. On October 29, 2021, the Underwriters exercised that option in full. 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 approximately $80,264.


	Three Months Ended				Six Months Ended
	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Capital expenditures:
Outdoor	$	1,089	$	580	$	2,325	$	1,272
Precision Sport		772		1,298		1,222		1,953
Adventure		311		-		525		-
Total capital expenditures	$	2,172	$	1,878	$	4,072	$	3,225
Depreciation:
Outdoor	$	829	$	694	$	1,646	$	1,407
Precision Sport		812		655		1,593		1,298
Adventure		236		-		470		-
Total depreciation	$	1,877	$	1,349	$	3,709	$	2,705
Amortization:
Outdoor	$	250	$	258	$	505	$	517
Precision Sport		693		939		1,385		1,877
Adventure		2,994		-		6,167		-
Total amortization	$	3,937	$	1,197	$	8,057	$	2,394

The Company intends to use a portion of the net proceeds of the offering for the repayment in full of approximately $65,000 in aggregate principal amount under the revolving loan facility available pursuant to the Credit Agreement and the remaining portion of the net proceeds from the offering for general corporate purposes, including capital expenditures and potential acquisitions.

The closing of the offering of 2,750 shares of common stock occurred on October 29, 2021, and the closing of the Underwriters’ 30-day option to purchase 413 shares of common stock occurred on November 2, 2021.

On October 29, 2021, the Company recorded a liability in the amount of $500 owed to Kanders & Company in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, and negotiating the offering.

2526

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Please note that in this Quarterly Report on Form 10-Q Clarus Corporation (which may be referred to as the “Company,” “Clarus,” “we,” “our” or “us”) may use words such as “appears,” “anticipates,” “believes,” “plans,” “expects,” “intends,” “future” and similar expressions which constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting the Company and therefore involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements.

Potential risks and uncertainties that could cause the actual results of operations or financial condition of the Company to differ materially from those expressed or implied by forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, the overall level of consumer demand on our products; general economic conditions and other factors affecting consumer confidence, preferences, and behavior; disruption and volatility in the global currency, capital and credit markets; the financial strength of the Company’s customers; the Company’s ability to implement its business strategy; the ability of the Company to execute and integrate acquisitions; changes in governmental regulation, legislation or public opinion relating to the manufacture and sale of bullets and ammunition, and the possession and use of firearms and ammunition by our customers; the Company’s exposure to product liability or product warranty claims and other loss contingencies; disruptions and other impacts to the Company’s business, as a result of the COVID-19 global pandemic and government actions and restrictive measures implemented in response; stability of the Company’s manufacturing facilities and suppliers, as well as consumer demand for our products, in light of disease epidemics and health-related concerns such as the COVID-19 global pandemic; the impact that global climate change trends may have on the Company and its suppliers and ~~customers;~~customers, increased focus on sustainability issues as a result of global climate change, the Company's ability to protect patents, trademarks and other intellectual property rights; any breaches of, or interruptions in, our information systems; the ability of our information technology systems or information security systems to operate effectively, including as a result of security breaches, viruses, hackers, malware, natural disasters, vendor business interruptions or other causes; our ability to properly maintain, protect, repair or upgrade our information technology systems or information security systems, or problems with our transitioning to upgraded or replacement systems; the impact of adverse publicity about the Company and/or its brands, including without limitation, through social media or in connection with brand damaging events and/or public perception; fluctuations in the price, availability and quality of raw materials and contracted products as well as foreign currency fluctuations; ongoing disruptions and delays in the shipping and transportation of our products due to port congestion, container ship availability and/or other logistical challenges; the impact of political unrest, natural disasters or other crises, terrorist acts, acts of war and/or military operations; our ability to utilize our net operating loss carryforwards; changes in tax laws and liabilities, tariffs, legal, regulatory, political and economic risks; the Company’s ability to maintain a quarterly dividend; and any material differences in the actual financial results of the Rhino-Rack acquisition as compared with expectations, including the impact of the acquisition on the Company’s future earnings per share. More information on potential factors that could affect the Company’s financial results is included from time to time in the Company’s public reports filed with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. All forward-looking statements included in this Quarterly Report on Form 10-Q are based upon information available to the Company as of the date of this Quarterly Report on Form 10-Q, and speak only as of the date hereof. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

Overview

Headquartered in Salt Lake City, Utah, Clarus is ~~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 ~~Rhino-Rack®~~MAXTRAX® brand names through outdoor specialty and online retailers, our own websites, distributors and original equipment manufacturers. Our portfolio of iconic brands is well-positioned for sustainable, long-term growth underpinned by powerful industry trends across the outdoor and adventure sport end markets.

~~Through~~One of the key elements of our ~~Black Diamond, PIEPS,~~sustained financial performance is our persistent focus on brand building through product initiatives. Our iconic brands are rooted in performance-defining technologies that enable our customers to have their best days outdoors. We have a long history of technical innovation and ~~SKINourishment brands, we offer a broad range of products including: high-performance, activity-based apparel (such as shells, insulation, midlayers, pants~~product development, backed by an extensive patent portfolio that continues to evolve and logowear); rock-climbing footwear and equipment (such as carabiners, protection devices, harnesses, belay devices, helmets, and ice-climbing gear); technical backpacks and high-end day packs; trekking poles; headlamps and lanterns; gloves and mittens; and skincare and other sport-enhancing products.advance our markets. We ~~also offer advanced skis, ski poles, ski skins, and snow safety products, including avalanche airbag systems, avalanche transceivers, shovels, and probes. Through~~currently employ approximately 120 engineers across the portfolio, focusing on enhancing our ~~Sierra and Barnes brands, we manufacture a wide range of high-performance bullets and ammunition for both rifles and~~customers’

2627

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

~~pistols that are used~~performance in the most critical moments. Our commitment to quality, rigorous safety, and ultimately best-in-class design is evidenced by outstanding industry recognition, as we have received numerous product awards across our portfolio of super fan brands.

Each of our brands represents a unique customer value proposition. Supported by six decades of proven innovation, Black Diamond, is an established global leader in high-performance, activity-based climbing, skiing, and technical mountain sports equipment. The brand is synonymous with premium performance, safety and reliability. Our Sierra and Barnes brands have been leading specialty manufacturers of bullets and ammunition for ~~precision target~~over 50 years. Since 1947, Sierra has been dedicated to manufacturing the highest-quality, most accurate bullets in the world for hunting and sport shooting ~~hunting~~enthusiasts. Barnes traces its history back to 1932, and since 1989 has manufactured technologically-advanced lead-free bullets and premium ammunition for hunters, range shooters, military and law enforcement ~~purposes.~~ professionals. Founded in 1992, our Rhino-Rack brand is a ~~leading manufacturer~~globally-recognized designer and distributor of highly-engineered automotive roof racks ~~trays, mounting systems, luggage boxes, carriers~~ and accessories ~~with leading market share~~to enhance the outdoor enthusiast’s overlanding experience. Founded in ~~Australia~~2005, our MAXTRAX brand offers high-quality overlanding and ~~New Zealand~~off-road vehicle recovery and ~~a growing presence in~~extraction tracks for the ~~United States.~~overland and off-road market.

On August 14, 2017, the Company changed its name from Black Diamond, Inc. to Clarus Corporation and its stock ticker symbol from “BDE” to “CLAR” on the NASDAQ stock exchange.

On August 21, 2017, the Company acquired Sierra Bullets, L.L.C. (“Sierra”). On November 6, 2018, the Company acquired the assets of SKINourishment, Inc. (“SKINourishment”).

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

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

Impact of COVID-19

The global outbreak of COVID-19 was declared a ~~global~~ pandemic by the World Health Organization and a national emergency by each of the U.S., European, and Australian governments in March 2020, with governments world-wide implementing safety measures restricting travel and requiring citizen lockdowns and self-confinements for quarantining purposes. This has negatively affected the U.S., European, Australian and global economies, disrupted global supply chains, and resulted in significant transport restrictions and disruption of global financial markets. ~~The impact of this global pandemic has created significant uncertainty in the global economy and has affected our business, employees, retail and distribution partners, suppliers, and customers.~~

We experienced a decline in retail demand within our Black Diamond segment beginning in the second half of March 2020 through December 2020, which negatively impacted our sales and profitability during this period. This continued during the nine months ended September 30, 2021, although to a lesser extent, as certain countries began to ease restrictions. During the third quarter of 2021, the Australian government instituted a mandatory lockdown for its citizens. This caused a decline in retail demand and a disruption in operations within our Rhino-Rack segment, which negatively impacted our sales and profitability for the third quarter of 2021. We expect a continued impact on the Company’s sales and profitability in future periods. The duration of these trends and the magnitude of such impacts cannot be precisely estimated at this time, as they are affected by a number of factors (some of which are outside management’s control), including those presented in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2020.

Since the beginning of the pandemic, we have mitigated some of the negative impacts to our operating results by taking significant actions to improve our current operating results and liquidity position, including drawing on the credit facility, temporarily suspending share repurchases, temporarily suspending cash dividends, postponing non-essential capital expenditures, reducing operating costs, modulating production in line with demand, and substantially reducing discretionary spending. As the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess the impact on the Company and respond accordingly.

The COVID-19 pandemic has significantly impacted the global supply chain, with restrictions and limitations on related activities causing disruption and delay, along with increased raw material, storage, and shipping costs. These disruptions and delays have strained domestic and international supply chains, which have affected and could continue to negatively affect the flow or availability of certain ~~products.~~critical raw materials and finished good products that the Company relies upon. Furthermore, significantly increased demand from online sales channels, including our website, has impacted our logistical operations, including our fulfillment and shipping functions, which has resulted in periodic delays in the delivery of our products.

We expect a continued impact on the Company’s sales and profitability in future periods due to the ongoing impact of the pandemic. The ~~further spread~~duration of ~~COVID-19,~~these trends and the ~~requirements to take action to help limit~~magnitude of such impacts cannot be precisely estimated at this time, as they are affected by a number of factors (some of which are outside management’s control), including those presented in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the ~~spread~~year ended December 31, 2021.

Critical Accounting Policies and Use of ~~the illness, could impact~~Estimates

Management’s discussion of our ~~ability to carry out our business as usual~~financial condition and ~~may materially adversely impact global economic conditions, our business,~~ results of operations ~~cash flows, and~~is based on the consolidated financial ~~condition. For example, travel restrictions imposed as a result~~statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of the ~~COVID-19 pandemic negatively impacted~~consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates also affect the reported amounts of revenues and

2728

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

certain of our product development initiatives, as we were unable to visit certain third-party manufacturers to review processes and procedures for new products and product enhancements. The extent of the impact of COVID-19 on our business and financial results will depend on future developments, including the duration and severity of the outbreak (including the severity and transmission rates of new variants of the coronavirus) within the markets in which we and our manufacturers and suppliers operate, the timing, distribution, and efficacy of vaccines and other treatments, the related impact on consumer confidence and spending, and the effect of governmental regulations imposed in response to the pandemic, all of which are highly uncertain and ever-changing. While we have experienced an increase in demand for our products due to the impact that the COVID-19 pandemic has had on consumer behaviors, including due to various stay-at-home orders and restrictions on dining options and restaurant closures, this increased demand may not be sustained following the pandemic, or if economic conditions worsen, which would negatively impact consumer spending.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. The CARES Act established a program with provisions to allow U.S. companies to defer the employer’s portion of social security taxes between March 27, 2020 and December 31, 2020 and pay such taxes in two installments in 2021 and 2022. As permitted by the CARES Act, we have deferred payment of the employer’s portion of social security payroll tax payments.

~~Critical Accounting Policies and Use of Estimates~~

Management’s discussion of our financial condition and results of operations is based on the condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of the condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed consolidated financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting periods. We continually evaluate our estimates and assumptions including those related to derivatives, revenue recognition, income taxes and valuation of long-lived assets, goodwill and other intangible assets. We base our estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.

There have been no significant changes to our critical accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Accounting Pronouncements Issued Not Yet Adopted

~~See “Accounting Pronouncements Not Yet Adopted” in Note 1 of the unaudited condensed consolidated financial statements.~~None

‎

2829

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

Results of Operations

~~Condensed Consolidated~~ Three Months Ended ~~September~~June 30, ~~2021~~2022 Compared to ~~Condensed Consolidated~~ Three Months Ended ~~September~~June 30, ~~2020~~2021

The following presents a discussion of ~~condensed consolidated~~ operations for the three months ended ~~September~~June 30, ~~2021,~~2022, compared with the ~~condensed consolidated~~ three months ended ~~September~~June 30, ~~2020.~~2021.


	Three Months Ended				Three Months Ended
	September 30, 2021		September 30, 2020		June 30, 2022		June 30, 2021

Sales
Domestic sales	$	61,259	$	34,686	$	64,073	$	51,876
International sales		47,712		29,805		50,860		21,433
Total sales		108,971		64,491		114,933		73,309

Cost of goods sold		69,792		42,822		71,251		45,288
Gross profit		39,179		21,669		43,682		28,021

Operating expenses
Selling, general and administrative		31,314		18,674		35,444		20,704
Transaction costs		8,147		1,440		821		649
Contingent consideration benefit						(374)		-

Total operating expenses		39,461		20,114		35,891		21,353

Operating (loss) income		(282)		1,555
Operating income						7,791		6,668

Other (expense) income
Other expense
Interest expense, net		(1,476)		(232)		(1,728)		(212)
Other, net		338		449		(1,343)		(4,461)

Total other (expense) income, net		(1,138)		217
Total other expense, net						(3,071)		(4,673)

(Loss) income before income tax		(1,420)		1,772
Income tax (benefit) expense		(5,950)		589
Income before income tax						4,720		1,995
Income tax expense						956		155
Net income	$	4,530	$	1,183	$	3,764	$	1,840

Sales

~~Consolidated~~Total sales increased ~~$44,480,~~$41,624, or ~~69.0%~~56.8%, to ~~$108,971,~~$114,933, during the three months ended ~~September~~June 30, ~~2021,~~2022, compared to ~~consolidated~~total sales of ~~$64,491~~$73,309 during the three months ended ~~September~~June 30, ~~2020.~~ 2021. The increase in sales was primarily attributable to $27,142 of sales from the ~~increase~~inclusion of Rhino-Rack and MAXTRAX in the ~~quantity of new and existing climb, mountain, and ski products sold during the period of $8,665.~~current period. Additionally, there was an increase in the quantity of new and existing precision sport products sold ~~by Sierra~~ of ~~$2,028 and the inclusion of Barnes, which contributed $13,162. The increase~~$6,770. There was also ~~driven by the inclusion of adventure products sold by Rhino-Rack of $19,625. We experienced~~ an increase in the quantity of new and existing outdoor products sold during the period of $9,129. This was partially offset by a decrease in sales of ~~$1,000~~$1,417 due to the ~~weakening~~strengthening of the U.S. dollar against foreign currencies during the three months ended ~~September~~June 30, ~~2021,~~2022, compared to the prior period.

~~Consolidated domestic~~Domestic sales increased ~~$26,573,~~$12,197, or ~~76.6%~~23.5%, to ~~$61,259~~$64,073 during the three months ended ~~September~~June 30, ~~2021,~~2022, compared to ~~consolidated~~ domestic sales of ~~$34,686~~$51,876 during the three months ended ~~September~~June 30, ~~2020.~~2021. The increase in sales was primarily attributable to $9,587 of sales from the ~~increase~~inclusion of Rhino-Rack and MAXTRAX in the ~~quantity of new and existing climb, mountain, and ski products sold during the period of $4,820.~~current period. Additionally, there was an increase in the quantity of new and existing precision sport products sold ~~by Sierra~~ of ~~$2,496~~$549. There was also an increase in the quantity of new and ~~the inclusion of Barnes, which contributed $12,134. The remaining increase was driven by the inclusion of adventure~~existing outdoor products sold ~~by Rhino-Rack~~during the period of ~~$7,123.~~$2,061.

~~Consolidated international~~International sales increased ~~$17,907,~~$29,427, or ~~60.1%~~137.3%, to ~~$47,712~~$50,860 during the three months ended ~~September~~June 30, ~~2021,~~2022, compared to ~~consolidated~~ international sales of ~~$29,805~~$21,433 during the three months ended ~~September~~June 30, ~~2020.~~2021. The increase in sales was primarily attributable to $17,555 of sales from the inclusion of Rhino-Rack and MAXTRAX in the current period. Additionally, there was an increase in the quantity of new and existing ~~climb, mountain, and ski products of $3,845 and the inclusion of Barnes,~~

~~CLARUS CORPORATION~~

~~MANAGEMENT DISCUSSION AND ANALYSIS~~

~~(in thousands, except per share amounts)~~

~~which contributed $1,028. The increase was also driven by the inclusion of adventure~~precision sport products sold ~~by Rhino-Rack~~ of ~~$12,502. We experienced~~$6,221. There was also an increase in ~~sales~~the quantity of ~~$1,000 due to the weakening of the U.S. dollar against foreign currencies~~new and existing outdoor products sold during the ~~three months ended September 30, 2021 compared to the prior period. The increase~~period of $7,068. This was partially offset by a decrease in ~~the quantity~~sales of ~~new and existing sport products sold by Sierra of $468.~~

~~Cost of Goods Sold~~

Consolidated cost of goods sold increased $26,970 or 63.0%, to $69,792 during the three months ended September 30, 2021, compared to consolidated cost of goods sold of $42,822 during the three months ended September 30, 2020. The increase in cost of goods sold was primarily attributable to an increase in the number of units sold.

~~Gross Profit~~

Consolidated gross profit increased $17,510 or 80.8%, to $39,179 during the three months ended September 30, 2021, compared to consolidated gross profit of $21,669 during the three months ended September 30, 2020. Consolidated gross margin was 36.0% during the three months ended September 30, 2021, compared to a consolidated gross margin of 33.6% during the three months ended September 30, 2020. Consolidated gross margin during the three months ended September 30, 2021, increased compared to the prior year due to a favorable product mix in higher margin products and the favorable impacts related to foreign currency. Gross margin also benefited from the inclusion of Barnes and Rhino-Rack. However, the benefit from Rhino-Rack was offset by a decrease in gross margin of 2.8%$1,417 due to the ~~sale of Rhino-Rack inventory that was recorded at its fair value in purchase accounting during the three months ended September 30, 2021.~~

~~Selling, General and Administrative~~

Consolidated selling, general, and administrative expenses increased $12,640, or 67.7%, to $31,314 during the three months ended September 30, 2021, compared to consolidated selling, general and administrative expenses of $18,674 during the three months ended September 30, 2020. The increase in selling, general and administrative expenses is due to the inclusion of Barnes and Rhino-Rack, which contributed $1,678 and $7,722, respectively. The remaining increase was attributable to the Company’s investments in the brand related activities of sales, direct-to-consumer, marketing, and warehousing and logistics, focused on supporting its strategic initiatives around expanding distribution, elevating brand awareness and being easier to do business with. The increase was partially offset by a decrease of stock compensation of $1,140 during the three months ended September 30, 2021 compared to the prior year.

~~Transaction Costs~~

Consolidated transaction expense increased to $8,147 during the three months ended September 30, 2021, compared to consolidated transaction costs of $1,440 during the three months ended September 30, 2020, which consisted of expenses related to the Company’s various acquisition efforts.

~~Interest Expense, net~~

Consolidated interest expense, net increased to $1,476 during the three months ended September 30, 2021, compared to consolidated interest expense, net of $232 during the three months ended September 30, 2020. The increase in interest expense recognized during the three months ended September 30, 2021 was primarily associated with the increase in average outstanding debt amounts during the period compared to the prior year and the recording of certain debt issuance costs.

~~Other, net~~

Consolidated other, net income changed by $111, or 24.7%, to $338 during the three months ended September 30, 2021, compared to consolidated other, net income of $449 during the three months ended September 30, 2020. The decrease in other, net, was primarily attributable to a decrease in remeasurement gains recognized on the Company’s foreign denominated accounts receivable and accounts payable. The decrease was partially offset by changes on mark-to-market adjustments on non-hedged foreign currency contracts.

~~Income Taxes~~

Consolidated income tax changed by $6,539, or 1,110.2%, to a benefit of $5,950 during the three months ended September 30, 2021, compared to income tax expense of $589 during the same period in 2020. Our effective income tax rate was a benefit of 419.0% for the three months ended September 30, 2021, and differed compared to the statutory tax rates due to a ~~release of a partial valuation allowance~~strengthening of the ~~deferred tax assets. This release is primarily due to a change in accounting method which increased taxable income and the ability~~U.S. dollar against

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

~~to utilize NOLs (defined below). For~~foreign currencies during the three months ended ~~September~~June 30, ~~2020, our effective income tax rate was an expense of 33.2% and was higher~~2022, compared to the ~~statutory tax rates due to permanent book to tax differences primarily related to incentive stock options.~~prior period.

~~Condensed Consolidated Nine Months Ended September 30, 2021 Compared to Condensed Consolidated Nine Months Ended September 30, 2020~~Cost of Goods Sold

~~The following presents a discussion~~Cost of ~~condensed consolidated operations for~~goods sold increased $25,963, or 57.3%, to $71,251 during the ~~nine~~three months ended ~~September~~June 30, ~~2021,~~2022, compared ~~with~~to cost of goods sold of $45,288 during the ~~condensed consolidated nine~~three months ended ~~September~~June 30, ~~2020.~~2021. The increase in cost of goods sold was primarily attributable to an increase in the number of units sold.

Nine Months Ended
September 30, 2021
September 30, 2020
Sales
Domestic sales
$
160,708
$
83,493
International sales
96,903
64,567
Total sales
257,611
148,060
Cost of goods sold
163,361
97,243
Gross profit
94,250
50,817
Operating expenses
Selling, general and administrative
72,903
50,537
Transaction costs
9,272
1,870
Total operating expenses
82,175
52,407
Operating income (loss)
12,075
(1,590)
Other expense
Interest expense, net
(1,926)
(800)
Other, net
(4,263)
324
Total other expense, net
(6,189)
(476)
Income (loss) before income tax
5,886
(2,066)
Income tax benefit
(6,161)
(542)
Net income (loss)
$
12,047
$
(1,524)

~~Sales~~Gross Profit

~~Consolidated sales~~Gross profit increased ~~$109,551,~~$15,661, or ~~74.0%~~55.9%, to ~~$257,611,~~$43,682 during the ~~nine~~three months ended ~~September~~June 30, ~~2021,~~2022, compared to ~~consolidated sales~~gross profit of ~~$148,060~~$28,021 during the ~~nine~~three months ended ~~September~~June 30, ~~2020. The increase in sales~~2021. Gross margin was ~~attributable to the increase in the quantity of new and existing climb, mountain, and ski products sold~~38.0% during the ~~period~~three months ended June 30, 2022, compared to a gross margin of ~~$37,083. Additionally, there was an increase~~38.2% during the three months ended June 30, 2021. Improvements in channel and product mix were completely offset by higher freight costs at the ~~quantity of new~~Outdoor and existing sport products sold by Sierra of $16,254 and the inclusion of Barnes, which contributed $33,316. The increase was also driven by the inclusion of adventure products sold by Rhino-Rack of $19,625. We experienced an increase in sales of $3,273Adventure segments as well as unfavorable foreign exchange impacts due to the ~~weakening~~strengthening of the U.S. dollar against foreign currencies during the ~~nine~~three months ended ~~September~~June 30, ~~2021,~~2022.

Selling, General and Administrative

Selling, general, and administrative expenses increased $14,740, or 71.2%, to $35,444 during the three months ended June 30, 2022, compared to selling, general and administrative expenses of $20,704 during the three months ended June 30, 2021. The increase in selling, general and administrative expenses is primarily due to the inclusion of Rhino-Rack and MAXTRAX, which contributed $8,493 and $1,303, respectively. Additionally, the Company incurred higher Corporate costs of $1,025 primarily related to payroll and professional fees along with an increase of stock compensation of $1,729 during the three months ended June 30, 2022 compared to the prior ~~period.~~year. The remaining increase was primarily attributable to the Company’s investments in retail and direct-to-consumer initiatives at the Outdoor segment.

~~Consolidated domestic sales~~Transaction Costs

Transaction expense increased ~~$77,215, or 92.5%,~~ to ~~$160,708~~$821 during the ~~nine~~three months ended ~~September~~June 30, 2022, compared to transaction costs of $649 during the three months ended June 30, 2021, which consisted of expenses related to the Company’s various acquisition efforts.

Contingent Consideration Benefit

Contingent consideration benefit increased to $374 during the three months ended June 30, 2022, compared to ~~consolidated domestic sales of $83,493~~$0 contingent consideration benefit during the ~~nine~~three months ended ~~September~~June 30, ~~2020.~~2021, which consisted of changes in estimated fair value of contingent consideration liabilities.

Interest Expense, net

Interest expense, net increased to $1,728 during the three months ended June 30, 2022, compared to interest expense, net of $212 during the three months ended June 30, 2021. The increase in ~~sales~~interest expense recognized during the three months ended June 30, 2022 was ~~attributable to~~primarily associated with the increase in the ~~quantity of new and existing climb, mountain, and ski products sold~~average outstanding debt amounts during the period compared to the prior year and the recording of ~~$21,384. Additionally, there~~certain debt issuance costs.

Other, net

Other, net changed by $3,118, or 69.9%, to $1,343 during the three months ended June 30, 2022, compared to other, net of $4,461 during the three months ended June 30, 2021. The change in other, net, was primarily attributable to changes on mark-to-market adjustments on non-hedged commodity derivative contracts during the three months ended June 30, 2022 and non-hedged foreign currency contracts during the three months ended June 30, 2021. The change was partially offset by an increase in remeasurement losses recognized on the ~~quantity of new~~Company’s foreign denominated accounts receivable and existing sport products sold by Sierra of $17,861 and the inclusion of Barnes, which contributed $30,847. The remaining increase was driven by the inclusion of adventure products sold by Rhino-Rack of $7,123.accounts payable.

Income Taxes

Income tax expense changed by $801, or 516.8%, to an expense of $956 during the three months ended June 30, 2022, compared to income tax expense of $155 during the same period in 2021. Our effective income tax rate was 20.3% for the three months ended June 30, 2022, and differed compared to the statutory tax rates due to the impact of foreign tax credits. For the three months ended June 30, 2021, our effective income tax rate was 7.8% and differed compared to the statutory tax rates due to a release of a partial valuation

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

allowance of the deferred tax assets and a discrete charge recorded during the period.

~~Consolidated international~~

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

The following presents a discussion of operations for the six months ended June 30, 2022, compared with the six months ended June 30, 2021.


	Six Months Ended
	June 30, 2022		June 30, 2021

Sales
Domestic sales	$	126,380	$	99,449
International sales		101,829		49,191
Total sales		228,209		148,640

Cost of goods sold		140,275		93,569
Gross profit		87,934		55,071

Operating expenses
Selling, general and administrative		69,619		41,589
Transaction costs		2,022		1,125
Contingent consideration expense		389		-

Total operating expenses		72,030		42,714

Operating income		15,904		12,357

Other expense
Interest expense, net		(2,844)		(450)
Other, net		(1,410)		(4,601)

Total other expense, net		(4,254)		(5,051)

Income before income tax		11,650		7,306
Income tax expense (benefit)		2,577		(211)
Net income	$	9,073	$	7,517

Sales

Total sales increased ~~$32,336,~~$79,569, or ~~50.1%~~53.5%, to ~~$96,903~~$228,209, during the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to ~~consolidated international~~total sales of ~~$64,567~~$148,640 during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The increase in sales was primarily attributable to $55,778 of sales from the inclusion of Rhino-Rack and MAXTRAX in the current period. Additionally, there was an increase in the quantity of new and existing ~~climb, mountain, and ski products of $15,699 and the inclusion of Barnes, which contributed $2,469. The increase was also driven by the inclusion of adventure~~precision sport products sold ~~by Rhino-Rack~~ of ~~$12,502. We experienced~~$16,353. There was also an increase in the quantity of new and existing outdoor products sold during the period of $9,382. This was partially offset by a decrease in sales of ~~$3,273~~$1,944 due to the ~~weakening~~strengthening of the U.S. dollar against foreign currencies during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022, compared to the prior period.

Domestic sales increased $26,931, or 27.1%, to $126,380 during the six months ended June 30, 2022, compared to domestic sales of $99,449 during the six months ended June 30, 2021. The increase in sales was primarily attributable to $18,822 of sales from the inclusion of Rhino-Rack and MAXTRAX in the current period. Additionally, there was an increase in the quantity of new and existing precision sport products sold of $6,179. This was partially offset by a decrease in the quantity of new and existing ~~sport~~outdoor products sold ~~by Sierra~~during the period of ~~$1,607.~~$1,930.

~~Cost of Goods Sold~~

~~Consolidated cost of goods sold~~International sales increased ~~$66,118~~$52,638, or ~~68.0%~~107.0%, to ~~$163,361~~$101,829 during the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to ~~consolidated cost~~international sales of ~~goods sold of $97,243~~$49,191 during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The increase in ~~cost of goods sold~~sales was primarily attributable to $36,956 of sales from the inclusion of Rhino-Rack and MAXTRAX in the current period. Additionally, there was an increase in the ~~number~~quantity of ~~units sold.~~

~~Gross Profit~~

~~Consolidated gross profit increased $43,433 or 85.5%, to $94,250 during the nine months ended September 30, 2021, compared to consolidated gross profit~~new and existing precision sport products sold of ~~$50,817 during the nine months ended September 30, 2020. Consolidated gross margin~~$10,174. There was 36.6% during the nine months ended September 30, 2021, compared to a consolidated gross margin of 34.3% during the nine months ended September 30, 2020. Consolidated gross margin during the nine months ended September 30, 2021, increased compared to the prior year due to a favorable product mix in higher margin products and the favorable impacts related to foreign currency. Gross margin also benefited from the inclusion of Barnes and Rhino-Rack; however, this benefit was offset by a decrease in gross margin of 1.3% due to the sale of Barnes and Rhino-Rack inventory that was recorded at its fair value in purchase accounting during the year ended December 31, 2020 and three months ended September 30, 2021, respectively.

~~Selling, General and Administrative~~

Consolidated selling, general, and administrative expenses increased $22,366, or 44.3%, to $72,903 during the nine months ended September 30, 2021, compared to consolidated selling, general and administrative expenses of $50,537 during the nine months ended September 30, 2020. Thean increase in ~~selling, general~~the quantity of new and administrative expenses is due to the inclusion of Barnes and Rhino-Rack, which contributed $5,008 and $7,722, respectively, and an increase of stock compensation of $981 during the nine months ended September 30, 2021 compared to the prior year. The remaining increase was attributable to the Company’s investments in the brand related activities of sales, direct-to-consumer, marketing, and warehousing and logistics, focused on supporting its strategic initiatives around expanding distribution, elevating brand awareness and being easier to do business with.

~~Transaction Costs~~

Consolidated transaction expense increased to $9,272 during the nine months ended September 30, 2021, compared to consolidated transaction costs of $1,870 during the nine months ended September 30, 2020, which consisted of expenses related to the Company’s various acquisition efforts.

~~Interest Expense, net~~

Consolidated interest expense, net increased to $1,926 during the nine months ended September 30, 2021, compared to consolidated interest expense, net of $800 during the nine months ended September 30, 2020. The increase in interest expense recognized during the nine months ended September 30, 2021 was primarily associated with the increase in average outstanding debt amounts during the period compared to the prior year and the recording of certain debt issuance costs.

~~Other, net~~

Consolidated other, net expense changed $4,587, or 1,415.7%, to $4,263 during the nine months ended September 30, 2021, compared to consolidated other, net income of $324 during the nine months ended September 30, 2020. The change in other, net, was primarily attributable to changes on mark-to-market adjustments on non-hedged foreign currency contracts, including contracts associated with the purchase price of Rhino-Rack, as well as a decrease in remeasurement losses recognized on the Company’s foreign denominated accounts receivable and accounts payable.

existing outdoor products sold

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

during the period of $7,452. This was partially offset by a decrease in sales of $1,944 due to the strengthening of the U.S. dollar against foreign currencies during the six months ended June 30, 2022, compared to the prior period.

Cost of Goods Sold

Cost of goods sold increased $46,706, or 49.9%, to $140,275 during the six months ended June 30, 2022, compared to cost of goods sold of $93,569 during the six months ended June 30, 2021. The increase in cost of goods sold was primarily attributable to an increase in the number of units sold.

Gross Profit

Gross profit increased $32,863, or 59.7%, to $87,934 during the six months ended June 30, 2022, compared to gross profit of $55,071 during the six months ended June 30, 2021. Gross margin was 38.5% during the six months ended June 30, 2022, compared to a gross margin of 37.0% during the six months ended June 30, 2021. Gross margin during the six months ended June 30, 2022, increased compared to the prior year due to a favorable product mix from higher margin products and from the inclusion of Rhino-Rack and MAXTRAX in the current period. This increase was partially offset by the $269 MAXTRAX fair value inventory charge due to purchase accounting during the six months ended June 30, 2022 as well as unfavorable foreign exchange impacts due to the strengthening of the U.S. dollar against foreign currencies.

Selling, General and Administrative

Selling, general, and administrative expenses increased $28,030, or 67.4%, to $69,619 during the six months ended June 30, 2022, compared to selling, general and administrative expenses of $41,589 during the six months ended June 30, 2021. The increase in selling, general and administrative expenses is primarily due to the inclusion of Rhino-Rack and MAXTRAX, which contributed $16,634 and $2,534, respectively. Additionally, the Company incurred higher Corporate costs of $1,656 primarily related to payroll and professional fees along with an increase of stock compensation of $3,572 during the six months ended June 30, 2022 compared to the prior year. The remaining increase was primarily attributable to the Company’s investments in retail and direct-to-consumer initiatives at the Outdoor segment.

Transaction Costs

Transaction expense increased to $2,022 during the six months ended June 30, 2022, compared to transaction costs of $1,125 during the six months ended June 30, 2021, which consisted of expenses related to the Company’s various acquisition efforts.

Contingent Consideration Expense

Contingent consideration expense increased to $389 during the six months ended June 30, 2022, compared to $0 contingent consideration expense during the six months ended June 30, 2021, which consisted of changes in estimated fair value of contingent consideration liabilities.

Interest Expense, net

Interest expense, net increased to $2,844 during the six months ended June 30, 2022, compared to interest expense, net of $450 during the six months ended June 30, 2021. The increase in interest expense recognized during the six months ended June 30, 2022 was primarily associated with the increase in the average outstanding debt amounts during the period compared to the prior year and the recording of certain debt issuance costs.

Other, net

Other, net changed by $3,191, or 69.4%, to $1,410 during the six months ended June 30, 2022, compared to other, net of $4,601 during the six months ended June 30, 2021. The change in other, net, was primarily attributable to changes on mark-to-market adjustments on non-hedged commodity derivative contracts during the six months ended June 30, 2022 and non-hedged foreign currency contracts during the six months ended June 30, 2021. The change was partially offset by an increase in remeasurement losses recognized on the Company’s foreign denominated accounts receivable and accounts payable.

Income Taxes

~~Consolidated income~~Income tax ~~benefit increased $5,619,~~expense changed by $2,788, or ~~1,036.7%~~-1,321.3%, to ~~a benefit~~an expense of ~~$6,161~~$2,577 during the ~~nine~~six months ended September 30, 2021, compared to income tax benefit of $542 during the same period in 2020. Our effective income tax rate was a benefit of 104.7% for the nine months ended September 30, 2021, differed compared to the statutory tax rates due to a release of a partial valuation allowance of the deferred tax assets. This release is primarily due to a change in accounting method which increased taxable income and the ability to utilize NOLs (defined below). For the nine months ended September 30, 2020, our effective income tax rate was a benefit of 26.2% and was higher compared to the statutory tax rates due to permanent book to tax differences primarily related to incentive stock options.

~~Liquidity and Capital Resources~~

~~Condensed Consolidated Nine Months Ended September 30, 2021 Compared to Condensed Consolidated Nine Months Ended September 30, 2020~~

Our primary ongoing funding requirements are for working capital, expansion of our operations (both organically and through acquisitions) and general corporate needs, as well as investing activities associated with the expansion into new product categories. We plan to fund these activities through a combination of our future operating cash flows and revolving credit facility which had approximately $34,600 available to borrow at September 30, 2021. We believe that our liquidity requirements for at least the next 12 months will be adequately covered by cash provided by operations and our existing revolving credit facility. However, as the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs. The COVID-19 pandemic has negatively affected the U.S., European, Australian and global economies, disrupted global supply chains, and resulted in significant travel and transport restrictions and disruption of financial markets. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, ability to meet debt covenants, access to sources of liquidity and financial condition. Given the economic uncertainty as a result of the pandemic, we have taken actions to improve our current liquidity position, including drawing on the credit facility, suspending share repurchases and cash dividends, postponing nonessential capital expenditures, reducing operating costs, modulating production in line with demand, initiating workforce reductions and furloughs, and substantially reducing discretionary spending.

Further, the Company and certain of its direct and indirect subsidiaries (each, a “Loan Party” and, collectively, the “Loan Parties”) entered into Amendment No. 3 (“Amendment No. 3”) to that certain Credit Agreement, dated May 3, 2019, as amended by Amendment No. 1 dated May 28, 2019 and Amendment No. 2 dated November 12, 2020, with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto (collectively, the “Credit Agreement”). The Credit Agreement increased the aggregate amount of the term loan facility thereunder to $125,000 and increased the maximum amount of the revolving loan facility thereunder to $100,000. The term loan facility was fully borrowed at the closing of Amendment No. 3 on July 1, 2021. The Company is required to repay the term loan through quarterly payments of $1,563 each beginning with September 30, 2021, increasing to $3,125 beginning SeptemberJune 30, 2022, and any remaining obligations will be repaid in full on the maturity date of the Credit Agreement of May 3, 2024. Amendment No. 3 also removed the previously agreed upon ability of the Company to issue debt securities that may be convertible into equity interests of the Company in an aggregate principal amount of up to $125,000 and also increased the maximum consolidated total leverage ratio permitted under the Credit Agreement to 4.25:1.00.

Subsequent to the balance sheet date, the Company entered into an underwriting agreement relating to the public offer and sale of 2,750 shares of the Company’s common stock as well as a 30-day option to purchase up to 413 additional shares of common stock. The closing of the offering of 2,750 shares of common stock as well as the 413 additional shares of common stock occurred on October 29, 2021 and November 2, 2021, respectively. The net proceeds to the Company from the offering were approximately $80,264 before expenses and after deducting the applicable underwriting discounts and commissions. The Company intends to use a portion of the net proceeds of the offering for the repayment in full of approximately $65,000 in aggregate principal amount under the revolving loan facility available pursuant to the Credit Agreement and the remaining portion of the net proceeds from the offering for general corporate purposes, including capital expenditures and potential acquisitions.

~~At September 30, 2021, we had total cash of $10,170,~~ compared to a cash balance of $17,789 at December 31, 2020, which was substantially controlled by the Company’s U.S. entities. At September 30, 2021, the Company had $4,888 of the $10,170 in cash held by foreign entities, of which $2,995 is considered permanently reinvested.

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

to a benefit of $211 during the same period in 2021. Our effective income tax rate was 22.1% for the six months ended June 30, 2022, and differed compared to the statutory tax rates due to the impact of foreign earnings taxed at applicable statutory rates and permanent book to tax differences related to incentive stock options and officer compensation limitations. For the six months ended June 30, 2021, our effective income tax rate was a benefit of 2.9% and differed compared to the statutory tax rates due to a release of a partial valuation allowance of the deferred tax assets and a discrete charge recorded during the period.

Liquidity and Capital Resources

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

At June 30, 2022, we had total cash of $13,888, compared to a cash balance of $19,465 at December 31, 2021. At June 30, 2022, the Company had $5,301 of the $13,888 in cash held by foreign entities, of which $3,614 is considered permanently reinvested.

The following presents a discussion of cash flows for the condensed consolidated ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared with the condensed consolidated ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.


	Nine Months Ended				Six Months Ended
	September 30, 2021		September 30, 2020		June 30, 2022		June 30, 2021

Net cash (used in) provided by operating activities	$	(17,101)	$	21,048	$	(6,276)	$	362
Net cash used in investing activities		(141,181)		(33,779)		(3,774)		(3,200)
Net cash provided by financing activities		151,041		27,956
Net cash provided by (used in) financing activities						4,930		(8,031)
Effect of foreign exchange rates on cash		(378)		99		(457)		(138)
Change in cash		(7,619)		15,324		(5,577)		(11,007)
Cash, beginning of year		17,789		1,703		19,465		17,789
Cash, end of period	$	10,170	$	17,027	$	13,888	$	6,782

Net Cash From Operating Activities

~~Consolidated net~~Net cash used in operating activities was ~~$17,101~~$6,276 during the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to ~~consolidated~~ net cash provided by operating activities of ~~$21,048~~$362 during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The change in net cash used in operating activities during ~~2021~~2022 is primarily due to an increase in net operating assets, or non-cash working capital, of ~~$52,207,~~$20,963, partially offset by ~~an increase~~increases in ~~net income~~depreciation and amortization expenses, as well as stock compensation during the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to the same period in ~~2020.~~2021.

Free cash flow, defined as net cash (used in) provided by operating activities less capital expenditures, of ($~~22,680)~~10,348) was used during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~$17,442 generated~~($2,863) used during the same period in ~~2020.~~2021. The Company believes that the non-GAAP measure, free cash flow, provides an understanding of the capital required by the Company to expand its asset base. A reconciliation of free cash flows to comparable GAAP financial measures is set forth below:


	Nine Months Ended				Six Months Ended
	September 30, 2021		September 30, 2020		June 30, 2022		June 30, 2021

Net cash (used in) provided by operating activities	$	(17,101)	$	21,048	$	(6,276)	$	362
Purchase of property and equipment		(5,579)		(3,606)		(4,072)		(3,225)
Free cash flow	$	(22,680)	$	17,442	$	(10,348)	$	(2,863)

~~Net Cash From Investing Activities~~

Consolidated net cash used in investing activities was $141,181 during the nine months ended September 30, 2021, compared to $33,779 during the nine months ended September 30, 2020. The increase in cash used during the nine months ended September 30, 2021 is due to the acquisition of Rhino-Rack and an increase in purchases of property and equipment, compared to the same period in 2020.

~~Net Cash From Financing Activities~~

Consolidated net cash provided by financing activities was $151,041 during the nine months ended September 30, 2021, compared to net cash provided of $27,956 during the nine months ended September 30, 2020. The increase in cash used during the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to the net proceeds to the revolving line of credit and draws of the term loan under Amendment No.3 described below. Cash provided by financing activities during the nine months ended September 30, 2020 was primarily due to the proceeds of $20,000 borrowed under the term loan and net proceeds from the sale of common stock, offset by net repayment to the revolving line of credit.

~~Net Operating Loss~~

As of December 31, 2020, the Company had net operating loss carryforwards (“NOLs”) and research and experimentation credit for U.S. federal income tax purposes of $120,309 and $1,889, respectively. The Company believes its U.S. Federal NOLs will substantially offset its future U.S. Federal income taxes until expiration. The majority of the Company’s pre-tax income is currently earned and expected to be earned in the U.S., or taxed in the U.S. as Subpart F income and will be offset with the NOLs. $120,309 of net operating

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

~~losses available~~

Net Cash From Investing Activities

Net cash used in investing activities was $3,774 during the six months ended June 30, 2022, compared to $3,200 during the six months ended June 30, 2021. The increase in cash used during the six months ended June 30, 2022 is due to an increase in purchases of property and equipment, compared to the same period in 2021.

Net Cash From Financing Activities

Net cash provided by financing activities was $4,930 during the six months ended June 30, 2022, compared to net cash used by financing activities of $8,031 during the six months ended June 30, 2021. The increase in cash provided during the six months ended June 30, 2022, compared to the same period in 2021 was primarily due to the net proceeds to the revolving line of credit. Cash used by financing activities during the six months ended June 30, 2021 was primarily due to the net repayments to the revolving line of credit and repayments of the term loan.

Net Operating Loss

As of December 31, 2021, the Company had net operating loss carryforwards (“NOLs”) and research and experimentation credit for U.S. federal income tax purposes of $60,712 and $2,289, respectively. The Company believes its U.S. Federal NOLs will substantially offset ~~taxable~~its future U.S. Federal income ~~does not~~taxes until expiration. The Company has $60,712 of NOLs, of which, $39,507 expire ~~until 2022 or later,~~on December 31, 2022. These NOLs are subject to compliance with Section 382 of the Internal Revenue Code of 1986, as amended.

Credit Agreement

~~On May 3, 2019,~~As of June 30, 2022, the Company ~~Borrowers~~had drawn approximately $25,472of the $300,000 revolving loan commitment that was available for borrowing under the Restated Credit Agreement (as defined below), and $123,438 was outstanding under the term loan commitment. As of June 30, 2022, the interest rates on the revolving loan and term loan commitments were approximately 3.5%.The Company was in compliance with the debt covenants set forth in the Restated Credit Agreement as of June 30, 2022.

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

The Restated Credit Agreement provides for borrowings of up to ~~$60,000~~$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 ~~$40,000~~$125,000 under a secured term loan facility ~~that is available to be drawn until May 3, 2020.~~(the “Term Loans”). The Restated Credit Agreement also permits the Borrowers, subject to certain requirements, to arrange with lenders for an aggregate of up to ~~$50,000~~$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 ~~$150,000.~~$600,000. The proceeds of loans made under the Restated Credit Agreement may be used for working capital and general corporate purposes, including acquisitions permitted under the Restated Credit Agreement. The Restated Credit Agreement matures on ~~May 3, 2024.~~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.

On November 12, 2020, the Borrowers entered into Amendment No. 2 of the Credit Agreement. Amendment No. 2 increased the maximum consolidated total leverage ratio permitted under the Credit Agreement to 4.00:1.00 from 3.00:1.00. In addition, Amendment No. 2 permits, among other things, the issuance by the Company of debt securities, that may be convertible into equity interests of the Company, in an aggregate principal amount of up to $125,000, and eliminates the requirement that the proceeds therefrom be used to prepay any revolving loans or term loans under the Credit Agreement.

On July 1, 2021, the Borrowers entered into Amendment No. 3 of the Credit Agreement. Amendment No. 3 increased the aggregate amount of the term loan facility thereunder to $125,000 and increased the maximum amount of the revolving loan facility thereunder to $100,000. The term loan facility was fully borrowed at the closing of Amendment No. 3 on July 1, 2021 in connection with the Rhino-Rack Acquisition. The Credit Agreement continues to permit the Borrowers, subject to certain requirements, to arrange with lenders for an aggregate of up to $50,000 of additional revolving and/or term loan commitments (both of which are currently uncommitted), for potential aggregate revolving and term loan commitments under the Credit Agreement of up to $275,000.

Amendment No. 3 provides for additional subsidiaries of the Company to guarantee and provide collateral for the loans under the Credit Agreement, including certain of its newly formed or newly acquired Australian subsidiaries in connection with the Rhino-Rack Acquisition. Amendment No. 3 also removed the previously agreed upon ability of the Company to issue debt securities that may be convertible into equity interests of the Company in an aggregate principal amount of up to $125,000 and also increased the maximum consolidated total leverage ratio permitted under the Credit Agreement to 4.25:1.00. Amendment No. 3 did not change the maturity date which remains May 3, 2024.

The ~~Borrowers may elect to have~~Term Loans were fully drawn on the ~~revolving~~Effective Date and ~~term loans under the~~cannot be reborrowed. The Restated Credit Agreement ~~bear interest at an alternate base rate or a Term Benchmark rate plus an applicable rate. The applicable rate~~provides for these borrowings will range from 0.50% to 1.625% per annum, in the case of alternate base rate borrowings, and 1.50% to 2.625% per annum, in the case of Term Benchmark borrowings. The applicable rate was initially 0.875% per annum, in the case of alternate base rate borrowings, and 1.875% per annum, in the case of Term Benchmark borrowings; however, it may be adjusted from time to time based upon the levelquarterly amortization payments of the ~~Company’s consolidated total leverage ratio.~~ ~~The Credit Agreement also requires the Borrowers to pay a commitment fee~~Term Loans on the ~~unused portion~~last business day of ~~the revolving~~each March, June, September and ~~term loan commitments. Such commitment fee will range between 0.15% and 0.30% per annum, and is also based upon the level of the Company’s consolidated total leverage ratio.~~

All obligations under the Credit Agreement are secured by 100% of our domestic, and 65% of our foreign, subsidiary equity interests, as well as accounts receivable, inventory, intellectual property and certain other assets owned by the Company. The Credit Agreement contains restrictions on the Company’s ability to ~~pay dividends or make distributions or other restricted payments if certain conditions in the Credit Agreement are not fulfilled~~. The Credit Agreement includes 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, 2021.

~~As of September 30, 2021, the Company had drawn approximately $65,412of the $100,000 revolving loan commitment that was available for borrowing under the Credit Agreement, and $123,437 outstanding under the term loan commitment.~~ ~~As of September 30, 2021, the interest rate for each loan was 1.6250%. On April 30, 2020, the Company borrowed $20,000 under the term loan facility and~~December,

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

commencing on June 30, 2022. Through and including the payment due on March 31, 2023, the scheduled amortization payment is $1,563 per quarter, and each scheduled amortization payment due thereafter through the Maturity Date is $3,125 per quarter.

The Borrowers may elect to have the Revolving Loans and Term Loans under the Restated Credit Agreement bear interest at an applicable rate plus either:

(i) in the case of alternate base rate borrowings, a rate per annum generally equal to the greatest of:

(a)

the prime rate in effect on such day;

(b)

0.50% plus the greater of the Federal Reserve Bank of New York’s effective federal funds rate or the Federal Reserve Bank of New York’s overnight bank funding rate in effect on such day; and

(c)

1.00% plus the adjusted term SOFR rate for a 1-month interest period;

provided that, in certain circumstances where the alternate base rate is being used as an alternate rate of interest, the ~~proceeds~~alternate base rate shall be determined only according to (a) and (b), and shall be subject to a 1.00% floor; or

(ii) in the case of term benchmark borrowings, a rate per annum as follows:

(a)

for borrowings denominated in U.S. Dollars, the term SOFR rate (based on one, three or six-month interest periods) plus 0.10%, subject to a 0.00% floor; or

(b)

for borrowings denominated in a Foreign Currency, the applicable rate for such Foreign Currency set forth in the Restated Credit Agreement.

The applicable rate for these borrowings will range from 0.50% to 1.625% per annum, in the case of alternate base rate borrowings, and 1.50% to 2.625% per annum, in the case of term benchmark borrowings. The applicable rate was initially 0.875% per annum, in the case of alternate base rate borrowings, and 1.875% per annum, in the case of term benchmark borrowings, however, these initial applicable rates may be adjusted from time to time based upon the level of the Company’s consolidated total leverage ratio, which is more fully discussed in the Restated Credit Agreement. If one or more of the above interest rates are not determinable, or under certain other circumstances set forth in the Restated Credit Agreement, a substitute or alternative interest rate may apply under the Restated Credit Agreement.

The Restated Credit Agreement also requires the Borrowers to pay ~~down amounts outstanding under~~a commitment fee on the ~~revolving~~unused portion of the revolving loan commitments. Such commitment fee will range between 0.15% and 0.30% per annum, and is also based upon the level of the Company’s consolidated total leverage ratio, which is more fully discussed in the Restated Credit Agreement. ~~On July 1, 2021, the term loan facility was fully borrowed at the closing of Amendment No. 3.~~ The Company is ~~required~~also obligated to ~~repay the term loan through quarterly payments~~pay other customary closing fees, arrangement fees, administration fees and letter of ~~$1,563 each beginning with September 30, 2021, increasing to $3,125 beginning September 30, 2022,~~credit fees for a credit facility of this size and ~~any remaining obligations will be repaid in full~~type.

The Restated Credit Agreement contains customary affirmative and negative covenants, including limitations on the ~~maturity date~~ability of the Company and its subsidiaries to perform the following, subject to certain customary exceptions, qualifications and “baskets”: (i) incur additional debt; (ii) create liens; (iii) engage in mergers, consolidations, certain divisions, liquidations or dissolutions other than in certain permitted instances as described in the Restated Credit Agreement; (iv) substantially change the business conducted by the Company and its subsidiaries; (v) make certain investments, loans, advances, guarantees and acquisitions other than in certain permitted instances as described in the Restated Credit Agreement; (vi) sell assets; (vii) pay dividends or make distributions or other restricted payments if certain conditions in the Restated Credit Agreement are not fulfilled; (viii) prepay other indebtedness; (ix) engage in certain transactions with affiliates; (x) enter into agreements that restrict dividends from subsidiaries or the ability of subsidiaries to grant liens upon their assets; (xi) amend certain charter documents and material agreements governing subordinated indebtedness; (xii) permit the consolidated total leverage ratio, which is to be determined for each quarter end on a trailing twelve month basis, from exceeding a limit of 3:75 to 1, provided, that, subject to certain terms and conditions set forth in the Restated Credit Agreement, so long as no Event of Default (as defined in the Restated Credit Agreement) exists at such time or would result therefrom, the Company may elect to increase the maximum consolidated total leverage ratio permitted under the Restated Credit Agreement to 4.25:1.00 for a period of four consecutive fiscal quarters in connection with any acquisition permitted under the Restated Credit Agreement for which the aggregate consideration is greater than or equal to $60,000; and (xiii) permit the consolidated fixed charge coverage ratio, which is to be determined for each quarter end on a trailing twelve month basis, to be less than 1.25 to 1.

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

The Restated Credit Agreement also contains customary events of default, including, but not limited to: (i) failure to pay amounts due under the Restated Credit Agreement; (ii) materially incorrect representations and warranties; (iii) failure to comply with covenants; (iv) change of control; and (v) default under other indebtedness aggregating at least $3,000.

The obligations of each Loan Party under the Restated Credit Agreement are guaranteed by each other Loan Party. All obligations under the Restated Credit Agreement, and the guarantees of those obligations (as well as banking services obligations and certain swap agreements), are secured by pledges and liens on 100% of the equity interests of domestic subsidiaries, either 100% or 65% of the equity interests of certain foreign subsidiaries, and the accounts receivable, inventory, intellectual property and certain real property or other assets of the Loan Parties pursuant to (i) a Pledge and Security Agreement, dated as of May 3, ~~2024.~~2019, by and among certain of the Loan Parties and the Administrative Agent (as amended from time to time prior to the Effective Date, the “PSA”), (ii) a General Security Deed, dated as of August 30, 2021, by and among certain of the Loan Parties and the Administrative Agent (the “Oscar GSD”), (iii) a General Security Deed, dated as of January 31, 2022, by and among certain of the Loan Parties and the Administrative Agent (the “Simpson GSD”) or (iv) a mortgage or other applicable security agreement or instrument. Each of the PSA, the Oscar GSD and the Simpson GSD was reaffirmed by the Loan Parties on the Effective Date pursuant to a Reaffirmation Agreement dated as of the Effective Date by and among the Administrative Agent and the Loan Parties (the “Reaffirmation Agreement”) pursuant to which each Loan Party ratified and reaffirmed its obligations to the Lenders in connection with entering into the Restated Credit Agreement.

Off-Balance Sheet Arrangements

We do not engage in any transactions or have relationships or other arrangements with unconsolidated entities. These include special purpose and similar entities or other off-balance sheet arrangements. We also do not engage in energy, weather or other commodity-based contracts.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has not been any material change in the market risk disclosure contained in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management carried out an evaluation, under the supervision and with the participation of the Company’s Executive Chairman and ~~Executive Vice President/~~Chief Financial Officer, its principal executive officer and principal financial officer, respectively, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15I and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of ~~September~~June 30, ~~2021,~~2022, pursuant to Exchange Act Rule 13a-15. Such disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company is accumulated and communicated to the appropriate management on a basis that permits timely decisions regarding disclosure. Based upon that evaluation, the Company’s Executive Chairman and ~~Executive Vice President/~~Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of ~~September~~June 30, ~~2021,~~2022, were effective.

~~The Company acquired certain assets and liabilities constituting the Barnes business (“Barnes”) on October 2, 2020.~~ On July 1, 2021, the Company completed the acquisition of Australia-based Rhino-Rack Holdings Pty Ltd (“Rhino-Rack”). On December 1, 2021, the Company completed the acquisition of Australia-based MaxTrax Australia Pty Ltd (“MAXTRAX”). Management excluded ~~Barnes~~Rhino-Rack and ~~Rhino-Rack~~MAXTRAX from its assessment of the effectiveness of the Company’s internal control over financial reporting as of ~~September~~June 30, 2021. Barnes’ financial statements constitute 9% of total assets and 13% of total sales of the condensed consolidated financial statement amounts as of and for the nine months ended September 30, 2021. Rhino-Rack’s financial statements constitute 45% of total assets and 8% of total sales of the condensed consolidated financial statement amounts as of and for the nine months ended September 30, 2021.2022.

Changes in Internal Control over Financial Reporting

~~On October 2, 2020, the~~The Company acquired ~~Barnes. On~~MAXTRAX and Rhino-Rack on December 1, 2021 and July 1, 2021, respectively. The Company is currently in the ~~Company acquired Rhino-Rack. Because Barnes and Rhino-Rack utilize separate information and accounting systems,~~process of integrating the ~~Company has implemented~~ internal controls over financial reporting at MAXTRAX and Rhino-Rack. Except for ~~acquisition-related accounting and disclosures. The Company’s management is reviewing and evaluating its internal control procedures and~~ the ~~design~~continued integration of ~~those control procedures related to the Barnes~~MAXTRAX and Rhino-Rack, ~~acquisitions and evaluating when it will complete an evaluation and review of Barnes’ and Rhino-Rack’s internal controls over financial reporting.~~

~~Except as described above,~~ there has been no change in our internal control over financial reporting that occurred during the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

3637

CLARUS CORPORATION

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Legal Proceedings

Litigation

The Company is involved in various lawsuits arising from time to time that the Company considers ordinary routine litigation incidental to its business. Amounts accrued for litigation matters represent the anticipated costs (damages and/or settlement amounts) in connection with pending litigation and claims and related anticipated legal fees for defending such actions, which legal fees are expensed as incurred. The costs are accrued when it is both probable that a liability has been incurred and the amount can be reasonably estimated. The accruals are based upon the Company’s assessment, after consultation with counsel (if deemed appropriate), of probable loss based on the facts and circumstances of each case, the legal issues involved, the nature of the claim made, the nature of the damages sought and any relevant information about the plaintiffs and other significant factors that vary by case. When it is not possible to estimate a specific expected cost to be incurred, the Company evaluates the range of probable loss and records the minimum end of the range. 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. There is a reasonable possibility of loss from contingencies in excess of the amounts accrued by the Company in the accompanying condensed consolidated balance sheets; however, the actual amounts of such possible losses cannot currently be reasonably estimated by the Company at this time. It is possible that, as additional information becomes available, the impact on the Company could have a different effect.

Product Liability

Based on current information, there are no pending product liability claims and lawsuits of the Company, which the Company believes in the aggregate, will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A. of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

‎

3738

CLARUS CORPORATION

ITEM 6. EXHIBITS


Exhibit		Description
~~10.1~~		Amendment No. 3 dated as of July 1, 2021, to that certain Credit Agreement, dated May 3, 2019, as amended by Amendment No. 1 dated May 28, 2019, and Amendment No. 2 dated November 12, 2020, by and among Clarus Corporation, Black Diamond Retail, Inc., Black Diamond Retail – Alaska, LLC, Sierra Bullets, L.L.C., SKINourishment, LLC, Black Diamond Retail – Colorado, LLC, Black Diamond Retail – Montana, LLC, Barnes Bullets – Mona, LLC, and Black Diamond Retail – Wyoming, LLC, as borrowers, the other loan parties party thereto, JPMorgan Chase Bank, N.A., as administrative agent, U.S. Bank National Association, as syndication agent, Regions Bank and Bank of America, N.A., as co-documentation agents, JPMorgan Chase Bank, N.A., as sole bookrunner and sole lead arranger, and the other lenders from time to time party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on July 8, 2021, and incorporated herein by reference).
~~99.1~~		Letter to TT Investimentos Ltda, dated October 6, 2021 (filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on October 8, 2021, and incorporated herein by reference).
31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **
32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **
101.INS		XBRL Instance Document *
101.SCH		XBRL Taxonomy Extension Schema Document *
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB		XBRL Taxonomy Extension Label Linkbase Document *
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document *
104		Cover Page Interactive Data File – formatted as Inline XBRL and contained in Exhibit 101
*		Filed herewith
**		Furnished herewith
+		~~Management contract or compensation plan or arrangement~~

‎

3839

CLARUS CORPORATION

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	CLARUS CORPORATION
Date: ~~November 8, 2021~~August 1, 2022	By:	/s/ Warren B. Kanders
	Name:	Warren B. Kanders
	Title:	Executive Chairman
		(Principal Executive Officer)

Date: ~~November 8, 2021~~August 1, 2022	By:	/s/ ~~Aaron~~Michael J. ~~Kuehne~~Yates
	Name:	~~Aaron~~Michael J. ~~Kuehne~~Yates
	Title:	~~Executive Vice President~~ ~~and~~
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

3940


Years Ending December 31,	Amortization Expense
2021 (excluding the nine months ended September 30, 2021)	$	3,529
2022		12,729
2023		11,148
2024		9,731
2025		8,035
Thereafter		17,500
	$	62,672