Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2023 | Nov. 03, 2023 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2023 | |
Document Transition Report | false | |
Entity File Number | 001-40698 | |
Entity Registrant Name | CADRE HOLDINGS, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 38-3873146 | |
Entity Address, Address Line One | 13386 International Pkwy | |
Entity Address, City or Town | Jacksonville, | |
Entity Address State Or Province | FL | |
Entity Address, Postal Zip Code | 32218 | |
City Area Code | 904 | |
Local Phone Number | 741-5400 | |
Title of 12(b) Security | Common Stock, par value $0.0001 per share | |
Trading Symbol | CDRE | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 37,586,031 | |
Entity Central Index Key | 0001860543 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Current assets | ||
Cash and cash equivalents | $ 69,412 | $ 45,286 |
Accounts receivable, net of allowance for doubtful accounts of $819 and $924, respectively | 61,261 | 64,557 |
Inventories | 82,546 | 70,273 |
Prepaid expenses | 14,667 | 10,091 |
Other current assets | 8,836 | 6,811 |
Total current assets | 236,722 | 197,018 |
Property and equipment, net of accumulated depreciation and amortization of $48,994 and $42,694, respectively | 43,657 | 45,285 |
Operating lease assets | 6,643 | 8,489 |
Deferred tax assets, net | 2,299 | 2,255 |
Intangible assets, net | 44,333 | 50,695 |
Goodwill | 81,212 | 81,576 |
Other assets | 5,639 | 6,634 |
Total assets | 420,505 | 391,952 |
Current liabilities | ||
Accounts payable | 30,733 | 23,406 |
Accrued liabilities | 38,673 | 38,720 |
Income tax payable | 7,049 | 4,584 |
Current portion of long-term debt | 13,251 | 12,211 |
Total current liabilities | 89,706 | 78,921 |
Long-term debt | 130,309 | 137,476 |
Long-term operating lease liabilities | 3,603 | 4,965 |
Deferred tax liabilities | 5,047 | 3,508 |
Other liabilities | 1,843 | 1,192 |
Total liabilities | 230,508 | 226,062 |
Commitments and contingencies (Note 7) | ||
Mezzanine equity | ||
Preferred stock ($0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of September 30, 2023 and December 31, 2022) | ||
Shareholders' equity | ||
Common stock ($0.0001 par value, 190,000,000 shares authorized, 37,586,031 and 37,332,271 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively) | 4 | 4 |
Additional paid-in capital | 210,543 | 206,540 |
Accumulated other comprehensive income | 2,143 | 2,087 |
Accumulated deficit | (22,693) | (42,741) |
Total shareholders' equity | 189,997 | 165,890 |
Total liabilities, mezzanine equity and shareholders' equity | $ 420,505 | $ 391,952 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance for doubtful accounts | $ 819,000 | $ 924,000 |
Property and equipment, accumulated depreciation and amortization | $ 48,994,000 | $ 42,694,000 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 190,000,000 | 190,000,000 |
Common stock, shares issued | 37,586,031 | 37,332,271 |
Common stock, shares outstanding | 37,586,031 | 37,332,271 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||||
Net sales | $ 125,114,000 | $ 111,554,000 | $ 357,949,000 | $ 334,192,000 |
Cost of goods sold | 71,511,000 | 67,814,000 | 206,981,000 | 207,042,000 |
Gross profit | 53,603,000 | 43,740,000 | 150,968,000 | 127,150,000 |
Operating expenses | ||||
Selling, general and administrative | 36,314,000 | 31,732,000 | 105,615,000 | 118,431,000 |
Restructuring and transaction costs | 439,000 | 1,578,000 | 1,132,000 | 3,380,000 |
Related party expense | 116,000 | 112,000 | 379,000 | 1,346,000 |
Total operating expenses | 36,869,000 | 33,422,000 | 107,126,000 | 123,157,000 |
Operating income | 16,734,000 | 10,318,000 | 43,842,000 | 3,993,000 |
Other expense | ||||
Interest expense | (1,073,000) | (1,567,000) | (3,727,000) | (4,496,000) |
Other (expense) income, net | (315,000) | (1,851,000) | 395,000 | (2,812,000) |
Total other expense, net | (1,388,000) | (3,418,000) | (3,332,000) | (7,308,000) |
Income (loss) before provision for income taxes | 15,346,000 | 6,900,000 | 40,510,000 | (3,315,000) |
(Provision) benefit for income taxes | (4,293,000) | (1,959,000) | (11,463,000) | 2,536,000 |
Net income (loss) | $ 11,053,000 | $ 4,941,000 | $ 29,047,000 | $ (779,000) |
Net income (loss) per share: | ||||
Basic | $ 0.29 | $ 0.13 | $ 0.77 | $ (0.02) |
Diluted | $ 0.29 | $ 0.13 | $ 0.77 | $ (0.02) |
Weighted average shares outstanding: | ||||
Basic | 37,586,031 | 37,289,880 | 37,515,976 | 35,697,891 |
Diluted | 37,930,888 | 37,747,614 | 37,830,790 | 35,697,891 |
Net income (loss) | $ 11,053,000 | $ 4,941,000 | $ 29,047,000 | $ (779,000) |
Other comprehensive income: | ||||
Unrealized holding gains, net of tax(1) | 1,131,000 | 2,350,000 | 2,281,000 | 6,414,000 |
Reclassification adjustments for gains included in net income (loss), net of tax(2) | (884,000) | (252,000) | (2,266,000) | (106,000) |
Total unrealized gain on interest rate swaps, net of tax | 247,000 | 2,098,000 | 15,000 | 6,308,000 |
Foreign currency translation adjustments, net of tax(3) | (850,000) | (2,839,000) | 41,000 | (5,237,000) |
Other comprehensive (loss) income | (603,000) | (741,000) | 56,000 | 1,071,000 |
Comprehensive income, net of tax | $ 10,450,000 | $ 4,200,000 | $ 29,103,000 | $ 292,000 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Parenthetical) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||||
Unrealized holding gains, net of tax expense | $ 377,000 | $ 783,000 | $ 760,000 | $ 2,138,000 |
Reclassification adjustments for gains included in net of income tax expense | 295,000 | 84,000 | 755,000 | 35,000 |
Foreign currency translation adjustments, net of tax expense (benefit) | $ (170,000) | $ (916,000) | $ 55,000 | $ (934,000) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Cash Flows From Operating Activities: | ||
Net income (loss) | $ 29,047 | $ (779) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation and amortization | 12,385 | 11,319 |
Amortization of original issue discount and debt issue costs | 359 | 554 |
Amortization of inventory step-up | 3,055 | |
Deferred income taxes | 1,317 | (2,755) |
Stock-based compensation | 7,060 | 28,988 |
Gain on sale of fixed assets | (98) | |
Provision for losses on accounts receivable | 37 | 245 |
Foreign exchange (gain) loss | (243) | 3,006 |
Other | (296) | |
Changes in operating assets and liabilities, net of impact of acquisitions: | ||
Accounts receivable | 3,429 | (3,271) |
Inventories | (12,229) | (7,187) |
Prepaid expenses and other assets | (3,131) | 986 |
Accounts payable and other liabilities | 8,623 | (4,660) |
Net cash provided by operating activities | 46,260 | 29,501 |
Cash Flows From Investing Activities: | ||
Purchase of property and equipment | (4,248) | (2,938) |
Proceeds from disposition of property and equipment | 206 | |
Business acquisitions, net of cash acquired | (55,039) | |
Net cash used in investing activities | (4,042) | (57,977) |
Cash Flows From Financing Activities: | ||
Proceeds from revolving credit facilities | 43,000 | |
Principal payments on revolving credit facilities | (43,000) | |
Principal payments on term loans | (7,500) | (7,514) |
Proceeds from insurance premium financing | 3,949 | 3,989 |
Principal payments on insurance premium financing | (2,909) | (3,878) |
Payment of capital leases | (26) | |
Taxes paid in connection with employee stock transactions | (2,725) | (6,216) |
Proceeds from secondary offering, net of underwriter discounts | 56,329 | |
Deferred offering costs | (2,953) | |
Dividends distributed | (8,999) | (8,521) |
Net cash (used in) provided by financing activities | (18,184) | 31,210 |
Effect of foreign exchange rates on cash and cash equivalents | 92 | (241) |
Change in cash and cash equivalents | 24,126 | 2,493 |
Cash and cash equivalents, beginning of period | 45,286 | 33,857 |
Cash and cash equivalents, end of period | 69,412 | 36,350 |
Supplemental Disclosure of Cash Flows Information: | ||
Cash paid for income taxes, net | 7,923 | 710 |
Cash paid for interest | 7,389 | 3,860 |
Supplemental Disclosure of Non-Cash Investing and Financing Activities: | ||
Accruals and accounts payable for capital expenditures | $ 24 | $ 272 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total |
Balance at the beginning at Dec. 31, 2021 | $ 3,000 | $ 127,606,000 | $ (1,917,000) | $ (37,052,000) | $ 88,640,000 |
Balance at the beginning (in shares) at Dec. 31, 2021 | 34,383,350 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | (10,165,000) | (10,165,000) | |||
Dividends declared | (2,750,000) | (2,750,000) | |||
Stock-based compensation | 22,436,000 | 22,436,000 | |||
Common stock issued under employee compensation plans | 1,152,000 | 1,152,000 | |||
Common stock issued under employee compensation plans (in shares) | 580,990 | ||||
Common stock withheld related to net share settlement of stock-based compensation | (6,216,000) | (6,216,000) | |||
Common stock withheld related to net share settlement of stock-based compensation (in shares) | (182,069) | ||||
Foreign currency translation adjustments | (360,000) | (360,000) | |||
Change in fair value of derivative instruments | 3,208,000 | 3,208,000 | |||
Balance at the end at Mar. 31, 2022 | $ 3,000 | 144,978,000 | 931,000 | (49,967,000) | 95,945,000 |
Balance at the end (in shares) at Mar. 31, 2022 | 34,782,271 | ||||
Balance at the beginning at Dec. 31, 2021 | $ 3,000 | 127,606,000 | (1,917,000) | (37,052,000) | 88,640,000 |
Balance at the beginning (in shares) at Dec. 31, 2021 | 34,383,350 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | (779,000) | ||||
Foreign currency translation adjustments | (5,237,000) | ||||
Balance at the end at Sep. 30, 2022 | $ 4,000 | 203,754,000 | (846,000) | (46,352,000) | 156,560,000 |
Balance at the end (in shares) at Sep. 30, 2022 | 37,332,271 | ||||
Balance at the beginning at Mar. 31, 2022 | $ 3,000 | 144,978,000 | 931,000 | (49,967,000) | 95,945,000 |
Balance at the beginning (in shares) at Mar. 31, 2022 | 34,782,271 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | 4,445,000 | 4,445,000 | |||
Issuance of common stock in secondary offering, net of underwriter discounts and issuance costs | $ 1,000 | 46,987,000 | 46,988,000 | ||
Issuance of common stock in secondary offering, net of underwriter discounts and issuance costs (in shares) | 2,250,000 | ||||
Dividends declared | (2,783,000) | (2,783,000) | |||
Stock-based compensation | 2,739,000 | 2,739,000 | |||
Foreign currency translation adjustments | (2,038,000) | (2,038,000) | |||
Change in fair value of derivative instruments | 1,002,000 | 1,002,000 | |||
Balance at the end at Jun. 30, 2022 | $ 4,000 | 194,704,000 | (105,000) | (48,305,000) | 146,298,000 |
Balance at the end (in shares) at Jun. 30, 2022 | 37,032,271 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | 4,941,000 | 4,941,000 | |||
Issuance of common stock in secondary offering, net of underwriter discounts and issuance costs | 6,389,000 | 6,389,000 | |||
Issuance of common stock in secondary offering, net of underwriter discounts and issuance costs (in shares) | 300,000 | ||||
Dividends declared | (2,988,000) | (2,988,000) | |||
Stock-based compensation | 2,661,000 | 2,661,000 | |||
Foreign currency translation adjustments | (2,839,000) | (2,839,000) | |||
Change in fair value of derivative instruments | 2,098,000 | 2,098,000 | |||
Balance at the end at Sep. 30, 2022 | $ 4,000 | 203,754,000 | (846,000) | (46,352,000) | 156,560,000 |
Balance at the end (in shares) at Sep. 30, 2022 | 37,332,271 | ||||
Balance at the beginning at Dec. 31, 2022 | $ 4,000 | 206,540,000 | 2,087,000 | (42,741,000) | $ 165,890,000 |
Balance at the beginning (in shares) at Dec. 31, 2022 | 37,332,271 | 37,332,271 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | 7,002,000 | $ 7,002,000 | |||
Dividends declared | (2,986,000) | (2,986,000) | |||
Stock-based compensation | 2,636,000 | 2,636,000 | |||
Common stock issued under employee compensation plans (in shares) | 395,837 | ||||
Common stock withheld related to net share settlement of stock-based compensation | (2,725,000) | (2,725,000) | |||
Common stock withheld related to net share settlement of stock-based compensation (in shares) | (142,077) | ||||
Foreign currency translation adjustments | 706,000 | 706,000 | |||
Change in fair value of derivative instruments | (1,073,000) | (1,073,000) | |||
Balance at the end at Mar. 31, 2023 | $ 4,000 | 206,451,000 | 1,720,000 | (38,725,000) | 169,450,000 |
Balance at the end (in shares) at Mar. 31, 2023 | 37,586,031 | ||||
Balance at the beginning at Dec. 31, 2022 | $ 4,000 | 206,540,000 | 2,087,000 | (42,741,000) | $ 165,890,000 |
Balance at the beginning (in shares) at Dec. 31, 2022 | 37,332,271 | 37,332,271 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | $ 29,047,000 | ||||
Foreign currency translation adjustments | 41,000 | ||||
Balance at the end at Sep. 30, 2023 | $ 4,000 | 210,543,000 | 2,143,000 | (22,693,000) | $ 189,997,000 |
Balance at the end (in shares) at Sep. 30, 2023 | 37,586,031 | 37,586,031 | |||
Balance at the beginning at Mar. 31, 2023 | $ 4,000 | 206,451,000 | 1,720,000 | (38,725,000) | $ 169,450,000 |
Balance at the beginning (in shares) at Mar. 31, 2023 | 37,586,031 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | 10,992,000 | 10,992,000 | |||
Dividends declared | (3,007,000) | (3,007,000) | |||
Stock-based compensation | 2,041,000 | 2,041,000 | |||
Foreign currency translation adjustments | 185,000 | 185,000 | |||
Change in fair value of derivative instruments | 841,000 | 841,000 | |||
Balance at the end at Jun. 30, 2023 | $ 4,000 | 208,492,000 | 2,746,000 | (30,740,000) | 180,502,000 |
Balance at the end (in shares) at Jun. 30, 2023 | 37,586,031 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | 11,053,000 | 11,053,000 | |||
Dividends declared | (3,006,000) | (3,006,000) | |||
Stock-based compensation | 2,051,000 | 2,051,000 | |||
Foreign currency translation adjustments | (850,000) | (850,000) | |||
Change in fair value of derivative instruments | 247,000 | 247,000 | |||
Balance at the end at Sep. 30, 2023 | $ 4,000 | $ 210,543,000 | $ 2,143,000 | $ (22,693,000) | $ 189,997,000 |
Balance at the end (in shares) at Sep. 30, 2023 | 37,586,031 | 37,586,031 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares | 3 Months Ended | ||||
Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Jun. 30, 2022 | Mar. 31, 2022 | |
CONENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY | |||||
Dividend declared (in dollars per share) | $ 0.08 | $ 0.08 | $ 0.08 | $ 0.08 | $ 0.08 |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2023 | |
SIGNIFICANT ACCOUNTING POLICIES | |
SIGNIFICANT ACCOUNTING POLICIES | 1. SIGNIFICANT ACCOUNTING POLICIES Nature of Operations and Basis of Presentation Cadre Holdings, Inc., D/B/A The Safariland Group (the “Company”, “Cadre”, “we”, “us”, and “our”), a Delaware corporation, began operations on April 12, 2012. The Company, headquartered in Jacksonville, Florida, is a global leader in manufacturing and distributing safety and survivability products and other related products for the law enforcement, first responder and military markets. The business operates through 16 manufacturing plants within the U.S., Mexico, Canada, the United Kingdom, Italy, France, and Lithuania, and sells its products worldwide through its direct sales force, distribution channel and distribution partners, online stores, and third-party resellers. Principles of Consolidation The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP" or “U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting, and include the accounts of the Company, its wholly owned subsidiaries, and other entities consolidated as required by GAAP. Accordingly, they do not include all of the information and footnotes required by GAAP for annual audited financial statements. The unaudited condensed consolidated interim financial statements have been prepared on a basis consistent with the audited consolidated financial statements and include all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. These condensed consolidated interim financial statements and notes thereto should be read in conjunction with the Company’s most recently completed annual consolidated financial statements. All adjustments considered necessary for a fair presentation have been included. All intercompany balances and transactions have been eliminated in consolidation. Secondary Offering On June 9, 2022, the Company completed a secondary offering in which the Company issued and sold 2,250,000 shares of common stock at a price of $23.50 per share. The Company’s net proceeds from the sale of shares were $46,988 after underwriter discounts and commissions, fees and expenses of $2,715 , of which $2,000 was paid to Kanders & Company, Inc., a company controlled by Warren Kanders, our Chief Executive Officer On July 14, 2022, the underwriters exercised a portion of their over-allotment option and purchased an additional 300,000 shares of common stock at a price of $23.50 per share, resulting in net proceeds to the Company of $6,627 after underwriter discounts and commissions, fees and expenses of $423 . Emerging Growth Company We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible for exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including, but not limited to, presenting only two years of audited financial statements, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation, and an exemption from the requirements to obtain a non-binding advisory vote on executive compensation or golden parachute arrangements. In addition, an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this provision of the JOBS Act. As a result, we will not be subject to new or revised accounting standards at the same time as other public companies that are not emerging growth companies. Therefore, our condensed consolidated financial statements may not be comparable to those of companies that comply with new or revised accounting pronouncements as of public company effective dates. Use of Estimates The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Fair Value Measurements The Company follows the guidance of Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. Level 3: Unobservable inputs that reflect assumptions about what market participants would use in pricing assets or liabilities based on the best information available. The Company’s financial instruments consist principally of cash, accounts receivable, prepaid expenses, other current assets, accounts payable, accrued liabilities, income tax payable and debt. The carrying amounts of certain of these financial instruments, including cash, accounts receivable, prepaid expenses, other current assets, accounts payable, accrued liabilities and income tax payable approximate their current fair value due to the relatively short-term nature of these accounts. The following table presents our fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis: September 30, 2023 December 31, 2022 Carrying Fair Value Carrying Fair Value Amount Level 1 Level 2 Level 3 Amount Level 1 Level 2 Level 3 Assets: Interest rate swaps (Note 6) $ 9,303 $ — $ 9,303 $ — $ 8,985 $ — $ 8,985 $ — Liabilities: Interest rate swaps (Note 6) — — — — — — — — There were no transfers of assets or liabilities between levels during the nine months ended September 30, 2023 and 2022. There have not been material changes in the fair value of debt (Level 2), as compared to the carrying value, as of September 30, 2023 and December 31, 2022 . Revenue Recognition The Company derives revenue primarily from the sale of physical products. The Company recognizes revenue when a contract exists with a customer that specifies the goods and services to be provided at an agreed upon sales price and when the performance obligation is satisfied by transferring the goods or service to the customer. The performance obligation is considered satisfied when control transfers, which is generally determined when products are shipped or delivered to the customer but could be delayed until the receipt of customer acceptance, depending on the terms of the contract. Sales are made on normal and customary short-term credit terms or upon delivery for point of sale transactions. The Company enters into contractual arrangements primarily with customers in the form of individual customer orders which specify the goods, quantity, pricing, and associated order terms. The Company has some long-term contracts that may contain research and development performance obligations that are satisfied over time. The Company invoices the customer once the billing milestone is reached and collects under customary short-term credit terms. For long-term contracts, the Company recognizes revenue using the input method based on costs incurred, as this method is an appropriate measure of progress toward the complete satisfaction of the performance obligation. Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near-term. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. When the current estimate of total costs for a performance obligation indicates a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident. Revenue related to contracts recognized over time do not represent a material portion of the Company’s overall revenue. At the time of revenue recognition, the Company also provides for estimated sales returns and miscellaneous claims from customers as reductions to revenues. The estimates are based on historical rates of product returns and claims. The Company accrues for such estimated returns and claims with an estimated accrual and associated reduction of revenue. Additionally, the Company records inventory that it expects to be returned as part of inventories, with a corresponding reduction to cost of goods sold. Charges for shipping and handling fees billed to customers are included in net sales and the corresponding shipping and handling expenses are included in cost of goods sold in the accompanying condensed consolidated statements of operations and comprehensive income. We consider our costs related to shipping and handling after control over a product has transferred to a customer to be a cost of fulfilling the promise to transfer the product to the customer. Sales commissions paid to employees as compensation are expensed as incurred for contracts with service periods less than a year. For contracts with service periods greater than a year, these costs have historically been immaterial and are capitalized and amortized over the life of the contract. Commission costs are recorded in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive income. Product Warranty Some of the Company’s manufactured products carry limited warranty provisions for defects in quality and workmanship. A warranty reserve is established at the time of sale to cover estimated costs based on the Company’s history of warranty repairs and replacements, and is recorded in cost of goods sold in the Company’s condensed consolidated statements of operations and comprehensive income. The following table sets forth the changes in the Company’s accrued warranties, which is recorded in accrued liabilities in the condensed consolidated balance sheets: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Beginning accrued warranty expense $ 1,567 $ 1,427 $ 1,234 $ 1,256 Current period claims (451) (311) (802) (398) Provision for current period sales 590 81 1,274 339 Ending accrued warranty expense $ 1,706 $ 1,197 $ 1,706 $ 1,197 Net Income (Loss) per Share Basic income or loss per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the periods presented. Diluted income or loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of potential common shares, determined using the treasury-stock method. Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net income (loss) $ 11,053 $ 4,941 $ 29,047 $ (779) Weighted average shares outstanding - basic 37,586,031 37,289,880 37,515,976 35,697,891 Effect of dilutive securities: Stock-based awards 344,857 457,734 314,814 — Weighted average shares outstanding - diluted 37,930,888 37,747,614 37,830,790 35,697,891 Net income (loss) per share: Basic $ 0.29 $ 0.13 $ 0.77 $ (0.02) Diluted $ 0.29 $ 0.13 $ 0.77 $ (0.02) For the nine months ended September 30, 2022, 7,363 restricted stock awards were excluded from diluted weighted average shares outstanding because the impact would be anti-dilutive due to a net loss in the period. Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments. he adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and related amendments. 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 began to be phased out in 2021, to alternate reference rates, such as the Secured Overnight Financing Rate (“SOFR”). On May 31, 2023, we amended our 2021 credit agreement and interest rate swap agreements to affect the transition from LIBOR to SOFR. In connection with these amendments, the Company adopted ASU 2020-04 in the second quarter of 2023. In doing so, the Company elected to adopt the suite of optional expedients when analyzing the amendment to the credit agreement and related interest swaps. As such, the amendments to the Company’s 2021 credit agreement and swap agreements, and the adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures |
ACQUISITIONS
ACQUISITIONS | 9 Months Ended |
Sep. 30, 2023 | |
ACQUISITIONS | |
ACQUISITIONS | 2. ACQUISITIONS Radar Acquisition On January 11, 2022, Safariland, LLC, a wholly-owned subsidiary of the Company, completed the acquisition of Radar Leather Division S.r.l. The acquisition was accounted for as a business combination. Total acquisition-related costs for the acquisition of Radar were $627 , of which $204 was incurred and recognized during 2022. Total consideration, net of cash acquired, was $19,365 for 100% of the equity interests in Radar. The total consideration was as follows: Cash paid $ 20,844 Less: cash acquired (1,479) Total consideration, net $ 19,365 The following table summarizes the total purchase price consideration and the amounts recognized for the assets acquired and liabilities assumed, which have been estimated at their fair values. The excess of purchase consideration over the assets acquired and liabilities assumed is recorded as goodwill. Goodwill for the Radar acquisition is included in the Product segment and reflects synergies and additional legacy growth and profitability expected from this acquisition through expansion into new markets and customers. Total consideration, net $ 19,365 Accounts receivable $ 2,347 Inventories 1,874 Prepaid expenses 682 Other current assets 665 Property and equipment 3,053 Intangible assets 10,200 Goodwill 7,101 Total assets acquired 25,922 Accounts payable 1,120 Deferred tax liabilities 2,787 Accrued liabilities 2,106 Long-term debt 544 Total liabilities assumed 6,557 Net assets acquired $ 19,365 In connection with the acquisition, the Company acquired exclusive rights to Radar’s trademarks, customer relationships, and product technologies. The amounts assigned to each class of intangible asset and the related average useful lives are as follows: Gross Average Useful Life Customer relationships $ 9,300 15 Technology 600 10 Trademarks 300 7 Total $ 10,200 The full amount of goodwill of $7,101 is expected to be non-deductible for tax purposes. No pre-existing relationships existed between the Company and Radar prior to the acquisition. Radar revenue and cost of goods sold are included in the Product segment from the date of acquisition. The acquisition was not material to our consolidated financial statements and consequently we have not included any pro-forma information. Cyalume Acquisition On May 4, 2022, Safariland, LLC, a wholly-owned subsidiary of the Company, completed the acquisition of Cyalume Technologies, Inc, CT SAS Holdings, Inc. and Cyalume Technologies SAS (collectively “Cyalume”) engaged in the design and manufacture of proprietary chemical illumination solutions for a diverse range of products, including light sticks, infrared products, safety markings and non-pyrophoric training ammunition The acquisition was accounted for as a business combination. Acquisition-related costs for the acquisition of Cyalume were was incurred and recognized during 2022 Total consideration, net of cash acquired, was $36,178 for 100% of the equity interests in Cyalume. The total consideration was as follows: Cash paid $ 38,012 Less: cash acquired (1,834) Total consideration, net $ 36,178 The following table summarizes the total purchase price consideration and the amounts recognized for the assets acquired and liabilities assumed, which have been estimated at their fair values. Since December 31, 2022, we have decreased goodwill by $393 for changes in assumptions used to fair value property, equipment, and customer relationships, and deferred income taxes for certain book and tax basis differences as we complete the tax return filings for the pre-acquisition period. The excess of purchase consideration over the assets acquired and liabilities assumed is recorded as goodwill. Goodwill for the Cyalume acquisition is included in the Product segment and reflects synergies and additional legacy growth and profitability expected from this acquisition through expansion into new markets and customers. Total consideration, net $ 36,178 Accounts receivable $ 3,302 Inventories 10,908 Prepaid expenses 255 Other current assets 10 Property and equipment 12,492 Intangible assets 8,100 Goodwill 8,708 Total assets acquired 43,775 Accounts payable 1,080 Deferred tax liabilities 4,652 Accrued liabilities 1,577 Other long-term liabilities 288 Total liabilities assumed 7,597 Net assets acquired $ 36,178 In connection with the acquisition, the Company acquired exclusive rights to Cyalume’s trademarks, customer relationships, and product technologies. The amounts assigned to each class of intangible asset and the related average useful lives are as follows: Gross Average Useful Life Customer relationships $ 3,700 15 Technology 3,600 10 Trademarks 800 Indefinite Total $ 8,100 The full amount of goodwill of $8,708 is expected to be non-deductible for tax purposes. No pre-existing relationships existed between the Company and Cyalume prior to the acquisition. Cyalume revenue and cost of goods sold are included in the Product segment from the date of acquisition. The acquisition was not material to our consolidated financial statements and consequently we have not included any pro-forma information. |
REVENUE RECOGNITION
REVENUE RECOGNITION | 9 Months Ended |
Sep. 30, 2023 | |
REVENUE RECOGNITION | |
REVENUE RECOGNITION | 3. REVENUE RECOGNITION The following tables disaggregate net sales by channel and geography: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 U.S. state and local agencies (a) $ 75,584 $ 64,359 $ 212,965 $ 188,724 Commercial 9,525 11,211 30,834 33,572 U.S. federal agencies 13,355 16,652 42,484 34,014 International 25,821 18,264 69,194 74,789 Other 829 1,068 2,472 3,093 Net sales $ 125,114 $ 111,554 $ 357,949 $ 334,192 (a) Includes all Distribution sales Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 United States $ 99,293 $ 93,290 $ 288,755 $ 259,403 International 25,821 18,264 69,194 74,789 Net sales $ 125,114 $ 111,554 $ 357,949 $ 334,192 Contract Liabilities Contract liabilities are recorded as a component of other liabilities when customers remit cash payments in advance of the Company satisfying performance obligations. Contract liabilities are reversed into revenue when the performance obligation is satisfied. Contract liabilities are included in accrued liabilities in the Company’s condensed consolidated balance sheets and totaled $3,893 and $4,615 as of September 30, 2023 and December 31, 2022, respectively. Revenue recognized during the three and nine months ended September 30, 2023 from amounts included in contract liabilities as of December 31, 2022 was $407 and $2,752, respectively. Remaining Performance Obligations As of September 30, 2023, we had $17,620 of remaining unfulfilled performance obligations, which included amounts that will be invoiced and recognized in future periods. The remaining performance obligations are limited only to arrangements that meet the definition of a contract under ASC Topic 606, Revenue from Contracts with Customers |
INVENTORIES
INVENTORIES | 9 Months Ended |
Sep. 30, 2023 | |
INVENTORIES | |
INVENTORIES | 4. INVENTORIES The following table sets forth a summary of inventories stated at lower of cost or net realizable value, as of September 30, 2023 and December 31, 2022: September 30, 2023 December 31, 2022 Finished goods $ 30,701 $ 25,208 Work-in-process 9,004 7,466 Raw materials and supplies 42,841 37,599 Total $ 82,546 $ 70,273 |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2023 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
GOODWILL AND OTHER INTANGIBLE ASSETS | 5. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill The following table summarizes the changes in goodwill for the three and nine months ended September 30, 2023: Product Distribution Total Balance, December 31, 2022 $ 78,960 $ 2,616 $ 81,576 Measurement period adjustments (593) — (593) Foreign currency translation adjustments 309 — 309 Balance, March 31, 2023 $ 78,676 $ 2,616 $ 81,292 Measurement period adjustments 200 — 200 Foreign currency translation adjustments 68 — 68 Balance, June 30, 2023 $ 78,944 $ 2,616 $ 81,560 Foreign currency translation adjustments (348) — (348) Balance, September 30, 2023 $ 78,596 $ 2,616 $ 81,212 Gross goodwill and accumulated impairment losses was $88,797 and $7,585, respectively, as of September 30, 2023 and $89,161 and $7,585, respectively, as of December 31, 2022. Intangible Assets Intangible assets such as certain customer relationships and patents on core technologies and product technologies are amortizable over their estimated useful lives. Certain trade names and trademarks which provide exclusive and perpetual rights to manufacture and sell their respective products are deemed indefinite-lived and are therefore not subject to amortization. Intangible assets consisted of the following as of September 30, 2023 and December 31, 2022: September 30, 2023 Weighted Accumulated Average Gross Amortization Net Useful Life Definite lived intangibles: Customer relationships $ 85,680 $ (64,337) $ 21,343 11 Technology 15,974 (11,793) 4,181 8 Tradenames 6,513 (5,126) 1,387 4 Non-compete agreements 980 (980) — 4 $ 109,147 $ (82,236) $ 26,911 Indefinite lived intangibles: Tradenames 17,422 — 17,422 Indefinite Total $ 126,569 $ (82,236) $ 44,333 December 31, 2022 Weighted Accumulated Average Gross Amortization Net Useful Life Definite lived intangibles: Customer relationships $ 85,847 $ (59,122) $ 26,725 11 Technology 15,629 (11,309) 4,320 8 Tradenames 6,484 (4,254) 2,230 4 Non-compete agreements 973 (973) — 4 $ 108,933 $ (75,658) $ 33,275 Indefinite lived intangibles: Tradenames 17,420 — 17,420 Indefinite Total $ 126,353 $ (75,658) $ 50,695 The Company recorded amortization expense of $2,155 and $2,274 for the three months ended September 30, 2023 and 2022, respectively, of which $55 and $134 was included in cost of goods sold in the condensed consolidated statements of operations and comprehensive income for the respective periods. Amortization expense for the nine months ended September 30, 2023 and 2022 was $6,308 and $6,671, respectively, of which $372 and $314 was included in cost of goods sold in the condensed consolidated statements of operations and comprehensive income for the respective periods. The estimated amortization expense for definite-lived intangible assets for the remaining three months of 2023, the next four years and thereafter is as follows: Remainder of 2023 $ 1,477 2024 5,013 2025 3,053 2026 2,656 2027 2,479 Thereafter 12,233 Total $ 26,911 |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 2023 | |
DEBT | |
DEBT | 6. DEBT The Company’s debt is as follows: September 30, 2023 December 31, 2022 Short-term debt: Insurance premium financing $ 3,251 $ 2,211 Current portion of term loan 10,000 10,000 $ 13,251 $ 12,211 Long-term debt: Revolver — — Term loan 131,064 138,564 Other 509 512 $ 131,573 $ 139,076 Unamortized debt discount and debt issuance costs (1,264) (1,600) Total long-term debt, net $ 130,309 $ 137,476 The following summarizes the aggregate principal payments of our long-term debt, excluding debt discount and debt issuance costs, for the remaining three months of 2023, the next four years and thereafter: Remainder of 2023 $ 2,500 2024 10,127 2025 10,127 2026 118,691 2027 128 Total principal payments $ 141,573 2021 Credit Facility On August 20, 2021 (the “Closing Date”), the Company refinanced its existing credit facilities and entered into a new credit agreement whereby Safariland, LLC, as borrower (the “Borrower”), the Company and certain domestic subsidiaries of the Borrower, as guarantors (the “Guarantors”), closed on and received funding under a credit agreement (initially entered into on July 23, 2021), pursuant to a First Amendment to Credit Agreement (collectively, the “2021 Credit Agreement”) with PNC Bank, National Association (“PNC”), as administrative agent, and the several lenders from time to time party thereto (together with PNC, the “Lenders”) pursuant to which the Borrower (i) borrowed $200,000 under a term loan (the “Term Loan”), and (ii) may borrow up to $100,000 under a revolving credit facility (including up to $15,000 for letters of credit and up to $10,000 for swing line loans) (the “Revolving Loan”). Each of the Term Loan and the Revolving Loan mature on July 23, 2026. Commencing December 31, 2021, the Term Loan requires scheduled quarterly payments in amounts equal to 1.25% per quarter of the original aggregate principal amount of the Term Loan, with the balance due at maturity. The 2021 Credit Agreement is guaranteed, jointly and severally, by the Guarantors and, subject to certain exceptions, secured by a first-priority security interest in substantially all of the assets of the Borrower and the Guarantors pursuant to a Security and Pledge Agreement and a Guaranty and Suretyship Agreement, each dated as of the Closing Date. There were no amounts outstanding under the Revolving Loan as of September 30, 2023 and December 31, 2022. As of September 30, 2023, there were $2,613 in outstanding letters of credit and $97,387 of availability. The Borrower may elect to have the Revolving Loan and Term Loan under the 2021 Credit Agreement bear interest at a base rate or LIBOR, in each case, plus an applicable margin. However, in connection with the market transition away from applicable LIBOR rates to SOFR, on May 31, 2023, the Company, the Borrowers and the Lenders entered into the third amendment to the 2021 Credit Agreement (the “Third Amendment”) pursuant to which the 2021 Credit Agreement was amended to implement the SOFR rates. The applicable margin for these borrowings ranges from 0.50% to 1.50% per annum, in the case of base rate borrowings, and 1.60% to 2.60% per annum, in the case of SOFR (and prior to May 31, 2023, on LIBOR) borrowings, in each case based upon the level of the Company’s consolidated total net leverage ratio. The 2021 Credit Agreement also requires the Borrower to pay a commitment fee on the unused portion of the loan commitments. Such commitment fee ranges between 0.175% and 0.25% per annum, and is also based upon the level of the Company’s consolidated total net leverage ratio. The 2021 Credit Agreement also contains customary representations and warranties, and affirmative and negative covenants, including limitations on additional indebtedness, dividends, and other distributions, entry into new lines of business, use of loan proceeds, capital expenditures, restricted payments, restrictions on liens on the assets of the Borrowers or any Guarantor, transactions with affiliates, amendments to organizational documents, accounting changes, sale and leaseback transactions, dispositions, and mandatory prepayments in connection with certain liquidity events. The 2021 Credit Agreement contains certain restrictive debt covenants, which require us to: (i) maintain a minimum fixed charge coverage ratio of 1.25 to 1.00, starting with the quarter ended December 31, 2021, which is to be determined for each quarter end on a trailing four quarter basis and (ii) maintain a quarterly maximum consolidated total net leverage ratio of 3.75 to 1.00 from the quarter ended December 31, 2022 until the quarter ended September 30, 2023, and thereafter 3.50 to 1.00, which is in each case to be determined on a trailing four quarter basis; provided that under certain circumstances and subject to certain limitations, in the event of a material acquisition, we may temporarily increase the consolidated total net leverage ratio by up to 0.50 to 1.00 for four fiscal quarters following such acquisition. The 2021 Credit Agreement contains customary events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, failure to make payment on, or defaults with respect to, certain other material indebtedness, bankruptcy and insolvency events, material judgments and change of control provisions. Upon the occurrence of an event of default, and after the expiration of any applicable grace period, payment of any outstanding loans under the 2021 Credit Agreement may be accelerated and the Lenders could foreclose on their security interests in the assets of the Borrowers and the Guarantors. Canadian Credit Facility On October 14, 2021, Med-Eng Holdings ULC and Pacific Safety Products Inc., the Company’s Canadian subsidiaries, as borrowers (the “Canadian Borrowers”), and Safariland, LLC, as guarantor (the “Canadian Guarantor”), closed on a line of credit pursuant to a Loan Agreement (the “Canadian Loan Agreement”) and a Revolving Line of Credit Note (the “Note”) with PNC Bank Canada Branch (“PNC Canada”), as lender pursuant to which the Canadian Borrowers may borrow up to CDN$10,000 under a revolving line of credit (including up to $3,000 for letters of credit) (the “Revolving Canadian Loan”). The Revolving Canadian Loan matures on July 23, 2026. The Canadian Loan Agreement is guaranteed by the Canadian Guarantor pursuant to a Guaranty and Suretyship Agreement (the “Canadian Guaranty Agreement”). The Canadian Borrowers may elect to have borrowings either in United States dollars or Canadian dollars under the Canadian Loan Agreement, which will bear interest at a base rate or LIBOR, in each case, plus an applicable margin, in the case of borrowings in United States dollars, or at a Canadian Prime Rate (as announced from time to time by PNC Canada) or a Canadian deposit offered rate (“CDOR”) as determined from time to time by PNC Canada in accordance with the Canadian Loan Agreement. The applicable margin for these borrowings range from 0.50% to 1.50% per annum, in the case of base rate borrowings and Canadian Prime Rate borrowings, and 1.50% to 2.50% per annum, in the case of LIBOR borrowings and CDOR borrowings. The Canadian Loan Agreement also requires the Canadian Borrowers to pay (i) an unused line fee on the unused portion of the loan commitments in an amount ranging between 0.175% and 0.25% per annum, based upon the level of the Company’s consolidated total net leverage ratio, and (ii) an upfront fee equal to 0.25% of the principal amount of the Note. There were no amounts outstanding under the Revolving Canadian Loan as of September 30, 2023 and December 31, 2022. The Canadian Loan Agreement also contains customary representations and warranties, and affirmative and negative covenants, including, among others, limitations on additional indebtedness, entry into new lines of business, entry into guarantee agreements, making of any loans or advances to, or investments in, any other person, restrictions on liens on the assets of the Canadian Borrowers and mergers, transfers of assets and acquisitions. The Canadian Loan Agreement and Note also contain customary events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, failure to make payment on, or defaults with respect to, certain other material indebtedness, bankruptcy and insolvency events, material judgments and change of control provisions. Upon the occurrence of an event of default, and after the expiration of any applicable grace period, payment of any outstanding loans under the Canadian Loan Agreement may be accelerated. Interest Rate Swaps We entered into interest rate swap agreements to hedge forecasted monthly interest rate payments on our floating rate debt. As of September 30, 2023, we had the following interest rate swap agreements (the “Swap Agreements”): Effective Date Notional Amount Fixed Rate September 30, 2021 through July 23, 2026 $ 100,000 0.812 % May 31, 2023 through July 23, 2026 $ 50,000 3.905 % On May 31, 2023, concurrent with the third amendment to the 2021 Credit Agreement, we amended our $100,000 notional amount swap agreement to reflect the change from LIBOR to SOFR. In addition, we entered into an additional $50,000 notional amount interest rate swap to further mitigate our interest rate exposure on our floating rate debt. Under the terms of the Swap Agreements, we receive payments based on the 1-month SOFR (5.32% as of September 30, 2023). During the nine months ended September 30, 2023, there were no interest rate swap agreements that expired. We designated the Swap Agreements as cash flow hedges. A portion of the amount included in accumulated other comprehensive income is reclassified into interest expense, net as a yield adjustment as interest is either paid or received on the hedged debt. The fair value of our Swap Agreements is based upon Level 2 inputs. We have considered our own credit risk and the credit risk of the counterparties when determining the fair value of our Swap Agreements. It is our policy to execute such instruments with creditworthy banks and not to enter into derivative financial instruments for speculative purposes. We believe our interest rate swap counterparty will be able to fulfill their obligations under our agreements, and we believe we will have debt outstanding through the expiration date of the swap agreements such that the occurrence of future cash flow hedges remains probable. The estimated fair value of our Swap Agreements in the condensed consolidated balance sheets was as follows: Balance Sheet Accounts September 30, 2023 December 31, 2022 Other current assets $ 4,550 $ 3,619 Other assets $ 4,753 $ 5,366 A cumulative gain, net of tax, of $6,755 and $6,739 as of September 30, 2023 and December 31, 2022, respectively, is recorded in accumulated other comprehensive income. The amount of gain, net of tax, recognized in other comprehensive (loss) income for the three months ended September 30, 2023 and 2022 was $1,131 and $2,350, respectively. There was a gain, net of tax, of $884 and $252 reclassified from accumulated other comprehensive income into earnings for the three months ended September 30, 2023 and 2022, respectively. The amount of gain, net of tax, recognized in other comprehensive (loss) income for the nine months ended September 30, 2023 and 2022 was $2,281 and $6,414, respectively. There was a gain, net of tax, of $2,266 and $106 reclassified from accumulated other comprehensive income into earnings for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, approximately $4,449 is expected to be reclassified from accumulated other comprehensive income into interest expense over the next 12 months. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2023 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 7. COMMITMENTS AND CONTINGENCIES Legal Proceedings In September 2021, Safariland, LLC, a wholly-owned subsidiary of the Company, received a jury verdict awarding $7,500 to a plaintiff relating to a personal injury case wherein the plaintiff alleged various product liability claims against Safariland, LLC. The plaintiff in the proceeding, Mr. David Hakim, instituted the proceeding on July 24, 2015, through the filing of a complaint with the United States District Court, Northern District of Illinois, Eastern Division. In the proceeding, the plaintiff, a SWAT officer with the DuPage County Sheriff’s Office (“DCSO”), alleged that he suffered injuries during a training exercise conducted by DCSO in which a Defense Technology Shotgun Breaching TKO round was deployed and passed through a door and lower-floor ceiling causing a fragment to strike plaintiff’s back resulting in injury. Prior to the jury rendering its verdict, the court deferred ruling on Safariland, LLC’s Motion for Judgment as a Matter of Law (“JMOL”). On November 8, 2021, Safariland, LLC filed its post-trial motions, including a supplemental JMOL, motion for new trial and remittitur. On April 18, 2022, the court denied Safariland, LLC’s JMOL, motion for new trial and remittitur and, accordingly, entered a judgment in favor of plaintiff, David Hakim, as to the Third Claim. In response, Safariland, LLC timely filed its notice of appeal with the United States Court of Appeals for the Seventh Circuit (the “Seventh Circuit”). Safariland and Plaintiff have filed their appeal briefs, and oral arguments were held on October 25, 2022. On August 21, 2023, the Seventh Circuit affirmed the judgment of the district court. In accordance with the Company’s applicable insurance policies, the Company was fully indemnified. The insurer satisfied the judgment and a release of the judgment was entered on September 11, 2023. Accordingly, this matter is now closed The Company is also involved in various legal disputes and other legal proceedings and claims that arise from time to time in the ordinary course of business. The Company vigorously defends itself against all lawsuits and evaluates the amount of reasonably possible losses that the Company could incur as a result of these matters. While any litigation contains an element of uncertainty, the Company believes that the reasonably possible losses that the Company could incur in excess of insurance coverage would not have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity. Insurance The Company has various insurance policies, including product liability insurance, covering risks and in amounts it considers adequate. There can be no assurance that the insurance coverage maintained by the Company is sufficient or will be available in adequate amounts or at a reasonable cost. International As an international company, we are, from time to time, the subject of investigations relation to the Company’s international operations, including under U.S. export control laws (such as ITAR), the FCPA and other similar U.S. and international laws. To the best of the Company’s knowledge, there are not any potential or pending investigations at this time. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2023 | |
INCOME TAXES | |
INCOME TAXES | 8. INCOME TAXES The Company and its subsidiaries file income tax returns in the U.S. federal, various state and local, and certain foreign jurisdictions. As of September 30, 2023, the Company’s tax years subsequent to 2016 are subject to examination by tax authorities with few exceptions. The 2018 and 2019 tax returns of a Canadian subsidiary of the Company are currently under examination by the Canadian Revenue Agency. The Company’s effective tax rate was 28.0% and 28.4% for the three months ended September 30, 2023 and 2022, respectively, and 28.3% and 76.5% for the nine months ended September 30, 2023 and 2022, respectively. Our effective tax rate for the three and nine months ended September 30, 2023 and 2022 differs from our statutory rate primarily due to state taxes and executive compensation, partially offset by research and development tax credits |
COMPENSATION PLANS
COMPENSATION PLANS | 9 Months Ended |
Sep. 30, 2023 | |
COMPENSATION PLANS | |
COMPENSATION PLANS | 9. COMPENSATION PLANS Long-Term Incentive Plan In March 2021, the Company initiated a cash-based long-term incentive plan. Each award granted under the plan shall be eligible to vest in three equal annual installments over a period of three consecutive one-year performance periods, with each installment of the award vesting on the last day of the applicable performance period, subject to the achievement of the performance metrics established by the board of directors for the applicable annual performance period. Compensation expense related to this plan was $185 and $375 for the three months ended September 30, 2023 and 2022, respectively, and $489 and $933 for the nine months ended September 30, 2023 and 2022, respectively, and is . On March 9, 2022, the Company’s board of directors approved the common stock settlement of vested awards of the long-term incentive plan. The board of directors also approved the future settlement of unvested awards in common stock. Modification accounting was not applied as this change did not affect the fair value of the awards, vesting conditions, or the liability classification of the awards. Executive Compensation Plan The Company maintains a cash-based executive compensation plan for certain employees. The Company’s board of directors awarded 1,433,500 interests in the plan (“units”). Each unit represents an unfunded and unsecured right, subject to certain conditions as set forth by the plan. One-third of the units granted to any holder vest on each of the first, second, and third anniversaries of March 18, 2021 during the term of such holder’s employment with the Company. Payment of a holder’s vested balance is dependent upon a transaction or series of related transactions constituting a qualifying exit event, as defined by the executive compensation plan. The plan will expire on March 18, 2025, at which time the plan and all awarded units will be terminated for no consideration if a qualifying exit event has not occurred before that date. If a qualifying exit event becomes probable, the fair value of the units would be the closing stock price of the Company on the day the qualifying exit event becomes probable and compensation expense would be recognized at that time On March 9, 2022, the Company’s board of directors modified the performance condition, specifically the definition of a qualifying exit event, in the cash-based executive compensation plan. In addition, the board of directors approved the settlement of the majority of vested and unvested units in common stock rather than cash, which resulted in a change in classification of those outstanding units from liability to equity. As a result, modification of the units occurred on March 9, 2022 with a grant date fair value of $23.45 , the closing stock price of the Company on the date of modification. There were 632,500 units that vested on March 18, 2022 and 801,000 units that vest in equal amounts on the second and third anniversaries of the plan. The Company recognized compensation expense of $22,100 in selling, general and administrative in the on the modification date. Unrecognized compensation expense related to the unvested units was $11,516 as of the modification date. |
LEASES
LEASES | 9 Months Ended |
Sep. 30, 2023 | |
LEASES | |
LEASES | 10. LEASES The Company leases certain manufacturing and office space, retail locations, and equipment. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company has elected not to recognize a lease liability or right-of-use (“ROU”) asset for short-term leases (leases with a term of twelve months or less). The Company’s incremental borrowing rate is the rate for collateralized borrowings based on the current economic environment, credit history, credit rating, value of leases, currency in which the lease obligation is satisfied, rate sensitivity, lease term and materiality. The amount of assets and liabilities related to our operating leases were as follows: Balance Sheet Accounts September 30, 2023 December 31, 2022 Assets: Operating lease assets Operating lease assets $ 6,643 $ 8,489 Liabilities: Current: Operating lease liabilities Accrued liabilities $ 3,192 $ 3,773 Long-term: Operating lease liabilities Long-term operating lease liabilities 3,603 4,965 Total lease liabilities $ 6,795 $ 8,738 The components of lease expense are recorded to cost of sales and selling, general and administration expenses in the condensed consolidated statements of operations and comprehensive income. The components of lease expense were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2023 Fixed operating lease costs (1) $ 954 $ 3,019 Variable operating lease costs 511 1,267 Total $ 1,465 $ 4,286 (1) Includes short-term leases, which are immaterial. The weighted average remaining lease term and weighted average discount rate is as follows: September 30, 2023 December 31, 2022 Weighted average remaining lease term (years): Operating leases 2.30 2.62 Weighted average discount rate: Operating leases 3.06% 2.96% The approximate future minimum lease payments under operating leases as of September 30, 2023 are as follows: Remainder of 2023 $ 1,090 2024 3,250 2025 1,835 2026 768 2027 134 Thereafter 8 Total future lease payments 7,085 Less: Amount representing interest (290) Present value of lease liabilities $ 6,795 Supplemental cash flow information related to leases is as follows: September 30, 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows - operating leases $ 3,063 Right-of-use assets obtained in exchange for lease liabilities: Operating leases $ — |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2023 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | 11. RELATED PARTY TRANSACTIONS The Company leases 4 distribution warehouses and retail stores from certain employees. The Company recorded rent expense related to these leases of $116 and $112 for the three months ended September 30, 2023 and 2022, respectively, and $379 and $346 for the nine months ended September 30, 2023 and 2022, respectively. Rent expense related to these leases is included in related party expense in the Company’s condensed consolidated statements of operations and comprehensive income. During the nine months ended September 30, 2022, the Company made the following payments to Kanders & Company, Inc., a company controlled by Warren Kanders, our Chief Executive Officer: ● $1,000 for services related to the acquisition of Cyalume, which is included in related party expense in the Company’s condensed consolidated statements of operations and comprehensive income. ● $2,000 for services related to the Company’s secondary offering, which is included in direct offering costs and recorded against offering proceeds in additional paid in capital in the Company’s condensed consolidated balance sheets . There were no other payments made to Kanders & Company for any other period presented. |
SEGMENT DATA
SEGMENT DATA | 9 Months Ended |
Sep. 30, 2023 | |
SEGMENT DATA | |
SEGMENT DATA | 12. SEGMENT DATA Our operations are comprised of two reportable segments: Product and Distribution. Segment information is consistent with how the chief operating decision maker (“CODM”), our chief executive officer, reviews the business, makes investing and resource allocation decisions and assesses operating performance. The CODM is not provided asset information or operating expenses by segment. Three Months Ended September 30, 2023 Reconciling Product Distribution Items (1) Total Net sales $ 108,495 $ 24,208 $ (7,589) $ 125,114 Cost of goods sold 60,380 18,724 (7,593) 71,511 Gross profit $ 48,115 $ 5,484 $ 4 $ 53,603 Three Months Ended September 30, 2022 Reconciling Product Distribution Items (1) Total Net sales $ 92,718 $ 26,012 $ (7,176) $ 111,554 Cost of goods sold 54,125 20,859 (7,170) 67,814 Gross profit $ 38,593 $ 5,153 $ (6) $ 43,740 Nine Months Ended September 30, 2023 Reconciling Product Distribution Items (1) Total Net sales $ 305,057 $ 74,594 $ (21,702) $ 357,949 Cost of goods sold 171,204 57,200 (21,423) 206,981 Gross profit $ 133,853 $ 17,394 $ (279) $ 150,968 Nine Months Ended September 30, 2022 Reconciling Product Distribution Items (1) Total Net sales $ 277,941 $ 73,836 $ (17,585) $ 334,192 Cost of goods sold 166,192 $ 58,437 $ (17,587) 207,042 Gross profit $ 111,749 $ 15,399 $ 2 $ 127,150 (1) |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2023 | |
SIGNIFICANT ACCOUNTING POLICIES | |
Nature of Operations and Basis of Presentation | Nature of Operations and Basis of Presentation Cadre Holdings, Inc., D/B/A The Safariland Group (the “Company”, “Cadre”, “we”, “us”, and “our”), a Delaware corporation, began operations on April 12, 2012. The Company, headquartered in Jacksonville, Florida, is a global leader in manufacturing and distributing safety and survivability products and other related products for the law enforcement, first responder and military markets. The business operates through 16 manufacturing plants within the U.S., Mexico, Canada, the United Kingdom, Italy, France, and Lithuania, and sells its products worldwide through its direct sales force, distribution channel and distribution partners, online stores, and third-party resellers. |
Principles of Consolidation | Principles of Consolidation The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP" or “U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting, and include the accounts of the Company, its wholly owned subsidiaries, and other entities consolidated as required by GAAP. Accordingly, they do not include all of the information and footnotes required by GAAP for annual audited financial statements. The unaudited condensed consolidated interim financial statements have been prepared on a basis consistent with the audited consolidated financial statements and include all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. These condensed consolidated interim financial statements and notes thereto should be read in conjunction with the Company’s most recently completed annual consolidated financial statements. All adjustments considered necessary for a fair presentation have been included. All intercompany balances and transactions have been eliminated in consolidation. |
Secondary Offering | Secondary Offering On June 9, 2022, the Company completed a secondary offering in which the Company issued and sold 2,250,000 shares of common stock at a price of $23.50 per share. The Company’s net proceeds from the sale of shares were $46,988 after underwriter discounts and commissions, fees and expenses of $2,715 , of which $2,000 was paid to Kanders & Company, Inc., a company controlled by Warren Kanders, our Chief Executive Officer On July 14, 2022, the underwriters exercised a portion of their over-allotment option and purchased an additional 300,000 shares of common stock at a price of $23.50 per share, resulting in net proceeds to the Company of $6,627 after underwriter discounts and commissions, fees and expenses of $423 . |
Emerging Growth Company | Emerging Growth Company We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible for exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including, but not limited to, presenting only two years of audited financial statements, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation, and an exemption from the requirements to obtain a non-binding advisory vote on executive compensation or golden parachute arrangements. In addition, an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this provision of the JOBS Act. As a result, we will not be subject to new or revised accounting standards at the same time as other public companies that are not emerging growth companies. Therefore, our condensed consolidated financial statements may not be comparable to those of companies that comply with new or revised accounting pronouncements as of public company effective dates. |
Use of Estimates | Use of Estimates The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. |
Fair Value Measurements | Fair Value Measurements The Company follows the guidance of Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. Level 3: Unobservable inputs that reflect assumptions about what market participants would use in pricing assets or liabilities based on the best information available. The Company’s financial instruments consist principally of cash, accounts receivable, prepaid expenses, other current assets, accounts payable, accrued liabilities, income tax payable and debt. The carrying amounts of certain of these financial instruments, including cash, accounts receivable, prepaid expenses, other current assets, accounts payable, accrued liabilities and income tax payable approximate their current fair value due to the relatively short-term nature of these accounts. The following table presents our fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis: September 30, 2023 December 31, 2022 Carrying Fair Value Carrying Fair Value Amount Level 1 Level 2 Level 3 Amount Level 1 Level 2 Level 3 Assets: Interest rate swaps (Note 6) $ 9,303 $ — $ 9,303 $ — $ 8,985 $ — $ 8,985 $ — Liabilities: Interest rate swaps (Note 6) — — — — — — — — There were no transfers of assets or liabilities between levels during the nine months ended September 30, 2023 and 2022. There have not been material changes in the fair value of debt (Level 2), as compared to the carrying value, as of September 30, 2023 and December 31, 2022 . |
Revenue Recognition | Revenue Recognition The Company derives revenue primarily from the sale of physical products. The Company recognizes revenue when a contract exists with a customer that specifies the goods and services to be provided at an agreed upon sales price and when the performance obligation is satisfied by transferring the goods or service to the customer. The performance obligation is considered satisfied when control transfers, which is generally determined when products are shipped or delivered to the customer but could be delayed until the receipt of customer acceptance, depending on the terms of the contract. Sales are made on normal and customary short-term credit terms or upon delivery for point of sale transactions. The Company enters into contractual arrangements primarily with customers in the form of individual customer orders which specify the goods, quantity, pricing, and associated order terms. The Company has some long-term contracts that may contain research and development performance obligations that are satisfied over time. The Company invoices the customer once the billing milestone is reached and collects under customary short-term credit terms. For long-term contracts, the Company recognizes revenue using the input method based on costs incurred, as this method is an appropriate measure of progress toward the complete satisfaction of the performance obligation. Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near-term. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. When the current estimate of total costs for a performance obligation indicates a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident. Revenue related to contracts recognized over time do not represent a material portion of the Company’s overall revenue. At the time of revenue recognition, the Company also provides for estimated sales returns and miscellaneous claims from customers as reductions to revenues. The estimates are based on historical rates of product returns and claims. The Company accrues for such estimated returns and claims with an estimated accrual and associated reduction of revenue. Additionally, the Company records inventory that it expects to be returned as part of inventories, with a corresponding reduction to cost of goods sold. Charges for shipping and handling fees billed to customers are included in net sales and the corresponding shipping and handling expenses are included in cost of goods sold in the accompanying condensed consolidated statements of operations and comprehensive income. We consider our costs related to shipping and handling after control over a product has transferred to a customer to be a cost of fulfilling the promise to transfer the product to the customer. Sales commissions paid to employees as compensation are expensed as incurred for contracts with service periods less than a year. For contracts with service periods greater than a year, these costs have historically been immaterial and are capitalized and amortized over the life of the contract. Commission costs are recorded in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive income. |
Product Warranty | Product Warranty Some of the Company’s manufactured products carry limited warranty provisions for defects in quality and workmanship. A warranty reserve is established at the time of sale to cover estimated costs based on the Company’s history of warranty repairs and replacements, and is recorded in cost of goods sold in the Company’s condensed consolidated statements of operations and comprehensive income. The following table sets forth the changes in the Company’s accrued warranties, which is recorded in accrued liabilities in the condensed consolidated balance sheets: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Beginning accrued warranty expense $ 1,567 $ 1,427 $ 1,234 $ 1,256 Current period claims (451) (311) (802) (398) Provision for current period sales 590 81 1,274 339 Ending accrued warranty expense $ 1,706 $ 1,197 $ 1,706 $ 1,197 |
Net Income (Loss) per Share | Net Income (Loss) per Share Basic income or loss per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the periods presented. Diluted income or loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of potential common shares, determined using the treasury-stock method. Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net income (loss) $ 11,053 $ 4,941 $ 29,047 $ (779) Weighted average shares outstanding - basic 37,586,031 37,289,880 37,515,976 35,697,891 Effect of dilutive securities: Stock-based awards 344,857 457,734 314,814 — Weighted average shares outstanding - diluted 37,930,888 37,747,614 37,830,790 35,697,891 Net income (loss) per share: Basic $ 0.29 $ 0.13 $ 0.77 $ (0.02) Diluted $ 0.29 $ 0.13 $ 0.77 $ (0.02) For the nine months ended September 30, 2022, 7,363 restricted stock awards were excluded from diluted weighted average shares outstanding because the impact would be anti-dilutive due to a net loss in the period. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments. he adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and related amendments. 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 began to be phased out in 2021, to alternate reference rates, such as the Secured Overnight Financing Rate (“SOFR”). On May 31, 2023, we amended our 2021 credit agreement and interest rate swap agreements to affect the transition from LIBOR to SOFR. In connection with these amendments, the Company adopted ASU 2020-04 in the second quarter of 2023. In doing so, the Company elected to adopt the suite of optional expedients when analyzing the amendment to the credit agreement and related interest swaps. As such, the amendments to the Company’s 2021 credit agreement and swap agreements, and the adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
SIGNIFICANT ACCOUNTING POLICIES | |
Summary of assets and liabilities measured at fair value on a recurring basis | September 30, 2023 December 31, 2022 Carrying Fair Value Carrying Fair Value Amount Level 1 Level 2 Level 3 Amount Level 1 Level 2 Level 3 Assets: Interest rate swaps (Note 6) $ 9,303 $ — $ 9,303 $ — $ 8,985 $ — $ 8,985 $ — Liabilities: Interest rate swaps (Note 6) — — — — — — — — |
Summary of changes in the accrued warranties and related costs | Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Beginning accrued warranty expense $ 1,567 $ 1,427 $ 1,234 $ 1,256 Current period claims (451) (311) (802) (398) Provision for current period sales 590 81 1,274 339 Ending accrued warranty expense $ 1,706 $ 1,197 $ 1,706 $ 1,197 |
Summary of calculation of weighted average shares outstanding and net income (loss) per share | Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net income (loss) $ 11,053 $ 4,941 $ 29,047 $ (779) Weighted average shares outstanding - basic 37,586,031 37,289,880 37,515,976 35,697,891 Effect of dilutive securities: Stock-based awards 344,857 457,734 314,814 — Weighted average shares outstanding - diluted 37,930,888 37,747,614 37,830,790 35,697,891 Net income (loss) per share: Basic $ 0.29 $ 0.13 $ 0.77 $ (0.02) Diluted $ 0.29 $ 0.13 $ 0.77 $ (0.02) |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Radar | |
ACQUISITIONS | |
Schedule of total consideration | Cash paid $ 20,844 Less: cash acquired (1,479) Total consideration, net $ 19,365 |
Summary of total purchase price consideration and preliminary fair value amounts recognized for assets acquired and liabilities assumed | Total consideration, net $ 19,365 Accounts receivable $ 2,347 Inventories 1,874 Prepaid expenses 682 Other current assets 665 Property and equipment 3,053 Intangible assets 10,200 Goodwill 7,101 Total assets acquired 25,922 Accounts payable 1,120 Deferred tax liabilities 2,787 Accrued liabilities 2,106 Long-term debt 544 Total liabilities assumed 6,557 Net assets acquired $ 19,365 |
Schedule of acquired intangible assets | Gross Average Useful Life Customer relationships $ 9,300 15 Technology 600 10 Trademarks 300 7 Total $ 10,200 |
Cyalume | |
ACQUISITIONS | |
Schedule of total consideration | Cash paid $ 38,012 Less: cash acquired (1,834) Total consideration, net $ 36,178 |
Summary of total purchase price consideration and preliminary fair value amounts recognized for assets acquired and liabilities assumed | Total consideration, net $ 36,178 Accounts receivable $ 3,302 Inventories 10,908 Prepaid expenses 255 Other current assets 10 Property and equipment 12,492 Intangible assets 8,100 Goodwill 8,708 Total assets acquired 43,775 Accounts payable 1,080 Deferred tax liabilities 4,652 Accrued liabilities 1,577 Other long-term liabilities 288 Total liabilities assumed 7,597 Net assets acquired $ 36,178 |
Schedule of acquired intangible assets | Gross Average Useful Life Customer relationships $ 3,700 15 Technology 3,600 10 Trademarks 800 Indefinite Total $ 8,100 |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
REVENUE RECOGNITION | |
Summary of disaggregation of net sales by channel and geography | Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 U.S. state and local agencies (a) $ 75,584 $ 64,359 $ 212,965 $ 188,724 Commercial 9,525 11,211 30,834 33,572 U.S. federal agencies 13,355 16,652 42,484 34,014 International 25,821 18,264 69,194 74,789 Other 829 1,068 2,472 3,093 Net sales $ 125,114 $ 111,554 $ 357,949 $ 334,192 (a) Includes all Distribution sales Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 United States $ 99,293 $ 93,290 $ 288,755 $ 259,403 International 25,821 18,264 69,194 74,789 Net sales $ 125,114 $ 111,554 $ 357,949 $ 334,192 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
INVENTORIES | |
Summary of inventories stated at lower of cost or net realizable value | September 30, 2023 December 31, 2022 Finished goods $ 30,701 $ 25,208 Work-in-process 9,004 7,466 Raw materials and supplies 42,841 37,599 Total $ 82,546 $ 70,273 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
Summary of changes in goodwill | Product Distribution Total Balance, December 31, 2022 $ 78,960 $ 2,616 $ 81,576 Measurement period adjustments (593) — (593) Foreign currency translation adjustments 309 — 309 Balance, March 31, 2023 $ 78,676 $ 2,616 $ 81,292 Measurement period adjustments 200 — 200 Foreign currency translation adjustments 68 — 68 Balance, June 30, 2023 $ 78,944 $ 2,616 $ 81,560 Foreign currency translation adjustments (348) — (348) Balance, September 30, 2023 $ 78,596 $ 2,616 $ 81,212 |
Summary of intangible assets | September 30, 2023 Weighted Accumulated Average Gross Amortization Net Useful Life Definite lived intangibles: Customer relationships $ 85,680 $ (64,337) $ 21,343 11 Technology 15,974 (11,793) 4,181 8 Tradenames 6,513 (5,126) 1,387 4 Non-compete agreements 980 (980) — 4 $ 109,147 $ (82,236) $ 26,911 Indefinite lived intangibles: Tradenames 17,422 — 17,422 Indefinite Total $ 126,569 $ (82,236) $ 44,333 December 31, 2022 Weighted Accumulated Average Gross Amortization Net Useful Life Definite lived intangibles: Customer relationships $ 85,847 $ (59,122) $ 26,725 11 Technology 15,629 (11,309) 4,320 8 Tradenames 6,484 (4,254) 2,230 4 Non-compete agreements 973 (973) — 4 $ 108,933 $ (75,658) $ 33,275 Indefinite lived intangibles: Tradenames 17,420 — 17,420 Indefinite Total $ 126,353 $ (75,658) $ 50,695 |
Summary of estimated amortization expense for definite lived intangible assets | Remainder of 2023 $ 1,477 2024 5,013 2025 3,053 2026 2,656 2027 2,479 Thereafter 12,233 Total $ 26,911 |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
DEBT | |
Schedule of company's debt | September 30, 2023 December 31, 2022 Short-term debt: Insurance premium financing $ 3,251 $ 2,211 Current portion of term loan 10,000 10,000 $ 13,251 $ 12,211 Long-term debt: Revolver — — Term loan 131,064 138,564 Other 509 512 $ 131,573 $ 139,076 Unamortized debt discount and debt issuance costs (1,264) (1,600) Total long-term debt, net $ 130,309 $ 137,476 |
Summary of aggregate principal payments of long-term debt | Remainder of 2023 $ 2,500 2024 10,127 2025 10,127 2026 118,691 2027 128 Total principal payments $ 141,573 |
Schedule of Interest rate swaps | Effective Date Notional Amount Fixed Rate September 30, 2021 through July 23, 2026 $ 100,000 0.812 % May 31, 2023 through July 23, 2026 $ 50,000 3.905 % |
Schedule of fair value swap agreement | Balance Sheet Accounts September 30, 2023 December 31, 2022 Other current assets $ 4,550 $ 3,619 Other assets $ 4,753 $ 5,366 |
LEASES (Tables)
LEASES (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
LEASES | |
Schedule of operating leases | The amount of assets and liabilities related to our operating leases were as follows: Balance Sheet Accounts September 30, 2023 December 31, 2022 Assets: Operating lease assets Operating lease assets $ 6,643 $ 8,489 Liabilities: Current: Operating lease liabilities Accrued liabilities $ 3,192 $ 3,773 Long-term: Operating lease liabilities Long-term operating lease liabilities 3,603 4,965 Total lease liabilities $ 6,795 $ 8,738 The components of lease expense are recorded to cost of sales and selling, general and administration expenses in the condensed consolidated statements of operations and comprehensive income. The components of lease expense were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2023 Fixed operating lease costs (1) $ 954 $ 3,019 Variable operating lease costs 511 1,267 Total $ 1,465 $ 4,286 (1) Includes short-term leases, which are immaterial. The weighted average remaining lease term and weighted average discount rate is as follows: September 30, 2023 December 31, 2022 Weighted average remaining lease term (years): Operating leases 2.30 2.62 Weighted average discount rate: Operating leases 3.06% 2.96% |
Summary of future minimum lease payments required under operating leases | The approximate future minimum lease payments under operating leases as of September 30, 2023 are as follows: Remainder of 2023 $ 1,090 2024 3,250 2025 1,835 2026 768 2027 134 Thereafter 8 Total future lease payments 7,085 Less: Amount representing interest (290) Present value of lease liabilities $ 6,795 |
Schedule of supplemental cash flow information related leases | September 30, 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows - operating leases $ 3,063 Right-of-use assets obtained in exchange for lease liabilities: Operating leases $ — |
SEGMENT DATA (Tables)
SEGMENT DATA (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
SEGMENT DATA | |
Summary of segment data | Three Months Ended September 30, 2023 Reconciling Product Distribution Items (1) Total Net sales $ 108,495 $ 24,208 $ (7,589) $ 125,114 Cost of goods sold 60,380 18,724 (7,593) 71,511 Gross profit $ 48,115 $ 5,484 $ 4 $ 53,603 Three Months Ended September 30, 2022 Reconciling Product Distribution Items (1) Total Net sales $ 92,718 $ 26,012 $ (7,176) $ 111,554 Cost of goods sold 54,125 20,859 (7,170) 67,814 Gross profit $ 38,593 $ 5,153 $ (6) $ 43,740 Nine Months Ended September 30, 2023 Reconciling Product Distribution Items (1) Total Net sales $ 305,057 $ 74,594 $ (21,702) $ 357,949 Cost of goods sold 171,204 57,200 (21,423) 206,981 Gross profit $ 133,853 $ 17,394 $ (279) $ 150,968 Nine Months Ended September 30, 2022 Reconciling Product Distribution Items (1) Total Net sales $ 277,941 $ 73,836 $ (17,585) $ 334,192 Cost of goods sold 166,192 $ 58,437 $ (17,587) 207,042 Gross profit $ 111,749 $ 15,399 $ 2 $ 127,150 (1) |
SIGNIFICANT ACCOUNTING POLICI_4
SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) $ / shares in Units, $ in Thousands | 9 Months Ended | |||
Jul. 14, 2022 USD ($) $ / shares shares | Jun. 09, 2022 USD ($) $ / shares shares | Sep. 30, 2023 item | Sep. 30, 2022 USD ($) | |
Nature of Operations and Basis of Presentation | ||||
Number of manufacturing plants | item | 16 | |||
Stock Split | ||||
Net proceeds from the sale of shares | $ 46,988 | |||
Underwriter discounts and commissions, fees and expenses | 2,715 | |||
Kanders & Company, Inc | ||||
Stock Split | ||||
Underwriter discounts and commissions, fees and expenses | $ 2,000 | $ 2,000 | ||
Secondary Offering | ||||
Stock Split | ||||
Number of shares issued | shares | 2,250,000 | |||
Issue price | $ / shares | $ 23.50 | |||
Over-Allotment Option | ||||
Stock Split | ||||
Number of shares issued | shares | 300,000 | |||
Issue price | $ / shares | $ 23.50 | |||
Net proceeds from the sale of shares | $ 6,627 | |||
Underwriter discounts and commissions, fees and expenses | $ 423 |
SIGNIFICANT ACCOUNTING POLICI_5
SIGNIFICANT ACCOUNTING POLICIES - Assets and liabilities measured at fair value on a recurring basis (Details) - Recurring - Interest Rate Swaps - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Carrying amount | ||
Assets: | ||
Assets | $ 9,303 | $ 8,985 |
Fair value | Level 2 | ||
Assets: | ||
Assets | $ 9,303 | $ 8,985 |
SIGNIFICANT ACCOUNTING POLICI_6
SIGNIFICANT ACCOUNTING POLICIES - Transfers of assets or liabilities (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
SIGNIFICANT ACCOUNTING POLICIES | ||
Transfers between fair value measurement levels, amount | $ 0 | $ 0 |
SIGNIFICANT ACCOUNTING POLICI_7
SIGNIFICANT ACCOUNTING POLICIES - Accrued warranties and related costs (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Changes in the Company's accrued warranties and related costs | ||||
Beginning accrued warranty expense | $ 1,567 | $ 1,427 | $ 1,234 | $ 1,256 |
Current period claims | (451) | (311) | (802) | (398) |
Provision for current period sales | 590 | 81 | 1,274 | 339 |
Ending accrued warranty expense | $ 1,706 | $ 1,197 | $ 1,706 | $ 1,197 |
SIGNIFICANT ACCOUNTING POLICI_8
SIGNIFICANT ACCOUNTING POLICIES - Weighted average shares outstanding and net income (loss) per share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Numerator for basic and diluted earnings per share: | ||||
Net income (loss) | $ 11,053 | $ 4,941 | $ 29,047 | $ (779) |
Weighted average shares outstanding: | ||||
Weighted average shares outstanding - basic | 37,586,031 | 37,289,880 | 37,515,976 | 35,697,891 |
Effect of dilutive securities: | ||||
Stock-based awards | 344,857 | 457,734 | 314,814 | |
Weighted average shares outstanding - diluted | 37,930,888 | 37,747,614 | 37,830,790 | 35,697,891 |
Net income (loss) per share: | ||||
Basic | $ 0.29 | $ 0.13 | $ 0.77 | $ (0.02) |
Diluted | $ 0.29 | $ 0.13 | $ 0.77 | $ (0.02) |
Anti-dilutive instruments excluded | 7,363 |
ACQUISITIONS - Summary - Radar
ACQUISITIONS - Summary - Radar (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Jan. 11, 2022 | Sep. 30, 2022 | Dec. 31, 2022 | |
Total consideration, net of cash acquired: | |||
Total consideration, net | $ 55,039 | ||
Radar | |||
ACQUISITIONS | |||
Total acquisition-related costs | $ 627 | ||
Acquisition-related costs incurred during the period | $ 204 | ||
Percentage acquired | 100% | ||
Total consideration, net of cash acquired: | |||
Cash paid | $ 20,844 | ||
Less: cash acquired | (1,479) | ||
Total consideration, net | $ 19,365 |
ACQUISITIONS - Purchase Price C
ACQUISITIONS - Purchase Price Consideration and Fair Value - Radar (Details) - USD ($) $ in Thousands | 9 Months Ended | |||||
Jan. 11, 2022 | Sep. 30, 2022 | Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Dec. 31, 2022 | |
Total purchase price consideration and preliminary fair value amounts recognized | ||||||
Total consideration, net | $ 55,039 | |||||
Goodwill | $ 81,212 | $ 81,560 | $ 81,292 | $ 81,576 | ||
Radar | ||||||
Total purchase price consideration and preliminary fair value amounts recognized | ||||||
Total consideration, net | $ 19,365 | |||||
Accounts receivable | 2,347 | |||||
Inventories | 1,874 | |||||
Prepaid expenses | 682 | |||||
Other current assets | 665 | |||||
Property and equipment | 3,053 | |||||
Intangible assets | 10,200 | |||||
Goodwill | 7,101 | |||||
Total assets acquired | 25,922 | |||||
Accounts payable | 1,120 | |||||
Deferred tax liabilities | 2,787 | |||||
Accrued liabilities | 2,106 | |||||
Long-term debt | 544 | |||||
Total liabilities assumed | 6,557 | |||||
Net assets acquired | $ 19,365 |
ACQUISITIONS - Intangible Asset
ACQUISITIONS - Intangible Assets - Radar (Details) - Radar $ in Thousands | Jan. 11, 2022 USD ($) |
ACQUISITIONS | |
Gross | $ 10,200 |
Goodwill, non-deductible for tax purposes | 7,101 |
Customer relationships | |
ACQUISITIONS | |
Gross | $ 9,300 |
Average Useful Life | 15 years |
Technology | |
ACQUISITIONS | |
Gross | $ 600 |
Average Useful Life | 10 years |
Trademarks | |
ACQUISITIONS | |
Gross | $ 300 |
Average Useful Life | 7 years |
ACQUISITIONS - Summary - Cyalum
ACQUISITIONS - Summary - Cyalume (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
May 04, 2022 | Sep. 30, 2022 | Dec. 31, 2022 | |
Total consideration, net of cash acquired: | |||
Total consideration, net | $ 55,039 | ||
Cyalume | |||
ACQUISITIONS | |||
Acquisition-related costs incurred during the period | $ 3,546 | ||
Percentage acquired | 100% | ||
Total consideration, net of cash acquired: | |||
Cash paid | $ 38,012 | ||
Less: cash acquired | (1,834) | ||
Total consideration, net | $ 36,178 |
ACQUISITIONS - Purchase Price_2
ACQUISITIONS - Purchase Price Consideration and Fair Value - Cyalume (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
May 04, 2022 | Jun. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
ACQUISITIONS | ||||||
Measurement period adjustments | $ 200 | $ (593) | ||||
Total purchase price consideration and preliminary fair value amounts recognized | ||||||
Total consideration, net | $ 55,039 | |||||
Goodwill | $ 81,560 | $ 81,292 | $ 81,212 | $ 81,576 | ||
Cyalume | ||||||
ACQUISITIONS | ||||||
Measurement period adjustments | $ (393) | |||||
Total purchase price consideration and preliminary fair value amounts recognized | ||||||
Total consideration, net | $ 36,178 | |||||
Accounts receivable | 3,302 | |||||
Inventories | 10,908 | |||||
Prepaid expenses | 255 | |||||
Other current assets | 10 | |||||
Property and equipment | 12,492 | |||||
Intangible assets | 8,100 | |||||
Goodwill | 8,708 | |||||
Total assets acquired | 43,775 | |||||
Accounts payable | 1,080 | |||||
Deferred tax liabilities | 4,652 | |||||
Accrued liabilities | 1,577 | |||||
Other long-term liabilities | 288 | |||||
Total liabilities assumed | 7,597 | |||||
Net assets acquired | $ 36,178 |
ACQUISITIONS - Intangible Ass_2
ACQUISITIONS - Intangible Assets - Cyalume (Details) - Cyalume $ in Thousands | May 04, 2022 USD ($) |
ACQUISITIONS | |
Gross | $ 8,100 |
Goodwill, non-deductible for tax purposes | 8,708 |
Customer relationships | |
ACQUISITIONS | |
Gross | $ 3,700 |
Average Useful Life | 15 years |
Technology | |
ACQUISITIONS | |
Gross | $ 3,600 |
Average Useful Life | 10 years |
Trademarks | |
ACQUISITIONS | |
Gross | $ 800 |
REVENUE RECOGNITION - Net sales
REVENUE RECOGNITION - Net sales by channel and geography (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Revenue Recognition | ||||
Net sales | $ 125,114 | $ 111,554 | $ 357,949 | $ 334,192 |
U.S. state and local agencies | ||||
Revenue Recognition | ||||
Net sales | 75,584 | 64,359 | 212,965 | 188,724 |
Commercial | ||||
Revenue Recognition | ||||
Net sales | 9,525 | 11,211 | 30,834 | 33,572 |
U.S. federal agencies | ||||
Revenue Recognition | ||||
Net sales | 13,355 | 16,652 | 42,484 | 34,014 |
International | ||||
Revenue Recognition | ||||
Net sales | 25,821 | 18,264 | 69,194 | 74,789 |
Other | ||||
Revenue Recognition | ||||
Net sales | $ 829 | $ 1,068 | $ 2,472 | $ 3,093 |
REVENUE RECOGNITION - Includes
REVENUE RECOGNITION - Includes all Distribution sales (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Revenue Recognition | ||||
Net sales | $ 125,114 | $ 111,554 | $ 357,949 | $ 334,192 |
United States | ||||
Revenue Recognition | ||||
Net sales | 99,293 | 93,290 | 288,755 | 259,403 |
International. | ||||
Revenue Recognition | ||||
Net sales | $ 25,821 | $ 18,264 | $ 69,194 | $ 74,789 |
REVENUE RECOGNITION - Contract
REVENUE RECOGNITION - Contract Liabilities (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2023 | Dec. 31, 2022 | |
REVENUE RECOGNITION | |||
Contract liabilities, current | $ 3,893 | $ 3,893 | $ 4,615 |
Revenue recognized from amounts included in contract liabilities | $ 407 | $ 2,752 |
REVENUE RECOGNITION - Additiona
REVENUE RECOGNITION - Additional information (Details) $ in Thousands | Sep. 30, 2023 USD ($) |
Revenue Recognition | |
Remaining performance obligations | $ 17,620 |
Percentage of remaining performance obligations expect to recognize | 58% |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-10-01 | |
Revenue Recognition | |
Expected timing of satisfaction | 12 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-10-01 | |
Revenue Recognition | |
Expected timing of satisfaction | 2 years |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
INVENTORIES | ||
Finished goods | $ 30,701 | $ 25,208 |
Work-in-process | 9,004 | 7,466 |
Raw materials and supplies | 42,841 | 37,599 |
Total | $ 82,546 | $ 70,273 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS - Summary of changes in goodwill (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2023 | |
Summary of changes in goodwill | ||||
Balance at beginning of period | $ 81,560 | $ 81,292 | $ 81,576 | $ 81,576 |
Measurement period adjustments | 200 | (593) | ||
Foreign currency translation adjustments | (348) | 68 | 309 | |
Balance at end of period | 81,212 | 81,560 | 81,292 | 81,212 |
Product. | ||||
Summary of changes in goodwill | ||||
Balance at beginning of period | 78,944 | 78,676 | 78,960 | 78,960 |
Measurement period adjustments | 200 | (593) | ||
Foreign currency translation adjustments | (348) | 68 | 309 | |
Balance at end of period | 78,596 | 78,944 | 78,676 | 78,596 |
Distribution | ||||
Summary of changes in goodwill | ||||
Balance at beginning of period | 2,616 | 2,616 | 2,616 | 2,616 |
Balance at end of period | $ 2,616 | $ 2,616 | $ 2,616 | $ 2,616 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS - Impairment of Goodwill (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
GOODWILL AND OTHER INTANGIBLE ASSETS | ||
Gross goodwill | $ 88,797 | $ 89,161 |
Accumulated impairment losses | $ 7,585 | $ 7,585 |
GOODWILL AND OTHER INTANGIBLE_5
GOODWILL AND OTHER INTANGIBLE ASSETS - Summary of intangible assets (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Summary of intangible assets | ||
Definite lived intangibles, Gross | $ 109,147 | $ 108,933 |
Definite lived intangibles, Accumulated amortization | (82,236) | (75,658) |
Definite lived intangibles, Net | 26,911 | 33,275 |
Indefinite lived intangibles | 126,569 | 126,353 |
Indefinite lived intangibles, Net | 44,333 | 50,695 |
Tradenames | ||
Summary of intangible assets | ||
Indefinite lived intangibles | 17,422 | 17,420 |
Indefinite lived intangibles, Net | 17,422 | 17,420 |
Customer relationships | ||
Summary of intangible assets | ||
Definite lived intangibles, Gross | 85,680 | 85,847 |
Definite lived intangibles, Accumulated amortization | (64,337) | (59,122) |
Definite lived intangibles, Net | $ 21,343 | $ 26,725 |
Weighted Average Useful Life | 11 years | 11 years |
Technology | ||
Summary of intangible assets | ||
Definite lived intangibles, Gross | $ 15,974 | $ 15,629 |
Definite lived intangibles, Accumulated amortization | (11,793) | (11,309) |
Definite lived intangibles, Net | $ 4,181 | $ 4,320 |
Weighted Average Useful Life | 8 years | 8 years |
Tradenames | ||
Summary of intangible assets | ||
Definite lived intangibles, Gross | $ 6,513 | $ 6,484 |
Definite lived intangibles, Accumulated amortization | (5,126) | (4,254) |
Definite lived intangibles, Net | $ 1,387 | $ 2,230 |
Weighted Average Useful Life | 4 years | 4 years |
Non-compete agreements | ||
Summary of intangible assets | ||
Definite lived intangibles, Gross | $ 980 | $ 973 |
Definite lived intangibles, Accumulated amortization | $ (980) | $ (973) |
Weighted Average Useful Life | 4 years | 4 years |
GOODWILL AND OTHER INTANGIBLE_6
GOODWILL AND OTHER INTANGIBLE ASSETS - Additional information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | ||||
Amortization expense | $ 2,155 | $ 2,274 | $ 6,308 | $ 6,671 |
Amortization expense included in cost of goods sold | $ 55 | $ 134 | $ 372 | $ 314 |
GOODWILL AND OTHER INTANGIBLE_7
GOODWILL AND OTHER INTANGIBLE ASSETS - Amortization expense for definite lived intangible assets (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Estimated amortization expense for finite-lived intangible assets | ||
Remainder of 2023 | $ 1,477 | |
2024 | 5,013 | |
2025 | 3,053 | |
2026 | 2,656 | |
2027 | 2,479 | |
Thereafter | 12,233 | |
Total | $ 26,911 | $ 33,275 |
DEBT - Schedule of company's de
DEBT - Schedule of company's debt (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Debt | ||
Short-term debt | $ 13,251 | $ 12,211 |
Long-term debt | 131,573 | 139,076 |
Unamortized debt discount and debt issuance costs | (1,264) | (1,600) |
Total long-term debt, net | 130,309 | 137,476 |
Term loan | ||
Debt | ||
Long-term debt | 131,064 | 138,564 |
Other. | ||
Debt | ||
Long-term debt | 509 | 512 |
Insurance premium financing | ||
Debt | ||
Short-term debt | 3,251 | 2,211 |
Current portion of term loan | ||
Debt | ||
Short-term debt | $ 10,000 | $ 10,000 |
DEBT - Summary of aggregate pri
DEBT - Summary of aggregate principal payment of long-term debt (Details) $ in Thousands | Sep. 30, 2023 USD ($) |
DEBT | |
Remainder of 2023 | $ 2,500 |
2024 | 10,127 |
2025 | 10,127 |
2026 | 118,691 |
2027 | 128 |
Total principal payments | $ 141,573 |
DEBT - 2021 Credit Facility (De
DEBT - 2021 Credit Facility (Details) $ in Thousands | 4 Months Ended | 9 Months Ended | ||
Aug. 20, 2021 USD ($) | Sep. 30, 2023 USD ($) | Sep. 30, 2023 USD ($) | Dec. 31, 2022 USD ($) | |
Debt | ||||
Outstanding borrowings | $ 131,573 | $ 131,573 | $ 139,076 | |
2021 Credit Facility | ||||
Debt | ||||
Increase in total net leverage ratio | 0.50 | |||
2021 Credit Facility | Minimum | ||||
Debt | ||||
Commitment Fee | 0.175% | 0.175% | ||
2021 Credit Facility | Maximum | ||||
Debt | ||||
Commitment Fee | 0.25% | 0.25% | ||
2021 Credit Facility | Each quarter starting with the quarter ended December 31, 2021 | ||||
Debt | ||||
Minimum fixed charge coverage ratio | 1.25 | |||
2021 Credit Facility | From the Quarter Ended December 31, 2022 until the quarter ended September 30, 2023 | ||||
Debt | ||||
Total net leverage ratio | 3.75 | |||
2021 Credit Facility | Period after the quarter ended September 30, 2023 | Maximum | ||||
Debt | ||||
Total net leverage ratio | 3.50 | |||
2021 Credit Facility | Base Rate | Minimum | ||||
Debt | ||||
Applicable margin (as a percent) | 0.50% | |||
2021 Credit Facility | Base Rate | Maximum | ||||
Debt | ||||
Applicable margin (as a percent) | 1.50% | |||
2021 Credit Facility | SOFR | Minimum | ||||
Debt | ||||
Applicable margin (as a percent) | 1.60% | |||
2021 Credit Facility | SOFR | Maximum | ||||
Debt | ||||
Applicable margin (as a percent) | 2.60% | |||
2021 Credit Facility | Revolving credit facility. | ||||
Debt | ||||
Maximum borrowing capacity | $ 100,000 | |||
Outstanding borrowings | $ 0 | $ 0 | $ 0 | |
Available borrowing capacity | 97,387 | 97,387 | ||
2021 Credit Facility | Term loan | ||||
Debt | ||||
Aggregate principal amount per quarter (in percent) | 1.25% | |||
Outstanding borrowings | $ 200,000 | |||
2021 Credit Facility | Letter of credit | ||||
Debt | ||||
Maximum borrowing capacity | 15,000 | |||
Outstanding letters of credit | $ 2,613 | $ 2,613 | ||
2021 Credit Facility | Swing line loans | ||||
Debt | ||||
Maximum borrowing capacity | $ 10,000 |
DEBT - Canadian Credit Facility
DEBT - Canadian Credit Facility (Details) - Canadian Credit Facility $ in Thousands, $ in Thousands | 9 Months Ended | |||
Sep. 30, 2023 USD ($) | Dec. 31, 2022 USD ($) | Oct. 14, 2021 USD ($) | Oct. 14, 2021 CAD ($) | |
Minimum | ||||
Debt | ||||
Unused line fee (as a percent) | 0.175% | |||
Maximum | ||||
Debt | ||||
Unused line fee (as a percent) | 0.25% | |||
Base Rate | Minimum | ||||
Debt | ||||
Applicable margin (as a percent) | 0.50% | |||
Base Rate | Maximum | ||||
Debt | ||||
Applicable margin (as a percent) | 1.50% | |||
LIBOR | Minimum | ||||
Debt | ||||
Applicable margin (as a percent) | 1.50% | |||
LIBOR | Maximum | ||||
Debt | ||||
Applicable margin (as a percent) | 2.50% | |||
Revolving credit facility. | ||||
Debt | ||||
Maximum borrowing capacity | $ 10,000 | |||
Amount outstanding | $ 0 | $ 0 | ||
Upfront Fee | 0.25% | |||
Letter of credit | ||||
Debt | ||||
Maximum borrowing capacity | $ 3,000 |
DEBT - Schedule of interest rat
DEBT - Schedule of interest rate swaps (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2023 | May 31, 2023 | |
Interest Rate Swaps | ||
Interest Rate Swaps | ||
Variable rate | 5.32% | |
Interest Rate Swap, One | ||
Interest Rate Swaps | ||
Debt instrument, start maturity date | Sep. 30, 2021 | |
Debt instrument, end maturity date | Jul. 23, 2026 | |
Notional amount | $ 100,000,000 | $ 100,000 |
Fixed rate | 0.812% | |
Interest Rate Swap, Two | ||
Interest Rate Swaps | ||
Debt instrument, start maturity date | May 31, 2023 | |
Debt instrument, end maturity date | Jul. 23, 2026 | |
Notional amount | $ 50,000,000 | $ 50,000 |
Fixed rate | 3.905% |
DEBT - Schedule of fair value s
DEBT - Schedule of fair value swap agreement (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Interest Rate Swaps | |||||
Cumulative gain, net of tax reflected in accumulated other comprehensive income (loss) | $ 6,755 | $ 6,755 | $ 6,739 | ||
Gain recognized in other comprehensive income (loss) | 1,131 | $ 2,350 | 2,281 | $ 6,414 | |
Amount reclassified from accumulated other comprehensive income to earnings | 884 | $ 252 | 2,266 | $ 106 | |
Amount reclassified from AOCI into interest expense within next twelve months | 4,449 | 4,449 | |||
Interest Rate Swaps | Other current assets | |||||
Interest Rate Swaps | |||||
Derivative asset | $ 4,550 | $ 4,550 | $ 3,619 | ||
Derivative Asset, Statement of Financial Position [Extensible Enumeration] | Other Assets, Current | Other Assets, Current | Other Assets, Current | ||
Interest Rate Swaps | Other assets | |||||
Interest Rate Swaps | |||||
Derivative asset | $ 4,753 | $ 4,753 | $ 5,366 | ||
Derivative Asset, Statement of Financial Position [Extensible Enumeration] | Other Assets, Noncurrent | Other Assets, Noncurrent | Other Assets, Noncurrent |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Legal Proceedings (Details) $ in Thousands | 1 Months Ended |
Sep. 30, 2021 USD ($) | |
COMMITMENTS AND CONTINGENCIES | |
Damage awarded | $ 7,500 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
INCOME TAXES. | ||||
Effective tax rate | 28% | 28.40% | 28.30% | 76.50% |
COMPENSATION PLANS - Long-Term
COMPENSATION PLANS - Long-Term Incentive Plan (Details) - Long-Term Incentive Plan $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Mar. 31, 2021 installment | Sep. 30, 2023 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2023 USD ($) | Sep. 30, 2022 USD ($) | |
Compensation Plans | |||||
Number of equal installments | installment | 3 | ||||
Vesting period for awards granted under the cash-based long-term incentive plan | 3 years | ||||
Compensation expense related to the cash-based long-term incentive plan | $ | $ 185 | $ 375 | $ 489 | $ 933 |
COMPENSATION PLANS - Executive
COMPENSATION PLANS - Executive Compensation Plan (Details) - Executive Compensation Plan - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | ||
Mar. 09, 2022 | Sep. 30, 2023 | Mar. 18, 2022 | |
Compensation Plans | |||
Number of awards granted under cash-based executive compensation plan | 1,433,500 | ||
Grant date fair value per share of common stock of all vested and unvested units under the cash-based executive compensation plan | $ 23.45 | ||
Number of units expected to vest under cash-based executive compensation plan | 632,500 | ||
Number of unvested units under cash-based executive compensation plan | 801,000 | ||
Share based compensation expense | $ 22,100 | ||
Unrecognized compensation expense | $ 11,516 |
LEASES - Schedule of operating
LEASES - Schedule of operating assets and liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Leases | ||
Operating lease assets | $ 6,643 | $ 8,489 |
Current operating lease liabilities | $ 3,192 | $ 3,773 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration] | Accrued Liabilities, Current | Accrued Liabilities, Current |
Long-term operating lease liabilities | $ 3,603 | $ 4,965 |
Total lease liabilities | $ 6,795 | $ 8,738 |
Maximum | ||
Leases | ||
Remaining contractual terms | 5 years | |
Optional lease extension terms | 5 years |
LEASES - Components of lease ex
LEASES - Components of lease expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2023 | Sep. 30, 2023 | |
LEASES | ||
Fixed operating lease costs | $ 954 | $ 3,019 |
Variable operating lease costs | 511 | 1,267 |
Total | $ 1,465 | $ 4,286 |
LEASES - Weighted average remai
LEASES - Weighted average remaining lease term and discount rate (Details) | Sep. 30, 2023 | Dec. 31, 2022 |
LEASES | ||
Operating leases weighted average remaining lease term (years): | 2 years 3 months 18 days | 2 years 7 months 13 days |
Operating leases weighted average discount rate | 3.06% | 2.96% |
LEASES - Future minimum lease p
LEASES - Future minimum lease payments under operating leases (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
LEASES | ||
Remainder of 2023 | $ 1,090 | |
2024 | 3,250 | |
2025 | 1,835 | |
2026 | 768 | |
2027 | 134 | |
Thereafter | 8 | |
Total future lease payments | 7,085 | |
Less: Amount representing interest | (290) | |
Present value of lease liabilities | $ 6,795 | $ 8,738 |
LEASES - Supplemental cash flow
LEASES - Supplemental cash flow information related to leases (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2023 USD ($) | |
LEASES | |
Operating cash flows - operating leases | $ 3,063 |
Operating leases |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Jun. 09, 2022 USD ($) | Sep. 30, 2023 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2023 USD ($) warehouse | Sep. 30, 2022 USD ($) | |
Related Party Transactions | |||||
Number of distribution warehouses and retail stores | warehouse | 4 | ||||
Rent expense | $ 116 | $ 112 | $ 379 | $ 346 | |
Direct offering costs | $ 2,715 | ||||
Kanders & Company, Inc | |||||
Related Party Transactions | |||||
Related party, acquisition costs | 1,000 | ||||
Direct offering costs | $ 2,000 | $ 2,000 |
SEGMENT DATA - Other (Details)
SEGMENT DATA - Other (Details) | 9 Months Ended |
Sep. 30, 2023 segment | |
SEGMENT DATA | |
Number of reportable segments | 2 |
SEGMENT DATA - asset informatio
SEGMENT DATA - asset information or operating expenses by segment (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Segment Data | ||||
Net sales | $ 125,114 | $ 111,554 | $ 357,949 | $ 334,192 |
Cost of goods sold | 71,511 | 67,814 | 206,981 | 207,042 |
Gross profit | 53,603 | 43,740 | 150,968 | 127,150 |
Reconciling Items | ||||
Segment Data | ||||
Net sales | (7,589) | (7,176) | (21,702) | (17,585) |
Cost of goods sold | (7,593) | (7,170) | (21,423) | (17,587) |
Gross profit | 4 | (6) | (279) | 2 |
Product. | Operating segments | ||||
Segment Data | ||||
Net sales | 108,495 | 92,718 | 305,057 | 277,941 |
Cost of goods sold | 60,380 | 54,125 | 171,204 | 166,192 |
Gross profit | 48,115 | 38,593 | 133,853 | 111,749 |
Distribution | Operating segments | ||||
Segment Data | ||||
Net sales | 24,208 | 26,012 | 74,594 | 73,836 |
Cost of goods sold | 18,724 | 20,859 | 57,200 | 58,437 |
Gross profit | $ 5,484 | $ 5,153 | $ 17,394 | $ 15,399 |