UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended: September 30, 2018
or
¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _________ to _________
Commission File Number: 001-34767
CLARUS CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 58-1972600 |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
|
2084 East 3900 South Salt Lake City, Utah |
84124 | |
| (Address of principal executive offices) | (Zip code) |
| (801) 278-5552 |
| (Registrant’s telephone number, including area code) |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ¨ | Non-accelerated filer | ¨ | |
| Accelerated filer | x | Smaller reporting company | x | |
| Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of October 31, 2018, there were 29,850,189 shares of common stock, par value $0.0001, outstanding.
INDEX
CLARUS CORPORATION
| 2 |
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share amounts)
| September 30, 2018 | December 31, 2017 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | 3,005 | $ | 1,856 | ||||
| Accounts receivable, less allowance for doubtful accounts of $495 and $382, respectively | 39,295 | 35,817 | ||||||
| Inventories | 60,840 | 58,138 | ||||||
| Prepaid and other current assets | 4,362 | 3,633 | ||||||
| Income tax receivable | 43 | - | ||||||
| Total current assets | 107,545 | 99,444 | ||||||
| Property and equipment, net | 22,971 | 24,345 | ||||||
| Other intangible assets, net | 20,259 | 23,238 | ||||||
| Indefinite lived intangible assets | 41,742 | 41,843 | ||||||
| Goodwill | 18,090 | 17,745 | ||||||
| Other long-term assets | 1,489 | 834 | ||||||
| Total assets | $ | 212,096 | $ | 207,449 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 21,504 | $ | 19,456 | ||||
| Income tax payable | 248 | 328 | ||||||
| Current portion of long-term debt | 41 | - | ||||||
| Total current liabilities | 21,793 | 19,784 | ||||||
| Long-term debt | 22,655 | 20,842 | ||||||
| Deferred income taxes | 3,553 | 3,666 | ||||||
| Other long-term liabilities | 101 | 175 | ||||||
| Total liabilities | 48,102 | 44,467 | ||||||
| Stockholders' Equity | ||||||||
| Preferred stock, $.0001 par value; 5,000 shares authorized; none issued | - | - | ||||||
| Common stock, $.0001 par value; 100,000 shares authorized; 33,244 and 32,917 issued and 29,850 and 30,041 outstanding, respectively | 3 | 3 | ||||||
| Additional paid in capital | 487,819 | 485,285 | ||||||
| Accumulated deficit | (307,378 | ) | (310,390 | ) | ||||
| Treasury stock, at cost | (17,124 | ) | (12,415 | ) | ||||
| Accumulated other comprehensive income | 674 | 499 | ||||||
| Total stockholders' equity | 163,994 | 162,982 | ||||||
| Total liabilities and stockholders' equity | $ | 212,096 | $ | 207,449 | ||||
See accompanying notes to condensed consolidated financial statements.
| 3 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands, except per share amounts)
| Three Months Ended | ||||||||
| September 30, 2018 | September 30, 2017 | |||||||
| Sales | ||||||||
| Domestic sales | $ | 26,168 | $ | 21,141 | ||||
| International sales | 29,518 | 24,633 | ||||||
| Total sales | 55,686 | 45,774 | ||||||
| Cost of goods sold | 35,829 | 30,490 | ||||||
| Gross profit | 19,857 | 15,284 | ||||||
| Operating expenses | ||||||||
| Selling, general and administrative | 15,773 | 14,431 | ||||||
| Restructuring charge | 22 | 33 | ||||||
| Transaction costs | 50 | 1,869 | ||||||
| Total operating expenses | 15,845 | 16,333 | ||||||
| Operating income (loss) | 4,012 | (1,049 | ) | |||||
| Other (expense) income | ||||||||
| Interest expense, net | (303 | ) | (71 | ) | ||||
| Other, net | 102 | 213 | ||||||
| Total other (expense) income, net | (201 | ) | 142 | |||||
| Income (loss) before income tax | 3,811 | (907 | ) | |||||
| Income tax (benefit) expense | (316 | ) | 676 | |||||
| Net income (loss) | 4,127 | (1,583 | ) | |||||
| Other comprehensive income (loss), net of tax: | ||||||||
| Foreign currency translation adjustment | (54 | ) | 684 | |||||
| Unrealized loss on hedging activities | (193 | ) | (419 | ) | ||||
| Other comprehensive (loss) income | (247 | ) | 265 | |||||
| Comprehensive income (loss) | $ | 3,880 | $ | (1,318 | ) | |||
| Net income (loss) per share: | ||||||||
| Basic | $ | 0.14 | $ | (0.05 | ) | |||
| Diluted | 0.14 | (0.05 | ) | |||||
| Weighted average shares outstanding: | ||||||||
| Basic | 29,739 | 30,017 | ||||||
| Diluted | 30,166 | 30,017 | ||||||
| Dividends declared per common share | $ | 0.03 | $ | - | ||||
See accompanying notes to condensed consolidated financial statements.
| 4 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands, except per share amounts)
| Nine Months Ended | ||||||||
| September 30, 2018 | September 30, 2017 | |||||||
| Sales | ||||||||
| Domestic sales | $ | 79,667 | $ | 59,474 | ||||
| International sales | 75,167 | 58,536 | ||||||
| Total sales | 154,834 | 118,010 | ||||||
| Cost of goods sold | 101,290 | 81,388 | ||||||
| Gross profit | 53,544 | 36,622 | ||||||
| Operating expenses | ||||||||
| Selling, general and administrative | 48,692 | 39,826 | ||||||
| Restructuring charge | 86 | 116 | ||||||
| Transaction costs | 383 | 1,869 | ||||||
| Total operating expenses | 49,161 | 41,811 | ||||||
| Operating income (loss) | 4,383 | (5,189 | ) | |||||
| Other (expense) income | ||||||||
| Interest expense, net | (1,020 | ) | (948 | ) | ||||
| Other, net | 31 | 435 | ||||||
| Total other expense, net | (989 | ) | (513 | ) | ||||
| Income (loss) before income tax | 3,394 | (5,702 | ) | |||||
| Income tax (benefit) expense | (359 | ) | 990 | |||||
| Net income (loss) | 3,753 | (6,692 | ) | |||||
| Other comprehensive income (loss), net of tax: | ||||||||
| Foreign currency translation adjustment | (546 | ) | 2,305 | |||||
| Unrealized income (loss) on hedging activities | 721 | (1,797 | ) | |||||
| Other comprehensive income | 175 | 508 | ||||||
| Comprehensive income (loss) | $ | 3,928 | $ | (6,184 | ) | |||
| Net income (loss) per share: | ||||||||
| Basic | $ | 0.13 | $ | (0.22 | ) | |||
| Diluted | 0.12 | (0.22 | ) | |||||
| Weighted average shares outstanding: | ||||||||
| Basic | 29,939 | 30,015 | ||||||
| Diluted | 30,162 | 30,015 | ||||||
| Dividends declared per common share | $ | 0.03 | $ | - | ||||
See accompanying notes to condensed consolidated financial statements.
| 5 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Nine Months Ended | ||||||||
| September 30, 2018 | September 30, 2017 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net income (loss) | $ | 3,753 | $ | (6,692 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Depreciation of property and equipment | 3,314 | 1,830 | ||||||
| Amortization of intangible assets | 2,902 | 1,183 | ||||||
| Accretion of notes payable | - | 833 | ||||||
| Amortization of debt issuance costs | 371 | 11 | ||||||
| Loss on disposition of assets | 11 | 109 | ||||||
| Loss (gain) from removal of accumulated translation adjustment | 172 | (149 | ) | |||||
| Stock-based compensation | 2,067 | 729 | ||||||
| Deferred income taxes | (539 | ) | 446 | |||||
| Changes in operating assets and liabilities, net of acquisition: | ||||||||
| Accounts receivable | (4,007 | ) | (8,524 | ) | ||||
| Inventories | (3,182 | ) | (8,274 | ) | ||||
| Prepaid and other assets | 443 | (808 | ) | |||||
| Accounts payable and accrued liabilities | 2,421 | 3,489 | ||||||
| Income taxes | (114 | ) | (387 | ) | ||||
| Other | - | (374 | ) | |||||
| Net cash provided by (used in) operating activities | 7,612 | (16,578 | ) | |||||
| Cash Flows From Investing Activities: | ||||||||
| Purchase of business, net of cash received | (345 | ) | (79,238 | ) | ||||
| Proceeds from disposition of property and equipment | 5 | 53 | ||||||
| Purchase of property and equipment | (1,854 | ) | (1,919 | ) | ||||
| Net cash used in investing activities | (2,194 | ) | (81,104 | ) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Proceeds from revolving credit facilities | 101,331 | 36,232 | ||||||
| Repayments on revolving credit facilities | (99,572 | ) | (8,879 | ) | ||||
| Repayments of long-term debt and capital leases | (29 | ) | (22,690 | ) | ||||
| Payment of debt issuance costs | (1,032 | ) | (334 | ) | ||||
| Purchase of treasury stock | (4,709 | ) | (17 | ) | ||||
| Proceeds from exercise of stock options | 467 | 179 | ||||||
| Cash dividends paid | (741 | ) | - | |||||
| Net cash (used in) provided by financing activities | (4,285 | ) | 4,491 | |||||
| Effect of foreign exchange rates on cash | 16 | 125 | ||||||
| Change in cash | 1,149 | (93,066 | ) | |||||
| Cash, beginning of period | 1,856 | 94,738 | ||||||
| Cash, end of period | $ | 3,005 | $ | 1,672 | ||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash paid for income taxes | $ | 296 | $ | 946 | ||||
| Cash paid for interest | $ | 700 | $ | 284 | ||||
| Supplemental Disclosures of Non-Cash Investing and Financing Activities: | ||||||||
| Property and equipment purchased with accounts payable | $ | 155 | $ | 27 | ||||
| Property and equipment acquired through a capital lease | $ | 123 | $ | - | ||||
See accompanying notes to condensed consolidated financial statements.
| 6 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
NOTE 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements of Clarus Corporation and subsidiaries (which may be referred to as the “Company,” “Clarus,” “we,” “us” or “our”) as of September 30, 2018 and December 31, 2017 and for the three and nine months ended September 30, 2018 and 2017, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments, except otherwise disclosed) necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. The results of the three and nine months ended September 30, 2018 are not necessarily indicative of the results to be obtained for the year ending December 31, 2018. These interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the Securities and Exchange Commission (the “SEC”).
Clarus, incorporated in Delaware in 1991, acquired Black Diamond Equipment, Ltd. (which may be referred to as “Black Diamond Equipment”) and Gregory Mountain Products, LLC (which may be referred to as “Gregory Mountain Products” or “Gregory”) in May 2010 and changed its name to Black Diamond, Inc. in January 2011. In July 2012, we acquired POC Sweden AB and its subsidiaries (collectively, “POC”) and in October 2012, we acquired PIEPS Holding GmbH and its subsidiaries (collectively, “PIEPS”).
On July 23, 2014, the Company completed the sale of certain assets to Samsonite LLC comprising Gregory Mountain Products’ business. On October 7, 2015, the Company sold its equity interests in POC.
On August 14, 2017, the Company changed its name from Black Diamond, Inc. to Clarus Corporation and its stock ticker symbol from “BDE” to “CLAR” on the NASDAQ stock exchange. On August 21, 2017, the Company acquired Sierra Bullets, L.L.C. (“Sierra”).
On May 7, 2018, the Company announced a “modified Dutch auction” tender offer for Clarus’ common stock, as well as the preferred share purchase rights associated with such shares (collectively, the “Shares”). On July 11, 2018, the tender offer expired, following which the Company announced it would accept 417,237 Shares for purchase at a price of $8.00 per Share, for an aggregate cost of approximately $3,338, excluding fees and expenses.
On August 6, 2018, the Company announced that its Board of Directors approved the initiation of a quarterly cash dividend program of $0.025 per share of the Company’s common stock (the “Quarterly Cash Dividend”) or $0.10 per share on an annualized basis. The declaration and payment of future Quarterly Cash Dividends is subject to the discretion of and approval of the Company’s Board of Directors. On October 26, 2018, the Company announced that its Board of Directors approved the payment on November 16, 2018 of the Quarterly Cash Dividend to the record holders of shares of the Company’s common stock as of the close of business on November 2, 2018.
Nature of Business
Headquartered in Salt Lake City, Utah, Clarus, a company focused on the outdoor and consumer industries, is seeking opportunities to acquire and grow businesses that can generate attractive shareholder returns. The Company has substantial net operating tax loss carryforwards that it is seeking to redeploy to maximize shareholder value in outdoor and consumer businesses. Clarus’ primary business is as a leading developer, manufacturer and distributor of outdoor equipment and lifestyle products focused on the climb, ski, mountain, and sport categories. The Company’s products are principally sold under the Black Diamond®, Sierra® and PIEPS® brand names through specialty and online retailers, distributors and original equipment manufacturers throughout the U.S. and internationally.
Through our Black Diamond and PIEPS brands, we offer a broad range of products including: high performance apparel (such as jackets, shells, pants and bibs); rock-climbing equipment (such as carabiners, protection devices, harnesses, belay devices, helmets, and ice-climbing gear); technical backpacks and high-end day packs; tents; trekking poles; headlamps and lanterns; and gloves and mittens. We also offer advanced skis, ski poles, ski skins, and snow safety products, including avalanche airbag systems, avalanche transceivers, shovels, and probes. Through our Sierra brand, we manufacture a wide range of high performance bullets for both rifles and pistols that are used for precision target shooting, hunting and military and law enforcement purposes.
| 7 |
CLARUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
(in thousands, except per share amounts)
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The more significant estimates relate to purchase price allocation, excess or obsolete inventory, and valuation of deferred tax assets. We base our estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.
Significant Accounting Policies
Revenue Recognition
On January 1, 2018, the Company adopted new guidance on revenue from customers using the modified retrospective method applied to revenues that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under the new guidance, while prior period amounts are not adjusted and continue to be reported in accordance with Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition.
There was no cumulative effect adjustment recorded to opening retained earnings as of January 1, 2018, upon adoption of ASC Topic 606, Revenue from Contracts with Customers. However, the new revenue standard provides new guidance that resulted in immaterial reclassifications between Prepaid and other current assets, Sales, Cost of goods sold, and Accounts payable and accrued liabilities associated with accounting for revenue with a right of return. The impact of the reclassifications to revenues and expenses for the three and nine months ended September 30, 2018, was also immaterial as a result of applying ASC Topic 606. We do not expect an impact to our net income on an ongoing basis as a result of the adoption of the new standard.
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 complete when products are shipped or delivered to the customer depending on the terms of the contract. Sales are made on normal and customary short- term credit terms or upon delivery of point of sale transactions.
The Company enters into contractual arrangement with customers in the form of individual customer orders which specify the goods, quantity, pricing, and associated order terms. The Company does not have long-term contracts that are satisfied over time. Due to the nature of the contracts, no significant judgment exists in relation to the identification of the customer contract, satisfaction of the performance obligation, or transaction price. The Company expenses incremental costs of obtaining a contract due to the short term nature of the contracts.
The Company’s contract terms or historical business practices can give rise to variable consideration such as term discounts and customer cooperative payments. We estimate the expected term discounts based on an analysis of historical experience and record cash discounts as a reduction to revenue. Through cooperative advertising programs, the Company reimburses its wholesale customers for some of their costs of advertising the Company’s products. The Company records such costs as a reduction of revenue, where the fair value cannot be reasonably estimated or where costs exceed the fair value of the services.
At the time of revenue recognition, we also provide 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 an other current asset, with a corresponding reduction of cost of goods sold. Such balances as of September 30, 2018 and January 1, 2018 are immaterial. The Company also offers assurance-type warranties relating to its products sold to end customers that are accounted for under ASC Topic 460, Guarantees.
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 consolidated statements of comprehensive income (loss).
Sales commissions are expensed as incurred. These costs are recorded in Selling, general and administrative. Taxes collected from customers and remitted to government authorities are reported on the net basis and are excluded from sales.
| 8 |
CLARUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
(in thousands, except per share amounts)
The Company has a wide variety of technical outdoor equipment and lifestyle products focused on the climb, ski, mountain, and sport categories that are sold to a variety of customers in multiple end markets. While there are multiple products sold, the nature of products are similar in terms of the nature of the revenue recognition policies. See Note 14 - Segment Information, for disaggregated revenue by segment.
Contract liabilities are recorded as a component of accounts payable and accrued liabilities when customers remit contractual cash payments in advance of us satisfying performance obligations which are satisfied at a future point of time. Contract liabilities totaled $125 and $360 at September 30, 2018 and January 1, 2018, respectively. Contract liabilities are derecognized when the performance obligation is satisfied. Revenue recognized from satisfaction of performance obligations relating to the advanced payments during the three and nine months ended September 30, 2018 totaled $56 and $433, respectively.
The accounts receivable trade balance related to customers totaled $39,790, less allowance of $495, and $35,940, less allowance of $382, as of September 30, 2018 and January 1, 2018, respectively.
Accounting Pronouncements adopted during 2018
In November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This ASU is effective for fiscal years beginning January 1, 2018, and interim periods within those fiscal years. The amendments in this update are required to be applied using a retrospective transition method to each period presented. Accordingly, the Company adopted this ASU on January 1, 2018 and determined that the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.
In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which clarifies the treatment of several cash flow categories. In addition, ASU 2016-15 clarifies that when cash receipts and cash payments have aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source or use. This ASU is effective for annual and interim reporting periods beginning after December 15, 2017 with early adoption permitted. Accordingly, the Company adopted this ASU on January 1, 2018 and determined that the adoption of this guidance did not impact the Company’s consolidated financial statements and related disclosures.
In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting, which clarifies that an entity should account for the effects of a modification unless the fair value, vesting terms and classification as liability or equity of the modified and original awards do not change on the modification date. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments in this update are applied using a prospective transition method. Accordingly, the Company adopted this ASU on January 1, 2018 and determined that the adoption of this guidance did not impact the Company’s consolidated financial statements and related disclosures.
In March 2018, the FASB issued ASU 2018-5 Income Tax (Topic 740) Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 which adds various paragraphs pursuant to the issuance of SEC Staff Accounting Bulletin No. 118 (“SAB 118”). This guidance provides for the application of ASC Topic 740, Income Taxes, in the reporting period in which the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law and establishes a measurement period that should not extend beyond one year from the Tax Act enactment date (December 22, 2017) to obtain the appropriate documentation and complete the accounting under ASC Topic 740 for certain income tax effects of the Tax Act which were incomplete at December 31, 2017. This ASU became effective when issued in March 2018. The Company believes that all material adjustments have been identified and recorded relating to the Tax Act in 2017. Accordingly, the Company believes that adoption of this guidance will not have a material impact on the Company’s consolidated financial statements and related disclosures.
| 9 |
CLARUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
(in thousands, except per share amounts)
Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases, which revises the accounting related to lessor and lessee accounting. In July 2018, the FASB also issued ASU 2018-10 Codification Improvements to Topic 842, Leases and ASU 2018-11 Leases (Topic 842) Targeted Improvements. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset (“ROU”) for all leases with terms greater than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The provisions of ASU 2016-02 are effective for fiscal years beginning after December 15, 2018 and may be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements with certain practical expedients available. An entity may apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Early adoption is permitted. Since the effective date will not be until January 1, 2019, there is no immediate impact on the financial statements. Leases previously defined as capital leases will continue to be defined as a capital lease with no material changes to the accounting methodology. The Company currently maintains two capital leases. The Company is performing an assessment of its leases and has begun preparations for implementation and recognition of a cumulative-effective adjustment to the Janaury 1, 2019 balances on a prospective basis. Under the new guidance, leases previously defined as operating leases will be defined as financing leases and capitalized if the term is greater than one year. As a result, financing leases will be recorded as an asset and a corresponding liability at the present value of the total lease payments. The asset will be decremented over the life of the lease on a pro-rata basis resulting in lease expense while the liability will be decremented using the interest method (i.e. principal and interest). As such, the Company expects the new guidance will materially impact the asset and liability balances of the Company’s consolidated financial statements and related disclosures at the time of adoption. The majority of our current operating leases have been negotiated to expire after the adoption date. Consequently, for the leases with terms that go beyond the adoption date, the amounts we expect to recognize as additional liabilities and corresponding ROU assets based upon the present value of the remaining rental payments should approximate $1,318.
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The standard simplifies the accounting for goodwill impairment by requiring a goodwill impairment to be measured using a single step impairment model, whereby the impairment equals the difference between the carrying amount and the fair value of the specified reporting units in their entirety. This eliminates the second step of the current impairment model that requires companies to first estimate the fair value of all assets in a reporting unit and measure impairments based on those fair values and a residual measurement approach. It also specifies that any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. We will adopt this standard no later than the effective date of January 1, 2020 on a prospective basis. The impact of the new standard will be dependent on the specific facts and circumstances of future individual impairments, if any.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This standard enables entities to better portray the economics of their risk management activities in the financial statements and enhances the transparency and understandability of hedge results through improved disclosures. This ASU is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted, and we intend to adopt the new guidance in the first quarter of 2019. The Company is still evaluating the impact of the adoption and implementation of this standard on its consolidated financial statements.
In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income which allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. This ASU is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period. We intend to adopt the new guidance in the first quarter of 2019. The Company does not believe the adoption and implementation of this standard will have a significant impact on its consolidation financial statements.
NOTE 2. ACQUISITION
On August 21, 2017, the Company, through Everest/Sapphire Acquisition, LLC (“Everest/Sapphire”), a Delaware limited liability company and wholly owned subsidiary of Clarus, acquired 100% of the outstanding membership interests of Sierra, a manufacturer of a wide range of bullets primarily for both rifles and pistols, pursuant to the terms of the purchase and sale agreement dated August 21, 2017 (the “Purchase Agreement”), by and among Everest/Sapphire, Sierra, BHH Management, Inc., a California corporation (“BHH”), Lumber Management, Inc., a Delaware corporation (“LMI” and, together with BHH, the “Sellers”), and BHH, in its capacity as the representative of Sellers. Under the terms of the Purchase Agreement, Everest/Sapphire acquired Sierra for an aggregate purchase price of $79,000, plus or minus a working capital adjustment, in accordance with and subject to the terms and conditions set forth in the Purchase Agreement. During the three months ended June 30, 2018, the Company finalized the working capital adjustment and adjusted the recorded purchase consideration and goodwill by $345.
| 10 |
CLARUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
(in thousands, except per share amounts)
Pro Forma Results
The following unaudited pro forma results of operations for the three and nine months ended September 30, 2017 give pro forma effect as if the acquisition and borrowings used to finance the acquisition had occurred on January 1, 2016, after giving effect to certain adjustments including the amortization of intangible assets, depreciation of fixed assets, the Sellers’ management fees, interest expense and taxes and assumes the purchase price was allocated to the assets purchased and liabilities assumed based on their fair market values at the date of purchase.
| Three Months Ended | Nine Months Ended | |||||||
| September 30, 2017 | September 30, 2017 | |||||||
| Sales | $ | 48,496 | $ | 138,510 | ||||
| Net loss | $ | 32 | $ | (1,379 | ) | |||
| Net loss per share - basic | $ | - | $ | (0.05 | ) | |||
| Net loss per share - diluted | $ | - | $ | (0.05 | ) | |||
The unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred had the transaction been consummated as of January 1, 2016. Furthermore, such unaudited pro forma information is not necessarily indicative of future operating results of the combined companies, and should not be construed as representative of the operating results of the combined companies for any future dates or periods.
NOTE 3. INVENTORIES
Inventories, as of September 30, 2018 and December 31, 2017, were as follows:
| September 30, 2018 | December 31, 2017 | |||||||
| Finished goods | $ | 46,254 | $ | 46,729 | ||||
| Work-in-process | 6,624 | 5,194 | ||||||
| Raw materials and supplies | 7,962 | 6,215 | ||||||
| $ | 60,840 | $ | 58,138 | |||||
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment, net as of September 30, 2018 and December 31, 2017, were as follows:
| September 30, 2018 | December 31, 2017 | |||||||
| Land | $ | 3,160 | $ | 3,160 | ||||
| Building and improvements | 6,793 | 6,800 | ||||||
| Furniture and fixtures | 4,273 | 3,822 | ||||||
| Computer hardware and software | 4,788 | 4,897 | ||||||
| Machinery and equipment | 20,927 | 19,764 | ||||||
| Construction in progress | 593 | 721 | ||||||
| 40,534 | 39,164 | |||||||
| Less accumulated depreciation | (17,563 | ) | (14,819 | ) | ||||
| $ | 22,971 | $ | 24,345 | |||||
| 11 |
CLARUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
(in thousands, except per share amounts)
NOTE 5. OTHER INTANGIBLE ASSETS
Goodwill
The following table summarizes the changes in goodwill by segment:
| Black Diamond | Sierra | Total | ||||||||||
| Balance at December 31, 2017 | $ | - | $ | 17,745 | $ | 17,745 | ||||||
| Increase due to working capital adjustment | - | 345 | 345 | |||||||||
| Balance at September 30, 2018 | $ | - | $ | 18,090 | $ | 18,090 | ||||||
Indefinite Lived Intangible Assets
The Company’s indefinite lived intangible assets consist of certain tradenames and trademarks that provide Black Diamond Equipment, PIEPS and Sierra with the exclusive and perpetual rights to manufacture and sell their respective products. Tradenames and trademarks are not amortized, but reviewed annually for impairment or upon the existence of a triggering event. There was a decrease in tradenames and trademarks during the nine months ended September 30, 2018 due to the impact of foreign currency exchange rates. The following table summarizes the changes in indefinite lived intangible assets:
| Balance at December 31, 2017 | $ | 41,843 | ||
| Impact of foreign currency exchange rates | (101 | ) | ||
| Balance at September 30, 2018 | $ | 41,742 |
Other Intangible Assets, net
The Company’s other intangible assets, such as certain customer lists and relationships, product technologies, tradenames, trademarks and core technologies, are amortizable over their estimated useful lives. There was a decrease in gross other intangible assets during the nine months ended September 30, 2018 due to the impact of foreign currency exchange rates. The following table summarizes the changes in gross other intangible assets:
| Gross balance at December 31, 2017 | $ | 33,062 | ||
| Impact of foreign currency exchange rates | (147 | ) | ||
| Gross balance at September 30, 2018 | $ | 32,915 | ||
Other intangible assets, net of amortization as of September 30, 2018 and December 31, 2017, were as follows:
| September 30, 2018 | December 31, 2017 | |||||||
| Customer lists and relationships | $ | 26,084 | $ | 26,166 | ||||
| Product technologies | 4,784 | 4,849 | ||||||
| Tradename / trademark | 1,100 | 1,100 | ||||||
| Core technologies | 947 | 947 | ||||||
| 32,915 | 33,062 | |||||||
| Less accumulated amortization | (12,656 | ) | (9,824 | ) | ||||
| $ | 20,259 | $ | 23,238 | |||||
| 12 |
CLARUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
(in thousands, except per share amounts)
NOTE 6. LONG-TERM DEBT
Long-term debt as of September 30, 2018 and December 31, 2017, was as follows:
| September 30, 2018 | December 31, 2017 | |||||||
| Revolving credit facility (a) | $ | 22,601 | $ | 20,842 | ||||
| Capital lease | 95 | - | ||||||
| 22,696 | 20,842 | |||||||
| Less current portion | (41 | ) | - | |||||
| $ | 22,655 | $ | 20,842 | |||||
| (a) | As of September 30, 2018, the Company had drawn $22,601 on amounts available under the credit agreement with JPMorgan Chase Bank, N.A., with a maturity date of June 27, 2022. |
NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS
The Company’s primary exchange rate risk management objective is to mitigate the uncertainty of anticipated cash flows attributable to changes in foreign currency exchange rates. The Company primarily focuses on mitigating changes in cash flows resulting from sales denominated in currencies other than the U.S. dollar. The Company manages this risk primarily by using currency forward and option contracts. If the anticipated transactions are deemed probable, the resulting relationships are formally designated as cash flow hedges. The Company accounts for these contracts as cash flow hedges and tests effectiveness by determining whether changes in the expected cash flow of the derivative offset, within a range, changes in the expected cash flow of the hedged item.
At September 30, 2018, the Company’s derivative contracts had remaining maturities of approximately one year or less. The counterparty to these transactions had both long-term and short-term investment grade credit ratings. The maximum net exposure of the Company’s credit risk to the counterparty is generally limited to the aggregate unrealized loss of all contracts with that counterparty. At September 30, 2018, there was no such exposure to the counterparty. The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain of $614 on all contracts at September 30, 2018. The Company’s derivative counterparty has strong credit ratings and as a result, the Company does not require collateral to facilitate transactions.
The Company held the following contracts designated as hedged instruments as of September 30, 2018 and December 31, 2017:
| September 30, 2018 | ||||||||
| Notional | Latest | |||||||
| Amount | Maturity | |||||||
| Foreign exchange contracts - Canadian Dollars | $9,129 | August 2019 | ||||||
| Foreign exchange contracts - Euros | €10,244 | August 2019 | ||||||
| December 31, 2017 | ||||||||
| Notional | Latest | |||||||
| Amount | Maturity | |||||||
| Foreign exchange contracts - Norwegian Kroner | NOK 2,629 | February 2018 | ||||||
| Foreign exchange contracts - Canadian Dollars | $9,538 | February 2019 | ||||||
| Foreign exchange contracts - British Pounds | £1,737 | February 2019 | ||||||
| Foreign exchange contracts - Euros | €15,928 | February 2019 | ||||||
For contracts that qualify as effective hedge instruments, the effective portion of gains and losses resulting from changes in fair value of the instruments are included in accumulated other comprehensive income and reclassified to sales in the period the underlying hedged transaction is recognized in earnings. Gains (losses) of $255 and $(422) were reclassified to sales during the three months ended September 30, 2018 and 2017, respectively, and $(75) and $(36) were reclassified to sales during the nine months ended September 30, 2018 and 2017, respectively.
| 13 |
CLARUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
(in thousands, except per share amounts)
The following table presents the balance sheet classification and fair value of derivative instruments as of September 30, 2018 and December 31, 2017:
| Classification | September 30, 2018 | December 31, 2017 | ||||||||
| Derivative instruments in asset positions: | ||||||||||
| Forward exchange contracts | Prepaid and other current assets | $ | 614 | $ | 40 | |||||
| Forward exchange contracts | Other long-term assets | $ | - | $ | 6 | |||||
| Derivative instruments in liability positions: | ||||||||||
| Forward exchange contracts | Accounts payable and accrued liabilities | $ | - | $ | 919 | |||||
| Forward exchange contracts | Other long-term liabilities | $ | - | $ | 74 | |||||
NOTE 8. ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income (“AOCI”) primarily consists of foreign currency translation adjustments and changes in our forward foreign exchange contracts. The components of AOCI, net of tax, were as follows:
| Foreign Currency Translation Adjustments | Unrealized Gains (Losses) on Cash Flow Hedges | Total | ||||||||||
| Balance as of December 31, 2017 | $ | 905 | $ | (406 | ) | $ | 499 | |||||
| Other comprehensive income (loss) before reclassifications | (718 | ) | 936 | 218 | ||||||||
| Amounts reclassified from other comprehensive income (loss) | 172 | (215 | ) | (43 | ) | |||||||
| Net current period other comprehensive income (loss) | (546 | ) | 721 | 175 | ||||||||
| Balance as of September 30, 2018 | $ | 359 | $ | 315 | $ | 674 | ||||||
The effects on net income of amounts reclassified from unrealized gains (losses) on cash flow hedges for foreign exchange contracts and foreign currency translation adjustments for the three and nine months ended September 30, 2018, were as follows:
| Gains (losses) reclassified from AOCI to the Condensed Consolidated Statements of Comprehensive Income (Loss) | ||||||||
| Affected line item in the Condensed Consolidated Statements of Comprehensive Income (Loss) | For the Three Months Ended September 30, 2018 | For the Nine Months Ended September 30, 2018 | ||||||
| Foreign exchange contracts: | ||||||||
| Sales | $ | 255 | $ | (75 | ) | |||
| Less: Income tax expense | 19 | (290 | ) | |||||
| Amount reclassified, net of tax | $ | 236 | $ | 215 | ||||
| Foreign currency translation adjustments: | ||||||||
| Other, net | (131 | ) | (172 | ) | ||||
| Total reclassifications from AOCI | $ | 105 | $ | 43 | ||||
The Company’s policy is to classify reclassifications of cumulative foreign currency translation from AOCI to Other, net.
| 14 |
CLARUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
(in thousands, except per share amounts)
NOTE 9. FAIR VALUE MEASUREMENTS
We measure certain financial assets and liabilities at fair value on a recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, under a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
| Level 1 | - inputs to the valuation methodology are quoted market prices for identical assets or liabilities in active markets. |
| Level 2 | - inputs to the valuation methodology include quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. |
| Level 3 | - inputs to the valuation methodology are based on prices or valuation techniques that are unobservable. |
Assets and liabilities measured at fair value on a recurring basis at September 30, 2018 and December 31, 2017 were as follows:
| September 30, 2018 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets | ||||||||||||||||
| Forward exchange contracts | $ | - | $ | 614 | $ | - | $ | 614 | ||||||||
| $ | - | $ | 614 | $ | - | $ | 614 | |||||||||
| December 31, 2017 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets | ||||||||||||||||
| Forward exchange contracts | $ | - | $ | 46 | $ | - | $ | 46 | ||||||||
| $ | - | $ | 46 | $ | - | $ | 46 | |||||||||
| Liabilities | ||||||||||||||||
| Forward exchange contracts | $ | - | $ | 993 | $ | - | $ | 993 | ||||||||
| $ | - | $ | 993 | $ | - | $ | 993 | |||||||||
Derivative financial instruments are recorded at fair value based on current market pricing models. No nonrecurring fair value measurements existed at September 30, 2018 and December 31, 2017.
NOTE 10. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing earnings (loss) by the weighted average number of common shares outstanding during each period. Diluted earnings (loss) per share is computed by dividing earnings (loss) by the total of the weighted average number of shares of common stock outstanding during each period, plus the effect of dilutive outstanding stock options and unvested restricted stock grants. Potentially dilutive securities are excluded from the computation of diluted earnings per share if their effect is anti-dilutive to the loss from continuing operations.
The following table is a reconciliation of basic and diluted shares of common stock outstanding used in the calculation of earnings (loss) per share:
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CLARUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
(in thousands, except per share amounts)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||||||||
| Weighted average shares outstanding - basic | 29,739 | 30,017 | 29,939 | 30,015 | ||||||||||||
| Effect of dilutive stock awards | 427 | - | 223 | - | ||||||||||||
| Weighted average shares outstanding - diluted | 30,166 | 30,017 | 30,162 | 30,015 | ||||||||||||
| Net income (loss) per share: | ||||||||||||||||
| Basic | $ | 0.14 | $ | (0.05 | ) | $ | 0.13 | $ | (0.22 | ) | ||||||
| Diluted | 0.14 | (0.05 | ) | 0.12 | (0.22 | ) | ||||||||||
For the three months ended September 30, 2018 and 2017, equity awards of 986 and 2,835, respectively, and for the nine months ended September 30, 2018 and 2017, equity awards of 1,408 and 2,793, respectively, were outstanding and anti-dilutive and therefore not included in the calculation of earnings (loss) per share for these periods.
NOTE 11. STOCK-BASED COMPENSATION PLAN
Under the Company’s current 2015 Stock Incentive Plan (the “2015 Plan”), the Company’s Board of Directors (the “Board of Directors”) has flexibility to determine the type and amount of awards to be granted to eligible participants, who must be employees, directors, officers or consultants of the Company or its subsidiaries. The 2015 Plan allows for grants of incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation rights, and restricted units. The aggregate number of shares of common stock that may be granted through awards under the 2015 Plan to any employee in any calendar year may not exceed 500 shares. The 2015 Plan will continue in effect until December 2025 unless terminated sooner.
During the nine months ended September 30, 2018, the Company issued stock options for an aggregate of 1,913 shares under the 2015 Plan to directors and employees of the Company. The 1,875 options issued vest in five equal tranches on December 31, 2018, 2019, 2020, 2021 and 2022. The remaining options vest in four equal consecutive quarterly tranches from the date of grant.
For computing the fair value of the stock-based awards, the fair value of each option grant has been estimated as of the date of grant using the Black-Scholes option-pricing model with the following assumptions:
Options Granted During the Nine Months Ended September 30, 2018
| Number of options | 1,913 | |||
| Option vesting period | 1 - 5 Years | |||
| Grant price | $6.80 - $9.18 | |||
| Dividend yield | 0.00% - 1.09% | |||
| Expected volatility (a) | 40.7% - 42.5% | |||
| Risk-free interest rate | 2.65% - 2.88% | |||
| Expected life (years) (b) | 5.00 - 6.50 | |||
| Weighted average fair value | $2.77 - $3.63 |
| (a) | Expected volatility is based upon the Company’s historical volatility. |
| (b) | The expected term was determined based upon the underlying terms of the awards and the category and employment history of employee award recipient. |
| 16 |
CLARUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
(in thousands, except per share amounts)
Using these assumptions, the fair value of the stock options granted during the nine months ended September 30, 2018 was $5,956, which will be recognized over the vesting period of the options.
The total non-cash stock compensation expense related to restricted stock, stock options and stock awards recorded by the Company for the three months ended September 30, 2018 and 2017 was $912 and $387, respectively, and for the nine months ended September 30, 2018 and 2017 was $2,067 and $729, respectively. For the three and nine months ended September 30, 2018 and 2017, the majority of stock-based compensation costs were classified as selling, general and administrative expenses.
As of September 30, 2018, there were 2,184 unvested stock options and unrecognized compensation cost of $5,834 related to unvested stock options, as well as 350 unvested restricted stock awards and unrecognized compensation costs of $350 related to unvested restricted stock awards.
NOTE 12. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal disputes and other legal proceedings that arise from time to time in the ordinary course of business. Based on currently available information, the Company does not believe that it is reasonably possible that the disposition of any of the legal disputes the Company or its subsidiaries is currently involved in will have a material adverse effect upon the Company’s consolidated financial condition, results of operations or cash flows. There is a reasonable possibility of loss from contingencies in excess of the amounts accrued by the Company in the accompanying condensed consolidated balance sheets; however, the actual amounts of such possible losses cannot currently be reasonably estimated by the Company at this time. It is possible that, as additional information becomes available, the impact on the Company could have a different effect.
The Company leases office, warehouse and distribution space under non-cancelable operating leases. As leases expire, it can be expected that, in the normal course of business, certain leases will be renewed or replaced. Certain lease agreements include escalating rents over the lease terms. The Company expenses rent on a straight-line basis over the lease term which commences on the date the Company has the right to control the property. The cumulative expense recognized on a straight-line basis in excess of the cumulative payments is included in accounts payable and accrued liabilities and other long-term liabilities in the accompanying condensed consolidated balance sheets.
Total rent expense of the Company for the three months ended September 30, 2018 and 2017 was $193 and $214, respectively, and for the nine months ended September 30, 2018 and 2017 was $614 and $611, respectively.
NOTE 13. INCOME TAXES
On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The Tax Act made broad and complex changes to existing U.S. tax laws that impact the Company. Most notably, the Tax Act reduced the U.S. federal corporate tax rate from 35 percent to 21 percent effective January 1, 2018. The provisions of the Tax Act and related guidance provided by Staff Accounting Bulletin No. 118 allow for adjustments throughout 2018 to account for the impacts of the 2017 tax law changes. As of September 31, 2018, no additional adjustments related to the impacts of the 2017 tax law changes have been made; however, final adjustments may be necessary in the fourth quarter due to the significant complexity of the Tax Act and anticipated additional regulatory guidance or technical corrections that may be forthcoming as well as actions the Company may take as a result of tax reform.
In several states in which the Company operates, the states’ position is to conform to Federal tax legislation. However, in practice no formal declaration is made by the states upon tax legislation changes. It is unclear at this time whether states have conformed to the Tax Act or adopted their own laws to address the federal changes. On a provisional basis, the Company released federal valuation allowance of $4,512 during the year ended December 31, 2017. If the Company had released the state valuation allowance, it would have resulted in an incremental tax benefit of approximately $400. The Company is also continuing to gather additional information and expects to complete its accounting within one year of enactment.
The Company takes into consideration the various changes of the Tax Act when calculating the estimated annual effective tax rate.
The difference between the Company’s estimated effective tax rate and the U.S. federal statutory tax rate of 21 percent for the three and nine months ended September 30, 2018, was primarily attributed to a discrete benefit associated with a tax windfall deduction from the vesting of restricted stock units and exercise of stock options and the release of an additional portion of the Company’s valuation allowance based on the Company’s forecasted pre-tax earnings for the year.
| 17 |
CLARUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
(in thousands, except per share amounts)
As of December 31, 2017, the Company’s gross deferred tax asset was $50,732. The Company had recorded a valuation allowance of $45,811, resulting in a net deferred tax asset of $4,921, before deferred tax liabilities of $8,587. The Company has provided a valuation allowance against a portion of the deferred tax assets as of December 31, 2017, because the ultimate realization of those assets did not meet the more likely than not criteria. The majority of the Company’s deferred tax assets consist of net operating loss carryforwards for federal tax purposes. If a change in control were to occur, these could be limited under Section 382 of the Internal Revenue Code of 1986 (“Code”), as amended.
In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and net operating loss and credit carryforwards expire. The estimates and judgments associated with the Company’s valuation allowance on deferred tax assets are considered critical due to the amount of deferred tax assets recorded by the Company on its consolidated balance sheet and the judgment required in determining the Company’s future taxable income. The need for a valuation allowance is reassessed at each interim reporting period.
As of December 31, 2017, the Company had net operating loss, research and experimentation credit and alternative minimum tax credit carryforwards for U.S. federal income tax purposes of $156,598, $3,452 and $0, respectively. The Company believes its U.S. federal net operating loss (“NOL”) will substantially offset its future U.S. federal income taxes. The majority of the Company’s pre-tax income is currently earned and expected to be earned in the U.S., or taxed in the U.S. as Subpart F income and will be offset with the NOL.
NOLs available to offset taxable income, subject to compliance with Section 382 of the Code, begin to expire based upon the following schedule:
| Net Operating Loss Carryforward Expiration Dates | |||||
| December 31, 2017 | |||||
| Expiration Dates December 31, | Net Operating Loss Amount | ||||
| 2021 | $ | 21,026 | |||
| 2022 | 115,000 | ||||
| 2023 | 5,712 | ||||
| 2024 | 3,566 | ||||
| 2025 and beyond | 11,294 | ||||
| Total | $ | 156,598 | |||
NOTE 14. SEGMENT INFORMATION
As a result of our August 21, 2017 acquisition of Sierra, we now operate our business structure within two segments. These segments are defined based on the internal financial reporting used by management. Certain significant selling and general and administrative expenses are not allocated to the segments including non-cash stock compensation expense. Each segment is described below:
| · | The Black Diamond segment, which includes Black Diamond Equipment and PIEPS, is a global leader in designing, manufacturing, and marketing innovative outdoor engineered equipment and apparel for climbing, mountaineering, backpacking, skiing, and a wide range of other year-round outdoor recreation activities. The Black Diamond segment offers a broad range of products including: high performance apparel (such as jackets, shells, pants and bibs); rock-climbing equipment (such as carabiners, protection devices, harnesses, belay devices, helmets, and ice-climbing gear); technical backpacks and high-end day packs; tents; trekking poles; headlamps and lanterns; and gloves and mittens. It also offers advanced skis, ski poles, ski skins, and snow safety products, including avalanche airbag systems, avalanche transceivers, shovels, and probes. |
| · | The Sierra segment, which consists of Sierra, is an iconic American manufacturer of a wide range of high performance bullets for both rifles and pistols. These bullets are used for precision target shooting, hunting and military and law enforcement purposes. |
| 18 |
CLARUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
(in thousands, except per share amounts)
Financial information for our segments is as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||||||||
| Sales to external customers: | ||||||||||||||||
| Black Diamond | ||||||||||||||||
| Domestic sales | $ | 19,840 | $ | 18,840 | $ | 59,434 | $ | 57,173 | ||||||||
| International sales | 27,410 | 23,402 | 67,796 | 57,305 | ||||||||||||
| Total Black Diamond | 47,250 | 42,242 | 127,230 | 114,478 | ||||||||||||
| Sierra | ||||||||||||||||
| Domestic sales | 6,328 | 2,301 | 20,233 | 2,301 | ||||||||||||
| International sales | 2,108 | 1,231 | 7,371 | 1,231 | ||||||||||||
| Total Sierra | 8,436 | 3,532 | 27,604 | 3,532 | ||||||||||||
| Total sales to external customers | 55,686 | 45,774 | 154,834 | 118,010 | ||||||||||||
| Segment operating income: | ||||||||||||||||
| Black Diamond | 4,639 | 2,085 | 6,254 | 1,098 | ||||||||||||
| Sierra | 1,532 | 416 | 4,703 | 416 | ||||||||||||
| Total segment operating income | 6,171 | 2,501 | 10,957 | 1,514 | ||||||||||||
| Restructuring charge | (22 | ) | (33 | ) | (86 | ) | (116 | ) | ||||||||
| Transaction costs | (50 | ) | (1,869 | ) | (383 | ) | (1,869 | ) | ||||||||
| Corporate and other expenses | (1,985 | ) | (1,435 | ) | (6,074 | ) | (4,283 | ) | ||||||||
| Interest expense, net | (303 | ) | (71 | ) | (1,020 | ) | (948 | ) | ||||||||
| Income (loss) before income tax | $ | 3,811 | $ | (907 | ) | $ | 3,394 | $ | (5,702 | ) | ||||||
There were no intercompany sales between the Black Diamond and Sierra segments for the periods presented. Restructuring charges for the periods presented relate to the Black Diamond segment.
Total assets by segment, as of September 30, 2018 and December 31, 2017, were as follows:
| September 30, 2018 | December 31, 2017 | |||||||
| Black Diamond | $ | 134,828 | $ | 127,202 | ||||
| Sierra | 74,612 | 77,270 | ||||||
| Corporate | 2,656 | 2,977 | ||||||
| $ | 212,096 | $ | 207,449 | |||||
Capital expenditures, depreciation and amortization by segment is as follows.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||||||||
| Capital expenditures: | ||||||||||||||||
| Black Diamond | $ | 279 | $ | 770 | $ | 1,495 | $ | 1,918 | ||||||||
| Sierra | 57 | 1 | 359 | 1 | ||||||||||||
| Total capital expenditures | $ | 336 | $ | 771 | $ | 1,854 | $ | 1,919 | ||||||||
| Depreciation: | ||||||||||||||||
| Black Diamond | $ | 617 | $ | 569 | $ | 1,837 | $ | 1,674 | ||||||||
| Sierra | 489 | 156 | 1,477 | 156 | ||||||||||||
| Total depreciation | $ | 1,106 | $ | 725 | $ | 3,314 | $ | 1,830 | ||||||||
| Amortization: | ||||||||||||||||
| Black Diamond | $ | 272 | $ | 273 | $ | 822 | $ | 808 | ||||||||
| Sierra | 693 | 375 | 2,080 | 375 | ||||||||||||
| Total amortization | $ | 965 | $ | 648 | $ | 2,902 | $ | 1,183 | ||||||||
| 19 |
CLARUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
(in thousands, except per share amounts)
NOTE 15. RELATED PARTY TRANSACTIONS
5% Unsecured Subordinated Notes due May 28, 2017
As part of the consideration payable to the stockholders of a formerly acquired entity, the Company issued 5% Unsecured Subordinated Notes due May 28, 2017 (the “Merger Consideration Subordinated Notes”) to members of the Board of Directors and five former employees. Given the below market interest rate for comparably secured notes and the relative illiquidity of the Merger Consideration Subordinated Notes, we discounted the notes at the date of acquisition. We were accreting the discount on the Merger Consideration Subordinated Notes to interest expense using the effective interest method over the term of the Merger Consideration Subordinated Notes. In February 2017, the Board of Directors approved the repayment of the Merger Consideration Subordinated Notes. On February 13, 2017, the entire principal amounts and all accrued interest amounts were paid in full, at which time, the note discount of $814 was expensed and recognized as interest expense during the three months ended March 31, 2017.
| 20 |
CLARUS CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS
(in thousands, except per share amounts)
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
Please note that in this Quarterly Report on Form 10-Q Clarus Corporation (which may be referred to as the “Company,” “Clarus,” “we,” “our” or “us”) may use words such as “appears,” “anticipates,” “believes,” “plans,” “expects,” “intends,” “future” and similar expressions which constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting the Company and therefore involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements.
Potential risks and uncertainties that could cause the actual results of operations or financial condition of the Company to differ materially from those expressed or implied by forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, the overall level of consumer demand on our products; general economic conditions and other factors affecting consumer confidence, preferences, and behavior; disruption and volatility in the global currency, capital and credit markets; the financial strength of the Company’s customers; the Company’s ability to implement its business strategy; the ability of the Company to execute and integrate acquisitions; changes in governmental regulation, legislation or public opinion relating to the manufacture and sale of bullets by our Sierra segment, and the possession and use of firearms and ammunition by our customers; the Company’s exposure to product liability or product warranty claims and other loss contingencies; stability of the Company’s manufacturing facilities and suppliers; the Company’s ability to protect patents, trademarks and other intellectual property rights; any breaches of, or interruptions in, our information systems; fluctuations in the price, availability and quality of raw materials and contracted products as well as foreign currency fluctuations; our ability to utilize our net operating loss carryforwards; changes in tax laws and liabilities, tariffs, legal, regulatory, political and economic risks; and the company’s ability to declare a dividend. More information on potential factors that could affect the Company’s financial results is included from time to time in the Company’s public reports filed with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. All forward-looking statements included in this Quarterly Report on Form 10-Q are based upon information available to the Company as of the date of this Quarterly Report on Form 10-Q, and speak only as of the date hereof. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.
Overview
Headquartered in Salt Lake City, Utah, Clarus, a company focused on the outdoor and consumer industries, is seeking opportunities to acquire and grow businesses that can generate attractive shareholder returns. The Company has substantial net operating tax loss carryforwards that it is seeking to redeploy to maximize shareholder value in outdoor and consumer businesses. Clarus’ primary business is as a leading developer, manufacturer and distributor of outdoor equipment and lifestyle products focused on the climb, ski, mountain, and sport categories. The Company’s products are principally sold under the Black Diamond®, Sierra® and PIEPS® brand names through specialty and online retailers, distributors and original equipment manufacturers throughout the U.S. and internationally.
Through our Black Diamond and PIEPS brands, we offer a broad range of products including: high performance apparel (such as jackets, shells, pants and bibs); rock-climbing equipment (such as carabiners, protection devices, harnesses, belay devices, helmets, and ice-climbing gear); technical backpacks and high-end day packs; tents; trekking poles; headlamps and lanterns; and gloves and mittens. We also offer advanced skis, ski poles, ski skins, and snow safety products, including avalanche airbag systems, avalanche transceivers, shovels, and probes. Through our Sierra brand, we manufacture a wide range of high performance bullets for both rifles and pistols that are used for precision target shooting, hunting and military and law enforcement purposes.
Clarus Corporation, incorporated in Delaware in 1991, acquired Black Diamond Equipment, Ltd. (which may be referred to as “Black Diamond Equipment”) and Gregory Mountain Products, LLC (which may be referred to as “Gregory Mountain Products” or “Gregory”) in May 2010 and changed its name to Black Diamond, Inc., in January 2011. In July 2012, we acquired POC Sweden AB and its subsidiaries (collectively, “POC”) and in October 2012, we acquired PIEPS Holding GmbH and its subsidiaries (collectively, “PIEPS”).
On July 23, 2014, the Company completed the sale of certain assets to Samsonite LLC comprising Gregory Mountain Product’s business. On October 7, 2015, the Company sold its equity interests in POC.
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CLARUS CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS
(in thousands, except per share amounts)
On August 14, 2017, the Company changed its name from Black Diamond, Inc. to Clarus Corporation and its stock ticker symbol from “BDE” to “CLAR” on the NASDAQ stock exchange. On August 21, 2017, the Company acquired Sierra Bullets, L.L.C. (“Sierra”).
On May 7, 2018, the Company announced a “modified Dutch auction” tender offer for Clarus’ common stock, as well as the preferred share purchase rights associated with such shares (collectively, the “Shares”). On July 11, 2018, the tender offer expired, following which the Company announced it would accept 417,237 Shares for purchase at a price of $8.00 per Share, for an aggregate cost of approximately $3,338, excluding fees and expenses.
On August 6, 2018, the Company announced that its Board of Directors approved the initiation of a quarterly cash dividend program of $0.025 per share of the Company’s common stock (the “Quarterly Cash Dividend”) or $0.10 per share on an annualized basis. The declaration and payment of future Quarterly Cash Dividends is subject to the discretion of and approval of the Company’s Board of Directors. On October 26, 2018, the Company announced that its Board of Directors approved the payment on November 16, 2018 of the Quarterly Cash Dividend to the record holders of shares of the Company’s common stock as of the close of business on November 2, 2018.
Critical Accounting Policies and Use of Estimates
Management’s discussion of our financial condition and results of operations is based on the condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of the condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed consolidated financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting periods. We continually evaluate our estimates and assumptions including those related to derivatives, revenue recognition, income taxes and valuation of long-lived assets and other intangible assets. We base our estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.
See “Significant Accounting Policies” in Note 1 to the notes to the unaudited condensed consolidated financial statements for discussion related to changes to our critical accounting policies including revenue recognition from the adoption of Accounting Standards Codification Topic 606. There have been no other significant changes to our critical accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2017.
Accounting Pronouncements Issued Not Yet Adopted
See “Accounting Pronouncements Not Yet Adopted” in Note 1 to the notes to the unaudited condensed consolidated financial statements.
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CLARUS CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS
(in thousands, except per share amounts)
Results of Operations
Condensed Consolidated Three Months Ended September 30, 2018 Compared to Condensed Consolidated Three Months Ended September 30, 2017
The following presents a discussion of condensed consolidated operations for the three months ended September 30, 2018, compared with the condensed consolidated three months ended September 30, 2017.
| Three Months Ended | ||||||||
| September 30, 2018 | September 30, 2017 | |||||||
| Sales | ||||||||
| Domestic sales | $ | 26,168 | $ | 21,141 | ||||
| International sales | 29,518 | 24,633 | ||||||
| Total sales | 55,686 | 45,774 | ||||||
| Cost of goods sold | 35,829 | 30,490 | ||||||
| Gross profit | 19,857 | 15,284 | ||||||
| Operating expenses | ||||||||
| Selling, general and administrative | 15,773 | 14,431 | ||||||
| Restructuring charge | 22 | 33 | ||||||
| Transaction costs | 50 | 1,869 | ||||||
| Total operating expenses | 15,845 | 16,333 | ||||||
| Operating income (loss) | 4,012 | (1,049 | ) | |||||
| Other (expense) income | ||||||||
| Interest expense, net | (303 | ) | (71 | ) | ||||
| Other, net | 102 | 213 | ||||||
| Total other (expense) income, net | (201 | ) | 142 | |||||
| Income (loss) before income tax | 3,811 | (907 | ) | |||||
| Income tax (benefit) expense | (316 | ) | 676 | |||||
| Net income (loss) | $ | 4,127 | $ | (1,583 | ) | |||
Sales
Consolidated sales increased $9,912, or 21.7%, to $55,686 during the three months ended September 30, 2018, compared to consolidated sales of $45,774 during the three months ended September 30, 2017. The increase in sales was partially attributable to the inclusion of Sierra, which contributed $8,436 in total sales and $4,904 in incremental sales during the three months ended September 30, 2018. The remaining increase was attributable to the increase in the quantity of new and existing climb and mountain products sold during the period and an increase in sales of $257 due to the strengthening of foreign currencies against the U.S. dollar during the three months ended September 30, 2018 compared to the prior period. These increases were partially offset by a decrease in the quantity of new and existing ski products sold during the period.
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CLARUS CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS
(in thousands, except per share amounts)
Consolidated domestic sales increased $5,027, or 23.8%, to $26,168 during the three months ended September 30, 2018, compared to consolidated domestic sales of $21,141 during the three months ended September 30, 2017. The increase in sales was attributable to the inclusion of Sierra, which contributed $6,328 in total sales and $4,027 in incremental sales during the three months ended September 30, 2018. The remaining increase was attributable to the increase in the quantity of new and existing climb and mountain products sold during the three months ended September 30, 2018. These increases were partially offset by a decrease in the quantity of new and existing ski products sold during the period.
Consolidated international sales increased $4,885, or 19.8%, to $29,518 during the three months ended September 30, 2018, compared to consolidated international sales of $24,633 during the three months ended September 30, 2017. The increase in sales was partially attributable to the inclusion of Sierra, which contributed $2,108 in total sales and $877 in incremental sales during the three months ended September 30, 2018. The remaining increase in international sales was attributable to the increase in the quantity of new and existing climb and mountain products sold during the period and an increase in sales of $257 due to the strengthening of foreign currencies against the U.S. dollar during the three months ended September 30, 2018 compared to the prior period. These increases were partially offset by a decrease in the quantity of new and existing ski products sold during the period.
Cost of Goods Sold
Consolidated cost of goods sold increased $5,339, or 17.5%, to $35,829 during the three months ended September 30, 2018, compared to consolidated cost of goods sold of $30,490 during the three months ended September 30, 2017. The increase in cost of goods sold was partially attributable to the inclusion of Sierra, which contributed $2,775 in incremental cost of goods sold. The remaining increase was attributable to an increase in the number of units sold.
Gross Profit
Consolidated gross profit increased $4,573 or 29.9%, to $19,857 during the three months ended September 30, 2018, compared to consolidated gross profit of $15,284 during the three months ended September 30, 2017. Consolidated gross margin was 35.7% during the three months ended September 30, 2018, compared to a consolidated gross margin of 33.4% during the three months ended September 30, 2017. Consolidated gross margin during the three months ended September 30, 2018, increased compared to the prior year due to a favorable product mix in higher margin products and channel distribution. Gross margin also benefited from the inclusion of Sierra. Consolidated gross margin during the three months ended September 30, 2017 was also negatively impacted by 0.9% due to the sale of inventory that was recorded at its preliminary fair value in purchase accounting.
Selling, General and Administrative
Consolidated selling, general, and administrative expenses increased $1,342, or 9.3%, to $15,773 during the three months ended September 30, 2018, compared to consolidated selling, general and administrative expenses of $14,431 during the three months ended September 30, 2017. The increase in selling, general and administrative expenses was partially attributable to the inclusion of Sierra of $1,013 in incremental selling, general, and administrative expenses. The remaining increase was attributable to the Company’s investment in the brand related activities of sales, fulfillment, and research and development in supporting its strategic initiatives around new product introduction and increasing brand equity. Stock compensation also increased $525 during the three months ended September 30, 2018 compared to the prior year.
Restructuring Charges
Consolidated restructuring expense decreased $11, or 33.3%, to $22 during the three months ended September 30, 2018, compared to consolidated restructuring expense of $33 during the three months ended September 30, 2017. Restructuring expenses incurred during the three months ended September 30, 2018, related to costs associated with the formal closure and liquidation of the Company’s Black Diamond Equipment manufacturing operations in Zhuhai, China.
Transaction Costs
Consolidated transaction expense decreased to $50 during the three months ended September 30, 2018, compared to consolidated transaction costs of $1,869 during the three months ended September 30, 2017, which consisted of expenses related to the Company’s acquisition of Sierra.
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CLARUS CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS
(in thousands, except per share amounts)
Interest Expense, net
Consolidated interest expense, net increased $232, or 326.8%, to expense of $303 during the three months ended September 30, 2018, compared to consolidated interest expense, net, of $71 during the three months ended September 30, 2017. The increase in interest expense was primarily attributable to higher average outstanding debt amounts during the three months ended September 30, 2018 compared to the same period in 2017.
Other, net
Consolidated other, net, decreased $111, or 52.1%, to income of $102 during the three months ended September 30, 2018, compared to consolidated other, net income of $213 during the three months ended September 30, 2017. The decrease in other, net, was primarily attributable to a decrease in remeasurement gains recognized on the Company’s foreign denominated accounts receivable and accounts payable and losses related to recognition of cumulative translation adjustments due to the substantial liquidation of a foreign entity. This decrease was partially offset by gains on mark-to-market adjustments on non-hedged foreign currency contracts.
Income Taxes
Consolidated income tax (benefit) expense increased $992, or 146.7%, to a benefit of $316 during the three months ended September 30, 2018, compared to a consolidated income tax expense of $676 during the same period in 2017. The tax benefit recorded during the three months ended September 30, 2018 includes discrete benefits associated with a disproportionate tax effect released from accumulated other comprehensive income of $11 and $434 associated with a tax windfall deduction from the vesting of restricted stock units and exercises of stock options. The tax expense recorded during the three months ended September 30, 2017 includes discrete charges associated with a disproportionate tax effect released from accumulated other comprehensive loss of $109.
Our effective income tax rate was 8.3% for the three months ended September 30, 2018, compared to 74.5% for the same period in 2017. The primary reasons for the effective income tax rate changes are due to differing levels of income (loss) before income tax and discrete charges recorded during the respective periods. Factors that could cause our annual effective tax rate to differ materially from our quarterly effective tax rates include changes in the geographic mix of taxable income and discrete events that may occur.
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CLARUS CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS
(in thousands, except per share amounts)
Results of Operations
Condensed Consolidated Nine Months Ended September 30, 2018 Compared to Condensed Consolidated Nine Months Ended September 30, 2017
The following presents a discussion of condensed consolidated operations for the nine months ended September 30, 2018, compared with the condensed consolidated nine months ended September 30, 2017.
| Nine Months Ended | ||||||||
| September 30, 2018 | September 30, 2017 | |||||||
| Sales | ||||||||
| Domestic sales | $ | 79,667 | $ | 59,474 | ||||
| International sales | 75,167 | 58,536 | ||||||
| Total sales | 154,834 | 118,010 | ||||||
| Cost of goods sold | 101,290 | 81,388 | ||||||
| Gross profit | 53,544 | 36,622 | ||||||
| Operating expenses | ||||||||
| Selling, general and administrative | 48,692 | 39,826 | ||||||
| Restructuring charge | 86 | 116 | ||||||
| Transaction costs | 383 | 1,869 | ||||||
| Total operating expenses | 49,161 | 41,811 | ||||||
| Operating income (loss) | 4,383 | (5,189 | ) | |||||
| Other (expense) income | ||||||||
| Interest expense, net | (1,020 | ) | (948 | ) | ||||
| Other, net | 31 | 435 | ||||||
| Total other expense, net | (989 | ) | (513 | ) | ||||
| Income (loss) before income tax | 3,394 | (5,702 | ) | |||||
| Income tax (benefit) expense | (359 | ) | 990 | |||||
| Net income (loss) | $ | 3,753 | $ | (6,692 | ) | |||
Sales
Consolidated sales increased $36,824, or 31.2%, to $154,834 during the nine months ended September 30, 2018, compared to consolidated sales of $118,010 during the nine months ended September 30, 2017. The increase in sales was partially attributable to the inclusion of Sierra, which contributed $27,604 in total sales and $24,072 in incremental sales during the nine months ended September 30, 2018. The remaining increase was attributable to the increase in the quantity of new and existing climb and mountain products sold during the period and an increase in sales of $2,678 due to the strengthening of foreign currencies against the U.S. dollar during the nine months ended September 30, 2018 compared to the prior period. These increases were partially offset by a decrease in the quantity of new and existing ski products sold during the period.
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CLARUS CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS
(in thousands, except per share amounts)
Consolidated domestic sales increased $20,193, or 34.0%, to $79,667 during the nine months ended September 30, 2018, compared to consolidated domestic sales of $59,474 during the nine months ended September 30, 2017. The increase in sales was attributable to the inclusion of Sierra, which contributed $20,233 in total sales and $17,932 in incremental sales during the nine months ended September 30, 2018. The remaining increase was attributable to the increase in the quantity of new and existing climb and mountain products sold during the nine months ended September 30, 2018. These increases were partially offset by a decrease in the quantity of new and existing ski products sold during the period.
Consolidated international sales increased $16,631, or 28.4%, to $75,167 during the nine months ended September 30, 2018, compared to consolidated international sales of $58,536 during the nine months ended September 30, 2017. The increase in sales was partially attributable to the inclusion of Sierra, which contributed $7,371 in total sales and $6,140 in incremental sales during the nine months ended September 30, 2018. The remaining increase in international sales was attributable to the increase in the quantity of new and existing climb and mountain products sold during the period and an increase in sales of $2,678 due to the strengthening of foreign currencies against the U.S. dollar during the nine months ended September 30, 2018 compared to the prior period. These increases were partially offset by a decrease in the quantity of new and existing ski products sold during the period.
Cost of Goods Sold
Consolidated cost of goods sold increased $19,902, or 24.5%, to $101,290 during the nine months ended September 30, 2018, compared to consolidated cost of goods sold of $81,388 during the nine months ended September 30, 2017. The increase in cost of goods sold was partially attributable to the inclusion of Sierra, which contributed $15,316 in incremental cost of goods sold, which included $1,049 related to the sale of inventory that was recorded at fair value in purchase accounting. The remaining increase was attributable to an increase in the number of units sold and the mix of higher cost products sold.
Gross Profit
Consolidated gross profit increased $16,922 or 46.2%, to $53,544 during the nine months ended September 30, 2018, compared to consolidated gross profit of $36,622 during the nine months ended September 30, 2017. Consolidated gross margin was 34.6% during the nine months ended September 30, 2018, compared to a consolidated gross margin of 31.0% during the nine months ended September 30, 2017. Consolidated gross margin during the nine months ended September 30, 2018, increased compared to the prior year due to a favorable product mix in higher margin products and channel distribution. Gross margin also benefited from the inclusion of Sierra; however, this benefit was partially offset by a decrease in gross margin of 0.7% due to the sale of inventory that was recorded at its fair value in purchase accounting. Consolidated gross margin during the nine months ended September 30, 2017 was also negatively impacted by 0.4% due to the sale of inventory that was recorded at its preliminary fair value in purchase accounting.
Selling, General and Administrative
Consolidated selling, general, and administrative expenses increased $8,866, or 22.3%, to $48,692 during the nine months ended September 30, 2018, compared to consolidated selling, general and administrative expenses of $39,826 during the nine months ended September 30, 2017. The increase in selling, general and administrative expenses was partially attributable to the inclusion of Sierra of $4,469 in incremental selling, general, and administrative expenses. The remaining increase being attributable to the Company’s investment in the brand related activities of sales, marketing, research and development, and fulfillment in supporting its strategic initiatives around new product introduction and increasing brand equity. Stock compensation also increased $1,338 during the nine months ended September 30, 2018 compared to the prior year.
Restructuring Charges
Consolidated restructuring expense decreased $30, or 25.9%, to $86 during the nine months ended September 30, 2018, compared to consolidated restructuring expense of $116 during the nine months ended September 30, 2017. Restructuring expenses incurred during the nine months ended September 30, 2018, related to costs associated with the formal closure and liquidation of the Company’s Black Diamond Equipment manufacturing operations in Zhuhai, China.
Transaction Costs
Consolidated transaction expense decreased to $383 during the nine months ended September 30, 2018, compared to consolidated transaction costs of $1,869 during the nine months ended September 30, 2017, which consisted of expenses related to the Company’s acquisition of Sierra.
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CLARUS CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS
(in thousands, except per share amounts)
Interest Expense, net
Consolidated interest expense, net increased $72, or 7.6%, to $1,020 during the nine months ended September 30, 2018, compared to consolidated interest expense, net, of $948 during the nine months ended September 30, 2017. Interest expense recognized during the nine months ended September 30, 2018 was primarily attributable to the write-off of previously capitalized origination costs associated with the Terminated Credit Agreement, which was replaced with the new Credit Agreement with JPMorgan Chase Bank, N.A., and interest expense associated with the average outstanding debt amounts during the nine months ended September 30, 2018. Interest expense recognized during the nine months ended September 30, 2017 was primarily attributable to the Company’s 5% Senior Subordinated Notes which were repaid during the nine months ended September 30, 2017.
Other, net
Consolidated other, net, decreased $404, or 92.9%, to income of $31 during the nine months ended September 30, 2018, compared to consolidated other, net income of $435 during the nine months ended September 30, 2017. The decrease in other, net, was primarily attributable to a decrease in remeasurement gains recognized on the Company’s foreign denominated accounts receivable and accounts payable and losses related to recognition of cumulative translation adjustments due to the substantial liquidation of a foreign entity. This decrease was partially offset by gains on mark-to-market adjustments on non-hedged foreign currency contracts.
Income Taxes
Consolidated income tax (benefit) expense increased $1,349, or 136.3%, to a benefit of $359 during the nine months ended September 30, 2018, compared to a consolidated income tax expense of $990 during the same period in 2017. The tax benefit recorded during the nine months ended September 30, 2018 includes discrete benefits associated with a disproportionate tax effect released from accumulated other comprehensive income of $63 and $434 associated with a tax windfall deduction from the vesting of restricted stock units and exercises of stock options. The tax expense recorded during the nine months ended September 30, 2017 includes discrete charges associated with a disproportionate tax effect released from accumulated other comprehensive loss of $344.
Our effective income tax rate was 10.6% for the nine months ended September 30, 2018, compared to 17.4% for the same period in 2017. The primary reasons for the effective income tax rate changes are due to differing levels of income (loss) before income tax and discrete charges recorded during the respective periods. Factors that could cause our annual effective tax rate to differ materially from our quarterly effective tax rates include changes in the geographic mix of taxable income and discrete events that may occur.
Liquidity and Capital Resources
Condensed Consolidated Nine Months Ended September 30, 2018 Compared to Condensed Consolidated Nine Months Ended September 30, 2017
The following presents a discussion of cash flows for the condensed consolidated nine months ended September 30, 2018 compared with the condensed consolidated nine months ended September 30, 2017. Our primary ongoing funding requirements are for working capital, expansion of our operations (both organically and through acquisitions) and general corporate needs, as well as investing activities associated with the expansion into new product categories. We plan to fund these activities through a combination of our future operating cash flows and revolving credit facility. We believe that our liquidity requirements for at least the next 12 months will be adequately covered by cash provided by operations and our existing revolving credit facility. At September 30, 2018, we had total cash of $3,005, compared to a cash balance of $1,856 at December 31, 2017, which was substantially controlled by the Company’s U.S. entities. At September 30, 2018, the Company had $1,038 of the $3,005 in cash held by foreign entities, of which $203 is considered permanently reinvested.
| Nine Months Ended | ||||||||
| September 30, 2018 | September 30, 2017 | |||||||
| Net cash provided by (used in) operating activities | $ | 7,612 | $ | (16,578 | ) | |||
| Net cash used in investing activities | (2,194 | ) | (81,104 | ) | ||||
| Net cash (used in) provided by financing activities | (4,285 | ) | 4,491 | |||||
| Effect of foreign exchange rates on cash | 16 | 125 | ||||||
| Change in cash | 1,149 | (93,066 | ) | |||||
| Cash, beginning of period | 1,856 | 94,738 | ||||||
| Cash, end of period | $ | 3,005 | $ | 1,672 | ||||
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CLARUS CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS
(in thousands, except per share amounts)
Net Cash From Operating Activities
Consolidated net cash provided by operating activities was $7,612 during the nine months ended September 30, 2018, compared to consolidated net cash used in operating activities of $16,578 during the nine months ended September 30, 2017. The increase in net cash provided by operating activities during 2018 is primarily due to a decrease in net operating assets, net of assets acquired or non-cash working capital of $10,065 and an increase to net income during the nine months ended September 30, 2018, compared to the same period in 2017.
Free cash flow, defined as net cash provided by operating activities less capital expenditures, was free cash flows generated of $5,758 during the nine months ended September 30, 2018 compared to free cash flows used of $18,497 during the same period in 2017. The Company believes that the non-GAAP measure, free cash flow, provides an understanding of the capital required by the Company to expand its asset base. A reconciliation of free cash flows to comparable GAAP financial measures is set forth below:
| Nine Months Ended | ||||||||
| September 30, 2018 | September 30, 2017 | |||||||
| Net cash provided by (used in) operating activities | $ | 7,612 | $ | (16,578 | ) | |||
| Purchase of property and equipment | (1,854 | ) | (1,919 | ) | ||||
| Free cash flow | $ | 5,758 | $ | (18,497 | ) | |||
Net Cash From Investing Activities
Consolidated net cash used in investing activities was $2,194 during the nine months ended September 30, 2018, compared to consolidated net cash used in investing activities of $81,104 during the nine months ended September 30, 2017. The decrease in cash used during the nine months ended September 30, 2018 is primarily due to the $79,238 used for the purchase of Sierra, net of cash acquired during the nine months ended September 30, 2017.
Net Cash From Financing Activities
Consolidated net cash used in financing activities was $4,285 during the nine months ended September 30, 2018, compared to consolidated cash provided by financing activities of $4,491 during the nine months ended September 30, 2017. The cash used during the nine months ended September 30, 2018 relates primarily to the purchase of treasury stock and payment of debt issuance costs. The cash provided during the nine months ended September 30, 2017 relates to net proceeds from the revolving line of credit partially offset by repayments of debt.
Net Operating Loss
As of December 31, 2017, the Company had net operating loss, research and experimentation credit and alternative minimum tax credit carryforwards for U.S. federal income tax purposes of $156,598, $3,452 and $0, respectively. The Company believes its U.S. federal net operating loss (“NOL”) will substantially offset its future U.S. federal income taxes. The majority of the Company’s pre-tax income is currently earned and expected to be earned in the U.S., or taxed in the U.S. as Subpart F income and will be offset with the NOL. $156,598 of NOLs available to offset taxable income does not expire until 2021 or later, subject to compliance with Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”).
As of December 31, 2017, the Company’s gross deferred tax asset was $50,732. The Company has recorded a valuation allowance of $45,811, resulting in a net deferred tax asset of $4,921, before deferred tax liabilities of $8,587. The Company has provided a valuation allowance against a portion of the net deferred tax assets as of December 31, 2017, because the ultimate realization of those assets does not meet the more likely than not criteria. The majority of the Company’s deferred tax assets consist of net operating loss carryforwards for federal tax purposes. If a change in control were to occur, these could be limited under Section 382 of the Code.
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CLARUS CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS
(in thousands, except per share amounts)
Revolving Credit Facility
On June 27, 2018, the Company, Black Diamond Equipment, Ltd., Black Diamond Retail, Inc., Sierra Bullets, L.L.C. (collectively with the Company, the “Borrowers”) and the other loan parties party thereto (together with the Borrowers, the “Loan Parties”) entered into an asset based revolving Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto. Each of the Loan Parties, other than the Company, is a direct or indirect subsidiary of the Company.
The Credit Agreement provides for a revolving commitment of $75,000 (including up to $5,000 for letters of credit) and matures on June 27, 2022. The Credit Agreement also permits the Borrowers, subject to certain requirements, to arrange with lenders for up to $75,000 of additional revolving commitments (which are currently uncommitted), for a potential aggregate revolving commitment of up to $150,000. The amount of the revolving commitment available for borrowing at any given time is subject to a borrowing base formula that is based upon the Company’s accounts receivable, inventory and intellectual property.
The obligations of each Loan Party under the Credit Agreement are unconditionally guaranteed by each other Loan Party. All obligations under the Credit Agreement, and the guarantees of those obligations (as well as banking services obligations and certain swap agreements), are secured by the accounts receivable, inventory, intellectual property and certain other assets of the Loan Parties pursuant to the Pledge and Security Agreement, dated June 27, 2018, by and among the Loan Parties and JPMorgan Chase Bank, N.A., as administrative agent.
The Borrowers may elect to have the revolving loans under the Credit Agreement bear interest at either (a) in the case of “CBFR” borrowings, a rate generally equal to the London Interbank Offered Rate (“LIBOR”) for an interest period of one month, subject to a 0.00% floor, or (b) in the case of “Eurodollar” borrowings, a rate generally equal to an adjusted LIBOR for the interest period relevant to such borrowing, subject to a 0.00% floor, plus, in each such case, an applicable rate generally ranging from 1.50% to 2.20% per annum. The applicable rate was initially 1.50% per annum, however, it may be adjusted from time to time primarily based upon the achievement of a specified fixed charge coverage ratio, and also based upon the type of assets that generate availability under the borrowing base formula. The Credit Agreement also requires the Borrowers to pay a commitment fee on the unused portion of the revolving commitment. Such commitment fee will range between 0.25% and 0.375% per annum, based upon the average percentage of the revolving commitment that is used in each month of the fiscal year.
The Credit Agreement contains customary affirmative and negative covenants, including limitations on the ability of the Company and its subsidiaries to perform the following, subject to certain customary exceptions, qualifications and “baskets”: (i) incur additional debt; (ii) create liens; (iii) engage in mergers, consolidations, liquidations or dissolutions other than in certain permitted instances as described in the Credit Agreement; (iv) substantially change the business conducted by the Company and its subsidiaries (v) make certain investments, loans, advances, guarantees and acquisitions other than in certain permitted instances as described in the Credit Agreement; (vi) sell assets; (vii) pay dividends or make distributions or other restricted payments if certain conditions in the Credit Agreement are not fulfilled; (viii) prepay other indebtedness; (ix) engage in certain transactions with affiliates; (x) enter into agreements that restrict dividends from subsidiaries or the ability of subsidiaries to grant liens upon their assets; (xi) amend certain charter documents and material agreements governing subordinated indebtedness; and (xii) sell, assign, transfer, encumber or license certain intellectual property without the prior written consent of the administrative agent. As of September 30, 2018, the Company had drawn $22,601 on the approximately $49,000 of the revolving commitment that was available for borrowing.
5% Senior Subordinated Notes due May 28, 2017
As part of the consideration payable to the stockholders of a formerly acquired entity, the Company issued 5% Unsecured Subordinated Notes due May 28, 2017 (the “Merger Consideration Subordinated Notes”) to members of the Board of Directors and five former employees. Given the below market interest rate for comparably secured notes and the relative illiquidity of the Merger Consideration Subordinated Notes, we discounted the notes at the date of acquisition. We were accreting the discount on the Merger Consideration Subordinated Notes to interest expense using the effective interest method over the term of the Merger Consideration Subordinated Notes. In February 2017, the Board of Directors approved the repayment of the Merger Consideration Subordinated Notes. On February 13, 2017, the entire principal amounts and all accrued interest amounts were paid in full, at which time, the note discount of $814 was expensed and recognized as interest expense during the three months ended March 31, 2017.
Off-Balance Sheet Arrangements
We do not engage in any transactions or have relationships or other arrangements with unconsolidated entities. These include special purpose and similar entities or other off-balance sheet arrangements. We also do not engage in energy, weather or other commodity-based contracts.
| 30 |
CLARUS CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS
(in thousands, except per share amounts)
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has not been any material change in the market risk disclosure contained in our Annual Report on Form 10-K for the year ended December 31, 2017.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s management carried out an evaluation, under the supervision and with the participation of the Company’s Executive Chairman and Chief Administrative Officer/Chief Financial Officer, its principal executive officer and principal financial officer, respectively, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of September 30, 2018, pursuant to Exchange Act Rule 13a-15. Such disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company is accumulated and communicated to the appropriate management on a basis that permits timely decisions regarding disclosure. Based upon that evaluation, the Company’s Executive Chairman and Chief Administrative Officer/Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of September 30, 2018, were effective.
Changes in Internal Control over Financial Reporting
On August 21, 2017, the Company acquired Sierra. The Company has been reviewing and evaluating Sierra’s internal controls in accordance with applicable rules, and during the quarter ended September 30, 2018, the Company integrated Sierra’s financial activity into the Company’s existing internal control structure.
Effective January 1, 2018, we adopted Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC Topic 606”). Although the adoption of ASC Topic 606 had an immaterial impact on our financial statements, we implemented certain changes to our related revenue recognition control activities, including the development of new policies and periodic reviews of revenue transactions, based on the five-step model provided in the new revenue standard. There were no other changes in our internal control over financial reporting that occurred during the nine months ended September 30, 2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 31 |
CLARUS CORPORATOIN
Legal Proceedings
The Company is involved in various legal disputes and other legal proceedings that arise from time to time in the ordinary course of business. Based on currently available information, the Company does not believe that the disposition of any of the legal disputes the Company or its subsidiaries is currently involved in will have a material adverse effect upon the Company’s consolidated financial condition, results of operations or cash flows. It is possible that, as additional information becomes available, the impact on the Company of an adverse determination could have a different effect.
Litigation
The Company is involved in various lawsuits arising from time to time that the Company considers ordinary routine litigation incidental to its business. Amounts accrued for litigation matters represent the anticipated costs (damages and/or settlement amounts) in connection with pending litigation and claims and related anticipated legal fees for defending such actions, which legal fees are expensed as incurred. The costs are accrued when it is both probable that a liability has been incurred and the amount can be reasonably estimated. The accruals are based upon the Company’s assessment, after consultation with counsel (if deemed appropriate), of probable loss based on the facts and circumstances of each case, the legal issues involved, the nature of the claim made, the nature of the damages sought and any relevant information about the plaintiffs and other significant factors that vary by case. When it is not possible to estimate a specific expected cost to be incurred, the Company evaluates the range of probable loss and records the minimum end of the range. Based on currently available information, the Company does not believe that it is reasonably possible that the disposition of any of the legal disputes the Company or its subsidiaries is currently involved in will have a material adverse effect upon the Company’s consolidated financial condition, results of operations or cash flows. There is a reasonable possibility of loss from contingencies in excess of the amounts accrued by the Company in the accompanying condensed consolidated balance sheets; however, the actual amounts of such possible losses cannot currently be reasonably estimated by the Company at this time. It is possible that, as additional information becomes available, the impact on the Company could have a different effect.
Product Liability
As a consumer goods manufacturer and distributor, the Company faces the risk of product liability and related lawsuits involving claims for substantial money damages, product recall actions and higher than anticipated rates of warranty returns or other returns of goods. The Company is therefore vulnerable to various personal injury and property damage lawsuits relating to its products and incidental to its business.
Based on current information, there are no pending product liability claims and lawsuits of the Company, which the Company believes in the aggregate, will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.
There have been no material changes in our risk factors from those disclosed in Part I, Item 1A. of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and Part II, Item 1A. of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
The Company did not sell any securities during the quarter ended September 30, 2018 that were not registered under the Securities Act of 1933, as amended.
| 32 |
CLARUS CORPORATOIN
Issuer Repurchases of Equity Securities
On November 9, 2015, the Company announced that its Board of Directors authorized a stock repurchase program that allows the repurchase of up to $30,000,000 of the Company’s outstanding common stock. During the third quarter of 2018, the Company purchased 417,237 shares of the Company’s common stock for $3,337,896 under the Company’s authorized stock repurchase program.
| Total Number of Shares | Maximum Dollar Value | |||||||||||||||
| Purchased as Part of | of Shares that May Yet | |||||||||||||||
| Total Number of | Average Price Paid | Publicly Announced | Be Purchased Under | |||||||||||||
| Shares Purchased | per Share | Plans or Programs | the Plans or Programs | |||||||||||||
| Period | ||||||||||||||||
| July 1 to 31, 2018 | 417,237 | $ | 8.00 | 417,237 | $ | 14,433,572 | ||||||||||
| August 1 to 31, 2018 | - | $ | - | - | $ | 14,433,572 | ||||||||||
| September 1 to 30, 2018 | - | $ | - | - | $ | 14,433,572 | ||||||||||
| Total | 417,237 | |||||||||||||||
| 33 |
CLARUS CORPORATOIN
| 34 |
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CLARUS CORPORATION | ||
| Date: November 5, 2018 | By: | /s/ Warren B. Kanders |
| Name: Warren B. Kanders | ||
| Title: Executive Chairman | ||
| (Principal Executive Officer) | ||
| By: | /s/ Aaron J. Kuehne | |
| Name: Aaron J. Kuehne | ||
| Title: Chief Administrative Officer and | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) | ||
| (Principal Accounting Officer) |
| 35 |
CLARUS CORPORATOIN
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Warren B. Kanders, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Clarus Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Date: November 5, 2018 | By: | /s/ Warren B. Kanders |
| Name: | Warren B. Kanders | |
| Title: | Executive Chairman | |
| (Principal Executive Officer) |
CLARUS CORPORATOIN
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Aaron J. Kuehne, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Clarus Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Date: November 5, 2018 | By: | /s/ Aaron J. Kuehne |
| Name: | Aaron J. Kuehne | |
| Title: | Chief Administrative Officer and | |
|
Chief Financial Officer (Principal Financial Officer) |
CLARUS CORPORATOIN
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Clarus Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Warren B. Kanders, Executive Chairman, certify to my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: November 5, 2018 | By: | /s/ Warren B. Kanders |
| Name: | Warren B. Kanders | |
| Title: | Executive Chairman | |
| (Principal Executive Officer) |
CLARUS CORPORATOIN
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Clarus Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Aaron Kuehne, Chief Administrative Officer and Chief Financial Officer, certify to my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: November 5, 2018 | By: | /s/ Aaron J. Kuehne |
| Name: | Aaron J. Kuehne | |
| Title: | Chief Administrative Officer and | |
| Chief Financial Officer | ||
|
(Principal Financial Officer)
|
Document And Entity Information - shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2018 |
Oct. 31, 2018 |
|
| Document And Entity Information [Abstract] | ||
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Period End Date | Sep. 30, 2018 | |
| Document Fiscal Period Focus | Q3 | |
| Document Fiscal Year Focus | 2018 | |
| Entity Registrant Name | Clarus Corp | |
| Entity Central Index Key | 0000913277 | |
| Trading Symbol | clar | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Accelerated Filer | |
| Entity Common Stock, Shares Outstanding | 29,850,189 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Consolidated Balance Sheets | ||
| Accounts receivable,allowance for doubtful accounts | $ 495 | $ 382 |
| Preferred stock, par value | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 100,000,000 | 100,000,000 |
| Common stock, shares issued | 33,244,000 | 32,917,000 |
| Common stock, shares outstanding | 29,850,000 | 30,041,000 |
Consolidated Statements Of Comprehensive Income (Loss) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Sales | ||||
| Sales | $ 55,686 | $ 45,774 | $ 154,834 | $ 118,010 |
| Cost of goods sold | 35,829 | 30,490 | 101,290 | 81,388 |
| Gross profit | 19,857 | 15,284 | 53,544 | 36,622 |
| Operating expenses | ||||
| Selling, general and administrative | 15,773 | 14,431 | 48,692 | 39,826 |
| Restructuring charge | 22 | 33 | 86 | 116 |
| Transaction costs | 50 | 1,869 | 383 | 1,869 |
| Total operating expenses | 15,845 | 16,333 | 49,161 | 41,811 |
| Operating income (loss) | 4,012 | (1,049) | 4,383 | (5,189) |
| Other income (expense) | ||||
| Interest income (expense), net | (303) | (71) | (1,020) | (948) |
| Other, net | 102 | 213 | 31 | 435 |
| Total other income (expense), net | (201) | 142 | (989) | (513) |
| Income (loss) before income tax | 3,811 | (907) | 3,394 | (5,702) |
| Income tax (benefit) expense | (316) | 676 | (359) | 990 |
| Net income (loss) | 4,127 | (1,583) | 3,753 | (6,692) |
| Other comprehensive income (loss), net of tax: | ||||
| Foreign currency translation adjustment | (54) | 684 | (546) | 2,305 |
| Unrealized income (loss) on hedging activities | (193) | (419) | 721 | (1,797) |
| Other comprehensive income (loss) | (247) | 265 | 175 | 508 |
| Comprehensive income (loss) | $ 3,880 | $ (1,318) | $ 3,928 | $ (6,184) |
| Net income (loss) per share: | ||||
| Basic | $ 0.14 | $ (0.05) | $ 0.13 | $ (0.22) |
| Diluted | $ 0.14 | $ (0.05) | $ 0.12 | $ (0.22) |
| Weighted average shares outstanding: | ||||
| Basic | 29,739 | 30,017 | 29,939 | 30,015 |
| Diluted | 30,166 | 30,017 | 30,162 | 30,015 |
| Dividends declared per common share | $ 0.03 | $ 0.03 | ||
| Domestic Sales [Member] | ||||
| Sales | ||||
| Sales | $ 26,168 | $ 21,141 | $ 79,667 | $ 59,474 |
| International Sales [Member] | ||||
| Sales | ||||
| Sales | $ 29,518 | $ 24,633 | $ 75,167 | $ 58,536 |
Nature Of Operations And Summary Of Significant Accounting Policies |
9 Months Ended |
|---|---|
Sep. 30, 2018 | |
| Nature Of Operations And Summary Of Significant Accounting Policies [Abstract] | |
| Nature Of Operations And Summary Of Significant Accounting Policies | NOTE 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited condensed consolidated financial statements of Clarus Corporation and subsidiaries (which may be referred to as the “Company,” “Clarus,” “we,” “us” or “our”) as of September 30, 2018 and December 31, 2017 and for the three and nine months ended September 30, 2018 and 2017, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments, except otherwise disclosed) necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. The results of the three and nine months ended September 30, 2018 are not necessarily indicative of the results to be obtained for the year ending December 31, 2018. These interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the Securities and Exchange Commission (the “SEC”). Clarus, incorporated in Delaware in 1991, acquired Black Diamond Equipment, Ltd. (which may be referred to as “Black Diamond Equipment”) and Gregory Mountain Products, LLC (which may be referred to as “Gregory Mountain Products” or “Gregory”) in May 2010 and changed its name to Black Diamond, Inc. in January 2011. In July 2012, we acquired POC Sweden AB and its subsidiaries (collectively, “POC”) and in October 2012, we acquired PIEPS Holding GmbH and its subsidiaries (collectively, “PIEPS”). On July 23, 2014, the Company completed the sale of certain assets to Samsonite LLC comprising Gregory Mountain Products’ business. On October 7, 2015, the Company sold its equity interests in POC. On August 14, 2017, the Company changed its name from Black Diamond, Inc. to Clarus Corporation and its stock ticker symbol from “BDE” to “CLAR” on the NASDAQ stock exchange. On August 21, 2017, the Company acquired Sierra Bullets, L.L.C. (“Sierra”). On May 7, 2018, the Company announced a “modified Dutch auction” tender offer for Clarus’ common stock, as well as the preferred share purchase rights associated with such shares (collectively, the “Shares”). On July 11, 2018, the tender offer expired, following which the Company announced it would accept 417,237 Shares for purchase at a price of $8.00 per Share, for an aggregate cost of approximately $3,338, excluding fees and expenses. On August 6, 2018, the Company announced that its Board of Directors approved the initiation of a quarterly cash dividend program of $0.025 per share of the Company’s common stock (the “Quarterly Cash Dividend”) or $0.10 per share on an annualized basis. The declaration and payment of future Quarterly Cash Dividends is subject to the discretion of and approval of the Company’s Board of Directors. On October 26, 2018, the Company announced that its Board of Directors approved the payment on November 16, 2018 of the Quarterly Cash Dividend to the record holders of shares of the Company’s common stock as of the close of business on November 2, 2018. Nature of Business Headquartered in Salt Lake City, Utah, Clarus, a company focused on the outdoor and consumer industries, is seeking opportunities to acquire and grow businesses that can generate attractive shareholder returns. The Company has substantial net operating tax loss carryforwards that it is seeking to redeploy to maximize shareholder value in outdoor and consumer businesses. Clarus’ primary business is as a leading developer, manufacturer and distributor of outdoor equipment and lifestyle products focused on the climb, ski, mountain, and sport categories. The Company’s products are principally sold under the Black Diamond®, Sierra® and PIEPS® brand names through specialty and online retailers, distributors and original equipment manufacturers throughout the U.S. and internationally. Through our Black Diamond and PIEPS brands, we offer a broad range of products including: high performance apparel (such as jackets, shells, pants and bibs); rock-climbing equipment (such as carabiners, protection devices, harnesses, belay devices, helmets, and ice-climbing gear); technical backpacks and high-end day packs; tents; trekking poles; headlamps and lanterns; and gloves and mittens. We also offer advanced skis, ski poles, ski skins, and snow safety products, including avalanche airbag systems, avalanche transceivers, shovels, and probes. Through our Sierra brand, we manufacture a wide range of high performance bullets for both rifles and pistols that are used for precision target shooting, hunting and military and law enforcement purposes. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The more significant estimates relate to purchase price allocation, excess or obsolete inventory, and valuation of deferred tax assets. We base our estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates. Significant Accounting Policies Revenue Recognition On January 1, 2018, the Company adopted new guidance on revenue from customers using the modified retrospective method applied to revenues that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under the new guidance, while prior period amounts are not adjusted and continue to be reported in accordance with Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition. There was no cumulative effect adjustment recorded to opening retained earnings as of January 1, 2018, upon adoption of ASC Topic 606, Revenue from Contracts with Customers. However, the new revenue standard provides new guidance that resulted in immaterial reclassifications between Prepaid and other current assets, Sales, Cost of goods sold, and Accounts payable and accrued liabilities associated with accounting for revenue with a right of return. The impact of the reclassifications to revenues and expenses for the three and nine months ended September 30, 2018, was also immaterial as a result of applying ASC Topic 606. We do not expect an impact to our net income on an ongoing basis as a result of the adoption of the new standard. 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 complete when products are shipped or delivered to the customer depending on the terms of the contract. Sales are made on normal and customary short- term credit terms or upon delivery of point of sale transactions. The Company enters into contractual arrangement with customers in the form of individual customer orders which specify the goods, quantity, pricing, and associated order terms. The Company does not have long-term contracts that are satisfied over time. Due to the nature of the contracts, no significant judgment exists in relation to the identification of the customer contract, satisfaction of the performance obligation, or transaction price. The Company expenses incremental costs of obtaining a contract due to the short term nature of the contracts. The Company’s contract terms or historical business practices can give rise to variable consideration such as term discounts and customer cooperative payments. We estimate the expected term discounts based on an analysis of historical experience and record cash discounts as a reduction to revenue. Through cooperative advertising programs, the Company reimburses its wholesale customers for some of their costs of advertising the Company’s products. The Company records such costs as a reduction of revenue, where the fair value cannot be reasonably estimated or where costs exceed the fair value of the services. At the time of revenue recognition, we also provide 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 an other current asset, with a corresponding reduction of cost of goods sold. Such balances as of September 30, 2018 and January 1, 2018 are immaterial. The Company also offers assurance-type warranties relating to its products sold to end customers that are accounted for under ASC Topic 460, Guarantees. 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 consolidated statements of comprehensive income (loss). Sales commissions are expensed as incurred. These costs are recorded in Selling, general and administrative. Taxes collected from customers and remitted to government authorities are reported on the net basis and are excluded from sales. The Company has a wide variety of technical outdoor equipment and lifestyle products focused on the climb, ski, mountain, and sport categories that are sold to a variety of customers in multiple end markets. While there are multiple products sold, the nature of products are similar in terms of the nature of the revenue recognition policies. See Note 14 - Segment Information, for disaggregated revenue by segment. Contract liabilities are recorded as a component of accounts payable and accrued liabilities when customers remit contractual cash payments in advance of us satisfying performance obligations which are satisfied at a future point of time. Contract liabilities totaled $125 and $360 at September 30, 2018 and January 1, 2018, respectively. Contract liabilities are derecognized when the performance obligation is satisfied. Revenue recognized from satisfaction of performance obligations relating to the advanced payments during the three and nine months ended September 30, 2018 totaled $56 and $433, respectively. The accounts receivable trade balance related to customers totaled $39,790, less allowance of $495, and $35,940, less allowance of $382, as of September 30, 2018 and January 1, 2018, respectively. Accounting Pronouncements adopted during 2018 In November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This ASU is effective for fiscal years beginning January 1, 2018, and interim periods within those fiscal years. The amendments in this update are required to be applied using a retrospective transition method to each period presented. Accordingly, the Company adopted this ASU on January 1, 2018 and determined that the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which clarifies the treatment of several cash flow categories. In addition, ASU 2016-15 clarifies that when cash receipts and cash payments have aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source or use. This ASU is effective for annual and interim reporting periods beginning after December 15, 2017 with early adoption permitted. Accordingly, the Company adopted this ASU on January 1, 2018 and determined that the adoption of this guidance did not impact the Company’s consolidated financial statements and related disclosures. In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting, which clarifies that an entity should account for the effects of a modification unless the fair value, vesting terms and classification as liability or equity of the modified and original awards do not change on the modification date. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments in this update are applied using a prospective transition method. Accordingly, the Company adopted this ASU on January 1, 2018 and determined that the adoption of this guidance did not impact the Company’s consolidated financial statements and related disclosures. In March 2018, the FASB issued ASU 2018-5 Income Tax (Topic 740) Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 which adds various paragraphs pursuant to the issuance of SEC Staff Accounting Bulletin No. 118 (“SAB 118”). This guidance provides for the application of ASC Topic 740, Income Taxes, in the reporting period in which the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law and establishes a measurement period that should not extend beyond one year from the Tax Act enactment date (December 22, 2017) to obtain the appropriate documentation and complete the accounting under ASC Topic 740 for certain income tax effects of the Tax Act which were incomplete at December 31, 2017. This ASU became effective when issued in March 2018. The Company believes that all material adjustments have been identified and recorded relating to the Tax Act in 2017. Accordingly, the Company believes that adoption of this guidance will not have a material impact on the Company’s consolidated financial statements and related disclosures. Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued ASU 2016-02, Leases, which revises the accounting related to lessor and lessee accounting. In July 2018, the FASB also issued ASU 2018-10 Codification Improvements to Topic 842, Leases and ASU 2018-11 Leases (Topic 842) Targeted Improvements. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset (“ROU”) for all leases with terms greater than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The provisions of ASU 2016-02 are effective for fiscal years beginning after December 15, 2018 and may be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements with certain practical expedients available. An entity may apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Early adoption is permitted. Since the effective date will not be until January 1, 2019, there is no immediate impact on the financial statements. Leases previously defined as capital leases will continue to be defined as a capital lease with no material changes to the accounting methodology. The Company currently maintains two capital leases. The Company is performing an assessment of its leases and has begun preparations for implementation and recognition of a cumulative-effective adjustment to the Janaury 1, 2019 balances on a prospective basis. Under the new guidance, leases previously defined as operating leases will be defined as financing leases and capitalized if the term is greater than one year. As a result, financing leases will be recorded as an asset and a corresponding liability at the present value of the total lease payments. The asset will be decremented over the life of the lease on a pro-rata basis resulting in lease expense while the liability will be decremented using the interest method (i.e. principal and interest). As such, the Company expects the new guidance will materially impact the asset and liability balances of the Company’s consolidated financial statements and related disclosures at the time of adoption. The majority of our current operating leases have been negotiated to expire after the adoption date. Consequently, for the leases with terms that go beyond the adoption date, the amounts we expect to recognize as additional liabilities and corresponding ROU assets based upon the present value of the remaining rental payments should approximate $1,318. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The standard simplifies the accounting for goodwill impairment by requiring a goodwill impairment to be measured using a single step impairment model, whereby the impairment equals the difference between the carrying amount and the fair value of the specified reporting units in their entirety. This eliminates the second step of the current impairment model that requires companies to first estimate the fair value of all assets in a reporting unit and measure impairments based on those fair values and a residual measurement approach. It also specifies that any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. We will adopt this standard no later than the effective date of January 1, 2020 on a prospective basis. The impact of the new standard will be dependent on the specific facts and circumstances of future individual impairments, if any. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This standard enables entities to better portray the economics of their risk management activities in the financial statements and enhances the transparency and understandability of hedge results through improved disclosures. This ASU is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted, and we intend to adopt the new guidance in the first quarter of 2019. The Company is still evaluating the impact of the adoption and implementation of this standard on its consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income which allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. This ASU is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period. We intend to adopt the new guidance in the first quarter of 2019. The Company does not believe the adoption and implementation of this standard will have a significant impact on its consolidation financial statements.
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Acquisition |
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| Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition | NOTE 2. ACQUISITION On August 21, 2017, the Company, through Everest/Sapphire Acquisition, LLC (“Everest/Sapphire”), a Delaware limited liability company and wholly owned subsidiary of Clarus, acquired 100% of the outstanding membership interests of Sierra, a manufacturer of a wide range of bullets primarily for both rifles and pistols, pursuant to the terms of the purchase and sale agreement dated August 21, 2017 (the “Purchase Agreement”), by and among Everest/Sapphire, Sierra, BHH Management, Inc., a California corporation (“BHH”), Lumber Management, Inc., a Delaware corporation (“LMI” and, together with BHH, the “Sellers”), and BHH, in its capacity as the representative of Sellers. Under the terms of the Purchase Agreement, Everest/Sapphire acquired Sierra for an aggregate purchase price of $79,000, plus or minus a working capital adjustment, in accordance with and subject to the terms and conditions set forth in the Purchase Agreement. During the three months ended June 30, 2018, the Company finalized the working capital adjustment and adjusted the recorded purchase consideration and goodwill by $345. Pro Forma Results The following unaudited pro forma results of operations for the three and nine months ended September 30, 2017 give pro forma effect as if the acquisition and borrowings used to finance the acquisition had occurred on January 1, 2016, after giving effect to certain adjustments including the amortization of intangible assets, depreciation of fixed assets, the Sellers’ management fees, interest expense and taxes and assumes the purchase price was allocated to the assets purchased and liabilities assumed based on their fair market values at the date of purchase.
The unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred had the transaction been consummated as of January 1, 2016. Furthermore, such unaudited pro forma information is not necessarily indicative of future operating results of the combined companies, and should not be construed as representative of the operating results of the combined companies for any future dates or periods.
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Inventories |
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| Inventories | NOTE 3. INVENTORIES Inventories, as of September 30, 2018 and December 31, 2017, were as follows:
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Property And Equipment |
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| Property And Equipment | NOTE 4. PROPERTY AND EQUIPMENT Property and equipment, net as of September 30, 2018 and December 31, 2017, were as follows:
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Goodwill And Other Intangible Assets |
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| Goodwill And Other Intangible Assets [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill And Other Intangible Assets | NOTE 5. OTHER INTANGIBLE ASSETS Goodwill The following table summarizes the changes in goodwill by segment:
Indefinite Lived Intangible Assets The Company’s indefinite lived intangible assets consist of certain tradenames and trademarks that provide Black Diamond Equipment, PIEPS and Sierra with the exclusive and perpetual rights to manufacture and sell their respective products. Tradenames and trademarks are not amortized, but reviewed annually for impairment or upon the existence of a triggering event. There was a decrease in tradenames and trademarks during the nine months ended September 30, 2018 due to the impact of foreign currency exchange rates. The following table summarizes the changes in indefinite lived intangible assets:
Other Intangible Assets, net The Company’s other intangible assets, such as certain customer lists and relationships, product technologies, tradenames, trademarks and core technologies, are amortizable over their estimated useful lives. There was a decrease in gross other intangible assets during the nine months ended September 30, 2018 due to the impact of foreign currency exchange rates. The following table summarizes the changes in gross other intangible assets:
Other intangible assets, net of amortization as of September 30, 2018 and December 31, 2017, were as follows:
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Long-Term Debt |
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| Long-Term Debt | NOTE 6. LONG-TERM DEBT Long-term debt as of September 30, 2018 and December 31, 2017, was as follows:
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Derivative Financial Instruments |
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| Derivative Financial Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Financial Instruments | NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS The Company’s primary exchange rate risk management objective is to mitigate the uncertainty of anticipated cash flows attributable to changes in foreign currency exchange rates. The Company primarily focuses on mitigating changes in cash flows resulting from sales denominated in currencies other than the U.S. dollar. The Company manages this risk primarily by using currency forward and option contracts. If the anticipated transactions are deemed probable, the resulting relationships are formally designated as cash flow hedges. The Company accounts for these contracts as cash flow hedges and tests effectiveness by determining whether changes in the expected cash flow of the derivative offset, within a range, changes in the expected cash flow of the hedged item. At September 30, 2018, the Company’s derivative contracts had remaining maturities of approximately one year or less. The counterparty to these transactions had both long-term and short-term investment grade credit ratings. The maximum net exposure of the Company’s credit risk to the counterparty is generally limited to the aggregate unrealized loss of all contracts with that counterparty. At September 30, 2018, there was no such exposure to the counterparty. The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain of $614 on all contracts at September 30, 2018. The Company’s derivative counterparty has strong credit ratings and as a result, the Company does not require collateral to facilitate transactions. The Company held the following contracts designated as hedged instruments as of September 30, 2018 and December 31, 2017:
For contracts that qualify as effective hedge instruments, the effective portion of gains and losses resulting from changes in fair value of the instruments are included in accumulated other comprehensive income and reclassified to sales in the period the underlying hedged transaction is recognized in earnings. Gains (losses) of $255 and $(422) were reclassified to sales during the three months ended September 30, 2018 and 2017, respectively, and $(75) and $(36) were reclassified to sales during the nine months ended September 30, 2018 and 2017, respectively. The following table presents the balance sheet classification and fair value of derivative instruments as of September 30, 2018 and December 31, 2017:
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Accumulated Other Comprehensive Income |
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| Accumulated Other Comprehensive Income | NOTE 8. ACCUMULATED OTHER COMPREHENSIVE INCOME Accumulated other comprehensive income (“AOCI”) primarily consists of foreign currency translation adjustments and changes in our forward foreign exchange contracts. The components of AOCI, net of tax, were as follows:
The effects on net income of amounts reclassified from unrealized gains (losses) on cash flow hedges for foreign exchange contracts and foreign currency translation adjustments for the three and nine months ended September 30, 2018, were as follows:
The Company’s policy is to classify reclassifications of cumulative foreign currency translation from AOCI to Other, net.
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Fair Value Of Measurements |
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| Fair Value Of Measurements | NOTE 9. FAIR VALUE MEASUREMENTS We measure certain financial assets and liabilities at fair value on a recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, under a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows: Level 1 - inputs to the valuation methodology are quoted market prices for identical assets or liabilities in active markets. Level 2 - inputs to the valuation methodology include quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 3 - inputs to the valuation methodology are based on prices or valuation techniques that are unobservable. Assets and liabilities measured at fair value on a recurring basis at September 30, 2018 and December 31, 2017 were as follows:
Derivative financial instruments are recorded at fair value based on current market pricing models. No nonrecurring fair value measurements existed at September 30, 2018 and December 31, 2017.
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Earnings Per Share |
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| Earnings Per Share | NOTE 10. EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share is computed by dividing earnings (loss) by the weighted average number of common shares outstanding during each period. Diluted earnings (loss) per share is computed by dividing earnings (loss) by the total of the weighted average number of shares of common stock outstanding during each period, plus the effect of dilutive outstanding stock options and unvested restricted stock grants. Potentially dilutive securities are excluded from the computation of diluted earnings per share if their effect is anti-dilutive to the loss from continuing operations. The following table is a reconciliation of basic and diluted shares of common stock outstanding used in the calculation of earnings (loss) per share:
For the three months ended September 30, 2018 and 2017, equity awards of 986 and 2,835, respectively, and for the nine months ended September 30, 2018 and 2017, equity awards of 1,408 and 2,793, respectively, were outstanding and anti-dilutive and therefore not included in the calculation of earnings (loss) per share for these periods.
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Stock-Based Compensation Plan |
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| Stock-Based Compensation Plan | NOTE 11. STOCK-BASED COMPENSATION PLAN Under the Company’s current 2015 Stock Incentive Plan (the “2015 Plan”), the Company’s Board of Directors (the “Board of Directors”) has flexibility to determine the type and amount of awards to be granted to eligible participants, who must be employees, directors, officers or consultants of the Company or its subsidiaries. The 2015 Plan allows for grants of incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation rights, and restricted units. The aggregate number of shares of common stock that may be granted through awards under the 2015 Plan to any employee in any calendar year may not exceed 500 shares. The 2015 Plan will continue in effect until December 2025 unless terminated sooner. During the nine months ended September 30, 2018, the Company issued stock options for an aggregate of 1,913 shares under the 2015 Plan to directors and employees of the Company. The 1,875 options issued vest in five equal tranches on December 31, 2018, 2019, 2020, 2021 and 2022. The remaining options vest in four equal consecutive quarterly tranches from the date of grant. For computing the fair value of the stock-based awards, the fair value of each option grant has been estimated as of the date of grant using the Black-Scholes option-pricing model with the following assumptions:
Using these assumptions, the fair value of the stock options granted during the nine months ended September 30, 2018 was $5,956, which will be recognized over the vesting period of the options. The total non-cash stock compensation expense related to restricted stock, stock options and stock awards recorded by the Company for the three months ended September 30, 2018 and 2017 was $912 and $387, respectively, and for the nine months ended September 30, 2018 and 2017 was $2,067 and $729, respectively. For the three and nine months ended September 30, 2018 and 2017, the majority of stock-based compensation costs were classified as selling, general and administrative expenses. As of September 30, 2018, there were 2,184 unvested stock options and unrecognized compensation cost of $5,834 related to unvested stock options, as well as 350 unvested restricted stock awards and unrecognized compensation costs of $350 related to unvested restricted stock awards.
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Commitments And Contingencies |
9 Months Ended |
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Sep. 30, 2018 | |
| Commitments And Contingencies [Abstract] | |
| Commitments And Contingencies | NOTE 12. COMMITMENTS AND CONTINGENCIES The Company is involved in various legal disputes and other legal proceedings that arise from time to time in the ordinary course of business. Based on currently available information, the Company does not believe that it is reasonably possible that the disposition of any of the legal disputes the Company or its subsidiaries is currently involved in will have a material adverse effect upon the Company’s consolidated financial condition, results of operations or cash flows. There is a reasonable possibility of loss from contingencies in excess of the amounts accrued by the Company in the accompanying condensed consolidated balance sheets; however, the actual amounts of such possible losses cannot currently be reasonably estimated by the Company at this time. It is possible that, as additional information becomes available, the impact on the Company could have a different effect. The Company leases office, warehouse and distribution space under non-cancelable operating leases. As leases expire, it can be expected that, in the normal course of business, certain leases will be renewed or replaced. Certain lease agreements include escalating rents over the lease terms. The Company expenses rent on a straight-line basis over the lease term which commences on the date the Company has the right to control the property. The cumulative expense recognized on a straight-line basis in excess of the cumulative payments is included in accounts payable and accrued liabilities and other long-term liabilities in the accompanying condensed consolidated balance sheets. Total rent expense of the Company for the three months ended September 30, 2018 and 2017 was $193 and $214, respectively, and for the nine months ended September 30, 2018 and 2017 was $614 and $611, respectively.
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Income Taxes |
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| Income Taxes | NOTE 13. INCOME TAXES On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The Tax Act made broad and complex changes to existing U.S. tax laws that impact the Company. Most notably, the Tax Act reduced the U.S. federal corporate tax rate from 35 percent to 21 percent effective January 1, 2018. The provisions of the Tax Act and related guidance provided by Staff Accounting Bulletin No. 118 allow for adjustments throughout 2018 to account for the impacts of the 2017 tax law changes. As of September 31, 2018, no additional adjustments related to the impacts of the 2017 tax law changes have been made; however, final adjustments may be necessary in the fourth quarter due to the significant complexity of the Tax Act and anticipated additional regulatory guidance or technical corrections that may be forthcoming as well as actions the Company may take as a result of tax reform. In several states in which the Company operates, the states’ position is to conform to Federal tax legislation. However, in practice no formal declaration is made by the states upon tax legislation changes. It is unclear at this time whether states have conformed to the Tax Act or adopted their own laws to address the federal changes. On a provisional basis, the Company released federal valuation allowance of $4,512 during the year ended December 31, 2017. If the Company had released the state valuation allowance, it would have resulted in an incremental tax benefit of approximately $400. The Company is also continuing to gather additional information and expects to complete its accounting within one year of enactment. The Company takes into consideration the various changes of the Tax Act when calculating the estimated annual effective tax rate. The difference between the Company’s estimated effective tax rate and the U.S. federal statutory tax rate of 21 percent for the three and nine months ended September 30, 2018, was primarily attributed to a discrete benefit associated with a tax windfall deduction from the vesting of restricted stock units and exercise of stock options and the release of an additional portion of the Company’s valuation allowance based on the Company’s forecasted pre-tax earnings for the year. As of December 31, 2017, the Company’s gross deferred tax asset was $50,732. The Company had recorded a valuation allowance of $45,811, resulting in a net deferred tax asset of $4,921, before deferred tax liabilities of $8,587. The Company has provided a valuation allowance against a portion of the deferred tax assets as of December 31, 2017, because the ultimate realization of those assets did not meet the more likely than not criteria. The majority of the Company’s deferred tax assets consist of net operating loss carryforwards for federal tax purposes. If a change in control were to occur, these could be limited under Section 382 of the Internal Revenue Code of 1986 (“Code”), as amended. In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and net operating loss and credit carryforwards expire. The estimates and judgments associated with the Company’s valuation allowance on deferred tax assets are considered critical due to the amount of deferred tax assets recorded by the Company on its consolidated balance sheet and the judgment required in determining the Company’s future taxable income. The need for a valuation allowance is reassessed at each interim reporting period. As of December 31, 2017, the Company had net operating loss, research and experimentation credit and alternative minimum tax credit carryforwards for U.S. federal income tax purposes of $156,598, $3,452 and $0, respectively. The Company believes its U.S. federal net operating loss (“NOL”) will substantially offset its future U.S. federal income taxes. The majority of the Company’s pre-tax income is currently earned and expected to be earned in the U.S., or taxed in the U.S. as Subpart F income and will be offset with the NOL. NOLs available to offset taxable income, subject to compliance with Section 382 of the Code, begin to expire based upon the following schedule:
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Segment Information |
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| Segment Information | NOTE 14. SEGMENT INFORMATION As a result of our August 21, 2017 acquisition of Sierra, we now operate our business structure within two segments. These segments are defined based on the internal financial reporting used by management. Certain significant selling and general and administrative expenses are not allocated to the segments including non-cash stock compensation expense. Each segment is described below:
Financial information for our segments is as follows:
There were no intercompany sales between the Black Diamond and Sierra segments for the periods presented. Restructuring charges for the periods presented relate to the Black Diamond segment. Total assets by segment, as of September 30, 2018 and December 31, 2017, were as follows:
Capital expenditures, depreciation and amortization by segment is as follows.
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Related Party Transactions |
9 Months Ended |
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Sep. 30, 2018 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions | NOTE 15. RELATED PARTY TRANSACTIONS 5% Unsecured Subordinated Notes due May 28, 2017 As part of the consideration payable to the stockholders of a formerly acquired entity, the Company issued 5% Unsecured Subordinated Notes due May 28, 2017 (the “Merger Consideration Subordinated Notes”) to members of the Board of Directors and five former employees. Given the below market interest rate for comparably secured notes and the relative illiquidity of the Merger Consideration Subordinated Notes, we discounted the notes at the date of acquisition. We were accreting the discount on the Merger Consideration Subordinated Notes to interest expense using the effective interest method over the term of the Merger Consideration Subordinated Notes. In February 2017, the Board of Directors approved the repayment of the Merger Consideration Subordinated Notes. On February 13, 2017, the entire principal amounts and all accrued interest amounts were paid in full, at which time, the note discount of $814 was expensed and recognized as interest expense during the three months ended March 31, 2017.
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Nature Of Operations And Summary Of Significant Accounting Policies (Policy) |
9 Months Ended |
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Sep. 30, 2018 | |
| Nature Of Operations And Summary Of Significant Accounting Policies [Abstract] | |
| Basis Of Presentation And Organization | The accompanying unaudited condensed consolidated financial statements of Clarus Corporation and subsidiaries (which may be referred to as the “Company,” “Clarus,” “we,” “us” or “our”) as of September 30, 2018 and December 31, 2017 and for the three and nine months ended September 30, 2018 and 2017, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments, except otherwise disclosed) necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. The results of the three and nine months ended September 30, 2018 are not necessarily indicative of the results to be obtained for the year ending December 31, 2018. These interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the Securities and Exchange Commission (the “SEC”). Clarus, incorporated in Delaware in 1991, acquired Black Diamond Equipment, Ltd. (which may be referred to as “Black Diamond Equipment”) and Gregory Mountain Products, LLC (which may be referred to as “Gregory Mountain Products” or “Gregory”) in May 2010 and changed its name to Black Diamond, Inc. in January 2011. In July 2012, we acquired POC Sweden AB and its subsidiaries (collectively, “POC”) and in October 2012, we acquired PIEPS Holding GmbH and its subsidiaries (collectively, “PIEPS”). On July 23, 2014, the Company completed the sale of certain assets to Samsonite LLC comprising Gregory Mountain Products’ business. On October 7, 2015, the Company sold its equity interests in POC. On August 14, 2017, the Company changed its name from Black Diamond, Inc. to Clarus Corporation and its stock ticker symbol from “BDE” to “CLAR” on the NASDAQ stock exchange. On August 21, 2017, the Company acquired Sierra Bullets, L.L.C. (“Sierra”). On May 7, 2018, the Company announced a “modified Dutch auction” tender offer for Clarus’ common stock, as well as the preferred share purchase rights associated with such shares (collectively, the “Shares”). On July 11, 2018, the tender offer expired, following which the Company announced it would accept 417,237 Shares for purchase at a price of $8.00 per Share, for an aggregate cost of approximately $3,338, excluding fees and expenses. On August 6, 2018, the Company announced that its Board of Directors approved the initiation of a quarterly cash dividend program of $0.025 per share of the Company’s common stock (the “Quarterly Cash Dividend”) or $0.10 per share on an annualized basis. The declaration and payment of future Quarterly Cash Dividends is subject to the discretion of and approval of the Company’s Board of Directors. On October 26, 2018, the Company announced that its Board of Directors approved the payment on November 16, 2018 of the Quarterly Cash Dividend to the record holders of shares of the Company’s common stock as of the close of business on November 2, 2018.
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| Nature Of Business | Nature of Business Headquartered in Salt Lake City, Utah, Clarus, a company focused on the outdoor and consumer industries, is seeking opportunities to acquire and grow businesses that can generate attractive shareholder returns. The Company has substantial net operating tax loss carryforwards that it is seeking to redeploy to maximize shareholder value in outdoor and consumer businesses. Clarus’ primary business is as a leading developer, manufacturer and distributor of outdoor equipment and lifestyle products focused on the climb, ski, mountain, and sport categories. The Company’s products are principally sold under the Black Diamond®, Sierra® and PIEPS® brand names through specialty and online retailers, distributors and original equipment manufacturers throughout the U.S. and internationally. Through our Black Diamond and PIEPS brands, we offer a broad range of products including: high performance apparel (such as jackets, shells, pants and bibs); rock-climbing equipment (such as carabiners, protection devices, harnesses, belay devices, helmets, and ice-climbing gear); technical backpacks and high-end day packs; tents; trekking poles; headlamps and lanterns; and gloves and mittens. We also offer advanced skis, ski poles, ski skins, and snow safety products, including avalanche airbag systems, avalanche transceivers, shovels, and probes. Through our Sierra brand, we manufacture a wide range of high performance bullets for both rifles and pistols that are used for precision target shooting, hunting and military and law enforcement purposes.
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| Use Of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The more significant estimates relate to purchase price allocation, excess or obsolete inventory, and valuation of deferred tax assets. We base our estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.
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| Recent Accounting Pronouncements | Significant Accounting Policies Revenue Recognition On January 1, 2018, the Company adopted new guidance on revenue from customers using the modified retrospective method applied to revenues that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under the new guidance, while prior period amounts are not adjusted and continue to be reported in accordance with Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition. There was no cumulative effect adjustment recorded to opening retained earnings as of January 1, 2018, upon adoption of ASC Topic 606, Revenue from Contracts with Customers. However, the new revenue standard provides new guidance that resulted in immaterial reclassifications between Prepaid and other current assets, Sales, Cost of goods sold, and Accounts payable and accrued liabilities associated with accounting for revenue with a right of return. The impact of the reclassifications to revenues and expenses for the three and nine months ended September 30, 2018, was also immaterial as a result of applying ASC Topic 606. We do not expect an impact to our net income on an ongoing basis as a result of the adoption of the new standard. 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 complete when products are shipped or delivered to the customer depending on the terms of the contract. Sales are made on normal and customary short- term credit terms or upon delivery of point of sale transactions. The Company enters into contractual arrangement with customers in the form of individual customer orders which specify the goods, quantity, pricing, and associated order terms. The Company does not have long-term contracts that are satisfied over time. Due to the nature of the contracts, no significant judgment exists in relation to the identification of the customer contract, satisfaction of the performance obligation, or transaction price. The Company expenses incremental costs of obtaining a contract due to the short term nature of the contracts. The Company’s contract terms or historical business practices can give rise to variable consideration such as term discounts and customer cooperative payments. We estimate the expected term discounts based on an analysis of historical experience and record cash discounts as a reduction to revenue. Through cooperative advertising programs, the Company reimburses its wholesale customers for some of their costs of advertising the Company’s products. The Company records such costs as a reduction of revenue, where the fair value cannot be reasonably estimated or where costs exceed the fair value of the services. At the time of revenue recognition, we also provide 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 an other current asset, with a corresponding reduction of cost of goods sold. Such balances as of September 30, 2018 and January 1, 2018 are immaterial. The Company also offers assurance-type warranties relating to its products sold to end customers that are accounted for under ASC Topic 460, Guarantees. 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 consolidated statements of comprehensive income (loss). Sales commissions are expensed as incurred. These costs are recorded in Selling, general and administrative. Taxes collected from customers and remitted to government authorities are reported on the net basis and are excluded from sales. The Company has a wide variety of technical outdoor equipment and lifestyle products focused on the climb, ski, mountain, and sport categories that are sold to a variety of customers in multiple end markets. While there are multiple products sold, the nature of products are similar in terms of the nature of the revenue recognition policies. See Note 14 - Segment Information, for disaggregated revenue by segment. Contract liabilities are recorded as a component of accounts payable and accrued liabilities when customers remit contractual cash payments in advance of us satisfying performance obligations which are satisfied at a future point of time. Contract liabilities totaled $125 and $360 at September 30, 2018 and January 1, 2018, respectively. Contract liabilities are derecognized when the performance obligation is satisfied. Revenue recognized from satisfaction of performance obligations relating to the advanced payments during the three and nine months ended September 30, 2018 totaled $56 and $433, respectively. The accounts receivable trade balance related to customers totaled $39,790, less allowance of $495, and $35,940, less allowance of $382, as of September 30, 2018 and January 1, 2018, respectively. Accounting Pronouncements adopted during 2018 In November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This ASU is effective for fiscal years beginning January 1, 2018, and interim periods within those fiscal years. The amendments in this update are required to be applied using a retrospective transition method to each period presented. Accordingly, the Company adopted this ASU on January 1, 2018 and determined that the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which clarifies the treatment of several cash flow categories. In addition, ASU 2016-15 clarifies that when cash receipts and cash payments have aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source or use. This ASU is effective for annual and interim reporting periods beginning after December 15, 2017 with early adoption permitted. Accordingly, the Company adopted this ASU on January 1, 2018 and determined that the adoption of this guidance did not impact the Company’s consolidated financial statements and related disclosures. In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting, which clarifies that an entity should account for the effects of a modification unless the fair value, vesting terms and classification as liability or equity of the modified and original awards do not change on the modification date. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments in this update are applied using a prospective transition method. Accordingly, the Company adopted this ASU on January 1, 2018 and determined that the adoption of this guidance did not impact the Company’s consolidated financial statements and related disclosures. In March 2018, the FASB issued ASU 2018-5 Income Tax (Topic 740) Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 which adds various paragraphs pursuant to the issuance of SEC Staff Accounting Bulletin No. 118 (“SAB 118”). This guidance provides for the application of ASC Topic 740, Income Taxes, in the reporting period in which the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law and establishes a measurement period that should not extend beyond one year from the Tax Act enactment date (December 22, 2017) to obtain the appropriate documentation and complete the accounting under ASC Topic 740 for certain income tax effects of the Tax Act which were incomplete at December 31, 2017. This ASU became effective when issued in March 2018. The Company believes that all material adjustments have been identified and recorded relating to the Tax Act in 2017. Accordingly, the Company believes that adoption of this guidance will not have a material impact on the Company’s consolidated financial statements and related disclosures. Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued ASU 2016-02, Leases, which revises the accounting related to lessor and lessee accounting. In July 2018, the FASB also issued ASU 2018-10 Codification Improvements to Topic 842, Leases and ASU 2018-11 Leases (Topic 842) Targeted Improvements. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset (“ROU”) for all leases with terms greater than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The provisions of ASU 2016-02 are effective for fiscal years beginning after December 15, 2018 and may be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements with certain practical expedients available. An entity may apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Early adoption is permitted. Since the effective date will not be until January 1, 2019, there is no immediate impact on the financial statements. Leases previously defined as capital leases will continue to be defined as a capital lease with no material changes to the accounting methodology. The Company currently maintains two capital leases. The Company is performing an assessment of its leases and has begun preparations for implementation and recognition of a cumulative-effective adjustment to the Janaury 1, 2019 balances on a prospective basis. Under the new guidance, leases previously defined as operating leases will be defined as financing leases and capitalized if the term is greater than one year. As a result, financing leases will be recorded as an asset and a corresponding liability at the present value of the total lease payments. The asset will be decremented over the life of the lease on a pro-rata basis resulting in lease expense while the liability will be decremented using the interest method (i.e. principal and interest). As such, the Company expects the new guidance will materially impact the asset and liability balances of the Company’s consolidated financial statements and related disclosures at the time of adoption. The majority of our current operating leases have been negotiated to expire after the adoption date. Consequently, for the leases with terms that go beyond the adoption date, the amounts we expect to recognize as additional liabilities and corresponding ROU assets based upon the present value of the remaining rental payments should approximate $1,318. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The standard simplifies the accounting for goodwill impairment by requiring a goodwill impairment to be measured using a single step impairment model, whereby the impairment equals the difference between the carrying amount and the fair value of the specified reporting units in their entirety. This eliminates the second step of the current impairment model that requires companies to first estimate the fair value of all assets in a reporting unit and measure impairments based on those fair values and a residual measurement approach. It also specifies that any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. We will adopt this standard no later than the effective date of January 1, 2020 on a prospective basis. The impact of the new standard will be dependent on the specific facts and circumstances of future individual impairments, if any. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This standard enables entities to better portray the economics of their risk management activities in the financial statements and enhances the transparency and understandability of hedge results through improved disclosures. This ASU is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted, and we intend to adopt the new guidance in the first quarter of 2019. The Company is still evaluating the impact of the adoption and implementation of this standard on its consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income which allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. This ASU is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period. We intend to adopt the new guidance in the first quarter of 2019. The Company does not believe the adoption and implementation of this standard will have a significant impact on its consolidation financial statements.
|
Acquisition (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pro Forma Results |
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Inventories (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventories [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventories |
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Property And Equipment (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property And Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property And Equipment |
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Goodwill And Other Intangible Assets (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill And Other Intangible Assets [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule Of Goodwill |
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| Schedule Of Indefinite Lived Intangible Assets |
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| Schedule Of Definite Lived Intangible Assets, Net |
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| Schedule Of Intangible Assets, Net Of Amortization |
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Long-Term Debt (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Long-Term Debt [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Components Of Long-Term Debt |
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Derivative Financial Instruments - (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Financial Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule Of Contracts Designated As Hedged Instruments |
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| Schedule Of Derivative Instruments Fair Value And Balance Sheet Classification |
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Accumulated Other Comprehensive Income (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated Other Comprehensive Income [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Components Of Accumulated Other Comprehensive Income |
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| Reclassification Out Of Accumulated Other Comprehensive Income |
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Fair Value Of Measurements (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Of Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule Of Assets And Liabilities Measured On A Recurring Basis |
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Earnings Per Share (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule Of Reconciliation Of Basic And Diluted Shares Of Common Stock Outstanding Used In Calculation Of Earnings Per Share |
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Stock-Based Compensation Plan (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation Plan [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
| Schedule Of Valuation Assumptions Used In Computing Fair Value Of Stock-Based Awards |
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Income Taxes (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||
| Income Taxes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
| Summary Of Tax Credit Carryforwards |
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Segment Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financial Information for Segments |
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| Total Assets by Segment |
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| Depreciation and Amortization by Segment |
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Acquisition (Narrative) (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Jun. 30, 2018 |
Aug. 21, 2017 |
|---|---|---|---|
| Business Acquisition [Line Items] | |||
| Total consideration value | $ 79,000 | ||
| Closing adjustment related to working capital | $ 345 | ||
| Capital leases | $ 95 | ||
| Sierra Bullets, L.L.C [Member] | |||
| Business Acquisition [Line Items] | |||
| Acquired outstanding membership interests | 100.00% |
Acquisition (Pro Forma Results) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended |
|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2017 |
|
| Acquisition [Abstract] | ||
| Sales | $ 48,496 | $ 138,510 |
| Net income (loss) | $ 32 | $ (1,379) |
| Net income (loss) per share - basic | $ (0.05) | |
| Net income (loss) per share - diluted | $ (0.05) |
Inventories (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Inventories [Abstract] | ||
| Finished goods | $ 46,254 | $ 46,729 |
| Work-in-process | 6,624 | 5,194 |
| Raw materials and supplies | 7,962 | 6,215 |
| Inventories | $ 60,840 | $ 58,138 |
Property And Equipment (Property And Equipment) (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Property And Equipment [Abstract] | ||
| Land | $ 3,160 | $ 3,160 |
| Buildings and improvements | 6,793 | 6,800 |
| Furniture and fixtures | 4,273 | 3,822 |
| Computer hardware and software | 4,788 | 4,897 |
| Machinery and equipment | 20,927 | 19,764 |
| Construction in progress | 593 | 721 |
| Property and equipment, gross | 40,534 | 39,164 |
| Less accumulated depreciation | (17,563) | (14,819) |
| Property and equipment | $ 22,971 | $ 24,345 |
Goodwill And Other Intangible Assets (Schedule Of Goodwill) (Details) $ in Thousands |
9 Months Ended |
|---|---|
|
Sep. 30, 2018
USD ($)
| |
| Goodwill [Line Items] | |
| Beginning Balance | $ 17,745 |
| Increase due to working capital adjustment | 345 |
| Ending Balance | 18,090 |
| Sierra [Member] | |
| Goodwill [Line Items] | |
| Beginning Balance | 17,745 |
| Increase due to working capital adjustment | 345 |
| Ending Balance | $ 18,090 |
Goodwill And Other Intangible Assets (Schedule Of Indefinite Lived Intangible Assets) (Details) $ in Thousands |
9 Months Ended |
|---|---|
|
Sep. 30, 2018
USD ($)
| |
| Acquisition [Abstract] | |
| Balance at December 31, 2017 | $ 41,843 |
| Impact of foreign currency exchange rates | (101) |
| Balance at September 30, 2018 | $ 41,742 |
Goodwill And Other Intangible Assets (Schedule Of Definite Lived Intangible Assets, Net) (Details) $ in Thousands |
9 Months Ended |
|---|---|
|
Sep. 30, 2018
USD ($)
| |
| Acquisition [Abstract] | |
| Gross balance at December 31, 2017 | $ 33,062 |
| Impact of foreign currency exchange rates | (147) |
| Gross balance at September 30, 2018 | $ 32,915 |
Goodwill And Other Intangible Assets (Schedule Of Intangible Assets, Net Of Amortization) (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets, gross | $ 32,915 | $ 33,062 |
| Less accumulated amortization | (12,656) | (9,824) |
| Intangible assets, net | 20,259 | 23,238 |
| Customer Lists And Relationships [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets, gross | 26,084 | 26,166 |
| Product Technologies [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets, gross | 4,784 | 4,849 |
| Trade Names and Trademarks [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets, gross | 1,100 | 1,100 |
| Core Technologies [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets, gross | $ 947 | $ 947 |
Long-Term Debt (Narrative) (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Revolving Credit Facility [Member] | ||
| Line Of Credit Facility And Long Term Debt [Line Items] | ||
| Line of credit facility, amount outstanding | $ 22,601 | $ 20,842 |
Long-Term Debt (Components Of Long-Term Debt) (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Line Of Credit Facility And Long Term Debt [Line Items] | ||
| Capital leases | $ 95 | |
| Total carrying amount of long-term debt | 22,696 | $ 20,842 |
| Less current portion | (41) | |
| Long-term debt, net | 22,655 | 20,842 |
| Revolving Credit Facility [Member] | ||
| Line Of Credit Facility And Long Term Debt [Line Items] | ||
| Revolving credit facility (a) | $ 22,601 | $ 20,842 |
Derivative Financial Instruments (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Sales | $ 55,686 | $ 45,774 | $ 154,834 | $ 118,010 |
| Unrealized Gains (Losses) on Cash Flow Hedges [Member] | ||||
| Maximum net exposure to company | 614 | |||
| Reclassification Out Of Accumulated Other Comprehensive Income [Member] | Unrealized Gains (Losses) on Cash Flow Hedges [Member] | ||||
| Sales | $ 255 | $ (422) | $ (75) | $ (36) |
Derivative Financial Instruments (Schedule Of Derivative Instruments Fair Value And Balance Sheet Classification) (Details) - Forward exchange contracts [Member] - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Prepaid And Other Current Assets [Member] | ||
| Derivative instruments in asset positions, Forward exchange contracts | $ 614 | $ 40 |
| Other Long-Term Assets [Member] | ||
| Derivative instruments in asset positions, Forward exchange contracts | 6 | |
| Accounts Payable And Accrued Liabilities [Member] | ||
| Derivative instruments in liability positions, Forward exchange contracts | 919 | |
| Other Long-Term Liabilities [Member] | ||
| Derivative instruments in liability positions, Forward exchange contracts | $ 74 |
Earnings Per Share - (Narrative) (Details) - shares shares in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Earnings Per Share [Abstract] | ||||
| Antidilutive securities excluded from computation of earnings per share, number of shares | 986 | 2,835 | 1,408 | 2,793 |
Earnings Per Share (Schedule Of Reconciliation Of Basic And Diluted Shares Of Common Stock Outstanding Used In Calculation Of Earnings Per Share) (Details) - $ / shares shares in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Earnings Per Share [Abstract] | ||||
| Weighted average number of shares outstanding - basic | 29,739 | 30,017 | 29,939 | 30,015 |
| Effect of dilutive stock awards | 427 | 223 | ||
| Weighted average number of shares outstanding - diluted | 30,166 | 30,017 | 30,162 | 30,015 |
| Basic net income (loss) per share | $ 0.14 | $ (0.05) | $ 0.13 | $ (0.22) |
| Diluted net income (loss) per share | $ 0.14 | $ (0.05) | $ 0.12 | $ (0.22) |
Stock-Based Compensation Plan (Schedule Of Valuation Assumptions Used In Computing Fair Value Of Stock-Based Awards) (Details) - Stock Options |
9 Months Ended |
|---|---|
|
Sep. 30, 2018
$ / shares
shares
| |
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
| Options granted | shares | 1,913 |
| Minimum [Member] | |
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
| Vesting period | 1 year |
| Grant price | $ 6.80 |
| Dividend yield | 0.00% |
| Expected Volatility | 40.70% |
| Risk-free interest rate | 2.65% |
| Expected life (years) | 5 years |
| Weighted average fair value | $ 2.77 |
| Maximum [Member] | |
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
| Vesting period | 5 years |
| Grant price | $ 9.18 |
| Dividend yield | 1.09% |
| Expected Volatility | 42.50% |
| Risk-free interest rate | 2.88% |
| Expected life (years) | 6 years 6 months |
| Weighted average fair value | $ 3.63 |
Commitments And Contingencies (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Commitments And Contingencies [Abstract] | ||||
| Total rent expense | $ 193 | $ 214 | $ 614 | $ 611 |
Income Taxes (Narrative) (Details) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2018 |
Dec. 31, 2017 |
|
| Income Taxes [Abstract] | ||
| Statutory income tax benefit | 21.00% | 35.00% |
| Tax Cuts and Jobs Act of 2017, Valuation Allowance, Federal | $ 4,512 | |
| Tax Cuts and Jobs Act of 2017, Valuation Allowance, State, If Recognized | 400 | |
| Gross deferred tax asset | 50,732 | |
| Valuation allowance | 45,811 | |
| Net deferred tax asset | 4,921 | |
| Deferred tax liabilities, gross | 8,587 | |
| Net operating loss carryforwards for U.S. federal income tax purposes | 156,598 | |
| Research and experimentation credit carryforwards | 3,452 | |
| Alternative minimum tax credit carryforwards | $ 0 |
Income Taxes (Summary Of Tax Credit Carryforwards) (Details) $ in Thousands |
Dec. 31, 2017
USD ($)
|
|---|---|
| Tax Credit Carryforward [Line Items] | |
| Total net operating loss amount | $ 156,598 |
| Operating loss carryforward expiration year 2021 | |
| Tax Credit Carryforward [Line Items] | |
| Net operating loss amount | 21,026 |
| Operating loss carryforward expiration year 2022 | |
| Tax Credit Carryforward [Line Items] | |
| Net operating loss amount | 115,000 |
| Operating loss carryforward expiration year 2023 | |
| Tax Credit Carryforward [Line Items] | |
| Net operating loss amount | 5,712 |
| Operating loss carryforward expiration year 2024 | |
| Tax Credit Carryforward [Line Items] | |
| Net operating loss amount | 3,566 |
| Operating loss carryforward expiration year 2025 and beyond [Member] | |
| Tax Credit Carryforward [Line Items] | |
| Net operating loss amount | $ 11,294 |
Segment Information (Narrative) (Details) |
9 Months Ended |
|---|---|
|
Sep. 30, 2018
segment
| |
| Segment Information [Abstract] | |
| Number of segments | 2 |
Segment Information (Total Assets by Segments) (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Segment Reporting Information [Line Items] | ||
| Assets | $ 212,096 | $ 207,449 |
| Black Diamond [Member] | ||
| Segment Reporting Information [Line Items] | ||
| Assets | 134,828 | 127,202 |
| Sierra [Member] | ||
| Segment Reporting Information [Line Items] | ||
| Assets | 74,612 | 77,270 |
| Corporate [Member] | ||
| Segment Reporting Information [Line Items] | ||
| Assets | $ 2,656 | $ 2,977 |
Segment Information (Capital Expenditures, Depreciation and Amortization by Segment) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Segment Reporting Information [Line Items] | ||||
| Capital expenditures | $ 336 | $ 771 | $ 1,854 | $ 1,919 |
| Depreciation | 1,106 | 725 | 3,314 | 1,830 |
| Amortization | 965 | 648 | 2,902 | 1,183 |
| Black Diamond [Member] | ||||
| Segment Reporting Information [Line Items] | ||||
| Capital expenditures | 279 | 770 | 1,495 | 1,918 |
| Depreciation | 617 | 569 | 1,837 | 1,674 |
| Amortization | 272 | 273 | 822 | 808 |
| Sierra [Member] | ||||
| Segment Reporting Information [Line Items] | ||||
| Capital expenditures | 57 | 1 | 359 | 1 |
| Depreciation | 489 | 156 | 1,477 | 156 |
| Amortization | $ 693 | $ 375 | $ 2,080 | $ 375 |
Related Party Transactions - (Narrative) (Details) - USD ($) $ in Thousands |
May 28, 2010 |
Mar. 31, 2017 |
|---|---|---|
| Related Party Transactions [Abstract] | ||
| Subordinated debt interest rate | 5.00% | |
| Debt Instrument, Unamortized Discount | $ 814 |