0001558370-23-013606.txt : 20230807 0001558370-23-013606.hdr.sgml : 20230807 20230807162538 ACCESSION NUMBER: 0001558370-23-013606 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 87 CONFORMED PERIOD OF REPORT: 20230630 FILED AS OF DATE: 20230807 DATE AS OF CHANGE: 20230807 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Clarus Corp CENTRAL INDEX KEY: 0000913277 STANDARD INDUSTRIAL CLASSIFICATION: [3949] IRS NUMBER: 581972600 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-34767 FILM NUMBER: 231147953 BUSINESS ADDRESS: STREET 1: 2084 EAST 3900 SOUTH CITY: SALT LAKE CITY STATE: UT ZIP: 84124 BUSINESS PHONE: 801-278-5552 MAIL ADDRESS: STREET 1: 2084 EAST 3900 SOUTH CITY: SALT LAKE CITY STATE: UT ZIP: 84124 FORMER COMPANY: FORMER CONFORMED NAME: Black Diamond, Inc. DATE OF NAME CHANGE: 20110121 FORMER COMPANY: FORMER CONFORMED NAME: CLARUS CORP DATE OF NAME CHANGE: 19980911 FORMER COMPANY: FORMER CONFORMED NAME: SQL FINANCIALS INTERNATIONAL INC /DE/ DATE OF NAME CHANGE: 19980911 10-Q 1 clar-20230630x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: June 30, 2023

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)

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

Title of each class

    

Trading Symbol

    

Name of each exchange on which registered

Common Stock, par value $.0001 per share

CLAR

NASDAQ Global Select Market

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

Yes   No  

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

Yes   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

Smaller reporting company

Emerging growth company

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

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

As of August 2, 2023, there were 37,470,470 shares of common stock, par value $0.0001, outstanding.

INDEX

CLARUS CORPORATION

Page

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

3

Condensed Consolidated Balance Sheets – June 30, 2023 and December 31, 2022

3

Condensed Consolidated Statements of Comprehensive Loss – Three months ended June 30, 2023 and 2022

4

Condensed Consolidated Statements of Comprehensive Loss – Six months ended June 30, 2023 and 2022

5

Condensed Consolidated Statements of Cash Flows – Six months ended June 30, 2023 and 2022

6

Condensed Consolidated Statements of Stockholders’ Equity – Three and six months ended June 30, 2023 and 2022

7

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

37

Item 4.

Controls and Procedures

38

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

39

Item 1A.

Risk Factors

39

Item 6.

Exhibits

40

Signature Page

41

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CLARUS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share amounts)

    

June 30, 2023

    

December 31, 2022

Assets

Current assets

Cash

$

11,315

$

12,061

Accounts receivable, less allowance for

credit losses of $1,694 and $1,211

53,445

66,553

Inventories

148,963

147,072

Prepaid and other current assets

8,544

9,899

Income tax receivable

2,993

3,034

Total current assets

225,260

238,619

Property and equipment, net

41,919

43,010

Other intangible assets, net

47,792

55,255

Indefinite-lived intangible assets

81,976

82,901

Goodwill

62,437

62,993

Deferred income taxes

19,556

17,912

Other long-term assets

19,056

17,455

Total assets

$

497,996

$

518,145

Liabilities and Stockholders’ Equity

Current liabilities

Accounts payable

$

24,639

$

27,052

Accrued liabilities

20,322

25,170

Income tax payable

386

421

Current portion of long-term debt

12,543

11,952

Total current liabilities

57,890

64,595

Long-term debt, net

114,685

127,082

Deferred income taxes

17,946

18,506

Other long-term liabilities

17,502

15,854

Total liabilities

208,023

226,037

Stockholders’ Equity

Preferred stock, $0.0001 par value per share; 5,000 shares authorized; none issued

-

-

Common stock, $0.0001 par value per share; 100,000 shares authorized; 41,833 and 41,637 issued and 37,221 and 37,048 outstanding, respectively

4

4

Additional paid in capital

682,243

679,339

Accumulated deficit

(339,196)

(336,843)

Treasury stock, at cost

(32,929)

(32,707)

Accumulated other comprehensive loss

(20,149)

(17,685)

Total stockholders’ equity

289,973

292,108

Total liabilities and stockholders’ equity

$

497,996

$

518,145

See accompanying notes to condensed consolidated financial statements.

3

CLARUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended

    

June 30, 2023

    

June 30, 2022

Sales

Domestic sales

$

46,656

$

64,073

International sales

37,072

50,860

Total sales

83,728

114,933

Cost of goods sold

52,974

71,251

Gross profit

30,754

43,682

Operating expenses

Selling, general and administrative

30,200

35,444

Restructuring charges

736

-

Transaction costs

59

821

Contingent consideration benefit

-

(374)

Total operating expenses

30,995

35,891

Operating (loss) income

(241)

7,791

Other income (expense)

Interest expense, net

(2,857)

(1,728)

Other, net

224

(1,343)

Total other expense, net

(2,633)

(3,071)

(Loss) income before income tax

(2,874)

4,720

Income tax (benefit) expense

(783)

956

Net (loss) income

(2,091)

3,764

Other comprehensive loss, net of tax:

Foreign currency translation adjustment

(1,389)

(17,632)

Unrealized gain on hedging activities

25

622

Other comprehensive loss

(1,364)

(17,010)

Comprehensive loss

$

(3,455)

$

(13,246)

Net (loss) income per share:

Basic

$

(0.06)

$

0.10

Diluted

(0.06)

0.09

Weighted average shares outstanding:

Basic

37,192

37,235

Diluted

37,192

39,697

See accompanying notes to condensed consolidated financial statements.

4

CLARUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except per share amounts)

Six Months Ended

June 30, 2023

June 30, 2022

Sales

Domestic sales

$

91,572

$

126,380

International sales

89,540

101,829

Total sales

181,112

228,209

Cost of goods sold

114,337

140,275

Gross profit

66,775

87,934

Operating expenses

Selling, general and administrative

63,019

69,619

Restructuring charges

736

-

Transaction costs

133

2,022

Contingent consideration (benefit) expense

(1,565)

389

Total operating expenses

62,323

72,030

Operating income

4,452

15,904

Other income (expense)

Interest expense, net

(5,603)

(2,844)

Other, net

309

(1,410)

Total other expense, net

(5,294)

(4,254)

(Loss) income before income tax

(842)

11,650

Income tax (benefit) expense

(349)

2,577

Net (loss) income

(493)

9,073

Other comprehensive loss, net of tax:

Foreign currency translation adjustment

(2,410)

(11,555)

Unrealized (loss) gain on hedging activities

(54)

708

Other comprehensive loss

(2,464)

(10,847)

Comprehensive loss

$

(2,957)

$

(1,774)

Net (loss) income per share:

Basic

$

(0.01)

$

0.24

Diluted

(0.01)

0.23

Weighted average shares outstanding:

Basic

37,164

37,199

Diluted

37,164

39,751

See accompanying notes to condensed consolidated financial statements.

5

CLARUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Six Months Ended

    

June 30, 2023

    

June 30, 2022

Cash Flows From Operating Activities:

Net (loss) income

$

(493)

$

9,073

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

Depreciation of property and equipment

3,732

3,709

Amortization of other intangible assets

6,499

8,057

Amortization of debt issuance costs

464

361

(Gain) loss on disposition of property and equipment

(44)

18

Noncash lease expense

1,475

1,652

Contingent consideration (benefit) expense

(1,565)

365

Stock-based compensation

2,869

6,922

Deferred income taxes

(1,569)

276

Changes in operating assets and liabilities:

Accounts receivable

10,495

(11,825)

Inventories

(1,953)

(26,237)

Prepaid and other assets

1,237

(380)

Accounts payable

1,233

5,288

Accrued liabilities

(5,063)

(443)

Income taxes

(31)

(3,112)

Net cash provided by (used in) operating activities

17,286

(6,276)

Cash Flows From Investing Activities:

Proceeds from disposition of property and equipment

169

298

Purchases of property and equipment

(3,252)

(4,072)

Net cash used in investing activities

(3,083)

(3,774)

Cash Flows From Financing Activities:

Proceeds from revolving credit facilities

19,801

61,933

Repayments on revolving credit facilities

(26,879)

(54,961)

Repayments on term loans

(4,837)

(123,542)

Proceeds from issuance of term loans

-

125,000

Payment of debt issuance costs

-

(1,210)

Purchase of treasury stock

(222)

(1,097)

Proceeds from exercise of options

35

668

Cash dividends paid

(1,860)

(1,861)

Net cash (used in) provided by financing activities

(13,962)

4,930

Effect of foreign exchange rates on cash

(987)

(457)

Change in cash

(746)

(5,577)

Cash, beginning of year

12,061

19,465

Cash, end of period

$

11,315

$

13,888

Supplemental Disclosure of Cash Flow Information:

Cash paid for income taxes

$

1,010

$

5,492

Cash paid for interest

$

5,127

$

2,339

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Property and equipment purchased with accounts payable

$

159

$

607

Lease liabilities arising from obtaining right of use assets

$

4,066

$

1,324

Unpaid debt issuance costs

$

$

175

See accompanying notes to condensed consolidated financial statements.

6

CLARUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except per share amounts)

Accumulated

Additional

Other

Total

Common Stock

Paid-In

Accumulated

Treasury Stock

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Shares

    

Amount

    

Income (Loss)

    

Equity

Balance, December 31, 2021

41,105

$

4

$

662,996

$

(263,342)

(4,011)

$

(24,440)

$

(5,050)

$

370,168

Net income

5,309

5,309

Other comprehensive income

6,163

6,163

Cash dividends ($0.025 per share)

(930)

(930)

Purchase of treasury stock

(51)

(1,097)

(1,097)

Stock-based compensation expense

3,367

3,367

Proceeds from exercise of options

167

126

126

Balance, March 31, 2022

41,272

$

4

$

666,489

$

(258,963)

(4,062)

$

(25,537)

$

1,113

$

383,106

Net income

3,764

3,764

Other comprehensive loss

(17,010)

(17,010)

Cash dividends ($0.025 per share)

(931)

(931)

Stock-based compensation expense

3,555

3,555

Proceeds from exercise of options

56

542

542

Balance, June 30, 2022

41,328

$

4

$

670,586

$

(256,130)

(4,062)

$

(25,537)

$

(15,897)

$

373,026

Accumulated

Additional

Other

Total

Common Stock

Paid-In

Accumulated

Treasury Stock

Comprehensive

Stockholders’

Shares

    

Amount

    

Capital

    

Deficit

    

Shares

    

Amount

    

Loss

    

Equity

Balance, December 31, 2022

41,637

$

4

$

679,339

$

(336,843)

(4,589)

$

(32,707)

$

(17,685)

$

292,108

Net income

1,598

1,598

Other comprehensive loss

(1,100)

(1,100)

Cash dividends ($0.025 per share)

(930)

(930)

Purchase of treasury stock

(12)

(118)

(118)

Stock-based compensation expense

1,334

1,334

Proceeds from exercise of options

154

Balance, March 31, 2023

41,791

$

4

$

680,673

$

(336,175)

(4,601)

$

(32,825)

$

(18,785)

$

292,892

Net loss

(2,091)

(2,091)

Other comprehensive loss

(1,364)

(1,364)

Cash dividends ($0.025 per share)

(930)

(930)

Purchase of treasury stock

(11)

(104)

(104)

Stock-based compensation expense

1,535

1,535

Proceeds from exercise of options

42

35

35

Balance, June 30, 2023

41,833

$

4

$

682,243

$

(339,196)

(4,612)

$

(32,929)

$

(20,149)

$

289,973

See accompanying notes to condensed consolidated financial statements.

7

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CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(in thousands, except per share amounts)

NOTE 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements of Clarus Corporation and subsidiaries (which may be referred to as the “Company,” “Clarus,” “we,” “us” or “our”) as of June 30, 2023 and December 31, 2022 and for the three and six months ended June 30, 2023 and 2022, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), instructions to the Quarterly Report on Form 10-Q, and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments, except otherwise disclosed) necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. The results for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be obtained for the year ending December 31, 2023. These interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2023.

Nature of Business

Headquartered in Salt Lake City, Utah, we are a global leading designer, developer, manufacturer and distributor of best-in-class outdoor equipment and lifestyle products focused on the outdoor and consumer enthusiast markets. Our mission is to identify, acquire and grow outdoor “super fan” brands through our unique “innovate and accelerate” strategy. We define a “super fan” brand as a brand that creates the world’s pre-eminent, performance-defining product that the best-in-class user cannot live without. Each of our brands has a long history of continuous product innovation for core and everyday users alike. The Company’s products are principally sold globally under the Black Diamond®, Sierra®, Barnes®, Rhino-Rack® and MAXTRAX® brand names through outdoor specialty and online retailers, our own websites, distributors and original equipment manufacturers.

Use of Estimates

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

NOTE 2. INVENTORIES

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

    

June 30, 2023

    

December 31, 2022

Finished goods

$

111,169

$

107,453

Work-in-process

9,360

8,719

Raw materials and supplies

28,434

30,900

$

148,963

$

147,072

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CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

NOTE 3. PROPERTY AND EQUIPMENT

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

    

June 30, 2023

    

December 31, 2022

Land

$

4,160

$

4,160

Building and improvements

17,928

17,357

Furniture and fixtures

8,384

7,384

Computer hardware and software

8,785

8,498

Machinery and equipment

39,349

37,054

Construction in progress

3,279

5,028

81,885

79,481

Less accumulated depreciation

(39,966)

(36,471)

$

41,919

$

43,010

Depreciation expense for the three months ended June 30, 2023 and 2022 was $1,941 and $1,877, respectively, and for the six months ended June 30, 2023 and 2022 was $3,732 and $3,709, respectively.

NOTE 4. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following table summarizes the balances in goodwill by segment:

    

Outdoor

    

Precision Sport

    

Adventure

    

Total

Goodwill

$

29,507

$

26,715

$

88,349

$

144,571

Accumulated goodwill impairment losses

(29,507)

(52,071)

(81,578)

Balance at December 31, 2022

26,715

36,278

62,993

Impact of foreign currency exchange rates

(556)

(556)

Balance at June 30, 2023

$

$

26,715

$

35,722

$

62,437

Indefinite-Lived Intangible Assets

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

Balance at December 31, 2022

    

$

82,901

Impact of foreign currency exchange rates

(925)

Balance at June 30, 2023

$

81,976

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CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

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

    

June 30, 2023

    

December 31, 2022

Black Diamond

$

19,600

$

19,600

PIEPS

3,038

2,986

Sierra

18,900

18,900

Barnes

5,600

5,600

Rhino-Rack

25,041

25,744

MAXTRAX

9,797

10,071

$

81,976

$

82,901

Other Intangible Assets, net

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

Gross balance at December 31, 2022

    

$

100,889

Impact of foreign currency exchange rates

(1,406)

Gross balance at June 30, 2023

$

99,483

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

June 30, 2023

    

Gross

    

Accumulated Amortization

    

Net

    

Weighted Average Useful Life

Intangibles subject to amortization

Customer relationships

$

76,337

$

(39,136)

$

37,201

13.8 years

Product technologies

20,936

(10,706)

10,230

10.2 years

Tradename / trademark

1,263

(902)

361

9.4 years

Core technologies

947

(947)