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

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

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.

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).

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.

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¨ Nox

As of ~~October 30, 2019,~~November 4, 2020, there were ~~29,759,620~~31,063,094 shares of common stock, par value $0.0001, outstanding.

INDEX

CLARUS CORPORATION

		~~Page~~
PART I	FINANCIAL INFORMATION	Page
~~PART I~~	~~FINANCIAL INFORMATION~~

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets – September 30, ~~2019~~2020 and December 31, ~~2018~~2019	3

	Condensed Consolidated Statements of Comprehensive Income – Three months ended September 30, ~~2019~~2020 and ~~2018~~2019	4

	Condensed Consolidated Statements of Comprehensive (Loss) Income – Nine months ended September 30, ~~2019~~2020 and ~~2018~~2019	5

	Condensed Consolidated Statements of Cash Flows – Nine months ended September 30, ~~2019~~2020 and ~~2018~~2019	6

	Condensed Consolidated Statements of Stockholders’ Equity – ~~Nine~~Three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019	7

	Notes to Condensed Consolidated Financial Statements	8 9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22 23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31 32

Item 4.	Controls and Procedures	31 32

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	32 33
Item 1A.	Risk Factors	33
Item ~~1A.~~6.	~~Risk Factors~~Exhibits	32 35

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	32

~~Item 6.~~	~~Exhibits~~	34

Signature Page		35 36

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CLARUS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share amounts)
September 30, 2020
December 31, 2019
Assets
Current assets
Cash
$
17,027
$
1,703
Accounts receivable, less allowance for credit losses and
doubtful accounts of $1,460 and $494, respectively
42,582
41,628
Inventories
64,897
73,432
Prepaid and other current assets
4,544
3,787
Income tax receivable
532
322
Total current assets
129,582
120,872
Property and equipment, net
22,691
22,919
Other intangible assets, net
13,610
15,816
Indefinite lived intangible assets
41,772
41,630
Goodwill
18,090
18,090
Deferred income taxes
8,728
7,904
Other long-term assets
33,365
3,034
Total assets
$
267,838
$
230,265
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities
$
29,157
$
24,304
Income tax payable
489
260
Current portion of long-term debt
4,000
-
Total current liabilities
33,646
24,564
Long-term debt
37,062
22,670
Deferred income taxes
1,219
1,224
Other long-term liabilities
624
615
Total liabilities
72,551
49,073
Stockholders' Equity
Preferred stock, $.0001 par value per share; 5,000
shares authorized; 0ne issued
-
-
Common stock, $.0001 par value per share; 100,000 shares authorized;
35,021 and 33,615 issued and 31,051 and 29,760 outstanding, respectively
4
3
Additional paid in capital
511,331
492,353
Accumulated deficit
(292,393)
(288,592)
Treasury stock, at cost
(23,789)
(22,269)
Accumulated other comprehensive income (loss)
134
(303)
Total stockholders' equity
195,287
181,192
Total liabilities and stockholders' equity
$
267,838
$
230,265
See accompanying notes to condensed consolidated financial statements.

‎

CLARUS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
September 30, 2020
September 30, 2019
Sales
Domestic sales
$
34,686
$
28,794
International sales
29,805
31,409
Total sales
64,491
60,203
Cost of goods sold
42,822
39,646
Gross profit
21,669
20,557
Operating expenses
Selling, general and administrative
18,674
16,443
Transaction costs
1,440
37
Total operating expenses
20,114
16,480
Operating income
1,555
4,077
Other income (expense)
Interest expense, net
(232)
(353)
Other, net
449
(420)
Total other income (expense), net
217
(773)
Income before income tax
1,772
3,304
Income tax expense (benefit)
589
(188)
Net income
1,183
3,492
Other comprehensive income, net of tax:
Foreign currency translation adjustment
807
(726)
Unrealized (loss) gain on hedging activities
(600)
759
Other comprehensive income
207
33
Comprehensive income
$
1,390
$
3,525
Net income per share:
Basic
$
0.04
$
0.12
Diluted
0.04
0.11
Weighted average shares outstanding:
Basic
29,983
29,876
Diluted
30,986
31,077
See accompanying notes to condensed consolidated financial statements.

‎

CLARUS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
(In thousands, except per share amounts)
Nine Months Ended
September 30, 2020
September 30, 2019
Sales
Domestic sales
$
83,493
$
87,805
International sales
64,567
80,610
Total sales
148,060
168,415
Cost of goods sold
97,243
109,810
Gross profit
50,817
58,605
Operating expenses
Selling, general and administrative
50,537
51,215
Restructuring charge
-
13
Transaction costs
1,870
124
Total operating expenses
52,407
51,352
Operating (loss) income
(1,590)
7,253
Other expense
Interest expense, net
(800)
(978)
Other, net
324
(260)
Total other expense, net
(476)
(1,238)
(Loss) income before income tax
(2,066)
6,015
Income tax benefit
(542)
(570)
Net (loss) income
(1,524)
6,585
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment
773
(869)
Unrealized (loss) gain on hedging activities
(336)
171
Other comprehensive income (loss)
437
(698)
Comprehensive (loss) income
$
(1,087)
$
5,887
Net (loss) income per share:
Basic
$
(0.05)
$
0.22
Diluted
(0.05)
0.21
Weighted average shares outstanding:
Basic
29,854
29,841
Diluted
29,854
30,999
See accompanying notes to condensed consolidated financial statements.

‎

CLARUS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
September 30, 2020
September 30, 2019
Cash Flows From Operating Activities:
Net (loss) income
$
(1,524)
$
6,585
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation of property and equipment
3,405
3,332
Amortization of other intangible assets
2,290
2,665
Amortization of debt issuance costs
230
206
Loss on disposition of property and equipment
32
62
Noncash lease expense
563
501
Stock-based compensation
5,433
2,246
Deferred income taxes
(885)
(551)
Changes in operating assets and liabilities:
Accounts receivable
(541)
(6,480)
Inventories
9,477
(9,310)
Prepaid and other assets
(971)
3
Accounts payable and accrued liabilities
3,530
6,559
Income taxes
9
(183)
Net cash provided by operating activities
21,048
5,635
Cash Flows From Investing Activities:
Deposit for business acquisition
(30,500)
-
Proceeds from disposition of property and equipment
327
20
Purchase of property and equipment
(3,606)
(2,838)
Net cash used in investing activities
(33,779)
(2,818)
Cash Flows From Financing Activities:
Proceeds from revolving credit facilities
49,265
106,934
Repayments on revolving credit facilities
(50,014)
(104,088)
Repayments of financing and capital leases
(1,000)
(31)
Proceeds from issuance of long-term debt
20,000
-
Payment of debt issuance costs
(44)
(680)
Purchase of treasury stock
(1,520)
(4,167)
Proceeds from exercise of stock options
862
896
Cash dividends paid
(744)
(2,243)
Proceeds from the sale of common stock
11,476
-
Common stock issuance costs
(325)
-
Net cash provided by (used in) financing activities
27,956
(3,379)
Effect of foreign exchange rates on cash
99
(73)
Change in cash
15,324
(635)
Cash, beginning of period
1,703
2,486
Cash, end of period
$
17,027
$
1,851
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes
$
418
$
131
Cash paid for interest
$
624
$
781
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
Property and equipment purchased with accounts payable
$
286
$
133
Lease liabilities arising from obtaining right of use assets
$
499
$
1,855
Unpaid debt issuance costs
$
150
$
-
Stock dividends
$
1,533
$
-
See accompanying notes to condensed consolidated financial statements.

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, 2018
33,244
$
3
$
488,404
$
(304,577)
(3,496)
$
(18,102)
$
477
$
166,205
Net income
-
-
-
3,787
-
-
-
3,787
Other comprehensive loss
-
-
-
-
-
-
(462)
(462)
Cash dividends ($0.025 per share)
-
-
-
(746)
-
-
-
(746)
Stock-based compensation expense
-
-
785
-
-
-
-
785
Balance, March 31, 2019
33,244
$
3
$
489,189
$
(301,536)
(3,496)
$
(18,102)
$
15
$
169,569
Net loss
-
-
-
(694)
-
-
-
(694)
Other comprehensive loss
-
-
-
-
-
-
(269)
(269)
Cash dividends ($0.025 per share)
-
-
-
(748)
-
-
-
(748)
Purchase of treasury stock
-
-
-
-
(116)
(1,505)
-
(1,505)
Stock-based compensation expense
-
-
783
-
-
-
-
783
Proceeds from exercise of options
351
-
804
-
-
-
-
804
Balance, June 30, 2019
33,595
$
3
$
490,776
$
(302,978)
(3,612)
$
(19,607)
$
(254)
$
167,940
Net income
-
-
-
3,492
-
-
-
3,492
Other comprehensive income
-
-
-
-
-
-
33
33
Cash dividends ($0.025 per share)
-
-
-
(749)
-
-
-
(749)
Purchase of treasury stock
-
-
-
-
(243)
(2,662)
-
(2,662)
Stock-based compensation expense
-
-
678
-
-
-
-
678
Proceeds from exercise of options
10
-
92
-
-
-
-
92
Balance, September 30, 2019
33,605
$
3
$
491,546
$
(300,235)
(3,855)
$
(22,269)
$
(221)
$
168,824

‎

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, 2019
33,615
$
3
$
492,353
$
(288,592)
(3,855)
$
(22,269)
$
(303)
$
181,192
Net income
-
-
-
36
-
-
-
36
Other comprehensive income
-
-
-
-
-
-
412
412
Cash dividends ($0.025 per share)
-
-
-
(744)
-
-
-
(744)
Stock-based compensation expense
-
-
613
-
-
-
-
613
Balance, March 31, 2020
33,615
$
3
$
492,966
$
(289,300)
(3,855)
$
(22,269)
$
109
$
181,509
Net loss
-
-
-
(2,743)
-
-
-
(2,743)
Other comprehensive loss
-
-
-
-
-
-
(182)
(182)
Stock dividends ($0.025 per share)
70
-
714
(714)
-
-
-
-
Purchase of treasury stock
-
-
-
-
(14)
(137)
-
(137)
Stock-based compensation expense
-
-
616
-
-
-
-
616
Proceeds from exercise of options
72
-
497
-
-
-
-
497
Balance, June 30, 2020
33,757
$
3
$
494,793
$
(292,757)
(3,869)
$
(22,406)
$
(73)
$
179,560
Net income
-
-
-
1,183
-
-
-
1,183
Other comprehensive income
-
-
-
-
-
-
207
207
Stock dividends ($0.025 per share)
63
-
819
(819)
-
-
-
-
Purchase of treasury stock
-
-
-
-
(101)
(1,383)
-
(1,383)
Stock-based compensation expense
244
-
4,204
-
-
-
-
4,204
Proceeds from exercise of options
57
-
365
-
-
-
-
365
Issuance of common stock, net of issuance costs
900
1
11,150
-
-
-
-
11,151
Balance, September 30, 2020
35,021
$
4
$
511,331
$
(292,393)
(3,970)
$
(23,789)
$
134
$
195,287
See accompanying notes to condensed consolidated financial statements.

CLARUS CORPORATION

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(Unaudited)~~

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

September 30, 2019 December 31, 2018
Assets
Current assets
Cash $ 1,851 $ 2,486
Accounts receivable, less allowance for doubtful accounts of $528 and $392, respectively 41,717 35,943
Inventories 73,535 64,933
Prepaid and other current assets 5,171 5,115
Income tax receivable - 24
Total current assets 122,274 108,501

Property and equipment, net 22,640 23,401
Other intangible assets, net 16,649 19,416
Indefinite lived intangible assets 41,547 41,694
Goodwill 18,090 18,090
Other long-term assets 3,748 2,026
Total assets $ 224,948 $ 213,128

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 28,275 $ 21,489
Income tax payable - 210
Current portion of long-term debt - 41
Total current liabilities 28,275 21,740

Long-term debt 24,908 22,105
Deferred income taxes 2,144 2,919
Other long-term liabilities 797 159
Total liabilities 56,124 46,923

Stockholders' Equity
Preferred stock, $.0001 par value; 5,000 shares authorized; none issued - -
Common stock, $.0001 par value; 100,000 shares authorized; 33,605 and 33,244 issued and 29,750 and 29,748 outstanding, respectively 3 3
Additional paid in capital 491,546 488,404
Accumulated deficit (300,235 ) (304,577 )
Treasury stock, at cost (22,269 ) (18,102 )
Accumulated other comprehensive (loss) income (221 ) 477
Total stockholders' equity 168,824 166,205
Total liabilities and stockholders' equity $ 224,948 $ 213,128

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

~~CLARUS CORPORATION~~

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~(Unaudited)~~

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

Three Months Ended
September 30, 2019 September 30, 2018
Sales
Domestic sales $ 28,794 $ 26,168
International sales 31,409 29,518
Total sales 60,203 55,686

Cost of goods sold 39,646 35,829
Gross profit 20,557 19,857

Operating expenses
Selling, general and administrative 16,443 15,773
Restructuring charge - 22
Transaction costs 37 50

Total operating expenses 16,480 15,845

Operating income 4,077 4,012

Other (expense) income
Interest expense (353 ) (303 )
Other, net (420 ) 102

Total other expense, net (773 ) (201 )

Income before income tax 3,304 3,811
Income tax benefit (188 ) (316 )
Net income 3,492 4,127

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment (726 ) (54 )
Unrealized income (loss) on hedging activities 759 (193 )
Other comprehensive income (loss) 33 (247 )
Comprehensive income $ 3,525 $ 3,880

Net income per share:
Basic $ 0.12 $ 0.14
Diluted 0.11 0.14

Weighted average shares outstanding:
Basic 29,876 29,739
Diluted 31,077 30,166

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

~~CLARUS CORPORATION~~

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~(Unaudited)~~

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

Nine Months Ended
September 30, 2019 September 30, 2018
Sales
Domestic sales $ 87,805 $ 79,667
International sales 80,610 75,167
Total sales 168,415 154,834

Cost of goods sold 109,810 101,290
Gross profit 58,605 53,544

Operating expenses
Selling, general and administrative 51,215 48,692
Restructuring charge 13 86
Transaction costs 124 383

Total operating expenses 51,352 49,161

Operating income 7,253 4,383

Other (expense) income
Interest expense (978 ) (1,020 )
Other, net (260 ) 31

Total other expense, net (1,238 ) (989 )

Income before income tax 6,015 3,394
Income tax benefit (570 ) (359 )
Net income 6,585 3,753

Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment (869 ) (546 )
Unrealized income on hedging activities 171 721
Other comprehensive (loss) income (698 ) 175
Comprehensive income $ 5,887 $ 3,928

Net income per share:
Basic $ 0.22 $ 0.13
Diluted 0.21 0.12

Weighted average shares outstanding:
Basic 29,841 29,939
Diluted 30,999 30,162

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

~~CLARUS CORPORATION~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~

~~(In thousands)~~

Nine Months Ended
September 30, 2019 September 30, 2018
Cash Flows From Operating Activities:
Net income $ 6,585 $ 3,753
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment 3,332 3,314
Amortization of intangible assets 2,665 2,902
Amortization of debt issuance costs 206 371
Loss on disposition of property and equipment 62 11
Noncash lease expense 501 -
Loss from removal of accumulated translation adjustment - 172
Stock-based compensation 2,246 2,067
Deferred income taxes (551 ) (539 )
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable (6,480 ) (4,007 )
Inventories (9,310 ) (3,182 )
Prepaid and other assets 3 443
Accounts payable and accrued liabilities 6,559 2,421
Income taxes (183 ) (114 )
Net cash provided by operating activities 5,635 7,612

Cash Flows From Investing Activities:
Purchase of business, net of cash received - (345 )
Proceeds from disposition of property and equipment 20 5
Purchase of property and equipment (2,838 ) (1,854 )
Net cash used in investing activities (2,818 ) (2,194 )

Cash Flows From Financing Activities:
Proceeds from revolving credit facilities 106,934 101,331
Repayments on revolving credit facilities (104,088 ) (99,572 )
Repayments of financing and capital leases (31 ) (29 )
Payment of debt issuance costs (680 ) (1,032 )
Purchase of treasury stock (4,167 ) (4,709 )
Proceeds from exercise of stock options 896 467
Cash dividends paid (2,243 ) (741 )
Net cash used in financing activities (3,379 ) (4,285 )

Effect of foreign exchange rates on cash (73 ) 16

Change in cash (635 ) 1,149
Cash, beginning of period 2,486 1,856
Cash, end of period $ 1,851 $ 3,005

Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $ 131 $ 296
Cash paid for interest $ 781 $ 700
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
Property and equipment purchased with accounts payable $ 133 $ 155
Property and equipment acquired through a capital lease $ - $ 123
Lease liabilities arising from obtaining right of use assets $ 1,855 $ -

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

~~CLARUS CORPORATION~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY~~

~~(Unaudited)~~

~~(In thousands)~~

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, 2017 32,917 $ 3 $ 485,285 $ (310,390 ) (2,875 ) $ (12,415 ) $ 499 $ 162,982
Net income - - - 403 - - - 403
Other comprehensive income - - - - - - 714 714
Stock-based compensation expense - - 499 - - - - 499
Balance, March 31, 2018 32,917 $ 3 $ 485,784 $ (309,987 ) (2,875 ) $ (12,415 ) $ 1,213 $ 164,598
Net loss - - - (777 ) - - - (777 )
Other comprehensive loss - - - - - - (292 ) (292 )
Purchase of treasury stock - - - - - (217 ) - (217 )
Stock-based compensation expense - - 656 - - - - 656
Balance, June 30, 2018 32,917 $ 3 $ 486,440 $ (310,764 ) (2,875 ) $ (12,632 ) $ 921 $ 163,968
Net income - - - 4,127 - - - 4,127
Other comprehensive loss - - - - - - (247 ) (247 )
Cash dividends ($0.025 per share) - - - (741 ) - - - (741 )
Purchase of treasury stock - - - - (519 ) (4,492 ) - (4,492 )
Stock-based compensation expense - - 912 - - - - 912
Proceeds from exercise of options 327 - 467 - - - - 467
Balance, September 30, 2018 33,244 $ 3 $ 487,819 $ (307,378 ) (3,394 ) $ (17,124 ) $ 674 $ 163,994

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, 2018 33,244 $ 3 $ 488,404 $ (304,577 ) (3,496 ) $ (18,102 ) $ 477 $ 166,205
Net income - - - 3,787 - - - 3,787
Other comprehensive loss - - - - - - (462 ) (462 )
Cash dividends ($0.025 per share) - - - (746 ) - - - (746 )
Stock-based compensation expense - - 785 - - - - 785
Balance, March 31, 2019 33,244 $ 3 $ 489,189 $ (301,536 ) (3,496 ) $ (18,102 ) $ 15 $ 169,569
Net loss - - - (694 ) - - - (694 )
Other comprehensive loss - - - - - - (269 ) (269 )
Cash dividends ($0.025 per share) - - - (748 ) - - - (748 )
Purchase of treasury stock - - - - (116 ) (1,505 ) - (1,505 )
Stock-based compensation expense - - 783 - - - - 783
Proceeds from exercise of options 351 - 804 - - - - 804
Balance, June 30, 2019 33,595 $ 3 $ 490,776 $ (302,978 ) (3,612 ) $ (19,607 ) $ (254 ) $ 167,940
Net income - - - 3,492 - - - 3,492
Other comprehensive income - - - - - - 33 33
Cash dividends ($0.025 per share) - - - (749 ) - - - (749 )
Purchase of treasury stock - - - - (243 ) (2,662 ) - (2,662 )
Stock-based compensation expense - - 678 - - - - 678
Proceeds from exercise of options 10 - 92 - - - - 92
Balance, September 30, 2019 33,605 $ 3 $ 491,546 $ (300,235 ) (3,855 ) $ (22,269 ) $ (221 ) $ 168,824

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

~~CLARUS CORPORATION~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(in thousands, except per share amounts)

~~NOTE~~

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, ~~2019~~2020 and December 31, ~~2018~~2019 and for the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, 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 offor the three and nine months ended September 30, ~~2019~~2020 are not necessarily indicative of the results to be obtained for the year ending December 31, ~~2019.~~2020. 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, ~~2018,~~2019, filed with the Securities and Exchange Commission (the “SEC”). on March 9, 2020.

Clarus, incorporated in Delaware in 1991, acquired Black Diamond Equipment, Ltd. (“Black Diamond Equipment”~~) and Gregory Mountain Products, LLC (“Gregory Mountain Products”~~) 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 November 6, 2018, the Company acquired the assets of SKINourishment, Inc. (“SKINourishment”).

On October 2, 2020, the Company completed the acquisition of certain assets and liabilities relating to the Barnes brand of bullets (“Barnes”) for a purchase price of $30,500. See Note 15 for a more detailed explanation of the acquisition.

On August 6, 2018, the Company announced that its Board of Directors approved the initiation of a quarterly cash dividend program of $0.025 per share of the Company’s common stock (the “Quarterly Cash Dividend”) or $0.10 per share on an annualized basis. The declaration and payment of future Quarterly Cash Dividends is subject to the discretion of and approval of the Company’s Board of Directors. On May 1, 2020, the Company announced that, in light of the operational impact of the COVID-19 pandemic, its Board of Directors temporarily replaced its Quarterly Cash Dividend with a stock dividend (the “Quarterly Stock Dividend”). On October ~~28, 2019,~~19, 2020, the Company announced that its Board of Directors approved the ~~payment on November 15, 2019~~reinstatement of ~~the~~its Quarterly Cash Dividend. The reinstated Quarterly Cash Dividend will be paid on November 20, 2020 to the ~~record holders~~shareholders of ~~shares~~record of the Company’s common stock as of the close of business on November ~~8, 2019.~~9, 2020.

~~On November 6, 2018, the Company acquired the assets of SKINourishment, Inc. (“SKINourishment”).~~

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 net operating tax loss carryforwards which it is seeking to redeploy to maximize shareholder value. Clarus’ primary business is as a leading designer, developer, manufacturer and distributor of outdoor equipment and lifestyle products focused on the climb, ski, mountain, sport and skincare markets. The Company’s products are principally sold under the Black Diamond®, Sierra®, PIEPS® and SKINourishment® brand names through outdoor specialty and online retailers, distributors and original equipment manufacturers throughout the U.S. and internationally.

Through our Black Diamond, PIEPS, and SKINourishment brands, we offer a broad range of products including: ~~high performance~~high-performance, activity-based apparel (such as shells, insulation, midlayers, pants and logowear); rock-climbing footwear and equipment (such as carabiners, protection devices, harnesses, belay devices, helmets, and ice-climbing gear); technical backpacks and high-end day packs; trekking poles; headlamps and lanterns; gloves and mittens; and skincare and other sport-enhancing products. We also offer advanced skis, ski poles, ski skins, and snow safety products, including avalanche airbag systems, avalanche transceivers, shovels, and probes. Through our Sierra brand, we manufacture a wide range of high-performance bullets and ammunition for both rifles and pistols that are used for precision target shooting, hunting and military and law enforcement purposes.

Impact of COVID-19

The global outbreak of COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S. government in March 2020, with governments world-wide implementing safety measures restricting travel and requiring citizen lockdowns and self-confinements for quarantining purposes. This has negatively affected the U.S. and global economy, disrupted global

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

supply chains, and resulted in significant transport restrictions and disruption of financial markets. The impact of this pandemic has created significant uncertainty in the global economy and has affected our business, employees, retail and distribution partners, suppliers, and customers.

The decline in retail demand within our Black Diamond segment over the second half of March 2020 and during the three months ended June 30, 2020 and September 30, 2020, negatively impacted our sales and profitability for the first, second and third quarters of 2020. We also expect an impact on the Company’s sales and profitability in future periods. The duration of these trends and the magnitude of such impacts cannot be precisely estimated at this time, as they are affected by a number of factors (some of which are outside management’s control), including those presented in Item 1A. Risk Factors of our Quarterly Report for the quarterly period ended March 31, 2020.

We are mitigating some of the negative impacts to our operating results by taking significant actions to improve our current operating results and liquidity position, including drawing on the credit facility, suspending share repurchases and temporarily suspending cash dividends, postponing non-essential capital expenditures, reducing operating costs, modulating production in line with demand, initiating workforce reductions and furloughs, and substantially reducing discretionary spending. We will continue to adjust mitigation measures as needed related to health and safety. Those measures have and might continue to include temporarily suspending manufacturing or retail operations, modifying workspaces, continuing social distancing policies, implementing new personal protective equipment or health screening policies at our facilities, or such other industry best practices needed to continue maintain a healthy and safe environment for our employees amidst the pandemic.

These countermeasures are expected to partially mitigate the impacts of COVID-19 on our full year 2020 financial results. As the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess the impact on the Company and respond accordingly.

Sustained adverse impacts to the Company, certain of its suppliers, dealers or customers may also affect the Company’s future cash flows, liquidity, and valuation of certain assets and therefore may increase the likelihood of an impairment charge, write-off, or reserve associated with such assets, including goodwill, indefinite and finite-lived intangible assets, property and equipment, inventories, accounts receivable, net deferred tax assets, and other assets.

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~~Estimates are used to ~~purchase price allocation,~~record the allowance for credit losses and doubtful accounts, liabilities for product warranties, excess or obsolete inventory, valuation of deferred tax assets, and valuation of ~~goodwill,~~ long-lived assets, goodwill and other intangible assets. We base our estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.

Significant Accounting Policies

~~Lease~~ Accounting Pronouncements not yet adopted

~~On January 1, 2019,~~In March 2020, the ~~Company adopted~~Financial Accounting Standards ~~Codification~~Board (“~~ASC”~~FASB”) ~~Topic 842,~~~~Leases,~~issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional expedients and ~~elected~~exceptions to existing guidance on contract modifications and hedge accounting to facilitate the ~~prospective method~~market transition from existing reference rates, such as the London Inter-Bank Offered Rate (“LIBOR”) which ~~was~~is being phased out in 2021, to alternate reference rates, such as the Secured Overnight Financing Rate (“SOFR”). The standard is currently effective and upon adoption may be applied prospectively to ~~all leases in effect~~contract modifications made on or before December 31, 2022. The provisions have impact as ~~of January 1, 2019. Results for reporting periods beginning after January 1, 2019 are presented under the new guidance,~~contract modifications and other changes occur while ~~prior period amounts are not adjusted and continue to be presented in accordance with ASC Topic 840,~~~~Leases~~.

Under the new guidance, lessees are required to recognize a lease liability and a right-of-use (“ROU”) asset for all leases with terms greater than 12 months. Leases are now classified as either finance or operating, with classification affecting the pattern of expense recognitionLIBOR is phased out. The Company is in the ~~income statement. Classification is based upon~~process of evaluating the ~~underlying asset’s existence, nature~~optional relief guidance provided within this ASU. Management will continue its assessment and ~~timing of ownership transfer in~~monitor regulatory developments during the related lease. Leases previously defined as operating leases record lease expense based upon the related ROU asset amortization and lease liability interest expense using the interest method over the life of the lease. Leases previously defined as capital leases are now classified as a finance lease with no material changes to the accounting methodology.LIBOR transition period.

ASC 842 provides new guidance that resulted in recording the present value of ROU assets and related lease liabilities for the Company’s outstanding operating leases over the remaining lease term at January 1, 2019 totaling $1,516.

Lease assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists. Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our incremental borrowing rate. Lease terms include options to extend or terminate the lease when it is reasonably certain that those options will be exercised.

Variable lease payments are generally expensed as incurred and include certain nonlease components, such as common area maintenance and other services provided by the lessor, and other charges such as utilities, insurance and property taxes included in the lease. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the expense for these short-term leases and for operating leases is recognized on a straight-line basis over the lease term. Nonlease components are excluded from the ROU asset and lease liability present value computations. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Certain of the leases contain extension options of one to five years. At January 1, 2019, the Company is uncertain as to whether the extension options will be executed. Accordingly, no extension options were considered in the present value computations of the ROU assets or related lease liabilities.

The Company elected the package of practical expedients in transition for leases that commenced prior to January 1, 2019, whereby these contracts were not reassessed or reclassified from their previous assessments as of December 31, 2018. We also elected certain other practical expedients in transition, including not reassessing existing land easements as lease contracts. The Company has also elected to not record the ROU assets and related liabilities for outstanding leases as of January 1, 2019 with a remaining term of 12 months or less. In these cases, the Company recognizes a lease payment as an expense on a straight-line basis. See Note 14. Leases for the financial position impact and additional disclosures.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

~~Accounting Pronouncements adopted during 2019~~

~~On January 1, 2019, the Company early adopted Accounting Standards Update (“ASU”) 2017-04,~~~~Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~ as permitted. 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. This ASU was adopted on a prospective basis with no impact to the Company’s consolidated financial statements.

~~On January 1, 2019, the Company adopted ASU 2017-12,~~~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~. The ASU was adopted on a prospective basis. 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.~~The adoption of this guidance did not impact the Company’s consolidated financial statements and related disclosures.~~

~~On January 1, 2019, the Company adopted 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. Adoption of this ASU did not impact the beginning retained earnings on January 1, 2019.~~The adoption of this guidance did not impact the Company’s consolidated financial statements and related disclosures~~.

NOTE 2. INVENTORIES

Inventories, as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, were as follows:

September 30, 2019 December 31, 2018
Finished goods $ 58,516 $ 51,626
Work-in-process 7,545 6,221
Raw materials and supplies 7,474 7,086
$ 73,535 $ 64,933


	September 30, 2020		December 31, 2019

Finished goods	$	51,685	$	59,452
Work-in-process		4,984		7,474
Raw materials and supplies		8,228		6,506
	$	64,897	$	73,432

NOTE 3. PROPERTY AND EQUIPMENT

Property and equipment, net, as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, were as follows:

September 30, 2019 December 31, 2018
Land $ 3,160 $ 3,160
Building and improvements 6,939 6,870
Furniture and fixtures 4,955 4,376
Computer hardware and software 5,030 4,863
Machinery and equipment 21,622 21,004
Construction in progress 1,694 1,761
43,400 42,034
Less accumulated depreciation (20,760 ) (18,633 )
$ 22,640 $ 23,401


	September 30, 2020		December 31, 2019

Land	$	3,160	$	3,160
Building and improvements		6,958		6,964
Furniture and fixtures		5,654		5,255
Computer hardware and software		5,522		5,298
Machinery and equipment		22,265		21,578
Construction in progress		2,508		1,690
		46,067		43,945
Less accumulated depreciation		(23,376)		(21,026)
	$	22,691	$	22,919

~~CLARUS CORPORATION~~

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

~~(Unaudited)~~

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

NOTE 4. ~~OTHER~~GOODWILL AND INTANGIBLE ASSETS

Goodwill

~~There were no changes in the balances in goodwill from the prior period.~~ The following table summarizes the balances in goodwill by segment:

Black Diamond Sierra Total

Balance at December 31, 2018 $ - $ 18,090 $ 18,090

Balance at September 30, 2019 $ - $ 18,090 $ 18,090



	Black Diamond		Sierra		Total

Balance at December 31, 2019	$	-	$	18,090	$	18,090

Balance at September 30, 2020	$	-	$	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. The following table summarizes the changes in indefinite lived intangible assets:

Balance at December 31, 2018 $ 41,694

Impact of foreign currency exchange rates (147 )

Balance at September 30, 2019 $ 41,547


Balance at December 31, 2019	$	41,630

Impact of foreign currency exchange rates		142

Balance at September 30, 2020	$	41,772

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

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

Gross balance at December 31, 2018 $ 33,010

Impact of foreign currency exchange rates (213 )

Gross balance at September 30, 2019 $ 32,797


Gross balance at December 31, 2019	$	32,917

Impact of foreign currency exchange rates		205

Gross balance at September 30, 2020	$	33,122

Other intangible assets, net of amortization as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, were as follows:

September 30, 2019 December 31, 2018
Customer lists and relationships $ 25,928 $ 26,047
Product technologies 4,659 4,753
Tradename / trademark 1,263 1,263
Core technologies 947 947
32,797 33,010
Less accumulated amortization (16,148 ) (13,594 )
$ 16,649 $ 19,416


	September 30, 2020		December 31, 2019

Customer lists and relationships	$	26,109	$	25,995
Product technologies		4,803		4,712
Tradename / trademark		1,263		1,263
Core technologies		947		947
		33,122		32,917
Less accumulated amortization		(19,512)		(17,101)
	$	13,610	$	15,816

~~CLARUS CORPORATION~~

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

~~(Unaudited)~~

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

NOTE 5. LONG-TERM DEBT

Long-term debt as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, was as follows:

September 30, 2019 December 31, 2018
Revolving credit facility (a) $ 24,908 $ 22,062
Other - 84
24,908 22,146
Less current portion - (41 )
$ 24,908 $ 22,105

~~(a)~~

~~As of September 30, 2019, the Company had drawn $24,908~~


	September 30, 2020		December 31, 2019

Revolving credit facility (a)	$	21,066	$	22,670
Foreign credit facilities (b)		996		-
Term note (c)		19,000		-
		41,062		22,670
Less current portion		(4,000)		-
	$	37,062	$	22,670

(a)As of September 30, 2020, the Company had drawn $21,066 on the $60,000 revolving commitment that was available under the credit agreement with JPMorgan Chase Bank, N.A., with a maturity date of May 3, 2024.

On May 3, 2019, the Company together with certain of its direct and indirect domestic subsidiaries (the “Borrowers”) and the other loan parties party thereto entered into a Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto, for borrowings of up to $60,000 under a revolving credit facility (including up to $5,000 for letters of credit), and borrowings of up to $40,000 under a term loan facility that is available to be drawn until May 3, 2020. The Credit Agreement also permits the Borrowers, subject to certain requirements, to arrange with lenders for an aggregate of up to $50,000 of additional revolving and/or term loan commitments (both of which are currently uncommitted), for potential aggregate revolving and term loan commitments under the Credit Agreement of up to $150,000. The Credit Agreement matures on May 3, 2024.

The Borrowers may elect to have the revolving and term loans under the Credit Agreement bear interest at an alternate base rate or a Eurodollar rate plus an applicable rate. The applicable rate for these borrowings will range from 0.50% to 1.25% per annum, in the case of alternate base rate borrowings, and 1.50% to 2.25% per annum, in the case of Eurodollar borrowings. The applicable rate was initially 0.875% per annum, in the case of alternate base rate borrowings, and 1.875% per annum, in the case of Eurodollar borrowings, however, it may be adjusted from time to time based upon the level of the Company’s consolidated total leverage ratio. The Credit Agreement also requires the Borrowers to pay a commitment fee on the unused portion of the revolving and term loan commitments. Such commitment fee will range between 0.15% and 0.25% per annum, and is also based upon the level of the Company’s consolidated total leverage ratio. The Company pays interest monthly on any borrowings on the Credit Agreement. As of September 30, 2020 and December 31, 2019, the rate was ~~3.5625%.~~1.6875% and 3.3125%, respectively.

~~On May 3, 2019, concurrent with entering into~~The Credit Agreement contains restrictions on the Company’s ability to pay dividends or make distributions or other restricted payments if certain conditions in the Credit Agreement are not fulfilled. The Credit Agreement also includes other customary affirmative and negative covenants, including financial covenants relating to the Company’s ~~previous~~consolidated total leverage ratio and fixed charge coverage ratio. The Company was in compliance with the debt covenants set forth in the Credit Agreement as of September 30, 2020.

(b)A foreign subsidiary of the Company has a revolving credit facility with ~~JPMorgan Chase Bank, N.A. (the “2018 Credit Agreement”),~~a financial institution which ~~provided for a revolving commitment of up to $75,000, was paid in full and terminated.~~matures on March 31, 2022. The ~~Company paid~~foreign subsidiary pays interest monthly on any borrowings on the ~~2018~~credit facility. As of September 30, 2020, the rate was 1.3387%.

(c)Under the Credit Agreement, ~~at London Inter-bank Offered Rate (“LIBOR”) plus 1.5% (3.8493% as~~the Company had access to a term loan facility that was available for drawdown until May 3,

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

2020. On April 30, 2020, the Company borrowed $20,000 under such term loan facility. The Company is required to repay the term loan through quarterly payments of ~~December 31, 2018),~~$1,000 each beginning with September 30, 2020, and ~~an annual commitment fee of 0.25%~~any remaining obligations will be repaid in full on the ~~unused portion~~maturity date of the ~~commitment.~~Credit Agreement of May 3, 2024. The Company pays interest monthly on any borrowings on the Credit Agreement. As of September 30, 2020, the rate was 1.6875%.

NOTE 6. 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, ~~2019,~~2020, the Company’s derivative contracts had remaining maturities of ~~approximately~~less than one ~~year or less.~~and one-half years. The ~~counterparty~~counterparties to these transactions had both long-term and short-term investment grade credit ratings. The maximum net exposure of the Company’s credit risk to the ~~counterparty~~counterparties is generally limited to the aggregate unrealized loss of all contracts with that ~~counterparty. At~~counterparty, which is $688 as of September 30, ~~2019, there was no such exposure to the counterparty.~~2020. The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain ~~of $885~~ on all ~~contracts at~~contracts. At September 30, ~~2019.~~2020, there was no such exposure to the counterparties. The Company’s derivative ~~counterparty has~~counterparties have strong credit ratings and as a result, the Company does not require collateral to facilitate transactions.

~~CLARUS CORPORATION~~

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

~~(Unaudited)~~

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

The Company held the following contracts designated as ~~hedged~~hedging instruments as of September 30, ~~2019~~2020 and December 31, ~~2018:~~2019:


	September 30, ~~2019~~			2020
	Notional			Latest
	Amount			Maturity

Foreign exchange contracts - Canadian Dollars	$8,279	~~11,344~~			August ~~2020~~	2021
Foreign exchange contracts - Euros	€ 25,962	~~18,064~~	February 2022

		~~August 2020~~
	December 31, 2019
	Notional		Latest
	Amount		Maturity

Foreign exchange contracts - Canadian Dollars	$15,932		February 2021
Foreign exchange contracts - Euros	€ 18,168		February 2021
Foreign exchange contracts - Swiss Francs	CHF 661	661		August 2020

December 31, 2018
Notional Latest
Amount Maturity
Foreign exchange contracts - Canadian Dollars $ 6,166 August 2019
Foreign exchange contracts - Euros € 10,710 February 2020

For contracts that qualify as effective hedge instruments, the effective portion of gains and losses resulting from changes in fair value of the instruments are included in accumulated other comprehensive income (loss) ~~income~~ and reclassified to sales in the period the underlying hedged transaction is recognized in earnings. Gains (losses) of ~~$261~~$(376) and ~~$255~~$261 were reclassified to sales during the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~$844~~$206 and ~~$(75)~~$844 were reclassified to sales during the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively.

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, ~~2019~~2020 and December 31, ~~2018:~~2019:

Classification September 30, 2019 December 31, 2018
Derivative instruments in asset positions:
Forward exchange contracts Prepaid and other current assets $ 909 $ 729

Derivative instruments in liability positions:
Forward exchange contracts Accounts payable and accrued liabilities $ 24 $ -
Forward exchange contracts Other long-term liabilities $ - $ 5


	Classification	September 30, 2020		December 31, 2019

Derivative instruments in asset positions:
Forward exchange contracts	Prepaid and other current assets	$	89	$	226
Forward exchange contracts	Other long-term assets	$	36	$	-

Derivative instruments in liability positions:
Forward exchange contracts	Accounts payable and accrued liabilities	$	813	$	152
Forward exchange contracts	Other long-term liabilities	$	-	$	29

NOTE 7. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) (“AOCI”) primarily consists of foreign currency translation adjustments and changes in our forward foreign exchange contracts. The ~~components of~~following table sets forth the changes in AOCI, net of tax, ~~were as follows:~~for the three months ended September 30, 2020:

Foreign Currency
Translation
Adjustments Unrealized Gains
(Losses) on
Cash Flow
Hedges Total
Balance as of December 31, 2018 $ 73 $ 404 $ 477
Other comprehensive (loss) income before reclassifications (869 ) 954 85
Amounts reclassified from other comprehensive income (loss) - (783 ) (783 )
Net current period other comprehensive (loss) income (869 ) 171 (698 )
Balance as of September 30, 2019 $ (796 ) $ 575 $ (221 )


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

Balance as of June 30, 2020	$	(320)	$	247	$	(73)
Other comprehensive income (loss) before reclassifications		807		(886)		(79)
Amounts reclassified from other comprehensive income (loss)		-		286		286
Net current period other comprehensive income (loss)		807		(600)		207
Balance as of September 30, 2020	$	487	$	(353)	$	134

The following table sets forth the changes in AOCI, net of tax, for the three months ended September 30, 2019:


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

Balance as of June 30, 2019	$	(70)	$	(184)	$	(254)
Other comprehensive (loss) income before reclassifications		(726)		1,115		389
Amounts reclassified from other comprehensive (loss) income		-		(356)		(356)
Net current period other comprehensive (loss) income		(726)		759		33
Balance as of September 30, 2019	$	(796)	$	575	$	(221)

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

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


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

Balance as of December 31, 2019	$	(286)	$	(17)	$	(303)
Other comprehensive income (loss) before reclassifications		773		(180)		593
Amounts reclassified from other comprehensive income (loss)		-		(156)		(156)
Net current period other comprehensive income (loss)		773		(336)		437
Balance as of September 30, 2020	$	487	$	(353)	$	134

The following table sets forth the changes in AOCI, net of tax, for the nine months ended September 30, 2019:


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

Balance as of December 31, 2018	$	73	$	404	$	477
Other comprehensive (loss) income before reclassifications		(869)		954		85
Amounts reclassified from other comprehensive (loss) income		-		(783)		(783)
Net current period other comprehensive (loss) income		(869)		171		(698)
Balance as of September 30, 2019	$	(796)	$	575	$	(221)

The effects on net income of amounts reclassified from unrealized gains ~~(losses)~~ on cash flow hedges for foreign exchange contracts for the three and nine months ended September 30, 2020 and 2019, were as follows:

Gains reclassified from AOCI to the
Condensed Consolidated Statements of
Comprehensive Income
Affected line item in the Condensed Consolidated Statements
of Comprehensive Income For the Three Months Ended
September 30, 2019 For the Nine Months Ended
September 30, 2019
Foreign exchange contracts:
Sales $ 261 $ 844
Less: Income tax expense (95 ) 61
Amount reclassified, net of tax $ 356 $ 783

Total reclassifications from AOCI $ 356 $ 783

~~The Company’s policy is to classify reclassifications of cumulative foreign currency translation from AOCI to Other, net.~~


	Gains reclassified from AOCI to the Consolidated Statements of Comprehensive Income (Loss)
Affected line item in the Consolidated	Three Months Ended				Nine Months Ended
Statements of Comprehensive Income (Loss)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Foreign exchange contracts:
Sales	$	(376)	$	261	$	206	$	844
Less: Income tax (benefit) expense		(90)		(95)		50		61
Amount reclassified, net of tax	$	(286)	$	356	$	156	$	783

Total reclassifications from AOCI	$	(286)	$	356	$	156	$	783

NOTE 8. 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 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.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

Assets and liabilities measured at fair value on a recurring basis at September 30, ~~2019~~2020 and December 31, ~~2018~~2019 were as follows:

September 30, 2019
Level 1 Level 2 Level 3 Total
Assets
Forward exchange contracts $ - $ 909 $ - $ 909
$ - $ 909 $ - $ 909

Liabilities
Forward exchange contracts $ - $ 24 $ - $ 24
$ - $ 24 $ - $ 24

December 31, 2018
Level 1 Level 2 Level 3 Total
Assets
Forward exchange contracts $ - $ 729 $ - $ 729
$ - $ 729 $ - $ 729

Liabilities
Forward exchange contracts $ - $ 5 $ - $ 5
$ - $ 5 $ - $ 5


	September 30, 2020
	Level 1		Level 2		Level 3		Total

Assets
Forward exchange contracts	$	-	$	125	$	-	$	125
	$	-	$	125	$	-	$	125

Liabilities
Forward exchange contracts	$	-	$	813	$	-	$	813
	$	-	$	813	$	-	$	813

	December 31, 2019
	Level 1		Level 2		Level 3		Total

Assets
Forward exchange contracts	$	-	$	226	$	-	$	226
	$	-	$	226	$	-	$	226

Liabilities
Forward exchange contracts	$	-	$	181	$	-	$	181
	$	-	$	181	$	-	$	181

Derivative financial instruments are recorded at fair value based on current market pricing models. No nonrecurring fair value measurements existed at September 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

NOTE 9. EARNINGS (LOSS) PER SHARE

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

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


									Three Months Ended				Nine Months Ended
	Three Months Ended				Nine Months Ended				September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Weighted average shares outstanding - basic		29,876		29,739		29,841		29,939		29,983		29,876		29,854		29,841
Effect of dilutive stock awards		1,201		427		1,158		223		1,003		1,201		-		1,158
Weighted average shares outstanding - diluted		31,077		30,166		30,999		30,162		30,986		31,077		29,854		30,999

Net income per share:
Net income (loss) per share:
Basic	$	0.12	$	0.14	$	0.22	$	0.13	$	0.04	$	0.12	$	(0.05)	$	0.22
Diluted		0.11		0.14		0.21		0.12		0.04		0.11		(0.05)		0.21

For the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, equity awards of ~~798~~927 and ~~986,~~798, respectively, and for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, equity awards of ~~669~~4,384 and ~~1,408,~~669, respectively, were ~~outstanding and~~ anti-dilutive and therefore not included in the calculation of earnings (loss) per share for these periods.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

NOTE 10. STOCK-BASED COMPENSATION PLAN

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

Options Granted:

During the nine months ended September 30, ~~2019,~~2020, the Company issued stock options for an aggregate of ~~188~~613 shares under the 2015 Plan to directors and employees of the Company. Of the ~~188~~613 options issued, 38 options vest in ~~four~~4 equal consecutive quarterly tranches from the date of grant. ~~150~~145 options issued vest in 4 equal annual tranches beginning December 31, 2020. 50 options issued vest in 5 equal annual tranches beginning December 31, 2020. 30 options issued vest in 3 equal annual tranches beginning December 31, 2020. The remaining 350 options issued vest in three equal annual tranches ~~on June 5, 2020, 2021 and 2022.~~beginning August 27, 2021.

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, 2019~~


Number of options		~~188~~ 613
Option vesting period		1 - 35 Years
Grant price (per share)		$~~13.21~~9.99 - $15.00
Dividend yield		~~0.76%~~ 0.79% - 1.00%
Expected volatility (a)		~~41.0%~~ 40.9% - ~~41.2%~~44.2%
Risk-free interest rate		~~1.88%~~ 0.41% - ~~1.93%~~0.65%
Expected life (years) (b)		5.31 - ~~6.00~~6.38
Weighted average fair value (per share)		$~~4.87~~3.72 - ~~$5.13~~$4.35

~~(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.~~

~~Using these assumptions,~~(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.

The grant date fair value of the stock options granted during the nine months ended September 30, ~~2019~~2020 was ~~$952,~~$2,581, which will be recognized over the vesting period of the options.

Stock Award Granted:

On September 14, 2020, the Company issued and granted to the Executive Chairman a stock award of 244 shares under the 2015 Plan which vested immediately. The fair value of the stock award was calculated as of the date of grant using the closing market price. The grant date fair value of the stock award granted during the nine months ended September 30, 2020 was $3,314, which was recognized immediately.

Market Condition Restricted Shares Granted:

On ~~January 7, 2019,~~August 27, 2020, the Company issued and granted to an employee a restricted stock award of ~~350~~100 restricted shares under the 2015 Plan, ~~that~~of which 100 restricted shares will vest ~~as follows: (A) the stock award will vest and become nonforfeitable~~ if, on or before ~~January 7, 2024,~~August 27, 2023, the ~~closing price~~Fair Market Value (as defined in the Plan) of the Company’s common stock shall have equaled or exceeded $15.00 per share for twenty consecutive trading days (such 20th day being the “Price Trigger Date”); and (B) once the Price Trigger Date occurs, (i) 117 shares of the Company’s common stock shall vest on each of the first and second anniversary of the Price Trigger Date; and (ii) 116 shares of the Company’s common stock shall vest on the third anniversary of the Price Trigger Date.days. For computing the fair value of the ~~350~~100 restricted shares with a market condition, the fair value of ~~each~~the restricted stock award grant has been estimated as of the date of grant using the Monte-Carlo pricing model with the assumptions below.

On January 7, 2019, the Company issued and granted to an employee a restricted stock award of 150 restricted shares under the 2015 Plan, that will vest as follows: (A) the stock award will vest and become nonforfeitable if, on or before January 7, 2024, the closing price of the Company’s common stock shall have equaled or exceeded $15.00 per share for twenty consecutive trading days (such 20th day being the Price Trigger Date); and (B) once the Price Trigger Date occurs, the shares shall equally vest on each of the first, second, third and fourth anniversary of the Price Trigger Date. For computing the fair value of the 150 restricted shares with a market condition, the fair value of each restricted stock award grant has been estimated as of the date of grant using the Monte-Carlo pricing model with the assumptions below.

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

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 purchase price allocation, excess or obsolete inventory, valuation of deferred tax assets, and valuation of goodwill, 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 leases from the adoption of Accounting Standards Codification Topic 842. 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, ~~2018.~~2019.

Accounting Pronouncements Issued Not Yet Adopted

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

23
‎

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

Results of Operations

Condensed Consolidated Three Months Ended September 30, ~~2019~~2020 Compared to Condensed Consolidated Three Months Ended September 30, ~~2018~~2019

The following presents a discussion of condensed consolidated operations for the three months ended September 30, ~~2019,~~2020, compared with the condensed consolidated three months ended September 30, ~~2018.~~2019.

~~Sales~~


	Three Months Ended
	September 30, 2020		September 30, 2019

Sales
Domestic sales	$	34,686	$	28,794
International sales		29,805		31,409
Total sales		64,491		60,203

Cost of goods sold		42,822		39,646
Gross profit		21,669		20,557

Operating expenses
Selling, general and administrative		18,674		16,443
Transaction costs		1,440		37

Total operating expenses		20,114		16,480

Operating income		1,555		4,077

Other income (expense)
Interest expense, net		(232)		(353)
Other, net		449		(420)

Total other income (expense), net		217		(773)

Income before income tax		1,772		3,304
Income tax expense (benefit)		589		(188)
Net income	$	1,183	$	3,492

Sales

Consolidated sales increased ~~$4,517,~~$4,288, or ~~8.1%~~7.1%, to $64,491 during the three months ended September 30, 2020, compared to consolidated sales of $60,203 during the three months ended September 30, ~~2019, compared to consolidated sales of $55,686 during the three months ended September 30, 2018.~~ 2019. The increase in sales was attributable to the increase in the quantity of new and existing ~~climb, mountain, and ski products sold during the period. These increases were partially offset by a decrease in the quantity of new and existing~~ sport products sold ~~during the period and a decrease~~of $8,676. We also experienced an increase in sales of ~~$773~~$279 due to the ~~strengthening~~weakening of the U.S. dollar against foreign currencies during the three months ended September 30, ~~2019~~2020 compared to the prior period.

Consolidated domestic sales increased $2,626, or 10.0%, to $28,794 during the three months ended September 30, 2019, compared to consolidated domestic sales of $26,168 during the three months ended September 30, 2018. The increase in domestic sales was attributable to an increase in the quantity of new and existing climb and ski products sold during the three months ended September 30, 2019. These We believe these increases were partially offset by ~~a decrease in the quantity of new and existing sport products sold during the period.~~

Consolidated international sales increased $1,891, or 6.4%, to $31,409 during the three months ended September 30, 2019, compared to consolidated international sales of $29,518 during the three months ended September 30, 2018. The increase in international sales was attributablelower consumer demand related to the ~~increase~~COVID-19 pandemic, which drove a decrease in the quantity of new and existing climb, mountain, and ski products sold during the period. ~~These increases were partially offset by a decrease~~

Consolidated domestic sales increased $5,892, or 20.5%, to $34,686 during the three months ended September 30, 2020, compared to consolidated domestic sales of $28,794 during the three months ended September 30, 2019. The increase in sales was attributable to the increase in the quantity of new and existing sport products sold ~~during~~of $7,573. We believe the ~~period and~~increase in domestic sales was partially offset by lower consumer demand related to the COVID-19 pandemic, which drove a decrease in the quantity of new and existing climb, mountain, and ski products sold during the period.

Consolidated international sales decreased $1,604, or 5.1%, to $29,805 during the three months ended September 30, 2020, compared to consolidated international sales of ~~$773~~$31,409 during the three months ended September 30, 2019. We believe the decrease in international sales was attributable to lower consumer demand related to the COVID-19 pandemic, which drove a decrease in the

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

quantity of new and existing climb, mountain, and ski products sold during the period. The decrease was partially offset by an increase in the quantity of new and existing sport products sold of $1,103 and an increase in sales of $279 due to the ~~strengthening~~weakening of the U.S. dollar against foreign currencies during the three months ended September 30, ~~2019~~2020 compared to the prior period.

~~CLARUS CORPORATION~~

~~MANAGEMENT DISCUSSION AND ANALYSIS~~

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

Cost of Goods Sold

Consolidated cost of goods sold increased ~~$3,817,~~$3,176, or ~~10.7%~~8.0%, to $42,822 during the three months ended September 30, 2020, compared to consolidated cost of goods sold of $39,646 during the three months ended September 30, ~~2019, compared to consolidated cost of goods sold of $35,829 during the three months ended September 30, 2018.~~2019. The increase in cost of goods sold was primarily attributable to an increase in the number of units ~~sold and the mix of higher cost products~~ sold.

Gross Profit

Consolidated gross profit increased ~~$700,~~$1,112 or ~~3.5%~~5.4%, to $21,669 during the three months ended September 30, 2020, compared to consolidated gross profit of $20,557 during the three months ended September 30, ~~2019, compared to consolidated~~2019. Consolidated gross ~~profit of $19,857~~margin was 33.6% during the three months ended September 30, ~~2018. Consolidated~~2020, compared to a consolidated gross margin ~~was~~of 34.1% during the three months ended September 30, ~~2019, compared to a consolidated gross margin of 35.7% during the three months ended September 30, 2018.~~2019. Consolidated gross margin during the three months ended September 30, ~~2019~~2020, decreased compared to the prior year due to an unfavorable ~~mix in lower margin channel distribution~~impacts on our supply chain and logistic activities due to the ~~negative impacts of foreign currency.~~COVID-19 pandemic.

Selling, General and Administrative

Consolidated selling, general, and administrative expenses increased ~~$670,~~$2,231, or ~~4.2%~~13.6%, to ~~$16,443~~$18,674 during the three months ended September 30, ~~2019,~~2020, compared to consolidated selling, general and administrative expenses of ~~$15,773~~$16,443 during the three months ended September 30, ~~2018.~~2019. The increase in selling, general and administrative expenses ~~was attributable~~reflect an increase of stock compensation of $3,526 during the three months ended September 30, 2020 compared to the ~~Company’s continued investment~~prior year. The increase was partially offset by the cost-saving initiatives implemented in response to the ~~brand~~COVID-19 pandemic, primarily related ~~activities of~~to reductions within sales, marketing, research and development, and ~~direct-to-consumer and~~brand supporting activities.

Transaction Costs

Consolidated transaction expense increased to $1,440 during the three months ended September 30, 2020, compared to consolidated transaction costs ~~incurred associated with our warehousing activities. Stock compensation also decreased $234~~of $37 during the three months ended September 30, 2019, which consisted of expenses related to the Company’s various acquisition efforts, including acquiring the Barnes Purchased Assets.

Interest Expense, net

Consolidated interest expense, net during the three months ended September 30, 2020 remained relatively consistent with consolidated interest expense, net, during the three months ended September 30, 2019.

Other, net

Consolidated other, net, income increased $869, or 206.9%, to $449 during the three months ended September 30, 2020, compared to consolidated other, net expense of $420 during the three months ended September 30, 2019. The increase in other, net, was primarily attributable to an increase in remeasurement gains recognized on the Company’s foreign denominated accounts receivable and accounts payable. This decrease was partially offset by losses on mark-to-market adjustments on non-hedged foreign currency contracts.

Income Taxes

Consolidated income tax expense increased $777, or 413.3%, to $589 during the three months ended September 30, 2020, compared to a consolidated income tax benefit of $188 during the same period in 2019. Our effective income tax rate was 33.2% for the three months ended September 30, 2020, and was higher compared to the statutory tax rates due to permanent book to tax differences primarily related to incentive stock options. For the three months ended September 30, 2019, our effective income tax rate was 5.7% and was lower compared to the statutory tax rates due to a stock compensation windfall.

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

Results of Operations

Condensed Consolidated Nine Months Ended September 30, 2020 Compared to Condensed Consolidated Nine Months Ended September 30, 2019

The following presents a discussion of condensed consolidated operations for the nine months ended September 30, 2020, compared with the condensed consolidated nine months ended September 30, 2019.


	Nine Months Ended
	September 30, 2020		September 30, 2019

Sales
Domestic sales	$	83,493	$	87,805
International sales		64,567		80,610
Total sales		148,060		168,415

Cost of goods sold		97,243		109,810
Gross profit		50,817		58,605

Operating expenses
Selling, general and administrative		50,537		51,215
Restructuring charge		-		13
Transaction costs		1,870		124

Total operating expenses		52,407		51,352

Operating (loss) income		(1,590)		7,253

Other expense
Interest expense, net		(800)		(978)
Other, net		324		(260)

Total other expense, net		(476)		(1,238)

(Loss) income before income tax		(2,066)		6,015
Income tax benefit		(542)		(570)
Net (loss) income	$	(1,524)	$	6,585

Sales

Consolidated sales decreased $20,355, or 12.1%, to $148,060 during the nine months ended September 30, 2020, compared to consolidated sales of $168,415 during the nine months ended September 30, 2019. We believe lower consumer demand related to the COVID-19 pandemic drove a decrease in the quantity of new and existing climb, mountain, and ski products sold during the period. We also experienced a decrease in sales of $297 due to the strengthening of the U.S. dollar against foreign currencies during the nine months ended September 30, 2020 compared to the prior period. These decreases were partially offset by an increase in the quantity of new and existing sport products sold of $8,282.

Consolidated domestic sales decreased $4,312, or 4.9%, to $83,493 during the nine months ended September 30, 2020, compared to consolidated domestic sales of $87,805 during the nine months ended September 30, 2019. We believe the decrease in domestic sales was attributable to lower consumer demand related to the COVID-19 pandemic, which drove a decrease in the quantity of new and existing climb, mountain, and ski products sold during the period. This decrease was partially offset by an increase in the quantity of new and existing sport products sold of $9,622.

Consolidated international sales decreased $16,043, or 19.9%, to $64,567 during the nine months ended September 30, 2020, compared to consolidated international sales of $80,610 during the nine months ended September 30, 2019. We believe the decrease in

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

international sales was attributable to lower consumer demand related to the COVID-19 pandemic, which drove a decrease in the quantity of new and existing climb, mountain, and ski products sold during the period. We also experienced a decrease in the quantity of new and existing sport products sold of $1,340 and a decrease in sales of $297 due to the strengthening of the U.S. dollar against foreign currencies during the nine months ended September 30, 2020 compared to the prior period.

Cost of Goods Sold

Consolidated cost of goods sold decreased $12,567, or 11.4%, to $97,243 during the nine months ended September 30, 2020, compared to consolidated cost of goods sold of $109,810 during the nine months ended September 30, 2019. The decrease in cost of goods sold was primarily attributable to a decrease in the number of units sold due to lower consumer demand related to the COVID-19 pandemic.

Gross Profit

Consolidated gross profit decreased $7,788 or 13.3%, to $50,817 during the nine months ended September 30, 2020, compared to consolidated gross profit of $58,605 during the nine months ended September 30, 2019. Consolidated gross margin was 34.3% during the nine months ended September 30, 2020, compared to a consolidated gross margin of 34.8% during the nine months ended September 30, 2019. Consolidated gross margin during the nine months ended September 30, 2020, decreased compared to the prior year due to unfavorable impacts on our supply chain and logistic activities due to the COVID-19 pandemic, along with negative impacts from foreign currency and tariffs.

Selling, General and Administrative

Consolidated selling, general, and administrative expenses decreased $678, or 1.3%, to $50,537 during the nine months ended September 30, 2020, compared to consolidated selling, general and administrative expenses of $51,215 during the nine months ended September 30, 2019. The decrease in selling, general and administrative expenses reflect the cost-saving initiatives implemented in response to the COVID-19 pandemic, primarily related to reductions within sales, marketing, and logistics. The decrease was partially offset by an increase of stock compensation of $3,187 during the nine months ended September 30, 2020 compared to the prior year.

Restructuring Charges

Consolidated restructuring expense decreased to $0 during the ~~three~~nine months ended September 30, ~~2019,~~2020, compared to consolidated restructuring expense of ~~$22~~$13 during the ~~three~~nine months ended September 30, ~~2018.~~2019. Restructuring expenses incurred during the ~~three~~nine months ended September 30, ~~2018,~~2019, 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~~increased to ~~$37~~$1,870 during the ~~three~~nine months ended September 30, ~~2019,~~2020, compared to consolidated transaction costs of ~~$50~~$124 during the ~~three~~nine months ended September 30, ~~2018,~~2019, which consisted of expenses related to the Company’s various acquisition ~~of Sierra.~~efforts, including acquiring the Barnes Purchased Assets.

Interest Expense, net

Consolidated interest expense, net ~~increased $50, or 16.5%, to $353~~ during the ~~three~~nine months ended September 30, ~~2019, compared to~~2020 remained relatively consistent with consolidated interest expense, net, ~~of $303~~ during the ~~three~~nine months ended September 30, ~~2018. Interest expense recognized~~2019.

Other, net

Consolidated other, net, increased $584, or 224.6%, to income of $324 during the ~~three~~nine months ended September 30, ~~2019 was primarily associated with the average outstanding debt amounts during the period.~~

~~Other, net~~

~~Consolidated other, net, decreased $522, or 511.8%, to expense of $420 during the three months ended September 30, 2019,~~2020, compared to consolidated other, net ~~income~~expense of ~~$102~~$260 during the ~~three~~nine months ended September 30, ~~2018.~~2019. The ~~decrease~~increase in other, net, was primarily attributable to an increase in remeasurement losses recognized on the Company’s foreign denominated accounts receivable and accounts payable. This decrease was partially offset by gains on mark-to-market adjustments on non-hedged foreign currency contracts. During the three months ended September 30, 2018, the income was primarily attributable to an increase in remeasurement gains recognized on the Company’s foreign denominated accounts receivable and accounts payable. This increase was partially offset by losses on mark-to-market adjustments on non-hedged foreign currency contracts.

~~CLARUS CORPORATION~~

~~MANAGEMENT DISCUSSION AND ANALYSIS~~

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

Income Taxes

Consolidated income tax benefit decreased $28, or 4.9%, to ~~$188~~$542 during the ~~three~~nine months ended September 30, ~~2019,~~2020, compared to a consolidated income tax benefit of ~~$316~~$570 during the same period in 2018. The tax expense recorded during the three months ended September 30, 2019 includes a release of certain valuation allowances on the deferred tax assets due to projected taxable income for the current year.

2019. Our effective income tax rate was ~~5.7%~~26.2% for the ~~three~~nine months

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

ended September 30, 2020, and was higher compared to the statutory tax rates due to permanent book to tax differences primarily related to incentive stock options. For the nine months ended September 30, 2019, ~~compared to 8.3% for the same period in 2018. The primary reasons for the~~our effective income tax rate ~~changes are~~was 9.5% and is lower compared to the statutory tax rates due to ~~differing levels of income before income tax, partial~~a discrete benefit associated with a release of ~~the valuation allowance on the deferred~~a tax ~~assets due to current year income, and discrete charges recorded during the respective periods.~~reserve. 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

~~CLARUS CORPORATION~~

~~MANAGEMENT DISCUSSION AND ANALYSIS~~

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

~~Results of Operations~~

Condensed Consolidated Nine Months Ended September 30, ~~2019~~2020 Compared to Condensed Consolidated Nine Months Ended September 30, ~~2018~~2019

~~The following presents a discussion of condensed consolidated operations for the nine months ended September 30, 2019, compared with the condensed consolidated nine months ended September 30, 2018.~~

~~Sales~~

Consolidated sales increased $13,581, or 8.8%, to $168,415 during the nine months ended September 30, 2019, compared to consolidated sales of $154,834 during the nine months ended September 30, 2018. The increase in sales was attributable to the increase in the quantity of new and existing climb, mountain, and ski products sold during the period. These increases were partially offset by a decrease in the quantity of new and existing sport products sold during the period and a decrease in sales of $1,906 due to the strengthening of the U.S. dollar against foreign currencies during the nine months ended September 30, 2019 compared to the prior period.

Consolidated domestic sales increased $8,138, or 10.2%, to $87,805 during the nine months ended September 30, 2019, compared to consolidated domestic sales of $79,667 during the nine months ended September 30, 2018. The increase in domestic sales was attributable to an increase in the quantity of new and existing climb, mountain, and ski products sold during the nine months ended September 30, 2019. These increases were partially offset by a decrease in the quantity of new and existing sport products sold during the period.

Consolidated international sales increased $5,443, or 7.2%, to $80,610 during the nine months ended September 30, 2019, compared to consolidated international sales of $75,167 during the nine months ended September 30, 2018. The increase in international sales was attributable to the increase in the quantity of new and existing climb, mountain, ski, and sport products sold during the period. These increases were partially offset by a decrease in sales of $1,906 due to the strengthening of the U.S. dollar against foreign currencies during the nine months ended September 30, 2019 compared to the prior period.

~~CLARUS CORPORATION~~

~~MANAGEMENT DISCUSSION AND ANALYSIS~~

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

~~Cost of Goods Sold~~

Consolidated cost of goods sold increased $8,520, or 8.4%, to $109,810 during the nine months ended September 30, 2019, compared to consolidated cost of goods sold of $101,290 during the nine months ended September 30, 2018. The increase in cost of goods sold 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 $5,061, or 9.5%, to $58,605 during the nine months ended September 30, 2019, compared to consolidated gross profit of $53,544 during the nine months ended September 30, 2018. Consolidated gross margin was 34.8% during the nine months ended September 30, 2019, compared to a consolidated gross margin of 34.6% during the nine months ended September 30, 2018. Consolidated gross margin during the nine months ended September 30, 2019, increased compared to the prior year due to a favorable product mix in higher margin products. Gross margin during the nine months ended September 30, 2018 included a decrease in gross margin of 0.7% due to the sale of inventory that was recorded at its fair value in purchase accounting.

~~Selling, General and Administrative~~

Consolidated selling, general, and administrative expenses increased $2,523, or 5.2%, to $51,215 during the nine months ended September 30, 2019, compared to consolidated selling, general and administrative expenses of $48,692 during the nine months ended September 30, 2018. The increase in selling, general and administrative expenses was attributable to the Company’s continued investment in the brand related activities of sales, marketing and research and development in supporting its strategic initiatives around new product introduction and increasing brand equity. Stock compensation also increased $179 during the nine months ended September 30, 2019 compared to the prior year.

~~Restructuring Charges~~

Consolidated restructuring expense decreased $73, or 84.9%, to $13 during the nine months ended September 30, 2019, compared to consolidated restructuring expense of $86 during the nine months ended September 30, 2018. Restructuring expenses incurred during the nine months ended September 30, 2019 and 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 $124 during the nine months ended September 30, 2019, compared to consolidated transaction costs of $383 during the nine months ended September 30, 2018, which consisted of expenses related to the Company’s acquisition of Sierra.

~~Interest Expense, net~~

Consolidated interest expense, net decreased $42, or 4.1%, to $978 during the nine months ended September 30, 2019, compared to consolidated interest expense, net, of $1,020 during the nine months ended September 30, 2018. Interest expense recognized during the nine months ended September 30, 2019 was primarily associated with the average outstanding debt amounts during the period. Interest expense recognized during the nine months ended September 30, 2018 was primarily attributable to the write-off of previously capitalized origination costs and interest expense associated with the average outstanding debt amounts during the period.

~~Other, net~~

Consolidated other, net, decreased $291, or 938.7%, to expense of $260 during the nine months ended September 30, 2019, compared to consolidated other, net income of $31 during the nine months ended September 30, 2018. The decrease in other, net, was primarily attributable to an increase in remeasurement losses recognized on the Company’s foreign denominated accounts receivable and accounts payable. This decrease was partially offset by gains on mark-to-market adjustments on non-hedged foreign currency contracts. During the nine months ended September 30, 2018, the income was offset by losses related to recognition of cumulative translation adjustments due to the substantial liquidation of a foreign entity.

~~CLARUS CORPORATION~~

~~MANAGEMENT DISCUSSION AND ANALYSIS~~

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

~~Income Taxes~~

Consolidated income tax benefit increased $211, or 58.8%, to $570 during the nine months ended September 30, 2019, compared to a consolidated income tax benefit of $359 during the same period in 2018. The tax expense recorded during the nine months ended September 30, 2019 includes a discrete benefit associated with a release of a tax reserve of $63, a release of certain valuation allowances of $1,300, and a discrete benefit associated with stock compensation windfall for $590.

Our effective income tax rate was 9.5% for the nine months ended September 30, 2019, compared to 10.6% for the same period in 2018. The primary reasons for the effective income tax rate changes are due to differing levels of income before income tax, release of a partial valuation allowance of the deferred tax assets due to current year taxable income, 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, 2019 Compared to Condensed Consolidated Nine Months Ended September 30, 2018~~

~~The following presents a discussion of cash flows for the condensed consolidated nine months ended September 30, 2019 compared with the condensed consolidated nine months ended September 30, 2018.~~ 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.~~facility which had approximately $38,900 available to borrow at September 30, 2020. We believe that our liquidity requirements for at least the next 12 months will be adequately covered by cash provided by operations and our existing revolving credit facility. However, as the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs. The COVID-19 pandemic has negatively affected the U.S. and global economies, disrupted global supply chains, and resulted in significant travel and transport restrictions and disruption of financial markets. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, ability to meet debt covenants, access to sources of liquidity and financial condition. Given the economic uncertainty as a result of the pandemic, we have taken actions to improve our current liquidity position, including drawing on the credit facility, suspending share repurchases and cash dividends, postponing nonessential capital expenditures, reducing operating costs, modulating production in line with demand, initiating workforce reductions and furloughs, and substantially reducing discretionary spending.

Further, we borrowed $20,000 under the term loan portion of the Credit Agreement to increase our overall liquidity. The Company is required to repay the term loan through quarterly payments of $1,000 each beginning with September 30, 2020, and any remaining obligations will be repaid in full on the maturity date of the Credit Agreement of May 3, 2024.

Additionally, during the three months ended September 30, 2020, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with three existing stockholders of the Company. Pursuant to the Securities Purchase Agreement, the Company sold its common stock in a registered direct offering (the “Offering”). The net proceeds to the Company from the Offering were $11,151, after deducting estimated Offering expenses payable by the Company, and were used to pay down amounts outstanding on our revolving loan commitment. The Offering was made pursuant to the Company’s effective registration statement on Form S-3 (File No. 333-218751), previously filed with and declared effective by the Securities and Exchange Commission

At September 30, ~~2019,~~2020, we had total cash of ~~$1,851,~~$17,027, compared to a cash balance of ~~$2,486~~$1,703 at December 31, ~~2018,~~2019, which was substantially controlled by the Company’s U.S. entities. At September 30, ~~2019,~~2020, the Company had ~~$1,606~~$6,093 of the ~~$1,851~~$17,027 in cash held by foreign entities, of which ~~$385~~$762 is considered permanently reinvested.

Nine Months Ended
September 30, 2019 September 30, 2018
Net cash provided by operating activities $ 5,635 $ 7,612
Net cash used in investing activities (2,818 ) (2,194 )
Net cash used in financing activities (3,379 ) (4,285 )
Effect of foreign exchange rates on cash (73 ) 16
Change in cash (635 ) 1,149
Cash, beginning of period 2,486 1,856
Cash, end of period $ 1,851 $ 3,005

The following presents a discussion of cash flows for the condensed consolidated nine months ended September 30, 2020 compared with the condensed consolidated nine months ended September 30, 2019.

Nine Months Ended
September 30, 2020
September 30, 2019
Net cash provided by operating activities
$
21,048
$
5,635
Net cash used in investing activities
(33,779)
(2,818)
Net cash provided by (used in) financing activities
27,956
(3,379)
Effect of foreign exchange rates on cash
99
(73)
Change in cash
15,324
(635)
Cash, beginning of period
1,703
2,486
Cash, end of period
$
17,027
$
1,851

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 $21,048 during the nine months ended September 30, 2020, compared to $5,635 during the nine months ended September 30, ~~2019, compared to $7,612 during the nine months ended September 30, 2018.~~2019. The ~~decrease~~increase in net cash provided by operating activities during ~~2019~~2020 is primarily due to an increase in net operating assets, ~~net of assets acquired~~ or non-cash working capital, of ~~$4,972,~~$20,915, and stock compensation of $3,187, partially offset by ~~an increase~~a decrease in net income during the nine months ended September 30, ~~2019,~~2020, compared to the same period in ~~2018.~~2019.

Free cash flow, defined as net cash provided by operating activities less capital expenditures, of ~~$2,797~~$17,442 was generated during the nine months ended September 30, ~~2019~~2020 compared to ~~$5,758~~$2,797 generated during the same period in ~~2018.~~2019. 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, 2020		September 30, 2019

Net cash provided by operating activities	$	21,048	$	5,635
Purchase of property and equipment		(3,606)		(2,838)
Free cash flow	$	17,442	$	2,797

~~CLARUS CORPORATION~~

~~MANAGEMENT DISCUSSION AND ANALYSIS~~

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

Nine Months Ended
September 30, 2019 September 30, 2019
Net cash provided by operating activities $ 5,635 $ 7,612
Purchase of property and equipment (2,838 ) (1,854 )
Free cash flow $ 2,797 $ 5,758

Net Cash From Investing Activities

Consolidated net cash used in investing activities was $33,779 during the nine months ended September 30, 2020, compared to $2,818 during the nine months ended September 30, ~~2019, compared to $2,194 during the nine months ended September 30, 2018.~~2019. The increase in cash used during the nine months ended September 30, ~~2019~~2020 is due to a deposit the Company paid to be applied to the purchase of the assets of the Barnes brand as well as an increase in purchases of property and equipment, compared to the same period in ~~2018.~~2019.

Net Cash From Financing Activities

Consolidated net cash ~~used in~~provided by financing activities was $27,956 during the nine months ended September 30, 2020, compared to consolidated net cash used of $3,379 during the nine months ended September 30, ~~2019, compared to $4,285~~2019. The increase in cash provided during the nine months ended September 30, ~~2018. The decrease in cash used during the nine months ended September 30, 2019~~2020 compared to the same period in ~~2018~~2019 was primarily due to the proceeds of $20,000 borrowed under the term loan and the net proceeds from the Offering of $11,151. These increases were partially offset by net repayments to the revolving line of credit and ~~was partially offset by dividend payments.~~repayments of the term loan.

Net Operating Loss

As of December 31, ~~2018,~~2019, the Company had net operating loss ~~(“NOL”)~~ and research and experimentation credit for U.S. federal income tax purposes of ~~$141,067~~$131,621 and ~~$3,791,~~$4,250, respectively. The Company believes its U.S. Federal NOL will offset some of 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. ~~None~~$131,621 of ~~the NOL~~net operating losses available to offset taxable income ~~will~~does not expire until ~~2021~~2022 or later, subject to compliance with Section 382 of the Internal Revenue Code of 1986, as amended.

As of December 31, ~~2018,~~2019, the Company’s gross deferred tax asset was ~~$47,922.~~$43,945. The Company has recorded a valuation allowance of ~~$42,122,~~$28,632, resulting in a net deferred tax asset of ~~$5,800,~~$15,313, before deferred tax liabilities of ~~$8,719.~~$8,633. The Company has provided a valuation allowance against a portion of the net deferred tax assets as of September 30, 2020 and December 31, ~~2018,~~2019, 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 Internal Revenue Code of 1986 (“Code”), as amended.

Credit Agreement

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

permits the Borrowers, subject to certain requirements, to arrange with lenders for an aggregate of up to $50,000 of additional revolving and/or term loan commitments (both of which are currently uncommitted), for potential aggregate revolving and term loan commitments under the Credit Agreement of up to $150,000. The Credit Agreement matures on May 3, 2024.

As of September 30, ~~2019,~~2020, the Company had drawn approximately ~~$24,908~~ $21,066 of the $60,000 revolving ~~loan commitment, and none of the $40,000 term~~ loan commitment that was available for borrowing under the Credit ~~Agreement.~~ Agreement, and $19,000 outstanding under the term loan commitment. As of September 30, ~~2019,~~2020, the interest rate for ~~such loans~~each loan was ~~3.5625%~~1.6875%.

~~CLARUS CORPORATION~~

~~MANAGEMENT DISCUSSION AND ANALYSIS~~

( On April 30, 2020, the Company borrowed $20,000 under the term loan facility and used the proceeds to pay down amounts outstanding under the revolving portion of the Credit Agreement. The Company is required to repay the term loan through quarterly payments of $1,000 each beginning with September 30, 2020, and any remaining obligations will be repaid in ~~thousands, except per share amounts)~~

~~On May 3, 2019, concurrent with entering into~~full on the maturity date of the Credit Agreement of May 3, 2024.

The Credit Agreement contains restrictions on the Company’s ~~previous credit facility~~ability to pay dividends or make distributions or other restricted payments if certain conditions in the Credit Agreement are not fulfilled. The Credit Agreement also includes other customary affirmative and negative covenants, including financial covenants relating to the Company’s consolidated total leverage ratio and fixed charge coverage ratio. The Company was in compliance with ~~JPMorgan Chase Bank, N.A., which provided for a revolving commitment~~the debt covenants set forth in the Credit Agreement as of ~~up to $75,000, was paid in full and terminated.~~September 30, 2020.

Off-Balance Sheet Arrangements

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has not been any material change in the market risk disclosure contained in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

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-15I and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of September 30, ~~2019,~~2020, 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, ~~2019,~~2020, were effective.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the nine months ended September 30, ~~2019,~~2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

CLARUS CORPORATION

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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.

ITEM 1A. RISK FACTORS

~~There~~Except for the risk factors discussed below and the risk factors presented in Item 1A. Risk Factors of our Quarterly Report for the quarterly period ended March 31, 2020, 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, ~~2018.~~2019.

~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~Breaches of our information systems could adversely affect our reputation, disrupt our operations, and result in increased costs and loss of revenue.

~~Unregistered Sales~~There have been an increasing number of ~~Equity Securities~~recent global cyber security incidents affecting companies, including us. These incidents could cause operational failures or compromise sensitive or confidential corporate and personal data. Because we are interconnected with and dependent on third-party vendors, we could also be adversely affected if we or any of our vendors are subject to a successful cyber-attack or other information security event. Such cyber security incidents may result in the loss or compromise of customer, financial, or operational data; disruption of billing, collections, or normal operating activities; disruption of electronic monitoring and control of operational systems; and delays in financial reporting and other management functions, and our acquisition activities could increase such risk. There can be no guarantees that such a cyber incident would not result in the unauthorized access to or the disclosure of customer data, our trade secrets or other intellectual property, or personal information of our employees. There can be no guarantee that the disclosure of any of this information would not have a material adverse effect on our business, reputation, financial condition, and results of operations. We continually evaluate our systems and may implement further controls and additional preventative actions to further strengthen our systems against attacks. We cannot assure you that such measures will provide absolute security, that we will be

~~The Company did not sell any securities during~~

CLARUS CORPORATION

able to react in a timely manner, or that our remediation efforts following past or future attacks will be successful. Possible impacts associated with a cyber security incident may include, among other things, business interruption, ransom payments, the ~~quarter ended September 30, 2019~~identification of material weaknesses or significant deficiencies, remediation costs related to lost, stolen, or compromised data; repairs to data processing systems; increased cyber security protection costs; reputational damage; and adverse effects on our compliance with privacy and other laws and regulations that ~~were not registered under~~are applicable to us. We have insurance coverage to protect us against losses from certain cyber security incidents, including liability for third-party vendors who mishandle our information. However, there can be no guarantee that every potential loss due to cyber-attack or theft of information has been insured against, nor that the ~~Securities Act~~limits of ~~1933, as amended.~~the insurance we have acquired will be sufficient to cover all such losses.

~~Issuer Repurchases of Equity Securities~~

~~On November 9, 2015,~~Adverse publicity about the Company ~~announced that~~and/or its ~~Board~~brands, including without limitation, through social media or in connection with brand damaging events and/or public perception could negatively impact our business.

Negative claims or publicity involving us, our board of ~~Directors authorized a stock repurchase program that allows~~directors, our brands, our products, services and experiences, consumer data, or any of our key employees, endorsers, or suppliers could seriously damage our reputation and the ~~repurchase~~image of upour brands, regardless of whether such claims are accurate.

Social media, which accelerates and potentially amplifies the scope of negative publicity, can increase the challenges of responding to ~~$30,000,000~~negative claims. Adverse publicity could also damage our reputation and the image of our brands, undermine consumer confidence in us and reduce long-term demand for our products, even if such adverse publicity is unfounded or not material to our operations. If the ~~Company’s outstanding common stock. During the third quarter~~reputation, culture or image of ~~2019, the Company purchased 243,873 shares~~any of ~~the Company’s common stock for $2,662,123 under the Company’s authorized stock repurchase program.~~our brands is tarnished or if we receive negative publicity, then our sales, financial condition and results of operations could be materially and adversely affected.

‎

CLARUS CORPORATION

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, 2019 - $ - - $ 13,455,710
August 1 to 31, 2019 243,873 $ 10.92 243,873 $ 10,793,587
September 1 to 30, 2019 - $ - - $ 10,793,587
Total 243,873

~~CLARUS CORPORATION~~

ITEM 6. EXHIBITS

~~Exhibit~~	~~Description~~
Exhibit		Description
~~31.1~~10.1		Employment Agreement, dated as of August 27, 2020, between Clarus Corporation and Aaron Kuehne (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 1, 2020 and incorporated herein by reference).
10.2		Securities Purchase Agreement, September 25, 2020, by and between Clarus Corporation and the Purchasers thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 29, 2020 and incorporated herein by reference).
10.3		Letter to Brown Advisory Incorporated dated September 25, 2020 (filed as Exhibit 99.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 29, 2020 and incorporated herein by reference).
10.4		Asset Purchase Agreement dated September 30, 2020, by and among Sierra Bullets, L.L.C., as Buyer, and Remington Outdoor Company, Inc., certain of its subsidiaries, as Seller (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 2, 2020 and incorporated herein by reference).
31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2
~~31.2~~	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
32.1
~~32.1~~	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **
32.2
~~32.2~~	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **
101.INS
~~101.INS~~	XBRL Instance Document *
101.SCH
~~101.SCH~~	XBRL Taxonomy Extension Schema Document *
101.CAL
~~101.CAL~~	XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF
~~101.DEF~~	XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB
~~101.LAB~~	XBRL Taxonomy Extension Label Linkbase Document *
101.PRE
~~101.PRE~~	XBRL Taxonomy Extension Presentation Linkbase Document *
*		Filed herewith
**	~~Filed herewith~~

**	Furnished herewith

‎

CLARUS CORPORATION

~~SIGNATURES~~

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~~
		CLARUS CORPORATION
Date: November ~~4, 2019~~9, 2020	~~By:~~	By:	/s/ Warren B. Kanders
		Name:	Warren B. Kanders
		Title:	Executive Chairman
			(Principal Executive Officer)

Date: November 9, 2020	~~By:~~	By:	/s/ Aaron J. Kuehne
		Name:	Aaron J. Kuehne
		Title:	Chief Administrative Officer and
			Chief Financial Officer
			(Principal Financial Officer)
			~~(Principal Accounting Officer)~~


Large accelerated filer	¨	Non-accelerated filer	¨

Accelerated filer	x	Smaller reporting company	x ¨

		Emerging growth company	¨



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

		~~January 7, 2019~~
~~Number issued~~		~~500~~ August 27, 2020

Number issued		100
Vesting period		$15.00 stock price target
Grant price (per share)		$~~10.21~~12.72
~~Expected volatility~~ Dividend yield		~~42.4%~~ 0.79%
Expected volatility		41.1%
Risk-free interest rate		~~2.53%~~ 0.19%
Expected term (years)		~~4.28 - 5.28~~ 0.52
Weighted average fair value (per share)		$~~7.92~~9.91


Net Operating Loss Carryforward Expiration Dates	Net Operating Loss Carryforward Expiration Dates			Net Operating Loss Carryforward Expiration Dates
December 31, 2018
December 31, 2019				December 31, 2019

Expiration Dates December 31,		Net Operating Loss Amount			Net Operating Loss Amount
2021		$	5,495
2022			115,000		$	111,049
2023			5,712			5,712
2024			3,566			3,566
2025 and beyond			11,294			11,294
Total		$	141,067		$	131,621


	Three Months Ended						Nine Months Ended						Three Months Ended				Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018			September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Sales to external customers:
Black Diamond
Domestic sales	$	23,634		$	19,840		$	70,315		$	59,434		$	21,953	$	23,634	$	56,381	$	70,315
International sales		30,118			27,410			73,683			67,796			27,411		30,118		58,980		73,683
Total Black Diamond		53,752			47,250			143,998			127,230			49,364		53,752		115,361		143,998
Sierra
Domestic sales		5,160			6,328			17,490			20,233			12,733		5,160		27,112		17,490
International sales		1,291			2,108			6,927			7,371			2,394		1,291		5,587		6,927
Total Sierra		6,451			8,436			24,417			27,604			15,127		6,451		32,699		24,417
Total sales to external customers		60,203			55,686			168,415			154,834			64,491		60,203		148,060		168,415
Segment operating income:
Black Diamond		5,388			4,639			10,096			6,254			4,035		5,388		1,709		10,096
Sierra		735			1,532			3,814			4,703			4,393		735		8,211		3,814
Total segment operating income		6,123			6,171			13,910			10,957			8,428		6,123		9,920		13,910
Restructuring charge		-			(22	)		(13	)		(86	)		-		-		-		(13)
Transaction costs		(37	)		(50	)		(124	)		(383	)		(1,440)		(37)		(1,870)		(124)
Corporate and other expenses		(2,429	)		(1,985	)		(6,780	)		(6,074	)		(4,984)		(2,429)		(9,316)		(6,780)
Interest expense, net		(353	)		(303	)		(978	)		(1,020	)		(232)		(353)		(800)		(978)
Income before income tax	$	3,304		$	3,811		$	6,015		$	3,394
Income (loss) before income tax													$	1,772	$	3,304	$	(2,066)	$	6,015


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

	September 30, 2020		December 31, 2019
Assets
Current assets
Cash	$	17,027	$	1,703
Accounts receivable, less allowance for credit losses and
doubtful accounts of $1,460 and $494, respectively		42,582		41,628
Inventories		64,897		73,432
Prepaid and other current assets		4,544		3,787
Income tax receivable		532		322
Total current assets		129,582		120,872

Property and equipment, net		22,691		22,919
Other intangible assets, net		13,610		15,816
Indefinite lived intangible assets		41,772		41,630
Goodwill		18,090		18,090
Deferred income taxes		8,728		7,904
Other long-term assets		33,365		3,034
Total assets	$	267,838	$	230,265

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities	$	29,157	$	24,304
Income tax payable		489		260
Current portion of long-term debt		4,000		-
Total current liabilities		33,646		24,564

Long-term debt		37,062		22,670
Deferred income taxes		1,219		1,224
Other long-term liabilities		624		615
Total liabilities		72,551		49,073

Stockholders' Equity
Preferred stock, $.0001 par value per share; 5,000
shares authorized; 0ne issued		-		-
Common stock, $.0001 par value per share; 100,000 shares authorized;
35,021 and 33,615 issued and 31,051 and 29,760 outstanding, respectively		4		3
Additional paid in capital		511,331		492,353
Accumulated deficit		(292,393)		(288,592)
Treasury stock, at cost		(23,789)		(22,269)
Accumulated other comprehensive income (loss)		134		(303)
Total stockholders' equity		195,287		181,192
Total liabilities and stockholders' equity	$	267,838	$	230,265

See accompanying notes to condensed consolidated financial statements.

																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, 2017		32,917	$	3	$	485,285	$	(310,390	)		(2,875	)	$	(12,415	)	$	499		$	162,982
Net income		-		-		-		403			-			-			-			403
Other comprehensive income		-		-		-		-			-			-			714			714
Stock-based compensation expense		-		-		499		-			-			-			-			499
Balance, March 31, 2018		32,917	$	3	$	485,784	$	(309,987	)		(2,875	)	$	(12,415	)	$	1,213		$	164,598
Net loss		-		-		-		(777	)		-			-			-			(777	)
Other comprehensive loss		-		-		-		-			-			-			(292	)		(292	)
Purchase of treasury stock		-		-		-		-			-			(217	)		-			(217	)
Stock-based compensation expense		-		-		656		-			-			-			-			656
Balance, June 30, 2018		32,917	$	3	$	486,440	$	(310,764	)		(2,875	)	$	(12,632	)	$	921		$	163,968
Net income		-		-		-		4,127			-			-			-			4,127
Other comprehensive loss		-		-		-		-			-			-			(247	)		(247	)
Cash dividends ($0.025 per share)		-		-		-		(741	)		-			-			-			(741	)
Purchase of treasury stock		-		-		-		-			(519	)		(4,492	)		-			(4,492	)
Stock-based compensation expense		-		-		912		-			-			-			-			912
Proceeds from exercise of options		327		-		467		-			-			-			-			467
Balance, September 30, 2018		33,244	$	3	$	487,819	$	(307,378	)		(3,394	)	$	(17,124	)	$	674		$	163,994

Balance at December 31, 2018	$	41,694

Impact of foreign currency exchange rates		(147	)

Balance at September 30, 2019	$	41,547

Gross balance at December 31, 2018	$	33,010

Impact of foreign currency exchange rates		(213	)

Gross balance at September 30, 2019	$	32,797

	Foreign Currency Translation Adjustments			Unrealized Gains (Losses) on Cash Flow Hedges			Total
Balance as of December 31, 2018	$	73		$	404		$	477
Other comprehensive (loss) income before reclassifications		(869	)		954			85
Amounts reclassified from other comprehensive income (loss)		-			(783	)		(783	)
Net current period other comprehensive (loss) income		(869	)		171			(698	)
Balance as of September 30, 2019	$	(796	)	$	575		$	(221	)

	Gains reclassified from AOCI to the Condensed Consolidated Statements of Comprehensive Income
Affected line item in the Condensed Consolidated Statements of Comprehensive Income	For the Three Months Ended September 30, 2019			For the Nine Months Ended September 30, 2019
Foreign exchange contracts:
Sales	$	261		$	844
Less: Income tax expense		(95	)		61
Amount reclassified, net of tax	$	356		$	783

Total reclassifications from AOCI	$	356		$	783

	Balance Sheet Classification	September 30, 2019
Assets
Operating lease ROU assets	Other long-term assets	$	1,343

Liabilities
Current operating lease liabilities	Accounts payable and accrued liabilities	$	704
Noncurrent operating lease liabilities	Other long-term liabilities	$	625

Years Ending December 31,	Operating Lease Payments
2019 (excluding the nine months ended September 30, 2019)	$	193
2020		725
2021		339
2022		86
2023 and thereafter		59
Total future lease payments		1,402
Less: amount representing interest		(73	)
Present value of future lease payments		1,329
Less: current lease obligations		(704	)
Long-term lease obligations	$	625

Years Ending December 31,	Future Minimum Lease Payments
2019	$	687
2020		634
2021		243
2022		24
2023		-
Thereafter		-
	$	1,588

					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, 2019		-	$	-		-	$	13,455,710
August 1 to 31, 2019		243,873	$	10.92		243,873	$	10,793,587
September 1 to 30, 2019		-	$	-		-	$	10,793,587
Total		243,873