Results

Clarus Corporation

08/10/2020 | Press release | Distributed by Public on 08/11/2020 03:20

10-Q Filing Q2 2020

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: June 30, 2020

or

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

For the transition period from _________ to _________

Commission File Number: 001-34767

CLARUS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

58-1972600

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

2084 East 3900 South

Salt Lake City, Utah

84124

(Address of principal executive offices)

(Zip code)

(801) 278-5552

(Registrant's telephone number, including area code)

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

Yes xNo ¨

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

Yes xNo ¨

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

Large accelerated filer

¨

Non-accelerated filer

¨

Accelerated filer

x

Smaller reporting company

¨

Emerging growth company

¨

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

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

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $.0001 per share

CLAR

NASDAQ Global Select Market

As of August 5, 2020, there were 29,888,200shares of common stock, par value $0.0001, outstanding.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CLARUS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share amounts)

June 30, 2020

December 31, 2019

Assets

Current assets

Cash

$

21,538

$

1,703

Accounts receivable, less allowance for credit losses and

doubtful accounts of $1,474and $494, respectively

23,895

41,628

Inventories

72,514

73,432

Prepaid and other current assets

4,363

3,787

Income tax receivable

387

322

Total current assets

122,697

120,872

Property and equipment, net

22,720

22,919

Other intangible assets, net

14,279

15,816

Indefinite lived intangible assets

41,634

41,630

Goodwill

18,090

18,090

Deferred income taxes

8,743

7,904

Other long-term assets

2,570

3,034

Total assets

$

230,733

$

230,265

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable and accrued liabilities

$

19,151

$

24,304

Income tax payable

96

260

Current portion of long-term debt

4,000

-

Total current liabilities

23,247

24,564

Long-term debt

26,521

22,670

Deferred income taxes

1,071

1,224

Other long-term liabilities

334

615

Total liabilities

51,173

49,073

Stockholders' Equity

Preferred stock, $.0001par value; 5,000

shares authorized; none issued

-

-

Common stock, $.0001 par value; 100,000shares authorized;

33,757and 33,615issued and 29,888and 29,760outstanding, respectively

3

3

Additional paid in capital

494,793

492,353

Accumulated deficit

(292,757)

(288,592)

Treasury stock, at cost

(22,406)

(22,269)

Accumulated other comprehensive loss

(73)

(303)

Total stockholders' equity

179,560

181,192

Total liabilities and stockholders' equity

$

230,733

$

230,265

See accompanying notes to condensed consolidated financial statements.

CLARUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended

June 30, 2020

June 30, 2019

Sales

Domestic sales

$

20,259

$

28,422

International sales

9,755

18,572

Total sales

30,014

46,994

Cost of goods sold

19,378

31,002

Gross profit

10,636

15,992

Operating expenses

Selling, general and administrative

14,493

17,192

Transaction costs

180

41

Total operating expenses

14,673

17,233

Operating loss

(4,037)

(1,241)

Other income (expense)

Interest expense, net

(257)

(315)

Other, net

406

183

Total other income (expense), net

149

(132)

Loss before income tax

(3,888)

(1,373)

Income tax benefit

(1,145)

(679)

Net loss

(2,743)

(694)

Other comprehensive loss, net of tax:

Foreign currency translation adjustment

367

230

Unrealized loss on hedging activities

(549)

(499)

Other comprehensive loss

(182)

(269)

Comprehensive loss

$

(2,925)

$

(963)

Net loss per share:

Basic

$

(0.09)

$

(0.02)

Diluted

(0.09)

(0.02)

Weighted average shares outstanding:

Basic

29,817

29,898

Diluted

29,817

29,898

See accompanying notes to condensed consolidated financial statements.

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CLARUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

(In thousands, except per share amounts)

Six Months Ended

June 30, 2020

June 30, 2019

Sales

Domestic sales

$

48,807

$

59,011

International sales

34,762

49,201

Total sales

83,569

108,212

Cost of goods sold

54,421

70,164

Gross profit

29,148

38,048

Operating expenses

Selling, general and administrative

31,863

34,772

Restructuring charge

-

13

Transaction costs

430

87

Total operating expenses

32,293

34,872

Operating (loss) income

(3,145)

3,176

Other expense

Interest expense, net

(568)

(625)

Other, net

(125)

160

Total other expense, net

(693)

(465)

(Loss) income before income tax

(3,838)

2,711

Income tax benefit

(1,131)

(382)

Net (loss) income

(2,707)

3,093

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment

(34)

(143)

Unrealized gain (loss) on hedging activities

264

(588)

Other comprehensive income (loss)

230

(731)

Comprehensive (loss) income

$

(2,477)

$

2,362

Net (loss) income per share:

Basic

$

(0.09)

$

0.10

Diluted

(0.09)

0.10

Weighted average shares outstanding:

Basic

29,789

29,824

Diluted

29,789

30,961

See accompanying notes to condensed consolidated financial statements.

CLARUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Six Months Ended

June 30, 2020

June 30, 2019

Cash Flows From Operating Activities:

Net (loss) income

$

(2,707)

$

3,093

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

Depreciation of property and equipment

2,265

2,242

Amortization of intangible assets

1,537

1,777

Amortization of debt issuance costs

154

132

(Gain) loss on disposition of property and equipment

(1)

49

Noncash lease expense

364

333

Stock-based compensation

1,229

1,568

Deferred income taxes

(1,081)

50

Changes in operating assets and liabilities:

Accounts receivable

17,662

3,291

Inventories

969

(8,150)

Prepaid and other assets

(149)

(105)

Accounts payable and accrued liabilities

(5,569)

5,973

Income taxes

(231)

(581)

Net cash provided by operating activities

14,442

9,672

Cash Flows From Investing Activities:

Proceeds from disposition of property and equipment

3

1

Purchase of property and equipment

(2,021)

(1,994)

Net cash used in investing activities

(2,018)

(1,993)

Cash Flows From Financing Activities:

Proceeds from revolving credit facilities

21,089

75,854

Repayments on revolving credit facilities

(33,264)

(81,266)

Repayments of financing and capital leases

-

(31)

Proceeds from issuance of long-term debt

20,000

-

Payment of debt issuance costs

(44)

(557)

Purchase of treasury stock

(137)

(1,505)

Proceeds from exercise of stock options

497

804

Cash dividends paid

(744)

(1,494)

Net cash provided by (used in) financing activities

7,397

(8,195)

Effect of foreign exchange rates on cash

14

(1)

Change in cash

19,835

(517)

Cash, beginning of period

1,703

2,486

Cash, end of period

$

21,538

$

1,969

Supplemental Disclosure of Cash Flow Information:

Cash paid for income taxes

$

266

$

103

Cash paid for interest

$

478

$

498

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Property and equipment purchased with accounts payable

$

456

$

180

Lease liabilities arising from obtaining right of use assets

$

80

$

1,855

Stock dividends

$

714

$

-

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 ($0.025per 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 ($0.025per 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

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 ($0.025per 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 ($0.025per 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

See accompanying notes to condensed consolidated financial statements.

NOT E 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements of Clarus Corporation and subsidiaries (which may be referred to as the 'Company,' 'Clarus,' 'we,' 'us' or 'our') as of June 30, 2020 and December 31, 2019 and for the three and six months ended June 30, 2020 and 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 for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be obtained for the year ending December 31, 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, 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') in May 2010 and changed its name to Black Diamond, Inc. in January 2011. In October 2012, we acquired PIEPS Holding GmbH and its subsidiaries (collectively, 'PIEPS').

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

On August 6, 2018, the Company announced that its Board of Directors approved the initiation of a quarterly cash dividend program of $0.025per share of the Company's common stock (the 'Quarterly Cash Dividend') or $0.10per 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 COVID-19 pandemic, its Board of Directors had temporarily replaced its Quarterly Cash Dividend with a stock dividend and on July 31, 2020, the Company announced that the stock dividend will continue for the quarter ending September 30, 2020. Each record holder of shares of the Company's common stock as of the close of business on August 10, 2020(the 'Record Date') will be entitled to receive 0.0021of a share of the Company's common stock for each share of common stock held on the Record Date. The Company will distribute the stock dividend on August 21, 2020, the distribution date. No fractional shares will be issued, and stockholders will receive cash for such fractional interests based on the closing market price of the Company's common stock on the Record Date. The quarterly stock dividend will have a value of $0.025per share, based on the closing market price on July 30, 2020. The dividend reflects an aggregate distribution of approximately 63shares with a market value of approximately $747.

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, 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 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, negatively impacted our sales and profitability for the first and second quarters of 2020. We also expect an adverse 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 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 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, 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. Estimates are used to 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 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

Accounting Pronouncements not yet adopted

In March 2020, the Financial Accounting Standards Board ('FASB') issued Accounting Standards Update ('ASU') 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional expedients and exceptions to existing guidance on contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as the London Inter-Bank Offered Rate ('LIBOR') which is being phased out in 2021, to alternate reference rates, such as the Secured Overnight Financing Rate ('SOFR'). The standard was effective upon issuance and allowed application to contract changes as early as January 1, 2020. The provisions have impact as contract modifications and other changes occur while LIBOR is phased out. The Company is in the process of evaluating the optional relief guidance provided within this ASU. Management will continue its assessment and monitor regulatory developments during the LIBOR transition period.

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NOTE 2. INVENTORIES

Inventories, as of June 30, 2020 and December 31, 2019, were as follows:

June 30, 2020

December 31, 2019

Finished goods

$

58,920

$

59,452

Work-in-process

5,830

7,474

Raw materials and supplies

7,764

6,506

$

72,514

$

73,432

NOTE 3. PROPERTY AND EQUIPMENT

Property and equipment, net, as of June 30, 2020 and December 31, 2019, were as follows:

June 30, 2020

December 31, 2019

Land

$

3,160

$

3,160

Building and improvements

6,976

6,964

Furniture and fixtures

5,621

5,255

Computer hardware and software

5,482

5,298

Machinery and equipment

22,937

21,578

Construction in progress

1,842

1,690

46,018

43,945

Less accumulated depreciation

(23,298)

(21,026)

$

22,720

$

22,919

NOTE 4. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following table summarizes the balances in goodwill by segment:

Black Diamond

Sierra

Total

Balance at December 31, 2019

$

-

$

18,090

$

18,090

Balance at June 30, 2020

$

-

$

18,090

$

18,090

Indefinite Lived Intangible Assets

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

Balance at December 31, 2019

$

41,630

Impact of foreign currency exchange rates

4

Balance at June 30, 2020

$

41,634

Other Intangible Assets, net

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

Gross balance at December 31, 2019

$

32,917

Impact of foreign currency exchange rates

6

Gross balance at June 30, 2020

$

32,923

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

June 30, 2020

December 31, 2019

Customer lists and relationships

$

25,998

$

25,995

Product technologies

4,715

4,712

Tradename / trademark

1,263

1,263

Core technologies

947

947

32,923

32,917

Less accumulated amortization

(18,644)

(17,101)

$

14,279

$

15,816

NOTE 5. LONG-TERM DEBT

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

June 30, 2020

December 31, 2019

Revolving credit facility (a)

$

9,566

$

22,670

Foreign credit facilities (b)

955

-

Term note (c)

20,000

-

30,521

22,670

Less current portion

(4,000)

-

$

26,521

$

22,670

(a)As of June 30, 2020, the Company had drawn $9,566on the $60,000revolving commitment that was available under the credit agreement with JPMorgan Chase Bank, N.A., with a maturity date of May 3, 2024. The Company pays interest monthly on any borrowings on the Credit Agreement. As of June 30, 2020 and December 31, 2019, the rate was 1.7500% and 3.3125%, respectively.

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 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 June 30, 2020.

(b)A foreign subsidiary of the Company has a revolving credit facility with a financial institution which matures on March 31, 2022. The foreign subsidiary pays interest monthly on any borrowings on the credit facility. As of June 30, 2020, the rate was 1.3864%.

(c)Under the Credit Agreement, the Company had access to a term loan facility that would be available for drawdown until May 3,

2020. On April 30, 2020, the Company borrowed $20,000under such 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 $1,000each 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. The Company pays interest monthly on any borrowings on the Credit Agreement. As of June 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 June 30, 2020, the Company's derivative contracts had remaining maturities of less than one and one-half years. The counterparties to these transactions had both long-term and short-term investment grade credit ratings. The maximum net exposure of the Company's credit risk to the counterparties is generally limited to the aggregate unrealized loss of all contracts with that counterparty. At June 30, 2020, there was no such exposure to the counterparties. The Company's exposure of counterparty credit risk is limited to the aggregate unrealized gain of $458on all contracts at June 30, 2020. The Company's derivative counterparties have strong credit ratings and as a result, the Company does not require collateral to facilitate transactions.

The Company held the following contracts designated as hedging instruments as of June 30, 2020 and December 31, 2019:

June 30, 2020

Notional

Latest

Amount

Maturity

Foreign exchange contracts - Canadian Dollars

$10,333

February 2021

Foreign exchange contracts - Euros

23,562

August 2021

Foreign exchange contracts - Swiss Francs

CHF 194

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

August 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 (loss) income and reclassified to sales in the period the underlying hedged transaction is recognized in earnings. Gains of $294and $302were reclassified to sales during the three months ended June 30, 2020 and 2019, respectively, and $582and $583were reclassified to sales during the six months ended June 30, 2020 and 2019, respectively.

The following table presents the balance sheet classification and fair value of derivative instruments as of June 30, 2020 and December 31, 2019:

Classification

June 30, 2020

December 31, 2019

Derivative instruments in asset positions:

Forward exchange contracts

Prepaid and other current assets

$

449

$

226

Forward exchange contracts

Other long-term assets

$

16

$

-

Derivative instruments in liability positions:

Forward exchange contracts

Accounts payable and accrued liabilities

$

7

$

152

Forward exchange contracts

Other long-term liabilities

$

-

$

29

NOTE 7. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

Accumulated other comprehensive (loss) income ('AOCI') primarily consists of foreign currency translation adjustments and changes in our forward foreign exchange contracts. The following table sets forth the changes in AOCI, net of tax, for the three months ended June 30, 2020:

Foreign Currency Translation Adjustments

Unrealized Gains (Losses) on Cash Flow Hedges

Total

Balance as of March 31, 2020

$

(687)

$

796

$

109

Other comprehensive income (loss) before reclassifications

367

(326)

41

Amounts reclassified from other comprehensive income (loss)

-

(223)

(223)

Net current period other comprehensive income (loss)

367

(549)

(182)

Balance as of June 30, 2020

$

(320)

$

247

$

(73)

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

Foreign Currency Translation Adjustments

Unrealized Gains (Losses) on Cash Flow Hedges

Total

Balance as of March 31, 2019

$

(300)

$

315

$

15

Other comprehensive income (loss) before reclassifications

230

(329)

(99)

Amounts reclassified from other comprehensive income (loss)

-

(170)

(170)

Net current period other comprehensive income (loss)

230

(499)

(269)

Balance as of June 30, 2019

$

(70)

$

(184)

$

(254)

The following table sets forth the changes in AOCI, net of tax, for the six months ended June 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 (loss) income before reclassifications

(34)

706

672

Amounts reclassified from other comprehensive (loss) income

-

(442)

(442)

Net current period other comprehensive (loss) income

(34)

264

230

Balance as of June 30, 2020

$

(320)

$

247

$

(73)

The following table sets forth the changes in AOCI, net of tax, for the six months ended June 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 before reclassifications

(143)

(161)

(304)

Amounts reclassified from other comprehensive loss

-

(427)

(427)

Net current period other comprehensive loss

(143)

(588)

(731)

Balance as of June 30, 2019

$

(70)

$

(184)

$

(254)

The effects on net income of amounts reclassified from unrealized gains on cash flow hedges for foreign exchange contracts for the three and six months ended June 30, 2020 and 2019, were as follows:

Gains reclassified from AOCI to the Consolidated Statements of Comprehensive Income (Loss)

Affected line item in the Consolidated

Three Months Ended

Six Months Ended

Statements of Comprehensive Income (Loss)

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Foreign exchange contracts:

Sales

$

294

$

302

$

582

$

583

Less: Income tax expense

71

132

140

156

Amount reclassified, net of tax

$

223

$

170

$

442

$

427

Total reclassifications from AOCI

$

223

$

170

$

442

$

427

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 asfollows:

Level 1 - inputs to the valuation methodology are quoted market prices for identical assets or liabilities in active markets.

Level 2 - inputs to the valuation methodology include quoted prices in markets that are not active or model inputs that are

observable either directly or indirectly for substantially the full term of the asset or liability.

Level 3 - inputs to the valuation methodology are based on prices or valuation techniques that are unobservable.

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

June 30, 2020

Level 1

Level 2

Level 3

Total

Assets

Forward exchange contracts

$

-

$

465

$

-

$

465

$

-

$

465

$

-

$

465

Liabilities

Forward exchange contracts

$

-

$

7

$

-

$

7

$

-

$

7

$

-

$

7

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 June 30, 2020 and December 31, 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

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Weighted average shares outstanding - basic

29,817

29,898

29,789

29,824

Effect of dilutive stock awards

-

-

-

1,137

Weighted average shares outstanding - diluted

29,817

29,898

29,789

30,961

Net (loss) income per share:

Basic

$

(0.09)

$

(0.02)

$

(0.09)

$

0.10

Diluted

(0.09)

(0.02)

(0.09)

0.10

For the three months ended June 30, 2020 and 2019, equity awards of 4,633and 4,395, respectively, and for the six months ended June 30, 2020 and 2019, equity awards of 4,590and 605, respectively, were anti-dilutive and therefore not included in the calculation of earnings (loss) per share for these periods.

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 500shares. The 2015 Plan will continue in effect until December 2025 unless terminated sooner.

During the six months ended June 30, 2020, the Company issued stock options for an aggregate of 263shares under the 2015 Plan to directors and employees of the Company. Of the 263options issued, 38options vest in fourequal consecutive quarterly tranches from the date of grant. 145options issued vest in fourequal annual tranches beginning December 31, 2020. 50options issued vest in fiveequal annual tranches beginning December 31, 2020. The remaining 30options issued vest in threeequal annual tranches beginning December 31, 2020.

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:

(b)

The grant date fair value of the stock options granted during the six months ended June 30, 2020 was $1,067, which will be recognized over the vesting period of the options.

The total non-cash stock compensation expense related to restricted stock, stock options and stock awards recorded by the Company for the three months ended June 30, 2020 and 2019 was $616and $783, respectively, and for the six months ended June 30, 2020 and 2019 was $1,229and $1,568, respectively. For the three and six months ended June 30, 2020 and 2019, the majority of stock-based compensation costs were classified as selling, general and administrative expenses.

As of June 30, 2020, there were 1,403unvested stock options and unrecognized compensation cost of $4,340related to unvested stock options, as well as 600unvested restricted stock awards and unrecognized compensation costs of $2,518related to unvested restricted stock awards.

NOTE 11. COMMITMENTS AND CONTINGENCIES

The Company is involved in various legal disputes and other legal proceedings that arise from time to time in the ordinary course of business. Based on currently available information, the Company does not believe that it is reasonably possible that the disposition of any of the legal disputes the Company or its subsidiaries is currently involved in will have a material adverse effect upon the Company's consolidated financial condition, results of operations or cash flows. There is a reasonable possibility of loss from contingencies in excess of the amounts accrued by the Company in the accompanying condensed consolidated balance sheets; however, the actual amounts of such possible losses cannot currently be reasonably estimated by the Company at this time. It is possible that, as additional information becomes available, the impact on the Company could have a different effect.

NOTE 12. INCOME TAXES

The Company's U.S. federal statutory tax rate of 21% and its foreign operations that are considered to be permanently reinvested have statutory tax rates of approximately 25%.

As of December 31, 2019, the Company's gross deferred tax asset was $43,945. The Company had recorded a valuation allowance of $28,632, resulting in a net deferred tax asset of $15,313, before deferred tax liabilities of $8,633. The Company has provided a valuation allowance against a portion of the deferred tax assets as of June 30, 2020 and December 31, 2019, because the ultimate realization of those assets did not meet the more likely than not criteria. The majority of the Company's deferred tax assets consist of net operating loss ('NOL') carryforwards for federal tax purposes. If a change in control were to occur, these could be limited under Section 382 of the Internal Revenue Code of 1986 ('Code'), as amended.

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

As of December 31, 2019, the Company had NOL and research and experimentation credit for U.S. federal income tax purposes of $131,621and $4,250, respectively. The Company believes its 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.

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

Net Operating Loss Carryforward Expiration Dates

December 31, 2019

Expiration Dates December 31,

Net Operating Loss Amount

2022

$

111,049

2023

5,712

2024

3,566

2025 and beyond

11,294

Total

$

131,621

NOTE 13. SEGMENT INFORMATION

We operate our business structure within twosegments. These segments are defined based on the internal financial reporting used by management. Certain significant selling and general and administrative expenses are not allocated to the segments including non-cash stock compensation expense. Each segment is described below:

Our Black Diamond segment, which includes Black Diamond Equipment, PIEPS, and SKINourishment, is a global leader in designing, manufacturing, and marketing innovative outdoor engineered equipment and apparel for climbing, mountaineering, trail running, backpacking, skiing, and a wide range of other year-round outdoor recreation activities. Our Black Diamond segment offers a broad range of products including: high-performance, activity-based apparel (such as shells, insulation, midlayers, pants and logowear); rock-climbing footwear and equipment (such as carabiners, protection devices, harnesses, belay devices, helmets, and ice-climbing gear); technical backpacks and high-end day packs; trekking poles; headlamps and lanterns; gloves and mittens; and skincare and other sport-enhancing products. We also offer advanced skis, ski poles, ski skins, and snow safety products, including avalanche airbag systems, avalanche transceivers, shovels, and probes.

Our Sierra segment, which includes Sierra, is an iconic American manufacturer of a wide range of high-performance bullets and ammunition for both rifles and pistols. These bullets and ammunition are used for precision target shooting, hunting and military and law enforcement purposes.

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

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

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Climb

38

%

37

%

38

%

36

%

Mountain

22

%

36

%

27

%

32

%

Ski

7

%

8

%

14

%

15

%

Sport

33

%

19

%

21

%

17

%

Contract liabilities are recorded as a component of accounts payable and accrued liabilities when customers remit contractual cash payments in advance of us satisfying performance obligations which are satisfied at a future point of time. Contract liabilities were not material at June 30, 2020 and December 31, 2019. Contract liabilities are derecognized when the performance obligation is satisfied. Revenue recognized from satisfaction of performance obligations relating to the advanced payments during the three and six months ended June 30, 2020 and 2019 were not material. No other material remaining performance obligations exist at June 30, 2020.

Financial information for our segments is as follows:

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Sales to external customers:

Black Diamond

Domestic sales

$

11,740

$

22,149

$

34,428

$

46,681

International sales

8,462

15,696

31,569

43,565

Total Black Diamond

20,202

37,845

65,997

90,246

Sierra

Domestic sales

8,519

6,273

14,379

12,330

International sales

1,293

2,876

3,193

5,636

Total Sierra

9,812

9,149

17,572

17,966

Total sales to external customers

30,014

46,994

83,569

108,212

Segment operating (loss) income:

Black Diamond

(4,000)

(468)

(2,326)

4,708

Sierra

2,346

1,418

3,818

3,079

Total segment operating (loss) income

(1,654)

950

1,492

7,787

Restructuring charge

-

-

-

(13)

Transaction costs

(180)

(41)

(430)

(87)

Corporate and other expenses

(1,797)

(1,967)

(4,332)

(4,351)

Interest expense, net

(257)

(315)

(568)

(625)

(Loss) income before income tax

$

(3,888)

$

(1,373)

$

(3,838)

$

2,711

There were no intercompany sales between the Black Diamond and Sierra segments for the periods presented. Restructuring charges for the periods presented relate to the Black Diamond segment.

Total assets by segment, as of June 30, 2020 and December 31, 2019, were as follows:

June 30, 2020

December 31, 2019

Black Diamond

$

129,863

$

147,261

Sierra

74,282

72,104

Corporate

26,588

10,900

$

230,733

$

230,265

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

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Capital expenditures:

Black Diamond

$

316

$

426

$

1,305

$

1,190

Sierra

403

522

716

804

Total capital expenditures

$

719

$

948

$

2,021

$

1,994

Depreciation:

Black Diamond

$

703

$

631

$

1,388

$

1,242

Sierra

445

508

877

1,000

Total depreciation

$

1,148

$

1,139

$

2,265

$

2,242

Amortization:

Black Diamond

$

269

$

277

$

545

$

556

Sierra

496

611

992

1,221

Total amortization

$

765

$

888

$

1,537

$

1,777

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

Forward-Looking Statements

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

Potential risks and uncertainties that could cause the actual results of operations or financial condition of the Company to differ materially from those expressed or implied by forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, the overall level of consumer demand on our products; general economic conditions and other factors affecting consumer confidence, preferences, and behavior; disruption and volatility in the global currency, capital and credit markets; the financial strength of the Company's customers; the Company's ability to implement its business strategy; the ability of the Company to execute and integrate acquisitions; changes in governmental regulation, legislation or public opinion relating to the manufacture and sale of bullets and ammunition by our Sierra segment, and the possession and use of firearms and ammunition by our customers; the Company's exposure to product liability or product warranty claims and other loss contingencies; disruptions and other impacts to the Company's business, as a result of the COVID-19 global pandemic and government actions and restrictive measures implemented in response; stability of the Company's manufacturing facilities and suppliers, as well as consumer demand for our products, in light of disease epidemics and health-related concerns such as the COVID-19 global pandemic; the impact that global climate change trends may have on the Company and its suppliers and customers; the Company's ability to protect patents, trademarks and other intellectual property rights; any breaches of, or interruptions in, our information systems; fluctuations in the price, availability and quality of raw materials and contracted products as well as foreign currency fluctuations; our ability to utilize our net operating loss carryforwards; changes in tax laws and liabilities, tariffs, legal, regulatory, political and economic risks; and the Company's ability to maintain a quarterly dividend. More information on potential factors that could affect the Company's financial results is included from time to time in the Company's public reports filed with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. All forward-looking statements included in this Quarterly Report on Form 10-Q are based upon information available to the Company as of the date of this Quarterly Report on Form 10-Q, and speak only as of the date hereof. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

Overview

Headquartered in Salt Lake City, Utah, Clarus, a company focused on the outdoor and consumer industries, is seeking opportunities to acquire and grow businesses that can generate attractive shareholder returns. The Company has 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, 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.

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

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

On 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 COVID-19 pandemic, its Board of Directors had temporarily replaced its Quarterly Cash Dividend with a stock dividend and on July 31, 2020, the Company announced that the stock dividend will continue for the quarter ending September 30, 2020. Each record holder of shares of the Company's common stock as of the close of business on August 10, 2020 (the 'Record Date') will be entitled to receive 0.0021 of a share of the Company's common stock for each share of common stock held on the Record Date. The Company will distribute the stock dividend on August 21, 2020, the distribution date. No fractional shares will be issued, and stockholders will receive cash for such fractional interests based on the closing market price of the Company's common stock on the Record Date. The quarterly stock dividend will have a value of $0.025 per share, based on the closing market price on July 30, 2020. The dividend reflects an aggregate distribution of approximately 63 shares with a market value of approximately $747.

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 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, negatively impacted our sales and profitability for the first and second quarters of 2020. We also expect an adverse 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 generally expect the second quarter of 2020 to be the most significantly impacted with sequential improvement throughout the remainder of the fiscal year.

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 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 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, tax assets, and other assets.

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 base our estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.

There have been no significant changes to our critical accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2019.

Accounting Pronouncements Issued Not Yet Adopted

See 'Accounting Pronouncements Not Yet Adopted' in Note 1 to the notes to the unaudited condensed consolidated financial statements.

Results of Operations

Condensed Consolidated Three Months Ended June 30, 2020 Compared to Condensed Consolidated Three Months Ended June 30, 2019

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

Three Months Ended

June 30, 2020

June 30, 2019

Sales

Domestic sales

$

20,259

$

28,422

International sales

9,755

18,572

Total sales

30,014

46,994

Cost of goods sold

19,378

31,002

Gross profit

10,636

15,992

Operating expenses

Selling, general and administrative

14,493

17,192

Transaction costs

180

41

Total operating expenses

14,673

17,233

Operating loss

(4,037)

(1,241)

Other income (expense)

Interest expense, net

(257)

(315)

Other, net

406

183

Total other income (expense), net

149

(132)

Loss before income tax

(3,888)

(1,373)

Income tax benefit

(1,145)

(679)

Net loss

$

(2,743)

$

(694)

Sales

Consolidated sales decreased $16,980, or 36.1%, to $30,014 during the three months ended June 30, 2020, compared to consolidated sales of $46,994 during the three months ended June 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 $139 due to the strengthening of the U.S. dollar against foreign currencies during the three months ended June 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 $663.

Consolidated domestic sales decreased $8,163, or 28.7%, to $20,259 during the three months ended June 30, 2020, compared to consolidated domestic sales of $28,422 during the three months ended June 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 $2,246.

Consolidated international sales decreased $8,817, or 47.5%, to $9,755 during the three months ended June 30, 2020, compared to consolidated international sales of $18,572 during the three months ended June 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 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 $1,583 and a decrease in sales of $139 due to the strengthening of the U.S. dollar against foreign currencies during the three months ended June 30, 2020 compared to the prior period.

Cost of Goods Sold

Consolidated cost of goods sold decreased $11,624, or 37.5%, to $19,378 during the three months ended June 30, 2020, compared to consolidated cost of goods sold of $31,002 during the three months ended June 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 $5,356 or 33.5%, to $10,636 during the three months ended June 30, 2020, compared to consolidated gross profit of $15,992 during the three months ended June 30, 2019. Consolidated gross margin was 35.4% during the three months ended June 30, 2020, compared to a consolidated gross margin of 34.0% during the three months ended June 30, 2019. Consolidated gross margin during the three months ended June 30, 2020, increased compared to the prior year due to a favorable product mix in higher margin products all the while experiencing 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 $2,699, or 15.7%, to $14,493 during the three months ended June 30, 2020, compared to consolidated selling, general and administrative expenses of $17,192 during the three months ended June 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.

Transaction Costs

Consolidated transaction expense increased to $180 during the three months ended June 30, 2020, compared to consolidated transaction costs of $41 during the three months ended June 30, 2019, which consisted of expenses related to the Company's efforts to acquire S.K.B. Corporation.

Interest Expense, net

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

Other, net

Consolidated other, net, income increased $223, or 121.9%, to $406 during the three months ended June 30, 2020, compared to consolidated other, net income of $183 during the three months ended June 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 benefit increased $466, or 68.6%, to $1,145 during the three months ended June 30, 2020, compared to a consolidated income tax benefit of $679 during the same period in 2019. Our effective income tax rate was 29.4% for the three months ended June 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 June 30, 2019, our effective income tax rate was 49.5% and was higher compared to the statutory tax rates due to a stock compensation windfall.

Results of Operations

Condensed Consolidated Six Months Ended June 30, 2020 Compared to Condensed Consolidated Six Months Ended June 30, 2019

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

Six Months Ended

June 30, 2020

June 30, 2019

Sales

Domestic sales

$

48,807

$

59,011

International sales

34,762

49,201

Total sales

83,569

108,212

Cost of goods sold

54,421

70,164

Gross profit

29,148

38,048

Operating expenses

Selling, general and administrative

31,863

34,772

Restructuring charge

-

13

Transaction costs

430

87

Total operating expenses

32,293

34,872

Operating (loss) income

(3,145)

3,176

Other expense

Interest expense, net

(568)

(625)

Other, net

(125)

160

Total other expense, net

(693)

(465)

(Loss) income before income tax

(3,838)

2,711

Income tax benefit

(1,131)

(382)

Net (loss) income

$

(2,707)

$

3,093

Sales

Consolidated sales decreased $24,643, or 22.8%, to $83,569 during the six months ended June 30, 2020, compared to consolidated sales of $108,212 during the six months ended June 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 the quantity of new and existing sport products sold of $394 and a decrease in sales of $577 due to the strengthening of the U.S. dollar against foreign currencies during the six months ended June 30, 2020 compared to the prior period.

Consolidated domestic sales decreased $10,204, or 17.3%, to $48,807 during the six months ended June 30, 2020, compared to consolidated domestic sales of $59,011 during the six months ended June 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 $2,049.

Consolidated international sales decreased $14,439, or 29.3%, to $34,762 during the six months ended June 30, 2020, compared to consolidated international sales of $49,201 during the six months ended June 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 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 $2,443 and a decrease in sales of $577 due to the strengthening of the U.S. dollar against foreign currencies during

the six months ended June 30, 2020 compared to the prior period.

Cost of Goods Sold

Consolidated cost of goods sold decreased $15,743, or 22.4%, to $54,421 during the six months ended June 30, 2020, compared to consolidated cost of goods sold of $70,164 during the six months ended June 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 $8,900 or 23.4%, to $29,148 during the six months ended June 30, 2020, compared to consolidated gross profit of $38,048 during the six months ended June 30, 2019. Consolidated gross margin was 34.9% during the six months ended June 30, 2020, compared to a consolidated gross margin of 35.2% during the six months ended June 30, 2019. Consolidated gross margin during the six months ended June 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 $2,909, or 8.4%, to $31,863 during the six months ended June 30, 2020, compared to consolidated selling, general and administrative expenses of $34,772 during the six months ended June 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.

Restructuring Charges

Consolidated restructuring expense decreased to $0 during the six months ended June 30, 2020, compared to consolidated restructuring expense of $13 during the six months ended June 30, 2019. Restructuring expenses incurred during the six months ended June 30, 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 increased to $430 during the six months ended June 30, 2020, compared to consolidated transaction costs of $87 during the six months ended June 30, 2019, which consisted of expenses related to the Company's efforts to acquire S.K.B. Corporation.

Interest Expense, net

Consolidated interest expense, net during the six months ended June 30, 2020 remained consistent with consolidated interest expense, net, during the six months ended June 30, 2019.

Other, net

Consolidated other, net, decreased $285, or 178.1%, to expense of $125 during the six months ended June 30, 2020, compared to consolidated other, net income of $160 during the six months ended June 30, 2019. 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.

Income Taxes

Consolidated income tax benefit increased $749, or 196.1%, to $1,131 during the six months ended June 30, 2020, compared to a consolidated income tax benefit of $382 during the same period in 2019. Our effective income tax rate was 29.5% for the six months ended June 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 six months ended June 30, 2019, our effective income tax rate was 14.1% and is lower compared to the statutory tax rates due to a discrete benefit associated with a release of a tax 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

Condensed Consolidated Six Months Ended June 30, 2020 Compared to Condensed Consolidated Six Months Ended June 30, 2019

Our primary ongoing funding requirements are for working capital, expansion of our operations (both organically and through acquisitions) and general corporate needs, as well as investing activities associated with the expansion into new product categories. We plan to fund these activities through a combination of our future operating cash flows and revolving credit facility which had approximately $50,400 available to borrow at June 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 proceeds borrowed on the term loan were used to pay down amounts outstanding on our revolving loan commitment. 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.

At June 30, 2020, we had total cash of $21,538, compared to a cash balance of $1,703 at December 31, 2019, which was substantially controlled by the Company's U.S. entities. At June 30, 2020, the Company had $5,793 of the $21,538 in cash held by foreign entities, of which $1,281 is considered permanently reinvested.

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

Six Months Ended

June 30, 2020

June 30, 2019

Net cash provided by operating activities

$

14,442

$

9,672

Net cash used in investing activities

(2,018)

(1,993)

Net cash provided by (used in) financing activities

7,397

(8,195)

Effect of foreign exchange rates on cash

14

(1)

Change in cash

19,835

(517)

Cash, beginning of period

1,703

2,486

Cash, end of period

$

21,538

$

1,969

Net Cash From Operating Activities

Consolidated net cash provided by operating activities was $14,442 during the six months ended June 30, 2020, compared to $9,672 during the six months ended June 30, 2019. The increase in net cash provided by operating activities during 2020 is primarily due to an increase in net operating assets, or non-cash working capital, of $12,254, partially offset by a decrease in net income and change in deferred taxes during the six months ended June 30, 2020, compared to the same period in 2019.

Free cash flow, defined as net cash provided by operating activities less capital expenditures, of $12,421 was generated during the six months ended June 30, 2020 compared to $7,678 generated during the same period in 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:

Six Months Ended

June 30, 2020

June 30, 2019

Net cash provided by operating activities

$

14,442

$

9,672

Purchase of property and equipment

(2,021)

(1,994)

Free cash flow

$

12,421

$

7,678

Net Cash From Investing Activities

Consolidated net cash used in investing activities was $2,018 during the six months ended June 30, 2020, compared to $1,993 during the six months ended June 30, 2019. The increase in cash used during the six months ended June 30, 2020 is due to an increase in purchases of property and equipment, compared to the same period in 2019.

Net Cash From Financing Activities

Consolidated net cash provided by financing activities was $7,397 during the six months ended June 30, 2020, compared to consolidated net cash used of $8,195 during the six months ended June 30, 2019. The increase in cash provided during the six months ended June 30, 2020 compared to the same period in 2019 was primarily due to the proceeds of $20,000 borrowed under the term loan partially offset by net repayments to the revolving line of credit.

Net Operating Loss

As of December 31, 2019, the Company had net operating loss and research and experimentation credit for U.S. federal income tax purposes of $131,621 and $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. $131,621 of net operating losses available to offset taxable income does not expire until 2022 or later, subject to compliance with Section 382 of the Internal Revenue Code of 1986, as amended.

As of December 31, 2019, the Company's gross deferred tax asset was $43,945. The Company has recorded a valuation allowance of $28,632, resulting in a net deferred tax asset of $15,313, before deferred tax liabilities of $8,633. The Company has provided a valuation allowance against a portion of the net deferred tax assets as of June 30, 2020 and December 31, 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

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.

As of June 30, 2020, the Company had drawn approximately $9,566 of the $60,000 revolving loan commitment, and $20,000 of the $40,000 term loan commitment, that was available for borrowing under the Credit Agreement. As of June 30, 2020, the interest rate for such loans was 1.7500% and 1.6875%, respectively. 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 full on the maturity date of the Credit Agreement of May 3, 2024.

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 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 June 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, 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 March 31, 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 June 30, 2020, were effective.

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

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

Except for 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, 2019.

SIGNATURES

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

CLARUS CORPORATION

Date: August 10, 2020

By:

/s/ Warren B. Kanders

Name:

Warren B. Kanders

Title:

Executive Chairman

(Principal Executive Officer)

Date: August 10, 2020

By:

/s/ Aaron J. Kuehne

Name:

Aaron J. Kuehne

Title:

Chief Administrative Officer and

Chief Financial Officer

(Principal Financial Officer)