CLARUS CORPORATION (Exact Name of Registrant As Specified in Its Charter)
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: June 30, 2019 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 (I.R.S. Employer incorporation or organization) Identification Number) 2084 East 3900 South Salt Lake City, Utah 84124 (Address of principal executive offices) (Zip code) (801) 278-5552 (Registrant’s telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically 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 x No ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ¨ Non-accelerated filer ¨ Accelerated filer x Smaller reporting company x Emerging growth company ¨ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x 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 July 31, 2019, there were 29,993,493 shares of common stock, par value $0.0001, outstanding. INDEX CLARUS CORPORATION Page PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets – June 30, 2019 and December 31, 2018 3 Condensed Consolidated Statements of Comprehensive Loss – Three months ended June 30, 2019 and 2018 4 Condensed Consolidated Statements of Comprehensive Income – Six months ended June 30, 2019 and 2018 5 Condensed Consolidated Statements of Cash Flows – Six months ended June 30, 2019 and 2018 6 Condensed Consolidated Statements of Stockholders’ Equity – Six months ended June 30, 2019 and 2018 7 Notes to Condensed Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 22 Item 3. Quantitative and Qualitative Disclosures About Market Risk 30 Item 4. Controls and Procedures 30 PART II OTHER INFORMATION Item 1. Legal Proceedings 31 Item 1A. Risk Factors 31 Item 6. Exhibits 32 Signature Page 33 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CLARUS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except per share amounts) June 30, 2019 December 31, 2018 Assets Current assets Cash $ 1,969 $ 2,486 Accounts receivable, less allowance for doubtful accounts of $620 and $392, respectively 32,545 35,943 Inventories 73,024 64,933 Prepaid and other current assets 4,475 5,115 Income tax receivable 400 24 Total current assets 112,413 108,501 Property and equipment, net 23,007 23,401 Other intangible assets, net 17,623 19,416 Indefinite lived intangible assets 41,674 41,694 Goodwill 18,090 18,090 Other long-term assets 3,897 2,026 Total assets $ 216,704 $ 213,128 Liabilities and Stockholders' Equity Current liabilities Accounts payable and accrued liabilities $ 28,373 $ 21,489 Income tax payable - 210 Current portion of long-term debt - 41 Total current liabilities 28,373 21,740 Long-term debt 16,650 22,105 Deferred income taxes 2,729 2,919 Other long-term liabilities 1,012 159 Total liabilities 48,764 46,923 Stockholders' Equity Preferred stock, $.0001 par value; 5,000 shares authorized; none issued - - Common stock, $.0001 par value; 100,000 shares authorized; 33,595 and 33,244 issued and 29,983 and 29,748 outstanding, respectively 3 3 Additional paid in capital 490,776 488,404 Accumulated deficit (302,978) (304,577) Treasury stock, at cost (19,607) (18,102) Accumulated other comprehensive (loss) income (254) 477 Total stockholders' equity 167,940 166,205 Total liabilities and stockholders' equity $ 216,704 $ 213,128 See accompanying notes to condensed consolidated financial statements. 3 CLARUS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (In thousands, except per share amounts) Three Months Ended June 30, 2019 June 30, 2018 Sales Domestic sales $ 28,422 $ 27,845 International sales 18,572 18,036 Total sales 46,994 45,881 Cost of goods sold 31,002 30,021 Gross profit 15,992 15,860 Operating expenses Selling, general and administrative 17,192 15,791 Restructuring charge - 24 Transaction costs 41 168 Total operating expenses 17,233 15,983 Operating loss (1,241) (123) Other (expense) income Interest expense (315) (463) Other, net 183 (192) Total other expense, net (132) (655) Loss before income tax (1,373) (778) Income tax benefit (679) (1) Net loss (694) (777) Other comprehensive (loss) income, net of tax: Foreign currency translation adjustment 230 (1,117) Unrealized (loss) income on hedging activities (499) 825 Other comprehensive loss (269) (292) Comprehensive loss $ (963) $ (1,069) Net loss per share: Basic $ (0.02) $ (0.03) Diluted (0.02) (0.03) Weighted average shares outstanding: Basic 29,898 30,041 Diluted 29,898 30,041 See accompanying notes to condensed consolidated financial statements. 4 CLARUS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (In thousands, except per share amounts) Six Months Ended June 30, 2019 June 30, 2018 Sales Domestic sales $ 59,011 $ 53,499 International sales 49,201 45,649 Total sales 108,212 99,148 Cost of goods sold 70,164 65,461 Gross profit 38,048 33,687 Operating expenses Selling, general and administrative 34,772 32,919 Restructuring charge 13 64 Transaction costs 87 333 Total operating expenses 34,872 33,316 Operating income 3,176 371 Other (expense) income Interest expense (625) (717) Other, net 160 (71) Total other expense, net (465) (788) Income (loss) before income tax 2,711 (417) Income tax benefit (382) (43) Net income (loss) 3,093 (374) Other comprehensive (loss) income, net of tax: Foreign currency translation adjustment (143) (492) Unrealized (loss) income on hedging activities (588) 914 Other comprehensive (loss) income (731) 422 Comprehensive income $ 2,362 $ 48 Net income (loss) per share: Basic $ 0.10 $ (0.01) Diluted 0.10 (0.01) Weighted average shares outstanding: Basic 29,824 30,041 Diluted 30,961 30,041 See accompanying notes to condensed consolidated financial statements. 5 CLARUS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Six Months Ended June 30, 2019 June 30, 2018 Cash Flows From Operating Activities: Net income (loss) $ 3,093 $ (374) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation of property and equipment 2,242 2,208 Amortization of intangible assets 1,777 1,937 Amortization of debt issuance costs 132 307 Loss (gain) on disposition of property and equipment 49 (2) Noncash lease expense 333 - Loss from removal of accumulated translation adjustment - 41 Stock-based compensation 1,568 1,155 Deferred income taxes 50 (92) Changes in operating assets and liabilities, net of acquisition: Accounts receivable 3,291 3,221 Inventories (8,150) (3,468) Prepaid and other assets (105) 275 Accounts payable and accrued liabilities 5,973 2,903 Income taxes (581) (196) Net cash provided by operating activities 9,672 7,915 Cash Flows From Investing Activities: Purchase of business, net of cash received - (345) Proceeds from disposition of property and equipment 1 2 Purchase of property and equipment (1,994) (1,518) Net cash used in investing activities (1,993) (1,861) Cash Flows From Financing Activities: Proceeds from revolving credit facilities 75,854 54,392 Repayments on revolving credit facilities (81,266) (59,234) Repayments of capital leases (31) (19) Payment of debt issuance costs (557) (494) Purchase of treasury stock (1,505) (22) Proceeds from exercise of stock options 804 - Cash dividends paid (1,494) - Net cash used in financing activities (8,195) (5,377) Effect of foreign exchange rates on cash (1) 38 Change in cash (517) 715 Cash, beginning of period 2,486 1,856 Cash, end of period $ 1,969 $ 2,571 Supplemental Disclosure of Cash Flow Information: Cash paid for income taxes $ 103 $ 246 Cash paid for interest $ 498 $ 526 Supplemental Disclosures of Non-Cash Investing and Financing Activities: Property and equipment purchased with accounts payable $ 180 $ 98 Property and equipment acquired through a capital lease $ - $ 123 Lease liabilities arising from obtaining right of use assets $ 1,855 $ - Unpaid debt issuance costs $ - $ 500 Unpaid treasury stock acquisition costs $ - $ 195 See accompanying notes to condensed consolidated financial statements.