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Acquisitions | 9 Months Ended
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Sep. 30, 2022
Acquisitions [Abstract] |
Acquisitions | NOTE 2. ACQUISITIONS MAXTRAX On November 26, 2021, Clarus entered into a Share and Unit Purchase Agreement (the “MAXTRAX Purchase Agreement”) to acquire MaxTrax Australia Pty Ltd (“MAXTRAX”), which subsequently closed on December 1, 2021. All United States dollar amounts contained herein are based on the exchange rates in effect for Australian dollars ($AUD) and the market value of the Company’s common stock at the time of closing of the acquisition of MAXTRAX (the “MAXTRAX Acquisition”). The Company acquired MAXTRAX for an aggregate purchase price of $AUD 49,744 (approximately $35,475), subject to a post-closing adjustment, comprised of $AUD 37,551 (approximately $26,780) cash, 107 shares of the Company’s common stock valued at $2,594, and additional consideration described below. The MAXTRAX Purchase Agreement also provides for the payment of additional consideration in the form of shares of the Company’s common stock valued at $AUD 6,250 (approximately $4,457) split equally on June 30, 2022 and 2023. During the three months ended September 30, 2022, approximately 108 shares of the Company’s common stock were issued in accordance with the MAXTRAX Purchase Agreement as additional consideration. The MAXTRAX Purchase Agreement provides for the payment of additional contingent consideration up to $AUD 6,250 (approximately $4,457) in cash if certain future net sales thresholds are met during 2022 and 2023 (the “MAXTRAX Contingent Consideration”). The Company estimated the initial fair value of the MAXTRAX Contingent Consideration to be $AUD 2,307 (approximately $1,644) and has recorded this liability within accrued liabilities and other long-term liabilities. The net sales threshold required for the payment of the 2022 portion of the MAXTRAX Contingent Consideration was met during the 2022 measurement period ended June 30, 2022. See Note 10 for discussion regarding the valuation of the MAXTRAX Contingent Consideration as of September 30, 2022. The acquisition was accounted for as a business combination. Rhino-Rack On May 30, 2021, Clarus entered into a Share Sale and Purchase Agreement (the “Purchase Agreement”) to acquire Rhino-Rack Holdings Pty Ltd (“Rhino-Rack”), which subsequently closed on July 1, 2021. All United States dollar amounts contained herein are based on the exchange rates in effect for Australian dollars ($AUD) and the market value of the Company’s common stock at the time of closing of the acquisition of Rhino-Rack (the “Rhino-Rack Acquisition”). The Company acquired Rhino-Rack for an aggregate purchase price of approximately $AUD 269,696 (approximately $202,488), subject to a post-closing adjustment, comprised of approximately $AUD 191,249 (approximately $143,590) cash, 2,315 shares of the Company’s common stock valued at $55,333, and additional contingent consideration described below. The Purchase Agreement also provides for the payment of additional contingent consideration up to approximately $AUD 10,000 (approximately $7,508) if certain future net sales thresholds are met (the “Rhino-Rack Contingent Consideration”). The Company estimated the initial fair value of the Rhino-Rack Contingent Consideration to be approximately $AUD 4,747 (approximately $3,565) and has recorded this liability within accrued liabilities. The net sales threshold required for the payment of the Rhino-Rack Contingent Consideration was not met during the measurement period ended June 30, 2022. See Note 10 for discussion regarding the valuation of the Rhino-Rack Contingent Consideration as of September 30, 2022. The acquisition was accounted for as a business combination. The Company believes the acquisitions of MAXTRAX and Rhino-Rack are expected to provide the Company with a greater combined global revenue base, increased gross margins, profitability and free cash flows, and access to increased liquidity to further seek to acquire and grow businesses. The following table is a reconciliation to the fair value of the purchase consideration and how the purchase consideration is allocated to assets acquired and liabilities assumed which have been estimated at their fair values. The fair value estimates for the purchase price allocation for MAXTRAX and Rhino-Rack are based on the Company’s best estimates and assumptions as of the reporting date and are considered preliminary. Since our initial purchase price allocation for the MAXTRAX acquisition, we have increased the fair value of accrued liabilities assumed and goodwill by $741. These adjustments were made after receiving certain information, which existed as of the date of acquisition, related to the fair value of assumed liabilities and such amounts were recorded during the first quarter of 2022. The fair value measurements of identifiable assets and liabilities, and the resulting goodwill related to the MAXTRAX Acquisition are subject to change and the final purchase price allocations could be different from the amounts presented below. We expect to finalize the valuation of MAXTRAX as soon as practicable, but not later than one year from the date of the acquisition. The fair value measurements for the acquisition of Rhino-Rack have been completed. The excess of purchase consideration over the assets acquired and liabilities assumed is recorded as goodwill. Goodwill for MAXTRAX and Rhino-Rack is included in the Adventure segment. The goodwill consists largely of the growth and profitability expected from these acquisitions.
|  | MAXTRAX |  | Rhino-Rack
|  | December 1, 2021 |  | July 1, 2021
|  | Number of Shares |  | Estimated Fair Value |  | Number of Shares |  | Estimated Fair Value
Cash paid |  | - |  | $ | 26,780 |  | - |  | $ | 143,590
Issuance of shares of Clarus Corporation |  | 107 |  |  | 2,594 |  | 2,315 |  |  | 55,333
Future issuance of shares of Clarus Corporation |  | - |  |  | 4,457 |  | - |  |  | -
Contingent consideration |  | - |  |  | 1,644 |  | - |  |  | 3,565
Total purchase consideration |  | 107 |  | $ | 35,475 |  | 2,315 |  | $ | 202,488
Assets acquired and liabilities assumed |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |
Cash |  |  |  | $ | 1,869 |  |  |  | $ | 7,513
Accounts receivable |  |  |  |  | 2,791 |  |  |  |  | 10,769
Inventories |  |  |  |  | 1,819 |  |  |  |  | 27,046
Prepaid and other current assets |  |  |  |  | 883 |  |  |  |  | 644
Property and equipment |  |  |  |  | 139 |  |  |  |  | 4,619
Other intangible assets |  |  |  |  | 10,341 |  |  |  |  | 55,400
Indefinite-lived intangible assets |  |  |  |  | 10,555 |  |  |  |  | 72,800
Goodwill |  |  |  |  | 15,199 |  |  |  |  | 78,347
Other long-term assets |  |  |  |  | 979 |  |  |  |  | 11,468
Total assets |  |  |  |  | 44,575 |  |  |  |  | 268,606
Liabilities |  |  |  |  |  |  |  |  |  |
Accounts payable and accrued liabilities |  |  |  |  | 2,176 |  |  |  |  | 16,511
Income tax payable |  |  |  |  | 251 |  |  |  |  | 3,413
Current portion of long-term debt |  |  |  |  | - |  |  |  |  | 607
Long-term debt |  |  |  |  | - |  |  |  |  | 2,107
Deferred income taxes |  |  |  |  | 5,863 |  |  |  |  | 32,451
Other long-term liabilities |  |  |  |  | 810 |  |  |  |  | 11,029
Total liabilities |  |  |  |  | 9,100 |  |  |  |  | 66,118
Net Book Value Acquired |  |  |  | $ | 35,475 |  |  |  | $ | 202,488
The estimated fair value of inventory was recorded at expected sales price less cost to sell plus a reasonable profit margin for selling efforts. In connection with the acquisitions, the Company acquired exclusive rights to MAXTRAX’s and Rhino-Rack’s trademarks, customer relationships, and product technologies. The amounts assigned to each class of intangible asset, other than goodwill acquired, and the related average useful lives as of the acquisition dates, are as follows:
| MAXTRAX |  | Rhino-Rack
|  |  | Average |  |  |  | Average
| Gross | Useful Life |  | Gross | Useful Life
Intangibles subject to amortization |  |  |  |  |  |  |  |  |
Customer relationships | $ | 8,986 |  | 13.5 years |  | $ | 40,400 |  | 13.5 years
Product technologies |  | 1,355 |  | 7.0 years |  |  | 15,000 |  | 10.0 years
Intangibles not subject to amortization |  |  |  |  |  |  |  |  |
Trademarks |  | 10,555 |  | N/A |  |  | 72,800 |  | N/A
| $ | 20,896 |  | 12.6 years |  | $ | 128,200 |  | 12.6 years
The full amount of goodwill of $15,199 for MAXTRAX and $78,347 for Rhino-Rack is expected to be non-deductible for tax purposes. No pre-existing relationships existed between the Company and MAXTRAX and Rhino-Rack or their sellers prior to the acquisition. MAXTRAX and Rhino-Rack revenue and operating income are included in the Adventure segment. The following unaudited pro forma results are based on the individual historical results of the Company, MAXTRAX and Rhino-Rack, with adjustments to give effect as if the acquisitions and borrowings used to finance the acquisitions had occurred on January 1, 2020, after giving effect to certain adjustments, including the amortization of intangible assets, depreciation of fixed assets, interest expense and taxes and assumes the purchase price was allocated to the assets purchased and liabilities assumed based on their fair market values at the date of purchase.
| Three Months Ended |  | Nine Months Ended
| September 30, 2021 |  | September 30, 2021
Sales | $ | 113,467 |  | $ | 319,559
Net income | $ | 17,144 |  | $ | 28,175
Net income per share - basic | $ | 0.51 |  | $ | 0.88
Net income per share - diluted | $ | 0.47 |  | $ | 0.83
The unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred had the transactions been consummated as of January 1, 2020. Furthermore, such pro forma information is not necessarily indicative of future operating results of the combined companies and should not be construed as representative of the operating results of the combined companies for any future dates or periods.

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