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Acquisitions | 12 Months Ended
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Dec. 31, 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 year ended December 31, 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 cash 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 December 31, 2022. The acquisition was accounted for as a business combination. Acquisition-related costs for the MAXTRAX Acquisition, which were included in transaction costs during the year ended December 31, 2022 and 2021 were $382 and $446, respectively. Rhino-Rack On May 30, 2021, Clarus entered into a Share Sale and Purchase Agreement (the “Purchase Agreement”) to acquire Rhino-Rack Holdings Pty Ltd (“Rhino-Rack”), which subsequently closed on July 1, 2021. All United States dollar amounts contained herein are based on the exchange rates in effect for Australian dollars ($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 $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 $AUD 4,747 (approximately $3,565) and has recorded this liability within accrued liabilities at the date of purchase. 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. As of December 31, 2022, no remaining contingent consideration liability existed related to the Rhino-Rack Acquisition. The acquisition was accounted for as a business combination. Acquisition-related costs for the Rhino-Rack Acquisition, which were included in transaction costs during the year ended December 31, 2022 and 2021 were $1,799 and $10,975, respectively. Barnes On September 30, 2020, the Company entered into an Asset Purchase Agreement (the “Barnes Asset Purchase Agreement”) with Remington Outdoor Company, Inc. and certain of its subsidiaries (the “Seller”), pursuant to which the Company agreed to (i) acquire certain assets of the Seller constituting the Barnes business (“Barnes”), including equipment, inventory, intellectual property (including exclusive use of Barnes’ intellectual property in the all-copper and powdered metallurgy ammunition fields as well as its trademarks) and a leasehold interest in certain real property located in Mona, Utah (collectively, the “Barnes Purchased Assets”) and (ii) assume certain liabilities related to the Barnes Purchased Assets in a transaction to be effected in Seller’s bankruptcy proceeding under Chapter 11 of title 11 of the United States Code, §§ 101 et seq. (the “Bankruptcy Code”) which commenced on July 27, 2020 in the United States Bankruptcy Court for the Northern District of Alabama (the “Bankruptcy Court”). Pursuant to the Barnes Asset Purchase Agreement, the purchase price to be paid for the Barnes Purchased Assets is $30,500 (the “Barnes Purchase Price”). On October 2, 2020, Sierra completed the acquisition of the Barnes Purchased Assets. Acquisition-related costs for the Barnes acquisition, which were included in transaction costs during the years ended December 31, 2022, 2021, and 2020 were $0, $273, and $922, respectively. The acquisition was accounted for as a business combination. The Company believes the acquisitions of MAXTRAX, Rhino-Rack, and Barnes will 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 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. 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 related to the fair value of assumed liabilities and such amounts were recorded during the first quarter of 2022. The fair value measurements for the acquisitions of MAXTRAX, Rhino-Rack, and Barnes 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 and goodwill for Barnes is included in the Precision Sport segment. The goodwill consists largely of the growth and profitability expected from these acquisitions.
|  | MAXTRAX |  | Rhino-Rack |  | Barnes
|  | December 1, 2021 |  | July 1, 2021 |  | October 2, 2020
|  | Number of Shares |  | Estimated Fair Value |  | Number of Shares |  | Estimated Fair Value |  | Estimated Fair Value
Cash paid |  | - |  | $ | 26,780 |  | - |  | $ | 143,590 |  | $ | 30,500
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 |  | $ | 30,500
Assets acquired and liabilities assumed |  |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |
Cash |  |  |  | $ | 1,869 |  |  |  | $ | 7,513 |  | $ | 2
Accounts receivable |  |  |  |  | 2,791 |  |  |  |  | 10,769 |  |  | -
Inventories |  |  |  |  | 1,819 |  |  |  |  | 27,046 |  |  | 4,535
Prepaid and other current assets |  |  |  |  | 883 |  |  |  |  | 644 |  |  | 612
Property and equipment |  |  |  |  | 139 |  |  |  |  | 4,619 |  |  | 4,036
Other intangible assets |  |  |  |  | 10,341 |  |  |  |  | 55,400 |  |  | 7,500
Indefinite-lived intangible assets |  |  |  |  | 10,555 |  |  |  |  | 72,800 |  |  | 5,600
Goodwill |  |  |  |  | 15,199 |  |  |  |  | 78,347 |  |  | 8,625
Other long-term assets |  |  |  |  | 979 |  |  |  |  | 11,468 |  |  | 4,355
Total assets |  |  |  |  | 44,575 |  |  |  |  | 268,606 |  |  | 35,265
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable and accrued liabilities |  |  |  |  | 2,176 |  |  |  |  | 16,511 |  |  | 842
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 |  |  | 3,923
Total liabilities |  |  |  |  | 9,100 |  |  |  |  | 66,118 |  |  | 4,765
Net Book Value Acquired |  |  |  | $ | 35,475 |  |  |  | $ | 202,488 |  | $ | 30,500
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, Rhino-Rack’s, and Barnes’ 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 are as follows:
| MAXTRAX |  | Rhino-Rack |  | Barnes
|  |  | Average |  |  |  | Average |  |  |  | Average
| Gross | Useful Life |  | Gross | Useful Life |  | Gross | Useful Life
Intangibles subject to amortization |  |  |  |  |  |  |  |  |  |  |  |  |  |
Customer relationships | $ | 8,986 |  | 13.5 years |  | $ | 40,400 |  | 13.5 years |  | $ | 5,700 |  | 10.0 years
Product technologies |  | 1,355 |  | 7.0 years |  |  | 15,000 |  | 10.0 years |  |  | 1,800 |  | 10.0 years
Intangibles not subject to amortization |  |  |  |  |  |  |  |  |  |  |  |  |  |
Trademarks |  | 10,555 |  | N/A |  |  | 72,800 |  | N/A |  |  | 5,600 |  | N/A
| $ | 20,896 |  | 12.6 years |  | $ | 128,200 |  | 12.6 years |  | $ | 13,100 |  | 10.0 years
The full amount of goodwill of $15,199 at MAXTRAX and $78,347 at 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. Total revenue of $1,728 and net income of $183 of MAXTRAX were included in the Company’s consolidated statements of comprehensive (loss) income from the date of acquisition to December 31, 2021. Total revenue of $43,411 and net loss of $7,310 of Rhino-Rack were included in the Company’s consolidated statements of comprehensive (loss) income from the date of acquisition to December 31, 2021. The acquisition of Barnes is treated as a purchase of assets for tax purposes. As such, the basis in the assets of Barnes is equal for both book and tax, which results in no initial recognition of deferred tax assets or liabilities. Furthermore, the full amount of goodwill recorded of $8,625 is expected to be deductible for tax purposes. No pre-existing relationships existed between the Company and the Barnes sellers prior to the acquisition. Barnes revenue and operating income were included in the Precision Sport segment. The following unaudited pro forma results are based on the individual historical results of the Company, MAXTRAX, Rhino-Rack, and Barnes, with adjustments to give effect as if the acquisition and borrowings used to finance the acquisition had occurred on January 1, 2020 for MAXTRAX and Rhino-Rack and January 1, 2019 for Barnes, 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.
| Year Ended December 31,
| 2021 |  | 2020
Sales | $ | 441,624 |  | $ | 324,539
Net income | $ | 46,903 |  | $ | 10,148
Net income per share - basic | $ | 1.42 |  | $ | 0.34
Net income per share - diluted | $ | 1.31 |  | $ | 0.32
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 for MAXTRAX and Rhino-Rack or January 1, 2019 for Barnes. 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. Material nonrecurring adjustments excluded from the unaudited pro forma financial information above consists of $12,616 transaction costs and $5,399 step up of inventory to its preliminary fair value, which were recorded as an unfavorable adjustment to cost of goods sold.

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