Clarus Corp

Previous wording

Please note that in this Annual Report on Form 10-K 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.

Current wording

Please note that in this Annual Report on Form 10-K Clarus Corporation (which may be referred to herein 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.

Previous wording

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 Annual Report on Form 10-K 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, including, without limitation, the impact of inflation; disruption and volatility in the global currency, capital and credit markets; the financial strength of retail economies and the Company’s customers; the Company’s ability to implement its business strategy; the ability of the Company to execute and integrate acquisitions; the Company’s exposure to product liability or product warranty claims and other loss contingencies, including, without limitation, recalls and liability claims relating to our avalanche beacon transceivers; disruptions and other impacts to the Company’s business, as a result of an outbreak of disease or similar public health threat, such as 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, increased focus on sustainability issues as a result of global climate change; regulatory or market responses to global climate change; the Company’s ability to protect patents, trademarks and other intellectual property rights; any breaches of, or interruptions in, our information systems; the ability of our information technology systems or information security systems to operate effectively, including as a result of security breaches, viruses, hackers, malware, natural disasters, vendor business interruptions or other causes; our ability to properly maintain, protect, repair or upgrade our information technology systems or information security systems, or problems with our transitioning to upgraded or replacement systems; the impact of adverse publicity about the Company and/or its brands and products, including without limitation, through social media or in connection with brand damaging events and/or public perception; the potential impact of the Consumer Products Safety Commission’s investigation related to the Company’s reporting obligations under the Consumer Product Safety Act in connection with the Company’s recall of certain models of its avalanche transceivers on our business, results of operations, and financial condition; fluctuations in the price, availability and quality of raw materials and contracted products as well as foreign currency fluctuations; ongoing disruptions and delays in the shipping and transportation of our products due to po…

Excerpt shortened here; the source contains the full paragraph.

Current wording

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 Annual Report on Form 10-K 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; the potential impact of the uncertain macroeconomic environment on our financial results, including, but not limited to, the effects of sustained global inflationary pressures and interest rates, potential economic slowdowns or recessions, trade restrictions and regulatory changes, and global supply chain disruptions; the effect of inflation on our business, including any future pricing actions taken in an effort to mitigate the effects of inflation and potential impacts on our revenue, operating margins and net income; disruption and volatility in the global currency, capital and credit markets; the financial strength of retail economies and the Company’s customers; the Company’s ability to implement its business strategy; the ability of the Company to execute and integrate acquisitions; the Company’s exposure to product liability or product warranty claims and other loss contingencies, including, without limitation, recalls and liability claims relating to certain avalanche beacon transceivers distributed by BDEL; disruptions and other impacts to the Company’s business, as a result of an outbreak of disease or similar public health threat, 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; the impact that global climate change trends may have on the Company and its suppliers and customers, increased focus on sustainability issues as a result of global climate change; regulatory or market responses to global climate change; the Company’s ability to protect patents, trademarks and other intellectual property rights; any breaches of, or interruptions in, our information systems; the ability of our information technology systems or information security systems to operate effectively, including as a result of security breaches, viruses, hackers, malware, natural disasters, vendor business interruptions or other causes; our ability to properly maintain, protect, repair or upgrade our information technology systems or information security systems, or problems with our transitioning to upgraded or replacement systems; the impact of adverse publicity about the Company and/or its brands and products, including without limitation, through social media or in connection with brand damaging events and/or public perception; the potential impact of the Consumer Products Safety Commission’s and the U.S. Department of Justice’s investigations related…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Headquartered in Salt Lake City, Utah, Clarus is a global leading designer, developer, manufacturer and distributor of best-in-class outdoor equipment and lifestyle products focused on the outdoor enthusiast markets. Each of our brands has a long history of continuous product innovation for core and everyday users alike. The Company’s products are principally sold globally under the Black Diamond®,

Current wording

Headquartered in Salt Lake City, Utah, Clarus is a global leading designer, developer, manufacturer and distributor of best-in-class outdoor equipment and lifestyle products focused on the outdoor enthusiast markets. Each of our brands has a long history of continuous product innovation for core and everyday users alike. The Company’s products are principally sold globally under the Black Diamond®, Rhino-Rack®, MAXTRAX®, and TRED Outdoors® brand names through outdoor specialty and online retailers, our own websites, distributors and original equipment manufacturers. Our portfolio of iconic brands is well-positioned for sustainable, long-term growth underpinned by powerful industry trends across the outdoor and adventure sport end markets.

Previous wording

On August 21, 2017, the Company acquired Sierra Bullets, L.L.C. (“Sierra”). On November 6, 2018, the Company acquired the assets of SKINourishment, Inc. (“SKINourishment”). On October 2, 2020, the Company completed the acquisition of certain assets and liabilities constituting the Barnes business (“Barnes”). On July 1, 2021, the Company completed the acquisition of Australia-based Rhino-Rack Holdings Pty Ltd (“Rhino-Rack”). On December 1, 2021, the Company completed the acquisition of Australia-based MaxTrax Australia Pty Ltd (“MAXTRAX”). On October 9, 2023, the Company completed the acquisition of Australia-based TRED Outdoors Pty Ltd. (“TRED”).

Current wording

On August 21, 2017, the Company acquired Sierra Bullets, L.L.C. (“Sierra”). On October 2, 2020, the Company completed the acquisition of certain assets and liabilities constituting the Barnes business (“Barnes”). On July 1, 2021, the Company completed the acquisition of Australia-based Rhino-Rack Holdings Pty Ltd (“Rhino-Rack”). On December 1, 2021, the Company completed the acquisition of Australia-based MaxTrax Australia Pty Ltd (“MAXTRAX”). On October 9, 2023, the Company completed the acquisition of Australia-based TRED Outdoors Pty Ltd. (“TRED”). On December 5, 2024, the Company completed the acquisition of certain assets and liabilities constituting the RockyMounts business (“RockyMounts”).

Previous wording

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. In 2023, 2022 and 2021 our total Quarterly Cash Dividends were $3,750,000, $3,721,000, and $3,335,000, respectively. On March 5, 2024, the Company announced that its Board of Directors approved the payment on March 18, 2024 of the Quarterly Cash Dividend of $0.025 to the record holders of shares of the Company’s common stock as of the close of business on March 28, 2024.

Current wording

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. In 2024, 2023 and 2022 our total Quarterly Cash Dividends were $3,831,000, $3,750,000, and $3,721,000, respectively. On March 5, 2025, the Company announced that its Board of Directors approved the payment on March 26, 2025 of the Quarterly Cash Dividend of $0.025 to the record holders of shares of the Company’s common stock as of the close of business on March 17, 2025.

Previous wording

Starting in 2023, the Company began incurring expenses to facilitate long-term sustainable growth through cost reduction actions, consisting of employee reductions, facility rationalization and contract termination costs. During the year ended December 31, 2023, the Company incurred $3,223,000 of restructuring charges related to these actions. The Company accrues for restructuring costs when they are probable and reasonably estimable. These costs include severance costs, exit costs, and other restructuring costs and are included in Restructuring charges in the consolidated statements of comprehensive (loss) income. Severance costs primarily consist of severance benefits through payroll continuation, conditional separation costs and employer tax liabilities, while exit costs primarily consist of lease exit and contract termination costs. Other costs consist primarily of costs related to the discontinuance of certain product lines and are distinguishable and directly attributable to the Company’s restructuring initiative and not a result of external market factors associated with the ongoing business. We estimate that we will incur restructuring costs related to employee-related costs and facility exit costs during the year 2024; however, the Company cannot estimate the total amount expected to be incurred as cost reduction actions continue to be evaluated. The Company anticipates completing these restructuring activities in 2024.

Current wording

Starting in 2023, the Company began incurring expenses to facilitate long-term sustainable growth through cost reduction actions, consisting of employee reductions, facility rationalization and contract termination costs. During the years ended December 31, 2024 and 2023, the Company incurred $1,948,000 and $3,223,000, respectively, of restructuring charges related to these actions. The Company has incurred $5,171,000 of cumulative restructuring charges since the commencement of our restructuring actions in 2023. The Company accrues for restructuring costs when they are probable and reasonably estimable. These costs include severance costs, exit costs, and other restructuring costs and are included in Restructuring charges in the consolidated statements of comprehensive loss. Severance costs primarily consist of severance benefits through payroll continuation, conditional separation costs and employer tax liabilities, while exit costs primarily consist of lease exit and contract termination costs. Other costs consist primarily of costs related to the discontinuance of certain product lines and are distinguishable and directly attributable to the Company’s restructuring initiative and not a result of external market factors associated with the ongoing business. We estimate that we will incur restructuring costs related to employee-related costs and facility exit costs during the year 2025; however, the Company cannot estimate the total amount expected to be incurred as cost reduction actions continue to be evaluated. The Company anticipates completing these restructuring activities in 2025.

Previous wording

Significant estimates in valuing certain intangible assets include, but are not limited to, the projected financial information related to each individual asset, particularly forecasted sales growth rates, cash flows, market-based royalty rates and estimated discount rates. Product technology and trademarks are valued using the relief-from-royalty method, and customer relationships are valued using the multi-period excess earnings model. The relief-from-royalty method is used to estimate the cost savings that accrue to the owner of an intangible asset who would otherwise have to pay royalties or license fees on revenues earned through the use of the asset. The multi-period excess earnings method supposes that the owner of the intangible asset is able to achieve a return in excess of that received without the intangible asset through enhanced revenues or cost savings. Our discounted cash flow estimates use discount rates that correspond to a weighted-average cost of capital consistent with a market-participant view. The discount rates are consistent with those used for investment decisions and take into account our operating plans and strategies. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. If we do not achieve the results reflected in the assumptions and estimates, our goodwill impairment evaluations could be adversely affected, and we may impair a portion or all of our intangible assets, which would adversely affect our operating results in the period of impairment.

Current wording

Significant estimates in valuing certain intangible assets include, but are not limited to, the projected financial information related to each individual asset, particularly forecasted sales growth rates, cash flows, market-based royalty rates and estimated discount rates. Product technology and trademarks are valued using the relief-from-royalty method, and customer relationships are valued using the multi-period excess earnings model. The relief-from-royalty method is used to estimate the cost savings that accrue to the owner of an intangible asset who would otherwise have to pay royalties or license fees on revenues earned through the use of the asset. The multi-period excess earnings method supposes that the owner of the intangible asset is able to achieve a return in excess

Previous wording

We also test indefinite-lived intangible assets for impairment annually during the fourth quarter, generally as of December 31 st of each year. Management may perform an interim indefinite-lived intangible asset impairment assessment whenever events or circumstances make it more likely than not that an impairment may have occurred, such as a significant adverse change in the business climate or a decision to sell or dispose of the reporting unit. If the carrying value of the indefinite-lived asset is higher than its fair value, then the asset is deemed to be impaired and the impairment charge is estimated as the difference. The Company calculates the fair value of its indefinite-lived intangible assets using the income approach, specifically the relief-from-royalty method. The relief-from-royalty method is used to estimate the cost savings that accrue to the owner of an intangible asset who would otherwise have to pay royalties or license fees on revenues earned through the use of the asset. Internally forecasted revenues, which the Company believes reasonably approximate market participant assumptions, are multiplied by a royalty rate to arrive at the estimated net after tax cost savings. The royalty rate used in the analysis is based on an analysis of empirical, market-derived royalty rates for comparable intangible assets. The net after tax cost savings are discounted using the same weighted-average cost of capital discount rate developed for purposes of the Company’s quantitative goodwill impairment test. The key uncertainties in these calculations are the assumptions used in determining the revenue associated with each indefinite-lived intangible asset and the royalty rate. If we do not achieve the results reflected in the market assumptions and forecasted estimates, our indefinite-lived intangibles impairment evaluations could be adversely affected, and we may impair a portion or all of their carrying values, which would adversely affect our operating results in the period of impairment.

Current wording

the asset is deemed to be impaired and the impairment charge is estimated as the difference. The Company calculates the fair value of its indefinite-lived intangible assets using the income approach, specifically the relief-from-royalty method. The relief-from-royalty method is used to estimate the cost savings that accrue to the owner of an intangible asset who would otherwise have to pay royalties or license fees on revenues earned through the use of the asset. Internally forecasted revenues, which the Company believes reasonably approximate market participant assumptions, are multiplied by a royalty rate to arrive at the estimated net after tax cost savings. The royalty rate used in the analysis is based on an analysis of empirical, market-derived royalty rates for comparable intangible assets. The net after tax cost savings are discounted using the same weighted-average cost of capital discount rate developed for purposes of the Company’s quantitative goodwill impairment test. The key uncertainties in these calculations are the assumptions used in determining the revenue associated with each indefinite-lived intangible asset and the royalty rate. If we do not achieve the results reflected in the market assumptions and forecasted estimates, our indefinite-lived intangibles impairment evaluations could be adversely affected, and we may impair a portion or all of their carrying values, which would adversely affect our operating results in the period of impairment.

Previous wording

Total sales decreased $29,231, or 9.3%, to $286,020 during the year ended December 31, 2023, compared to sales of $315,251 during the year ended December 31, 2022. The decrease in sales was primarily attributable to a decrease in sales at the Outdoor and Adventure segments of $18,292 and $10,939, respectively.

Current wording

Total sales decreased $21,705, or 7.6%, to $264,315 during the year ended December 31, 2024, compared to total sales of $286,020 during the year ended December 31, 2023. The decrease in sales was attributable to a decrease in sales at the Outdoor and Adventure segments of $20,485 and $1,220, respectively.

Previous wording

Domestic sales decreased $20,433, or 15.4%, to $112,385 during the year ended December 31, 2023, compared to domestic sales of $132,818 during the year ended December 31, 2022. The decrease in sales was primarily attributable to a decrease in sales at the Adventure and Outdoor segments of $11,160 and $9,273, respectively.

Current wording

Domestic sales decreased $6,640, or 5.9%, to $105,745 during the year ended December 31, 2024, compared to domestic sales of $112,385 during the year ended December 31, 2023. The decrease in sales was attributable to a decrease in sales at the Outdoor segment of $7,829, partially offset by an increase in sales at the Adventure segment of $1,189.

Previous wording

International sales decreased $8,798, or 4.8%, to $173,635 during the year ended December 31, 2023, compared to international sales of $182,433 during the year ended December 31, 2022. The decrease in sales was primarily attributable to a decrease in sales at the Outdoor segment of $9,019, partially offset by an increase in sales at the Adventure segment of $221.

Current wording

International sales decreased $15,065, or 8.7%, to $158,570 during the year ended December 31, 2024, compared to international sales of $173,635 during the year ended December 31, 2023. The decrease in sales was attributable to a decrease in sales at the Outdoor and Adventure segments of $12,656 and $2,409, respectively.

Previous wording

Cost of goods sold decreased $16,789, or 8.2%, to $188,509 during the year ended December 31, 2023, compared to cost of goods sold of $205,298 during the year ended December 31, 2022. The decrease in cost of goods sold was primarily attributable to a decrease in the number of units sold during the year ended December 31, 2023.

Current wording

Cost of goods sold decreased $16,813, or 8.9%, to $171,696 during the year ended December 31, 2024, compared to cost of goods sold of $188,509 during the year ended December 31, 2023.

Previous wording

Gross profit decreased $12,442, or 11.3%, to $97,511 during the year ended December 31, 2023, compared to gross profit of $109,953 during the year ended December 31, 2022. Gross margin was 34.1% during the year ended December 31, 2023, compared to a gross margin of 34.9% during the year ended December 31, 2022. Gross margin during the year ended December 31, 2023, decreased compared to the prior year due to promotional pricing and increases of $4,208 in inventory reserves at the Outdoor segment, as well as unfavorable foreign currency exchange movement. These decreases were partially offset by favorable variances, primarily related to easing freight costs, at both the Outdoor and Adventure segments.

Current wording

Gross profit decreased $4,892, or 5.0%, to $92,619 during the year ended December 31, 2024, compared to gross profit of $97,511 during the year ended December 31, 2023. Gross margin was 35.0% during the year ended December 31, 2024, compared to a gross margin of 34.1% during the year ended December 31, 2023. Gross margin during the year ended December 31, 2024, increased compared to the prior year due to favorable channel mix as a result of lower OEM sales at the Adventure segment and favorable product mix due to the simplification and SKU rationalization strategy at the Outdoor segment. These increases were partially offset by an increase in inventory reserve expenses at the Adventure segment.

Previous wording

Restructuring charges increased to $3,223 during the year ended December 31, 2023, compared to restructuring charges of $0 during the year ended December 31, 2022. The restructuring charges incurred during the year ended December 31, 2023 relate to benefits provided to employees who were or will be terminated due to the Company’s reduction-in-force as part of its continued realignment of resources within the organization of $1,328, lease exit and contract termination costs of $1,125, and other restructuring costs of $770.

Current wording

Restructuring charges decreased to $1,948 during the year ended December 31, 2024, compared to restructuring charges of $3,223 during the year ended December 31, 2023. The restructuring charges incurred during the year ended December 31, 2024 relate to benefits provided to employees who were terminated due to the Company’s reduction-in-force as part of its continued realignment of resources within the organization of $1,824 and lease exit and contract termination costs of $124.

Previous wording

Transaction expense decreased to $593 during the year ended December 31, 2023, compared to transaction costs of $2,818 during the year ended December 31, 2022. The 2023 transaction costs primarily related to the TRED Outdoor acquisition and other expenses related to the Company’s various acquisition efforts.

Current wording

Transaction expense decreased to $576 during the year ended December 31, 2024, compared to transaction costs of $593 during the year ended December 31, 2023. The 2024 transaction costs primarily related to the RockyMounts and TRED Outdoor acquisitions and other expenses related to the Company’s various acquisition efforts.

Previous wording

Contingent consideration benefit was $1,565 during the year ended December 31, 2023, compared to a $493 contingent consideration expense during the year ended December 31, 2022, which consisted of changes in estimated fair value of contingent consideration liabilities associated with our acquisition of MAXTRAX in 2021.

Current wording

Contingent consideration benefit decreased to $125 during the year ended December 31, 2024, compared to a contingent consideration benefit of $1,565 during the year ended December 31, 2023, which consisted of changes in the estimated fair value of contingent consideration liabilities associated with our acquisitions of MAXTRAX in 2021 and TRED in 2023.

Previous wording

Impairment of Goodwill and Indefinite-Lived Intangible Assets

Current wording

Impairment of Goodwill

Previous wording

Impairment of goodwill and indefinite-lived intangible assets decreased to $0 during the year ended December 31, 2023, compared to impairment of goodwill and indefinite-lived intangible assets of $92,311 during the year ended December 31, 2022. Based on the results of the Company’s impairment analysis completed as of December 31, 2022, the Company determined that goodwill at the Adventure reporting unit and certain indefinite-lived intangible assets, specifically the Rhino-Rack trademark, were impaired and recognized a charge of $52,071 and $40,240, respectively, during the year ended December 31, 2022.

Current wording

Impairment of goodwill increased to $36,264 during the year ended December 31, 2024, compared to impairment of goodwill of $0 during the year ended December 31, 2023. Based on the results of the Company’s annual impairment analysis completed as of December 31, 2024, the Company determined that goodwill at the Adventure reporting unit was impaired and recognized a charge of $36,264.

Previous wording

Impairment of goodwill and indefinite-lived intangible assets increased to $92,311 during the year ended December 31, 2022, compared to impairment of goodwill and indefinite-lived intangible assets of $0 during the year ended December 31, 2021. Based on the results of the Company’s impairment analysis completed as of December 31, 2022, the Company determined that goodwill at the Adventure reporting unit and certain indefinite-lived intangible assets, specifically the Rhino-Rack trademark, were impaired and recognized a charge of $52,071 and $40,240, respectively, during the year ended December 31, 2022.

Current wording

Impairment of indefinite-lived intangible assets increased to $8,545 during the year ended December 31, 2024, compared to impairment of indefinite-lived intangible assets of $0 during the year ended December 31, 2023. Based on the results of the Company’s impairment analysis completed as of December 31, 2024, the Company determined that certain indefinite-lived intangible assets, specifically the Rhino-Rack and MAXTRAX trademarks, were impaired and recognized charges of $3,480 and $5,065, respectively, during the year ended December 31, 2024.

Previous wording

Interest income, net increased to $67 during the year ended December 31, 2023, compared to interest income, net of $0 during the year ended December 31, 2022.

Current wording

Interest income, net increased to $1,467 during the year ended December 31, 2024, compared to interest income, net of $67 during the year ended December 31, 2023. The increase in interest income recognized during the year ended December 31, 2024, was due to interest income on higher cash balances.

Previous wording

Other, net changed by $1,996, or 192.9%, to $961 during the year ended December 31, 2023, compared to other, net of ($1,035) during the year ended December 31, 2022. The change in other, net was primarily attributable to an increase in remeasurement gains recognized on the Company’s foreign denominated accounts receivable and accounts payable, partially offset by changes in mark-to-market adjustments on non-hedged foreign currency contracts during the year ended December 31, 2023.

Current wording

Other, net changed by $2,634, or 274.1%, to ($1,673) during the year ended December 31, 2024, compared to other, net of $961 during the year ended December 31, 2023. The change in other, net was primarily attributable to an increase in remeasurement losses recognized on the Company’s foreign denominated accounts receivable and accounts payable. The change was partially offset by increases in gains in mark-to-market adjustments on non-hedged foreign currency contracts during the year ended December 31, 2024.

Previous wording

Income tax benefit decreased $10,425, or 70.8%, to $4,291 during the year ended December 31, 2023, compared to an income tax benefit of $14,716 during the same period in 2022. Our effective income tax rate was a benefit of 21.4% for the year ended December 31, 2023, and differed compared to the statutory tax rates primarily due to the impact of officer compensation limitations, partially offset by the impact of tax credits, and permanent book to tax differences related to incentive stock options. Our effective income tax rate was a benefit of 13.7% for the year ended December 31, 2022, and differed compared to the statutory tax rates due to the impact of impairment of goodwill as well as officer compensation limitations, partially offset by the impact of foreign earnings taxed at applicable statutory rates, tax credits, and permanent book to tax differences related to incentive stock options.

Current wording

Income tax expense (benefit) changed by $22,143, or 516.0%, to an income tax expense of $17,852 during the year ended December 31, 2024, compared to an income tax benefit of $4,291 during the same period in 2023. Our effective income tax rate was an expense of 25.3% for the year ended December 31, 2024, and differed compared to the statutory tax rates primarily due to the impact of recording a valuation allowance on deferred tax assets and the impairment of goodwill and indefinite-lived intangible assets, all of which are non-deductible for tax purposes. Our effective income tax rate was a benefit of 21.4% for the year ended December 31, 2023, and differed compared to the statutory tax rates due to the impact of officer compensation limitations, partially offset by the impact of tax credits, and permanent book to tax differences related to incentive stock options.

Previous wording

Net income from discontinued operations decreased $17,380, to $5,642 during the year ended December 31, 2023, compared to net income from discontinued operations of $23,022 during the year ended December 31, 2022. The decrease in net income from discontinued operations was primarily attributable to a decrease in sales and gross profit at the Precision Sport segment of $20,493, the recording of transaction costs of $2,013 related to the sale of the Precision Sport segment, and an increase in interest expense of $3,542 due to an increase in interest rates during the period compared to the prior year. These decreases were partially offset by lower amortization, lower sales commissions, and reductions across selling, general and administrative expense at the Precision Sport segment.

Current wording

Net income from discontinued operations changed by $30,508, to $36,150 during the year ended December 31, 2024, compared to net income from discontinued operations of $5,642 during the year ended December 31, 2023. The change in net income from discontinued operations was primarily attributable to the pre-tax gain on the sale of the Precision Sport segment of $40,585.

Previous wording

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 in the various brands. We plan to fund these activities through a combination of our future operating cash flows and net proceeds from the sale of our Precision Sport segment. Subsequent to year end and upon the closing of the sale of the Precision Sport segment, the Company terminated and settled all outstanding borrowings on our revolving credit facility and term debt under the Restated Credit Agreement. We believe that our liquidity requirements and contractual obligations for at least the next 12 months will be adequately covered by cash provided by operations and the net proceeds from the sale of the Precision Sport segment after the settlement of the Restated Credit Agreement. Additionally, long-term contractual obligations are also currently expected to be funded from cash from operations and net proceeds from the sale of the Precision Sport segment after

Current wording

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 in the various brands. We plan to fund these activities through a combination of our future operating cash flows and net proceeds from the sale of our Precision Sport segment. Upon the closing of the sale of the Precision Sport segment, the Company terminated and settled all outstanding borrowings on our revolving credit facility and term debt under the Restated Credit Agreement. We believe that our liquidity requirements and contractual obligations for at least the next 12 months will be adequately covered by cash provided by operations and the net proceeds from the sale of the Precision Sport segment after the settlement of the Restated Credit Agreement. Additionally, long-term contractual obligations are also currently expected to be funded from cash from operations and net proceeds from the sale of the Precision Sport segment after the settlement of the Restated Credit Agreement. For additional information regarding the Company’s credit facilities, see the section titled “Credit Agreement” below.

Previous wording

At December 31, 2023, we had total cash of $11,324, compared to cash of $12,061 at December 31, 2022. At December 31, 2023, the Company had $7,415 of the $11,324 in cash held by foreign entities, of which $4,950 is considered permanently reinvested.

Current wording

At December 31, 2024, we had total cash of $45,359, compared to cash of $11,324 at December 31, 2023. At December 31, 2024, the Company had $6,477 of the $45,359 in cash held by foreign entities, of which $4,665 is considered permanently reinvested.

Previous wording

The following presents a discussion of cash flows for the year ended December 31, 2023 compared with the year ended December 31, 2022.

Current wording

The following presents a discussion of cash flows for the year ended December 31, 2024 compared with the year ended December 31, 2023, inclusive of continuing and discontinued operations.

Previous wording

Net cash provided by operating activities was $31,924 during the year ended December 31, 2023, compared to net cash provided by operating activities of $14,610 during the year ended December 31, 2022. The change in net cash provided by operating activities during 2023 is primarily due to a decrease in cash outflows related to working capital of $56,604, partially offset by a decrease in stock compensation and amortization of other intangible assets, and an increase in contingent consideration benefit during the year ended December 31, 2023, compared to the same period in 2022.

Current wording

Net cash used in operating activities was $7,300 during the year ended December 31, 2024, compared to net cash provided by operating activities of $31,924 during the year ended December 31, 2023. The change in net cash (used in) provided by operating activities during 2024 is primarily due to the gain on sale of $40,585 related to the disposition of the Precision Sport segment, an increase in net loss of $42,141, and an increase in cash outflows related to working capital of $19,202, compared to the same period in 2023. These were partially offset by an increase in impairment of goodwill and indefinite-lived intangible assets at the Adventure segment of $44,809, as well as an increase in deferred income taxes of $22,530 during the year ended December 31, 2024, compared to the same period in 2023.

Previous wording

Free cash flow, defined as net cash provided by operating activities less capital expenditures, of $26,207 was generated during the year ended December 31, 2023 compared to $6,360 of free cash flow during the same period in 2022. 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:

Current wording

Free cash flow, defined as net cash (used in) provided by operating activities less capital expenditures, of ($14,039) was used during the year ended December 31, 2024 compared to $26,207 generated during the same period in 2023. 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, inclusive of continuing and discontinued operations:

Previous wording

Net cash used in investing activities was $11,416 during the year ended December 31, 2023 compared to net cash used in investing activities of $7,751 during the year ended December 31, 2021. The increase in cash used during the year ended December 31, 2023 is due to the acquisition of Tred, partially offset by a decrease in purchases of property and equipment during the year ended December 31, 2023.

Current wording

Net cash provided by investing activities was $165,160 during the year ended December 31, 2024 compared to net cash used in investing activities of $11,416 during the year ended December 31, 2023. The change in net cash provided by (used in) investing activities during the year ended December 31, 2024, is primarily due to the cash received related to the disposition of the Precision Sport segment, compared to the same period in 2023.

Previous wording

Net cash used in financing activities was $20,255 during the year ended December 31, 2023, compared to net cash used in financing activities of $13,858 during the year ended December 31, 2022. The increase in cash used during the year ended December 31, 2023, compared to the same period in 2022 was primarily due to a decrease in net proceeds from the revolving line of credit and term loan, partially offset by a decrease in purchases of treasury stock.

Current wording

Net cash used in financing activities was $123,239 during the year ended December 31, 2024, compared to net cash used in financing activities of $20,255 during the year ended December 31, 2023. The increase in cash used during the year ended December 31, 2024, compared to the same period in 2023 was primarily due to the settlement of all outstanding borrowings on our revolving credit facility and term debt under the Restated Credit Agreement.

Previous wording

As of December 31, 2023, the Company had net operating loss carryforwards (“NOLs”) and research and experimentation credit for U.S. federal income tax purposes of $7,699 and $2,997, respectively. The Company believes its U.S. Federal NOLs will substantially offset its future U.S. Federal income taxes until expiration. 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 NOLs. The Company has $7,669 of NOLs, none of which will expire until December 31, 2027. These NOLs are subject to compliance with Section 382 of the Internal Revenue Code of 1986, as amended.

Current wording

As of December 31, 2024, the Company had net operating loss carryforwards (“NOLs”) and research and experimentation credit for U.S. federal income tax purposes of $0 and $5,439, respectively.

Previous wording

As of December 31, 2023, the Company’s gross deferred tax asset was $39,893. The Company has recorded a valuation allowance of $714, resulting in a net deferred tax asset of $39,719, before deferred tax liabilities of $34,434. The Company has provided a valuation allowance against a portion of the net deferred tax assets as of December 31, 2023, 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.

Current wording

As of December 31, 2024, the Company’s gross deferred tax asset was $35,658. The Company has recorded a valuation allowance of $23,344, resulting in a net deferred tax asset of $12,314, before deferred tax liabilities of $24,488. The Company has provided a full valuation allowance against all of the net U.S. deferred tax assets as of December 31, 2024, 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 research and experimentation credits and capitalized costs for federal tax purposes. These deferred tax assets are expected to reverse into NOL carryforwards that can be used to offset taxable income and reduce income taxes payable in future periods. If a change in control were to occur, these future NOLs could be limited under Section 382 of the Internal Revenue Code of 1986 (“Code”), as amended.