Annual report pursuant to Section 13 and 15(d)

Discontinued Operations

Discontinued Operations

12 Months Ended

Dec. 31, 2023

NOTE 3. DISCONTINUED OPERATIONS

On February 29, 2024, the Company and Everest/Sapphire Acquisition, LLC, its wholly-owned subsidiary, completed the sale to Bullseye Acquisitions, LLC, an affiliate of JDH Capital Company, of all of the equity associated with the Company’s Precision Sport segment, which is comprised of the Company’s subsidiaries Sierra and Barnes Bullets – Mona, LLC (“Barnes”), pursuant to a Purchase and Sale Agreement dated as of December 29, 2023, by and among, Bullseye Acquisitions, LLC, Everest/Sapphire Acquisition, LLC and the Company (the “Precision Sport Purchase Agreement”). The Precision Sport segment is engaged in the business of designing, developing, manufacturing, and marketing bullets and ammunition to the military, law enforcement, and commercial/consumer markets. Under the terms of the Precision Sport Purchase Agreement, the Buyer agreed to pay $175,000 in cash, which is subject to a customary working capital adjustment. The Company received net proceeds of approximately $37,871 in cash, after payment of certain fees and settlement of the Restated Credit Agreement, for all of the equity associated with the Company’s Precision Sport segment. As the disposition was completed during our first fiscal quarter of 2024, we expect to recognize a gain on the disposition during the three months ending March 31, 2024. The activities of the Precision Sport segment have been segregated and reported as discontinued operations for all periods presented.

The carrying amounts of the assets and liabilities of the Precision Sport segment were classified as held for sale in our consolidated balance sheets as of December 31, 2023 and 2022. The asset and liability balances as of December 31, 2023 were classified as current as we anticipated the sale of these assets and liabilities within a one year period. The carrying amounts were as follows:


	December 31, 2023		December 31, 2022

Cash	$	-	$	80
Accounts receivable, net		9,914		18,419
Inventories		44,208		39,470
Prepaid and other current assets		2,931		3,599
Total current assets held for sale		57,053		61,568

Property and equipment, net		24,075		25,706
Other intangible assets, net		4,926		6,959
Indefinite-lived intangible assets		24,500		24,500
Goodwill		26,715		26,715
Other long-term assets		15		15
Total assets held for sale	$	137,284	$	145,463

Accounts payable	$	2,441	$	2,285
Accrued liabilities		3,303		4,617
Current portion of long-term debt		-		48
Total current liabilities held for sale		5,744		6,950

Total liabilities held for sale	$	5,744	$	6,950

Summarized results of discontinued operations for the Precision Sport segment are as follows:


	Year Ended December 31,
	2023		2022		2021

Sales	$	89,950	$	132,855	$	109,823
Cost of goods sold		(56,980)		(79,392)		(60,765)
Selling, general and administrative		(11,639)		(14,225)		(14,834)
Restructuring charges		(47)		-		-
Transaction costs		(2,162)		(149)		(323)
Interest expense, net		(11,437)		(7,895)		(2,922)
Other, net		(19)		(807)		11

Income from discontinued operations before taxes		7,666		30,387		30,990
Income tax expense		2,024		7,365		7,020
Income from discontinued operations, net of tax	$	5,642	$	23,022	$	23,970

In connection with the sale of the Precision Sport segment, all interest expense related to outstanding debt that was required to be repaid with the proceeds received from the sale pursuant to the terms of the Company’s credit facility is allocated to discontinued operations in our consolidated financial statements for the years ended December 31, 2023, 2022, and 2021.

Summarized cash flow information for the Precision Sport segment discontinued operations are as follows:


	Year Ended December 31,
	2023		2022		2021

Depreciation of property and equipment	$	3,452	$	3,238	$	2,633
Amortization of intangible assets	$	2,033	$	2,769	$	3,753
Stock-based compensation	$	151	$	163	$	-
Purchase of property and equipment	$	1,848	$	3,100	$	13,486