November 15, 2022 - 424B3: Prospectus filed pursuant to Rule 424(b)(3)

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Filed pursuant to Rule 424(b)(3)

Registration No. 333-261852

PROSPECTUS SUPPLEMENT NO. 9

(to Prospectus dated January 5, 2022)

Cadre Holdings, Inc.

27,483,350 Shares of Common Stock

This prospectus supplement supplements the prospectus dated January 5, 2022 (as supplemented or amended from time to time, the “Prospectus”), which forms a part of our registration statement on Form S-1 (No. 333-261852). This prospectus supplement is being filed to update and supplement the information in the Prospectus with the information contained in our quarterly report on Form 10-Q, filed with the Securities and Exchange Commission on November 10, 2022 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this prospectus supplement. The Prospectus and this prospectus supplement relate to the offer and sale from time to time by the selling securityholders named in the Prospectus (the “Selling Securityholders”), or their permitted transferees, of up to 27,483,350 shares of our common stock, $0.0001 par value per share (“Common Stock”). We will not receive any proceeds from the sale of shares of Common Stock by the Selling Securityholders pursuant to the Prospectus and this prospectus supplement.

Our registration of the securities covered by the Prospectus and this prospectus supplement does not mean that the Selling Securityholders will offer or sell any of the shares. The Selling Securityholders may sell the shares of Common Stock covered by the Prospectus and this prospectus supplement in a number of different ways and at varying prices. We provide more information about how the Selling Securityholders may sell the shares in the section entitled “Plan of Distribution.”

Our Common Stock is listed on The New York Stock Exchange under the symbol “CDRE”. On November 14, 2022, the closing price of our Common Stock was $29.48.

This prospectus supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.

See the section entitled “Risk Factors” beginning on page 11 of the Prospectus to read about factors you should consider before buying our securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus supplement is November 14, 2022.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: September 30, 2022

☐ 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: 001-40698

CADRE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

38-3873146

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)



13386 International Pkwy Jacksonville, Florida		32218
(Address of principal executive offices)		(Zip code)

(904) 741-5400

(Registrant’s telephone number, including area code)

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 $0.0001 per share	CDRE	New York Stock Exchange

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 ☑ 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 ☑ 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	☐	Smaller reporting company	☒

		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 ☒

As of November 7, 2022, there were 37,332,271 shares of common stock, par value $0.0001, outstanding.

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INDEX

CADRE HOLDINGS, INC.

PART I	FINANCIAL INFORMATION	Page
Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets – September 30, 2022 and December 31, 2021	5
	Consolidated Statements of Operations and Comprehensive Income (Loss) – Three and nine months ended September 30, 2022 and 2021	6
	Consolidated Statements of Cash Flows – Nine months ended September 30, 2022 and 2021	7
	Consolidated Statements of Shareholders’ Equity – Three and nine months ended September 30, 2022 and 2021	8
	Notes to Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 6.	Exhibits	42
Signature Page		43

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This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Except where the context otherwise requires or where otherwise indicated, the terms the “Company”, “Cadre”, “we,” “us,” and “our,” refer to the consolidated business of Cadre Holdings, Inc. and its consolidated subsidiaries. All statements in this Report, other than statements of historical fact, are forward-looking statements. These forward-looking statements are based on management’s current expectations, assumptions, hopes, beliefs, intentions, and strategies regarding future events and are based on currently available information as to the outcome and timing of future events. In some cases, you can identify forward-looking statements because they contain words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “could,” “plan,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. The Company cautions you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of the Company, incident to its business.

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. These forward-looking statements are based on information available as of the date of this Report (or, in the case of forward-looking statements incorporated herein by reference, if any, as of the date of the applicable filed document), and any accompanying supplement, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date, and the Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Report. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. Our forward-looking statements do not reflect the potential impact of any future acquisitions, partnerships, mergers, dispositions, joint ventures, or investments we may make.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

●

the availability of capital to satisfy our working capital requirements;

●

anticipated trends and challenges in our business and the markets in which we operate;

●

our ability to anticipate market needs or develop new or enhanced products to meet those needs;

●

our expectations regarding market acceptance of our products;

●

the success of competing products by others that are or become available in the markets in which we sell our products;

●

the impact of adverse publicity about the Company and/or its brands, including without limitation, through social media or in connection with brand damaging events and/or public perception;

●

changes in political, economic or regulatory conditions generally and in the markets in which we operate;

●

the impact of political unrest, natural disasters or other crises, terrorist acts, acts of war and/or military operations;

●

our ability to maintain or broaden our business relationships and develop new relationships with strategic alliances, suppliers, customers, distributors, or otherwise;

●

our ability to retain and attract senior management and other key employees;

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●

our ability to quickly and effectively respond to new technological developments;

●

the effect of the COVID-19 pandemic on the Company’s business;

●

logistical challenges related to supply chain disruptions and delays;

●

the impact of inflationary pressures and our ability to mitigate such impacts with pricing and productivity;

●

the possibility that the Company may be adversely affected by other political, economic, business, and/or competitive factors;

●

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;

●

our ability to protect our trade secrets or other proprietary rights and operate without infringing upon the proprietary rights of others and prevent others from infringing on the proprietary rights of the Company;

●

our ability to maintain a quarterly dividend; and

●

the increased expenses associated with being a public company and the related increased disclosure and reporting obligations..

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. Other risks and uncertainties are and will be disclosed in our prior and future filings with the Securities and Exchange Commission (“SEC”). The following information should be read in conjunction with the Consolidated Financial Statements included in this Report.

Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CADRE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share amounts)


	September 30, 2022		December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	36,350	$	33,857
Accounts receivable, net of allowance for doubtful accounts of $774 and $645, respectively		55,759		48,344
Inventories		79,246		63,978
Prepaid expenses		8,740		10,353
Other current assets		7,493		3,171
Assets held for sale		225		278
Total current assets		187,813		159,981
Property and equipment, net of accumulated depreciation and amortization of $41,478 and $37,171, respectively		45,671		33,053
Deferred tax assets, net		5,350		7,059
Intangible assets, net		51,518		42,415
Goodwill		77,196		66,262
Other assets		7,631		3,026
Total assets	$	375,179	$	311,796

Liabilities, Mezzanine Equity and Shareholders' Equity
Current liabilities
Accounts payable	$	24,523	$	19,328
Accrued liabilities		35,515		40,736
Income tax payable		957		1,255
Liabilities held for sale		91		128
Current portion of long-term debt		13,285		13,174
Total current liabilities		74,371		74,621
Long-term debt		139,818		146,516
Deferred tax liabilities		3,526		1,297
Other liabilities		904		722
Total liabilities		218,619		223,156

Commitments and contingencies (Note 7)

Mezzanine equity
Preferred stock ($0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of September 30, 2022 and December 31, 2021)		—		—

Shareholders' equity
Common stock ($0.0001 par value, 190,000,000 shares authorized, 37,332,271 and 34,383,350 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively)		4		3
Additional paid-in capital		203,754		127,606
Accumulated other comprehensive loss		(846)		(1,917)
Accumulated deficit		(46,352)		(37,052)
Total shareholders’ equity		156,560		88,640
Total liabilities, mezzanine equity and shareholders' equity	$	375,179	$	311,796

The accompanying notes are an integral part of these consolidated financial statements.

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CADRE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands, except share and per share amounts)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net sales	$	111,554	$	98,654	$	334,192	$	323,751
Cost of goods sold		67,814		59,346		207,042		192,256
Gross profit		43,740		39,308		127,150		131,495
Operating expenses
Selling, general and administrative		31,732		27,673		118,431		87,168
Restructuring and transaction costs		1,578		(49)		3,380		1,491
Related party expense		112		142		1,346		437
Total operating expenses		33,422		27,766		123,157		89,096
Operating income		10,318		11,542		3,993		42,399
Other expense
Interest expense		(1,567)		(3,464)		(4,496)		(14,129)
Loss on extinguishment of debt		—		(15,155)		—		(15,155)
Other expense, net		(1,851)		(352)		(2,812)		(881)
Total other expense, net		(3,418)		(18,971)		(7,308)		(30,165)
Income (loss) before provision for income taxes		6,900		(7,429)		(3,315)		12,234
(Provision) benefit for income taxes		(1,959)		2,123		2,536		(3,861)
Net income (loss)	$	4,941	$	(5,306)	$	(779)	$	8,373

Net income (loss) per share:
Basic	$	0.13	$	(0.19)	$	(0.02)	$	0.30
Diluted	$	0.13	$	(0.19)	$	(0.02)	$	0.30
Weighted average shares outstanding:
Basic		37,289,880		27,483,350		35,697,891		27,483,350
Diluted		37,747,613		27,483,350		35,697,891		27,483,350

Net income (loss)	$	4,941	$	(5,306)	$	(779)	$	8,373
Other comprehensive (loss) income:
Unrealized holding gains, net of tax⁽¹⁾		2,350		89		6,414		89
Reclassification adjustments for gains included in net loss, net of tax⁽²⁾		(252)		1		(106)		1
Total unrealized gains on interest rate swaps, net of tax		2,098		90		6,308		90
Foreign currency translation adjustments, net of tax⁽³⁾		(2,839)		(515)		(5,237)		23
Other comprehensive (loss) income		(741)		(425)		1,071		113
Comprehensive income (loss), net of tax	$	4,200	$	(5,731)	$	292	$	8,486

(1) Net of income tax expense of $783 and $2,138 for the three and nine months ended September 30, 2022, respectively.

(2) Amounts reclassified to net income (loss) relate to gains on interest rate swaps and are included in Interest expense above. Amounts are net of income tax benefit of $84 and $35 for the three and nine months ended September 30, 2022, respectively.

(3) Net of income tax benefit of $916 and $94 for the three months ended September 30, 2022 and 2021, respectively. Net of income tax benefit of $934 and income tax expense of $187 for the nine months ended September 30, 2022 and 2021, respectively.

The accompanying notes are an integral part of these consolidated financial statements.

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CADRE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Nine Months Ended September 30,
	2022		2021
Cash Flows From Operating Activities:
Net (loss) income	$	(779)	$	8,373
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		11,319		10,426
Amortization of original issue discount and debt issue costs		554		2,483
Amortization of inventory step-up		3,055		—
Loss on extinguishment of debt		—		15,155
Deferred income taxes		(2,755)		1,533
Stock-based compensation		28,988		—
Provision for (recoveries from) losses on accounts receivable		245		(254)
Foreign exchange loss		3,006		45
Changes in operating assets and liabilities, net of impact of acquisitions:
Accounts receivable		(3,271)		1,549
Inventories		(7,187)		(10,261)
Prepaid expenses and other assets		986		(4,642)
Accounts payable and other liabilities		(4,660)		6,582
Net cash provided by operating activities		29,501		30,989
Cash Flows From Investing Activities:
Purchase of property and equipment		(2,938)		(2,225)
Business acquisitions, net of cash acquired		(55,039)		—
Net cash used in investing activities		(57,977)		(2,225)
Cash Flows From Financing Activities:
Proceeds from revolving credit facilities		43,000		248,000
Principal payments on revolving credit facilities		(43,000)		(223,132)
Proceeds from term loans		—		198,735
Principal payments on term loans		(7,514)		(224,547)
Proceeds from insurance premium financing		3,989		4,269
Principal payments on insurance premium financing		(3,878)		(2,611)
Payment of capital leases		(26)		(32)
Payments for debt issuance costs		—		(2,830)
Payments on extinguishment of debt		—		(4,215)
Taxes paid in connection with employee stock transactions		(6,216)		—
Proceeds from secondary offering, net of underwriter discounts		56,329		—
Deferred offering costs		(2,953)		—
Dividends distributed		(8,521)		(9,996)
Net cash provided by (used in) financing activities		31,210		(16,359)
Effect of foreign exchange rates on cash and cash equivalents		(241)		(3)
Change in cash and cash equivalents		2,493		12,402
Cash and cash equivalents, beginning of period		33,857		2,873
Cash and cash equivalents, end of period	$	36,350	$	15,275
Supplemental Disclosure of Cash Flows Information:
Cash paid for income taxes, net	$	710	$	695
Cash paid for interest	$	3,860	$	8,524
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Accruals and accounts payable for capital expenditures	$	272	$	—

The accompanying notes are an integral part of these consolidated financial statements.

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CADRE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

(In thousands, except per share amounts)


				Additional
	Common Stock			Paid-In		Accumulated Other		Accumulated		Shareholders'
	Shares	Amount		Capital		Comprehensive Income (Loss)		Deficit		Equity
Balance, December 31, 2021	34,383,350	$	3	$	127,606	$	(1,917)	$	(37,052)	$	88,640
Net loss	—		—		—		—		(10,165)		(10,165)
Dividends declared	—		—		—		—		(2,750)		(2,750)
Stock-based compensation	—		—		22,436		—		—		22,436
Common stock issued under employee compensation plans	580,990		—		1,152		—		—		1,152
Common stock withheld related to net share settlement of stock-based compensation	(182,069)		—		(6,216)		—		—		(6,216)
Foreign currency translation adjustments	—		—		—		(360)		—		(360)
Change in fair value of derivative instruments	—		—		—		3,208		—		3,208
Balance, March 31, 2022	34,782,271	$	3	$	144,978	$	931	$	(49,967)	$	95,945
Net income	—		—		—		—		4,445		4,445
Issuance of common stock in secondary offering, net of underwriter discounts and issuance costs	2,250,000		1		46,987		—		—		46,988
Dividends declared	—		—		—		—		(2,783)		(2,783)
Stock-based compensation	—		—		2,739		—		—		2,739
Foreign currency translation adjustments	—		—		—		(2,038)		—		(2,038)
Change in fair value of derivative instruments	—		—		—		1,002		—		1,002
Balance, June 30, 2022	37,032,271	$	4	$	194,704	$	(105)	$	(48,305)	$	146,298
Net income	—		—		—		—		4,941		4,941
Issuance of common stock in secondary offering, net of underwriter discounts and issuance costs	300,000		—		6,389		—		—		6,389
Dividends declared	—		—		—		—		(2,988)		(2,988)
Stock-based compensation	—		—		2,661		—		—		2,661
Foreign currency translation adjustments	—		—		—		(2,839)		—		(2,839)
Change in fair value of derivative instruments	—		—		—		2,098		—		2,098
Balance, September 30, 2022	37,332,271	$	4	$	203,754	$	(846)	$	(46,352)	$	156,560

The accompanying notes are an integral part of these consolidated financial statements

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CADRE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - CONTINTUED

(Unaudited)

(In thousands, except per share amounts)


				Additional
	Common Stock			Paid-In		Accumulated Other		Accumulated		Shareholders'
	Shares	Amount		Capital		Comprehensive Loss		Deficit		Equity
Balance, December 31, 2020	27,483,350	$	3	$	48,670	$	(2,860)	$	(36,962)	$	8,851
Net income	—		—		—		—		6,864		6,864
Foreign currency translation adjustments	—		—		—		284		—		284
Balance, March 31, 2021	27,483,350	$	3	$	48,670	$	(2,576)	$	(30,098)	$	15,999
Net income	—		—		—		—		6,815		6,815
Foreign currency translation adjustments	—		—		—		254		—		254
Balance, June 30, 2021	27,483,350	$	3	$	48,670	$	(2,322)	$	(23,283)	$	23,068
Net loss	—		—		—		—		(5,306)		(5,306)
Dividends declared	—		—		—		—		(10,000)		(10,000)
Foreign currency translation adjustments	—		—		—		(515)		—		(515)
Change in fair value of derivative instruments	—		—		—		90		—		90
Balance, September 30, 2021	27,483,350	$	3	$	48,670	$	(2,747)	$	(38,589)	$	7,337

The accompanying notes are an integral part of these consolidated financial statements.

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CADRE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(in thousands, except share and per share amounts)

1. SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Cadre Holdings, Inc., D/B/A The Safariland Group (the “Company”, “Cadre”, “we”, “us”, and “our”), a Delaware corporation, began operations on April 12, 2012. The Company, headquartered in Jacksonville, Florida, is a global leader in manufacturing and distributing safety and survivability products and other related products for the law enforcement, first responder and military markets. The business operates through 16 manufacturing plants within the U.S., Mexico, Canada, the United Kingdom, Italy, France, and Lithuania, and sells its products worldwide through its direct sales force, distribution channel and distribution partners, online stores, and third-party resellers.

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting, and include the accounts of the Company, its wholly owned subsidiaries, and other entities consolidated as required by GAAP. Accordingly, they do not include all of the information and footnotes required by GAAP for annual audited financial statements. The unaudited interim consolidated financial statements have been prepared on a basis consistent with the audited consolidated financial statements and include all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. These interim consolidated financial statements and notes thereto should be read in conjunction with the Company’s most recently completed annual consolidated financial statements. All adjustments considered necessary for a fair presentation have been included. All intercompany transactions have been eliminated in consolidation.

Stock Split

In July 2021, the Company effected a 50-for-1 stock split of its common stock and preferred stock. All share and per share information has been retroactively adjusted to reflect the stock split for all periods presented.

Secondary Offering

On June 9, 2022, the Company completed a secondary offering in which the Company issued and sold 2,250,000 shares of common stock at a price of $23.50 per share. The Company’s net proceeds from the sale of shares were $46,987 after underwriter discounts and commissions, fees and expenses of $2,715, of which $2,000 was paid to Kanders & Company, Inc., a company controlled by Warren Kanders, our Chief Executive Officer.

On July 14, 2022, the underwriters exercised a portion of their over-allotment option and purchased an additional 300,000 shares of common stock at a price of $23.50 per share, resulting in net proceeds to the Company of $6,389 after underwriter discounts and commissions, fees and expenses of $661.

Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible for exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including, but not limited to, presenting only two years of audited financial statements, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation, and an exemption from the requirements to obtain a non-binding advisory vote on executive compensation or golden parachute arrangements.

In addition, an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this provision of the JOBS Act. As a result, we may not be subject to new or revised accounting standards at the same time as other public companies that are not emerging growth companies. Therefore, our consolidated financial statements may not be comparable to those of companies that comply with new or revised accounting pronouncements as of public company effective dates.

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CADRE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except share and per share amounts)

Use of Estimates

The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

The presentation of revenue by channel previously reported in the notes to the consolidated financial statements has been reclassified to conform to the current financial statement presentation.

Fair Value Measurements

The Company follows the guidance of Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This guidance also establishes the following three-level hierarchy based upon the transparency of inputs to the valuation of an asset or liability on the measurement date:

Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Unobservable inputs that reflect assumptions about what market participants would use in pricing assets or liabilities based on the best information available.

The Company’s financial instruments consist principally of cash, accounts receivable, prepaid expenses, other current assets, accounts payable, accrued liabilities, income tax payable and debt. The carrying amounts of certain of these financial instruments, including cash, accounts receivable, prepaid expenses, other current assets, accounts payable, accrued liabilities and income tax payable approximate their current fair value due to the relatively short-term nature of these accounts.

The following table presents our fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis:


	September 30, 2022								December 31, 2021
	Carrying		Fair Value						Carrying		Fair Value
	amount			Level 1		Level 2		Level 3	amount			Level 1		Level 2		Level 3
Assets:
Interest rate swap (Note 6)	$	9,628	$	—	$	9,628	$	—	$	1,607	$	—	$	1,607	$	—

Liabilities:
Interest rate swap (Note 6)	$	—	$	—	$	—	$	—	$	389	$	—	$	389	$	—

There were no transfers of assets or liabilities between levels during the nine months ended September 30, 2022 and 2021.

The carrying value of our long-term debt obligations approximates the fair value, as the long-term debt was entered into recently and contains a floating interest rate component.

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Goodwill and Other Intangible Assets

The Company tests goodwill and intangible assets determined to have indefinite useful lives for impairment annually, or more frequently if events or circumstances indicate that assets might be impaired. The Company performs these annual impairment tests as of October 31^st each year.

In evaluating goodwill for impairment, qualitative factors are considered to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Some of these qualitative factors may include macroeconomic conditions, industry and market considerations, a change in financial performance, or entity-specific events. If, through this qualitative assessment, the conclusion is made that it is more likely than not that a reporting unit’s fair value is less than its carrying amount, the Company performs a two-step goodwill impairment test. The first step involves a comparison of the fair value of a reporting unit to its carrying value. If the carrying amount of the reporting unit exceeds its fair value, the second step of the process is performed, which compares the implied value of the reporting unit goodwill with the carrying value of the goodwill of that reporting unit. If the carrying value of the goodwill of a reporting unit exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

The Company determines the fair value of its reporting units based on a combination of the income approach and market approach, weighted based on the circumstances. Both values are discounted using a rate that reflects the Company’s best estimate of the weighted average cost of capital of a market participant and is adjusted for appropriate risk factors.

Revenue Recognition

The Company derives revenue primarily from the sale of physical products. The Company recognizes revenue when a contract exists with a customer that specifies the goods and services to be provided at an agreed upon sales price and when the performance obligation is satisfied by transferring the goods or service to the customer. The performance obligation is considered satisfied when control transfers, which is generally determined when products are shipped or delivered to the customer but could be delayed until the receipt of customer acceptance, depending on the terms of the contract. Sales are made on normal and customary short-term credit terms or upon delivery for point of sale transactions.

The Company enters into contractual arrangements primarily with customers in the form of individual customer orders which specify the goods, quantity, pricing, and associated order terms. The Company has some long-term contracts that may contain research and development performance obligations that are satisfied over time. The Company invoices the customer once the billing milestone is reached and collects under customary short-term credit terms. For long-term contracts, the Company recognizes revenue using the input method based on costs incurred, as this method is an appropriate measure of progress toward the complete satisfaction of the performance obligation. Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near-term. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. When the current estimate of total costs for a performance obligation indicates a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident.

At the time of revenue recognition, the Company also provides for estimated sales returns and miscellaneous claims from customers as reductions to revenues. The estimates are based on historical rates of product returns and claims. The Company accrues for such estimated returns and claims with an estimated accrual and associated reduction of revenue. Additionally, the Company records inventory that it expects to be returned as part of inventories, with a corresponding reduction to cost of goods sold.

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Charges for shipping and handling fees billed to customers are included in net sales and the corresponding shipping and handling expenses are included in cost of goods sold in the accompanying consolidated statements of operations and comprehensive income (loss). We consider our costs related to shipping and handling after control over a product has transferred to a customer to be a cost of fulfilling the promise to transfer the product to the customer.

Sales commissions paid to employees as compensation are expensed as incurred for contracts with service periods less than a year. For contracts with service periods greater than a year, these costs are capitalized and amortized over the life of the contract. These costs are recorded in selling, general and administrative expenses in the Company’s consolidated statements of operations and comprehensive income (loss).

Product Warranty

Some of the Company’s manufactured products carry limited warranty provisions for defects in quality and workmanship. A warranty reserve is established at the time of sale to cover estimated costs based on the Company’s history of warranty repairs and replacements, and is recorded in cost of goods sold in the Company’s consolidated statements of operations and comprehensive income (loss).

The following table sets forth the changes in the Company’s accrued warranties, which is recorded in accrued liabilities in the consolidated balance sheets:


	Nine months ended September 30,
	2022		2021
Beginning accrued warranty expense	$	1,256	$	1,133
Current period claims		(398)		(236)
Provision for current period sales		339		256
Ending accrued warranty expense	$	1,197	$	1,153

Net Income (Loss) per Share

Basic income or loss per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the periods presented. Diluted income or loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of potential common shares, determined using the treasury-stock method. The calculation of weighted average shares outstanding and net income (loss) per share are as follows:


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	4,941	$	(5,306)	$	(779)	$	8,373

Weighted average shares outstanding - basic		37,289,880		27,483,350		35,697,891		27,483,350
Effect of dilutive securities:
Stock-based awards		457,734		—		—		—
Weighted average shares outstanding - diluted		37,747,613		27,483,350		35,697,891		27,483,350
Net income (loss) per share:
Basic	$	0.13	$	(0.19)	$	(0.02)	$	0.30
Diluted	$	0.13	$	(0.19)	$	(0.02)	$	0.30

For the nine months ended September 30, 2022, 7,363 restricted stock awards were excluded from diluted weighted average shares outstanding because the impact would be anti-dilutive due to a net loss in the period. There were no dilutive instruments outstanding for the three and nine months ended September 30, 2021.

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Recent Accounting Pronouncements

Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is intended to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. In July 2018, the FASB issued additional guidance which provided an additional transition method for adopting the updated guidance. Under the additional transition method, entities may elect to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. In June 2020, the FASB issued additional guidance which extends the effective date of ASU 2016-02 for emerging growth companies to begin in fiscal years beginning after December 15, 2021, and interim periods beginning after December 15, 2022. Early adoption is permitted. The Company adopted this standard for its annual period as of January 1, 2022 by utilizing the effective date option of the modified retrospective transition approach, which does not require application of the guidance to comparative periods in the year of adoption. The primary effect of adoption will be recording ROU assets and corresponding lease liabilities for current operating leases. We believe the adoption of this standard will have a significant effect on our consolidated balance sheets and currently estimate a ROU asset and lease liability of $12,300 to $13,200 to be recorded on January 1, 2022. We do not anticipate that the adoption of this standard will have a significant impact on our consolidated statements of operations and comprehensive income (loss) or our consolidated statements of cash flows.

Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 includes an impairment model (known as the current expected credit loss model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. The use of forecasted information is intended to incorporate more timely information in the estimate of expected credit loss. In November 2019, the FASB issued additional guidance which extends the effective date of ASU 2016-13 for emerging growth companies to begin in fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company plans to adopt this standard on January 1, 2023 and is currently in the process of evaluating the impact of the adoption of this standard on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying existing guidance. For emerging growth companies, this ASU is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures.

There were no other new accounting standards that the Company expects to have a potential material impact to the financial position or results of operations upon adoption.

2. ACQUISITIONS

Radar Acquisition

On January 11, 2022, Safariland, LLC, a wholly-owned subsidiary of the Company, completed the acquisition of Radar Leather Division S.r.l. (“Radar”), a premiere family-owned duty gear business based in Italy that specializes in the production of high-quality holsters, belts, duty belts, and other accessories.

The acquisition was accounted for as a business combination. Total acquisition-related costs for the acquisition of Radar were $627, of which $204 was incurred and recognized during the nine months ended September 30, 2022.

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Total consideration, net of cash acquired, was $19,365 for 100% of the equity interests in Radar. The total consideration was as follows:


Cash paid	$	20,844
Less: cash acquired		(1,479)
Total consideration, net	$	19,365

The following table summarizes the total purchase price consideration and the preliminary fair value amounts recognized for the assets acquired and liabilities assumed, which have been estimated at their fair values. The fair value estimates for the purchase price allocation 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, we have decreased goodwill by $422 for revisions made to cash paid. The fair value measurements of all identifiable assets and liabilities, and the resulting goodwill related to the Radar acquisition are subject to change and the final purchase price allocation could be different from the amounts presented below. We expect to finalize the valuations as soon as practicable, but no later than one year from the date of the acquisition. The excess of purchase consideration over the assets acquired and liabilities assumed is recorded as goodwill. Goodwill for the Radar acquisition is included in the Products segment and reflects synergies and additional legacy growth and profitability expected from this acquisition through expansion into new markets and customers.


Total consideration, net	$	19,365

Accounts receivable	$	2,347
Inventories		2,500
Prepaid expenses		682
Other current assets		612
Property and equipment		3,053
Intangible assets		10,200
Goodwill		6,289
Total assets acquired		25,683
Accounts payable		1,120
Deferred tax liabilities		2,548
Accrued liabilities		2,106
Long-term debt		544
Total liabilities assumed		6,318
Net assets acquired	$	19,365

In connection with the acquisition, the Company acquired exclusive rights to Radar’s trademarks, customer relationships, and product technologies. The amounts assigned to each class of intangible asset and the related average useful lives are as follows:

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The full amount of goodwill of $6,289 is expected to be non-deductible for tax purposes. No pre-existing relationships existed between the Company and Radar prior to the acquisition. Radar revenue and cost of goods sold are included in the Products segment from the date of acquisition. The acquisition was not material to our consolidated financial statements.

Cyalume Acquisition

On May 4, 2022, Safariland, LLC, a wholly-owned subsidiary of the Company, completed the acquisition of Cyalume Technologies, Inc, CT SAS Holdings, Inc. and Cyalume Technologies SAS (collectively “Cyalume”). Cyalume is engaged in the design and manufacture of proprietary chemical illumination solutions for a diverse range of products, including light sticks, infrared products, safety markings and non-pyrophoric training ammunition.

The acquisition was accounted for as a business combination. Acquisition-related costs for the acquisition of Cyalume were $870 and $3,177 for the three and nine months ended September 30, 2022, respectively.

Total consideration, net of cash acquired, was $35,674 for 100% of the equity interests in Cyalume. The total consideration was as follows:


Cash paid	$	37,508
Less: cash acquired		(1,834)
Total consideration, net	$	35,674

The following table summarizes the total purchase price consideration and the preliminary fair value amounts recognized for the assets acquired and liabilities assumed, which have been estimated at their fair values. The fair value estimates for the purchase price allocation are based on the Company’s best estimates and assumptions as of the reporting date and are considered preliminary. The fair value measurements of identifiable assets and liabilities, and the resulting goodwill related to the Cyalume acquisition are subject to change and the final purchase price allocation could be different from the amounts presented below. We expect to finalize the valuations as soon as practicable, but no later than one year from the date of the acquisition. The excess of purchase consideration over the assets acquired and liabilities assumed is recorded as goodwill. Goodwill for the Cyalume acquisition is included in the Products segment and reflects synergies and additional legacy growth and profitability expected from this acquisition through expansion into new markets and customers.


Total consideration, net	$	35,674

Accounts receivable	$	3,302
Inventories		10,908
Prepaid expenses		255
Other current assets		10
Property and equipment		11,701
Intangible assets		8,300
Goodwill		6,641
Total assets acquired		41,117
Accounts payable		1,080
Deferred tax liabilities		2,497
Accrued liabilities		1,578
Other long-term liabilities		288
Total liabilities assumed		5,443
Net assets acquired	$	35,674

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In connection with the acquisition, the Company acquired exclusive rights to Cyalume’s trademarks, customer relationships, and product technologies. The amounts assigned to each class of intangible asset and the related average useful lives are as follows:


	Gross		Average Useful Life
Customer relationships	$	3,900		15
Technology		3,600		10
Trademarks		800		Indefinite
Total	$	8,300

The full amount of goodwill of $6,641 is expected to be non-deductible for tax purposes. No pre-existing relationships existed between the Company and Cyalume prior to the acquisition. Cyalume revenue and cost of goods sold are included in the Products segment from the date of acquisition. The acquisition was not material to our consolidated financial statements.

3. REVENUE RECOGNITION

The following tables disaggregate net sales by channel and geography:


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
U.S. state and local agencies (a)	$	64,359	$	55,559	$	188,724	$	177,221
Commercial		11,211		7,669		33,572		29,263
U.S. federal agencies		16,652		11,286		34,014		37,368
International		18,264		22,613		74,789		74,647
Other		1,068		1,527		3,093		5,252
Net sales	$	111,554	$	98,654	$	334,192	$	323,751

(a) Includes all Distribution sales


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
United States	$	93,290	$	76,041	$	259,403	$	249,104
International		18,264		22,613		74,789		74,647
	$	111,554	$	98,654	$	334,192	$	323,751

Contract Liabilities

Contract liabilities are recorded as a component of other liabilities when customers remit cash payments in advance of the Company satisfying performance obligations which are satisfied at a future point of time. Contract liabilities are reduced when the performance obligation is satisfied. Contract liabilities are included in accrued liabilities in the Company’s consolidated balance sheets and totaled $6,216 and $10,949 as of September 30, 2022 and December 31, 2021, respectively. Revenue recognized during the three and nine months ended September 30, 2022 from amounts included in contract liabilities as of December 31, 2021 was $424 and $7,640, respectively.

Remaining Performance Obligations

As of September 30, 2022, we had $19,427 of remaining performance obligations, which included amounts that will be invoiced and recognized in future periods. The remaining performance obligations are limited only to arrangements that meet the definition of a

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contract under ASC Topic 606, Revenue from Contracts with Customers, as of September 30, 2022. We expect to recognize approximately 58% of this balance over the next twelve months and expect the remainder to be recognized in the following two years.

4. INVENTORIES

The following table sets forth a summary of inventories stated at lower of cost or net realizable value, as of September 30, 2022 and December 31, 2021:



	September 30, 2022		December 31, 2021
Finished goods	$	29,992	$	28,707
Work-in-process		8,941		4,053
Raw materials and supplies		40,313		31,218
	$	79,246	$	63,978

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The following table summarizes the changes in goodwill for the three and nine months ended September 30, 2022:


	Products		Distribution		Total
Balance, December 31, 2021	$	63,646	$	2,616	$	66,262
Radar acquisition		6,711		—		6,711
Foreign currency translation adjustments		(463)		—		(463)
Balance, March 31, 2022	$	69,894	$	2,616	$	72,510
Radar acquisition measurement period adjustment		(422)		—		(422)
Cyalume acquisition		6,641		—		6,641
Foreign currency translation adjustments		(702)		—		(702)
Balance, June 30, 2022	$	75,411	$	2,616	$	78,027
Foreign currency translation adjustments		(831)		—		(831)
Balance, September 30, 2022	$	74,580	$	2,616	$	77,196

Gross goodwill and accumulated impairment losses was $84,781 and $7,585, respectively, as of September 30, 2022 and $73,899 and $7,585, respectively, as of December 31, 2021.

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Intangible Assets

Intangible assets such as certain customer relationships and patents on core technologies and product technologies are amortizable over their estimated useful lives. Certain trade names and trademarks which provide exclusive and perpetual rights to manufacture and sell their respective products are deemed indefinite-lived and are therefore not subject to amortization.

Intangible assets consisted of the following as of September 30, 2022 and December 31, 2021:


	September 30, 2022
							Weighted
				Accumulated			Average
	Gross			amortization		Net	Useful Life
Definite lived intangibles:
Customer relationships	$	84,445	$	(57,160)	$	27,285	11
Technology		15,649		(11,213)		4,436	8
Tradenames		6,244		(3,857)		2,387	4
Non-compete agreements		922		(922)		—	4
	$	107,260	$	(73,152)	$	34,108
Indefinite lived intangibles:
Tradenames		17,410		—		17,410	Indefinite
Total	$	124,670	$	(73,152)	$	51,518


	December 31, 2021
							Weighted
				Accumulated			Average
	Gross			amortization		Net	Useful Life
Definite lived intangibles:
Customer relationships	$	74,078	$	(52,536)	$	21,542	11
Technology		11,978		(10,988)		990	7
Tradenames		6,473		(3,264)		3,209	4
Non-compete agreements		1,037		(1,037)		—	4
	$	93,566	$	(67,825)	$	25,741
Indefinite lived intangibles:
Tradenames		16,674		—		16,674	Indefinite
Total	$	110,240	$	(67,825)	$	42,415

The Company recorded amortization expense of $2,274 and $2,173 for the three months ended September 30, 2022 and 2021, respectively, of which $134 and $198 was included in cost of goods sold in the consolidated statements of operations and comprehensive income (loss) for the respective periods. Amortization expense for the nine months ended September 30, 2022 and 2021 was $6,671 and $6,538, respectively, of which $314 and $596 was included in cost of goods sold in the consolidated statements of operations and comprehensive income (loss) for the respective periods.

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The estimated amortization expense for definite-lived intangible assets for the remaining three months of 2022, the next four years and thereafter is as follows:


Remainder of 2022	$	1,910
2023		7,735
2024		4,853
2025		2,934
2026		2,543
Thereafter		14,133
	$	34,108

6. DEBT

The Company’s debt is as follows:


	September 30, 2022		December 31, 2021
Short-term debt:
Insurance premium financing	$	3,285	$	3,174
Current portion of term loan		10,000		10,000
	$	13,285	$	13,174
Long-term debt:
Revolver		—		—
Term loan		141,064		148,564
Other		466		—
	$	141,530	$	148,564
Unamortized debt discount and debt issuance costs		(1,712)		(2,048)
Total long-term debt, net	$	139,818	$	146,516

The following summarizes the aggregate principal payments of our long-term debt, excluding debt discount and debt issuance costs, for the remaining three months of 2022, the next four years and thereafter:


Remainder of 2022	$	2,500
2023		10,000
2024		10,116
2025		10,116
2026		118,680
Thereafter		118
Total principal payments	$	151,530

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New Credit Facility

On August 20, 2021 (the “Closing Date”), the Company refinanced its existing credit facilities and entered into a new credit agreement whereby Safariland, LLC, as borrower (the “Borrower”), the Company and certain domestic subsidiaries of the Borrower, as guarantors (the “Guarantors”), closed on and received funding under a credit agreement (initially entered into on July 23, 2021), pursuant to a First Amendment to Credit Agreement (collectively, the “New Credit Agreement”) with PNC Bank, National Association (“PNC”), as administrative agent, and the several lenders from time to time party thereto (together with PNC, the “Lenders”) pursuant to which the Borrower (i) borrowed $200,000 under a term loan (the “Term Loan”), and (ii) may borrow up to $100,000 under a revolving credit facility (including up to $15,000 for letters of credit and up to $10,000 for swing line loans) (the “Revolving Loan”). Each of the Term Loan and the Revolving Loan mature on July 23, 2026. Commencing December 31, 2021, the New Term Loan requires scheduled quarterly payments in amounts equal to 1.25% per quarter of the original aggregate principal amount of the Term Loan, with the balance due at maturity. The New Credit Agreement is guaranteed, jointly and severally, by the Guarantors and, subject to certain exceptions, secured by a first-priority security interest in substantially all of the assets of the Borrower and the Guarantors pursuant to a Security and Pledge Agreement and a Guaranty and Suretyship Agreement, each dated as of the Closing Date.

The Company performed an analysis on a creditor-by-creditor basis for debt modifications and extinguishments to determine the appropriate accounting treatment of associated issuance costs. In connection with the refinancing, the Company recorded a loss on debt extinguishment of $15,155 for the three and nine months ended September 30, 2021 related to early extinguishments fees and the write-off of unamortized debt discount and debt issuance costs

There were no amounts outstanding under the Revolving Loan as of September 30, 2022 and December 31, 2021. As of September 30, 2022, there were $2,291 in outstanding letters of credit and $97,709 of availability.

The Borrower may elect to have the Revolving Loan and Term Loan under the New Credit Agreement bear interest at a base rate or a LIBOR rate, in each case, plus an applicable margin. The applicable margin for these borrowings will range from 0.50% to 1.50% per annum, in the case of base rate borrowings, and 1.50% to 2.50% per annum, in the case of LIBOR borrowings, in each case based upon the level of the Company’s consolidated total net leverage ratio. The New Credit Agreement also requires the Borrower to pay a commitment fee on the unused portion of the loan commitments. Such commitment fee will range between 0.175% and 0.25% per annum, and is also based upon the level of the Company’s consolidated total net leverage ratio. The New Credit Agreement also contains customary representations and warranties, and affirmative and negative covenants, including limitations on additional indebtedness, dividends, and other distributions, entry into new lines of business, use of loan proceeds, capital expenditures, restricted payments, restrictions on liens on the assets of the Borrowers or any Guarantor, transactions with affiliates, amendments to organizational documents, accounting changes, sale and leaseback transactions, dispositions, and mandatory prepayments in connection with certain liquidity events. The New Credit Agreement contains certain restrictive debt covenants, which require us to: (i) maintain a minimum fixed charge coverage ratio of 1.25 to 1.00, starting with the quarter ended December 31, 2021, which is to be determined for each quarter end on a trailing four quarter basis and (ii) maintain a quarterly maximum consolidated total net leverage ratio of 3.75 to 1.00 from the quarter ended December 31, 2021 until the quarter ended September 30, 2022, and thereafter 3.50 to 1.00, which is in each case to be determined on a trailing four quarter basis; provided that under certain circumstances and subject to certain limitations, in the event of a material acquisition, we may temporarily increase the consolidated total net leverage ratio by up to 0.50 to 1.00 for four fiscal quarters following such acquisition. The New Credit Agreement contains customary events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, failure to make payment on, or defaults with respect to, certain other material indebtedness, bankruptcy and insolvency events, material judgments and change of control provisions. Upon the occurrence of an event of default, and after the expiration of any applicable grace period, payment of any outstanding loans under the New Credit Agreement may be accelerated and the Lenders could foreclose on their security interests in the assets of the Borrowers and the Guarantors.

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(in thousands, except share and per share amounts)

Canadian Credit Facility

On October 14, 2021, Med-Eng Holdings ULC and Pacific Safety Products Inc., the Company’s Canadian subsidiaries, as borrowers (the “Canadian Borrowers”), and Safariland, LLC, as guarantor (the “Canadian Guarantor”), closed on a line of credit pursuant to a Loan Agreement (the “Canadian Loan Agreement”) and a Revolving Line of Credit Note (the “Note”) with PNC Bank Canada Branch (“PNC Canada”), as lender pursuant to which the Canadian Borrowers may borrow up to CDN$10,000 under a revolving line of credit (including up to $3,000 for letters of credit) (the “Revolving Canadian Loan”). The Revolving Canadian Loan matures on July 23, 2026. The Canadian Loan Agreement is guaranteed by the Canadian Guarantor pursuant to a Guaranty and Suretyship Agreement (the “Canadian Guaranty Agreement”).

The Canadian Borrowers may elect to have borrowings either in United States dollars or Canadian dollars under the Canadian Loan Agreement, which will bear interest at a base rate or a LIBOR rate, in each case, plus an applicable margin, in the case of borrowings in United States dollars, or at a Canadian Prime Rate (as announced from time to time by PNC Canada) or a Canadian deposit offered rate (“CDOR”) as determined from time to time by PNC Canada in accordance with the Canadian Loan Agreement. The applicable margin for these borrowings will range from 0.50% to 1.50% per annum, in the case of base rate borrowings and Canadian Prime Rate borrowings, and 1.50% to 2.50% per annum, in the case of LIBOR borrowings and CDOR borrowings. The Canadian Loan Agreement also requires the Canadian Borrowers to pay (i) an unused line fee on the unused portion of the loan commitments in an amount ranging between 0.175% and 0.25% per annum, based upon the level of the Company’s consolidated total net leverage ratio, and (ii) an upfront fee equal to 0.25% of the principal amount of the Note.

There were no amounts outstanding under the Revolving Canadian Loan as of September 30, 2022 and December 31, 2021.

The Canadian Loan Agreement also contains customary representations and warranties, and affirmative and negative covenants, including, among others, limitations on additional indebtedness, entry into new lines of business, entry into guarantee agreements, making of any loans or advances to, or investments in, any other person, restrictions on liens on the assets of the Canadian Borrowers and mergers, transfers of assets and acquisitions. The Canadian Loan Agreement and Note also contain customary events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, failure to make payment on, or defaults with respect to, certain other material indebtedness, bankruptcy and insolvency events, material judgments and change of control provisions.

Upon the occurrence of an event of default, and after the expiration of any applicable grace period, payment of any outstanding loans under the Canadian Loan Agreement may be accelerated.

Interest Rate Swaps

In September 2021, we entered into an interest rate swap agreement to hedge forecasted monthly interest rate payments on our floating rate debt. As of September 30, 2022, we had the following interest rate swap agreement (the “Swap Agreement”):


Effective date	Notional amount		Fixed rate
September 30, 2021 through July 23, 2026	$	100,000	0.875	%

Under the terms of the Swap Agreement, we receive payments based on the 1-month LIBOR (approximately 3.12% as of September 30, 2022).

During the nine months ended September 30, 2022, there were no interest rate swap agreements that expired.

We entered into the Swap Agreement to convert a portion of the interest rate exposure on our floating rate debt from variable to fixed. We designated this Swap Agreement as a cash flow hedge. A portion of the amount included in accumulated other comprehensive loss is reclassified into interest expense, net as a yield adjustment as interest is either paid or received on the hedged debt. The fair value of

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CADRE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except share and per share amounts)

our Swap Agreement is based upon Level 2 inputs. We have considered our own credit risk and the credit risk of the counterparties when determining the fair value of our Swap Agreement.

It is our policy to execute such instruments with creditworthy banks and not to enter into derivative financial instruments for speculative purposes. We believe our interest rate swap counterparty will be able to fulfill their obligations under our agreement, and we believe we will have debt outstanding through the expiration date of the swap such that the occurrence of future cash flow hedges remains probable.

The estimated fair value of our Swap Agreement in the consolidated balance sheets was as follows: