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

or

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;

3


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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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CADRE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except share and per share amounts)

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 31st 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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CADRE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except share and per share amounts)

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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CADRE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except share and per share amounts)

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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CADRE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except share and per share amounts)

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:

    

Gross

    

Average Useful Life

Customer relationships

$

9,300

15

Technology

600

 

10

Trademarks

300

7

Total

$

10,200

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CADRE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except share and per share amounts)

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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Table of Contents

CADRE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except share and per share amounts)

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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CADRE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except share and per share amounts)

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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CADRE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except share and per share amounts)

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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CADRE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except share and per share amounts)

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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Table of Contents

CADRE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except share and per share amounts)

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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CADRE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(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: