UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Form 10-Q
☒
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2024
Or
☐
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMPASS DIVERSIFIED HOLDINGS
(Exact name of registrant as specified in its charter)
Delaware001-3492757-6218917
Delaware001-3492757-6218917
(State or other jurisdiction of

incorporation or organization)
(Commission

file number)
(I.R.S. employer

identification number)
COMPASS GROUP DIVERSIFIED HOLDINGS LLC
(Exact name of registrant as specified in its charter)
Delaware001-3492620-3812051
Delaware001-3492620-3812051
(State or other jurisdiction of

incorporation or organization)
(Commission

file number)
(I.R.S. employer

identification number)
301301 Riverside Avenue,
Second Floor,
Westport, CT 06880
(203)(203) 221-1703
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Shares representing beneficial interests in Compass Diversified HoldingsCODINew York Stock Exchange
Series A Preferred Shares representing beneficial interests in Compass Diversified HoldingsCODI PR ANew York Stock Exchange
Series B Preferred Shares representing beneficial interests in Compass Diversified HoldingsCODI PR BNew York Stock Exchange
Series C Preferred Shares representing beneficial interests in Compass Diversified HoldingsCODI PR CNew York Stock Exchange

Indicate by check mark whether the registrant: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.    YesýNo¨
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 ýNo¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "smaller reporting"emerging growth company" in Rule 12b-2 of the Exchange Act
Act.
Large accelerated filerxýAccelerated filer¨Non-accelerated filer¨
Non-accelerated filerSmaller reporting company☐¨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¨☐Noý


As of November 1, 2017,April 26, 2024, there were 59,900,000 Trustwere 75,384,052 Trust common shares of Compass Diversified Holdings outstanding.



COMPASS DIVERSIFIED HOLDINGS
QUARTERLY REPORT ON FORM 10-Q
For the period ended September 30, 2017March 31, 2024
TABLE OF CONTENTS
Page
Number
Page
Number4
FORWARD-LOOKING STATEMENTS
4
PART I. FINANCIAL INFORMATION
ITEM 1.
5
6
7
8
9
11
ITEM 2.
3438
ITEM 3.
64
ITEM 4.
64
PART II. OTHER INFORMATION
65
ITEM 1.
65
ITEM 1A.
65
ITEM 6.
6566
6768



2

NOTE TO READER
In reading this Quarterly Report on Form 10-Q, references to:

•the "Trust"“Trust” and "Holdings"“Holdings” refer to Compass Diversified Holdings;
"businesses," "operating segments," "subsidiaries"•the “LLC” refer to Compass Group Diversified Holdings LLC;
•the "Company" refer to Compass Diversified Holdings and "reporting units"Compass Group Diversified Holdings LLC, collectively;
•“businesses”, “operating segments”, “subsidiaries” and “reporting units” all refer to, collectively, the businesses controlled by the Company;
•the "Company" refer to Compass Group Diversified Holdings LLC;
the "Manager"“Manager” refer to Compass Group Management LLC ("CGM"(“CGM”);
•the "Trust Agreement" refer to the SecondThird Amended and Restated Trust Agreement of the Trust dated as of December 6, 2016;August 3, 2021;
•the "2011 Credit Facility" refer to a credit agreement (as amended) with a group of lenders led by Toronto Dominion (Texas) LLC, as agent, which provided for the 2011 Revolving Credit Facility and the 2011 Term Loan Facility;
the "2014"2022 Credit Facility" refer to the third amended and restated credit agreement as amendedentered into on July 12, 2022 among the LLC, the lenders from time to time entered into on June 6, 2014 with a group of lenders led byparty thereto, Bank of America, N.A., as administrative agent, which provides for a Revolving Credit FacilityAdministrative Agent, Swing Line Lender and a Term Loan;letter of credit issuer (the "agent")
•the "2014"2022 Revolving Credit Facility" referrefers to the $550$600 million Revolving Credit Facilityin revolving loans, swing line loans and letters of credit provided by the 20142022 Credit Facility that matures in June 2019;2027;
•the "2014"2022 Term Loan" refer to the $325$400 million Term Loan Facility,term loan provided by the 20142022 Credit Facility that matures in June 2021;Facility;
the "2016 Incremental Term Loan" refer to the $250 million Tranche B Term Facility provided by the 2014 Credit Facility (together with the 2014 Term Loan, the "Term Loans");
•the "LLC Agreement" refer to the fifth amendedSixth Amended and restated operating agreementRestated Operating Agreement of the Company dated as of December 6, 2016;August 3, 2021, as further amended; and
•"we," "us" and "our" refer to the Trust, the Company and the businesses together.



3

FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, contains both historical and forward-looking statements. We may, in some cases, use words such as "project," "predict," "believe," "anticipate," "plan," "expect," "estimate," "intend," "should," "would," "could," "potentially," "may," or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. All statements other than statements of historical or current fact are “forward-looking statements” for purposes of federal and state securities laws. Forward looking statements include, among other things, (i) statements as to our future performance or liquidity, such as expectations for our results of operation, net income, adjusted EBITDA, adjusted earnings, and ability to make quarterly distributions and (ii) our plans, strategies and objectives for future operations, including our business outlook and planned capital expenditures. Forward-looking statements in this Quarterly Report on Form 10-Q are subject to a number of risks and uncertainties, somesuch as those disclosed or incorporated by reference in our filings with the SEC, including, but not limited to, those described under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the United States Securities and Exchange Commission (“SEC”) on February 28, 2024, as such factors may be updated from time to time in our filings with the SEC. Many of whichthese risks and uncertainties are beyond our control including,. Important factors that could cause our actual results, performance and achievements to differ materially from those estimates or projections contained in our forward-looking statements include, among other things:

our ability to successfully operate our businesses on a combined basis, and to effectively integrate and improve future acquisitions;
our ability to remove CGM and CGM’s right to resign;
our organizational structure, which may limit our ability to meet our dividend and distribution policy;
our ability to service and comply with the terms of our indebtedness;
our cash flow available for distribution and reinvestment and our ability to make distributions in the future to our shareholders;
our ability to pay the management fee and profit allocation if and when due;
our ability to make and finance future acquisitions;
our ability to implement our acquisition and management strategies;
the regulatory environment in which our businesses operate;
trends in the industries in which our businesses operate;
•changes in general economic, political or business conditions or economic, political or demographic trends in the United States and other countries in which we have a presence, including changes in interest rates and inflation;
•disruption in the global supply chain, labor shortages and high labor costs;
•difficulties and delays in integrating, or business disruptions following, acquisitions or an inability to fully realize cost savings and other benefit related thereto;
•our ability to successfully operate our subsidiary businesses on a combined basis, and to effectively integrate and improve future acquisitions;
•our ability to maintain our credit facilities or incur additional borrowings on terms we deem attractive;
•our ability to remove CGM and CGM’s right to resign;
•our organizational structure, which may limit our ability to meet our dividend and distribution policy;
•our ability to service and comply with the terms of our indebtedness;
•our ability to make distributions in the future to our shareholders;
•our ability to pay the management fee and profit allocation if and when due;
•our ability to make and finance future acquisitions;
•our ability to implement our acquisition and management strategies;
•the legal and regulatory environment in which our subsidiaries operate;
•trends in the industries in which our subsidiaries operate;
•future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities);
•risks associated with possible disruption in operations or the economy generally due to terrorism or natural disaster or social, civil or political unrest;
•environmental risks affecting the business or operations of our businesses;subsidiaries;
•our and CGM’s ability to retain or replace qualified employees of our businessessubsidiaries and CGM;
•the impact of the tax reclassifications of the Trust;
•costs and effects of legal and administrative proceedings, settlements, investigations and claims; and
•extraordinary or force majeure events affecting the business or operations of our subsidiary businesses.
Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. Additional risks of which we are not currently aware or which we currently deem immaterial could also cause our actual results to differ.
In light of these risks, uncertainties and assumptions, you should not place undue reliance on any forward-looking statements. The forward-looking events discussed in this Quarterly Report on Form 10-Q may not occur. These forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances, whether as a result of new information, future events or otherwise, except as required by law.



4

PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

COMPASS DIVERSIFIED HOLDINGS
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31,
2024		March 31,
2024		December 31,
2023
(in thousands)September 30,
2017		 December 31,
2016
(Unaudited)  
Assets
Assets
Assets   
Current assets:   
Current assets:
Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents$41,487
 $39,772
Accounts receivable, net198,111
 181,191
Inventories242,817
 212,984
Inventories, net
Prepaid expenses and other current assets27,145
 18,872
Total current assets509,560
 452,819
Property, plant and equipment, net170,827
 142,370
Investment in FOX (refer to Note F)—
 141,767
Goodwill539,925
 491,637
Intangible assets, net591,878
 539,211
Other non-current assets8,616
 9,351
Total assets$1,820,806
 $1,777,155
Liabilities and stockholders’ equity   
Current liabilities:   
Current liabilities:
Current liabilities:
Accounts payable
Accounts payable
Accounts payable$77,417
 $61,512
Accrued expenses105,058
 91,041
Due to related party7,553
 20,848
Due to related parties (refer to Note P)
Current portion, long-term debt5,685
 5,685
Other current liabilities15,493
 23,435
Total current liabilities211,206
 202,521
Deferred income taxes122,033
 110,838
Long-term debt569,755
 551,652
Other non-current liabilities18,570
 17,600
Total liabilities921,564
 882,611
Commitments and contingencies (refer to Note O)
Stockholders’ equity   
Trust preferred shares, 50,000 authorized; 4,000 shares issued and outstanding at September 30, 201796,417
 —
Trust common shares, no par value, 500,000 authorized; 59,900 shares issued and outstanding at September 30, 2017 and December 31, 2016924,680
 924,680
Accumulated other comprehensive loss(2,184) (9,515)
Stockholders’ equity
Stockholders’ equity
Trust preferred shares, 50,000 authorized; 12,634 shares issued and outstanding at March 31, 2024 and 12,600 shares issued and outstanding at December 31, 2023
Trust preferred shares, 50,000 authorized; 12,634 shares issued and outstanding at March 31, 2024 and 12,600 shares issued and outstanding at December 31, 2023
Trust preferred shares, 50,000 authorized; 12,634 shares issued and outstanding at March 31, 2024 and 12,600 shares issued and outstanding at December 31, 2023
Series A preferred shares, no par value; 4,008 shares issued and outstanding at March 31, 2024 and 4,000 shares issued and outstanding at December 31, 2023
Series A preferred shares, no par value; 4,008 shares issued and outstanding at March 31, 2024 and 4,000 shares issued and outstanding at December 31, 2023
Series A preferred shares, no par value; 4,008 shares issued and outstanding at March 31, 2024 and 4,000 shares issued and outstanding at December 31, 2023
Series B preferred shares, no par value; 4,004 shares issued and outstanding at March 31, 2024 and and 4,000 shares issued and outstanding at December 31, 2023
Series C preferred shares, no par value; 4,623 shares issued and outstanding at March 31, 2024 and 4,600 shares issued and outstanding at December 31, 2023
Trust common shares, no par value, 500,000 authorized; 75,807 shares issued and 75,324 shares outstanding at March 31, 2024 and 75,753 issued and 75,270 outstanding at December 31, 2023
Treasury shares, at cost
Accumulated other comprehensive income (loss)
Accumulated deficit(167,297) (58,760)
Total stockholders’ equity attributable to Holdings851,616
 856,405
Noncontrolling interest47,626
 38,139
Total stockholders’ equity899,242
 894,544
Total liabilities and stockholders’ equity$1,820,806
 $1,777,155
See notes to condensed consolidated financial statements.

5


COMPASS DIVERSIFIED HOLDINGS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended 
 March 31,
(in thousands, except per share data)20242023
Net revenues$524,290 $483,933 
Cost of revenues282,463 278,869 
Gross profit241,827 205,064 
Operating expenses:
Selling, general and administrative expense150,714 130,264 
Management fees18,067 16,270 
Amortization expense26,288 23,973 
Impairment expense8,182 — 
Operating income38,576 34,557 
Other income (expense):
Interest expense, net(23,575)(26,180)
Amortization of debt issuance costs(1,005)(1,005)
Other income (expense), net(2,874)1,160 
Income from continuing operations before income taxes11,122 8,532 
Provision for income taxes8,686 6,920 
Income from continuing operations2,436 1,612 
Income from discontinued operations, net of income taxes— 10,000 
Gain on sale of discontinued operations, net of income taxes3,345 97,989 
Net income5,781 109,601 
Less: Net income from continuing operations attributable to noncontrolling interest7,429 4,171 
Less: Net income from discontinued operations attributable to noncontrolling interest— 33 
Net income (loss) attributable to Holdings$(1,648)$105,397 
Amounts attributable to Holdings
Loss from continuing operations$(4,993)$(2,559)
Income from discontinued operations, net of income tax— 9,967 
Gain on sale of discontinued operations, net of income tax3,345 97,989 
Net income (loss) attributable to Holdings$(1,648)$105,397 
Basic income (loss) per common share attributable to Holdings (refer to Note J)
Continuing operations$(0.89)$(0.19)
Discontinued operations0.04 1.48 
Basic income (loss) per common share attributable to Holdings (refer to Note J)$(0.85)$1.29 
Basic weighted average number of shares of common shares outstanding75,274 72,178 
Cash distributions declared per Trust common share (refer to Note J)$0.25 $0.25 
 Three months ended 
 September 30,		 Nine months ended 
 September 30,
(in thousands, except per share data)2017 2016 2017 2016
Net sales$268,281
 $200,770
 $767,960
 $525,713
Service revenues55,676
 51,515
 153,370
 134,035
Total net revenues323,957
 252,285
 921,330
 659,748
Cost of sales166,445
 133,006
 488,913
 340,576
Cost of service revenues39,787
 36,864
 110,639
 95,968
Gross profit117,725
 82,415
 321,778
 223,204
Operating expenses:       
Selling, general and administrative expense80,804
 53,648
 239,102
 140,702
Management fees8,277
 8,435
 24,308
 21,394
Amortization expense14,167
 8,423
 39,256
 23,966
Impairment expense—
 —
 8,864
 —
Loss on disposal of assets—
 551
 —
 7,214
Operating income14,477
 11,358
 10,248
 29,928
Other income (expense):       
Interest expense, net(6,945) (4,376) (22,499) (23,204)
Amortization of debt issuance costs(1,004) (687) (2,940) (1,827)
Gain (loss) on investment in FOX—
 50,414
 (5,620) 58,680
Other income (expense), net2,020
 (3,271) 2,950
 (1,852)
Income (loss) from continuing operations before income taxes8,548
 53,438
 (17,861) 61,725
Provision (benefit) for income taxes192
 4,894
 (2,002) 9,778
Income (loss) from continuing operations8,356
 48,544
 (15,859) 51,947
Income (loss) from discontinued operations, net of income tax—
 (455) —
 473
Gain on sale of discontinued operations, net of income tax—
 2,134
 340
 2,134
Net income (loss)8,356
 50,223
 (15,519) 54,554
Less: Net income attributable to noncontrolling interest650
 682
 2,492
 1,749
Less: Net loss from discontinued operations attributable to noncontrolling interest—
 (164) —
 (116)
Net income (loss) attributable to Holdings$7,706
 $49,705
 $(18,011) $52,921
Amounts attributable to Holdings       
Income (loss) from continuing operations$7,706
 $47,862
 $(18,351) $50,198
Income (loss) from discontinued operations, net of income tax—
 (291) —
 589
Gain on sale of discontinued operations, net of income tax—
 2,134
 340
 2,134
Net income (loss) attributable to Holdings$7,706
 $49,705
 $(18,011) $52,921
Basic and fully diluted income (loss) per common share attributable to Holdings (refer to Note L)
 

    
Continuing operations$0.10
 $0.72
 $(1.03) $0.59
Discontinued operations—
 0.03
 0.01
 0.05
 $0.10
 $0.75
 $(1.02) $0.64
Weighted average number of shares of common shares outstanding – basic and fully diluted59,900
 54,300
 59,900
 54,300
Cash distributions declared per common share (refer to Note L)$0.36
 $0.36
 $1.08
 $1.08





See notes to condensed consolidated financial statements.

6


COMPASS DIVERSIFIED HOLDINGS
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)


Three months ended 
 March 31,
(in thousands)20242023
Net income$5,781 $109,601 
Other comprehensive income (loss)
Foreign currency translation adjustments(1,239)1,246 
Pension benefit liability, net(833)(524)
Other comprehensive income (loss)(2,072)722 
Total comprehensive income, net of tax$3,709 $110,323 
Less: Net income attributable to noncontrolling interests7,429 4,204 
Less: Other comprehensive income (loss) attributable to noncontrolling interests(56)20 
Total comprehensive income (loss) attributable to Holdings, net of tax$(3,664)$106,099 
 Three months ended 
 September 30,		 Nine months ended 
 September 30,
(in thousands)2017 2016 2017 2016
        
Net income (loss)$8,356
 $50,223
 $(15,519) $54,554
Other comprehensive income (loss)       
Foreign currency translation adjustments3,370
 (1,945) 6,955
 3,275
Pension benefit liability, net(4) (765) 376
 (1,288)
Other comprehensive income (loss)3,366
 (2,710) 7,331
 1,987
Total comprehensive income (loss), net of tax11,722
 47,513
 (8,188) 56,541
Less: Net income attributable to noncontrolling interests650
 518
 2,492
 1,633
Less: Other comprehensive income (loss) attributable to noncontrolling interests675
 (268) 1,336
 929
Total comprehensive income (loss) attributable to Holdings, net of tax$10,397
 $47,263
 $(12,016) $53,979

See notes to condensed consolidated financial statements.



7



COMPASS DIVERSIFIED HOLDINGS
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)


(in thousands)Trust Preferred SharesTrust Common SharesAccumulated DeficitAccumulated Other
Comprehensive
Income (Loss)		Stockholders' Equity Attributable
to Holdings		Non-
Controlling
Interest		Non-
Controlling
Interest Attributable to Disc. Ops.		Total
Stockholders’
Equity
Series ASeries BSeries CTreasury Shares
Balance — January 1, 2023$96,417 $96,504 $110,997 $1,207,044 $— $(372,906)$(1,136)$1,136,920 $203,464 $21,578 $1,361,962 
Net income— — — — — 105,397 — 105,397 4,171 33 109,601 
Total comprehensive income, net— — — — — — 722 722 — — 722 
Issuance of Trust common shares— — — (48)— — — (48)— — (48)
Purchase of Trust common shares for treasury— — — — (3,954)— — (3,954)— — (3,954)
Option activity attributable to noncontrolling shareholders— — — — — — — — 1,641 1,377 3,018 
Effect of subsidiary stock option exercise— — — — — — — — 5 — 5 
Purchase of noncontrolling interest— — — — — — — — (848)— (848)
Disposition of ACI— — — — — — — — — (1,729)(1,729)
Distributions paid - Trust Common Shares— — — — — (18,051)— (18,051)— — (18,051)
Distributions paid - Trust Preferred Shares— — — — — (6,045)— (6,045)— — (6,045)
Balance — March 31, 2023$96,417 $96,504 $110,997 $1,206,996 $(3,954)$(291,605)$(414)$1,214,941 $208,433 $21,259 $1,444,633 
Balance — January 1, 2024$96,417 $96,504 $110,997 $1,281,303 $(9,339)$(249,243)$111 $1,326,750 $192,631 $— $1,519,381 
Net income (loss)— — — — — (1,648)— (1,648)7,429 — 5,781 
Total comprehensive loss, net— — — — — — (2,072)(2,072)— — (2,072)
Issuance of Trust common shares— — — 1,218 — — — 1,218 — — 1,218 
Issuance of Trust preferred shares183 89 555 — — — — 827 — — 827 
Option activity attributable to noncontrolling shareholders— — — — — — — — 4,330 — 4,330 
Purchase of noncontrolling interest— — — — — — — — (2,510)— (2,510)
Reclassification of noncontrolling shareholder interest to liability— — — — — — — — (614)— (614)
Acquisition of THP— — — — — — — — 41,674 — 41,674 
Distributions paid - Allocation Interests (refer to Note J)— — — — — (48,941)— (48,941)— — (48,941)
Distributions paid - Trust Common Shares— — — — — (18,818)— (18,818)— — (18,818)
Distributions paid - Trust Preferred Shares— — — — — (6,045)— (6,045)— — (6,045)
Balance — March 31, 2024$96,600 $96,593 $111,552 $1,282,521 $(9,339)$(324,695)$(1,961)$1,251,271 $242,940 $— $1,494,211 
8
(in thousands)Trust Preferred Shares Trust Common Shares Accumulated Deficit 
Accumulated Other
Comprehensive
Loss
 
Stockholders' Equity Attributable
to Holdings
 
Non-
Controlling
Interest
 
Total
Stockholders’
Equity
Balance — January 1, 2017$—
 $924,680
 $(58,760) $(9,515) $856,405
 $38,139
 $894,544
Net income (loss)—
 —
 (18,011) —
 (18,011) 2,492
 (15,519)
Total comprehensive income, net—
 —
 —
 7,331
 7,331
 —
 7,331
Issuance of Trust preferred shares, net of offering costs96,417
 —
 —
 —
 96,417
 —
 96,417
Option activity attributable to noncontrolling shareholders—
 —
 —
 —
 —
 4,952
 4,952
Effect of subsidiary stock option exercise—
 —
 —
 —
 —
 1,222
 1,222
Effect of issuance of subsidiary stock—
 —
 —
 —
 —
 40
 40
Acquisition of Crosman—
 —
 —
 —
 —
 781
 781
Distributions paid - Allocation Interests (refer to Note L)—
 —
 (25,834) —
 (25,834) —
 (25,834)
Distributions paid - Trust Common Shares—
 —
 (64,692) —
 (64,692) —
 (64,692)
Balance — September 30, 2017$96,417
 $924,680
 $(167,297) $(2,184) $851,616
 $47,626
 $899,242

COMPASS DIVERSIFIED HOLDINGS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three months ended March 31,
(in thousands)20242023
Cash flows from operating activities:
Net income$5,781 $109,601 
Income from discontinued operations— 10,000 
Gain on sale of discontinued operations3,345 97,989 
Income from continuing operations2,436 1,612 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense10,892 11,155 
Amortization expense - intangibles26,288 23,973 
Amortization expense - inventory step-up2,826 1,175 
Amortization of debt issuance costs1,005 1,005 
Impairment expense8,182 — 
Noncontrolling stockholder stock based compensation4,330 1,641 
Provision for receivable and inventory reserves(812)(1,224)
Deferred taxes(7,921)(6,351)
Other427 390 
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable(4,427)5,623 
Inventories(30,606)(46,799)
Other current and non-current assets2,622 3,024 
Accounts payable and accrued expenses(28,443)1,260 
Cash used in operating activities - continuing operations(13,201)(3,516)
Cash provided by operating activities - discontinued operations— 19,061 
Cash provided by (used in) provided by operating activities(13,201)15,545 
Cash flows from investing activities:
Acquisitions, net of cash acquired(379,524)— 
Purchases of property and equipment(7,747)(14,897)
Proceeds from sale of businesses3,345 103,042 
Other investing activities1,448 (303)
Cash provided by (used in) investing activities - continuing operations(382,478)87,842 
Cash provided by investing activities - discontinued operations— 66,882 
Cash provided by (used in) investing activities(382,478)154,724 
9

COMPASS DIVERSIFIED HOLDINGS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three months ended March 31,
(in thousands)20242023
Cash flows from financing activities:
Proceeds and expenses from issuance of Trust common shares, net1,218 (48)
Proceeds and expenses from issuance of Trust preferred shares, net827 — 
Purchase of treasury shares, net— (3,954)
Borrowings under credit facility100,000 76,000 
Repayments under credit facility(54,000)(223,000)
Principal payments - term loan(2,500)(2,500)
Distributions paid - common shares(18,818)(18,051)
Distributions paid - preferred shares(6,045)(6,045)
Distributions paid - allocation interests(48,941)— 
Net proceeds provided by noncontrolling shareholders— 5 
Net proceeds provided by noncontrolling shareholders - acquisitions41,674 — 
Purchase of noncontrolling interest(2,510)(848)
Other— (5)
Net cash provided by (used in) financing activities10,905 (178,446)
Foreign currency impact on cash(989)562 
Net decrease in cash and cash equivalents(385,763)(7,615)
Cash and cash equivalents — beginning of period (1)
450,478 61,271 
Cash and cash equivalents — end of period (2)
$64,715 $53,656 
(1) Includes cash from discontinued operations of $4.7 million at January 1, 2023.
(2) Includes cash from discontinued operations of $3.8 million at March 31, 2023.









See notes to condensed consolidated financial statements.


10
COMPASS DIVERSIFIED HOLDINGS
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 Nine months ended September 30,
(in thousands)2017 2016
Cash flows from operating activities:   
Net income (loss)$(15,519) $54,554
Income from discontinued operations—
 473
Gain on sale of discontinued operations, net340
 2,134
Net income (loss) from continuing operations(15,859) 51,947
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
Depreciation expense24,505
 19,481
Amortization expense64,154
 32,691
Impairment expense8,864
 —
Loss on disposal of assets—
 7,214
Amortization of debt issuance costs and original issue discount3,721
 2,363
Unrealized loss on interest rate swap1,178
 8,322
Noncontrolling stockholder stock based compensation4,952
 3,011
Excess tax benefit from subsidiary stock options exercised(417) (366)
Loss (gain) on investment in FOX5,620
 (58,680)
Provision for loss on receivables4,310
 59
Deferred taxes(17,937) (4,479)
Other494
 325
Changes in operating assets and liabilities, net of acquisition:
 
Increase in accounts receivable(1,015) (8,797)
(Increase) decrease in inventories(24,222) 440
(Increase) decrease in prepaid expenses and other current assets(4,501) 2,081
Increase in accounts payable and accrued expenses5,389
 1,296
Net cash provided by operating activities - continuing operations59,236
 56,908
Net cash provided by operating activities - discontinued operations—
 3,686
Cash provided by operating activities59,236
 60,594
Cash flows from investing activities:   
Acquisitions, net of cash acquired(164,742) (528,642)
Purchases of property and equipment(30,955) (15,528)
Net proceeds from sale of equity investment136,147
 110,685
Payment of interest rate swap(3,050) (3,114)
Purchase of noncontrolling interest—
 (1,476)
Proceeds from sale of business340
 11,249
Other investing activities(696) 350
Net cash used in investing activities - continuing operations(62,956) (426,476)
Net cash provided by investing activities - discontinued operations—
 9,192
Cash used in investing activities(62,956) (417,284)


COMPASS DIVERSIFIED HOLDINGS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine months ended September 30,
(in thousands)2017 2016
Cash flows from financing activities:   
Proceeds from the issuance of Trust preferred shares, net96,417
 —
Borrowings under credit facility214,500
 633,798
Repayments under credit facility(197,664) (221,719)
Distributions paid(64,692) (58,644)
Net proceeds provided by noncontrolling shareholders821
 9,473
Distributions paid to noncontrolling shareholders—
 (23,630)
Distributions paid to allocation interest holders (refer to Note L)(39,188) (16,829)
Repurchase of subsidiary stock—
 (15,407)
Excess tax benefit from subsidiary stock options exercised417
 366
Debt issuance costs(1,433) (5,993)
Other(1,316) (1,008)
Net cash provided by financing activities7,862
 300,407
Foreign currency impact on cash(2,427) (3,197)
Net increase (decrease) in cash and cash equivalents1,715
 (59,480)
Cash and cash equivalents — beginning of period (1)
39,772
 85,869
Cash and cash equivalents — end of period$41,487
 $26,389
(1)Includes cash from discontinued operations of $0.6 million at January 1, 2016.












See notes to condensed consolidated financial statements.

COMPASS DIVERSIFIED HOLDINGS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2017March 31, 2024


Note A — Organization- Presentation and Business OperationsPrinciples of Consolidation
Compass Diversified Holdings, a Delaware statutory trust (the "Trust" or "Holdings"), was incorporated in Delaware on November 18, 2005. and Compass Group Diversified Holdings LLC, a Delaware limited liability company (the "Company" or "CODI""LLC"), was also formed on November 18, 2005 with equity interests which were subsequently reclassified as the "Allocation Interests". The Trust and the Company were formed to acquire and manage a group of small and middle-market businesses headquartered in North America. Collectively, Compass Diversified Holdings and Compass Group Diversified Holdings, LLC are referred to as the "Company". In accordance with the amendedThird Amended and restatedRestated Trust Agreement, dated as of December 6, 2016 (theAugust 3, 2021 (as amended and restated, the "Trust Agreement"), the Trust is sole owner of 100% of the Trust Interests (as defined in the Company’s amendedSixth Amended and restated operating agreement,Restated Operating Agreement, dated as of December 6, 2016August 3, 2021 (as amended and restated, the "LLC Agreement")) of the CompanyLLC and, pursuant to the LLC Agreement, the CompanyLLC has, outstanding, the identical number of Trust Interests as the number of outstanding common shares of the Trust. The CompanyLLC is the operating entity with a board of directors and other corporate governance responsibilities, similar to that of a Delaware corporation.

The CompanyLLC is a controlling owner of nineten businesses, or reportable operating segments, at September 30, 2017.March 31, 2024. The segments are as follows: 5.11 Acquisition Corp. ("5.11" or "5.11 Tactical"), Crosman Corp.Boa Holdings Inc. ("Crosman"BOA"), The Ergo Baby Carrier, Inc. ("Ergobaby"), Liberty Safe and Security Products, Inc. ("Liberty Safe" or "Liberty"), Fresh Hemp Foods Ltd. ("Manitoba Harvest"), Compass ACLugano Holdings, Inc. ("ACI"Lugano Diamonds" or "Advanced Circuits""Lugano"), AMT Acquisition CorporationRelentless Topco, Inc. ("Arnold" or "Arnold Magnetics"PrimaLoft"), Clean EarthTHP Topco, Inc. ("The Honey Pot Co." or "THP"), CBCP Products, LLC ("Velocity Outdoor" or "Velocity"), AMTAC Holdings LLC ("Arnold"), FFI Compass, Inc. ("Altor Solutions" or "Altor"), and SternoCandleLamp Holdings, Inc. ("Clean Earth"Sterno"). The segments are referred to interchangeably as “businesses”, and Sterno Products, LLC ("Sterno"“operating segments” or "Sterno Products").“subsidiaries” throughout the financial statements. Refer to Note E - "Operating Segment Data" for further discussion of the operating segments. Compass Group Management LLC, a Delaware limited liability companyCompany ("CGM" or the "Manager"), manages the day to day operations of the CompanyLLC and oversees the management and operations of our businesses pursuant to a management services agreement ("MSA"(the "Management Services Agreement" or "MSA").
Note B -Basis of Presentation and Principles of Consolidation
The condensed consolidated financial statements for the three and nine month periods ended September 30, 2017March 31, 2024 and September 30, 2016,March 31, 2023 are unaudited, and in the opinion of management, contain all adjustments necessary for a fair presentation of the condensed consolidated financial statements. Such adjustments consist solely of normal recurring items. Interim results are not necessarily indicative of results for a full year or any subsequent interim period. The condensed consolidated financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP" or "GAAP") and presented as permitted by Form 10-Q and do not contain certain information included in the annual consolidated financial statements and accompanying notes of the Company. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
Seasonality
Earnings of certain of the Company’s operating segments are seasonal in nature. Earnings from Liberty are typically lowest in the second quarter due to lower demand for safes at the onset of summer. Crosman typically has higher sales in the third and fourth quarter each year, reflecting the hunting and holiday seasons. Earnings from Clean Earth are typically lower during the winter months due to the limits on outdoor construction and development activity because of the colder weather in the Northeastern United States. Sterno Products typically has higher sales in the second and fourth quarter of each year, reflecting the outdoor summer and holiday seasons, respectively.2023.
Consolidation
The condensed consolidated financial statements include the accounts of Holdingsthe Trust and all majority owned subsidiaries.the Company, as well as the businesses acquired as of their respective acquisition date. All significant intercompany transactionsaccounts and balancestransactions have been eliminated in consolidation. Discontinued operating entities are reflected as discontinued operations in the Company's results of operations and statements of financial position.
Discontinued Operations
During the third quarter of 2016, theThe Company completed the sale of Tridien Medical,Wheelhouse Holdings, Inc. ("Tridien"Marucci"). during the fourth quarter of 2023 and Compass AC Holdings, Inc. ("Advanced Circuits or "ACI") during the first quarter of 2023. The results of operations of TridienMarucci and ACI are reported as discontinued operations in the condensed consolidated statements of operations for the three and nine months ended September 30, 2016.March 31, 2023. Refer toNote DC - "Discontinued Operations" for additional information. Unless otherwise indicated, the disclosures accompanying the condensed consolidated financial statements reflect the Company's continuing operations.
Recently Adopted Accounting Pronouncements
11

In January 2017,Seasonality
Earnings of certain of our operating segments are seasonal in nature due to various recurring events, holidays and seasonal weather patterns, as well as the FASB issued new accounting guidancetiming of our acquisitions during a given year. Historically, the third and fourth quarter have produced the highest net sales in our fiscal year, however, due to simplifyvarious acquisitions in the accounting for goodwill impairment. The guidance removes step two of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the new guidance, a goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not

to exceed the carrying amount of goodwill. All other goodwill impairment guidance remains largely unchanged. Entities will continue to have the option to perform a qualitative test to determine if a quantitative testlast three years, there is necessary. The guidance is effective for fiscal years and interim periods within those years, after December 31, 2019, with early adoption permitted for any goodwill impairment tests performed after January 1, 2017 and will be applied prospectively. The Company adopted this guidance early, effective January 1, 2017,generally less seasonality in our net sales on a prospectiveconsolidated basis and will apply the guidance as necessary to annual and interim goodwill testing performed subsequent to January 1, 2017.than there has been historically.
Recently Issued Accounting Pronouncements
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
In March 2017,November 2023, the FASBFinancial Accounting Standards Board ("FASB") issued newASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This guidance that will require, employersamong other things, the following: (i) enhanced disclosures about significant segment expenses that sponsor defined benefit plansare regularly provided to present the service cost componentchief operating decision maker ("CODM") and included in a segment's reported measure of net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period, and requires the other components of net periodic pension cost to be presented in the income statement separately from the service component cost and outside a subtotal of income from operations. The new guidance shall be applied retrospectively for the presentationprofit or loss; (ii) disclosure of the service cost componentamount and description of the composition of other components of net periodic pension cost. The amended guidance is effective for fiscal years,segment items, as defined in ASU 2023-07, by reportable segment; and (iii) reporting the disclosures about each reportable segment's profit or loss and assets on an annual and interim periods within those years, beginning after December 15, 2017.basis. The Company's Arnold business segment has a defined benefit plan covering substantially all of Arnold's employees at its Switzerland location. The adoption of this guidance is not expected to have a material impact upon our financial condition or results of operations.
In January 2017, the FASB issued new guidance that changes the definition of a business to assist entities in evaluating when a set of transferred assets and activities constitutes a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If so, the set of transferred asset and activities is not a business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in the new revenue recognition guidance. The new standard will be effective for fiscal years beginning after December 15, 2023, and interim periods within thosefiscal years beginning after December 15, 2017.2024 and early adoption is permitted. The adoption ofCompany is currently evaluating the impact that this guidance is not expectedASU will have when adopted and anticipates the ASU will likely result in additional disclosures in our condensed consolidated financial statements.
Income Taxes (Topic 740): Improvements to have a material impact upon our financial condition or results of operations.Income Tax Disclosures
In August 2016,December 2023, the FASB issued an accounting standard update which updates theASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This guidance as to how certain cash receipts and cash payments should be presented and classified within the statement of cash flows. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted, including adoption in an interim period. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.
In February 2016, the FASB issued an accounting standard update related to the accounting for leases which will require, an entity to recognize right-of-use assets and lease liabilities on its balance sheet and disclose keyamong other things, the following for public business entities: (i) enhanced disclosures of specific categories of reconciling items included in the rate reconciliation, as well as additional information about leasing arrangements. The standard update offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to discloseany of these items meeting certain qualitative and quantitative information about leasing arrangementsthresholds; (ii) disclosure of the judgment used in categorizing them if not otherwise evident; and (iii) enhanced disclosures for income taxes paid, which includes federal, state, and foreign taxes, as well as for individual jurisdictions over a certain quantitative threshold. The amendments in ASU 2023-09 eliminate the requirement to enable a userdisclose the nature and estimate of financial statements to assess the amount, timing and uncertaintyrange of cash flows arising from leases. For public companies, the new standard isreasonably possible change in unrecognized tax benefits for the 12 months after the balance sheet date. The guidance will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period,2024 and requires modified retrospective adoption, with early adoption permitted. Accordingly, this standard is effective for the Company on January 1, 2019.permitted. The Company is currently assessingevaluating the impact ofthat this ASU will have when adopted and anticipates the new standard onASU will likely result in additional disclosures in our condensed consolidated financial statements.
In May 2014,
Note B — Acquisitions
The acquisitions of our businesses are accounted for under the FASB issuedacquisition method of accounting. For each platform acquisition, the Company typically structures the transaction so that a comprehensive new revenue recognition standard. The new standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principlenewly created holding company acquires 100% of the revenue model is that an entity should recognize revenue to depictequity interests in the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires disclosureacquired business. The entirety of the nature,purchase consideration is paid by the newly created holding company to the selling shareholders. The total purchase consideration is the amount timingpaid to the selling shareholders and uncertaintywe will, from time to time, allow the selling shareholder to reinvest a portion of revenue and cash flows arising from contracts with customers. The standard is designed to create greater comparability for financial statement users across industries, jurisdictions and capital markets and also requires enhanced disclosures. The new standard will be effective fortheir proceeds alongside the Company beginning January 1, 2018.at the same price per share, into the holding company that acquires the target business. Once the acquisition is complete, the selling shareholders no longer hold equity interests in the acquired company, but rather hold noncontrolling interest in the holding company that acquired the target business. Because the selling shareholders are investing in the transaction alongside the Company at the same price per share as the Company and are not retaining their existing equity in the acquired business, the Company includes the amount provided by noncontrolling shareholders in the total purchase consideration.
A component of our acquisition financing strategy that we utilize in acquiring the businesses we own and manage is to provide both equity capital and debt capital, raised at the parent level, typically through our existing credit facility. The FASB issued four subsequent standardsdebt capital is in 2016 containing implementation guidance relatedthe form of “intercompany loans” made by the LLC to the new standard.newly created holding company and the acquired business and are due from the newly created holding company and the acquired business, and payable to the LLC by the newly created holding company and the acquired business. The selling shareholders of the acquired businesses are not a party to the intercompany loan agreements nor do they have any obligation to repay the intercompany loans. These standards provide additional guidance related to principal versus agent considerations, licensing,intercompany loans eliminate in consolidation and identifying performance obligations. Additionally, these standards provide narrow-scope improvements and practical expedients as well as technical corrections and improvements.
The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company will be adopting the standard using the modified retrospective method effective January 1, 2018.
The Company has developed implementation procedures specific to each of its reportable segments.The Company has designed these procedures to assess the impact that the new revenue standard will haveare not reflected on the Company’s financialCompany's consolidated balance sheets.

12
statements and to make any changes necessary to its current accounting practices and internal controls over financial reporting. The Company expects to complete the implementation procedures during the fourth quarter of 2017. The Company has identified certain differences as it relates to the concepts of variable consideration, consideration payable to a customer and the focus on control to determine when and how revenue should be recognized (i.e. point in time versus over time) during the implementation process. Although certain differences have been identified around variable consideration and consideration payable to a customer, the total impact on each reportable segment will not be material to the financial statements. The Company has identified two reportable segments where revenue recognition will change to over time recognition from historical point in time revenue recognition. Although the timing of revenue recognition for these two reportable segments will change, these changes will not have a material impact on the Company’s financial statements. The Company expects to adopt certain practical expedients and make certain policy elections related to the accounting for significant financing components, sales taxes, shipping and handling, costs to obtain a contract and immaterial promised goods or services which mitigates any potential differences. In addition, the Company is currently analyzing our internal control over financial reporting framework to determine if controls should be added or modified as a result of adopting this standard, and reviewing the tax impact, if any, the option of the new standard may have. We also expect that the adoption of the new standard will result in expanded and disaggregated disclosure requirements.


Note C — Acquisitions

Acquisition of CrosmanThe Honey Pot Co.
On June 2, 2017, CBCP Acquisition Corp.January 31, 2024 (the "Buyer""Closing Date"), the LLC, through its newly formed acquisition subsidiaries, THP Topco, Inc., a wholly owned subsidiaryDelaware corporation (“THP Topco”) and THP Intermediate, Inc., a Delaware corporation (“THP Buyer”), acquired The Honey Pot Company Holdings, LLC (“THP”) and certain of the Company, entered into an equity purchase agreementits affiliated entities pursuant to which ita Merger and Stock Purchase Agreement (the “THP Purchase Agreement”) dated January 14, 2024 by and among THP Buyer, THP, VMG Honey Pot Blocker, Inc. (“Blocker I”), NVB1, Inc. (“Blocker II”), VMG Tax-Exempt IV, L.P., New Voices Fund, LP, THP Merger Sub, LLC (“THP Merger Sub”), VMG Honey Pot Holdings, LLC, as the Sellers’ Representative, and certain remaining equity holders of THP. Pursuant to the THP Purchase Agreement, subsequent to certain internal reorganizations, THP Buyer acquired all of the issued and outstanding equity of Blocker I and Blocker II and, thereafter, THP Merger Sub merged with and into THP (the “THP Merger”), with THP surviving such that the separate existence of THP Merger Sub ceased, with THP surviving the Merger as a wholly-owned, indirect subsidiary of the THP Topco. THP is the parent company of The Honey Pot Company (DE), LLC (“The Honey Pot Co.”).
The Company paid a purchase price of approximately $380 million, before working capital and certain other adjustments, at the Closing (the “THP Purchase Price”). The Company funded the THP Purchase Price with cash on hand. Certain minority equity holders of THP executed agreements pursuant to which they contributed a portion of their THP equity (the “Rollover Equity”) to THP Topco in exchange for THP Topco common stock. THP Topco contributed the Rollover Equity to THP Buyer. Certain other members of The Honey Pot Co. management team also contributed cash in exchange for equity in THP Topco. The Company directly owns approximately 85% of THP Topco, which in turn indirectly owns all of the issued and outstanding equity interests of Bullseye Acquisition Corporation,THP and The Honey Pot Co. Concurrent with the indirect owner ofClosing, the equity interests of Crosman Corp. ("Crosman"Company provided a credit facility to THP Buyer, THP and The Honey Pot Co., as borrowers (the “THP Credit Agreement”), pursuant to which a secured revolving loan commitment and secured term loans were made available to Buyer, THP and The Honey Pot Co. (collectively, the “Borrowers”). CrosmanThe initial amount outstanding under these facilities on the Closing Date was approximately $110 million.
The Honey Pot Co. is a designer, manufacturerfeminine care brand that offers an extensive range of holistic wellness products across feminine hygiene, menstrual, consumer health, and marketer of airguns, archery products, laser aiming devicessexual wellness categories. The Honey Pot Co.’s mission is to educate, support, and related accessories. Headquartered in Bloomfield, New York, Crosman serves over 425 customers worldwide, including mass merchants, sporting goods retailers, online channels and distributors serving smaller specialty stores and international markets. Its diversified product portfolio includesprovide consumers around the widely known Crosman, Benjamin and CenterPoint brands.

The Company made loans to, and purchased a 98.9% controlling interest in, Crosman. The purchase price, including proceeds from noncontrolling interests and net of transaction costs, was approximately $150.4 million. Crosman management invested in the transaction alongworld with the Company, representing approximately 1.1% of the initial noncontrolling interest on a primarytools and fully diluted basis. The fair value of the noncontrolling interest was determined based on the enterprise value of the acquired entity multiplied by the ratio of the number of shares acquired by the minority holders to total shares. The transaction was accounted for as a business combination. CGM acted as an advisor to the Company in the acquisitionresources that promote menstrual health and will continue to provide integration services during the first year of the Company's ownership of Crosman. CGM will receive integration service fees of $1.5 million payable quarterly over a twelve month period as services are rendered beginning in the quarter ended September 30, 2017. The Company incurred $1.5 million of transaction costs in conjunction with the Crosman acquisition, which was included in selling, general and administrative expense in the consolidated statements of income during the second quarter of 2017.

vaginal wellness.
The results of operations of CrosmanThe Honey Pot Co. have been included in the consolidated results of operations since the date of acquisition. Crosman'sThe Honey Pot Co.'s results of operations are reported as a separate operating segment as a branded consumer business. The table below provides the preliminary recording of the fair value of assets acquired and liabilities assumed as of the acquisition date.

date of acquisition.
13

  Preliminary Allocation Measurement Period Adjustments Revised Preliminary Allocation
(in thousands) As of 6/2/2017  As of 9/30/17
Assets:      
Cash $429
 $781
 $1,210
Accounts receivable (1)
 16,751
 —
 16,751
Inventory 25,598
 3,166
 28,764
Property, plant and equipment 10,963
 6,610
 17,573
Intangible assets —
 82,773
 82,773
Goodwill 139,434
 (91,316) 48,118
Other current and noncurrent assets 2,348
 —
 2,348
Total assets $195,523
 $2,014
 $197,537
       
(in thousands)Preliminary Purchase Price Allocation
Purchase Consideration$380,121 
Fair value of identifiable assets acquired:
Cash$4,076 
Accounts receivable (1)
16,361 
Inventory18,986 
Property, plant and equipment
1,888 
Intangible assets247,000 
Other current and noncurrent assets3,958 
Total identifiable assets292,269 
Fair value of liabilities assumed:
Current liabilities10,957 
Other liabilities1,480 
Deferred tax liabilities27,846 
Total liabilities40,283 
Net identifiable assets acquired251,986 
Goodwill$128,135 

Acquisition consideration
Purchase price$380,000 
Estimated cash acquired4,375 
Net working capital adjustment(3,126)
Other adjustments(1,128)
Total purchase consideration$380,121 
Liabilities and noncontrolling interest:      
Current liabilities $15,502
 $781
 $16,283
Other liabilities 91,268
 189
 91,457
Deferred tax liabilities 27,286
 1,382
 28,668
Noncontrolling interest 694
 —
 694
Total liabilities and noncontrolling interest $134,750
 $2,352
 $137,102
       
Net assets acquired $60,773
 $(338) $60,435
Noncontrolling interest 694
 —
 694
Intercompany loans to business 90,742
 —
 90,742
  $152,209
 $(338) $151,871
Acquisition Consideration      
Purchase price $151,800
 $—
 $151,800
Cash acquired 1,417
 (207) 1,210
Working capital adjustment (1,008) (131) (1,139)
Total purchase consideration 152,209
 (338) 151,871
Less: Transaction costs 1,397
 76
 1,473
Purchase price, net $150,812
 $(414) $150,398
(1) Includes $18.0 million of gross contractual accounts receivable of which $1.2 million was not expected to be collected. The fair value of accounts receivable approximatedapproximates book value acquired.

The preliminary allocation of the purchase price presented above is based onupon management's estimate of the fair values using valuation techniques including income, cost and market approach.approaches. In estimating the fair value of the identifiable acquired assets and assumed liabilities, the fair value estimates are based on, but not limited to, expected future revenue and cash flows, expected future growth rates and estimated discount rates. Current and noncurrent assets, property, plant and equipment and current and other liabilities are valuedestimated at their historical carrying values.values, which approximates fair value. Inventory is recognized at fair value, with finished goods stated at selling price less an estimated cost to sell. Property, plant and equipment is valued through a purchase price appraisal and will be depreciated on a straight-line basis over the respective remaining useful lives of the assets. Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual relationships, as well as expected future synergies. The goodwill of $48.1 million reflects the strategic fit of Crosman in the Company's branded consumer business and is not expected to be deductible for income tax purposes. The purchase accounting for Crosman is expected to be finalized during the fourth quarter of 2017.

The intangible assets recorded related to the Crosman acquisition are as follows (in thousands):
Intangible Assets Amount Estimated Useful Life
Tradename $51,642
 20 years
Customer relationships 28,718
 15 years
Technology 2,413
 15 years
  $82,773
  

The tradename was valued at $51.6 million using a multi-period excess earnings methodology. The customer relationships intangible asset was valued at $28.7 million using the distributor method, a variation of the multi-period excess earnings methodology, in which an asset is valuable to the extent it enables its owners to earn a return in excess of the required returns on the other assets utilized in the business. The technology was valued at $2.4 million using a relief from royalty method.

Acquisition of 5.11 Tactical
On August 31, 2016, 5.11 ABR Merger Corp. ("Merger Sub"), a wholly owned subsidiary of 5.11 ABR Corp. ("Parent"), which in turn is a wholly owned subsidiary of the Company, merged with and into 5.11 Tactical, with 5.11 Tactical as the surviving entity, pursuant to an agreement and plan of merger among Merger Sub, Parent, 5.11 Tactical, and TA Associates Management L.P. entered into on July 29, 2016. 5.11 Tactical is a leading provider of purpose-built tactical apparel and gear for law enforcement, firefighters, EMS, and military special operations as well as outdoor and adventure enthusiasts. 5.11 is a brand known for innovation and authenticity, and works directly with end users to create purpose-built apparel and gear designed to enhance the safety, accuracy, speed and performance of tactical professionals and enthusiasts worldwide.  Headquartered in Irvine, California, 5.11 operates sales offices and distribution centers globally, and 5.11 products are widely distributed in uniform stores, military exchanges, outdoor retail stores, its own retail stores and on 511tactical.com.

The Company made loans to, and purchased a 97.5% controlling interest in, 5.11 ABR Corp. The purchase price, including proceeds from noncontrolling interest and net of transaction costs, was approximately $408.2 million. 5.11 management invested in the transaction along with the Company, representing approximately 2.5% initial noncontrolling interest on a primary and fully diluted basis. The fair value of the noncontrolling interest was determined based on the enterprise value of the acquired entity multiplied by the ratio of the number of shares acquired by the minority holders to total shares. The transaction was accounted for as a business combination. CGM acted as an advisor to the Company in the acquisition and will continue to provide integration services during the first year of the Company's ownership of 5.11. CGM received integration service fees of $3.5 million payable quarterly over a twelve month period as services are rendered beginning in the quarter ended December 31, 2016.

The results of operations of 5.11 have been included in the consolidated results of operations since the date of acquisition. 5.11's results of operations are reported as a separate operating segment. The Company incurred $2.1 million of transaction costs in conjunction with the 5.11 acquisition, which was included in selling, general and administrative expense in the consolidated statements of income during the year of acquisition. The allocation of the purchase price, which was finalized during the fourth quarter of 2016, was based upon management's estimate of the fair values using valuation techniques including income, cost and market approaches. In estimating the fair value of the acquired assets and assumed liabilities, the fair value estimates were based on, but not limited to, expected future revenue and cash flows, expected future growth rates and estimated discount rates. Current and noncurrent assets and current and other liabilities were estimated at their historical carrying values. Property, plant and equipment was valued through a purchase price appraisal and will be depreciated on a straight-line basis over the respective remaining useful lives. Goodwill was calculated as the excess of the consideration transferred over the fair value of the identifiable net assets and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual relationships, as well as expected future synergies. The goodwill of $93.0$128.1 million reflects the strategic fit of 5.11The Honey Pot Co. in the Company's branded consumer business and is not expected to be deductible for income tax purposes. The purchase price of The Honey Pot Co. is expected to be finalized in the second quarter of 2024.
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The intangible assets recorded related to The Honey Pot Co. acquisition are as follows (in thousands):
Intangible AssetsFair ValueEstimated Useful Lives
Tradename$225,000 18 years
Customer relationships22,000 13 years
$247,000 
The tradename was considered the primary intangible asset and was valued at $225.0 million using a multi-period excess earnings method. The customer relationships intangible asset waswere valued at $75.2$22.0 million using ana multi period excess earnings methodology, in whichmethod. The multi period excess earnings method assumes an asset is valuablehas value to the extent that it enables its owners to earn a return in excess of the required returns on and of the other assets utilized in the business. The tradename intangible asset ($48.7 million) and the design patent technology asset ($4.0 million) were valued using a royalty savings methodology, in which an asset is valuable to the extent that the ownership of the asset relieves the company from the obligation of paying royalties for the benefits generated by the asset.
Unaudited pro forma information
The following unaudited pro forma data for the ninethree months ended September 30, 2017March 31, 2024 and the three and nine months ended September 30, 2016March 31, 2023 gives effect to the acquisition of Crosman and 5.11 Tactical,The Honey Pot Co., as described above, and the dispositions of ACI and Marucci, as if the acquisitionsthese transaction had been completed as of January 1, 2016, and the sale of Tridien as if the disposition had been completed on January 1, 2016.2023. The pro forma data gives effect to historical operating results with adjustments to interest expense, amortization and depreciation expense, management fees and related tax effects. The information is provided for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred if the transaction had been consummated on the date indicated, nor is it necessarily indicative of future operating results of the consolidated companies, and should not be construed as representing results for any future period.

Three months endedThree months ended
(in thousands, except per share data)March 31, 2024March 31, 2023
Net sales$534,961 $515,811 
Gross profit$248,161 $224,014 
Operating income$39,816 $39,450 
Net income from continuing operations$3,156 $4,890 
Net loss from continuing operations attributable to Holdings$(4,512)$(25)
Basic and fully diluted net loss per share attributable to Holdings$(0.87)$(0.15)
  Three months ended 
 September 30,		 Nine months ended 
 September 30,
(in thousands) 2016 2017 2016
Net sales $331,829
 $962,976
 $928,157
Gross profit 111,811
 332,682
 326,936
Operating income 13,463
 11,924
 36,424
Net income (loss) 46,054
 (12,581) 52,461
Net income (loss) attributable to Holdings 45,381
 (15,073) 50,743
Basic and fully diluted net income (loss) per share attributable to Holdings $0.67
 $(0.97) $0.60
Note C — Discontinued Operations

Other acquisitions
ErgobabySale of Marucci
On May 11, 2016,November 1, 2023, the Company's ErgobabyLLC, solely in its capacity as the representative of the holders of stock and options of Marucci, a majority owned subsidiary acquiredof the LLC, entered into a definitive Agreement and Plan of Merger with Fox Factory, Inc. (“Marucci Purchaser”), Marucci Merger Sub, Inc. (“Marucci Merger Sub”) and Wheelhouse, pursuant to which Marucci Purchaser agreed to acquire all of the issued and outstanding membership interests in New Baby Tula LLC ("Baby Tula"), a makersecurities of premium baby carriers, toddler carriers, slings, blankets and wraps. The purchase price was $73.8 million, net of transaction costs, plus a potential earn-out of $8.2 million based on 2017 financial performance. Ergobaby paid $0.8 million in transaction costs in connection withWheelhouse, the acquisition. Ergobaby funded the acquisition and payment of related transaction costs through the issuance of an additional $68.2 million in intercompany loans with the Company, and the issuance of $8.2 million in Ergobaby shares to the selling shareholders. Ergobaby recorded a purchase price allocation of $13.2 million in goodwill, which is expected to be deductible for income tax purposes, $55.3 million in intangible assets comprised of $52.9 million in finite lived tradenames, $1.7 million in non-compete agreements, $0.7 million in customer relationships, and $4.8 million in inventory step-up. In addition, the earn-out provisionparent company of the purchase price was allocatedoperating entity, Marucci Sports, LLC, through a fair valuemerger of $3.8 million. The remainder ofMarucci Merger Sub with and into Wheelhouse, with Wheelhouse surviving the purchase consideration was allocated to net assets acquired. The Company finalized the purchase price for the Baby Tula acquisition during the fourth quarter of 2016.
Clean Earth
On June 1, 2016, the Company's Clean Earth subsidiary acquired certain of the assetsmerger and liabilities of EWS Alabama, Inc. ("EWS"). Clean Earth funded the acquisition and the related transaction costs through the issuance of additional intercompany debt with the Company. Based in Glencoe, Alabama, EWS provides a range of hazardous and non-hazardous waste management services from a fully permitted hazardous waste RCRA Part B facility. In connection with the acquisition, Clean Earth recorded a purchase price allocation of $3.6 million in goodwill and $12.1 million in intangible assets.
On April 15, 2016, Clean Earth acquired certain assets of Phoenix Soil, LLC ("Phoenix Soil") and WIC, LLC (together with Phoenix Soil, the "Sellers"). Phoenix Soil is based in Plainville, Connecticut and provides environmental services for nonhazardous contaminated soil materials with a primary focus on soil. Phoenix Soil recently completed its transition to a new 58,000 square foot thermal desorption facility owned by WIC, LLC. The acquisition increased Clean Earth's soil treatment capabilities and expanded its geographic footprint into New England. Clean Earth financed the acquisition and payment of related transaction costs through the issuance of additional intercompany loans with the Company. In connection with the acquisition, Clean Earth recorded a purchase price allocation of $3.2 million in goodwill and $5.6 million in intangible assets.
Sterno Products
On January 22, 2016, Sterno Products,becoming a wholly owned subsidiary of Marucci Purchaser. On November 14, 2023, the Company, acquired all ofparties completed the outstanding stock of Northern International, Inc. ("NII"), for a total purchaseMerger. The sale price of approximately $35.8 million (C$50.6 million), plus a potential earn-out opportunity payable over the next two years up to a maximum amount of $1.8 million (C$2.5 million), and is subject to working capital adjustments. The contingent considerationWheelhouse was fair valued at $1.5 million, based on probability weighted models of the achievement of certain performance based financial targets. Headquartered in Coquitlam, British Columbia, Canada, NII sells flameless candles and outdoor lighting products through the retail segment. Sterno Products financed the acquisition and payment of the related transaction costs through the issuance of an additional $37.0 million in intercompany loans with the Company.
In connection with the acquisition, Sterno recorded a purchase price allocation of $6.0 million of goodwill, which is not expected to be deductible for income tax purposes, $12.7 million in intangible assets and $1.2 million in inventory step-up. In addition, the earn-out provision of the purchase price was allocated a fair value of $1.5 million. The remainder of the purchase consideration was allocated to net assets acquired. Sterno Products incurred $0.4 million in acquisition related costs in connection with the NII acquisition.


Note D - Discontinued Operations

Sale of Tridien
On September 21, 2016, the Company sold its majority owned subsidiary, Tridien, based on an enterprise value of $25 million.$572 million, subject to certain adjustments based on matters such as transaction tax benefits, transaction expenses of Wheelhouse, the net working capital and cash and debt balances of Wheelhouse at the time of the closing. After the allocation of the sales price to Wheelhouse non-controlling equity holders and the payment of transaction expenses, CODI received approximately $484.0 million of total proceeds at closing of which $87.3 million related to the repayment of intercompany loans with the Company. The Company recorded a pre-tax gain on sale of Marucci of $241.4 million in the year ended December 31, 2023. In the first quarter of 2024, the LLC received a net working capital settlement of approximately $3.3 million related to Marucci, which was recognized as an additional gain on sale of discontinued operations, net of taxes, in the accompanying condensed consolidated statement of operations. The proceeds from the Marucci sale were used to noncontrollingpay down outstanding debt under the Company’s 2022 Credit Facility, as well as, to fund a subsequent acquisition by Company.
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Summarized results of operations of Marucci for the threemonths ended March 31, 2023 are as follows (in thousands):
Three months ended March 31, 2023
Net sales$58,295 
Gross profit$32,767 
Operating income$14,340 
Income from continuing operations before income taxes (1)
$14,307 
Provision for income taxes$2,916 
Income from discontinued operations (1)
$11,391 
(1) The results of operations for the threemonths ended March 31, 2023 excludes $2.4 million of intercompany interest expense.
Sale of Advanced Circuits
On January 10, 2023, the LLC, solely in its capacity as the representative of the holders of stock and options of Compass AC Holdings, Inc., a majority owned subsidiary of the LLC, entered into a definitive Agreement and Plan of Merger with APCT Inc. (“ACI Purchaser”), Circuit Merger Sub, Inc. (“ACI Merger Sub”) and Advanced Circuits, pursuant to which ACI Purchaser agreed to acquire all of the issued and outstanding securities of Advanced Circuits, the parent company of the operating entity, Advanced Circuits, Inc., through a merger of ACI Merger Sub with and into Advanced Circuits, with Advanced Circuits surviving the merger and becoming a wholly owned subsidiary of ACI Purchaser (the “ACI Merger”). The ACI Merger was completed on February 14, 2023. The sale price of Advanced Circuits was based on an enterprise value of $220 million, subject to certain adjustments based on matters such as the working capital and cash and debt balances of Advanced Circuits at the time of the closing. After the allocation of the sales price to Advanced Circuits non-controlling equity holders and the payment of transaction expenses, the Company received approximately $22.7$170.9 million in netof total proceeds at closing, of which $66.9 million related to its debt and equity interests in Tridien.the repayment of intercompany loans with the Company. The Company recognizedrecorded a pre-tax gain on sale of $1.7$106.9 million foron the sale of Advanced Circuits in the year ended December 31, 20162023.
Summarized results of operations of ACI for the period of January 1, 2023 through the date of disposition are as follows (in thousands):
For the period January 1, 2023 through disposition
Net sales$8,829 
Gross profit$3,663 
Operating income$1,058 
Income (loss) from continuing operations before income taxes (1)
$(2,464)
Provision (benefit) for income taxes$(1,073)
Income (loss) from discontinued operations (1)
$(1,391)
(1) The results of operations for the period from January 1, 2023 through disposition excludes $1.4 million of intercompany interest expense.
Note D — Revenue
The Company recognizes revenue when a resultcustomer obtains control of promised goods or services. The amount of revenue recognized reflects the sale of Tridien. Approximately $1.6 million of the proceeds received byconsideration to which the Company expects to be entitled to receive in exchange for these goods or services, and excludes any sales incentives or taxes collected from customers which are subsequently remitted to government authorities.
Disaggregated Revenue - The Company disaggregates revenue by strategic business unit and by geography for each strategic business unit which are categories that depict how the salenature, amount and uncertainty of Tridien have been reservedrevenue and cash flows are affected by economic factors. The disaggregation in the tables below reflects where revenue is earned based on the shipping address of our customers unless otherwise noted. This disaggregation also represents how the Company evaluates its financial performance, as well as how the Company communicates its
16

financial performance to supportthe investors and other users of its financial statements. Each strategic business unit represents the Company’s indemnification obligations for future claims against Tridien that the Company may be liable for under the termsreportable segments and offers different products and services.
The following tables provide disaggregation of the Tridien sale agreement.

Operating results of discontinued operations
Summarized operating results of Tridienrevenue by reportable segment geography for the three and nine months ended September 30, 2016 are as follows:March 31, 2024 and 2023 (in thousands):
Three months ended March 31, 2024
United StatesMexicoEuropeAsia PacificOther InternationalTotal
5.11$96,170 $7,499 $8,092 $4,064 $9,149 $124,974 
BOA (1)
12,561 9 17,050 13,169 114 42,903 
Ergobaby9,134 11 5,915 4,042 2,116 21,218 
Lugano102,389 158 — 492 — 103,039 
PrimaLoft (1)
101 — 1,196 21,118 126 22,541 
The Honey Pot Co.20,078 — — — 87 20,165 
Velocity Outdoor26,185 381 527 169 2,637 29,899 
Altor46,544 6,860 — — — 53,404 
Arnold27,933 91 11,004 1,431 828 41,287 
Sterno62,486 — 584 1 1,789 64,860 
$403,581 $15,009 $44,368 $44,486 $16,846 $524,290 
(in thousands)Three months ended September 30, 2016 Nine months ended September 30, 2016
Net sales$15,978
 $45,951
Gross profit3,223
 7,917
Operating income967
 437
Income (loss) from continuing operations before income taxes(440) 488
Provision for income taxes15
 15
Income (loss) from discontinued operations (1)
$(455) $473
Three months ended March 31, 2023
United StatesMexicoEuropeAsia PacificOther InternationalTotal
5.11$98,527 $6,040 $6,607 $4,183 $9,095 $124,452 
BOA (1)
11,299 6 14,652 11,696 333 37,986 
Ergobaby8,829 — 6,865 4,534 2,190 22,418 
Lugano63,887 — — — — 63,887 
PrimaLoft (1)
172 39 1,033 23,110 175 24,529 
Velocity Outdoor29,892 284 1,340 129 2,395 34,040 
Altor53,462 8,050 — — — 61,512 
Arnold26,649 122 10,983 1,411 925 40,090 
Sterno71,588 — 1,247 — 2,184 75,019 
$364,305 $14,541 $42,727 $45,063 $17,297 $483,933 

(1)For BOA and PrimaLoft, revenue reflects the location of the Brand Partners of each business.
(1) The results for the three and nine months ended September 30, 2016 exclude $0.4 million and $1.1 million, respectively, of intercompany interest expense.

Gain on sale of businesses
During the first quarter of 2017, the Company settled the remaining outstanding escrow items related to the sale of American Furniture Manufacturing, Inc. in 2015, and received a settlement related to the CamelBak Products, LLC business, which was also sold in 2015. As a result of these transactions, the Company recognized a gain on sale of discontinued operations of $0.3 million for the nine months ended September 30, 2017.

Note E — Operating Segment Data
At September 30, 2017,March 31, 2024, the Company had nineten reportable operating segments. Each operating segment represents a platform acquisition. The Company’s operating segments are strategic business units that offer different products and services. TheyWhile each is actively managed by the Company, they are managed separately because each business requires different technology and marketing strategies. A description of each of the reportable segments and the types of products and services from which each segment derives its revenues is as follows:

•5.11 Tactical is a leading provider of purpose-built tacticaltechnical apparel and gear for law enforcement, firefighters, EMS, and military special operations as well as outdoor and adventure enthusiasts. 5.11 is a brand known for innovation and authenticity, and works directly with end users to create purpose-built apparel and gear designed to enhance the safety, accuracy, speed and performance of tactical professionals and enthusiasts worldwide. Headquartered in Irvine,Costa Mesa, California, 5.11 operates sales offices and distribution centers globally, and 5.11 products are widely distributed in uniform stores, military exchanges, outdoor retail stores, its own retail stores and on 511tactical.com.
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Crosman•BOA, creator of the revolutionary, award-winning, patented BOA Fit System, partners with market-leading brands to make the best gear even better. Delivering fit solutions purpose-built for performance, the BOA Fit System is featured in footwear across snow sports, cycling, outdoor, athletic, workwear as well as performance headwear and bracing. The system consists of three integral parts: a leading designer, manufacturer,micro-adjustable dial, high-tensile lightweight laces, and marketer of airguns, archery products, laser aiming deviceslow friction lace guides creating a superior alternative to laces, buckles, Velcro, and related accessories. Crosman offers its products underother traditional closure mechanisms. Each unique BOA configuration is designed with brand partners to deliver superior fit and performance for athletes, is engineered to perform in the highly recognizable Crosman, Benjamintoughest conditions and CenterPoint brands that are available through national retail chains, mass merchants, dealer and distributor networks. Crosmanis backed by The BOA Lifetime Guarantee. BOA is headquartered in Bloomfield, New York.
Denver, Colorado and has offices in Austria, Greater China, South Korea, and Japan.

•Ergobaby, headquartered in Torrance, California, is a designer, marketer and distributor of wearable baby carriers and accessories, blankets and swaddlers, nursing pillows, strollers, bouncers and related products.  Ergobaby primarily sells its Ergobaby and Baby Tula branded products through brick-and-mortar retailers, national chain stores, online retailers, its own websites and distributors and derives approximately 57%more than 50% of its sales from outside of the United States. Ergobaby
•Lugano Diamonds is headquartered in Los Angeles, California.


Liberty Safe is a leading designer, manufacturer and marketer of premium home, gunhigh-end, one-of-a-kind jewelry sought after by some of the world’s most discerning clientele. Lugano conducts sales via its own retail salons as well as pop-up showrooms at Lugano-hosted or sponsored events in partnership with influential organizations in the equestrian, art and office safes in North America. From its over 300,000 square foot manufacturing facility, Liberty produces a wide range of home and gun safe models in a broad assortment of sizes, features and styles. Libertyphilanthropic community. Lugano is headquartered in Payson, Utah.
Newport Beach, California.

Manitoba Harvest•PrimaLoft is a pioneerleading provider of branded, high-performance synthetic insulation and leadermaterials used primarily in consumer outerwear, and accessories. The portfolio of PrimaLoft synthetic insulations offers products that can both mimic natural down aesthetics and provide the freedom to design garments ranging from stylish puffers to lightweight performance apparel. PrimaLoft insulations also offer superior economics to the brand partner and enable better sustainability characteristics through the use of recycled, low-carbon inputs. PrimaLoft is headquartered in Latham, New York.
•The Honey Pot Co. is a leading “better-for-you” feminine care brand, powered by plant-derived ingredients and clinically tested formulas. Founded in 2012 by CEO Beatrice Dixon, The Honey Pot Co. is rooted in the manufacturebelief that all products should be made with healthy and distributionefficacious ingredients that are kind to and safe for skin. The company offers an extensive range of branded, hemp-based foodsholistic wellness products across the feminine hygiene, menstrual, personal care, and hemp-based ingredients. Manitoba Harvest’ssexual wellness categories. The Honey Pot Co.'s mission is to educate, support, and provide consumers around the world with tools and resources that promote menstrual health and vaginal wellness. Their products which include Hemp Hearts™, Hemp Heart Bites™, and Hemp protein powders, are currently carriedcan be found in over 13,000 retailmore than 33,000 stores across the United StatesU.S. through mass merchants, drug and Canada. Manitoba Harvestgrocery retail chains, and online. The Honey Pot Co. is headquartered in Winnipeg, Manitoba.
Atlanta, Georgia.

Advanced Circuits•Velocity Outdoor is an electronic components manufacturing companya leading designer, manufacturer, and marketer of airguns, archery products, laser aiming devices, hunting apparel and related accessories. Velocity Outdoor offers its products under the Crosman, Benjamin, LaserMax, Ravin, CenterPoint and King's Camo brands that provides small-run, quick-turnare available through national retail chains, mass merchants, dealer and volume production rigid printed circuit boards. ACI manufacturesdistributor networks. The airgun product category consists of air rifles, air pistols and delivers custom printed circuit boards to customers primarily in North America. ACIa range of accessories including targets, holsters and cases. Velocity Outdoor's other primary product categories are archery, with products including CenterPoint and Ravin crossbows, consumables, which includes steel and plastic BBs, lead pellets and CO2 cartridges, lasers for firearms, and airsoft products. The apparel category offers high-performance, feature rich hunting and casual apparel of uncompromised quality utilizing King’s own proprietary camo patterns. Velocity Outdoor is headquartered in Aurora, Colorado.
Bloomfield, New York.

•Altor Solutions is a designer and manufacturer of custom molded protective foam solutions and original equipment manufacturer components made from expanded polystyrene and expanded polypropylene. Altor provides products to a variety of end markets, including appliances and electronics, pharmaceuticals, health and wellness, automotive, building and other products. Altor is headquartered in Scottsdale, Arizona and operates 15 molding and fabricating facilities across North America.
•Arnold Magnetics is a global solutions provider and manufacturer of engineered magnetic solutions for a wide range of specialty applications and end-markets, including aerospace and defense, general industrial, motorsport/automotive,transportation, oil and gas, medical, general industrial, electric utility,energy, reprographics and advertising specialty markets.specialties. Arnold Magneticsengineers solutions for and produces high performance permanent magnets (PMAG), flexible magnets (Flexmag)stators, rotors and full electric motors ("Ramco"), precision foil products (Precision Thin Metals or "PTM"), and flexible magnets (Flexmag™) that are mission critical in motors, generators, sensors and other systems and components. Based on its long-term relationships, Arnold has built a diverse and blue-chip customer base totaling more than 2,000 clients worldwide.customers and
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leading systems-integrators worldwide with a focus on North America, Europe, and Asia. Arnold Magneticshas built a preferred rare earth supply chain and has leading rare earth and other permanent magnet production capabilities. Arnold is headquartered in Rochester, New York.

Clean Earth provides environmental services for a variety of contaminated materials including soils, dredged material, hazardous waste and drill cuttings. Clean Earth analyzes, treats, documents and recycles waste streams generated in multiple end-markets such as power, construction, oil and gas, infrastructure, industrial and dredging. Clean Earth is headquartered in Hatboro, Pennsylvania and operates 18 facilities in the eastern United States.

•Sterno Products is a leading manufacturer and marketer of portable food warming fuelsystems, creative indoor and creative tableoutdoor lighting, and home fragrance solutions for the food service industry and flameless candlesconsumer markets. Sterno also manufactures creative indoor and outdoor lighting productsand home fragrance solutions for consumers. Sterno's products includeconsumer markets. Sterno offers a broad range of wick and gel chafing fuels,systems, butane stoves and accessories, liquid and traditional wax candles, catering equipment and lamps through Sterno Products, as well as scented wax cubes, warmer products, outdoor lighting products.and essential oils used for home decor and fragrance systems through Rimports. Sterno Products is headquartered in Corona, California.
Plano, Texas.
The tabular information that follows shows data for each of the operating segments reconciled to amounts reflected in the consolidated financial statements. The results of operations of each of the operating segments are included in consolidated operating results as of their date of acquisition. Segment profit is determined based on internal performance measures used by the Manager to assess the performance of each business. Corporate consists of corporate overhead and management fees that are not allocated to any of the Company's reportable segments. There were no significant inter-segment transactions.
Summary of Operating Segments
Net RevenuesThree months ended March 31,
(in thousands)20242023
5.11$124,974 $124,452 
BOA42,903 37,986 
Ergobaby21,218 22,418 
Lugano103,039 63,887 
PrimaLoft22,541 24,529 
The Honey Pot Co.20,165 — 
Velocity Outdoor29,899 34,040 
Altor Solutions53,404 61,512 
Arnold41,287 40,090 
Sterno64,860 75,019 
Total segment revenue524,290 483,933 
Corporate— — 
Total consolidated revenues$524,290 $483,933 


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Net RevenuesThree months ended September 30, Nine months ended 
 September 30,
(in thousands)2017 2016 2017 2016
        
5.11 Tactical$72,005
 $27,203
 $228,471
 $27,203
Crosman34,449
 —
 44,202
 —
Ergobaby27,835
 29,664
 77,737
 75,048
Liberty18,423
 23,810
 66,008
 74,713
Manitoba Harvest13,948
 15,920
 42,625
 44,321
ACI22,436
 21,679
 66,404
 64,945
Arnold Magnetics26,489
 26,912
 79,421
 82,791
Clean Earth55,676
 51,515
 153,370
 134,035
Sterno Products52,696
 55,582
 163,092
 156,692
Total segment revenue323,957
 252,285
 921,330
 659,748
Corporate and other—
 —
 —
 —
Total consolidated revenues$323,957
 $252,285
 $921,330
 $659,748
Segment Profit (Loss)Three months ended March 31,
(in thousands)20242023
5.11$8,167 $7,670 
BOA9,656 7,951 
Ergobaby(998)388 
Lugano39,317 19,776 
PrimaLoft3,300 5,021 
The Honey Pot Co.(2,650)— 
Velocity Outdoor(12,424)(3,276)
Altor Solutions6,628 6,934 
Arnold4,172 5,038 
Sterno4,785 4,493 
Total segment operating income59,953 53,995 
Corporate (1)
(21,377)(19,438)
Total consolidated operating income38,576 34,557 
Reconciliation of segment operating income (loss) to consolidated income from continuing operations before income taxes:
Interest expense, net(23,575)(26,180)
Amortization of debt issuance costs(1,005)(1,005)
Other income (expense), net(2,874)1,160 
Total consolidated income from continuing operations before income taxes$11,122 $8,532 

(1)Corporate operating loss is comprised of management fees paid to CGM and corporate overhead expenses.

Depreciation and Amortization ExpenseThree months ended March 31,
(in thousands)20242023
5.11$5,799 $6,377 
BOA5,237 5,636 
Ergobaby2,160 2,014 
Lugano2,115 2,718 
PrimaLoft5,248 5,278 
The Honey Pot Co.5,087 — 
Velocity Outdoor3,271 3,284 
Altor Solutions4,023 4,104 
Arnold2,145 1,978 
Sterno4,921 4,914 
Total40,006 36,303 
Reconciliation of segment to consolidated total:
Amortization of debt issuance costs1,005 1,005 
Consolidated total$41,011 $37,308 



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Segment profit (loss) (1)
Three months ended September 30, Nine months ended 
 September 30,
(in thousands)2017 2016 2017 2016
        
5.11 Tactical$(253) $(1,794) $(14,542) $(1,794)
Crosman(1,388) —
 (1,587) —
Ergobaby5,884
 4,671
 14,728
 9,101
Liberty2,050
 2,417
 6,900
 9,879
Manitoba Harvest(169) 554
 75
 (865)
ACI6,191
 5,759
 18,106
 17,241
Arnold Magnetics2,000
 851
 (4,551) 3,828
Clean Earth5,592
 3,593
 7,597
 5,860
Sterno Products4,411
 5,536
 13,383
 14,095
Total24,318
 21,587
 40,109
 57,345
Reconciliation of segment profit (loss) to consolidated income (loss) before income taxes:       
Interest expense, net(6,945) (4,376) (22,499) (23,204)
Other income (expense), net2,020
 (3,271) 2,950
 (1,852)
Gain (loss) on equity method investment—
 50,414
 (5,620) 58,680
Corporate and other (2)
(10,845) (10,916) (32,801) (29,244)
Total consolidated income (loss) before income taxes$8,548
 $53,438
 $(17,861) $61,725
Accounts ReceivableIdentifiable Assets
March 31,December 31,March 31,December 31,
(in thousands)20242023
2024 (1)
2023 (1)
5.11$51,512 $50,452 $377,402 $398,050 
BOA3,153 1,368 241,695 243,243 
Ergobaby11,832 12,018 73,031 73,660 
Lugano136,345 124,776 591,460 510,484 
PrimaLoft1,876 1,381 282,067 288,212 
The Honey Pot Co.18,010 — 273,419 — 
Velocity Outdoor20,904 24,458 202,480 207,609 
Altor Solutions35,914 35,232 176,065 186,683 
Arnold28,298 25,977 108,968 110,883 
Sterno40,882 51,740 168,938 174,166 
Sales allowance accounts(10,416)(9,161)— — 
Total338,310 318,241 2,495,525 2,192,990 
Reconciliation of segment to consolidated totals:
Corporate and other identifiable assets
— — 8,170 404,322 
Total$338,310 $318,241 $2,503,695 $2,597,312 

(1)
Segment profit (loss) represents operating income (loss).
(2)
Primarily relates to management fees expensed and payable to CGM, and corporate overhead expenses.

Depreciation and Amortization ExpenseThree months ended September 30, Nine months ended 
 September 30,
(in thousands)2017 2016 2017 2016
        
5.11 Tactical$4,338
 $5,192
 $34,882
 $5,192
Crosman5,593
 —
 5,842
 —
Ergobaby3,068
 4,409
 9,386
 6,046
Liberty358
 616
 1,295
 1,925
Manitoba Harvest1,891
 1,732
 4,922
 5,200
ACI817
 885
 2,517
 2,585
Arnold Magnetics1,452
 2,268
 4,962
 6,778
Clean Earth5,687
 5,989
 16,140
 16,019
Sterno Products2,873
 2,396
 8,713
 8,427
Total26,077
 23,487
 88,659
 52,172
Reconciliation of segment to consolidated total:       
Amortization of debt issuance costs and original issue discount1,261
 888
 3,721
 2,363
Consolidated total$27,338
 $24,375
 $92,380
 $54,535
(1)Does not include accounts receivable balances per schedule above or goodwill balances - refer to Note G - "Goodwill and Other Intangible Assets".



 Accounts Receivable Identifiable Assets
 September 30, December 31, September 30, December 31,
(in thousands)2017 2016 
2017 (1)
 
2016 (1)
5.11 Tactical$46,112
 $49,653
 $313,072
 $311,560
Crosman24,904
 —
 134,047
 —
Ergobaby11,140
 11,018
 105,627
 113,814
Liberty13,708
 13,077
 27,901
 26,344
Manitoba Harvest5,251
 6,468
 100,330
 97,977
ACI7,010
 6,686
 15,847
 16,541
Arnold Magnetics15,407
 15,195
 69,154
 64,209
Clean Earth47,659
 45,619
 187,460
 193,250
Sterno Products37,389
 38,986
 126,135
 134,661
Allowance for doubtful accounts(10,469) (5,511) —
 —
Total198,111
 181,191
 1,079,573
 958,356
Reconciliation of segment to consolidated total:    
 
Corporate and other identifiable assets (2)
—
 —
 3,197
 145,971
Total$198,111
 $181,191
 $1,082,770
 $1,104,327

(1)
Does not include accounts receivable balances per schedule above or goodwill balances - refer to Note H - "Goodwill and Other Intangible Assets".
(2)
Corporate and other identifiable assets for the year ended December 31, 2016 includes the Company's investment in FOX, which was sold during the first quarter of 2017 - refer to Note F - "Investment in FOX".

Geographic Information
International RevenuesThree months ended September 30, Nine months ended September 30,
(in thousands)2017 2016 2017 2016
5.11 Tactical$19,238
 $6,141
 $63,088
 $6,141
Crosman4,542
 —
 6,412
 —
Ergobaby17,048
 16,701
 46,277
 40,660
Manitoba Harvest10,720
 8,573
 19,979
 20,983
Arnold Magnetics10,556
 12,208
 31,677
 33,654
Sterno Products5,809
 6,327
 16,265
 16,366
 $67,913
 $49,950
 $183,698
 $117,804

Note F - Investment in FOX

Fox Factory Holdings Corp. ("FOX"), a former majority owned subsidiary of the Company that is publicly traded on the NASDAQ Stock Market under the ticker "FOXF," is a designer, manufacturer and marketer of high-performance ride dynamic products used primarily for bicycles, side-by-side vehicles, on-road vehicles with off-road capabilities, off-road vehicles and trucks, all-terrain vehicles, snowmobiles, specialty vehicles and applications, and motorcycles. The Company held a 41%, ownership interest in FOX as of January 1, 2016, and a 14% ownership interest as of January 1, 2017. The investment in FOX was accounted for using the fair value option.
In March 2016, FOX closed on a secondary public offering (the "March 2016 Offering") of 2,500,000 FOX common shares held by the Company. Concurrently with the closing of the March 2016 Offering, FOX repurchased 500,000 shares of FOX common shares directly from the Company. As a result of the sale of shares through the March 2016 Offering and the repurchase of shares by FOX, the Company sold a total of 3,000,000 shares of FOX common stock, with total net proceeds of approximately $47.7 million. Upon completion of the March 2016 Offering and repurchase of shares by FOX, the Company's ownership interest in FOX was reduced from approximately 41% to 33%.

In August 2016, FOX closed on a secondary public offering (the "August Offering") of 4,025,000 shares held by certain FOX shareholders, including the Company. The Company sold a total of 3,500,000 shares of FOX common stock in the August Offering, for total net proceeds of $63.0 million. Upon completion of the August Offering, the Company's ownership of FOX decreased from approximately 33% to approximately 23%.
In November 2016, FOX closed on a secondary public offering (the "November Offering") of 3,500,000 shares of FOX common stock held by the Company, for total net proceeds of $71.8 million. Upon completion of the November Offering, the Company's ownership of FOX decreased from approximately 23% to approximately 14%. The Company's investment in FOX had a fair value of $141.8 million on December 31, 2016 based on the closing price of FOX shares on that date.
In March 2017, FOX closed on a secondary public offering (the "March 2017 Offering") through which the Company sold their remaining 5,108,718 shares in FOX for total net proceeds of $136.1 million. Subsequent to the March 2017 Offering, the Company no longer holds an ownership interest in FOX.

Note G — Property, Plant and Equipment and Inventory
Property, plant and equipment
Property, plant and equipment is comprised of the following at September 30, 2017March 31, 2024 and December 31, 2016 2023 (in thousands)thousands):
September 30, 2017 December 31, 2016
March 31, 2024March 31, 2024December 31, 2023
Machinery and equipment$168,621
 $155,591
Furniture, fixtures and other27,005
 13,737
Leasehold improvements18,337
 14,156
Buildings and land39,964
 35,392
Construction in process24,699
 8,308
278,626
 227,184
437,202
Less: accumulated depreciation(107,799) (84,814)
Total$170,827
 $142,370
Depreciation expense was $8.7 million and $24.5$10.9 million for the three and nine months ended September 30, 2017,March 31, 2024 and $7.3 million and $19.5$11.2 million for the three and nine months ended September 30, 2016, respectively.March 31, 2023.
21

Inventory
Inventory is comprised of the following at September 30, 2017March 31, 2024 and December 31, 2016 2023 (in thousands):
March 31, 2024December 31, 2023
Raw materials$87,499 $97,209 
Work-in-process39,306 25,516 
Finished goods690,033 646,406 
Less: obsolescence reserve(28,029)(28,744)
Total$788,809 $740,387 
 September 30, 2017 December 31, 2016
Raw materials$38,388
 $29,708
Work-in-process12,294
 8,281
Finished goods201,348
 182,886
Less: obsolescence reserve(9,213) (7,891)
Total$242,817
 $212,984


Note HG — Goodwill and Other Intangible Assets
As a result of acquisitions of various businesses, the Company has significant intangible assets on its balance sheet that include goodwill and indefinite-lived intangibles. The Company’s goodwill and indefinite-lived intangibles are tested and reviewed for impairment annually as of March 31st or more frequently if facts and circumstances warrant by comparing the fair value of each reporting unit to its carrying value. Each of the Company’s businesses represent a reporting unit, except Arnold, which comprises three reporting units.

unit.
Goodwill
2017 Annual goodwill impairment testingImpairment Testing
The Company uses a qualitative approach to test goodwill and indefinite lived intangible assets for impairment by first assessing qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-stepquantitative goodwill impairment testing.
2024 Annual Impairment Testing
For our annual impairment testing at March 31, 2024, we performed a qualitative assessment of our reporting units. The qualitative factors we consider include, in

part, the general macroeconomic environment, industry and market specific conditions for each reporting unit, financial performance including actual versus planned results and results of relevant prior periods, operating costs and cost impacts, as well as issues or events specific to the qualitative analysis indicated that it was more-likely-than-not that the fair value of each of our reporting unit. At March 31, 2017,units except Velocity exceeded their carrying value. Based on our analysis, we determined that the Manitoba HarvestVelocity operating segment required quantitative testing because we could not conclude that the fair value of this reporting unit significantly exceeded the carrying value based on qualitative factors alone. We performed a quantitative test of Velocity and the results of the testing indicated that the fair value of Velocity did not exceed the carrying value, resulting in goodwill impairment expense of $8.2 million as of March 31, 2024.
2023 Annual Impairment Testing
The Company determined that the Velocity reporting unit required furtheradditional quantitative testing (Step 1) because we could not conclude that the fair value of the reporting unit exceedsexceeded its carrying value based on qualitative factors alone. The Company utilized an income approach to perform the Step 1 testing at Manitoba Harvest. The weighted average cost of capital used in the income approach for Manitoba Harvest was 12.0%. Results of the Step 1 quantitative testing of Manitoba Harvest indicated that the fair value of Manitoba Harvest exceeded its carrying value by 15.0%. Manitoba Harvest's goodwill balance as of the date of the annual impairment testing was approximately $44.5 million. For the reporting units that were tested qualitatively,only on a qualitative basis for the Company concluded that2023 annual impairment testing, the results of the qualitative analysis indicated that it is more likely than not that the fair value of those reporting units exceeded theirthe carrying value and that aof these reporting units.
The quantitative analysistest of Velocity was not necessary.
Manitoba Harvest
The Company performed Step 1 testing during the 2017 annual impairment testing for Manitoba Harvest. Subsequentusing an income approach to the annual impairment test, the Company has compared the Manitoba Harvest operating results to the forecasts used in the Step 1 testing and has noted no material variances in the results. However, there is a significant degree of uncertainty inherent in the assumptions used to develop the forecast amounts used in the annual impairment test given the changing nature of consumer tastes, particularly related to future years. Therefore, the results of the forecast process for 2018, which are expected to be finalized in the fourth quarter of 2017, may make it necessary to perform interim goodwill impairment testing at Manitoba Harvest at December 31, 2017.
2016 Interim goodwill impairment testing
Arnold
As a result of decreases in forecasted revenue, operating income and cash flows at Arnold, as well as a shortfall in revenue and operating income during the latter half of 2016 as compared to budgeted amounts, the Company determined that it was necessary to perform interim goodwill impairment testing on each of the three reporting units at Arnold. The Company performed Step 1 of the goodwill impairment assessment at December 31, 2016. In Step 1 of the goodwill impairment test, the Company compareddetermine the fair value of the reporting units tounit. The discount rate used in the carrying amount. Based onincome approach was 15% and the results of the valuation,quantitative impairment testing indicated that the fair value of the Flexmag and PTMVelocity reporting unitsunit exceeded the carrying amount, therefore, no additionalvalue by 21%.
Interim Impairment Testing
2023 Interim Impairment Testing
PrimaLoft - The Company performed an interim impairment test of goodwill testingat PrimaLoft as of December 31, 2023. As a result of operating results that were below forecast amounts that were used as the basis for the purchase price allocation performed when PrimaLoft was required.acquired as well as the failure of certain financial covenants in the intercompany credit agreement as of December 31, 2023, the Company determined that a triggering event had occurred. The Company performed the quantitative impairment test using both an income approach and a market approach. The prospective information used in the income approach considers macroeconomic data, industry and reporting unit specific facts and circumstances and is our best estimate of operational results and cash flows for the
22

PrimaLoft reporting unit as of the date of our impairment testing. The discount rate used in the income approach was 11.3%. The results of the Step 1 test for the PMAG unit indicated a potential impairment of goodwill and the Company performed the second step of goodwillquantitative impairment testing (Step 2) to determine the amount of impairment of the PMAG reporting unit.
In the first test of goodwill impairment testing, we compare the fair value of each reporting unit to its carrying amount. For purposes of the Step 1 for the Arnold reporting units, we estimatedindicated that the fair value of the PrimaLoft reporting unit usingdid not exceed its carrying value, resulting in goodwill impairment expense of $57.8 million in the year ended December 31, 2023.
Velocity Outdoor - The Company performed interim quantitative impairment testing of goodwill at Velocity at August 31, 2023. As a result of operating results that were below the forecast that we used in the quantitative impairment test of Velocity Outdoor at March 31, 2023, the Company determined that a triggering event had occurred at Velocity in the third quarter of 2023 and performed an interim impairment test as of August 31, 2023. The Company used an income approach for the impairment test, whereby we estimate the fair value of athe reporting unit based on the present value of future cash flows. Cash flow projections are based on management's estimate of revenue growth rates and operating margins, and take into consideration industry and market conditions as well as company and reporting unit specific economic factors. The Company used a weighted average cost of capital of 17% in the income approach. The discount rate used iswas based on the weighted average cost of capital adjusted for the relevant risk associated with the business specific characteristics and the uncertainty associated with the reporting unit'sVelocity's ability to execute on the projected cash flows. For the Step 1 quantitative impairment testing for Arnold's reporting units, we used only an income approach because we determined that the guideline public company comparables for PMAG, Flexmag and PTM were not representative of these three reporting units. In the income approach, we used a weighted average cost of capital of 12.5% for PMAG, 12.0% for Flexmag and 13.0% for PTM.
The Company had not completed the Step 2 analysis as of December 31, 2016, and therefore estimated a range of impairment loss of $14 million to $19 million basedBased on the value of the total invested capital of the PMAG unit as well as the results of the Step 1 testing ofimpairment test, the fair value of PMAG.Velocity did not exceed its carrying value. The Company recorded an estimatedgoodwill impairment loss for PMAG of $16$31.6 million atduring the year ended December 31, 2016 based on that range. 2023.
The Company completed the Step 2 goodwill impairment test of the PMAG reporting unit in the first quarter of 2017, and the results indicated total impairment of the goodwill of the PMAG reporting unit of $24.9 million. The Step 2 impairment was higher than the initial estimate at December 31, 2016 due primarily to the valuation of PMAG's property, plant and equipment during the Step 2 exercise. The Company recorded the additional impairment loss of $8.9 million in the first quarter of 2017.
2016 Annual goodwill impairment testing
At March 31, 2016, we determined that the Tridien reporting unit (whichfollowing is reported as a discontinued operation in the accompanying financial statements after the sale of the reporting unit in September 2016) required further quantitative testing (Step 1) because we could not conclude that the fair value of the reporting unit exceeds its carrying value based on qualitative factors alone. Results of the Step 1 quantitative testing of Tridien indicated that the fair value of Tridien exceeded its carrying value. For the reporting units that were tested qualitatively, the results of the qualitative analysis indicated that the fair value of those reporting units exceeded their carrying value.

A summary of the net carrying valueamount of goodwill at September 30, 2017March 31, 2024 and December 31, 2016,2023, is as follows (in thousands):
March 31, 2024December 31, 2023
Goodwill - gross carrying amount$1,198,903 $1,069,125 
Accumulated impairment losses (1)
(175,879)(167,697)
Goodwill - net carrying amount$1,023,024 $901,428 
(1) Includes accumulated goodwill impairment expense of $20.6 million recorded at Ergobaby, $72.7 million at Velocity, $24.9 million at Arnold and $57.8 million at PrimaLoft. During the three months ended March 31, 2024, the Company recorded $8.2 million of goodwill impairment expense at Velocity. In the year ended December 31, 2023, the Company recorded $31.6 million of goodwill impairment expense at Velocity and $57.8 million of goodwill impairment expense at PrimaLoft.
23

 Nine months ended September 30, 2017 Year ended 
 December 31, 2016
Goodwill - gross carrying amount$564,789
 $507,637
Accumulated impairment losses(24,864) (16,000)
Goodwill - net carrying amount$539,925
 $491,637
The following is a reconciliation of the change in the carrying value of goodwill for the ninethree months ended September 30, 2017March 31, 2024 by operating segment (in thousands):
  Balance at January 1, 2017 
Acquisitions (1)
 Goodwill Impairment Foreign currency translation 
Other (4)
 Balance at September 30, 2017
5.11 $92,966
 $—
 $—
 $—
 $—
 $92,966
Crosman —
 49,880
 —
 —
 —
 49,880
Ergobaby 61,031
 —
 —
 —
 —
 61,031
Liberty 32,828
 —
 —
 —
 —
 32,828
Manitoba Harvest 44,171
 —
 —
 3,425
 —
 47,596
ACI 58,019
 —
 —
 —
 —
 58,019
Arnold (2)
 35,767
 —
 (8,864) —
 —
 26,903
Clean Earth 118,224
 802
 —
 —
 —
 119,026
Sterno 39,982
 2,898
 —
 —
 147
 43,027
Corporate (3)
 8,649
 —
 —
 —
 —
 8,649
Total $491,637
 $53,580
 $(8,864) $3,425
 $147
 $539,925
Balance at January 1, 2024Acquisitions/Measurement Period AdjustmentsGoodwill ImpairmentBalance at March 31, 2024
5.11$92,966 $— $— $92,966 
BOA254,153 — — 254,153 
Ergobaby41,521 — — 41,521 
Lugano86,337 — — 86,337 
PrimaLoft232,536 — — 232,536 
The Honey Pot Co.— 128,135 — 128,135 
Velocity Outdoor8,182 — (8,182)— 
Altor91,130 1,643 — 92,773 
Arnold39,267 — — 39,267 
Sterno55,336 — — 55,336 
Total$901,428 $129,778 $(8,182)$1,023,024 

(1)
The purchase price allocation for Crosman is preliminary and is expected to be completed during the fourth quarter of 2017. Clean Earth, Sterno and Crosman each completed add-on acquisitions during 2017. The goodwill related to the Clean Earth acquisition is based on a preliminary purchase price allocation. Crosman and Sterno completed small add-on acquisitions during the third quarter of 2017, and the preliminary purchase price allocations for these add-on acquisitions have not been prepared yet. The goodwill related to these add-on acquisitions represents the excess of purchase price over net assets acquired at September 30, 2017.
(2)
Arnold Magnetics has three reporting units PMAG, Flexmag and Precision Thin Metals with goodwill balances of $15.6 million, $4.8 million and $6.5 million, respectively.
(3)
Represents goodwill resulting from purchase accounting adjustments not "pushed down" to the ACI segment. This amount is allocated back to the ACI segment for purposes of goodwill impairment testing.
(4)
Represents the final settlement related to Sterno's acquisition of Sterno Home Inc. ("Sterno Home", formerly NII).
Long lived assets
Annual indefinite lived impairment testing
The Company used a qualitative approach to test indefinite lived intangible assets for impairment by first assessing qualitative factors to determine whether it is more-likely-than-not that the fair value of an indefinite lived intangible asset is impaired as a basis for determining whether it is necessary to perform quantitative impairment testing. The Company evaluated the qualitative factors of each reporting unit that maintains indefinite lived intangible assetsasset in connection with the annual impairment testing for 20172024 and 2016.2023. Results of the qualitative analysis indicate that it is more likely than not that the carryingfair value of the Company’sreporting units that maintain indefinite lived intangible assets did not exceed their fairexceeded the carrying value.

Other intangible assets are comprised of the following at September 30, 2017March 31, 2024 and December 31, 2016 (in2023 (in thousands):
March 31, 2024December 31, 2023
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Customer relationships$794,624 $(309,206)$485,418 $772,423 $(294,628)$477,795 
Technology and patents203,503 (69,776)133,727 202,898 (66,035)136,863 
Trade names, subject to amortization600,525 (132,506)468,019 375,507 (124,648)250,859 
Non-compete agreements4,638 (4,145)493 4,638 (4,082)556 
Other contractual intangible assets1,960 (1,643)317 1,960 (1,593)367 
Total1,605,250 (517,276)1,087,974 1,357,426 (490,986)866,440 
Trade names, not subject to amortization56,965 — 56,965 56,965 — 56,965 
In-process research and development (1)
500 — 500 500 — 500 
Total intangibles, net$1,662,715 $(517,276)$1,145,439 $1,414,891 $(490,986)$923,905 
 September 30, 2017 December 31, 2016
 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Customer relationships$338,461
 $(96,449) $242,012
 $304,751
 $(79,607) $225,144
Technology and patents48,452
 (21,502) 26,950
 44,710
 (18,290) 26,420
Trade names, subject to amortization180,565
 (19,194) 161,371
 128,675
 (6,833) 121,842
Licensing and non-compete agreements7,865
 (6,365) 1,500
 7,845
 (5,987) 1,858
Permits and airspace115,130
 (28,612) 86,518
 113,295
 (21,531) 91,764
Distributor relations and other606
 (606) —
 606
 (606) —
Total691,079
 (172,728) 518,351
 599,882
 (132,854) 467,028
Trade names, not subject to amortization73,527
 —
 73,527
 72,183
 —
 72,183
Total intangibles, net$764,606
 $(172,728) $591,878
 $672,065
 $(132,854) $539,211
(1) In-process research and development is considered indefinite lived until the underlying technology becomes viable, at which point the intangible asset will be amortized over the expected useful life.
Amortization expense related to intangible assets was $14.2 million and $39.3$26.3 million for the three and nine months ended September 30, 2017, and $8.4 millionMarch 31, 2024, and $24.0 million for the three and nine months ended September 30, 2016, respectively. March 31, 2023.
24

Estimated charges to amortization expense of intangible assets overfor the remainder of 2024 and the next fivefour years, is as follows (in thousands):
20242025202620272028
$81,376 $103,304 $97,005 $86,271 $84,140 
Note H — Warranties
  October 1, through Dec. 31, 2017 $12,689
2018 49,367
2019 48,077
2020 47,592
2021 47,288
  $205,013
The Company’s Ergobaby, BOA and Velocity Outdoor operating segments estimate their exposure to warranty claims based on both current and historical product sales data and warranty costs incurred. The Company assesses the adequacy of its recorded warranty liability quarterly and adjusts the amount as necessary. Warranty liability is included in accrued expenses in the accompanying consolidated balance sheets. A reconciliation of the change in the carrying value of the Company’s warranty liability for the three months ended March 31, 2024 and the year ended December 31, 2023 is as follows (in thousands):

Warranty liabilityThree months ended March 31, 2024Year ended December 31, 2023
Beginning balance$1,375 $1,530 
Provision for warranties issued during the period1,026 3,489 
Fulfillment of warranty obligations(626)(3,644)
Ending balance$1,775 $1,375 
Note I — Debt

20142022 Credit Facility

On July 12, 2022, the LLC entered into the Third Amended and Restated Credit Agreement (the "2022 Credit Facility") to amend and restate the 2021 Credit Facility. The 20142022 Credit Facility is secured by allprovides for revolving loans, swing line loans and letters of credit ("the assets2022 Revolving Line of the Company, including all of its equity interests in, and loansCredit") up to its consolidated subsidiaries. The Company amended the 2014 Credit Facility in June 2015, primarily to allow for intercompany loans to, and the acquisition of, Canadian-based companies on an unsecured basis, and to modify provisions that would allow for early termination of a "Leverage Increase Period," thereby providing additional flexibility as to the timing of subsequent acquisitions. On August 15, 2016, the Company amended the 2014 Credit Facility to, among other things, increase themaximum aggregate amount of $600 million ("the 2014 Credit Facility by2022 Revolving Loan Commitment") and a $400 million. On August 31, 2016, the Company entered into an Incremental Facility Amendment to the 2014 Credit Agreement (the "Incremental Facility Amendment"). The Incremental Facility Amendment provided for an increase to the 2014 Revolving Credit Facility of $150 million, and the 2016 Incremental Term Loan, in the amount of $250 million. As a result of the Incremental Facility Amendment, the 2014 Credit Facility currently provides for (i) a revolving credit facility of $550 million (as amended from time to time, the "2014 Revolving Credit Facility"), (ii) a $325 million term loan (the "2014“2022 Term Loan”). The 2022 Term Loan Facility"),requires quarterly payments ranging from $2.5 million to $7.5 million, commencing September 30, 2022, with a final payment of all remaining principal and (iii) a $250 million incremental term loan (the "2016 Incrementalinterest due on July 12, 2027, which is the 2022 Term Loan").

2014Loan’s maturity date. All amounts outstanding under the 2022 Revolving Line of Credit Facility

The 2014 Revolving Credit Facility will become due on July 12, 2027, which is the termination date of the 2022 Revolving Loan Commitment. The 2022 Credit Facility also permits the LLC, prior to the applicable maturity date, to increase the Revolving Loan Commitment and/or obtain additional term loans in June 2019. an aggregate amount of up to $250 million, subject to certain restrictions and conditions. On the closing date for the 2022 Credit Facility, the 2022 Term Loan was advanced in full and the initial borrowings outstanding under the 2022 Revolving Line of Credit were $115 million. We used the initial proceeds from the 2022 Credit Facility to pay all amounts outstanding under the 2021 Credit Facility, pay fees and expenses incurred in connection with the 2022 Credit Facility and fund the acquisition of PrimaLoft.
The Company canLLC may borrow, prepay and reborrow principal under the 20142022 Revolving Credit Facility from time to time during its term. Advances under the 20142022 Revolving Line of Credit Facility can be either LIBOR rateterm Secured Overnight Financing Rate ("SOFR") loans (as defined below) or base rate loans. LIBOR rateTerm SOFR revolving loans bear interest on the outstanding principal amount thereof for each interest period at a rate per annum equal tobased on the London Interbank Offered Rate (the "LIBOR Rate")applicable SOFR as administered by the Federal Reserve Bank of New York (or a successor administrator), as adjusted, plus a margin ranging from 2.00%1.50% to 2.75%2.50%, based on the ratio of consolidated net indebtedness to adjusted consolidated earnings before interest expense, tax expense, and depreciation and amortization expenses for such period (the "Consolidated“Consolidated Total Leverage Ratio"Ratio”). Base rate revolving loans bear interest on the outstanding principal amount thereof at a fluctuating rate per annum equal to the greatesthighest of (i) the primeFederal Funds rate of interest, orplus 0.50%, (ii) the Federal Funds Rate“prime rate”, and (iii) the applicable SOFR plus 0.50%1.0% (the "Base Rate"“Base Rate”), plus a margin ranging from 1.00%0.50% to 1.75%1.50%, based uponon the Company's Consolidated Total Leverage Ratio.

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Term Loans
2014Advances under the 2022 Term Loan
can be either term SOFR loans or base rate loans. The 2014 Term Loan Facility expires in June 2021 and requires quarterly payments that commenced September 30, 2014, with a final payment of all remaining principal and interest due on June 6, 2021. The 2014 Term Loan Facility was issued at an original issue discount of 99.5% of par value.

2016 Incremental Term Loan
The 2016 Incremental2022 Term Loan was issued at an original issue discount of 99.25% of par value. The Company incurred $6.0 millionadvanced in additional debt issuance costs related tofull on the Incrementalclosing date for the 2022 Credit Facility which will be recognized as expense during the remaining term of the related 2014 Revolving Credit Facility, and 2014a Term Loan and 2016 Incremental Term Loan. The Incremental Facility Amendment did not change the due dates or applicableSOFR loan with an interest rates of the 2014 Credit Agreement. The quarterly payments for the term advances under the 2014 Credit Agreement increased to approximately $1.4 million per quarter. The additional advances under the Incremental Credit Facility was a loan modification for accounting purposes. Consequently, the Company capitalized debt issuance costs of $6.0 million associated with fees charged by lenders of the Incremental Credit Facility. The capitalized debt issuance costs will be amortized over the remaining period of one month. On the 2014 Credit Facility.

In March 2017, the Company amended the 2014 Credit Facility (the "Fourth Amendment")last day of an interest period, Term SOFR loans may be converted to reduce the applicable rateTerm SOFR loans of a different interest for the 2014period or to Base Rate loans. Term Loan and 2016 Incremental Term Loan. Under the Fourth Amendment, outstanding LIBORSOFR term loans bear interest on the outstanding principal amount thereof for each interest period at LIBORa rate per annum based on the Term SOFR for such interest period plus an applicablea margin ranging from 1.50% to 2.50%, based on the Consolidated Total Leverage Ratio. Base rate of 2.75% and outstanding Base Rateterm loans bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus 1.75%. Priora margin ranging from 0.50% to 1.50%, based on the amendment,Consolidated Total Leverage Ratio.
Under the outstanding term loans bore interest at LIBOR plus 3.25% or Base Rate plus 2.25%. In connection with the Fourth Amendment, the Company capitalized debt issuance costs of $1.2 million associated with fees charged by term loan lenders.

Other
The 2014 Credit Facility provides for sub-facilities under the 20142022 Revolving Credit Facility, pursuant to which an aggregate amount of up to $100 million in letters of credit may be issued, as well as swing line loans of up to $25 million outstanding at one time. The issuance of such letters of credit and the making of any swing line loan would reduce the amount available under the 20142022 Revolving Credit Facility. The Company will pay (i) commitment fees on the unused portion of the 2014 Revolving Credit Facility ranging from 0.45% to 0.60% per annum based on its Consolidated Leverage Ratio, (ii) quarterly letter of credit fees, and (iii) administrative and agency fees.
The following table provides the Company’s debt holdings at September 30, 2017 and December 31, 2016 (in thousands):
 September 30, 2017 December 31, 2016
Revolving Credit Facility$25,500
 $4,400
Term Loan561,394
 565,658
Original issue discount(3,777) (4,706)
Debt issuance costs - term loan(7,677) (8,015)
Total debt$575,440
 $557,337
Less: Current portion, term loan facilities(5,685) (5,685)
Long term debt$569,755
 $551,652
Net availability under the 20142022 Revolving Credit Facility was approximately $523.2$551.6 million at September 30, 2017.March 31, 2024. Letters of credit outstanding at September 30, 2017March 31, 2024 totaled approximately $1.3$2.5 million. At September 30, 2017,March 31, 2024, the Company was in compliance with all covenants as defined in the 20142022 Credit Facility.
The2022 Revolving Credit Facility is secured by all of the assets of the Company, including all of its equity interests in, and loans to, its subsidiaries.
Senior Notes
2032 Senior Notes
On November 17, 2021, we consummated the issuance and sale of $300 million aggregate principal amount of our 5.000% Senior Notes due 2032 (the “2032 Notes” or "2032 Senior Notes") offered pursuant to a private offering to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933 (the "Securities Act"), and to non-U.S. persons under Regulation S under the Securities Act. The 2032 Notes were issued pursuant to an indenture, dated as of November 17, 2021 (the “2032 Notes Indenture”), between the Company and U.S. Bank National Association, as trustee (the “Trustee”). The 2032 Notes bear interest at the rate of 5.000% per annum and will mature on January 15, 2032. Interest on the 2032 Notes is payable in cash on January 15 and July 15 of each year, beginning on July 15, 2022.
The proceeds from the sale of the 2032 Notes was used to repay a portion of our debt outstanding under the 2021 Revolving Credit Facility.
2029 Senior Notes
On March 23, 2021, we consummated the issuance and sale of $1,000 million aggregate principal amount of our 5.250% Senior Notes due 2029 (the "2029 Notes" or "2029 Senior Notes") offered pursuant to a private offering to qualified institutional buyers in accordance with Rule 144A under the Securities Act, and to non-U.S. persons under Regulation S under the Securities Act. The 2029 Notes were issued pursuant to an indenture, dated as of March 23, 2021 (the “2029 Notes Indenture”), between the Company and U.S. Bank National Association, as trustee (the "Trustee"). The 2029 Notes bear interest at the rate of 5.250% per annum and will mature on April 15, 2029. Interest on the 2029 Notes is payable in cash on April 15th and October 15th of each year. The first interest payment date on the 2029 Senior Notes was October 15, 2021. The 2029 Notes are general unsecured obligations of the Company and are not guaranteed by our subsidiaries.
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The following table provides the Company’s outstanding long-term debt and effective interest rates at March 31, 2024 and December 31, 2023 (in thousands):
March 31, 2024December 31, 2023
Effective Interest RateAmountEffective Interest RateAmount
2029 Senior Notes5.25 %$1,000,000 5.25 %$1,000,000 
2032 Senior Notes5.00 %300,000 5.00 %300,000 
2022 Term Loan7.59 %382,500 7.50 %385,000 
2022 Revolving Credit Facility8.16 %46,000 — %— 
Less: Unamortized debt issuance costs(12,518)(13,121)
Total debt$1,715,982 $1,671,879 
Less: Current Portion, term loan facilities(10,000)(10,000)
Long-term debt$1,705,982 $1,661,879 
Annual maturities of the Company's debt obligations are as follows (in thousands):
2024$10,000 
202515,000 
202625,000 
2027378,500 
2028— 
2029 and thereafter1,300,000 
$1,728,500 
The Senior Notes consisted of the following carrying value and estimated fair value (in thousands):
Fair Value Hierarchy LevelMarch 31, 2024
Maturity DateRateCarrying ValueFair Value
2032 Senior NotesJanuary 15, 20325.000 %2$300,000 $267,000 
2029 Senior NotesApril 15, 20295.250 %2$1,000,000 $947,500 
Debt Issuance Costs
Deferred debt issuance costs represent the costs associated with the entering into the 2014 Credit Facility as well as amendments to the 2014 Credit Facility, and are amortized over the termissuance of the related debt instrument.Company's financing arrangements. Since the Company can borrow, repay and reborrow principal under the 20142022 Revolving Credit Facility, the debt issuance costs associated with this facilitythe 2022 Revolving Credit Facility have been classified as other non-current assets in the accompanying condensed consolidated balance sheet. The debt issuance costs associated with the 20142022 Term Loan and 2016 Incremental Term LoanSenior Notes are classified as a reduction of long-term debt in the accompanying condensed consolidated balance sheet.sheets.

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The following table summarizes debt issuance costs at September 30, 2017March 31, 2024 and December 31, 2016,2023, and the balance sheet classification in each of the periods presentspresented (in thousands):
March 31, 2024December 31, 2023
Deferred debt issuance costs$32,526 $32,526 
Accumulated amortization(14,783)(13,779)
Deferred debt issuance costs, net$17,743 $18,747 
Balance sheet classification:
Other noncurrent assets$5,225 $5,626 
Long-term debt12,518 13,121 
$17,743 $18,747 
 September 30, 2017 December 31, 2016
Deferred debt issuance costs$20,142
 $18,960
Accumulated amortization(9,188) (6,248)
Deferred debt issuance costs, less accumulated amortization$10,954
 $12,712
    
Balance Sheet classification:   
Other non-current assets$3,277
 $4,698
Long-term debt7,677
 8,014
 $10,954
 $12,712


Note J — Derivative Instruments and Hedging Activities
On September 16, 2014, the Company purchased an interest rate swap ("New Swap") with a notional amount of $220 million. The New Swap is effective April 1, 2016 through June 6, 2021, the termination date of the 2014 Term Loan. The agreement requires the Company to pay interest on the notional amount at the rate of 2.97% in exchange for the three-month LIBOR rate. At September 30, 2017 and December 31, 2016, the New Swap had a fair value loss of $8.8 million and $10.7 million, respectively, principally reflecting the present value of future payments and receipts under the agreement.
The Company did not elect hedge accounting for the above derivative transaction and as a result, periodic mark-to-market changes in fair value are reflected as a component of interest expense in the consolidated statement of operations.
The following table reflects the classification of the Company's interest rate swap on the consolidated balance sheets at September 30, 2017 and December 31, 2016 (in thousands):
 September 30, 2017 December 31, 2016
Other current liabilities$3,190
 $4,010
Other noncurrent liabilities5,657
 6,709
Total fair value$8,847
 $10,719

Note K — Fair Value Measurement
The following table provides the assets and liabilities carried at fair value measured on a recurring basis at September 30, 2017 and December 31, 2016 (in thousands):
 Fair Value Measurements at September 30, 2017
 
Carrying
Value
 Level 1 Level 2 Level 3
Liabilities:       
Put option of noncontrolling shareholders (1)
$(192) $—
 $—
 $(192)
Contingent consideration - acquisitions (2)
(4,367) —
 —
 (4,367)
Interest rate swap(8,847) —
 (8,847) —
Total recorded at fair value$(13,406) $—
 $(8,847) $(4,559)

(1)
Represents put option issued to noncontrolling shareholders in connection with the 5.11 Tactical and Liberty acquisitions.
(2)
Represents potential earn-outs payable by Sterno Products for the acquisition of NII and Ergobaby in connection with their acquisition of Baby Tula.

 Fair Value Measurements at December 31, 2016
 
Carrying
Value
 Level 1 Level 2 Level 3
Assets:       
Equity method investment - FOX$141,767
 $141,767
 $—
 $—
Liabilities:
 
 
 
Put option of noncontrolling shareholders(180) —
 —
 (180)
Contingent consideration - acquisitions(4,830) —
 —
 (4,830)
Interest rate swap(10,719) —
 (10,719) —
Total recorded at fair value$126,038
 $141,767
 $(10,719) $(5,010)
Reconciliations of the change in the carrying value of the Level 3 fair value measurements from January 1st through September 30th in 2017 and 2016 are as follows (in thousands):
 2017 2016
Balance at January 1st$(5,010) $(50)
Contingent consideration - acquisition—
 (1,500)
Balance at March 31st$(5,010) $(1,550)
Contingent consideration - acquisition—
 (3,780)
Payment of contingent consideration463
 —
Balance at June 30th$(4,547) $(5,330)
Put option - noncontrolling shareholder(12) (50)
Contingent consideration - payment—
 450
Balance at September 30th$(4,559) $(4,930)
Valuation Techniques
The Company has not changed its valuation techniques in measuring the fair value of any of its other financial assets and liabilities during the period. For details of the Company’s fair value measurement policies under the fair value hierarchy, refer to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

2014 Term Loan and 2016 Incremental Term Loan

At September 30, 2017, the carrying value of the principal under the Company’s outstanding Term Loans, including the current portion, was $561.4 million, which approximates fair value because it has a variable interest rate that reflects market changes in interest rates and changes in the Company's net leverage ratio. The estimated fair value of the outstanding 2014 Term Loan is based on quoted market prices for similar debt issues and is, therefore, classified as Level 2 in the fair value hierarchy.

Nonrecurring Fair Value Measurements

The following table provides the assets carried at fair value measured on a non-recurring basis as of September 30, 2017 and December 31, 2016:
 Fair Value Measurements at September 30, 2017 Nine months ended
(in thousands)Carrying
Value		 Level 1 Level 2 Level 3 Expense
          
Goodwill (1)
26,903
 —
 —
 26,903
 8,864
(1)Represents the fair value of the goodwill of the Arnold business segment. Refer to Note H - "Goodwill and Other Intangible Assets" for further discussion regarding the impairment and valuation techniques applied.

 Fair Value Measurements at December 31, 2016 Year ended
(in thousands)Carrying
Value		 Level 1 Level 2 Level 3 Expense
          
Goodwill35,767
 —
 —
 35,767
 16,000
Property, Plant and Equipment (1)
—
 —
 —
 —
 1,824
Tradename (1)
—
 —
 —
 —
 317
Technology (1)
—
 —
 —
 —
 3,460
Customer relationships (1)
—
 —
 —
 —
 2,426
Permits (1)
—
 —
 —
 —
 1,177
(1) Represents the fair value of the respective assets of the Orbit Baby product line of Ergobaby and the Clean Earth Williamsport site, both of which were disposed of during 2016.

Note L — Stockholders’ Equity
Trust Common Shares
The Trust is authorized to issue 500,000,000 Trust common shares and the CompanyLLC is authorized to issue a corresponding number of LLC interests. The Company will at all times have the identical number of LLC interests outstanding as Trust shares. Each Trust share represents an undivided beneficial interest in the Trust, and each Trust share is entitled to one vote per share on any matter with respect to which members of the CompanyLLC are entitled to vote.
Private Placement
On December 15, 2023, the Company completed the sale of 3,550,000 common shares in a private placement to Allspring Special Small Cap Value Fund for consideration per share equal to $21.18 per share, or an aggregate sale price of approximately $75.2 million. In connection with the issuance of the shares, we paid a commission equal to 1% of the aggregate sales price, or approximately $0.8 million. The sale of the common shares was made pursuant to a subscription agreement pursuant to which the buyer agreed not to dispose of the common shares for a period of six months following the date of the private placement.
At-the-market equity offering program - common shares
On September 7, 2021, the Company filed a prospectus supplement pursuant to which the Company may, but has no obligation to, issue and sell up to $500 million common shares of the Trust in amounts and at times to be determined by the Company. Actual sales will depend on a variety of factors to be determined by us from time to time, including, market conditions, the trading price of Trust common shares and determinations by us regarding appropriate sources of funding.
In connection with this offering, the Company entered into an At Market Issuance Sales Agreement (the “Common Sales Agreement”) with B. Riley Securities, Inc. and Goldman Sachs & Co. LLC (each a “Sales Agent” and, collectively, the “Sales Agents”). The Common Sales Agreement provides that the Company may offer and sell Trust common shares from time to time through the Sales Agents up to $500 million, in amounts and at times to be determined by the Company. Pursuant to the Common Sales Agreement, the shares may be offered and sold through each Sales Agent, acting separately, in ordinary brokers’ transactions, to or through a market maker, on or through the New York Stock Exchange or any other market venue where the securities may be traded, in the over-the-counter market, in privately negotiated transactions, in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act or through a combination of any such methods of sale.
During the three months ended March 31, 2024, the Company sold 53,932 Trust common shares under the Common Sales Agreement. For the same period, the Company received total net proceeds of approximately $1.3 million from these sales, and incurred approximately $0.2 million in commissions paid to the Sales Agents.
During the three months ended March 31, 2023, there were no sales of Trust common shares under the Common Sales Agreement as the at-the-market program is not active when the share repurchase program is active.
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The Company incurred approximately $0.4 million and $0.1 million in total costs related to the ATM programs during the three months ended March 31, 2024 and 2023, respectively.
Share repurchase program
In January 2023, the Company's Board of Directors approved a share repurchase program authorizing the Company to repurchase, through December 31, 2023, up to $50 million of its outstanding common shares.
The Company repurchased 210,000 shares for approximately $4.0 million during the three months ended March 31, 2023. The share repurchase program expired on December 31, 2023.
Trust Preferred Shares
The Trust is authorized to issue up to 50,000,000 Trust preferred shares and the Company is authorized to issue a corresponding number of trustTrust interests.
At-the-market equity offering program - preferred interests. shares
On March 20, 2024, the Company filed a prospectus supplement pursuant to which the Company may, but has no obligation to, issue and sell up to $100 million of the Trust’s 7.250% Series A Preferred Shares (the “Series A Preferred Shares”), 7.875% Series B Preferred Shares (the “Series B Preferred Shares”), and 7.875% Series C Preferred Shares (the “Series C Preferred Shares” and together with the Series A Preferred Shares, the Series B Preferred Shares, and the Series C Preferred Shares, the “Preferred Shares”), each representing beneficial interests in the Trust.
In connection with this offering, the Company entered into an At Market Issuance Sales Agreement (the “Preferred Sales Agreement”) with B. Riley Securities, Inc. (“B. Riley”), pursuant to which CODI may sell from time to time, through B. Riley acting as sales agent and/or principal (the “Sales Agent”). The Preferred Sales Agreement provides that the Company may offer and sell Trust preferred shares from time to time through the Sales Agent up to $100 million, in amounts and at times to be determined by the Company.
The following table reflects the activity in the preferred share ATM program during the three months ended March 31, 2024 (in thousands, except share data):
Number of Shares SoldNet ProceedsCommissions Paid
Series A Preferred Shares7,557 $186 $4 
Series B Preferred Shares3,660 92 2 
Series C Preferred Shares22,631 558 11 
     Total33,848 $836 $17 
Series C Preferred Shares
On November 20, 2019, the Trust issued 4,000,000 7.875% Series C Preferred Shares(the "Series C Preferred Shares") with a liquidation preference of $25.00 per share, and on December 2, 2019, the Trust issued 600,000 of the Series C Preferred Shares which were sold pursuant to an option to purchase additional shares by the underwriters. Total proceeds from the issuance of the Series C Preferred Shares were $115.0 million, or $111.0 millionnet of underwriters' discount and issuance costs. Distributions on the Series C Preferred Shares will be payable quarterly in arrears, when and as declared by the Company's board of directors on January 30, April 30, July 30, and October 30 of each year, beginning on January 30, 2020, at a rate per annum of 7.875%. Distributions on the Series C Preferred Shares are cumulative and at March 31, 2024, $1.5 million of Series C distributions are accumulated and unpaid. Unless full cumulative distributions on the Series C Preferred Shares have been or contemporaneously are declared and set apart for payment of the Series C Preferred Shares for all past distribution periods, no distribution may be declared or paid for payment on the Trust common shares. The Series C Preferred Shares are not convertible into Trust common shares and have no voting rights, except in limited circumstances as provided for in the share designation for the Series C Preferred Shares. The Series C Preferred Shares may be redeemed at the Company's option, in whole or in part, at any time after January 30, 2025, at a price of $25.00 per share, plus any accumulated and unpaid distributions (thereon whether authorized or declared) to, but excluding, the redemption date. Holders of Series C Preferred Shares will have no right to require the redemption of the Series C Preferred Shares and there is no maturity date.
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Series B Preferred Shares
On March 13, 2018, the Trust issued 4,000,000 7.875% Series B Preferred Shares (the "Series B Preferred Shares") with a liquidation preference of $25.00 per share, for gross proceeds of $100.0 million, or $96.5 million net of underwriters' discount and issuance costs. Distributions on the Series B Preferred Shares are payable quarterly in arrears, when and as declared by the Company's board of directors on January 30, April 30, July 30, and October 30 of each year, beginning on July 30, 2018, at a rate per annum of 7.875%. Holders of the Series B Preferred Shares are entitled to receive cumulative cash distributions (i) from and including the date of issuance to, but excluding, April 30, 2028 a rate equal to7.875% per annum and (ii) from and including April 30, 2028, at a floating rate equal to the applicable successor to three-month LIBOR (as determined by a calculation agent) plus a spread of 4.985% per annum. Subsequent to April 30, 2028, the distribution rate will be reset quarterly. At March 31, 2024, $1.3 million of Series B distributions are accumulated and unpaid. Unless full cumulative distributions on the Series B Preferred Shares have been or contemporaneously are declared and set apart for payment of the Series B Preferred Shares for all past distribution periods, no distribution may be declared or paid for payment on the Trust common shares. The Series B Preferred Shares are not convertible into Trust common shares and have no voting rights, except in limited circumstances as provided for in the share designation for the Series B Preferred Shares. The Series B Preferred Shares may be redeemed at the Company's option, in whole or in part, at any time after April 30, 2028, at a price of $25.00 per share, plus any accumulated and unpaid distributions (thereon whether authorized or declared) to, but excluding, the redemption date. Holders of Series B Preferred Shares will have no right to require the redemption of the Series B Preferred Shares and there is no maturity date.
Series A Preferred Shares
On June 28, 2017, the Trust issued 4,000,000 7.250% Series A Preferred Shares (the "Series A Preferred Shares") with a liquidation preference of $25.00 per share, for gross proceeds of $100.0 million, or $96.4 million net of underwriters' discount and issuance costs. When, and if declared by the Company's board of directors, distribution on the Series A Preferred Shares will be payable quarterly on January 30, April 30, July 30, and October 30 of each year, beginning on October 30, 2017, at a rate per annum of 7.250%. Distributions on the Series A Preferred Shares are discretionary and non-cumulative. The Company has no obligation to pay distributions for a quarterly distribution period if the board of directors does not declare the distribution before the scheduled record of date for the period, whether or not distributions are paid for any subsequent distribution periods with respect to the Series A Preferred Shares, or the Trust common shares. If the Company's board of directors does not declare a distribution for the Series A Preferred Shares for a quarterly distribution period, during the remainder of that quarterly distribution period the Company cannot declare or pay distributions on the Trust common shares. The Series A Preferred Shares are not convertible into Trust common shares and have no voting rights, except in limited circumstances as provided for in the share designation for the preferred shares.
The Series A Preferred Shares may be redeemed at the Company's option, in whole or in part, at any time after July 30, 2022, at a price of $25.00 per share, plus declared and unpaid distribution to, but excluding, the redemption date, without payment of any undeclared distributions. Holders of Series A Preferred Shares will have no right to require the redemption of the Series A Preferred Shares and there is no maturity date.
If a certain tax redemption event occurs prior to July 30, 2022, the Series A Preferred Shares may be redeemed at the Company's option, in whole but not in part, upon at least 30 days’ notice, within 60 days of the occurrence of such tax redemption event, at a price of $25.25 per share, plus declared and unpaid distributions to, but excluding, the redemption date, without payment of any undeclared distributions. If a certain fundamental change related to the Series A Preferred Shares or the Company occurs (whether before, on or after July 30, 2022), the Company will be required to repurchase the Series A Preferred Shares at a price of $25.25 per share, plus declared and unpaid distributions to, but excluding, the date of purchase, without payment of any undeclared distributions. If (i) a fundamental change occurs and (ii) the Company does not give notice prior to the 31st day following the fundamental change to repurchase all the outstanding Series A Preferred Shares, the distribution rate per annum on the Series A Preferred Shares will increase by 5.00%, beginning on the 31st day following such fundamental change. Notwithstanding any requirement that the Company repurchase all of the outstanding Series A Preferred Shares, the increase in the distribution rate is the sole remedy to holders in the event the Company fails to do so, and following any such increase, the Company will be under no obligation to repurchase any Series A Preferred Shares.
Profit Allocation Interests
The Allocation Interests represent the original equity interest in the Company. The holders of the Allocation Interests ("Holders"), through Sostratus LLC, are entitled to receive distributions pursuant to a profit allocation formula upon the occurrence of certain events. The

distributions of the profit allocation areis paid upon the occurrence of the sale of a material amount of capital stock or assets of one of the Company’s businesses ("Sale Event") or, at the option of the Holders, at each five-year anniversary date of the acquisition of one of the Company’s businesses ("Holding Event"). The Company records distributions of the profit allocation to the Holders upon occurrence of a Sale Event or Holding Event as distributionsdividends declared on Allocation Interests to stockholders’ equity when they are approved by the Company’s board of directors.
Sale Event
The sale of FOX sharesMarucci in March 2017 (refer to Note F - "Investment in FOX") qualified asNovember 2023 represented a Sale Event underand the Company's LLC Agreement. In April 2017, with respectboard of director's approved a distribution of $48.9 million in the first quarter of 2024. This distribution was paid to the March 2017 Offering,Holders of the Allocation Interests in February 2024.
The sale of Advanced Circuits in February 2023 represented a Sale Event and the Company's board of director's approved a distribution of $24.4 million in the second quarter of 2023. In addition, the Company's board of directors approved and declared a profit allocation payment totaling $25.8 million that was paid in the second quarterdistribution of 2017.
The sale of FOX shares in March 2016 (refer to Note F - "Investment in FOX") qualified as a Sale Event under the Company's LLC Agreement. In April 2016, with respect to the March 2016 Offering, the Company's board of directors approved and declared a profit allocation payment totaling $8.6 million that was paid to Holders during the second quarter of 2016. In November 2016, with respect to the sale of FOX shares in August 2016 and the sale of Tridien, both qualifying as Sale Events, the Company's board of directors approved and declared a profit allocation payment of $7.0 million that was paid during the fourth quarter of 2016. In the fourth quarter of 2016, the Company's board of directors declared a profit allocation payment to the Allocation Interest Holders of $13.4$2.1 million related to the FOX November Offering (refervarious sale proceeds received related to Note F - "Investment in FOX"). This amount wasprevious Sale Events. These distributions were paid in the first quarter of 2017.
The Company's board of directors also declared and the Company paid an $8.2 million distribution in the third quarter of 2016 to the Allocation Member in connection with a Holding Event of our ownershipHolders of the Advanced Circuits subsidiary. Allocation Interests in April 2023.
30

Reconciliation of net income (loss) available to common shares of Holdings
The payment is following table reconciles net income (loss) attributable to Holdings to net income (loss) attributable to the common shares of Holdings (in respect to Advanced Circuits' positive contribution-based profit in the five year holding period ending June 30, 2016.thousands):
Three months ended 
 March 31,
20242023
Net loss from continuing operations attributable to Holdings$(4,993)$(2,559)
Less: Distributions paid - Allocation Interests48,941 — 
Less: Distributions paid - Preferred Shares6,045 6,045 
Less: Accrued distributions - Preferred Shares2,878 2,869 
Net loss from continuing operations attributable to common shares of Holdings$(62,857)$(11,473)
Earnings per share
The Company calculates basic and diluted earnings per share using the two-class method which requires the Company to allocate to participating securities that have rights to earnings that otherwise would have been available only to Trust shareholders as a separate class of securities in calculating earnings per share. The Allocation Interests are considered participating securities that contain participating rights to receive profit allocations upon the occurrence of a Holding Event or Sale Event. The calculation of basic and diluted earnings per share for the three and nine months ended September 30, 2017March 31, 2024 and 20162023 reflects the incremental increase during the period in the profit allocation distribution to Holders related to Holding Events.
Basic and diluted earnings per share for the three and nine months ended September 30, 2017March 31, 2024 and 20162023 attributable to the common shares of Holdings is calculated as follows (in thousands, except per share data):
Three months ended
March 31,
Three months ended
March 31,
Three months ended
March 31,
2024
2024
2024
Net loss from continuing operations attributable to common shares of Holdings
Net loss from continuing operations attributable to common shares of Holdings
Net loss from continuing operations attributable to common shares of Holdings
Less: Effect of contribution based profit - Holding Event
Less: Effect of contribution based profit - Holding Event
Less: Effect of contribution based profit - Holding Event
Net loss from continuing operations attributable to common shares of Holdings
Net loss from continuing operations attributable to common shares of Holdings
Net loss from continuing operations attributable to common shares of Holdings
Income from discontinued operations attributable to Holdings
 Three months ended 
 September 30,		 Nine months ended 
 September 30,
 2017 2016 2017 2016
Income (loss) from continuing operations attributable to Holdings $7,706
 $47,862
 $(18,351) $50,198
Less: Profit Allocation paid to Holders —
 8,196
 39,120
 16,829
Less: Effect of contribution based profit - Holding Event 1,620
 812
 3,954
 1,292
Income (loss) from continuing operation attributable to common shares $6,086
 $38,854
 $(61,425) $32,077
Income from discontinued operations attributable to Holdings
        
Income from discontinued operations attributable to Holdings $—
 $1,843
 $340
 $2,723
Less: Effect of contribution based profit - Holding Event —
 —
 —
 —
Income from discontinued operations attributable to common shares $—
 $1,843
 $340
 $2,723
Less: Effect of contribution based profit - Holding Event
Less: Effect of contribution based profit - Holding Event
Income from discontinued operations attributable to common shares of Holdings
Income from discontinued operations attributable to common shares of Holdings
Income from discontinued operations attributable to common shares of Holdings
Basic and diluted weighted average common shares outstanding
Basic and diluted weighted average common shares outstanding
        
Basic and diluted weighted average common shares outstanding 59,900
 54,300
 59,900
 54,300
        
Basic and fully diluted income (loss) per common share attributable to Holdings        
Basic and fully diluted income (loss) per common share attributable to Holdings
Basic and fully diluted income (loss) per common share attributable to Holdings
Continuing operations
Continuing operations
Continuing operations $0.10
 $0.72
 $(1.03) $0.59
Discontinued operations —
 0.03
 0.01
 0.05
 $0.10
 $0.75
 $(1.02) $0.64
Discontinued operations
Discontinued operations
$
$
$
Distributions
The following table summarizes information related to our quarterly cash distributions on our Trust Common Shares
On January 26, 2017, the Company paid a distribution of $0.36common and preferred shares (in thousands, except per share to holders of record of the Company's common shares as of January 19, 2017. data):
PeriodCash Distribution per ShareTotal Cash DistributionsRecord DatePayment Date
Trust Common Shares:
January 1, 2024 - March 31, 2024 (1)
$0.25 $18,846 April 18, 2024April 25, 2024
31

October 1, 2023 - December 31, 2023$0.25 $18,818 January 18, 2024January 25, 2024
July 1, 2023 - September 30, 2023$0.25 $17,955 October 19, 2023October 26, 2023
April 1, 2023 - June 30, 2023$0.25 $17,974 July 20, 2023July 27, 2023
January 1, 2023 - March 31, 2023$0.25 $17,987 April 20, 2023April 27, 2023
Series A Preferred Shares:
January 30, 2024 - April 29, 2024 (1)
$0.453125 $1,822 April 15, 2024April 30, 2024
October 30, 2023 - January 29, 2024$0.453125 $1,813 January 15, 2024January 30, 2024
July 30, 2023 - October 29, 2023$0.453125 $1,813 October 15, 2023October 30, 2023
April 30, 2023 - July 29, 2023$0.453125 $1,813 July 15, 2023July 30, 2023
January 30, 2023 - April 29, 2023$0.453125 $1,813 April 15, 2023April 30, 2023
October 30, 2022 - January 29, 2023$0.453125 $1,813 January 15, 2023January 30, 2023
Series B Preferred Shares:
January 30, 2024 - April 29, 2024 (1)
$0.4921875 $1,983 April 15, 2024April 30, 2024
October 30, 2023 - January 29, 2024$0.4921875 $1,969 January 15, 2024January 30, 2024
July 30, 2023 - October 29, 2023$0.4921875 $1,969 October 15, 2023October 30, 2023
April 30, 2023 - July 29, 2023$0.4921875 $1,969 July 15, 2023July 30, 2023
January 30, 2023 - April 29, 2023$0.4921875 $1,969 April 15, 2023April 30, 2023
October 30, 2022 - January 29, 2023$0.4921875 $1,969 January 15, 2023January 30, 2023
Series C Preferred Shares:
January 30, 2024 - April 29, 2024 (1)
$0.4921875 $2,295 April 15, 2024April 30, 2024
October 30, 2023 - January 29, 2024$0.4921875 $2,264 January 15, 2024January 30, 2024
July 30, 2023 - October 29, 2023$0.4921875 $2,264 October 15, 2023October 30, 2023
April 30, 2023 - July 29, 2023$0.4921875 $2,264 July 15, 2023July 30, 2023
January 30, 2023 - April 29, 2023$0.4921875 $2,264 April 15, 2023April 30, 2023
October 30, 2022 - January 29, 2023$0.4921875 $2,264 January 15, 2023January 30, 2023
(1) This distribution was declared on January 5, 2017.
On April 27, 2017, the Company paid a distribution of $0.36 per share to holders of record of the Company's common shares as of April 20, 2017. This distribution was    declared on April 6, 2017.4, 2024.
On July 27, 2017, the Company paid a distribution of $0.36 per share to holders of record of the Company's common shares as of July 20, 2017. The distribution was declared on July 6, 2017.
On October 26, 2017, the Company paid a distribution of $0.36 per share to holders of record of the Company's common shares as of October 19, 2017. This distribution was declared on October 5, 2017.

Trust Preferred Shares
On October 30, 2017, the Company paid a distribution of $0.61423611 per share on the Company’s Series A Preferred Shares. The distribution on the Series A Preferred Shares covers the period from and including June 28, 2017, the original issue date of the Preferred Shares, up to, but excluding, October 30, 2017. This distribution was declared on October 5, 2017 and was payable to holders of record of the Company's Series A Preferred Shares as of October 15, 2017.

Note M — Warranties
The Company’s Crosman, Ergobaby and Liberty operating segments estimate their exposure to warranty claims based on both current and historical product sales data and warranty costs incurred. The Company assesses the adequacy of its recorded warranty liability quarterly and adjusts the amount as necessary. A reconciliation of the change in the carrying value of the Company’s warranty liability for the nine months ended September 30, 2017 and the year ended December 31, 2016 is as follows (in thousands):
 Nine months ended September 30, 2017 Year ended 
 December 31, 2016
Warranty liability:   
Beginning balance$1,258
 $1,259
Accrual507
 252
Warranty payments(266) (253)
Other (1)
509
 —
Ending balance$2,008
 $1,258
(1) Represents the warranty liability recorded in relation to the Crosman acquisition in June 2017 and an add-on acquisition by Crosman in July 2017.

Note NK — Noncontrolling Interest
Noncontrolling interest represents the portion of the Company’s majority owned subsidiary’ssubsidiaries' net income (loss) and equity that is owned by noncontrolling shareholders. The following tables reflect the Company’sLLC’s ownership percentage of its majority owned operating segments and related noncontrolling interest balances as of September 30, 2017March 31, 2024 and December 31, 2016:

2023:
32

 
% Ownership (1)
September 30, 2017
 
% Ownership (1)
December 31, 2016
 Primary 
Fully
Diluted
 Primary 
Fully
Diluted
5.11 Tactical97.5 85.7 97.5 85.1
Crosman98.8 89.2 N/a N/a
Ergobaby82.7 76.6 83.5 76.9
Liberty88.6 84.7 88.6 84.7
Manitoba Harvest76.6 67.0 76.6 65.6
ACI69.4 69.2 69.4 69.3
Arnold Magnetics96.7 84.7 96.7 84.7
Clean Earth97.5 79.8 97.5 79.8
Sterno Products100.0 89.5 100.0 89.5
% Ownership (1)
March 31, 2024
% Ownership (1)
December 31, 2023
PrimaryFully
Diluted		PrimaryFully
Diluted
5.1197.6 87.0 97.2 88.9 
BOA91.8 82.9 91.8 83.2 
Ergobaby81.6 72.8 81.6 72.8 
Lugano59.9 54.7 59.9 55.5 
PrimaLoft90.7 83.1 90.7 83.1 
The Honey Pot Co.84.8 77.4 — — 
Velocity Outdoor99.4 87.7 99.4 87.7 
Altor99.3 89.8 99.3 89.8 
Arnold98.0 85.8 98.0 85.5 
Sterno99.4 87.5 99.4 87.6 
(1)     The principal difference between primary and diluted percentages of our operating segments is due to stock option issuances of operating segment stock to management of the respective businesses.
Noncontrolling Interest Balances
(in thousands)March 31, 2024December 31, 2023
5.11$13,468 $15,350 
BOA9,407 8,316 
Ergobaby16,679 16,756 
Lugano114,033 105,425 
PrimaLoft31,294 30,736 
The Honey Pot Co.41,290 — 
Velocity Outdoor6,863 6,770 
Altor5,611 5,354 
Arnold1,743 1,707 
Sterno2,452 2,117 
Allocation Interests100 100 
$242,940 $192,631 

Note L — Fair Value Measurement
There were no assets or liabilities measured on a recurring basis as of March 31, 2024 or December 31, 2023.
Reconciliations of the change in the carrying value of the Level 3 fair value measurements from January 1, 2023 through March 31, 2024 are as follows (in thousands):
Level 3
Balance at January 1, 2023$(1,442)
Termination of put option of noncontrolling shareholder - 5.11 (1)
142 
Adjustment to contingent consideration - King's Camo (2)
25 
Payment of contingent consideration - King's Camo (2)
1,275 
Balance at December 31, 2023$— 
(1)
Balance at March 31, 2024		The principal difference between primary and diluted percentages of our operating segments is due to stock option issuances of operating segment stock to management of the respective businesses.$— 

(1)Represented a put option issued to a noncontrolling shareholder in connection with the 5.11 acquisition. The put option was terminated during the period ended March 31, 2023.
33

 Noncontrolling Interest Balances
(in thousands)September 30, 2017 December 31, 2016
5.11 Tactical$7,387
 $5,934
Crosman744
 N/a
Ergobaby21,282
 18,647
Liberty2,976
 2,681
Manitoba Harvest13,852
 13,687
ACI(8,502) (11,220)
Arnold Magnetics1,342
 1,536
Clean Earth6,585
 5,469
Sterno Products1,860
 1,305
Allocation Interests100
 100
 $47,626
 $38,139
(2)Velocity entered into a contingent consideration in connection with their purchase of King's Camo in July 2022. The purchase price of King's Camo included a potential earn-out if King's Camo achieved certain financial metrics. The payment of the earn-out occurred in April 2023.

Valuation Techniques
The Company has not changed its valuation techniques in measuring the fair value of any of its other financial assets and liabilities during the period. For details of the Company’s fair value measurement policies under the fair value hierarchy, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Nonrecurring Fair Value Measurements
The following table provides the assets and liabilities carried at fair value measured on a non-recurring basis as of March 31, 2024 and December 31, 2023. Refer to "Note G - Goodwill and Intangible Assets", for a description of the valuation techniques used to determine fair value of the assets measured on a non-recurring basis in the table below.
Expense
Fair Value Measurements at March 31, 2023Thee months ended
(in thousands)Carrying
Value		Level 1Level 2Level 3March 31, 2024
Goodwill - Velocity$— — — $— $8,182 
Expense
Fair Value Measurements at December 31, 2023Year ended
(in thousands)Carrying
Value		Level 1Level 2Level 3December 31, 2023
Goodwill - Velocity$8,182 — — $8,182 $31,590 
Goodwill - PrimaLoft$232,536 — — $232,536 $57,810 
Note OM — Income taxes
Each fiscal quarter, theThe Company estimates its annual effective tax rate each fiscal quarter and applies that estimated rate to its interim pre-tax earnings. In this regard, the Company reflects the full year’s estimated tax impact of certain unusual or infrequently occurring items and the effects of changes in tax laws or rates in the interim period in which they occur. The Company's parent, the Trust, is subject to entity-level U.S. federal, state and local corporate income taxes on the Company's earnings that flow through to the Trust.
The computation of the annual estimated effective tax rate infor each interim period requires certain assumptions, estimates, and significant judgment, including with respect to the projected operating income for the year, projections of the proportion of income earned and taxedtaxes incurred in othervarious jurisdictions, permanent and temporary differences and the likelihood of recovering deferred tax assets generated in the current year.assets. The accounting estimates used to compute the provision for income taxes may change as new events occur, as additional information is obtained, as our tax structure changes or as the tax environment changes.laws change. Certain foreign operations are subject to foreign income taxation under existing provisions of the laws of those jurisdictions. Pursuant to U.S. tax laws, earnings from those jurisdictions will be subject to the U.S. income tax rate when those earnings are repatriated.
34

The reconciliation between the Federal Statutory Rate and the effective income tax rate for the ninethree months ended September 30, 2017March 31, 2024 and 20162023 is as follows:

Three months ended March 31,
20242023
United States Federal Statutory Rate21.0 %21.0 %
State income taxes (net of Federal benefits)13.1 0.1 
Foreign income taxes9.6 20.2 
Impact of subsidiary employee stock options1.7 (2.3)
Non-deductible acquisition costs3.0 — 
Utilization of tax credits(20.6)(4.0)
Non-recognition of various carryforwards at subsidiaries35.5 30.6 
United States tax on foreign income(0.9)10.1 
Impairment expense13.4 — 
Other2.3 5.4 
Effective income tax rate78.1 %81.1 %
 Nine months ended September 30,
 2017 2016
United States Federal Statutory Rate(35.0)% 35.0 %
State income taxes (net of Federal benefits)(1.0) 0.2
Foreign income taxes4.5
 1.4
Expenses of Compass Group Diversified Holdings LLC representing a pass through to shareholders (1)
0.3
 6.3
Impairment expense16.9
 —
Effect of loss (gain) on equity method investment (2)
11.0
 (33.3)
Impact of subsidiary employee stock options2.5
 0.7
Credit utilization(7.7) —
Domestic production activities deduction(2.3) (0.6)
Effect of undistributed foreign earnings2.0
 4.5
Non-recognition of NOL carryforwards at subsidiaries(3.5) —
Other1.1
 1.6
Effective income tax rate(11.2)% 15.8 %

(1)
The effective income tax rate for the nine months ended September 30, 2017 and 2016 includes a loss at the Company's parent, which is taxed as a partnership.

(2)
The investment in FOX was held at the Company's parent, which is taxed as a partnership, resulting in the gain or loss on the investment as a reconciling item in deriving the effective tax rate.

Note PN — Defined Benefit Plan
In connection with the acquisition of Arnold, the Companycompany has a defined benefit plan covering substantially all of Arnold’s employees at its Lupfig, Switzerland location. The benefits are based on years of service and the employees’ highest average compensation during the specific period.
The unfunded liability of $3.5$3.3 million is recognized in the consolidated balance sheet as a component of other non-current liabilities at September 30, 2017.March 31, 2024. Net periodic benefit cost consists of the following for the three and nine months ended September 30, 2017March 31, 2024 and 20162023 (in thousands):

Three months ended March 31,
20242023
Service cost$132 $90 
Interest cost60 60 
Expected return on plan assets(49)(54)
Amortization of unrecognized loss— (9)
Effect of curtailment(11)(13)
Net periodic benefit cost$132 $74 
 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Service cost$134
 $111
 $401
 $325
Interest cost24
 35
 71
 103
Expected return on plan assets(39) (40) (117) (117)
Amortization of unrecognized loss63
 45
 188
 132
Net periodic benefit cost$182
 $151
 $543
 $443
During the three and nine months ended September 30, 2017,March 31, 2024, per the terms of the pension agreement, Arnold contributed $0.1 million and $0.3 million to the plan utilizing reserves from prior years over funding of the plan, respectively.plan. For the remainder of 2017,2024, the expected contribution to the plan will be approximately $0.1$0.4 million.
The plan assets are pooled with assets of other participating employers and are not separable; therefore, the fair values of the pension plan assets at September 30, 2017March 31, 2024 were considered Level 3.
Note QO - Commitments and Contingencies
In the normal course of business, the Company and its subsidiaries are involved in various claims and legal proceedings. While the ultimate resolution of these matters has yet to be determined, the Company does not believe that any unfavorable outcomes will have a material adverse effect on the Company's consolidated financial position or results of operations.

Leases
The Company and its subsidiaries lease office and manufacturing facilities, computer equipment and software under various arrangements. Certain of the leases are subject to escalation clauses and renewal periods. The Company
35

and its subsidiaries recognize lease expense, including predetermined fixed escalations, on a straight-line basis over the initial term of the lease including reasonably assured renewal periods from the time that the Company and its subsidiaries control the leased property. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Certain of our subsidiaries have leases that contain both fixed rent costs and variable rent costs based on achievement of certain operating metrics. The variable lease expense was not a material component of our total lease expense for the three months ended March 31, 2024 and 2023. The Company recognized $11.4 million and $11.9 million in the three months ended March 31, 2024 and March 31, 2023, respectively, in expense related to operating leases in the condensed consolidated statements of operations.
The maturities of lease liabilities at March 31, 2024 are as follows (in thousands):
2024 (excluding three months ended March 31, 2024)$34,423 
202544,058 
202643,102 
202738,084 
202829,754 
Thereafter76,407 
Total undiscounted lease payments$265,828 
Less: Interest65,351 
Present value of lease liabilities$200,477 
The calculated amount of the right-of-use assets and lease liabilities are impacted by the length of the lease term and discount rate used to present value the minimum lease payments. The Company's lease agreements often include one or more options to renew at the company's discretion. In general, it is not reasonably certain that lease renewals will be exercised at lease commencement and therefore lease renewals are not included in the lease term. As the discount rate is rarely determinable, the Company utilizes the incremental borrowing rate of the subsidiary entering into the lease arrangement, on a collateralized basis, over a similar term as adjusted for any country specific risk.
The weighted average remaining lease terms and discount rates for all of our operating leases were as follows:
Lease Term and Discount RateMarch 31, 2024March 31, 2023
Weighted-average remaining lease term (years)6.546.42
Weighted-average discount rate8.61 %7.85 %
Supplemental balance sheet information related to leases was as follows (in thousands):
Line Item in the Company’s Consolidated Balance SheetMarch 31, 2024December 31, 2023
Operating lease right-of-use assetsOther non-current assets$174,085 $177,581 
Current portion, operating lease liabilitiesOther current liabilities$30,424 $29,228 
Operating lease liabilitiesOther non-current liabilities$170,053 $173,586 
Supplemental cash flow information related to leases was as follows (in thousands):
Three months ended March 31, 2024Three months ended March 31, 2023
Cash paid for amounts included in the measurement of lease liabilities:
   Operating cash flows from operating leases$10,703 $10,161 
Right-of-use assets obtained in exchange for lease obligations:
   Operating leases$3,140 $17,882 
36

Note RP — Related Party Transactions
Management Services Agreement
The LLC entered into the Management Services Agreement ("MSA") with CGM effective May 16, 2006, as amended. Our Chief Executive Officer is a partner of CGM. The MSA provides for, among other things, CGM to perform services for the LLC in exchange for a management fee paid quarterly and equal to 0.5% of the LLC's adjusted net assets, as defined in the MSA.
During 2022, CGM entered into a waiver of the MSA for the period through June 30, 2023 to receive a 1% annual management fee related to PrimaLoft, rather than the 2% called for under the MSA, which resulted in a lower management fee at March 31, and June 30, 2023 than would normally have been due. At March 31, 2022, CGM entered into a waiver to exclude cash balances held at the LLC from the calculation of the management fee.
Integration Services Agreements
Integration service fees are included in selling, general and administrative expense on the subsidiaries' statement of operations in the period in which they are incurred. Under the Integration Services Agreement ("ISA"), CGM provides services for new platform acquisitions to, amongst other things, assist the management at the acquired entities in establishing a corporate governance program, implement compliance and reporting requirements of the Sarbanes-Oxley Act of 2002, as amended, and align the acquired entity's policies and procedures with our other subsidiaries.
The Honey Pot Co., which was acquired in January 2024, entered into an ISA with CGM whereby The Honey Pot Co. will pay CGM a total integration services fee of $3.5 million, payable quarterly over a twelve-month period beginning June 30, 2024.
PrimaLoft, which was acquired in July 2022, entered into an ISA with CGM whereby PrimaLoft paid CGM an integration services fee of $4.8 million quarterly over the twelve-month period ended June 30, 2023.
The Company and its businesses have the following significant related party transactions
5.11
Related Party Vendor Purchases -5.11 purchases inventory from a vendor who is a related party to 5.11 through one of the executive officers of 5.11 via the executive's 40% ownership interest in the vendor. 5.11 purchased approximately $0.4 million and $0.6 million during the three months endedMarch 31, 2024 and March 31, 2023, respectively in inventory from the vendor.
BOA
Recapitalization - In December 2023, the Company completed a recapitalization of BOA whereby the LLC entered into an amendment to the intercompany credit agreement with BOA (the "BOA Credit Agreement"). The BOA Credit Agreement was amended to provide for additional term loan borrowings of $165.9 million to fund a distribution to shareholders. The LLC received a distribution of $131.0 million related to their ownership of the outstanding shares of BOA on the date of the distribution. Noncontrolling shareholders received a distribution of $11.7 million, and the remaining amount of the recapitalization was used to repurchase shares owned by employees after the exercise of fully vested employee stock options, and to pay a bonus to employees who held phantom stock options and were not eligible to participate in the distribution to noncontrolling shareholders. BOA recorded compensation expense of $3.1 million related to the bonus paid to employees as part of the recapitalization.
Related Party Vendor Purchases - A contract manufacturer used by BOA as the primary supplier of molded injection parts is a noncontrolling shareholder of BOA. BOA purchased approximately $10.6 million and $9.7 million from this supplier during the three months ended March 31, 2024 and March 31, 2023, respectively.
Note Q — Subsequent Event
In October 2017,On April 30, 2024, Velocity Outdoor entered into a stock purchase agreement to sell Crosman Corporation ("Crosman"), their airgun product division, to Daisy Manufacturing Company, for an enterprise value of approximately $63 million. The Company expects to record a loss on the Company further amendedsale of Crosman in the 2014 Credit Facility (the "First Refinancing Amendment") to, in effect, refinance the 2014 Term Loan and the 2016 Incremental Term Loan (together, the “Term Loans”). Pursuantquarter ending June 30, 2024. Velocity received net proceeds of approximately $58.5 million related to the First Refinancing Amendment, sale of Crosman, which was used to repay amounts outstanding Term Loans at LIBOR Rate bear interest at LIBOR plus an applicable rate of 2.25% and outstanding Term Loans at Base Rate bear interest at Base Rate plus 1.25%. Prior to the amendment, the outstanding Term Loans bore interest at LIBOR plus 2.75% or Base Rate plus 1.75%. In connection with the First Refinancing Amendment, the Company incurred $1.4 million of debt issuance costs associated with fees charged by term loan lenders.under their intercompany credit agreement.



37

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Item 2 contains forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q are subject to a number of risks and uncertainties, some of which are beyond our control. Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. Additional risks of which we are not currently aware or which we currently deem immaterial could also cause our actual results to differ, including those discussed in the sectionssection entitled "Forward-Looking Statements" included elsewhere in this Quarterly Report on Form 10-Q as well as those risk factors discussed in the section entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 20162023 and in the section entitled "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q.
Overview
Compass Diversified Holdings a Delaware statutory trust ("Holdings", or the "Trust"), was incorporated in Delaware on November 18, 2005. Compass Group Diversified Holdings LLC a Delaware limited liability Company (the "Company""LLC"), was also formed on November 18, 2005. The TrustHoldings and the CompanyLLC (collectively, "CODI"the "Company") were formed to acquire and manage a group of small and middle-market businesses headquartered in North America. The TrustLLC is the solea controlling owner of 100% of the Trust Interests,ten businesses, or operating segments, at March 31, 2024. The segments are as defined in ourfollows: 5.11 Acquisition Corp. ("5.11"), Boa Holdings Inc. ("BOA"), The Ergo Baby Carrier, Inc. ("Ergobaby"), Lugano Holdings, Inc. ("Lugano Diamonds" or "Lugano"), Relentless Topco, Inc. ("PrimaLoft"), THP Topco, Inc. ("The Honey Pot Co." or "THP"), CBCP Products, LLC Agreement, of the Company. Pursuant to the("Velocity Outdoor" or "Velocity"), AMTAC Holdings LLC Agreement, the Trust owns an identical number of Trust Interests in the Company as exist for the number of outstanding shares of the Trust. Accordingly, our shareholders are treated as beneficial owners of Trust Interests in the Company("Arnold"), FFI Compass, Inc. ("Altor Solutions" or "Altor"), and as such, are subject to tax under partnership income tax provisions. The Company is the operating entity with a board of directors whose corporate governance responsibilities are similar to that of a Delaware corporation. The Company’s board of directors oversees the management of the Company and our businesses and the performance of Compass Group Management LLCSternoCandleLamp Holdings, Inc. ("CGM" or our "Manager"Sterno"). Certain persons who are employees and partners of our Manager receive a profit allocation as owners of 60.4% of the Allocation Interests in us, as defined in our LLC Agreement.
The Trust and the Company were formed to acquire and manage a group of small and middle-market businesses headquartered in North America. We characterize small to middle market businesses as those that generate annual cash flows of up to $60 million. We focus on companies of this size because of our belief that these companies are often more able to achieve growth rates above those of their relevant industries and are also frequently more susceptible to efforts to improve earnings and cash flow.
In pursuing new acquisitions, we seek businesses with the following characteristics:
North American base of operations;
stable and growing earnings and cash flow;
maintains a significant market share in defensible industry niche (i.e., has a "reason to exist");
solid and proven management team with meaningful incentives;
low technological and/or product obsolescence risk; and
a diversified customer and supplier base.
Our management team’s strategy for our businesses involves:
utilizing structured incentive compensation programs tailored to each business to attract, recruit and retain talented managers to operate our businesses;
regularly monitoring financial and operational performance, instilling consistent financial discipline, and supporting management in the development and implementation of information systems to effectively achieve these goals;
assisting management in their analysis and pursuit of prudent organic cash flow growth strategies (both revenue and cost related);
identifying and working with management to execute attractive external growth and acquisition opportunities; and
forming strong subsidiary level boards of directors to supplement management in their development and implementation of strategic goals and objectives.
We are dependent on the earnings of, and cash receipts from our businesses to meet our corporate overhead and management fee expenses and to pay distributions. These earnings and distributions, net of any minority interests in these businesses, are generally available:
first, to meet capital expenditure requirements, management fees and corporate overhead expenses;
second, to fund distributions from the businesses to the Company; and
third, to be distributed by the Trust to shareholders.

We acquired our existing businesses (segments) that we own at September 30, 2017March 31, 2024 as follows:
    Ownership Interest - September 30, 2017
Business Acquisition Date Primary Diluted
Advanced Circuits May 16, 2006 69.4% 69.2%
Liberty Safe March 31, 2010 88.6% 84.7%
Ergobaby September 16, 2010 82.7% 76.6%
Arnold Magnetics March 5, 2012 96.7% 84.7%
Clean Earth August 7, 2014 97.5% 79.8%
Sterno Products October 10, 2014 100.0% 89.5%
Manitoba Harvest July 10, 2015 76.6% 67%
5.11 Tactical August 31, 2016 97.5% 85.7%
Crosman June 2, 2017 98.8% 89.2%
Ownership Interest - March 31, 2024
BusinessAcquisition DatePrimaryDiluted
ErgobabySeptember 16, 201081.6%72.8%
ArnoldMarch 5, 201298.0%85.8%
SternoOctober 10, 201499.4%87.5%
5.11August 31, 201697.6%87.0%
Velocity OutdoorJune 2, 201799.4%87.7%
Altor SolutionsFebruary 15, 201899.3%89.8%
BOAOctober 16, 202091.8%82.9%
LuganoSeptember 3, 202159.9%54.7%
PrimaLoftJuly 12, 202290.7%83.1%
The Honey Pot Co.January 31, 202484.8%77.4%
We categorize theour subsidiary businesses we own into two separate groups of businesses: (i) branded consumer businesses, and (ii) niche industrial businesses. Branded consumer businesses are characterized as those businesses that we believe capitalize on a valuable brand name in their respective market sector. We believe that our branded consumer businesses are leaders in their particular product category. Niche industrialIndustrial businesses are characterized as those businesses that focus on manufacturing and selling particular products and industrial services within a specific market sector. We believe that our niche industrial businesses are leaders in their specific market sector. We recently announced the launch of our healthcare effort as our third grouping of companies. We believe healthcare has multiple attractive, high-growth segments with strong industry tailwinds, is an acyclical vertical that we expect will bring diversification and stability to the current group of companies, and has strong alignment with the Company’s existing subsidiary priorities.
Recent Events
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Trust Preferred Share IssuanceThe following is an overview of each of our subsidiary businesses:
On June 28, 2017,Branded Consumer
5.11 - 5.11 is a leading provider of purpose-built technical apparel and gear for law enforcement, firefighters, EMS, and military special operations as well as outdoor and adventure enthusiasts. 5.11 is a brand known for innovation and authenticity, and works directly with end users to create purpose-built apparel and gear designed to enhance the Trust issued 4,000,000 7.250% Series A Trust Preferred Shares (the "Series A Preferred Shares") for gross proceedssafety, accuracy, speed and performance of $100.0 million, or $96.4 million net of underwriters' discounttactical professionals and issuance costs.enthusiasts worldwide. Headquartered in Costa Mesa, California, 5.11 operates sales offices and distribution centers globally, and 5.11 products are widely distributed in uniform stores, military exchanges, outdoor retail stores, its own retail stores and on 511tactical.com.
Acquisition of Crosman
On June 2, 2017, through a wholly owned subsidiary, Crosman Acquisition Corp., we acquired 98.9%BOA - creator of the outstanding equityrevolutionary, award-winning, patented BOA Fit System, partners with market-leading brands to make the best gear even better. Delivering fit solutions purpose-built for performance, the BOA Fit System is featured in footwear across snow sports, cycling, outdoor, athletic, workwear as well as performance headwear and bracing. The system consists of Bullseye Acquisition Corporation, whichthree integral parts: a micro-adjustable dial, high-tensile lightweight laces, and low friction lace guides creating a superior alternative to laces, buckles, Velcro, and other traditional closure mechanisms. Each unique BOA configuration is designed with brand partners to deliver superior fit and performance for athletes, is engineered to perform in the sole owner of Crosman Corp. ("Crosman"). Crosmantoughest conditions and is backed by The BOA Lifetime Guarantee. BOA is headquartered in Denver, Colorado and has offices in Austria, Greater China, South Korea, and Japan.
Ergobaby - headquartered in Torrance, California, Ergobaby is a designer, marketer and distributor of wearable baby carriers and accessories, blankets and swaddlers, nursing pillows, strollers, bouncers and related products.  Ergobaby primarily sells its Ergobaby and Baby Tula branded products through brick-and-mortar retailers, national chain stores, online retailers, its own websites and distributors and derives more than 50% of its sales from outside of the United States.
Lugano - Lugano is a leading designer, manufacturer and marketer of high-end, one-of-a-kind jewelry sought after by some of the world’s most discerning clientele. Lugano conducts sales via its own retail salons as well as pop-up showrooms at Lugano-hosted or sponsored events in partnership with influential organizations in the equestrian, art and philanthropic community. Lugano is headquartered in Newport Beach, California.
PrimaLoft - PrimaLoft is a leading provider of branded, high-performance synthetic insulation and materials used primarily in consumer outerwear, and accessories. The portfolio of PrimaLoft synthetic insulations offers products that can both mimic natural down aesthetics and provide the freedom to design garments ranging from stylish puffers to lightweight performance apparel. PrimaLoft insulations also offer superior economics to the brand partner and enable better sustainability characteristics through the use of recycled, low-carbon inputs. PrimaLoft is headquartered in Latham, New York.
The Honey Pot Co.- The Honey Pot Co. is a leading “better-for-you” feminine care brand, powered by plant-derived ingredients and clinically tested formulas. Founded in 2012 by CEO Beatrice Dixon, The Honey Pot Co. is rooted in the belief that all products should be made with healthy and efficacious ingredients that are kind to and safe for skin. The company offers an extensive range of holistic wellness products across the feminine hygiene, menstrual, personal care, and sexual wellness categories. The Honey Pot Co.'s mission is to educate, support, and provide consumers around the world with tools and resources that promote menstrual health and vaginal wellness. Their products can be found in more than 33,000 stores across the U.S. through mass merchants, drug and grocery retail chains, and online. The Honey Pot Co. is headquartered in Atlanta, Georgia.
Velocity Outdoor - is a leading designer, manufacturer, and marketer of airguns, archery products, laser aiming devices, hunting apparel and related accessories. HeadquarteredVelocity Outdoor offers its products under the Crosman, Benjamin, LaserMax, Ravin, CenterPoint and King's Camo brands that are available through national retail chains, mass merchants, dealer and distributor networks. The airgun product category consists of air rifles, air pistols and a range of accessories including targets, holsters and cases. Velocity Outdoor's other primary product categories are archery, with products including CenterPoint and Ravin crossbows, consumables, which includes steel and plastic BBs, lead pellets and CO2 cartridges, lasers for firearms, and airsoft products. The apparel category offers high-performance, feature rich hunting and casual apparel of uncompromised quality utilizing King’s own proprietary camo patterns. Velocity Outdoor is headquartered in Bloomfield, New York, Crosman servesYork.
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Industrial
Altor Solutions - Altor Solutions is a designer and manufacturer of custom molded protective foam solutions and original equipment manufacturer components made from expanded polystyrene and expanded polypropylene. Altor provides products to a variety of end markets, including appliances and electronics, pharmaceuticals, health and wellness, automotive, building and other products. Altor is headquartered in Scottsdale, Arizona and operates 15 molding and fabricating facilities across North America.
Arnold - Arnold is a global solutions provider and manufacturer of engineered solutions for a wide range of specialty applications and end-markets, including aerospace and defense, general industrial, motorsport/transportation, oil and gas, medical, energy, reprographics and advertising specialties. Arnold engineers solutions for and produces high performance permanent magnets (PMAG), stators, rotors and full electric motors ("Ramco"), precision foil products (Precision Thin Metals or "PTM"), and flexible magnets (Flexmag™) that are mission critical in motors, generators, sensors and other systems and components. Based on its long-term relationships, Arnold has built a diverse and blue-chip customer base totaling more than 2,000 customers and leading systems-integrators worldwide with a focus on North America, Europe, and Asia. Arnold has built a preferred rare earth supply chain and has leading rare earth and other permanent magnet production capabilities. Arnold is headquartered in Rochester, New York.
Sterno - Sterno is a leading manufacturer and marketer of portable food warming systems, creative indoor and outdoor lighting, and home fragrance solutions for the consumer markets. Sterno also manufactures creative indoor and outdoor lighting and home fragrance solutions for consumer markets. Sterno offers a broad range of wick and gel chafing systems, butane stoves and accessories, liquid and traditional wax candles, catering equipment and lamps through Sterno Products, as well as scented wax cubes, warmer products, outdoor lighting and essential oils used for home decor and fragrance systems through Rimports. Sterno is headquartered in Plano, Texas.
While our subsidiary businesses have different growth opportunities and potential rates of growth, we actively manage each of our subsidiary businesses to increase the value of, and cash generated by, each business through various initiatives, including making selective capital investments to expand geographic reach, increase capacity or reduce manufacturing costs of our subsidiary businesses; improving and expanding existing sales and marketing programs; and assisting in the acquisition and integration of complementary businesses.
Significant Trends Impacting Our Subsidiary Businesses
Macroeconomic Trends
The macroeconomic environment remains dynamic as global macroeconomic trends, including inflationary pressures and higher interest rates, are impacting consumer spending behavior. We expect changing market conditions and continued inflationary pressures to continue to impact consumer spending, particularly for discretionary items purchased by low and middle income consumers, even as overall consumer sentiment among other income brackets appears to be improving going into 2024. While overall inflation increased at a slower pace domestically in 2023, prices remain significantly elevated as compared to the pre-COVID-19 environment, and inflation rates remain above central banks' targets. We continue to experience modest inflationary cost increases in our materials and rising labor costs, particularly at our businesses where hourly employees comprise a larger part of the workforce. We expect that low unemployment rates and increasing wage and benefit costs will have an impact on margins at our businesses in 2024. Certain locales that our businesses operate in have also significantly increased the minimum wage over 425 customers worldwide, including mass merchants, sporting goods retailers, online channelsthe past two years with more increases scheduled in coming years, which adds additional wage pressure to the rates we pay hourly workers in these locales.
Our lead-times for inventory have stabilized, which we expect will allow for more accurate forecasting in 2024. Several of our consumer brand businesses experienced a decrease in net revenues in 2023 resulting from higher than anticipated end market inventory levels due to supply chain normalization and distributors serving smaller specialty storesa corresponding inventory ordering surge experienced in 2022. Transportation costs have also decreased from a peak, but global geopolitical threats that arose in the latter half of 2023 continue to pressure both fuel and freight costs. Accordingly, our liquidity and financial results could be impacted in ways that we are not able to predict today.
Despite the negative trends noted above, the diversification of our businesses, concentration in the North American market and actions we have taken over the last few years to improve the overall composition of our subsidiary companies and to reduce our cost of capital have positioned us, we believe, to continue to execute on our strategy during 2024 from a position of strength.
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Business Outlook
The Company anticipates that the areas of focus for 2024, which are generally applicable to each of our businesses, include:
•Pursuing sales growth through a combination of new product development, increasing distribution, new customer acquisitions and international markets. Its diversified product portfolio includesexpansion;
•Driving free cash flow through increased net income and effective working capital management, enabling continued investment in our businesses;
•Raising prices, when appropriate, on our goods due to rising input costs to preserve operating margins;
•Taking market share, where possible, in each of our niche market leading companies, generally at the widely known Crosman, Benjaminexpense of less well capitalized competitors;
•Striving for excellence in supply chain management, manufacturing and CenterPoint brands.technological capabilities;
•Continuing to pursue expense reduction and cost savings in lower margin business lines or in response to lower production volume; and
•Continuing to grow through disciplined, strategic acquisitions and rigorous integration processes.
Recent Events
Acquisition of The purchase price, including proceeds from noncontrollingHoney Pot Co.
On January 31, 2024 (the "Closing Date"), the LLC, through its newly formed acquisition subsidiaries, THP Topco, Inc., a Delaware corporation (“THP Topco”) and THP Intermediate, Inc., a Delaware corporation (“THP Buyer”), acquired The Honey Pot Company Holdings, LLC (“THP”) and certain of its affiliated entities pursuant to a Merger and Stock Purchase Agreement (the “THP Purchase Agreement”) dated January 14, 2024 by and among THP Buyer, THP, VMG Honey Pot Blocker, Inc. (“Blocker I”), NVB1, Inc. (“Blocker II”), VMG Tax-Exempt IV, L.P., New Voices Fund, LP, THP Merger Sub, LLC (“THP Merger Sub”), VMG Honey Pot Holdings, LLC, as the Sellers’ Representative, and certain remaining equity holders of THP. Pursuant to the THP Purchase Agreement, subsequent to certain internal reorganizations, THP Buyer acquired all of the issued and outstanding equity of Blocker I and Blocker II and, thereafter, THP Merger Sub merged with and into THP (the “THP Merger”), with THP surviving such that the separate existence of THP Merger Sub ceased, with THP surviving the THP Merger as a wholly-owned, indirect subsidiary of the THP Topco. THP is the parent company of The Honey Pot Company (DE), LLC (“The Honey Pot Co.”).
The Company purchased The Honey Pot for a total enterprise value of $380 million, before working capital and certain other adjustments (the “THP Purchase Price”). The Company funded the THP Purchase Price with cash on hand. Certain minority equity holders of THP executed agreements pursuant to which they contributed a portion of their THP equity (the “THP Rollover Equity”) to THP Topco in exchange for THP Topco common stock. THP Topco contributed the THP Rollover Equity to THP Buyer. Certain other members of The Honey Pot Co. management team also contributed cash in exchange for equity in THP Topco. The Company directly owns approximately 85% of THP Topco, which in turn indirectly owns all of the issued and outstanding equity interests of THP and net of transaction costs, was approximately $150.4 million. Crosman management invested in the transaction alongThe Honey Pot Co. Concurrent with the Company, representing approximately 1.1% of the initial noncontrolling interest.
Divestiture of FOX shares
On March 13, 2017, Fox Factory Holding Corp. ("FOX") closed on a secondary public offering of 5,108,718 shares of FOX common stock held by CODI, which represented CODI's remaining investment in FOX. CODI received $136.1 million in net proceeds as a result of the sale. As a result of this secondary public offering,Closing, the Company no longer holds an ownership interest in FOX.
This sale ofprovided a credit facility to THP Buyer, THP and The Honey Pot Co., as borrowers (the “THP Credit Agreement”), pursuant to which a secured revolving loan commitment and secured term loans were made available to Buyer, THP and The Honey Pot Co. (collectively, the portion of our FOX shares in March 2017 qualified as a Sale Event“Borrowers”). The initial amount outstanding under these facilities on the Company's LLC Agreement. During the second quarter of 2017, our board of directors declared a distribution to the Holders of the Allocation Interests of $25.8 million in connection with the Sale Event of FOX. The profit allocation paymentClosing Date was made during the quarter ended June 30, 2017.
2017Outlook
Middle market deal flow continues to remain steady, in part due to continued attractive valuations for sellers.  High valuation levels continue to be driven by the availability of debt capital with favorable terms and financial and strategic buyers seeking to deploy available equity capital. We remain focused on marketing the Company’s attractive ownership and management attributes to potential sellers of middle market businesses and intermediaries.  In addition, we continue to pursue opportunities for add-on acquisitions by certain of our existing subsidiary companies, which can be particularly attractive from a strategic perspective.


Discontinued Operations
The results of operations for Tridien for the three and nine months ended September 30, 2016 are presented as discontinued operations in our consolidated financial statements as a result of the sale of Tridien in September 2016. Refer to Note D - "Discontinued Operations", of the condensed consolidated financial statements for further discussion of the operating results of our discontinued businesses.

approximately $110 million.
Non-GAAP Financial Measures
"U.S. GAAP refersGAAP" or "GAAP" refer to generally accepted accounting principles in the United States. A non-GAAP financial measure is a numerical measure of historical or future performance, financial position or cash flow that excludes amounts, or is subject to adjustments that effectively exclude amounts, included in the most directly comparable measure calculated and presented in accordance with GAAP in our financial statements, and vice versa for measures that include amounts, or are subject to adjustments that effectively include amounts, that are excluded from the most directly comparable measure as calculated and presented. Our Manitoba Harvest acquisition uses the Canadian Dollar as its functional currency. We will periodically refer to net sales
See “Reconciliation of Non-GAAP Financial Measures” for further discussion of our non-GAAP financial measures and net sales growth rates in the Manitoba Harvest management's discussion and analysis on a "constant currency" basis so that the business results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of Manitoba Harvest's business performance. "Constant currency" net sales results are calculated by translating current period net sales in local currency using the prior year’s currency conversion rate. Generally, when the dollar either strengthens or weakens against other currencies, the growth at constant currency rates or adjusting for currency will be higher or lower than growth reported at actual exchange rates. "Constant currency" measured net sales is not a measure of net sales presented in accordance with U.S. GAAP.related reconciliations.
Results of Operations
The following discussion reflects a comparison of the historical results of operations of our consolidated business for the three months ended March 31, 2024 and March 31, 2023, and components of the results of operations as well
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as those components presented as a percent of net revenues, for each of our subsidiary businesses on a stand-alone basis.
In the following results of operations, we provide (i) our actual consolidated resultsConsolidated Results of operationsOperations for the three and nine months ended September 30, 2017March 31, 2024 and 2016,2023, which includes the historical results of operations of each of our businesses (operating segments) from the date of acquisition in accordance with generally accepted accounting principles in the United States ("GAAP" or "US GAAP), and (ii) comparative historical components of the results of operations for each of our businesses on a stand-alone basis for the three and nine months ended September 30, 2017March 31, 2024 and 2016,2023, where all periods presented include relevant proformapro forma adjustments for pre-acquisition periods and explanations where applicable. For the acquisition of The Honey Pot Co. in January 2024, the pro forma results of operations for The Honey Pot Co. business segment has been prepared as if we purchased this business on January 1, 2023. We believe this is the most meaningful comparison for the operating results of acquired business segments. The following results of operations at each of our businesses are not necessarily indicative of the results to be expected for a full year.
Consolidated All dollar amounts in the financial tables are presented in thousands. References in the financial tables to percentage changes that are not meaningful are denoted by "NM."
Results of Operations – Compass Diversified Holdings- Consolidated
The following table sets forth our unaudited results of operations for the three months ended March 31, 2024 and Compass Group Diversified Holdings LLC2023:
Three months ended
(in thousands)March 31, 2024March 31, 2023
Net revenues$524,290 $483,933 
Cost of revenues282,463 278,869 
Gross profit241,827 205,064 
Selling, general and administrative expense150,714 130,264 
Fees to manager18,067 16,270 
Amortization of intangibles26,288 23,973 
Impairment expense8,182 — 
Operating income38,576 34,557 
Interest expense(23,575)(26,180)
Amortization of debt issuance costs(1,005)(1,005)
Other income (expense)(2,874)1,160 
Income from continuing operations before income taxes11,122 8,532 
Provision for income taxes8,686 6,920 
Net income (loss) from continuing operations$2,436 $1,612 

 Three months ended Nine months ended
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
(in thousands) 

    
Net sales$323,957
 $252,285
 $921,330
 $659,748
Cost of sales206,232
 169,870
 599,552
 436,544
Gross profit117,725
 82,415
 321,778
 223,204
Selling, general and administrative expense80,804
 53,648
 239,102
 140,702
Fees to manager8,277
 8,435
 24,308
 21,394
Amortization of intangibles14,167
 8,423
 39,256
 23,966
Impairment expense—
 —
 8,864
 —
Loss on disposal of assets—
 551
 —
 7,214
Operating income$14,477
 $11,358
 $10,248
 $29,928

Three months ended September 30, 2017March 31, 2024 compared to three months ended September 30, 2016March 31, 2023
Net salesrevenues
On a consolidated basis,Consolidated net salesrevenues for the three months ended September 30, 2017March 31, 2024 increased by approximately $71.7$40.4 million, or 28.4%8.3%, compared to the corresponding period in 2016.  Our acquisition of 5.11 Tactical on August 31, 2016 contributed $44.8 million to the increase in net sales, while our acquisition of Crosman on June 2, 2017 contributed $34.4 million.2023. During the three months ended September 30, 2017March 31, 2024 compared to 2016,2023, we also saw a notable sales increaseincreases in net revenues at Clean EarthBOA ($4.24.9 million primarily due to two acquisitions in 2016increase) and one acquisition in 2017)Lugano ($39.2 million increase), partially offset by a decreasedecreases in salesnet revenue at our LibertyVelocity Outdoor ($5.44.1 million decrease), ErgobabyAltor Solutions ($1.8 million decrease), Manitoba Harvest ($2.08.1 million decrease) and Sterno ($2.910.2 million decrease) subsidiaries.. The Honey Pot Co., which we acquired on January 31, 2024, contributed $20.2 million in net revenues in the first quarter of 2024. Refer to "Results of Operations - Our Businesses"Business Segments" for a more detailed analysis of net salesrevenues by subsidiary business segment.

We do not generate any revenues apart from those generated by the businesses we own.our subsidiaries. We may generate interest income on the investment of available funds, but we expect such earnings to be minimal. Our investment in our businesses is typically in the form ofWe make loans from the Company to suchour subsidiary businesses as well asand also hold equity interests in those companies.businesses. Cash flows coming to the Trust and the CompanyLLC are the result of interest payments on those loans, amortization of those loans and dividendsadditional principal payments on our equity ownership.those loans. However, on a consolidated basis, these items will be eliminated.

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Cost of salesrevenues
On a consolidated basis, cost of salesrevenues increased approximately $36.4$3.6 million during the three month periodmonths ended September 30, 2017,March 31, 2024 compared to the corresponding period in 2016. 5.11 Tactical accounted for $17.22023. We saw notable increases in cost of revenues at BOA ($1.5 million of the increase, while our Crosman acquisition accounted for $29.0increase) and Lugano ($12.5 million ofincrease) that correlates with the increase in cost of sales during the three months ended September 30, 2017. Clean Earth accounted for $2.9 million of the increase due to acquisitionsnet revenue in the prior and current year. These increases were offset byfirst quarter of 2024. We saw notable decreases in cost of revenues at Velocity ($2.6 million decrease), Altor ($7.6 million decrease), and Sterno ($11.3 million decrease) that corresponded to the decrease in net revenue noted above. The Honey Pot Co. had cost of sales at other operating segments, particularly Ergobaby ($4.8 million), Liberty ($4.7 million) and Arnold ($1.4 million).of $11.6 million in the first quarter of 2024 post-acquisition. Gross profit as a percentage of salesnet revenues was approximately 36.3%46.1% in the three months ended September 30, 2017March 31, 2024 compared to 32.7%42.4% in the three months ended September 30, 2016. March 31, 2023. The increase in gross profit as a percentage of net sales in the quarter ended March 31, 2024 as compared to the quarter ended March 31, 2023 is driven by the mix of products sold, with increases in net revenue at our higher margin businesses, particularly Lugano. Our branded consumer businesses had gross profit as a percentage of net revenues of 53.8% in the first quarter of 2024 as compared to 52.0% in the first quarter of 2023, while our industrial businesses had gross profit as a percentage of net revenues of 28.6% in the first quarter of 2024 as compared to 25.7% in the first quarter of 2023. Refer to "Results of Operations - Our Businesses"Business Segments" for a more detailed analysis of cost of salesgross profit by subsidiary business segment.
Selling, general and administrative expense
On a consolidated basis,Consolidated selling, general and administrative expense increased approximately $27.2$20.5 million during the three month periodmonths ended September 30, 2017,March 31, 2024, compared to the corresponding period in 2016. The2023. We saw increases in selling, general and administrative expenses at several of our consumer brands due to increased investment in marketing and headcount, increases in employee compensation and increases in fulfillment costs. We saw notable increase in selling, general and administrative expenses at BOA ($1.7 million of the increase), Ergobaby ($1.3 million of the increase) and Lugano ($7.1 million of the increase). The Honey Pot Co. had selling, general and administrative expense of $8.9 million in the 2017first quarter compared to 2016 is principally the result of the 5.11 Tactical acquisition in August 2016 ($23.6 million) and Crosman in June 2017 ($5.12024 post-acquisition, of which $3.5 million including $0.3 million inwas transaction costs incurred for acquisition costs duringassociated with the quarter).acquisition. Refer to "Results of Operations - Our Businesses"Business Segments" for a more detailed analysis of selling, general and administrative expense by subsidiary business segment. At the corporate level, general and administrative expense was $2.8$4.9 million in the thirdfirst quarter of 20172024 and $2.7$4.8 million in the thirdfirst quarter of 2016.

2023, an increase of $0.1 million.
Fees to manager
Pursuant to the Management Services Agreement ("MSA"), we pay CGM a quarterly management fee equal to 0.5% (2.0% annually) of our consolidated adjusted net assets. We accrue for the management fee on a quarterly basis. For the three months ended September 30, 2017,March 31, 2024, we incurred approximately $8.3$18.1 million in management fees as compared to $8.4$16.3 million in fees in the three months ended SeptemberMarch 31, 2023. The increase in management fees is primarily attributable to our acquisition of The Honey Pot Co. in January 2024.
CGM entered into a waiver of the MSA for a period through June 30, 2016.2023 to receive a 1% annual management fee related to PrimaLoft, rather than the 2% called for under the MSA, which resulted in a lower management fee paid in the first quarter of 2023 than would have normally been due. PrimaLoft was acquired in July 2022.
Amortization expense
Amortization expense for the three months ended September 30, 2017March 31, 2024 increased $5.7$2.3 million as compared to the three months ended September 30, 2016 primarilyMarch 31, 2023 as a result of the acquisitionsamortization expense associated with the intangibles that were recognized in conjunction with the purchase price allocation for The Honey Pot Co., which was acquired in January 2024.
Impairment expense
In connection with our annual goodwill impairment test, we tested the goodwill at the Velocity reporting unit quantitatively. The impairment test resulted in Velocity recording impairment expense of 5.11$8.2 million in August 2016 and Crosman in June 2017.the quarter ended March 31, 2024.
Loss on disposal of assetsInterest expense
ErgobabyWe recorded a $0.6interest expense totaling $23.6 million loss on disposal of assets duringfor the third quarter of 2016 related to its decision to dispose of the Orbit Baby product line. Refer to the Ergobaby section under "Results of Operations - Our Businesses" for additional details regarding the loss on disposal.

Ninethree months ended September 30, 2017March 31, 2024 compared to nine months ended September 30, 2016

Net sales
On a consolidated basis, net sales$26.2 million for the nine months ended September 30, 2017 increased by approximately $261.6 million, or 39.6%, compared to the correspondingcomparable period in 2016.  Our acquisition2023, a decrease of 5.11$2.6 million. We received $1.8 million in August 2016 contributed $201.3 million to the increase in net sales and our acquisition of Crosman in June 2016 contributed $44.2 million to the increase. During the nine months ended September 30, 2017 compared to 2016, we also saw notable sales increases at Ergobaby ($2.7 million, primarily due to the acquisition of Baby Tula), Clean Earth ($19.3 million, primarily due to two acquisitions in 2016 and one in 2017) and Sterno ($6.4 million, primarily due to the acquisition of Sterno Home Inc. ("Sterno Home", formerly Northern International, Inc.) in January 2016), offset by decreases in sales at Liberty ($8.7 million) and Arnold Magnetics ($3.4 million). Refer to "Results of Operations - Our Businesses" for a more detailed analysis of net sales by business segment.

We do not generate any revenues apart from those generated by the businesses we own. We may generate interest income on our cash balances at the investment of available funds, but we expect such earnings to be minimal. Our investment in our businesses is typically in the form of loans from the Company to such businesses, as well as equity interests in those companies. Cash flows coming to the Trust and the Company are the result of interest payments on those loans, amortization of those loans and dividends on our equity ownership. However, on a consolidated basis, these items will be eliminated.

Cost of sales
On a consolidated basis, cost of sales increased approximately $163.0 millionLLC during the nine month periodthree months ended September 30, 2017, compared to the corresponding period in 2016. 5.11 accounted for $121.4 million of the increase in cost of sales, including $21.7 in expenseMarch 31, 2024 related to the amortizationproceeds from our sale of the inventory step-up resulting from purchase accounting during the nine months ended September 30, 2017, while our Crosman acquisition accounted for $36.3 million of the increase. Clean Earth accounted for $14.7 million of the increase due to acquisitionsMarucci. The remaining decrease in the prior and current year, and Sterno accounted for $6.3 million of the increase. These increases were offset by decreases in cost of sales at other operating segments, particularly Liberty ($6.0 million) and Arnold ($5.0 million). Gross profit as a percentage of sales was approximately 34.9% in the nine months ended September 30, 2017 compared to 33.8% in the nine months ended September 30, 2016. Refer to "Results of Operations - Our Businesses" for a more detailed analysis of cost of sales by business segment.

Selling, general and administrativeinterest expense
On a consolidated basis, selling, general and administrative expense increased approximately $98.4 million during the nine month period ended September 30, 2017, compared to the corresponding period in 2016. The increase in selling, general and administrative expense in 2017 compared to 2016 is principally the result of the 5.11 acquisition in August 2016 ($85.3 million), and Crosman in June 2017 ($7.7 million, including $1.8 million in acquisition related expenses). We also saw an increase in selling general and administrative expense for the nine months ended September 30, 2017 at Clean Earth ($2.9 million due to acquisitions in the current and prior year), and an increase in selling, general and administrative expense at Ergobaby and Liberty due toquarter reflects the effect of bankruptcy filings by two major retailers during 2017. Refer to "Results of Operations - Our Businesses" for a more detailed analysis of selling, general and administrative expense by business segment. At the corporate level, general and administrative expense increased from $8.6 millionlower average amount
43

outstanding under our revolving credit facility in the nine months ended September 30, 2016 to $9.0 million in the nine months ended September 30, 2017.

Fees to manager
Pursuant to the MSA, we pay CGM a quarterly management fee equal to 0.5% (2.0% annually)first quarter of our consolidated adjusted net assets. We accrue for the management fee on a quarterly basis. For the nine months ended September 30, 2017, we incurred approximately $24.3 million in expense for these fees compared to $21.4 million for the corresponding period in 2016. The increase in the management fees that occurred is primarily due to the increase in consolidated net assets resulting from the acquisition of 5.11 in August 2016, and the acquisition of Crosman in June 2017.
Amortization expense
Amortization expense for the nine months ended September 30, 2017 increased $15.3 million2024 as compared to the nine months ended September 30, 2016 as a result of the acquisition of 5.11 in August 2016 and Crosman in June 2017.
Impairment expense
Arnold performed an interim impairment test at each of its reporting units in the fourthfirst quarter of 2016, which resulted2023. There was an average of $29 million outstanding on the revolving credit facility in the recording of preliminary impairment expense of the PMAG reporting unit of $16.0 million. In the first quarter of 2017, Arnold completed2024 and $107 million outstanding in the first quarter of 2023. The amount outstanding on the revolving credit facility in the last year was impacted by the timing of our dispositions and acquisitions in the past year, with the proceeds from the sale of Advanced Circuits in February 2023 used to pay down outstanding balances on the facility, and the proceeds from the sale of Marucci in November 2023 used to pay for the acquisition of The Honey Pot Co. rather than using the availability under the facility.
Other income (expense)
For the quarter ended March 31, 2024, we recorded $2.9 million in other expense as compared to $1.2 million in other income in the quarter ended March 31, 2023, a decrease of $4.0 million. Other income (expense) typically reflects the movement in foreign currency at our subsidiary businesses with international operations, gains or (losses) realized on the sale of property, plant and equipment, and expenses incurred or income earned that are not considered a part of our operations. In the quarter ended March 31, 2024, the other expense reflects a loss on an equity method investment at Altor Solutions.
Income taxes
We had an income tax provision of $8.7 million during the three months ended March 31, 2024 compared to an income tax provision of $6.9 million during the same period in 2023, an increase of $1.8 million. Our effective tax rate in the quarter ended March 31, 2024 was 78.1%, compared to an effective income tax rate of 81.1% during the same period in 2023. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. In addition to state income taxes, the items with the most significant impact on the difference between our statutory U.S. federal income tax rate of 21% percent and our effective income tax rate in 2024 was the limitations on the net operating loss carryforwards and utilization of tax credits at our subsidiaries and the impairment testingexpense recognized at Velocity in the first quarter of the PMAG reporting unit and recorded an additional $8.9 million impairment expense based on the results of the Step 2 impairment testing.2024.


Loss on disposal of assets
Ergobaby recorded a $7.2 million loss on disposal of assets during 2016 related to its decision to dispose of the Orbitbaby product line. Refer to the Ergobaby section under "Results of Operations - Our Businesses" for additional details regarding the loss on disposal.

Results of Operations - Our BusinessesBusiness Segments

The following discussion reflects a comparison of the historical results of operations of each of our businesses for the three and nine month periods ending September 30, 2017 and September 30, 2016 on a stand-alone basis. For the 2017 acquisition of Crosman, the following discussion reflects pro forma results of operations for the three and nine months ended September 30, 2017 and 2016 as if we had acquired Crosman January 1, 2016. For the 2016 acquisition of 5.11, the following discussion reflects pro forma results of operations for the three and nine months ended September 30, 2016 as if we had acquired 5.11 on January 1, 2016. Where appropriate, relevant pro forma adjustments are reflected as part of the historical operating results. We believe this is the most meaningful comparison of the operating results for each of our business segments. The following results of operations at each of our businesses are not necessarily indicative of the results to be expected for a full year.
Branded Consumer Businesses

5.11 Tactical
Overview
Three months ended
March 31, 2024March 31, 2023
Net sales$124,974 100.0 %$124,452 100.0 %
Gross profit$65,927 52.8 %$64,943 52.2 %
SG&A$55,339 44.3 %$54,831 44.1 %
Segment operating income$8,167 6.5 %$7,670 6.2 %
5.11 is a leading provider of purpose-built tactical apparel and gear for law enforcement, firefighters, EMS, and military special operations as well as outdoor and adventure enthusiasts. 5.11 is a brand known for innovation and authenticity, and works directly with end users to create purpose-built apparel and gear designed to enhance the safety, accuracy, speed and performance of tactical professionals and enthusiasts worldwide.  Headquartered in Irvine, California, 5.11 operates sales offices and distribution centers globally, and 5.11 products are widely distributed in uniform stores, military exchanges, outdoor retail stores, its own retail stores and on 511tactical.com.
We made loans to, and purchased a controlling interest in, 5.11 for a net purchase price of $408.2 million in August 2016, representing approximately 97.5% of the initial outstanding equity of 5.11 ABR Corp.
Results of Operations
In the following results of operations, we provide (i) the actual consolidated results of operations for 5.11 for the three and nine months ended September 30, 2017, and (ii) comparative results of operations for 5.11 for the three and nine months ended September 30, 2016, as if we had acquired the business on January 1, 2016, including relevant pro-forma adjustments for pre-acquisition periods and explanations where applicable.
 Three months ended Nine months ended
(in thousands)September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
   (Pro forma)   (Pro forma)
Net sales$72,005
 $74,655
 $228,471
 $212,667
Cost of sales (1)
37,452
 46,797
 141,590
 123,857
Gross profit34,553
 27,858
 86,881
 88,810
Selling, general and administrative expense (2)
32,370
 25,954
 94,000
 78,998
Fees to manager (3)
250
 250
 750
 750
Amortization of intangibles (4)
2,186
 2,047
 6,673
 6,140
Income (loss) from operations$(253) $(393) $(14,542) $2,922
Pro forma results of operations of 5.11 Tactical for the three and nine months ended September 30, 2016 include the following pro forma adjustments, applied to historical results as if we had acquired 5.11 on January 1, 2016:
(1)Cost of sales was decreased by $0.02 million and $0.08 million, respectively, for the three and nine months ended September 30, 2016 to reflect the increase in the depreciable lives for machinery and equipment.
(2) Selling, general and administrative expense was decreased by approximately $0.5 million and $2.3 million, respectively, for the three and nine months ended September 30, 2016 to reflect the increase in the depreciable lives for property, plant and equipment. Selling, general and administrative expense was increased by approximately $0.4 and $0.9 million in the three and nine months ended September 30, 2016, respectively, as a result of stock compensation expense related to stock options that were granted to 5.11 employees as a result of the acquisition.
(3) Represents management fees that would have been payable to the Manager in the nine months ending September 30, 2016.
(4) Represents amortization of intangible assets in the three and nine month period ended September 30, 2016 for amortization expense associated with the allocation of the fair value of intangible assets resulting from the purchase price allocation in connection with our acquisition.
Three months ended September 30, 2017March 31, 2024 compared to the pro forma three months ended September 30, 2016March 31, 2023
Net sales
Net sales for the three months ended September 30, 2017March 31, 2024 were $72.0$125.0 million as compared to net sales of $74.7$124.5 million for the three months ended September 30, 2016,March 31, 2023, an increase of $0.5 million, or 0.4%. This increase was driven largely by a decrease of $2.7 million or 3.5%. This decrease is due primarily toincrease in international sales growth from strong demand, which was partially offset by a $3.8$1.1 million decrease in international direct-to-agency business. Direct-to-agencydirect-to-consumer sales, represent large non-recurring contracts consisting primarily of special-make-up ("SMU") uniform product designed for large law enforcement divisions. Retail and e-commercea $0.8 million decrease in domestic wholesale sales grew $4.3 million or 56%, driven by growing demand in direct to consumer channels. Retail sales grew largely due to sixteen new retail store openings since September 2016 (bringing the total store count to 24 as of September 30, 2017). 5.11 implemented a new Enterprise Resource Planning (ERP) system and as part of the go-live process 5.11 shut down its warehouse as planned on September 28, 2017 to begin the cut-over activities. As a result, 5.11 had lessdecreased inventory availability.

Gross profit
shipping days during the third quarter of 2017 as compared to the prior year, which resulted in approximately $4 million to $5Gross profit was $65.9 million in sales shifting to the fourth quarter of 2017. The warehouse reopened on October 9, 2017, and 5.11 has resumed warehouse and shipping operations.
Cost of sales
Cost of sales for the three months ended September 30, 2017 were $37.5 millionMarch 31, 2024 as compared to $46.8$64.9 million for in the comparable period in 2016, a decreasethree months ended March 31, 2023, an increase of $9.3$1.0 million. Gross profit as a percentage of net sales was 48.0%52.8% in the three months ended September 30, 2017first quarter of 2024 as compared to 37.3%52.2% in the three months ended September 30, 2016. Costfirst quarter of 2023. Gross profit as a percentage of net sales for the three months ended September 30, 2016 includes $4.7 million in expense related to a $39.1 million inventory step-up resulting from the acquisition purchase price allocation. The total inventory step-up amount of $39.1 million was expensed to cost of goods sold over the expected turns of 5.11's inventory. The increase in gross profit percentage is due to lowerfavorably impacted by decreased product costs from efficiency in sourcing operations, improved gross margins on new product introductions, and a larger proportion of revenues from the higher margin retail and e-commerce distribution channels as compared to the same period in 2016.costs.
44

Selling, general and administrative expense
Selling, general and administrative expense for the three months ended September 30, 2017March 31, 2024 was $32.4$55.3 million, or 45.0%,44.3% of net sales compared to $26.0$54.8 million, or 34.8%44.1% of net sales for the comparable period in 2016. This2023. The increase in selling, general and administrative expense was primarily due to sixteen newlargely driven by the costs associated with additional retail stores that were not openand increased headcount from March 31, 2023, which was offset by a decrease in the prior comparable period, strategic investments into salesoutside service and marketing, and integration service fees billed by CGM to 5.11.bonus related expenses.
Loss from operationsSegment operating income
Loss from operationsSegment operating income for the three months ended September 30, 2017March 31, 2024 was $0.3$8.2 million, an increase of $0.1$0.5 million when compared to loss from operationssegment operating income of $0.4$7.7 million for the same period in 2016,2023, based on the factors described above.
Nine
BOA
Three months ended
March 31, 2024March 31, 2023
Net sales$42,903 100.0%$37,986 100.0%
Gross profit$26,215 61.1%$22,791 60.0%
SG&A$12,381 28.9%$10,660 28.1%
Segment operating income$9,656 22.5%$7,951 20.9%
Three months ended September 30, 2017March 31, 2024 compared to the pro forma nine months ended September 30, 2016
Net sales
Net sales for the nine months ended September 30, 2017 were $228.5 million as compared to net sales of $212.7 million for the nine months ended September 30, 2016, an increase of $15.8 million, or 7.4%. This increase is due primarily to an $8.7 million increase in international direct-to-agency business, and increased retail and e-commerce sales. Direct-to-agency sales represent large non-recurring contracts consisting primarily of SMU uniform product designed for large law enforcement divisions. Retail and e-commerce sales grew $10.7 million, or 45%, driven by growing demand in direct to consumer channels. Retail sales grew largely due to sixteen new retail store openings since September 2016 (bringing the total store count to 24 as of September 30, 2017). The consumer wholesale channel experienced a $4.2 million decrease due primarily to the bankruptcy of a large outdoor retail customer. 5.11 implemented a new Enterprise Resource Planning (ERP) system and as part of the go-live process 5.11 shut down its warehouse as planned on September 28, 2017 to begin the cut-over activities. As a result, 5.11 had less shipping days during the third quarter of 2017 as compared to the prior year, which resulted in approximately $4 million to $5 million in sales shifting to the fourth quarter of 2017. The warehouse reopened on October 9, 2017, and 5.11 has resumed warehouse and shipping operations.
Cost of sales
Cost of sales for the nine months ended September 30, 2017 were $141.6 million as compared to $123.9 million for the comparable period in 2016, an increase of $17.7 million. Gross profit as a percentage of sales was 38.0% in the nine months ended September 30, 2017 as compared to 41.8% in the nine months ended September 30, 2016. Cost of sales for the nine months ended September 30, 2017 includes $21.7 million in expense related to a $39.1 million inventory step-up resulting from the acquisition purchase price allocation while the nine months ended September 30, 2016 included $4.7 million in expense related to the inventory step-up resulting from the acquisition purchase price allocation, an increase of $17 million year-over-year. The total inventory step-up amount of $39.1 million was expensed to cost of goods sold over the expected turns of 5.11's inventory. Excluding the effect of the expense associated with the inventory step-up in both periods, gross profit as a percentage of sales increased 350 basis points to 47.5% for the nine months ended September 30, 2017 compared to 44.0% for the nine months ended September 30, 2016. This increase in gross profit percentage is due to lower product costs from efficiency in sourcing operations, improved gross margins on new product introductions, and a larger proportion of revenues from the higher margin retail and e-commerce distribution channels as compared to the same period in 2016.
Selling, general and administrative expense
Selling, general and administrative expense for the nine months ended September 30, 2017 was $94.0 million, or 41.1% of net sales compared to $79.0 million, or 37.1%, of net sales for the comparable period in 2016. This increase in selling, general and administrative expense was primarily due to an accounts receivable reserve for a large outdoor retail customer that filed for bankruptcy, sixteen new retail stores that were not open in the prior comparable period, strategic investments into sales and marketing, and integration service fees billed by CGM to 5.11.

(Loss) income from operations
Loss from operations for the nine months ended September 30, 2017 was $14.5 million, a decrease of $17.5 million when compared to income from operations of $2.9 million for the same period in 2016, based on the factors described above.
Crosman
Overview
Crosman, headquartered in Bloomfield, New York, is a leading designer, manufacturer, and marketer of airguns, archery products, laser aiming devices and related accessories. Crosman offers its products under the highly recognizable Crosman, Benjamin and CenterPoint brands that are available through national retail chains, mass merchants, dealer and distributor networks. Airguns historically represent Crosman's largest product category, with more than 50% of gross sales. The airgun product category consists of air rifles, air pistols and a range of accessories including targets, holsters and cases. Crosman's other primary product categories are archery, with products including CenterPoint crossbows and the Pioneer Airbow, consumables, which includes steel and plastic BBs, lead pellets and CO2 cartridges, and airsoft products. We made loans to, and purchased a controlling interest in, Crosman for a net purchase price of $150.4 million in June 2017, representing approximately 98.9% of the initial outstanding equity of Crosman Corp.
Results of Operations
In the following results of operations, we provide (i) the actual consolidated results of operations for Crosman for the three months ended September 30, 2017, and (ii) comparative results of operations for Crosman for the nine months ended September 30, 2017 and three and nine months ended September 30, 2016, as if we had acquired the business on January 1, 2016, including relevant pro-forma adjustments for pre-acquisition periods and explanations where applicable.
 Three months ended Nine months ended
(in thousands)September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
   (Pro forma) (Pro forma)
Net sales$34,449
 $32,092
 $85,848
 $82,945
Cost of sales (1)
29,034
 23,543
 67,088
 61,012
Gross profit5,415
 8,549
 18,760
 21,933
Selling, general and administrative expense5,121
 3,780
 13,715
 11,111
Fees to manager (2)
125
 125
 375
 375
Amortization of intangibles (3)
1,557
 1,164
 3,498
 3,493
Income from operations$(1,388) $3,480
 $1,172
 $6,954
Pro forma results of operations of Crosman for the nine months ended September 30, 2017 and the three and nine months ended September 30, 2016 include the following pro forma adjustments, applied to historical results as if we had acquired Crosman on January 1, 2016:
(1)Cost of sales was decreased by $0.2 million for the nine months ended September 30, 2017, and $0.1 million and $0.5 million, respectively, for the three and nine months ended September 30, 2016, to reflect the increase in the depreciable lives for machinery and equipment.
(2) Represents management fees that would have been payable to the Manager in the nine months ended September 30, 2017 and the three and nine months ended September 30, 2016.
(3) Represents amortization of intangible assets in the three and nine month period ended September 30, 2017 and 2016 associated with the allocation of the fair value of intangible assets resulting from the purchase price allocation in connection with our acquisition.
Three months ended September 30, 2017 compared to the pro forma three months ended September 30, 2016
Net sales
Net sales for the three months ended September 30, 2017 were $34.4 million, an increase of $2.4 million or 7.3%, compared to the same period in 2016. The increase in net sales for the three months ended September 30, 2017 is primarily due to growth in the archery products category and an add-on acquisition during the third quarter of 2017.
Cost of sales
Cost of sales for the three months ended September 30, 2017 were $29.0 million as compared to $23.5 million for the comparable period in 2016, an increase of $5.5 million, which is consistent with the net sales increase and also includes $3.2 million in expense related to the inventory step-up resulting from the preliminary purchase price allocation. After excluding the impact of the inventory step-up expense, gross profit as a percentage of sales was 24.9% for the three months ended

September 30, 2017 as compared to 26.6% in the three months ended September 30, 2016 due to the mix of products sold during the two periods.
Selling general and administrative expense
Selling, general and administrative expense for the three months ended September 30, 2017 was $5.1 million, or 14.9% of net sales compared to $3.8 million, or 11.8% of net sales for the three months ended September 30, 2016. The selling, general and administrative expense for the three months ended September 30, 2017 includes $0.4 million of acquisition related expenses, $0.4 million of integration services fees payable to CGM, $0.2 million of non-recurring consultant fees and increased expenses associated with higher sales.
(Loss) income from operations
Loss from operations for the three months ended September 30, 2017 was $1.4 million, a decrease of $4.9 million when compared to income from operations of $3.5 million for the same period in 2016, based on the factors described above.
Pro forma nine months ended September 30, 2017 compared to the pro forma nine months ended September 30, 2016
Net sales
Net sales for the nine months ended September 30, 2017 were $85.8 million compared to net sales of $82.9 million for the nine months ended September 30, 2016, an increase of $2.9 million or 3.5%. The increase in net sales for the nine months ended September 30, 2017 is primarily due to growth in the archery products category and an add-on acquisition during the third quarter of 2017.

Cost of sales
Cost of sales for the nine month period ended September 30, 2017 were $67.1 million, an increase of $6.1 million as compared to the comparable period in 2016. Cost of sales for the nine months ended September 30, 2017 includes $3.2 million in expense related to the inventory step-up resulting from the preliminary purchase price allocation. Excluding the effect of the inventory step-up, gross profit as a percentage of sales was 25.5% for the nine months ended September 30, 2017 as compared to 26.4% for the nine months ended September 30, 2016 due to the mix of products sold during the two periods.

Selling general and administrative expense
Selling, general and administrative expense for the nine months ended September 30, 2017 was $13.7 million, or 16.0% of net sales compared to $11.1 million, or 13.4%, for the nine months ended September 30, 2016. Selling, general and administrative expense for the nine months ended September 30, 2017 includes $1.8 million in transaction costs paid in relation to the acquisition of Crosman in June 2017 and an add-on acquisition at Crosman completed during the third quarter of 2017, as well as $0.4 million in integration services fees payable to CGM. Excluding the transaction costs and integration services fee from the selling, general and administrative expense, there was no material change in expense items.

Income from operations
Income from operations for the nine months ended September 30, 2017 was $1.2 million, a decrease of $5.8 million when compared to income from operations of $7.0 million for the comparable period in 2016, based on the factors described above.
Ergobaby
Overview
Ergobaby, headquartered in Los Angeles, California, is a designer, marketer and distributor of wearable baby carriers and accessories, blankets and swaddlers, nursing pillows, and related products.  On May 12, 2016, Ergobaby acquired New Baby Tula LLC (“Baby Tula”) for approximately $73.8 million, excluding a potential earn-out payment. Baby Tula designs, markets and distributes baby carriers and accessories. Ergobaby primarily sells its Ergobaby and Baby Tula branded products through brick-and-mortar retailers, national chain stores, online retailers, its own websites and distributors. Historically, Ergobaby derives approximately 59% of its sales from outside of the United States.

Results of Operations
The table below summarizes the income from operations data for Ergobaby for the three and nine months ended September 30, 2017 and September 30, 2016.

 Three months ended Nine months ended
(in thousands)September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Net sales$27,835

$29,664
 $77,737
 $75,048
Cost of sales9,003

13,818
 25,491
 29,169
Gross profit18,832

15,846
 52,246
 45,879
Selling, general and administrative expense9,973

9,947
 28,359
 27,489
Fees to manager125

125
 375
 375
Amortization of intangibles2,850

552
 8,784
 1,700
Loss on disposal of assets—
 551
 —
 7,214
Income from operations$5,884

$4,671
 $14,728
 $9,101
Three months ended September 30, 2017 compared to the three months ended September 30, 2016March 31, 2023
Net sales
Net sales for the three months ended September 30, 2017March 31, 2024 were $27.8$42.9 million a decrease of $1.8 million, or 6.2%,as compared to the same period in 2016. Netnet sales from Baby Tula for the third quarter were $4.8 million, compared to $5.8 million for the corresponding period in 2016. During the second quarter of 2016, Ergobaby’s board of directors approved a plan to dispose of the Orbit Baby infant travel system product line. Net sales from Orbit Baby branded infant travel systems were $1.6$38.0 million for the three months ended September 30, 2016. DuringMarch 31, 2023, an increase of $4.9 million, or 12.9%. The increase was reflected across key industries including Cycling, Athletic, Workwear and Snow Sports. The increase in sales was a result of the improvement of end market inventory levels, coupled with market share gains in many of our key industries.
Gross profit
Gross profit was $26.2 million in the three months ended September 30, 2017, international sales were approximately $17.0 million, representing a decrease of $0.3 million over the corresponding period in 2016. International sales from Baby Tula for the third quarter of 2017 were $1.6 million. International sales of baby carriers and accessories, including Baby Tula, increased by approximately $0.8 million and international sales of infant travel systems decreased by approximately $0.5 million during the quarter ended September 30, 2017March 31, 2024 as compared to the comparable quarter in 2016. Domestic sales were $10.8 million in the third quarter of 2017, reflecting a decrease of $2.1 million compared to the corresponding period in 2016. The decrease in domestic sales was due to a $1.0 million decrease in domestic sales of infant travel systems and accessories and a $1.1 million decrease in sales of baby carrier and accessories. Baby carriers and accessories represented 100% of sales in the three months ended September 30, 2017 compared to 95% in the same period in 2016.
Cost of sales
Cost of sales was approximately $9.0$22.8 million for the three months ended September 30, 2017, as compared to $13.8 million for the three months ended September 30, 2016, a decrease of $4.8 million. Cost of sales for the quarter ended September 30, 2016 included expense of $3.7 million related to the inventory step-up at Baby Tula resulting from the purchase price allocation. The remaining increase in cost of sales is primarily attributable to the reduction of sales compared to the prior period. Gross profit as a percentage of sales was 67.7% for the quarter ended September 30, 2017, as compared to 65.9% (excluding the effect of the inventory step-up at Baby Tula) for the three months ended September 30, 2016.

Selling, general and administrative expense
Selling, general and administrative expense was $10.0 million, or 35.8% of net sales for the three months ended September 30, 2017 as compared to $9.9 million or 33.5% of net sales for the same period of 2016. While selling, general and administrative expenses were flat, this resulted from an increase in a bad debt reserve related to a large retail customer that filed for bankruptcy during the third quarter of 2017, which was offset by lower professional fees.
Loss on disposal of assets
Ergobaby recorded a $0.6 million loss on disposal of assets during the third quarter of 2016 related to its decision to dispose of the Orbit Baby product line.

Income from operations
Income from operations for the three months ended September 30, 2017 increased $1.2 million, to $5.9 million, compared to $4.7 million for the same period of 2016, primarily as a result of the loss on disposal of assets and the absence of the inventory step-up at Baby Tula that was recorded in 2016.



Nine months ended September 30, 2017 compared to nine months ended September 30, 2016

Net sales
Net sales for the nine months ended September 30, 2017 were $77.7 million,March 31, 2023, an increase of $2.7 million, or 3.6%, compared to the same period in 2016. Net sales from Baby Tula for the nine months ended September 30, 2017 were $16.5 million, compared to $10.6 million in sales in the post-May acquisition period in 2016. During the nine months ended September 30, 2017, international sales were approximately $46.3 million, representing an increase of $5.6 million over the corresponding period in 2016. International sales of baby carriers and accessories increased by approximately $6.8 million and international sales of infant travel systems decreased by approximately $1.2 million during the nine months ended September 30, 2017 as compared to the comparable nine month period in 2016. BabyTula international sales during the nine months ended September 30, 2017 increased $2.8 million from the corresponding period in 2017. Domestic sales were $31.4 million during the nine months ended September 30, 2017, reflecting a decrease of $2.9 million compared to the corresponding period in 2016. The decrease in domestic sales is attributable to a $4.4 million decrease in domestic infant travel systems and accessories sales, a $1.7 million decrease in sales of Ergo branded baby carrier and accessories to national and specialty retail accounts, partially offset by a $3.2 million increase in Baby Tula domestic sales. The decrease in baby carrier and accessories sales was attributable to the overall weakness in the U.S. retail market during the nine months ended September 30, 2017. The decrease in infant travel systems and accessories sales was primarily attributable to exiting the Orbit Baby business during 2016. Baby carriers and accessories represented 100% of sales in the nine months ended September 30, 2017 compared to 92% in the same period in 2016.

Cost of sales
Cost of sales was approximately $25.5 million for the nine months ended September 30, 2017, as compared to $29.2 million for the nine months ended September 30, 2016, a decrease of $3.7$3.4 million. Cost of sales for the nine months ended September 30, 2016 included expense of $3.7 million related to the inventory step-up at Baby Tula resulting from the purchase price allocation. Gross profit as a percentage of sales was 67.2% for the nine months ended September 30, 2017 compared to 66.1% for the same period in 2016 after excluding the effect of the inventory step-up at Baby Tula.

Selling, general and administrative expense
Selling, general and administrative expense for the nine months ended September 30, 2017 increased to approximately $28.4 million, or 36.5%, of net sales compared to $27.5 million or 36.6% of net sales for the same period of 2016. The $0.9 million increase in the nine months ended September 30, 2017 compared to the same period in 2016 is primarily attributable to increases in variable expenses, such as distribution and fulfillment and commission, due to the increases in direct market sales, to increases in employee related costs due to increased staffing levels, due in part to the addition of Baby Tula in 2016 and to a bad debt reserve related to a large retail customer that filed for bankruptcy in the third quarter of 2017. These increases were partially offset by lower professional fees and marketing expenses, due to the timing of marketing spend, and to lower acquisition costs, related to the 2016 Baby Tula acquisition.
Amortization of intangible assets
Amortization of intangible assets increased $7.1 million for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 due primarily to the amortization of intangible assets associated with the acquisition of Baby Tula in the prior year.
Loss on disposal of assets
Ergobaby recorded a $7.2 million loss on disposal of assets during 2016 related to its decision to dispose of the Orbit Baby product line. The loss was comprised of the write-off of intangible assets of $5.5 million, property, plant and equipment of $0.4 million, and other assets of $1.0 million. Ergobaby also recorded expense of $0.3 million related to the early termination of the Orbitbaby lease.

Income from operations
Income from operations for the nine months ended September 30, 2017 increased $5.6 million, to $14.7 million, compared to $9.1 million for the same period of 2016, primarily as a result of the loss on disposal of assets that was recorded in 2016.
Liberty Safe
Overview
Based in Payson, Utah and founded in 1988, Liberty Safe is the premier designer, manufacturer and marketer of home and gun safes in North America. From its over 300,000 square foot manufacturing facility, Liberty Safe produces a wide range of home and gun safe models in a broad assortment of sizes, features and styles ranging from an entry level product to good, better and best products. Products are marketed under the Liberty brand, as well as a portfolio of licensed and private label brands, including Cabela’s, Case IH, Colt and John Deere. Liberty Safe’s products are the market share leader and

are sold through an independent dealer network ("Dealer sales") in addition to various sporting goods, farm and fleet and home improvement retail outlets ("Non-Dealer sales"). Liberty has the largest independent dealer network in the industry. Historically, approximately 55% of Liberty Safe’s net sales are Non-Dealer sales and 45% are Dealer sales.

Results of Operations

The table below summarizes the income from operations data for Liberty Safe for the three and nine months ended September 30, 2017 and September 30, 2016. 
 Three months ended Nine months ended
(in thousands)September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Net sales$18,423

$23,810
 $66,008
 $74,713
Cost of sales13,026

17,680
 47,157
 53,197
Gross profit5,397

6,130
 18,851
 21,516
Selling, general and administrative expense3,204

3,332
 11,284
 10,483
Fees to manager125

125
 375
 375
Amortization of intangibles18

256
 292
 779
Income from operations$2,050

$2,417
 $6,900
 $9,879

Three months ended September 30, 2017 compared to the three months ended September 30, 2016
Net sales
Net sales for the quarter ended September 30, 2017 decreased approximately $5.4 million, or 22.6%, to $18.4 million, compared to the corresponding quarter ended September 30, 2016. Non-Dealer sales were approximately $7.9 million in the three months ended September 30, 2017 compared to $11.9 million for the three months ended September 30, 2016 representing a decrease of $4.0 million, or 33.6%. Dealer sales totaled approximately $10.5 million in the three months ended September 30, 2017 compared to $11.9 million in the same period in 2016, representing a decrease of $1.4 million or 11.8%. The decrease in third quarter 2017 sales for the Non-Dealer channel is primarily attributable to the bankruptcy filing by a national retailer in the first quarter of 2017. The decrease in sales in the Dealer channel can be attributed to lower overall market demand in the third quarter of 2017 as compared to the third quarter of 2016.

Cost of sales
Cost of sales for the three months ended September 30, 2017 decreased approximately $4.7 million when compared to the same period in 2016. Gross profitProfit as a percentage of net sales totaled approximately 29.3% and 25.7%was 61.1% in the three months ended March 31, 2024 as compared to 60.0% for the quartersthree months ended September 30, 2017 and September 30, 2016, respectively.March 31, 2023. The increase in gross profit as a percentage of sales during the three months ended September 30, 2017 compared to the same period in 2016 is primarily attributable to lower sales to national accounts, which have lower margins, in the third quarter of 2017 versus the prior year.
Selling, general and administrative expense
Selling, general and administrative expense was $3.2 million for the three months ended September 30, 2017 compared to $3.3 million for the three months ended September 30, 2016. Selling, general and administrative expense represented 17.4% of net sales in 2017was driven by manufacturing overhead leverage, reduced freight and 14.0% of net sales for the same period of 2016. The increase in selling, general and administrative expense as a percentage of net sales is a result of the decrease in net sales for the quarter ended September 30, 2017 as compared to the corresponding third quarter in 2016.

Income from operations
Income from operations decreased $0.4 million during the three months ended September 30, 2017 to $2.1 million, compared to the corresponding period in 2016. This decrease was principally based on the factors described above.

Nine months ended September 30, 2017 compared to nine months ended September 30, 2016

Net sales
Net sales for the nine months ended September 30, 2017 decreased approximately $8.7 million or 11.7%, to $66.0 million, compared to the corresponding nine months ended September 30, 2016. Non-Dealer sales were approximately $29.9 million in the nine months ended September 30, 2017 compared to $36.4 million for the nine months ended September 30, 2016, representing a decrease of $6.5 million or 17.9%. Dealer sales totaled approximately $36.1 million in the nine months ended

September 30, 2017 compared to $38.3 million in the same period in 2016, representing a decrease of $2.2 million or 5.7%. The decrease in sales is attributable to lower overall market demand.

Cost of sales
Cost of sales for the nine months ended September 30, 2017 decreased approximately $6.0 million when compared to the same period in 2016. Gross profit as a percentage of net sales totaled approximately 28.6% and 28.8% for the nine months ended September 30, 2017 and September 30, 2016, respectively. The decrease in gross profit as a percentage of sales during the nine months ended September 30, 2017 compared to the same period in 2016 is attributable to higher raw materialwarranty costs offset by gains in manufacturing efficiencies.
Selling, general and administrative expense
Selling, general and administrative expense for the nine months ended September 30, 2017 increased to approximately $11.3 million or 17.1% of net sales compared to $10.5 million or 14.0% of net sales for the same period of 2016. The $0.8 million increase during the nine months ended September 30, 2017 is primarily attributable to a $1.4 million reserve established to reserve against outstanding accounts receivable of a retail customer that filed for bankruptcy in the first quarter of 2017.

Income from operations
Income from operations decreased $3.0 million during the nine months ended September 30, 2017 to $6.9 million, compared to $9.9 million during the same period in 2016, principally as a result of the decrease in sales, as described above.

Manitoba Harvest

Overview
Headquartered in Winnipeg, Manitoba, Manitoba Harvest is a pioneer and leader in branded, hemp-based foods and ingredients. Manitoba Harvest’s products, which management believes are one of the fastest growing in the hemp food market and among the fastest growing in the natural foods industry, are currently carried in approximately 13,000 retail stores across the United States and Canada. The Company’s hemp-based, 100% all-natural consumer products include hemp hearts, protein powder, hemp oil and snacks.

Results of Operations

The table below summarizes the income from operations data for Manitoba Harvest for the three and nine months ended September 30, 2017 and September 30, 2016.

 Three months ended Nine months ended
(in thousands)September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Net sales$13,948
 $15,920
 $42,625
 $44,321
Cost of sales7,792
 8,988
 23,412
 24,442
Gross profit6,156
 6,932
 19,213
 19,879
Selling, general and administrative expense5,065
 5,072
 15,502
 17,075
Fees to manager87
 88
 262
 261
Amortization of intangibles1,173
 1,218
 3,374
 3,408
Income (loss) from operations$(169) $554
 $75
 $(865)

Three months ended September 30, 2017 compared to three months ended September 30, 2016

Net sales
Net sales for the three months ended September 30, 2017 were approximately $13.9 million as compared to $15.9 million for the three months ended September 30, 2016, a decrease of $2.0 million, or 12.4%. During the third quarter of 2017, Manitoba Harvest experienced declining ingredients shipments to Asia as well as weak sales of protein powders. This was offset by the return of organic hemp hearts to store shelves after a lack of availability in organic based hemp seeds in 2016, which helped drive growth with key retailers in the United States and Canada. In addition, the company experienced strong growth in their core product line with key online retailers.


Cost of sales
Cost of sales for the three months ended September 30, 2017 was approximately $7.8 million compared to approximately $9.0 million for the same period in 2016. Gross profit as a percentage of sales was 44.1% in the quarter ended September 30, 2017 and 43.5% in the quarter ended September 30, 2016. The increase in gross profit as a percentage of sales in the third quarter of 2017 as compared to the same quarter in the prior year is primarily attributable to higher sales of branded hemp products in 2017, which have a higher gross margin percentage than bulk ingredient products.mix.
Selling, general and administrative expense
Selling, general and administrative expense for the three months ended September 30, 2017March 31, 2024 was approximately $5.1$12.4 million, in both the third quarter of 2017 and 2016. Selling, general and administrative expense was 36.3%or 28.9% of net sales in the third quarter of 2017 as compared to 31.9%$10.7 million, or 28.1% of net sales for the samecomparable period in 2016.2023. The increase in selling, general, and administrative expense as a percentage of sales inis primarily due to increased employee costs related to BOA’s bonus plan and equity program.
Segment operating income
Segment operating income for the three months ended September 30, 2017March 31, 2024 was $9.7 million, an increase of $1.7 million when compared to segment operating income of $8.0 million for the same period in 2023, based on the factors described above.
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Ergobaby
Three months ended
March 31, 2024March 31, 2023
Net sales$21,218 100.0 %$22,418 100.0 %
Gross profit$13,958 65.8 %$14,115 63.0 %
SG&A$12,991 61.2 %$11,737 52.4 %
Segment operating income (loss)$(998)(4.7)%$388 1.7 %
Three months ended March 31, 2024 compared to three months ended March 31, 2023
Net sales
Net sales for the three months ended March 31, 2024 were $21.2 million, a decrease of $1.2 million, or 5.4%, compared to the same period in 20162023. During the three months ended March 31, 2024, international sales were approximately $12.1 million, representing a decrease of $1.5 million over the corresponding period in 2023, primarily as a result of timing of Asia-Pacific distributor orders and an European warehouse transition during March causing delayed shipments. Domestic sales were $9.1 million in the first quarter of 2024, reflecting an increase of $0.3 million compared to the corresponding period in 2023. The increase in domestic sales was primarily due to ongoing investments in key operating capability initiatives suchincreases from online channels across brands.
Gross profit
Gross profit as marketing,a percentage of net sales and research and development.
Income (loss) from operations
Income from operationswas 65.8% for the three months ended September 30, 2017 decreased $0.7March 31, 2024, as compared to 63.0% for the three months ended March 31, 2023. The increase in gross profit as a percentage of sales was due to shifts in channel mix and reduced costs.
Selling, general and administrative expense
Selling, general and administrative expense increased $1.3 million whenquarter over quarter, with expense of $13.0 million, or 61.2% of net sales for the three months ended March 31, 2024 as compared to $11.7 million or 52.4% of net sales for the same period of 2023. The increase in selling, general and administrative expense in the three months ended March 31, 2024 as compared to the comparable period in the prior year is due to increased outbound freight, warehousing and marketing expenses, as well as increased legal fees.
Segment operating income (loss)
Ergobaby had segment operating loss of $1.0 million for the three months ended March 31, 2024, a decrease of $1.4 million compared to the same period in 2016,2023, based on the factors describednoted above.

NineLugano
Three months ended
March 31, 2024March 31, 2023
Net sales$103,039 100.0 %$63,887 100.0 %
Gross profit$60,904 59.1 %$34,277 53.7 %
SG&A$20,159 19.6 %$13,073 20.5 %
Segment operating income$39,317 38.2 %$19,776 31.0 %
Three months ended September 30, 2017March 31, 2024 compared to ninethree months ended September 30, 2016March 31, 2023
Net sales
Net sales for the nine monthsquarter ended September 30, 2017 wereMarch 31, 2024 increased approximately $42.6 million as compared to $44.3 million for the nine months ended September 30, 2016, a decrease of $1.7$39.2 million, or 3.8%. Manitoba Harvest experienced declines in bulk hemp seed ingredient sales61.3%, to international markets. This was partially offset by growth in their Canadian retail, U.S. club and online businesses, driven by sales of branded hemp heart products and hemp oil.

Cost of sales
Cost of sales for the nine months ended September 30, 2017 was approximately $23.4$103.0 million, compared to approximately $24.4 million for the corresponding quarter ended March 31, 2023. Lugano sells high-end jewelry primarily through retail salons in California, Florida, Texas, Washington D.C., Colorado and Connecticut, and via pop-up showrooms at multiple equestrian, social and charitable functions each year. In the current year period, Lugano has experienced strong same periodstore sales growth as it has invested in 2016. building out its inventory as well as its sales, marketing and event staff, while increasing the number of social and charitable functions it has attended. Lugano also opened its
46

Washington D.C. location in March 2023 and its Greenwich, Connecticut location in September 2023, and expects to open more retail locations in the near term to further expand sales opportunities, including a salon in London in the second quarter of 2024.
Gross profit
Gross profit as a percentage of net sales totaled approximately 59.1% and 53.7% for the quarters ended March 31, 2024 and March 31, 2023, respectively. Lugano has an extensive network of suppliers through which they procure high quality diamonds and gemstones, which make up a significant percentage of the cost of sales. The increase in margins is attributable to pricing and product mix, especially in its higher priced jewelry pieces.
Selling, general and administrative expense
Selling, general and administrative expense was 45.1%$20.2 million for the three months ended March 31, 2024 as compared to $13.1 million in selling, general and administrative expense in the ninethree months ended September 30, 2017March 31, 2023. Selling, general and 44.9%administrative expense represented 19.6% of net sales in the ninethree months ended September 30, 2016. ForMarch 31, 2024 and 20.5% of net sales for the first ninesame period of 2023. The increase in selling, general and administrative expense is primarily due to increased marketing spend and personnel costs, and variable costs that correlate to the increase in revenue. Lugano continues to increase its head count as it invests in additional professionals to support its growth.
Segment operating income
Segment operating income increased during the three months ended March 31, 2024 to $39.3 million, as compared to $19.8 million in the corresponding period in 2023. This increase was a result of the factors noted above.
PrimaLoft
Three months ended
March 31, 2024March 31, 2023
Net sales$22,541 100.0 %$24,529 100.0 %
Gross profit$14,050 62.3 %$15,580 63.5 %
SG&A$5,297 23.5 %$5,106 20.8 %
Segment operating income$3,300 14.6 %$5,021 20.5 %
Three months ended March 31, 2024 compared to three months ended March 31, 2023
Net sales
Net sales for the three months ended March 31, 2024 were $22.5 million, a decrease of $2.0 million as compared to net sales of $24.5 million for the three months ended March 31, 2023. The decrease in net sales in the current quarter versus the quarter ended March 31, 2023 is attributable to lower ordering from existing customers due to higher inventory levels that retailers are challenged to normalize with consumer demand, which more than offset new customer wins. We expect that retail ordering will begin to normalize this year which we believe will improve our results in 2024.
Gross profit
Gross profit for the quarter ended March 31, 2024 decreased $1.5 million as compared to the three months ended March 31, 2023. Gross profit as a percentage of net sales for the three months ended March 31, 2024 was 62.3%, as compared to gross profit marginsas a percentage of sales of 63.5% for the three months ended March 31, 2023. The decrease in our branded business expandedgross profit as a percentage of net sales in the quarter ended March 31, 2024 as compared to the quarter ended March 31, 2023 is due to improving product mix and lower material costs. Gross profit margins in our ingredient business declined due to a more competitive pricing environment and less fixed cost leverage.

margin shift.
Selling, general and administrative expense
Selling, general and administrative expense for the ninethree months ended September 30, 2017 decreased to approximately $15.5March 31, 2024 was $5.3 million, or 36.4%23.5% of net sales compared to $17.1$5.1 million, or 38.5%20.8% of net sales for the same period in 2016. The $1.6 million decreasethree months ended March 31, 2023. Selling, general and administrative expense in the nineprior year quarter included $1.2 million in integration services fees associated with the Company's acquisition of PrimaLoft. The increase in selling, general and administrative expense is due to the increase in headcount as PrimaLoft continues to focus on future growth.
47

Segment operating loss
Segment operating income for the three months ended September 30, 2017March 31, 2024 was $3.3 million, a decrease of $1.7 million when compared to segment operating income of $5.0 million for the same period in 2016 was primarily due to lower customer shipping costs, more efficient field selling2023, as a result of the factors noted above.
The Honey Pot Co.
In the following results of operations, and the timingwe provide comparative pro forma results of our consumer promotion spending.
Income (loss) from operations
Income from operations for the nine months ended September 30, 2017 was approximately $0.1 million, compared to loss from operations of $0.9 million in the same period in 2016, based on the factors described above.

Niche Industrial Businesses
Advanced Circuits
Overview
Advanced Circuits is a provider of small-run, quick-turn and volume production printed circuit boards ("PCBs") to customers throughout the United States. Historically, small-run and quick-turn PCBs have represented approximately 54% of Advanced Circuits’ gross revenues. Small-run and quick-turn PCBs typically command higher margins than volume production PCBs given that customers require high levels of responsiveness, technical support and timely delivery of small-run and quick-turn PCBs and are willing to pay a premiumThe Honey Pot Co. for them. Advanced Circuits is able to meet its customers’ demands by manufacturing custom PCBs in as little as 24 hours, while maintaining over 98.0% error-free production rates and real-time customer service and product tracking 24 hours per day.

Results of Operations
The table below summarizes the income from operations data for Advanced Circuits for the three and nine months ended September 30, 2017 and September 30, 2016.
 Three months ended Nine months ended
(in thousands)September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Net sales$22,436
 $21,679
 $66,404
 $64,945
Cost of sales12,137
 12,066
 36,095
 36,024
Gross profit10,299
 9,613
 30,309
 28,921
Selling, general and administrative expense3,673
 3,417
 10,895
 10,370
Fees to manager125
 125
 375
 375
Amortization of intangibles310
 312
 933
 935
Income from operations$6,191
 $5,759
 $18,106
 $17,241


Three months ended September 30, 2017 compared to the three months ended September 30, 2016March 31, 2024 and March 31, 2023 as if we had acquired the business on January 1, 2023. The results of operations that follow include relevant pro-forma adjustments for pre-acquisition periods and explanations where applicable. The operating results for The Honey Pot Co. have been included in the consolidated results of operation from the date of acquisition in January 2024.
Three months ended
March 31, 2024March 31, 2023
ProformaProforma
Net sales$30,836 100.0 %$31,878 100.0 %
Gross profit$14,919 48.4 %$18,950 59.4 %
SG&A$11,656 37.8 %$8,608 27.0 %
Segment operating (loss) income$(535)(1.7)%$6,544 20.5 %
Pro forma results of operations include the following pro forma adjustments as if we had acquired The Honey Pot Co. on January 1, 2023:
•Incremental stock compensation expense of $0.2 million for the three months ended March 31, 2024 and $0.3 million for the three months ended March 31, 2023. This amount is included in SG&A above and reduces segment operating income.
•Amortization expense associated with the intangible assets recorded in connection with the purchase price allocation for THP of $1.2 million for the three months ended March 31, 2024 and $3.5 for the three months ended March 31, 2023. This amount reduces segment operating income.
•Management fees that would have been payable to the Manager during each period. THP will pay a management fee of $1.0 million per year ($0.25 million per quarter) to CGM. This amount reduces segment operating income.
Proforma three months ended March 31, 2024 compared to proforma three months ended March 31, 2023
Net sales
Net sales for the three months ended September 30, 2017 increased approximately $0.8March 31, 2024 were $30.8 million, a decrease of $1.0 million or 3.3% from net sales of $31.9 million for the three months ended March 31, 2023. The decrease in net sales is primarily due to $22.4normalized replenishment levels in the current quarter as compared to larger, pipe fill orders from new customers and doors added in the drug and grocery channels in the first quarter of 2023.
Gross profit
Gross profit for the quarter ended March 31, 2024 decreased $4.0 million as compared to the three months ended September 30, 2016. The increase in net sales was due to increased sales in Quick-Turn Production PCBs by approximately $0.3 million, Long-Lead Time PCBs by approximately $0.4 million, and Subcontract by approximately $0.2 million, partially offset by decreased sales in Quick-Turn Small-Run PCBs by approximately $0.3 million. On a consolidated basis, Quick-Turn Small-Run PCBs comprised approximately 20.2% of gross sales and Quick-turn production PCBs represented approximately 32.4% of gross sales for the third quarter 2017. Quick-Turn Small-Run PCBs comprised approximately 21.9% of gross sales and Quick-turn production PCBs represented approximately 32.1% of gross sales for the third quarter 2016.

Cost of sales
Cost of sales for both the three months ended September 30, 2017 and the three months ended September 30, 2016 were $12.1 million.March 31, 2023. Gross profit as a percentage of net sales increased 160 basis points duringfor the three months ended September 30, 2017March 31, 2024 was 48.4%, as compared to gross profit as a percentage of sales of 59.4% for the three months ended March 31, 2023. Cost of sales in the quarter ended March 31, 2024 includes $2.7 million in amortization of the inventory step-up resulting from the acquisition purchase allocation. Excluding the effect of the step-up amortization, gross profit as a percentage of net sales for the first quarter of 2024 was 57.0%. The decline in gross profit as a percentage of net sales in the quarter ended March 31, 2024 as compared to the corresponding period in 2016 (45.9% at September 30, 2017 comparedquarter ended March 31, 2023 is attributable to 44.3% at September 30, 2016) primarily aschannel mix shift and higher fixed costs due to the replacement of 3PL distribution with a result of sales mix.larger dedicated distribution center to support future growth and that will benefit from scale efficiencies over time.
Selling, general and administrative expense
Selling, general and administrative expense was approximately $3.7 million infor the three months ended September 30, 2017 and $3.4March 31, 2024 was $11.7 million, in the three months ended September 30, 2016. Selling, general and administrative expense represented 16.4%or 37.8% of net sales compared to $8.6 million, or 27.0% of net sales for the three months ended September 30, 2017 compared to 15.8% of net salesMarch 31, 2023. Selling,
48

general and administrative expense in the corresponding periodcurrent quarter includes $3.5 million in 2016.transaction costs associated with the Company's acquisition of The Honey Pot Co.
Income from operationsSegment operating income (loss)
Income from operationsSegment operating loss for the three months ended September 30, 2017March 31, 2024 was approximately $6.2$0.5 million, a decrease of $7.1 million when compared to $5.8segment operating income of $6.5 million infor the same period in 2016, an increase of approximately $0.4 million, principally2023, as a result of the factors describednoted above.

NineVelocity Outdoor
Three months ended
March 31, 2024March 31, 2023
Net sales$29,899 100.0 %$34,040 100.0 %
Gross profit$6,498 21.7 %$8,015 23.5 %
SG&A$8,219 27.5 %$8,770 25.8 %
Impairment expense$8,182 27.4 %$— — %
Segment operating loss$(12,424)(41.6)%$(3,276)(9.6)%
Three months ended September 30, 2017March 31, 2024 compared to ninethree months ended September 30, 2016March 31, 2023
Net sales
Net sales for the ninethree months ended September 30, 2017 increased approximatelyMarch 31, 2024 were $29.9 million, a decrease of $4.1 million or 12.2%, compared to the same period in 2023. The decrease in net sales for the three months ended March 31, 2024 is due to reduced traffic at retail along with continued focus on inventory levels by our customers.
Gross profit
Gross profit for the quarter ended March 31, 2024 decreased $1.5 million to $66.4 million as compared to the nine monthsquarter ended September 30, 2016. The increase in net sales during the nine months ended September 30, 2017 was due to increased sales in Quick-Turn Production PCBs by approximately $1.2 million, Long-Lead Time PCBs by approximately $0.7 million, Subcontract by approximately $0.5 million, and decreased promotions by approximately $0.3 million. This was partially offset by decreases in Assembly by approximately $0.7 million and Quick-Turn Small-Run PCBs by approximately $0.6 million. On a consolidated basis, Quick-Turn Small-Run comprised approximately 20.7% of gross sales and Quick-Turn Production PCBs represented approximately 32.9% of gross sales for the nine months ended September

30, 2017. Quick-Turn Small-Run comprised approximately 21.9% of gross sales and Quick-Turn Production PCBs represented approximately 31.7% of gross sales for the nine months ended September 30, 2016.
Cost of sales
Cost of sales for the nine months ended September 30, 2017 was $36.1 million as compared to $36.0 million for the nine months ended September 30, 2016.March 31, 2023. Gross profit as a percentage of net sales increased 110 basis points duringdecreased to 21.7% for the ninethree months ended September 30, 2017March 31, 2024 as compared to 23.5% in the three months ended March 31, 2023 due to customer mix and reduced absorption of manufacturing costs driven by lower revenue.
Selling, general and administrative expense
Selling, general and administrative expense for the three months ended March 31, 2024 was $8.2 million, or 27.5% of net sales compared to $8.8 million, or 25.8% of net sales for the three months ended March 31, 2023. Selling, general and administrative expense decreased $0.6 million in the quarter ended March 31, 2024 as compared to the prior period but increased as a percentage of net sales due to the decrease in revenue noted above.
Impairment expense
The Velocity reporting unit was tested quantitatively in connection with the company's annual goodwill impairment testing, The impairment test resulted in Velocity recording impairment expense of $8.2 million in the quarter ended March 31, 2024 after the fair value of the reporting unit did not exceed the carrying value.
Segment operating loss
Segment operating loss for the three months ended March 31, 2024 was $12.4 million, an increase of $9.1 million when compared to segment operating loss of $3.3 million for the same period in 2016 (45.6% at September 30, 20172023 based on the factors noted above.
49

Industrial Businesses
Altor Solutions
Three months ended
March 31, 2024March 31, 2023
Net sales$53,404 100.0 %$61,512 100.0 %
Gross profit$16,173 30.3 %$16,713 27.2 %
SG&A$6,950 13.0 %$7,182 11.7 %
Segment operating income$6,628 12.4 %$6,934 11.3 %
Three months ended March 31, 2024 compared to 44.5% at September 30, 2016) primarilythree months ended March 31, 2023
Net sales
Net sales for the quarter ended March 31, 2024 were $53.4 million, a decrease of $8.1 million, or 13.2%, compared to the quarter ended March 31, 2023. The decrease in net sales during the quarter was due to shifting market conditions of the food delivery and other cold chain markets, which represent one of Altor's largest customer segments.
Gross profit
Gross profit as a resultpercentage of net sales mix.

was 30.3% and 27.2% for the three months ended March 31, 2024 and 2023, respectively. The increase in gross profit as a percentage of net sales in the quarter ended March 31, 2024, was primarily due to an improved cost base and raw material savings.
Selling, general and administrative expense
Selling, general and administrative expense was approximately $10.9 million infor the ninethree months ended September 30, 2017March 31, 2024 was $7.0 million as compared to $10.4$7.2 million infor the ninethree months ended September 30, 2016. Selling,March 31, 2023, a decrease of $0.2 million. The decrease in selling, general and administrative expense represented 16.4% of net sales for the nine months ended September 30, 2017 compared to 16.0% of net sales in the prior year's corresponding period.

Income from operations
Income from operations for the nine months ended September 30, 2017first quarter of 2024 was approximately $18.1 million compareddue to $17.2 million in the same period in 2016, an increase of approximately $0.9 million, principallylower incentive compensation as a result of the factors described above.decrease in revenue.

Segment operating income

Arnold Magnetics
Overview
Founded in 1895 and headquartered in Rochester, New York, Arnold Magnetics is a global manufacturer of engineered magnetic solutions for a wide range of specialty applications and end-markets, including aerospace and defense, motorsport/automotive, oil and gas, medical, general industrial, electric utility, reprographics and advertising specialties markets. Arnold is the largest and, we believe, most technically advanced U. S. manufacturer of engineered magnets. Arnold is one of two domestic producers to design, engineer and manufacture rare earth magnetic solutions. Arnold operates a 70,000 square foot manufacturing assembly and distribution facility in Rochester, New York with nine additional facilities worldwide, including sitesSegment operating income was $6.6 million in the United Kingdom, Switzerland and China. Arnold serves customers via three primary product sectors:
Permanent Magnet and Assemblies and Reprographics (PMAG) (historically approximately 70% of net sales) - High performance permanent magnets and magnetic assemblies with a wide variety of applications including precision motor/generator sensors as well as beam focusing and reprographics applications;
Flexible Magnets ("Flexmag") (historically approximately 20% of net sales) - Flexible bonded magnetic materials for commercial printing, advertising, and industrial applications; and
Precision Thin Metals ("PTM") (historically approximately 10% of net sales) - Ultra thin metal foil products utilizing magnetic and non- magnetic alloys.
Results of Operations
The table below summarizes the income from operations data for Arnold Magnetics for the three and nine months ended September 30, 2017 and September 30, 2016.
 Three months ended Nine months ended
(in thousands)September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Net sales$26,489
 $26,912
 $79,421
 $82,791
Cost of sales19,136
 20,520
 58,847
 63,829
Gross profit7,353
 6,392
 20,574
 18,962
Selling, general and administrative expense4,374
 4,535
 13,285
 12,117
Fees to manager125
 125
 375
 375
Amortization of intangibles854
 881
 2,601
 2,642
Impairment expense—
 —
 8,864
 —
Income (loss) from operations$2,000
 $851
 $(4,551) $3,828


Three months ended September 30, 2017March 31, 2024, a decrease of $0.3 million as compared to the three months ended September 30, 2016March 31, 2023, based on the factors noted above.
Arnold
Three months ended
March 31, 2024March 31, 2023
Net sales$41,287 100.0 %$40,090 100.0 %
Gross profit$11,805 28.6 %$12,041 30.0 %
SG&A$6,883 16.7 %$6,252 15.6 %
Segment operating income$4,172 10.1 %$5,038 12.6 %
Three months ended March 31, 2024 compared to three months ended March 31, 2023
Net sales
Net sales for the three months ended September 30, 2017March 31, 2024 were approximately $26.5$41.3 million, a decreasean increase of $0.4$1.2 million compared to the same period in 2016. 2023. International sales were $13.4 million in both the three months ended March 31, 2024 and the three months ended March 31, 2023. The decreaseincrease in net sales is primarily a result of a decreaseincreased demand in reprographic salesseveral markets including Aerospace and Defense, and Oil and Gas, partially offset by lower demand in the PMAG reporting unit. International sales were $10.6 million in the three months ended September 30, 2017 as compared to $12.2 million in the three months ended September 30, 2016, a decrease of $1.7 million, primarily as a result of the decrease in sales at PMAG.Industrial and Transportation markets.
Cost of sales
50

Cost of salesGross profit
Gross profit for the three months ended September 30, 2017 wereMarch 31, 2024 was approximately $19.1$11.8 million compared to approximately $20.5$12.0 million in the same period of 2016.2023. Gross profit as a percentage of net sales increased from 23.8%decreased to 28.6% for the quarter ended September 30, 2016 to 27.8%March 31, 2024 from 30.0% in the quarter ended September 30, 2017March 31, 2023 principally duedue to manufacturing efficienciesproduct mix and favorable sales mix.

higher staffing related costs.
Selling, general and administrative expense
Selling, general and administrative expense in the three month periodmonths ended September 30, 2017March 31, 2024 was $4.4$6.9 million, comparablean increase in expense of approximately $0.6 millioncompared to approximately $4.5$6.3 million for the three months ended September 30, 2016.March 31, 2023 due to increases in travel expense and consulting fees during the current quarter. Selling, general and administrative expense was 16.7% of net sales in the three months ended March 31, 2024 and 15.6% in the three months ended March 31, 2023.

Segment operating income
Income from operations
Income from operationsSegment operating income for the three months ended September 30, 2017March 31, 2024 was approximately $2.0$4.2 million, an increasea decrease of $1.1$0.9 million when compared to the same period in 2016, principally2023, as a result of the factors noted above.

Nine months ended September 30, 2017 compared to nine months ended September 30, 2016Sterno
Net sales
Net sales for the nine months ended September 30, 2017 were approximately $79.4 million, a decrease of $3.4 million compared to the same period in 2016. The decrease in net sales is primarily a result of decreases in the PMAG ($1.8 million) and Flexmag ($1.5 million) product sectors. PMAG sales represented approximately 73% of net sales for the nine months ended September 30, 2017 and 72% of net sales for the nine months ended September 30, 2016. The decrease in PMAG sales is principally attributable to lower sales of reprographic products. The decrease in Flexmag sales is attributable to lower overall customer demand.
International sales were $31.7 million during the nine months ended September 30, 2017 compared to $33.7 million during the same period in 2016, a decrease of $2.0 million or 5.9%. The decrease in international sales is due to a decrease in sales at PMAG.
Cost of sales
Cost of sales for the nine months ended September 30, 2017 were approximately $58.8 million compared to approximately $63.8 million in the same period of 2016. Gross profit as a percentage of sales increased from 22.9% for the nine months ended September 30, 2016 to 25.9% in the nine months ended September 30, 2017 principally due to a reduction in material costs and lower depreciation expense.

Selling, general and administrative expense
Selling, general and administrative expense in the nine month period ended September 30, 2017 was $13.3 million as compared to approximately $12.1 million for the nine months ended September 30, 2016. The increase in expense is primarily attributable to increased legal and professional fees.

Impairment expense
Arnold performed an interim impairment test at each of its reporting units in the fourth quarter of 2016, which resulted in the recording of preliminary impairment expense of the PMAG reporting unit of $16.0 million. In the first quarter of 2017, Arnold completed the impairment testing of the PMAG reporting unit and recorded an additional $8.9 million impairment expense based on the results of the Step 2 impairment testing.

(Loss) income from operations
Loss from operations for the nine months ended September 30, 2017 was approximately $4.6 million, a decrease of $8.4 million when compared to the same period in 2016, principally as a result of the impairment expense recognized in the first quarter of 2017, and the factors described above. Excluding the impairment expense, income from operations increased $0.5 million, or 12%, when compared to the same period in 2016.

Clean Earth
Overview

Founded in 1990 and headquartered in Hatboro, Pennsylvania, Clean Earth is a provider of environmental services for a variety of contaminated materials. Clean Earth provides a one-stop shop solution that analyzes, treats, documents and recycles waste streams generated in multiple end-markets such as power, construction, commercial development, oil and gas, medical, infrastructure, industrial and dredging. Historically, the majority of Clean Earth’s revenues have been generated by contaminated soils, which includes environmentally impacted soils, drill cuttings and other materials which are treated at one of its nine permitted soil treatment facilities. Clean Earth also operates four RCRA Part B hazardous waste facilities. The remaining revenue has been generated by dredge material, which consists of sediment removed from the floor of a body of water for navigational purposes and/or environmental remediation of contaminated waterways and is treated at one of its two permitted dredge processing facilities. Approximately 98% of the material processed by Clean Earth is beneficially reused for such purposes as daily landfill cover, industrial and brownfield redevelopment projects.

Results of Operations
The table below summarizes the income from operations data for Clean Earth for the three and nine months ended September 30, 2017 and September 30, 2016.
 Three months ended Nine months ended
(in thousands)September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Service revenues$55,676
 $51,515
 $153,370
 $134,035
Cost of services39,787
 36,863
 110,639
 95,967
Gross profit15,889
 14,652
 42,731
 38,068
Selling, general and administrative expense6,782
 7,352
 25,205
 22,263
Fees to manager125
 125
 375
 375
Amortization of intangibles3,390
 3,582
 9,554
 9,570
Income from operations$5,592
 $3,593
 $7,597
 $5,860

Three months ended
March 31, 2024March 31, 2023
Net sales$64,860 100.0 %$75,019 100.0 %
Gross profit$17,711 27.3 %$16,560 22.1 %
SG&A$8,689 13.4 %$7,830 10.4 %
Segment operating income$4,785 7.4 %$4,493 6.0 %
Three months ended September 30, 2017March 31, 2024 compared to the three months ended September 30, 2016.March 31, 2023
Service revenuesNet sales
RevenuesNet sales for the three months ended September 30, 2017March 31, 2024 were approximately $55.7$64.9 million, an increasea decrease of $4.2$10.2 million, or 8.1%or 13.5%, compared to the same period in 2016.2023. The increase in revenues is primarilynet sales variance reflects lower sales due to acquisitions madechanges in the second quarter of 2016 and the first quarter of 2017 as well as an increase in contaminated soil revenue. For the three months ended September 30, 2017, contaminated soil revenue increased 8% as compared to the same period last year, which is principally attributable to recent large project awards. Hazardous waste revenues increased 30% principallyconsumer discretionary buying behaviors as a result of acquisitions. Revenue from dredged material decreased for the three months ended September 30, 2017 as compared to the same period in 2016 due to the timing of projects. Contaminated soils represented approximately 55% of net service revenues for both the three months ended September 30, 2017 and the three months ended September 30, 2016.inflationary pressures.

Gross profit
Cost of services
Cost of services for the three months ended September 30, 2017 were approximately $39.8 million compared to approximately $36.9 million in the same period of 2016. The increase in costs of services was primarily due to the increased revenue and volume, as well as the mix of services. Gross profit as a percentage of service revenues was flat quarter over quarter, increasingnet sales increased from 28.4%22.1% for the three month periodmonths ended September 30, 2016March 31, 2023 to 28.5%27.3% for the same periodthree months ended September 30, 2017.

March 31, 2024. The increase in gross profit percentage in the first quarter of 2024 as compared to the first quarter of 2023 was primarily attributable to favorable direct materials, labor and freight costs across both divisions of the company.
Selling, general and administrative expense
Selling, general and administrative expense for the three months ended September 30, 2017 decreased to approximately $6.8 million, or 12.2%, of service revenues, as compared to $7.4 million, or 14.3%, of service revenues for the same period in 2016. The decrease was primarily due to decreased labor costs.


Income from operations
Income from operations for the three months ended September 30, 2017March 31, 2024 was approximately $5.6$8.7 million as compared to income from operations of $3.6$7.8 million for the three months ended September 30, 2016,March 31, 2023, an increase of $2.0$0.9 million primarily as a result of those factors described above.

Nine months ended September 30, 2017 compared to nine months ended September 30, 2016
Service revenues
Service revenues for the nine months ended September 30, 2017 were approximately $153.4 million, an increase of $19.3 million, or 14.4%, compared to the same period in 2016. The increase in service revenues is principally due to two acquisitions in 2016 and one in 2017, as well as increased contaminated soil revenue, offset in part by lower dredge revenue.

For the nine months ended September 30, 2017, contaminated soil revenue increased 13% as compared to the same period last year principally attributable to increased development activity in the Northeast and an acquisition made in 2016. Hazardous waste revenues increased 32% principally as a result of acquisitions. Revenue from dredged material decreased 44% for the nine months ended September 30, 2017 as compared to the same period in 2016 due to the timing of new bidding activity. Contaminated soils represented approximately 57% of net service revenues for the nine months ended September 30, 2017 compared to 58% for the nine months ended September 30, 2016.

Cost of services
Cost of services for the nine months ended September 30, 2017 were approximately $110.6 million compared to approximately $96.0 million in the same period of 2016. Gross profit as a percentage of service revenues decreased from 28.4% for the nine month period ended September 30, 2016 to 27.9% for the same period ended September 30, 2017. The decrease in gross margin during the nine months ended September 30, 2017 was primarily due to reduced dredged material volume.

Selling, general and administrative expense
Selling, general and administrative expense for the nine months ended September 30, 2017 increased to approximately $25.2 million, or 16.4%, of service revenues, as compared to $22.3 million, or 16.6%, of service revenues for the same period in 2016. The $2.9 million increase in selling, general and administrative expense in the nine months ended September 30, 2017 compared to 2016 is primarily attributable to acquisitions and increased corporate expenses.
Income from operations
Income from operations for the nine months ended September 30, 2017 was approximately $7.6 million, an increase of $1.7 million as compared to the nine months ended September 30, 2016, primarily as a result of those factors described above.

Sterno Products
Overview
Sterno Products, headquartered in Corona, California, is a manufacturer and marketer of portable food warming fuel and creative table lighting solutions for the food service industry. Sterno Products offers a broad range of wick and gel chafing fuels, butane stoves and accessories, liquid and traditional wax candles, catering equipment and lamps. Sterno Products was formed in 2012 with the merger of two manufacturers and marketers of portable food warming fuel products, The Sterno Products Group LLC and the Candle Lamp Company, LLC. On January 22, 2016, Sterno Products acquired Sterno Home, a seller of flameless candles and outdoor lighting products through the retail segment.
Results of Operations
The table below summarizes the income from operations data for Sterno Products for the three and nine months ended September 30, 2017 and September 30, 2016.

 Three months ended Nine months ended
(in thousands)September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Net sales$52,696
 $55,582
 $163,092
 $156,692
Cost of sales38,865
 39,744
 119,975
 113,724
      Gross Profit13,831
 15,838
 43,117
 42,968
Selling, general and administrative expense7,466
 8,556
 23,872
 23,568
Management fees125
 125
 375
 375
Amortization of intangibles1,829
 1,621
 5,487
 4,930
      Income from operations$4,411
 $5,536
 $13,383
 $14,095
Three months ended September 30, 2017 compared to the three months ended September 30, 2016
Net sales
Net sales for the three months ended September 30, 2017 were approximately $52.7 million, a decrease of $2.9 million, or 5.2%, compared to the same period in 2016. The sales variance reflects a decrease in sales at the candle and outdoor divisions of Sterno Home, offset by the timing of stocking programs of key Sterno food service customers.
Cost of sales
Cost of sales for the three months ended September 30, 2017 were approximately $38.9 million compared to approximately $39.7 million in the same period of 2016. Gross profit as a percentage of sales decreased from 28.5% for the three months ended September 30, 2016 to 26.2% for the same period ended September 30, 2017. The decrease in gross profit during the three months ended September 30, 2017 primarily reflectsreflecting an increase in chemical material costssales and lower margins on certain sales.
marketing related salaries and promotional activity for both divisions of the company in the current period. Selling, general and administrative expense
Selling, general and administrative expense for the three months ended September 30, 2017 and 2016 was approximately $7.5 million and $8.6 million, respectively. Selling, generalgeneral and administrative expense represented 14.2%13.4% of net sales for the three months ended September 30, 2017 as compared to 15.4% of net sales for the same period in 2016. The decrease in selling, generalMarch 31, 2024 and administrative expense of $1.1 million during the third quarter of 2017 reflects Sterno Home staffing reductions due to restructuring, as well as reduced legal fees, licensing and royalty costs.
Income from operations
Income from operations10.4% for the three months ended September 30, 2017March 31, 2023.
Segment operating income
Segment operating income for the three months ended March 31, 2024 was approximately $4.4 million, a decrease of $1.1 million when compared to the same period in 2016, as a result of those factors described above.
Nine months ended September 30, 2017 compared to nine months ended September 30, 2016
Net sales
Net sales for the nine months ended September 30, 2017 were approximately $163.1$4.8 million, an increase of $6.4$0.3 million or 4.1%, compared to the same period in 2016. The increase in net sales is a result of the acquisition of Sterno Home in January 2016, partially offset by sales shortfall at Sterno Home's candle division due to reduced demand and non-repeating orders. Sterno Home had net sales of $9.0 million in the period prior to acquisition in January 2016.

Cost of sales
Cost of sales for the ninethree months ended September 30, 2017 were approximately $120.0 million compared to approximately $113.7 million inMarch 31, 2023 based on the same period of 2016. Gross profit as a percentage of sales decreased from 27.4% for the nine months ended September 30, 2016 to 26.4% for the same period ended September 30, 2017. The decrease in gross margin during the nine months ended September 30, 2017 primarily reflects an increase in chemical material costs.

Selling, general and administrative expense
Selling, general and administrative expense for the nine months ended September 30, 2017 and 2016 was approximately $23.9 million and $23.6 million, respectively. Selling, general and administrative expense represented 14.6% of net sales for the nine months ended September 30, 2017 as compared to 15.0% of net sales for the same period in 2016. The decrease as a percentage of net sales during the nine months ended September 30, 2017 as compared to the same period in 2016 reflects the increase in sales during the period and Sterno Home reorganization efforts to reduce staff, as well as lower consulting fees, R&D expense and reduced legal expense.

Income from operations
Income from operations for the nine months ended September 30, 2017 was approximately $13.4 million, a decrease of $0.7 million when compared to the same period in 2016, as a result of those factors describednoted above.

51

Liquidity and Capital Resources

We generate cash primarily from the operations of our subsidiaries, and we have the ability to borrow under our 2022 Credit Facility to fund our operating, investing and financing activities. In January 2023, the Company's Board of Directors approved a share repurchase program authorizing the Company to repurchase, through December 31, 2023, up to $50 million of its outstanding common shares. In 2021, we filed a prospectus supplement pursuant to which we may, but we have no obligation to, issue and sell up to $500 million of the common shares of the Trust in amounts and at times to be determined by us. In the first quarter of 2024, we filed a prospectus supplement pursuant to which we may, but we have no obligation to, issue and sell up to $100 million of the preferred shares of the Trust in amounts and at times to be determined by us. Actual sales will depend on a variety of factors to be determined by us from time to time, including, market conditions, the trading price of Trust common and preferred shares and determinations by us regarding appropriate sources of funding.
Liquidity

AtOur liquidity requirements primarily relate to our debt service requirements, payments of our common and preferred share distributions, management fees paid to our Manager, working capital needs and purchase commitments at our subsidiaries. As of March 31, 2024, we had $1,000.0 million of indebtedness associated with our 5.250% 2029 Notes, $300.0 million of indebtedness associated with our 5.000% 2032 Notes, $382.5 million outstanding on our 2022 Term Loan, and $46.0 million outstanding on our 2022 Revolving Credit Facility. Only our 2022 Term Loan has required principal payments. Long-term debt liquidity requirements consist of the payment in full of our Notes upon their respective maturity dates, amounts outstanding under our 2022 Revolving Credit Facility upon its maturity date, and principal payments under our 2022 Term Loan. The 2022 Term Loan requires quarterly payments ranging from $2.5 million to $7.5 million, commencing September 30, 2017,2022, with a final payment of all remaining principal and interest due on July 12, 2027, which is the 2022 Term Loan’s maturity date. At March 31, 2024, approximately 25% of our outstanding debt was subject to interest rate changes.
At March 31, 2024, we had approximately $41.5$64.7 million of cash and cash equivalents on hand, an increasea decrease of $1.7$385.8 million as compared to the year ended December 31, 2016. The increase in cash is due primarily2023. In November 2023, we sold our Marucci subsidiary, receiving approximately $484.0 million of total proceeds at closing. A portion of the proceeds from the Marucci sale were used to pay down outstanding debt under the sale of our remaining shares of our FOX investment in the first quarter of 2017, which resulted in net proceeds of $136.1 million,Company’s 2022 Revolving Credit Facility and the issuance of preferred sharesremaining amount was held in short term investment and savings accounts at December 31, 2023. On January 31, 2024, the second quarter of 2017, offset by ourCompany completed the acquisition of Crosman andThe Honey Pot Co. using cash held on our common share distributions.balance sheet. The majority of our cash is in non-interest bearing checking accounts or invested in short-term money market accounts and is maintained in accordance with the Company’s investment policy, which identifies allowable investments and specifies credit quality standards.

Our availability under our 2022 Revolving Credit Facility at March 31, 2024 was $551.6 million. The change in cash and cash equivalents for the three months ended March 31, 2024 and 2023 is as follows:
  Nine months ended
(in thousands) September 30, 2017 September 30, 2016
Cash provided by operations $59,236
 $60,594
Cash used investing activities (62,956) (417,284)
Cash provided by financing activities 7,862
 300,407
Effect of exchange rates on cash and cash equivalents (2,427) (3,197)
Increase (decrease) in cash and cash equivalents $1,715
 $(59,480)

Operating Activities:
Three months ended
(in thousands)March 31, 2024March 31, 2023
Cash provided by (used in) operating activities$(13,201)$15,545 
For the ninethree months ended September 30, 2017,March 31, 2024, cash flows provided byused in operating activities totaled approximately $59.2$13.2 million, which represents a $1.4$28.7 million decreaseincrease in cash use compared to cash provided by operating activities of $60.6$15.5 million during the nine monththree-month period ended September 30, 2016 (from both continuing and discontinued operations). This decrease is principally the result of changes in cash used for working capital and non-cash charges in the nine months ended September 30, 2017 as compared to the same period in 2016, primarily as a result of the 5.11 acquisition, which occurred in the third quarter of 2016, and the effect of the cash flows from add-on acquisitions completed in 2016.March 31, 2023. Cash used in operating activities for working capital for the ninethree months ended September 30, 2017March 31, 2024 was $24.3$60.9 million, as compared to cash used in operating activities for working capital of $5.0$36.9 million for the ninethree months ended September 30, 2016. The increase was primarily dueMarch 31, 2023. We typically have a higher usage of cash for working capital in the first half of the year as most of our subsidiaries will build up inventories after the fourth quarter of the prior year. In the prior year, several of our businesses were working through higher levels of inventory that that were increased to combat supply chain issues during 2022 given longer lead times, resulting in lower cash outflows in the first quarter of 2023.
Lugano has used forsignificant cash to build inventory by our branded consumer businesses duringto support its sales growth strategy, with net inventory build of $80 million in the third quarter.first quarter of 2024 and $27 million in the first quarter of 2023. We expect Lugano to continue to use working capital to support its growth.
52

Investing Activities:
Three months ended
(in thousands)March 31, 2024March 31, 2023
Cash provided by (used in) investing activities$(382,478)$154,724 
Cash flows used in investing activities for the ninethree months ended September 30, 2017March 31, 2024 totaled approximately $63.0$382.5 million, compared to cash used inprovided by investing activities of $417.3$154.7 million in the same period of 2016.2023. In the current year, wecash used in investing activities reflects our acquisition of The Honey Pot Co. in January 2024, while in the prior year, investing activities reflects the sale of Advanced Circuits and the proceeds received approximately $136.1 million related to the sale of our remaining investment in FOX, offset by cash used for our Crosman acquisition and add-on acquisitions at our Clean Earth, Crosman and Sterno businesses ($164.7sale. Capital expenditures spend decreased $7.2 million during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, with $7.7 million in total) and capital expenditures ($31.0 million). Capitalin 2024 and $14.9 million in capital expenditures in 2023. The decrease in capital expenditures is primarily due to a lower investment at 5.11 as they reduced the nine months ended September 30, 2017 increased approximately $15.4 millionnumber of retail stores they plan to open in the current year as compared to the prior year, due primarily to expenditures at our 5.11 business.year. We expect capital expenditures for the full year of 20172024 to be approximately $42between approximately $50 million to $47$60 million. The 2016 investing activities reflect the acquisition of 5.11 in August 2016 ($395.4 million) and add-on acquisitions by Sterno in January 2016 ($35.6 million), Ergobaby in May 2016 ($65.0 million) and add-on acquisitions at Clean Earth during the first and second quarter of 2016 ($33.6 million), offset by proceeds from a partial divestiture of our FOX shares of $47.7 million.

Financing Activities:
Three months ended
(in thousands)March 31, 2024March 31, 2023
Cash provided by (used in) financing activities$10,905 $(178,446)
Cash flows provided by financing activities totaled approximately $7.9$10.9 million during the ninethree months ended September 30, 2017March 31, 2024 compared to cash flows used in financing activities of $178.4 million during the three months ended March 31, 2023. Financing activities in the current year reflects $2.0 million in Trust common and preferred shares issued under our at-the-market share offering program while financing activities in the first three months of 2023 reflects $4.0 million on purchases under our share repurchase program. In the current year, we borrowed $46 million, net, against our 2022 Revolving Credit Facility, while in the prior year, we used the proceeds from our sale of Advanced Circuits to repay amounts outstanding under our revolving credit facility, resulting in net repayments in the first quarter of 2023 of $147 million under our 2022 Revolving Credit Facility. The current year cash provided by financing activities also reflects the amount of $300.4 million duringequity investment made by noncontrolling shareholders related to the nine months ended September 30, 2016. acquisition of The Honey Pot Co. ($41.7 million).Financing activities in both periods reflect the payment of our quarterly distribution ($64.7 million in 2017common and $58.6 million in 2016), activity on our credit facilitypreferred share distributions, and current period financing cash flows includes the payment of athe profit allocation related tofrom the sale of FOX shares ($39.2 million in 2017 and $16.8 million in 2016). InMarucci to the nine months ended September 30, 2017, activity on our credit facility totaled $16.8 millionAllocation Interest Holders of cash borrowings, while the activity for the nine months ended September 30, 2016 reflected net borrowings of $412.1

million, which was used to fund the acquisitions of 5.11, as well as the acquisitions of Baby Tula by Ergobaby, a Clean Earth add-on acquisition and the repurchase of Ergobaby common stock from a noncontrolling shareholder. We also completed the Series A Preferred Share offering during the second quarter of 2017, resulting in cash proceeds net of transaction costs, of $96.4$48.9 million.
Intercompany Debt
A component of our acquisition financing strategy that we utilize in acquiring the subsidiary businesses we own and manage is to provide both equity capital and debt capital, raised at the parent level through our existing credit facility. Our strategy of providing intercompany debt financing within the capital structure of the businesses that we acquire and manageour subsidiaries allows us the ability to distribute cash to the parent company through monthly interest payments and amortization of the principal on these intercompany loans. Each loan to our subsidiary businesses has a scheduled maturity and each subsidiary business is entitled to repay all or a portion of the principal amount of the outstanding loans, without penalty, prior to maturity. Certain of our businessessubsidiaries have paid down their respective intercompany debt balances through the cash flow generated by these businessessubsidiaries and we have recapitalized, and expect to continue to recapitalize, these businessessubsidiaries in the normal course of our business. The recapitalization process involves funding the intercompany debt using either cash on hand at the parent or our revolvingapplicable credit facility, and serves the purpose of optimizing the capital structure at our subsidiaries and providing the noncontrolling shareholders with a distribution on their ownership interest in a cash flow positive business.

We will from time to time, amend the intercompany credit agreements to reflect changes in the business or funding needs of our businesses. The following amendments have been made in the time period indicated:
As a resultWe have made several amendments to the Lugano intercompany credit agreement to allow Lugano to continue to expand their operations and build inventory to support their salon expansion. Amendments were made to the Lugano intercompany credit agreement in the first quarter of significant investment2024, and the second, third and fourth quarter of 2023. We expect to continue to fund Lugano to support their sales growth in operational improvementsthe upcoming year.
53

In the first quarter of 2024, we amended the PrimaLoft intercompany credit agreement to enhance its competitive position, including planned capital expendituresto reposition Arnold for future growth, we have granted Arnold a waiver for certain financialamend the fixed charge ratio and leverage ratio covenants undercontained within their intercompany debtcredit agreement.
In the second quarter of 2023, we amended the Velocity intercompany credit agreement effectiveto extend the term of the facility and to increase the borrowing availability under the facility.
In the fourth quarter ended June 30, 2017 through December 31, 2017. Additionally, dueof 2023, we amended the Ergo Credit Agreement to significant capital expenditures related to the implementation of a new ERP system and a warehouse expansion, we have granted 5.11 a waiver under their intercompany debt agreement effective the quarter ended September 30, 2017. The waiver permits 5.11 to exclude certain capital expenditures associated with the ERP system and warehouse expansion from the calculation ofpermit the fixed charge coverage ratio.ratio to remain at the September 30, 2023 level through the period ending December 31, 2024.
In December 2023, we completed a recapitalization at BOA whereby the LLC entered into an amendment to the intercompany loan agreement with BOA (the "BOA Credit Agreement"). The BOA Credit Agreement was amended to provide for additional term loan borrowings of $165.9 million to fund a distribution to shareholders. The LLC received a distribution of $131.0 million related to their ownership of the outstanding shares of BOA on the date of the distribution. Noncontrolling shareholders received a distribution of $11.7 million, and the remaining amount of the recapitalization was used to repurchase employee stock options and to pay a bonus to employees who held phantom stock options and were not eligible to participate in the distribution to noncontrolling shareholders.
All of our subsidiaries except PrimaLoft and Velocity were in compliance with the financial covenants included within their intercompany credit arrangements at March 31, 2024. We issued a waiver to PrimaLoft for the quarters ended December 31, 2023 and March 31, 2024 related to their leverage ratio in the intercompany credit agreement. We issued a waiver to Velocity related to the fixed charge and leverage ratios in the intercompany credit agreement for the quarter ended March 31, 2024.
All intercompany loans eliminate in consolidation and are not reflected in the consolidated balance sheet. As of September 30, 2017,March 31, 2024, we had the following outstanding loans due from each of our businesses:subsidiary businesses (in thousands):
(in thousands)  
5.11 Tactical $185,750
Crosman $97,327
Ergobaby $66,448
Liberty $49,737
Manitoba Harvest $48,273
Advanced Circuits $95,064
Arnold Magnetics $72,715
Clean Earth $172,786
Sterno Products $75,127

SubsidiaryIntercompany loan
5.11$129,671 
BOA207,731 
Ergobaby83,125 
Lugano451,011 
PrimaLoft155,700 
The Honey Pot Co.108,500 
Velocity Outdoor114,850 
Altor71,743 
Arnold67,697 
Sterno115,664 
Total intercompany debt$1,505,692 
Corporate and eliminations(1,505,692)
Total$— 
Our primary source of cash is from the receipt of interest and principal on the outstanding loans to our businesses.subsidiaries. Accordingly, we are dependent upon the earnings of and cash flow from these businesses, which are available for (i) operating expenses; (ii) payment of principal and interest under our 2014 Credit Facility;applicable credit facility and interest on our Senior Notes; (iii) payments to CGM due pursuant to the Management Services AgreementMSA and the LLC Agreement; (iv) cash distributions to our shareholders; and (v) investments in future acquisitions. Payments made under (iii) above are required to be paid before distributions to shareholders and may be significant and exceed the funds held by us, which may require us to dispose of assets or incur debt to fund such expenditures.

Financing Arrangements

We believe that we currently have sufficient liquidity and capital resources to meet our existing obligations, including quarterly distributions to our shareholders, as approved by our board of directors, over the next twelve months. The quarterly distribution for the quarter ended September 30, 2017 on our common shares was paid on October 26, 2017 and totaled $21.6 million. A distribution on our Series A Preferred Shares of $2.5 million was paid on October 30, 2017.

Investment in FOX
On March 13, 2017, Fox Factory Holding Corp. ("FOX") closed on a secondary public offering of 5,108,718 shares of FOX common stock held by CODI, which represented CODI's remaining investment in FOX. CODI received $136.1 million in net proceeds as a result of the sale. We acquired a controlling interest in FOX in January 2008 for approximately $80.4 million. FOX completed an initial public offering in August 2013, and additional secondary offerings in July 2014, March, August and

November 2016, and March 2017. We sold shares of FOX in each of these offerings, recognizing total net proceeds of $465.1 million.

20142022 Credit Facility
On June 6, 2014,July 12, 2022, we entered into a new credit facility, the 2014Third Amended and Restated Credit Agreement (the "2022 Credit Facility") to amend and restate the 2021 Credit Facility. The 2022 Credit Facility which replaced our then existing 2011 Credit Facility entered into in October 2011. On August 31, 2016, we entered into an Incremental Facility Amendment to the 2014 Credit Agreement. The Incremental Facility Amendment provided an increase to the 2014 Revolving Credit Facility of $150.0 million, and the 2016 Incremental Term Loan in the amount of $250.0 million. The 2014 Credit Facility now provides for (i) revolving loans, swing line loans and letters of credit up to a maximum aggregate amount of $550$600 million (the "2022 Revolving Credit Facility") and maturesalso permits the LLC, prior to the applicable maturity date, to increase the revolving loan commitment and/or obtain
54

term loans in June 2019, (ii)an aggregate amount of up to $250 million, subject to certain restrictions and conditions. All amounts outstanding under the 2022 Revolving Credit Facility will become due on July 12, 2027, which is the maturity date of loans advanced under the 2022 Revolving Credit Facility. The 2022 Credit Facility also provides for a $325$400 million term loan and (iii) a $250 million incremental term loan. Our 2014(the “2022 Term Loan and 2016 IncrementalLoan”). The 2022 Term Loan requires quarterly payments ranging from $2.5 million to $7.5 million, commencing September 30, 2022, with a final payment of all remaining principal and interest due on July 12, 2027, which is the outstanding principal balance due in June 2021. (Refer to Note I - "Debt" of the condensed consolidated financial statements for a complete description of our 2014 Credit Facility.)

In March 2017, we amended the 2014 Credit Facility (the "Fourth Amendment") to reduce the applicable rate of interest for the 20142022 Term Loan and 2016 Incremental Term Loan. Under the Fourth Amendment, outstanding LIBOR loans bear interest at LIBOR plus an applicable rate of 2.75% and outstanding Base Rate loans bear interest at Base Rate plus 1.75%. Prior to the amendment, the outstanding term loans bore interest at LIBOR plus 3.25% or Base Rate plus 2.25%.
In October 2017, the Company further amended the 2014 Credit Facility (the "First Refinancing Amendment") to, in effect, refinance the 2014 Term Loan and the 2016 Incremental Term Loan (together, the “Term Loans”). Pursuant to the First Refinancing Amendment, outstanding Term Loans at LIBOR Rate bear interest at LIBOR plus an applicable rate of 2.25% and outstanding Term Loans at Base Rate bear interest at Base Rate plus 1.25%. Prior to the amendment, the outstanding Term Loans bore interest at LIBOR plus 2.75% or Base Rate plus 1.75%.

Loan’s maturity date.
We had $523.2$551.6 million in net availability under the 20142022 Revolving Credit Facility at September 30, 2017.March 31, 2024. The outstanding borrowings under the 20142022 Revolving Credit Facility includes $1.3include $2.5 million at September 30, 2017 of outstanding letters of credit.credit at March 31, 2024, which are not reflected on our balance sheet.

Senior Notes
2032 Notes
On November 17, 2021, we consummated the issuance and sale of $300 million aggregate principal amount of our 5.000% Senior Notes due 2032 (the "2032 Notes") offered pursuant to a private offering to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933 (the "Securities Act"), and to non-U.S. persons under Regulation S under the Securities Act. The 2032 Notes were issued pursuant to an indenture, dated as of November 17, 2021 (the “2032 Notes Indenture”), between the LLC and U.S. Bank National Association, as trustee. The 2032 Notes bear interest at the rate of 5.000% per annum and will mature on January 15, 2032. Interest on the 2032 Notes is payable in cash on July 15th and January 15th of each year. The 2032 Notes are general unsecured obligations of the LLC and are not guaranteed by our subsidiaries. The proceeds from the sale of the 2032 Notes were used to repay debt outstanding under the 2021 Credit Facility.
2029 Notes
On March 23, 2021, we consummated the issuance and sale of $1,000 million aggregate principal amount of our 5.250% Senior Notes due 2029 (the “2029 Notes”) offered pursuant to a private offering to qualified institutional buyers in accordance with Rule 144A under the Securities Act, and to non-U.S. persons under Regulation S under the Securities Act.The 2029 Notes were issued pursuant to an indenture, dated as of March 23, 2021 (the “2029 Notes Indenture”), between the LLC and U.S. Bank National Association, as trustee. The 2029 Notes bear interest at the rate of 5.250% per annum and will mature on April 15, 2029. Interest on the 2029 Notes is payable in cash on April 15th and October 15th of each year. The 2029 Notes are general unsecured obligations of the LLC and are not guaranteed by our subsidiaries.
The following table reflects required and actual financial ratios as of September 30, 2017March 31, 2024 included as part of the affirmative covenants in our 20142022 Credit Facility: 
Facility.
Description of Required Covenant RatioCovenant Ratio RequirementActual Ratio
Consolidated Fixed Charge Coverage RatiogreaterGreater than or equal to 1.50:1.03.12:4.15:1.0
Total Debt to EBITDAConsolidated Senior Secured Leverage RatiolessLess than or equal to 3.50:1.00.89:1.0
Consolidated Total Leverage Ratio2.76:Less than or equal to 5.00:1.03.84:1.0

We intend to use the availability under our 2014 Credit Facility and cash on hand to pursue acquisitions of additional businesses to the extent permitted under our 2014 Credit Facility, to fund distributions and to provide for other working capital needs.

Interest Expense
We recorded interest expense totaling $22.6 million for the nine months ended September 30, 2017 compared to $23.2 million for the comparable period in 2016. The components of interest expense and periodic interest charges on outstanding debt are as follows (in thousands):
 Three months ended March 31,
 20242023
Interest on credit facilities$7,985 $8,728 
Interest on Senior Notes16,875 16,875 
Unused fee on Revolving Credit Facility551 491 
Other interest expense12 92 
Interest income(1,848)(6)
Interest expense, net$23,575 $26,180 
55

 Nine months ended September 30,
 2017 2016
Interest on credit facilities$18,008
 $12,612
Unused fee on Revolving Credit Facility2,143
 1,356
Amortization of original issue discount781
 536
Unrealized loss on interest rate derivatives (1)
1,178
 8,322
Letter of credit fees63
 79
Other414
 320
Interest expense$22,587
 $23,225
Average daily balance of debt outstanding$593,314
 $403,988
Effective interest rate (1)
5.1% 7.7%

(1)On September 16, 2014, we purchased anThe following table provides the effective interest rate swap (the "New Swap") with a notional amount of $220 million effective April 1, 2016 through June 6, 2021. The agreement requires us to pay interest on the notional amount at the rate

of 2.97% in exchange for the three-month LIBOR rate. At September 30, 2017, the New Swap had a fair value loss of $8.8 million, reflecting the present value of future payments and receipts under the agreement and is reflected as a component of interest expense and current and other non-current liabilities. Refer to "Note J - Derivatives and Hedging Activities" of the condensed consolidated financial statements for a description of the New Swap.Company’s outstanding debt at March 31, 2024 and December 31, 2023 (in thousands):

March 31, 2024December 31, 2023
Effective Interest RateAmountEffective Interest RateAmount
2029 Senior Notes5.25%$1,000,000 5.25%$1,000,000 
2032 Senior Notes5.00%300,000 5.00%300,000 
2022 Term Loan7.59%382,500 7.50%385,000 
2022 Revolving Credit Facility8.16%46,000 —%— 
Unamortized debt issuance costs(12,518)(13,121)
Total debt outstanding$1,715,982 $1,671,879 
Income Taxes
We incurred an income tax benefit of $2.0 million with an effective income tax rate of (11.2)% during the nine months ended September 30, 2017 compared to income tax expense of $9.8 million with an effective income tax rate of 15.8% during the same period in 2016. The impairment expense at our Arnold business and non-deductible costs at the corporate level, including the effect of the loss on our equity investment of FOX prior to the sale of our FOX shares in the first quarter, account for the majority of the remaining difference in our effective income tax rates in the first nine months of 2017, while non-deductible costs at the corporate level, including the gain on our equity investment in FOX, account for the majority of the remaining differences in the first nine months of 2016. Certain foreign operations are subject to foreign income taxation under existing provisions of the laws of those jurisdictions. Pursuant to U.S. tax laws, earnings from those jurisdictions will be subject to the U.S. income tax rate when those earnings are repatriated.
The components of income tax expense as a percentage of income from continuing operations before income taxes for the nine months ended September 30, 2017 and 2016 are as follows: 
  Nine months ended September 30,
  2017 2016
United States Federal Statutory Rate (35.0)% 35.0 %
State income taxes (net of Federal benefits) (1.0) 0.2
Foreign income taxes 4.5
 1.4
Expenses of Compass Group Diversified Holdings LLC representing a pass through to shareholders (1)
 0.3
 6.3
Impairment expense 16.9
 —
Effect of loss (gain) on equity method investment (2)
 11.0
 (33.3)
Credit utilization (7.7) —
Impact of subsidiary employee stock options 2.5
 0.7
Domestic production activities deduction (2.3) (0.6)
Effect of undistributed foreign earnings 2.0
 4.5
Non-recognition of NOL carryforwards at subsidiaries (3.5) —
Other 1.1
 1.6
Effective income tax rate (11.2)% 15.8 %

(1)The effective income tax rate for the nine months ended September 30, 2017 and 2016 includes a loss at the Company's parent, which is taxed as a partnership.

(2) The equity method investment in FOX was held at the Company's parent, which is taxed as a partnership, resulting in the gain or loss on the investment being a reconciling item in deriving our effective tax rate.



Reconciliation of Non-GAAP Financial Measures
GAAP or U.S. GAAP refersrefer to generally accepted accounting principles in the United States. From time to time we may publicly disclose certain "non-GAAP"“non-GAAP” financial measures in the course of our investor presentations, earnings releases, earnings conference calls or other venues. A non-GAAP financial measure is a numerical measure of historical or future performance, financial position or cash flow that excludes amounts, or is subject to adjustments that effectively exclude amounts, included in the most directly comparable measure calculated and presented in accordance with GAAP in our financial statements, and vice versa for measures that include amounts, or are subject to adjustments that effectively include amounts, that are excluded from the most directly comparable measure as calculated and presented.
Non-GAAP financial measures are provided as additional information to investors in order to provide them with an alternative method for assessing our financial condition and operating results. These measures are not meantintended to be a substitute forreplace the presentation of financial results in accordance with U.S. GAAP, and may be different from or otherwise inconsistent with non-GAAP financial measures used by other companies.

The presentation of these non-GAAP financial measures supplements other metrics we use to internally evaluate our subsidiary businesses and facilitate the comparison of past and present operations.
The tables below reconcile the most directly comparable GAAP financial measures to EarningsAdjusted earnings before Interest, Income Taxes, Depreciation and Amortization ("Adjusted EBITDA"), and Adjusted Earnings.
Adjusted EBITDA and Cash Flow Available for Distribution and Reinvestment ("CAD").

Reconciliation of Net income (Loss) to– EBITDA and Adjusted EBITDA
EBITDA –EBITDA is calculated as net income (loss) from continuing operations before interest expense, income tax expense (benefit), loss on debt extinguishment, depreciation expense and amortization expense. Amortization expenses consist of amortization of intangibles and debt charges, including debt issuance costs, discounts, etc.
Adjusted EBITDA –costs. Adjusted EBITDA is calculated utilizing the same calculation as described above in arriving at EBITDA further adjusted by;by: (i) noncontrollingnon-controlling stockholder compensation, which generally consists of non-cash stock option expense; (ii) successful acquisition costs, which consist of transaction costs (legal, accounting, due diligence, etc.,) incurred in connection with the successful acquisition of a business expensed during the period in compliance with ASC 805; (iii) management fees, which reflect fees due quarterly to our Manager in connection with our Management Services Agreement ("MSA’), as well as Integration Services Fees paid by newly acquired companies; (iv) impairment charges, which reflect write downs to goodwill or other intangible assets; (iv) changes in the fair value of contingent consideration subsequent to initial purchase accounting, (v) integration service fees, which reflect fees paid by newly acquired companies to the Manager for integration services performed during the first year of ownership; and (vi) items of other income or expense that are material to a subsidiary and non-recurring in nature.
Adjusted Earnings –– Adjusted earnings is calculated as net income (loss) adjusted to include the cost of the distributions to preferred shareholders, and adjusted to exclude the impact of certain costs, expenses, gains and losses and other specified items the exclusion of which management believes provides insight regarding our ongoing operating performance. Depending on the period presented, these adjusted measures exclude the impact of certain of the following items: gains (losses) and income (loss) from discontinued operations, income (loss) from noncontrolling interest, amortization expense, subsidiary stock compensation expense, acquisition-related expenses and items of other income or losses recordedexpense that may be material to a subsidiary and non-recurring in connection with our investment; (vi) gains or losses recorded in connection withnature.
Adjusted EBITDA and Adjusted Earnings are non-GAAP measures used by the sale of fixed assets and (vii) foreign currency transaction gains or losses incurred in connection with the conversion of intercompany debt from a foreign functional currencyCompany to U.S. dollar.
assess its performance. We believe that Adjusted EBITDA and Adjusted EBITDAEarnings provide useful information to investors and reflect important financial measures as they excludethat are used by management in the effects of items which reflect the impact of long-term investment decisions, rather than the performance of near term operations. When compared to income (loss) from continuing operations these financial measures are limited in that they do not reflect the periodic costs of certain capital assets used in generating revenuesmonthly analysis of our businesses or the non-cash charges associated with impairments. Thisoperating results and in preparation of our annual budgets. We believe that investors’ understanding of our performance is enhanced
56

by disclosing these performance measures as this presentation also allows investors to view the performance of our businesses in a manner similar to the methods used by us and the management of our subsidiary businesses, provides additional insight into our operating results and provides a measure for evaluating targeted businesses for acquisition.
We believe that these measurements are also useful in measuring our ability to service debt and other payment obligations.Adjusted EBITDA and Adjusted Earnings exclude the effects of items which reflect the impact of long-term investment decisions, rather than the performance of near-term operations. When compared to net income (loss) and net income (loss) from continuing operations, Adjusted Earnings and Adjusted EBITDA, respectively, are each limited in that they do not reflect the periodic costs of certain capital assets used in generating revenues of our subsidiary businesses or the non-cash charges associated with impairments, as well as certain cash charges. The presentation of Adjusted Earnings provides insight into our operating results. Adjusted EBITDA and Adjusted Earnings are not meant to be a substitute for GAAP, and may be different from or otherwise inconsistent with non-GAAP financial measures used by other companies.
Reconciliation of Net income (loss) from continuing operations to Adjusted EBITDA
The following tables reconcile Adjusted EBITDA and Adjusted EBITDA to net income (loss), from continuing operations, which we consider to be the most comparable GAAP financial measure (in thousands):


Adjusted EBITDA
Nine months ended September 30, 2017



57
 Corporate 5.11 Crosman Ergobaby Liberty Manitoba Harvest ACI Arnold Clean Earth Sterno Consolidated
Net income (loss)$(5,407) $(15,043) $(3,375) $5,364
 $2,522
 $(2,505) $8,839
 $(10,282) $(1,980) $6,348
 $(15,519)
Adjusted for:                     
Provision (benefit) for income taxes—
 (10,405) (962) 3,941
 1,351
 (944) 2,755
 270
 (1,041) 3,034
 (2,001)
Interest expense, net22,154
 51
 23
 —
 —
 37
 (11) —
 245
 —
 22,499
Intercompany interest(49,297) 10,697
 2,561
 4,628
 2,989
 3,211
 6,194
 5,194
 10,108
 3,715
 —
Depreciation and amortization1,392
 35,233
 5,932
 10,002
 1,359
 5,011
 2,716
 5,238
 16,502
 8,995
 92,380
EBITDA(31,158) 20,533
 4,179
 23,935
 8,221
 4,810
 20,493
 420
 23,834
 22,092
 97,359
Gain on sale of business(340) —
 —
 —
 —
 —
 —
 —
 —
 —
 (340)
(Gain) loss on sale of fixed assets—
 —
 —
 —
 46
 (227) (10) (9) (56) 486
 230
Noncontrolling shareholder compensation—
 1,786
 —
 521
 7
 750
 18
 149
 1,166
 555
 4,952
Acquisition expenses and other—
 —
 1,836
 —
 —
 —
 —
 —
 —
 —
 1,836
Impairment expense—
 —
 —
 —
 —
 —
 —
 8,864
 —
 —
 8,864
Integration services fee—
 2,333
 375
 —
 —
 —
 —
 —
 —
 —
 2,708
Loss on equity method investment5,620
 —
 —
 —
 —
 —
 —
 —
 —
 —
 5,620
Gain on foreign currency transaction and other(3,583) —
 —
 —
 —
 —
 —
 —
 —
 —
 (3,583)
Management fees20,881
 750
 165
 375
 375
 262
 375
 375
 375
 375
 24,308
Adjusted EBITDA$(8,580) $25,402
 $6,555
 $24,831
 $8,649
 $5,595
 $20,876
 $9,799
 $25,319
 $23,508
 $141,954






Adjusted EBITDA
Three months ended March 31, 2024
Corporate5.11BOAErgobabyLuganoPrimaLoftTHPVelocity OutdoorAltorArnoldSternoConsolidated
Net income (loss) from continuing operations$(5,248)$3,400 3,351 $(1,831)$20,204 $(1,313)$(3,490)$(15,973)$693 $1,651 $992 $2,436 
Adjusted for:
Provision (benefit) for income taxes— 1,203 540 (1,310)7,044 (80)(1,167)579 628 796 453 8,686 
Interest expense, net23,593 (3)(3)— 3 (2)(22)44 — (35)— 23,575 
Intercompany interest(39,938)3,526 5,492 2,123 11,758 4,616 1,996 3,218 2,009 1,700 3,500 — 
Depreciation and amortization254 5,873 5,438 2,185 2,347 5,327 5,138 3,276 4,085 2,153 4,935 41,011 
EBITDA(21,339)13,999 14,818 1,167 41,356 8,548 2,455 (8,856)7,415 6,265 9,880 75,708 
Other (income) expense(39)(34)75 (5)76 — (17)(297)3,236 52 (173)2,874 
Noncontrolling shareholder compensation— 534 1,429 259 504 680 145 194 252 4 329 4,330 
Impairment expense— — — — — — — 8,182 — — — 8,182 
Acquisition expenses— — — — — — 3,479 — — — — 3,479 
Other— — — — — — 90 — — — 184 274 
Adjusted EBITDA
$(21,378)$14,499 $16,322 $1,421 $41,936 $9,228 $6,152 $(777)$10,903 $6,321 $10,220 $94,847 




Adjusted EBITDA
Nine months ended September 30, 2016



58

 Corporate 5.11 Crosman Ergobaby Liberty Manitoba Harvest ACI Arnold Clean Earth Sterno Consolidated
Net income (loss) (1)
$49,623
 $(3,167)   $3,192
 $3,942
 $(4,084) $7,297
 $(3,961) $(3,544) $4,783
 $54,081
Adjusted for:
   Not Applicable 
 
   
 
     
Provision (benefit) for income taxes—
 (1,963)  2,242
 2,614
 (1,468) 3,846
 2,486
 (832) 2,853
 9,778
Interest expense, net22,840
 6
  —
 —
 7
 —
 (2) 341
 12
 23,204
Intercompany interest(36,432) 1,206
  3,405
 3,172
 2,932
 5,619
 5,046
 9,156
 5,896
 —
Depreciation and amortization667
 5,237
  6,306
 2,099
 5,256
 2,938
 7,035
 16,380
 8,617
 54,535
EBITDA36,698
 1,319
  15,145
 11,827
 2,643
 19,700
 10,604
 21,501
 22,161
 141,598
Gain on sale of businesses(2,134) —
  —
 —
 —
 —
 —
 —
 —
 (2,134)
(Gain) loss on sale of fixed assets—
 —
  —
 48
 2
 (10) —
 375
 —
 415
Noncontrolling shareholder compensation—
 —
  585
 327
 564
 18
 192
 853
 472
 3,011
Loss on disposal of assets—
 —
  7,214
 —
 —
 —
 —
 —
 —
 7,214
Acquisition related expenses98
 2,063
  799
 —
 —
 —
 —
 738
 189
 3,887
Integration services fee—
 292
  —
 —
 500
 —
 —
 —
 —
 792
Gain on equity method investment(58,680) —
  —
 —
 —
 —
 —
 —
   (58,680)
Gain on foreign currency transaction and other(2,396) —
  —
 —
 —
 —
 —
 —
 —
 (2,396)
Management fees18,800
 83
  375
 375
 261
 375
 375
 375
 375
 21,394
Adjusted EBITDA (2)
$(7,614) $3,757
  $24,118
 $12,577
 $3,970
 $20,083
 $11,171
 $23,842
 $23,197
 $115,101



(1) Net income (loss) does not include income from discontinued operations for the nine months ended September 30, 2016.
Adjusted EBITDA
Three months ended March 31, 2023
Corporate5.11BOAErgobabyLuganoPrimaLoftVelocity OutdoorAltorArnoldSternoConsolidated
Net income (loss) from continuing operations
$(14,212)$2,150 $5,368 $(1,235)$9,968 $(1,227)$(4,501)$2,701 $2,305 $295 $1,612 
Adjusted for:
Provision (benefit) for income taxes— 726 622 (551)3,387 1,949 (1,455)1,094 1,040 108 6,920 
Interest expense, net26,052 (1)(2)— 4 (2)124 — 5 — 26,180 
Intercompany interest(31,467)4,799 1,792 2,149 6,284 4,322 3,128 2,874 1,649 4,470 — 
Depreciation and amortization316 6,452 5,693 2,039 2,850 5,360 3,387 4,165 2,019 5,027 37,308 
EBITDA(19,311)14,126 13,473 2,402 22,493 10,402 683 10,834 7,018 9,900 72,020 
Other (income) expense(128)(77)114 — — (104)(675)204 (2)(492)(1,160)
Noncontrolling shareholder compensation— 252 664 312 395 (708)230 316 9 171 1,641 
Integration services fee— — — — — 1,187 — — — — 1,187 
Other— — — — — — — — — 432 432 
Adjusted EBITDA (1)
$(19,439)$14,301 $14,251 $2,714 $22,888 $10,777 $238 $11,354 $7,025 $10,011 $74,120 


(2)
(1) As a result of the sale of our Tridien subsidiaryMarucci in September 2016,November 2023, Adjusted EBITDA for the nine months ended September 30, 2016 does not include $17.7 million that was previously included in the three months ended March 31, 2023.


59

Reconciliation of Net income (loss) to Adjusted Earnings and Adjusted EBITDA from Tridien of $1.5 million.





Cash Flow Available for Distribution and Reinvestment
The table below details cash receipts and payments that are not reflected on our income statement in order to provide an additional measure of management's estimate of cash available for distribution ("CAD"). CAD is a non-GAAP measure that we believe provides additional, useful information to our shareholders in order to enable them to evaluate our ability to make anticipated quarterly distributions. CAD is not meant to be a substitute for GAAP, and may be different from or otherwise inconsistent with non-GAAP financial measures used by other companies.
The following table reconciles CADAdjusted Earnings to netNet income (loss) and cash flows provided by (used in) operating activities,, which we consider to be the most directly comparable GAAP financial measure, calculated and presented Adjusted Earnings to Adjusted EBITDA (in accordancethousands):
Three months ended March 31,
20242023
Net income$5,781 $109,601 
Income (loss) from discontinued operations, net of tax— 10,000 
Gain on sale of discontinued operations, net of tax3,345 97,989 
Net income from continuing operations$2,436 $1,612 
Less: income from continuing operations attributable to noncontrolling interest7,429 4,171 
Net loss attributable to Holdings - continuing operations$(4,993)$(2,559)
Adjustments:
Distributions paid - preferred shares(6,045)(6,045)
Amortization expense - intangibles and inventory step-up29,114 25,148 
Impairment expense8,182 — 
Stock compensation4,330 1,641 
Acquisition expenses3,479 — 
Integration Services Fee— 1,187 
Other274 432 
Adjusted Earnings$34,341 $19,804 
Plus (less):
Depreciation expense10,892 11,155 
Income tax provision8,686 6,920 
Interest expense23,575 26,180 
Amortization of debt issuance costs1,005 1,005 
Income from continuing operations attributable to noncontrolling interest7,429 4,171 
Distributions paid - preferred shares6,045 6,045 
Other (income) expense2,874 (1,160)
Adjusted EBITDA$94,847 $74,120 

Seasonality
Earnings of certain of our operating segments are seasonal in nature due to various recurring events, holidays and seasonal weather patterns, as well as the timing of our acquisitions during a given year. Historically, the third and fourth quarter have produced the highest net sales in our fiscal year, however, due to various acquisitions in the last three years, there is generally less seasonality in our net sales on a consolidated basis than there has been historically.
Related Party Transactions
Management Services Agreement
We entered into the MSA with GAAP.CGM effective May 16, 2006. The MSA provides for, among other things, CGM to perform services for the LLC in exchange for a management fee paid quarterly and equal to 0.5% of the Company's adjusted net assets, as defined in the MSA. Our Chief Executive Officer is a partner of CGM.
During 2022, CGM entered into a waiver of the MSA for the period through June 30, 2023 to receive a 1% annual management fee related to PrimaLoft, rather than the 2% called for under the MSA, which resulted in a lower management fee at March 31, and June 30, 2023 than would normally have been due.
60

 Nine Months Ended
(in thousands)September 30, 2017 September 30, 2016
Net income (loss)$(15,519) $54,554
Adjustment to reconcile net (income) loss to cash provided by operating activities:
 
Depreciation and amortization88,659
 53,972
Impairment expense/ loss on disposal of assets8,864
 7,214
Gain on sale of businesses(340) (2,134)
Amortization of debt issuance costs and original issue discount3,721
 2,363
Unrealized loss on interest rate hedges1,178
 8,322
Loss (gain) on equity method investment5,620
 (58,680)
Noncontrolling shareholder charges4,952
 3,012
Excess tax benefit on stock compensation(417) (366)
Provision for loss on receivables4,310
 59
Deferred taxes(17,937) (4,280)
Other494
 349
Changes in operating assets and liabilities(24,349) (3,791)
Net cash provided by operating activities59,236
 60,594
Plus:
 
Unused fee on revolving credit facility2,143
 1,355
Integration services fee (1)
2,708
 792
Successful acquisition costs1,836
 3,888
Excess tax benefit on stock compensation417
 366
Changes in operating assets and liabilities24,349
 3,791
Other—
 245
Less:
 
Payments on swap3,050
 3,114
Maintenance capital expenditures: (2)

 
Compass Group Diversified Holdings LLC—
 —
5.11 Tactical2,914
 540
Advanced Circuits219
 2,845
Arnold2,548
 1,625
Clean Earth3,591
 4,504
Crosman968
 —
Ergobaby788
 441
Liberty389
 850
Manitoba Harvest625
 1,146
Sterno Products1,373
 1,408
Tridien—
 385
Realized gain from foreign currency (3)
3,583
 2,396
Other (4)
3,980
 —
Estimated cash flow available for distribution and reinvestment$66,661
 $51,777
    
Distribution paid in April 2017/2016$(21,564) $(19,548)
Distribution paid in July 2017/2016(21,564) (19,548)
For the three months ended March 31, 2024 and 2023, the Company incurred the following management fees to CGM, by entity:

Three months ended March 31,
(in thousands)20242023
5.11$250 $250 
BOA250250 
Ergobaby125125 
Lugano188188 
PrimaLoft250250 
The Honey Pot Co.— — 
Velocity125125 
Altor188188 
Arnold Magnetics125125 
Sterno125125 
Corporate16,441 14,644 
$18,067 $16,270 
Integration Services Agreements
Distribution paid in October 2017/ 2016(21,564) (19,548)
 $(64,692) $(58,644)
(1)RepresentsIntegration services represent fees paid by newly acquired companies to the Manager for integration services performed during the first year of ownership,ownership. Under the Integration Services Agreement ("ISA"), CGM provides services for new platform acquisitions to, amongst other things, assist the management at the acquired entities in establishing a corporate governance program, implement compliance and reporting requirements of the Sarbanes-Oxley Act of 2002, as amended, and align the acquired entity's policies and procedures with our other subsidiaries. Integration services fees are recorded as selling, general and administrative expense in the consolidated statement of operations.
The Honey Pot Co., which was acquired in January 2024, entered into an ISA with CGM whereby The Honey Pot Co. will pay CGM a total integration services fee of $3.5 million, payable quarterly.quarterly over a twelve-month period beginning June 30, 2024.
(2) Represents maintenance capital expenditures that were funded from operating cash flow, netPrimaLoft, which was acquired in July 2022, entered into an ISA with CGM whereby PrimaLoft paid CGM a total integration services fee of proceeds from$4.8 million, payable quarterly over a twelve-month period ended June 30, 2023.
Allocation Interests
The Allocation Interests represent the original equity interest in the Company. The holders of the Allocation Interests (“Holders”), through Sostratus LLC, are entitled to receive distributions pursuant to a profit allocation formula upon the occurrence of certain events. The distributions of the profit allocation are paid upon the occurrence of the sale of property, plant and equipment, and excludes growtha material amount of capital expendituresstock or assets of approximately $17.5 million forone of the nine months ended September 30, 2017 and $1.6 million for the nine months ended September 30, 2016.
(3)
Reflects the foreign currency transaction gainCompany’s businesses (“Sale Event”) or, loss resulting from the Canadian dollar intercompany loans issued to Manitoba Harvest.
(4)
Includes amounts for the establishment of accounts receivable reserves related to two retail customers who filed bankruptcy during the first and third quarters of 2017.

Seasonality
Earnings of certain of our operating segments are seasonal in nature. Earnings from Liberty are typically lowest in the second quarter due to lower demand for safes at the onsetoption of summer. Crosman typically has higher sales in the third and fourth quarterHolders, at each five year reflectinganniversary date of the hunting and holiday seasons. Earnings from Clean Earth are typically lower duringacquisition of one of the winter months dueCompany’s businesses (“Holding Event”). The Company records distributions of the profit allocation to the limitsHolders upon occurrence of a Sale Event or Holding Event as dividends declared on outdoor construction and development activity becauseAllocation Interests to stockholders’ equity when they are approved by the Company’s board of the colder weather in the Northeastern United States. Sterno Products typically has higher sales in the second and fourth quarter of each year, reflecting the outdoor summer and holiday seasons, respectively.directors.

Related Party Transactions
Equity method investment in FOX
In March 2017, FOX closed on a secondary offering through which we sold our remaining 5,108,718 shares in FOX for total net proceeds of $136.1 million, after the underwriter's discount of $8.9 million. Subsequent to the sale of FOX shares in March 2017, we no longer hold an ownership interest in FOX. The sale of FOX sharesAdvanced Circuits in a secondary offering in March 2017 qualified asFebruary 2023 represented a Sale Event underand the Company's LLC Agreement. Duringboard of director's approved a distribution of $24.4 million in April 2023, subsequent to the second quarterend of 2017, ourthe first quarter. In addition, the Company's board of directors declaredapproved a distribution of $2.1 million related to various sale proceeds received related to previous Sale Events. These distributions were paid to the Holders of the Allocation MemberInterests in connection with the FOXApril 2023.
The sale of Marucci in November 2023 represented a Sale Event and the Company's board of $25.8 million. The profit allocation paymentdirector's approved a distribution of $48.9 million in the first quarter of 2024. This distribution was made duringpaid to the quarter ended June 30, 2017.

The following table reflects the year to date activity from our investment in FOX (in thousands):
  2017
Balance January 1, 2017 $141,767
Proceeds from sale of FOX shares (136,147)
Mark-to-market adjustment - March 7, 2017 (1)
 (5,620)
Balance September 30, 2017 $—

(1) Represents the unrealized loss on the investment in FOX asHolders of the date of the FOX secondary offering through which we sold our remaining sharesAllocation
61

Interests in FOX.

February 2024.
5.11 -
Related Party Vendor Purchases
- 5.11 purchases inventory from a vendor who is a related party to 5.11 through one of the executive officers of 5.11 via the executive's 40% ownership interest in the vendor. During the three and nine months ended September 30, 2017, 5.11 purchased approximately $1.0$0.4 million and $4.7$0.6 million during the three months endedMarch 31, 2024 and March 31, 2023, respectively in inventory from the vendor.
BOA
Recapitalization - In December 2023, the Company completed a recapitalization of BOA whereby the LLC entered into an amendment to the intercompany credit agreement with BOA (the "BOA Credit Agreement"). The BOA Credit Agreement was amended to provide for additional term loan borrowings of $165.9 million to fund a distribution to shareholders. The LLC received a distribution of $131.0 million related to their ownership of the outstanding shares of BOA on the date of the distribution. Noncontrolling shareholders received a distribution of $11.7 million, and the remaining amount of the recapitalization was used to repurchase shares owned by employees after the exercise of fully vested employee stock options, and to pay a bonus to employees who held phantom stock options and were not eligible to participate in the distribution to noncontrolling shareholders. BOA recorded compensation expense of $3.1 million related to the bonus paid to employees as part of the recapitalization.
Related Party Vendor Purchases - A contract manufacturer used by BOA as the primary supplier of molded injection parts is a noncontrolling shareholder of BOA. BOA purchased approximately $10.6 million and $9.7 million from this vendor.supplier during the three months ended March 31, 2024 and March 31, 2023, respectively.
Off-Balance Sheet Arrangements
We have no special purpose entities or off-balance sheet arrangements, other than operating leases entered into in the ordinary course of business.arrangements.
Contractual Obligations
Long-term contractual obligations, except for our long-term debt obligations, are generally not recognized in our consolidated balance sheet. Non-cancelable purchase obligations are obligations we incur during the normal course of business, based on projected needs.

The table below summarizes the payment schedule of our contractual obligations at September 30, 2017:
(in thousands)Total 
Less than 1
Year
 1-3 Years 3-5 Years 
More than
5 Years
Long-term debt obligations (1)
$688,792
 $21,231
 $89,699
 $577,862
 $—
Operating lease obligations (2)
92,734
 12,231
 24,744
 17,333
 38,426
Purchase obligations (3)
408,105
 237,110
 105,495
 65,500
 —
Total (4)
$1,189,631
 $270,572
 $219,938
 $660,695
 $38,426
(1)
Reflects commitment fees and letter of credit fees under our 2014 Revolving Credit Facility and amounts due, together with interest on our 2014 Term Loan and 2016 Incremental Term Loan.
(2)
Reflects various operating leases for office space, manufacturing facilities and equipment from third parties with various lease terms.
(3)
Reflects non-cancelable commitments as of September 30, 2017, including: (i) shareholder distributions of $86.3 million; (ii) estimated management fees of $32.8 million per year over the next five years, and (iii) other obligations including amounts due under employment agreements. Distributions to our shareholders are approved by our board of directors each quarter. The amount ultimately approved as future quarterly distributions may differ from the amount included in this schedule.
(4)
The contractual obligation table does not include approximately $10.5 million in liabilities associated with unrecognized tax benefits as of September 30, 2017 as the timing of the recognition of this liability is not certain. The amount of the liability is not expected to significantly change in the next twelve months.
Critical Accounting Policies and Estimates
The preparation of our financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates under different assumptions and judgments and uncertainties, and potentially could result in materially different results under different conditions. These critical accounting policies and estimates are reviewed periodically by our independent auditors and the audit committee of our board of directors.
Except as set forth below, our critical accounting estimates have not changed materially from those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K, for the year ended December 31, 2016,2023, as filed with the Securities and Exchange Commission ("SEC")SEC on March 2, 2017.February 28, 2024.
Goodwill and Indefinite-lived Intangible Asset Impairment Testing

Goodwill

Goodwill represents the excess amount of the purchase price over the fair value of the assets acquired. Our goodwill and indefinite lived intangible assets are tested for impairment on an annual basis as of March 31st, and if current events or circumstances require, on an interim basis. Goodwill is allocated to various reporting units, which are generally an operating segment or one level below the operating segment. Each of our subsidiary businesses represents a reporting unit except Arnold, which is comprised of three reporting units, and each reporting unit is included in our annual impairment test.

unit.
We use a qualitative approach to test goodwill for impairment by first assessing qualitative factors to determine whether it is more-likely than-notmore-likely-than-not that the fair value of a reporting unit is lessgreater than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment testing. The qualitative factors we consider include, in part, the general macroeconomic environment, industry and market specific conditions for each reporting unit, financial performance including actual versus planned results and results of relevant prior periods, operating costs and cost impacts, as well as issues or events specific to the reporting unit.

2017 Annual Impairment Testing

At March 31, 2017, we determined that the Manitoba Harvest reporting unit required further quantitative testing (Step 1) because we could If qualitative factors are not concludesufficient to determine that the fair value of a reporting unit is more likely than not to exceed its carrying value, we will perform a quantitative test of the reporting unit exceeds its carrying value based on qualitative factors alone. For the Step 1 quantitative impairment test at Manitoba, the Company utilized an income approach. The weighted average cost of capital used in the income approach at Manitoba was 12.0%. Results of the Step 1 quantitative testing of Manitoba Harvest indicated that the fair value of Manitoba Harvest exceeded its carrying value. For the reporting units that were tested qualitatively, the results of the qualitative analysis indicated that the fair value of those reporting units exceeded their carrying value.

Manitoba Harvest
We performed Step 1 testing during the 2017 annual impairment testing for Manitoba Harvest. Subsequent to the annual impairment test,whereby we have compared the Manitoba Harvest operating results to the forecasts used in the Step 1 testing and noted no material variances in the results. However, there is a significant degree of uncertainty inherent in the assumptions used to develop the forecast amounts used in the annual impairment test given the changing nature of consumer tastes, particularly related to future years. Therefore, the results of the forecast process for 2018, which are expected to be finalized in the fourth quarter of 2017, may make it necessary to perform interim goodwill impairment testing at Manitoba Harvest in the fourth quarter of 2017.
2016 Interim Impairment Testing
As a result of decreases in forecasted revenue, operating income and cash flows at Arnold, as well as a shortfall in revenue and operating income during the latter half of 2016 as compared to budgeted amounts, we determined that it was necessary to perform interim goodwill impairment testing on each of the three reporting units at Arnold. We performed Step 1 of the goodwill impairment assessment at December 31, 2016. For purposes of Step 1 for the Arnold reporting units, we estimatedestimate the fair value of the reporting unit using only an income approach wherebyor market approach, or a weighting of the two methods. Under the income approach, we estimate the fair value of aour reporting unit based on the present value of future cash flows. We do not believe thatCash flow projections are based on management's estimate of revenue growth rates and operating margins and take into consideration industry and market conditions as well as company specific economic factors. The discount rate used is based on the weighted average cost of capital adjusted for the relevant risk associated with the business and the uncertainty
62

associated with the reporting unit's ability to execute on the projected cash flows. Under the market approach, results in relevant data points forwe estimate fair value based on market multiples or comparative dataof revenue and earnings derived from comparable public companies sincewith operating characteristics that are similar to the reporting unit. When market comparables are not meaningful or available, we estimate the fair value of the reporting unit using only the income approach. The valuation approaches are subject to key judgments and assumptions that are sensitive to change such as judgments and assumptions about appropriate sales growth rates, operating margins, weighted average cost of capital, and comparable company market multiples. When developing these key judgments and assumptions, we consider economic, operational and market conditions that could impact the fair value of the reporting unit. Estimates are inherently uncertain and represent only management’s reasonable expectations regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will most likely differ from actual future results.
2024 Annual Impairment Testing
For our annual impairment testing at March 31, 2024, we performed a qualitative assessment of Arnold's competitors are privately heldour reporting units. The results of the qualitative analysis indicated that it was more-likely-than-not that the fair value of each of our reporting units except Velocity exceeded their carrying value. Based on our analysis, we determined that the Velocity operating segment required quantitative testing because we could not conclude that the fair value of this reporting unit significantly exceeded the carrying value based on qualitative factors alone. We performed a quantitative test of Velocity and dothe results of the testing indicated that the fair value of Velocity did not publish dataexceed the carrying value, resulting in goodwill impairment expense of $8.2 million as of March 31, 2024, which represented the remaining balance of goodwill at Velocity.
2023 Interim goodwill impairment testing
PrimaLoft - The Company performed an interim impairment test of goodwill at PrimaLoft as of December 31, 2023. As a result of operating results that can bewere below forecast amounts that were used as the basis for the purchase price allocation performed when PrimaLoft was acquired as well as the failure of certain financial covenants in the intercompany credit agreement as of December 31, 2023, the Company determined that a triggering event had occurred. The Company performed the quantitative impairment test using both an income approach and a market approach. InThe prospective information used in the income approach considers macroeconomic data, industry and reporting unit specific facts and circumstances and is our best estimate of operational results and cash flows for the PrimaLoft reporting unit as of the date of our impairment testing. The discount rate used in the income approach was 11.3%. The results of the quantitative impairment testing indicated that the fair value of the PrimaLoft reporting unit did not exceed its carrying value, resulting in goodwill impairment expense of $57.8 million in the year ended December 31, 2023.
Velocity Outdoor - The Company performed interim quantitative impairment testing of goodwill at Velocity at August 31, 2023. As a result of operating results that were below the forecast that we used in the quantitative impairment test of Velocity Outdoor at March 31, 2023, the Company determined that a triggering event had occurred at Velocity in the third quarter of 2023 and performed an interim impairment test as of August 31, 2023. The Company used an income approach for the impairment test, whereby we estimate the fair value of the reporting unit based on the present value of future cash flows. Cash flow projections are based on management's estimate of revenue growth rates and operating margins, and take into consideration industry and market conditions as well as company specific economic factors. The Company used a weighted average cost of capital of 12.5%17% in the income approach. The discount rate used was based on the weighted average cost of capital adjusted for PMAG, 12.0% for Flexmagthe relevant risk associated with business specific characteristics and 13.0% for PTM. ResultsVelocity's ability to execute on projected cash flows. Based on the results of the Step 1impairment test, the fair value of Velocity did not exceed its carrying value. The Company recorded goodwill impairment of $31.6 million during the year ended December 31, 2023.
2023 Annual Impairment Testing
For our annual impairment testing for Arnold's Flexmag and PTMat March 31, 2023, we performed a qualitative assessment of our reporting units. The results of the qualitative analysis indicated that it was more-likely-than-not that the fair value of each of our reporting units except Velocity exceeded their carrying value. Based on our analysis, we determined that the Velocity operating segment required quantitative testing because we could not conclude that the fair value of this reporting unit significantly exceeded the carrying value based on qualitative factors alone. We performed the quantitative test of Velocity using an income approach to determine the fair value of the reporting unit. In developing the prospective financial information used in the income approach, we considered recent market conditions, taking into consideration the uncertainty associated with the current economic environment. The prospective financial information considers reporting unit specific facts and circumstances and is our best estimate of operational results
63

and cash flows for the Velocity reporting unit as of the date of our impairment testing. The discount rate used in the income approach was 15.0%, and the results of the quantitative impairment testing indicated that the fair value of thesethe Velocity reporting unitsunit exceeded theirthe carrying value by 34% and 38%, respectively.approximately 21%. The results of the Step 1 test for the PMAG unit indicated a potential impairment of goodwill and the Company performed the second step of goodwill impairment testing (Step 2)prospective financial information that is used to determine the amount of impairmentfair values of the PMAGVelocity reporting unit.
We hadunit requires us to make assumptions regarding future operational results including revenue growth rates and gross margins. If we do not completedachieve the Step 2 testing for PMAG at December 31, 2016,forecasted revenue growth rates and recorded an estimated impairment loss for PMAG of $16 million based on a range of impairment loss. During the first quarter of 2017, we recorded an additional $8.9 million of goodwill impairment aftergross margins, the results of the Step 2 indicated total goodwillquantitative testing could change, potentially leading to additional testing and impairment ofat the PMAG reporting unit of $24.9 million. The Step 2 impairmentthat was higher than the initial estimate at December 31, 2016 due primarily to the valuation of PMAG's property, plant and equipment during the Step 2 exercise.

tested quantitatively.
Indefinite-lived intangible assets
We use a qualitative approach to test indefinite lived intangible assets for impairment by first assessing qualitative factors to determine whether it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform quantitative impairment testing. Our indefinite-lived intangible assets consist of trade names with a carrying value of approximately $73.5$57.0 million. The Manitoba Harvest trade name, which had a carrying value of $12.4 million at March 31, 2017, was included in the Step 1 impairment testing for Manitoba Harvest as noted above. The results of the qualitative analysis of our other reporting unit's indefinite-lived intangible assets, which we completed as of March 31, 2017,2024, indicated that the fair value of the indefinite lived intangible assets exceeded their carrying value.
Recent Accounting Pronouncements
Refer to Note BA - "Presentation and Principles of Consolidation" of the condensed consolidated financial statements for a discussion of recent accounting pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to our market risk since December 31, 2016.2023. For a further discussion of our exposure to market risk, refer to the section entitled "Quantitative and Qualitative Disclosures about Market Risk" that was disclosed in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2016,2023, as filed with the SEC on March 2, 2017.February 28, 2024.


ITEM 4. CONTROLS AND PROCEDURES
As required by Securities Exchange Act of 1934, as amended (the "Exchange Act") Rule 13a-15(b), Holdings’the Trust's Regular Trustees and the Company’sLLC’s management, including the Chief Executive Officer and Chief Financial Officer of the Company,LLC, conducted an evaluation of the effectiveness of Holdings’the Trust's and the Company’sLLC’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), as of September 30, 2017.March 31, 2024. Based on that evaluation, the Holdings’Trust's Regular Trustees and the Chief Executive Officer and Chief Financial Officer of the CompanyLLC concluded that Holdings’the Trust's and the Company’sLLC’s disclosure controls and procedures were effective as of September 30, 2017.March 31, 2024.


There have been no material changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during our most recently completed fiscal quarter, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

64

PART II
OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS
There have been no material changes to those legal proceedings associated with the Company’s and Holdings’ business together with legal proceedings for the businesses discussed in the section entitled "Legal Proceedings" that was disclosed in Part I, Item 3 of our Annual Report on Form 10-K for the year ended December 31, 20162023, as filed with the SEC on March 2, 2017.February 28, 2024.

ITEM 1A. RISK FACTORS

There have been no material changes in thoseThe risk factors and other uncertainties associated with the Company and Holdings discussed in the section entitled "Risk Factors" that was disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed2023 should be considered together with information included in this Quarterly Report on Form 10-Q for the SEC onquarter ended March 2, 2017 except as noted below related31, 2024 and should not be considered the only risks to which we are exposed. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our acquisition of Crosman in June 2017, andbusiness, including our issuance of Series A Preferred Shares in June 2017.

Risks Related to Crosman
Crosman’s products are subject to product safety and liability lawsuits, which could materially and adversely affect its financial condition, business and results of operations.
As a manufacturer of recreational airguns, archery products, laser aiming devices and related accessories, Crosman is involved in various litigation matters that occur in the ordinary course of business. Although Crosman provides information regarding safety procedures and warnings with all of its product packaging, not all users of its products will observe all proper safety practices. Failure to observe proper safety practices may result in injuries that give rise to product liability and personal injury claims and lawsuits, as well as claims for breach of contract, loss of profits and consequential damages.

If any unresolved lawsuits or claims are determined adversely, they could have a material adverse effect on Crosman, its financial condition, business and results of operations. As more of Crosman’s products are sold to and used by its consumers, the likelihood of product liability claims being made against it increases. In addition, the running of statutes of limitations in the United States for personal injuries to minor children may be suspended during a child’s legal minority. Therefore, it is possible that accidents resulting in injuries to minors may not give rise to lawsuits until a number of years later.

While Crosman maintains product liability insurance to insure against potential claims, there is a risk such insurance may not be sufficient to cover all liabilities incurred in connection with such claims and the financial consequences of these claims and lawsuits will have a material adverse effect on its business, financial condition,operations, liquidity and results of operations.
Risks Related tofinancial condition. We believe there have been no material changes from the Series A Preferred Shares
Distributionsrisk factors previously disclosed in our Annual Report on Form 10-K for the Series A Preferred Shares are discretionary and non-cumulative.
Distributions on the Series A Preferred Shares are discretionary and non-cumulative. Holders of the Series A Preferred Shares will only receive distributions of the Series A Preferred Shares when, as and if declared by the board of directors of the Company. Consequently, if the board of directors of the Company does not authorize and declare a distribution for a distribution period, holders of the Series A Preferred Shares would not be entitled to receive any distribution for such distribution period, and such unpaid distribution will not be payable in such distribution period or in later distribution periods. We will have no obligation to pay distributions for a distribution period if the board of directors of the Company does not declare such distribution before the scheduled record date for such period, whether or not distributions are declared or paid for any subsequent distribution period with respect to the Series A Preferred Shares, or any other preferred shares we may issue or our common shares. This may result in holders of the Series A Preferred Shares not receiving the full amount of distributions that they expect to receive, or any distributions, and may make it more difficult to resell Series A Preferred Shares or to do so at a price that the holder finds attractive.
The board of directors of the Company may, in its sole discretion, determine to suspend distributions on the Series A Preferred Shares, which may have a material adverse effect on the market price of the Series A Preferred Shares. There can be no assurances that our operations will generate sufficient cash flows to enable us to pay distributions on the Series A Preferred Shares. Our financial and operating performance is subject to prevailing economic and industry conditions and to financial, business and other factors, some of which are beyond our control.


fiscal year ended December 31, 2023.
65

ITEM 6.EXHIBITS
Exhibit NumberDescription
3.1Description3.1 of the Form 8-K filed on August 4, 2021 (File No. 001-34927)).
3.2
10.1*
3.3
3.4
3.5
12.1*3.6
3.7
31.1*
3.8
3.9
3.10
3.11
3.12
3.13
3.14
3.15
31.1*
31.2*
66

32.1*+
32.2*+
99.1
101.INS*Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*Inline XBRL Taxonomy Extension Schema Document
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover page formatted as Inline XBRL and contained in Exhibit 101
*Filed herewith.
*+Filed herewith.
+In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed "filed" for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.

67

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date: May 1, 2024
COMPASS DIVERSIFIED HOLDINGS
By:By:/s/ Ryan J. Faulkingham
Ryan J. Faulkingham
Regular Trustee
Date: 11/8/2017
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date: May 1, 2024
COMPASS GROUP DIVERSIFIED HOLDINGS LLC
By:By:/s/ Ryan J. Faulkingham
Ryan J. Faulkingham
Chief Financial Officer

(Principal Financial and Accounting Officer)
Date: 11/8/2017

68

EXHIBIT INDEX
Exhibit NumberDescription
3.1
3.2Description
10.1*3.3
3.4
3.5
12.1*3.6
3.7
31.1*
3.8
3.9
3.10
3.11
3.12
3.13
3.14
3.15
31.1*
31.2*
32.1*+
69

32.2*+
99.1
101.INS*Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*Inline XBRL Taxonomy Extension Schema Document
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover page formatted as Inline XBRL and contained in Exhibit 101


*Filed herewith.
*+Filed herewith.
+In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed "filed" for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.



68
70