UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Form 10-Q
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20172023
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
(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
(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 filerýxAccelerated 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,July 28, 2023, there were 59,900,00071,895,929 Trust common shares of Compass Diversified Holdings outstanding.



COMPASS DIVERSIFIED HOLDINGS
QUARTERLY REPORT ON FORM 10-Q
For the period ended SeptemberJune 30, 20172023
TABLE OF CONTENTS
Page
Number
4
Page
Number
FORWARD-LOOKING STATEMENTS
4
PART I. FINANCIAL INFORMATION
ITEM 1.
5
6
7
8
910
1112
ITEM 2.
3439
ITEM 3.
6470
ITEM 4.
6471
PART II. OTHER INFORMATION
6572
ITEM 1.
6572
ITEM 1A.
6572
ITEM 6.
6573
6774



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"2022 Credit Facility" refers to the third amended and restated credit agreement entered into on July 12, 2022 among the LLC, the lenders from time to time party thereto, Bank of America, N.A., as Administrative Agent, Swing Line Lender and letter of credit issuer (the "agent")
•the "2022 Revolving Credit Facility" refers to the $600 million in revolving loans, swing line loans and letters of credit provided by the 2022 Credit Facility that matures in 2027;
•the "2022 Term Loan" refer to a credit agreement (as amended) with a group of lenders ledthe $400 million term loan provided by Toronto Dominion (Texas) LLC, as agent, which provided for the 2011 Revolving2022 Credit Facility and Facility;
•the 2011 Term Loan Facility;
the "2014"2021 Credit Facility" refer to the second amended and restated credit agreement as amendedentered into on March 23, 2021 among the Company, 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 aAdministrative Agent, Swing Line Lender and L/C Issuer (the "agent") and other agents party thereto;
•the "2021 Revolving Credit Facility" refers to the $600 million in revolving loans, swing line loans and letters of credit provided by the 2021 Credit Facility and a Term Loan;that matures in 2026;
•the "2014 Revolving"2018 Credit Facility" refer to the $550 million Revolving Credit Facility providedamended and restated credit agreement entered into on April 18, 2018 among the Company, the lenders from time to time party thereto, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer (the "agent") and other agents party thereto, which was subsequently amended and restated by the 20142021 Credit Facility that matures in June 2019;Facility;
the "2014 Term Loan" refer to the $325 million Term Loan Facility, provided by the 2014 Credit Facility that matures in June 2021;
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, 2022 filed with the United States Securities and Exchange Commission (“SEC”) on March 1, 2023, 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
June 30,
2023		December 31,
2022
(in thousands)September 30,
2017		 December 31,
2016		(in thousands)(Unaudited)
(Unaudited)  
Assets   Assets
Current assets:   Current assets:
Cash and cash equivalents$41,487
 $39,772
Cash and cash equivalents$67,354 $57,880 
Accounts receivable, net198,111
 181,191
Accounts receivable, net296,291 331,396 
Inventories242,817
 212,984
Inventories788,283 728,083 
Prepaid expenses and other current assets27,145
 18,872
Prepaid expenses and other current assets95,245 74,700 
Current assets of discontinued operationsCurrent assets of discontinued operations— 18,126 
Total current assets509,560
 452,819
Total current assets1,247,173 1,210,185 
Property, plant and equipment, net170,827
 142,370
Property, plant and equipment, net204,804 198,525 
Investment in FOX (refer to Note F)—
 141,767
Goodwill539,925
 491,637
Goodwill1,072,951 1,066,726 
Intangible assets, net591,878
 539,211
Intangible assets, net1,096,260 1,127,936 
Other non-current assets8,616
 9,351
Other non-current assets174,505 166,412 
Non-current assets of discontinued operationsNon-current assets of discontinued operations— 79,847 
Total assets$1,820,806
 $1,777,155
Total assets$3,795,693 $3,849,631 
Liabilities and stockholders’ equity   Liabilities and stockholders’ equity
Current liabilities:   Current liabilities:
Accounts payable$77,417
 $61,512
Accounts payable$90,234 $90,404 
Accrued expenses105,058
 91,041
Accrued expenses178,287 196,239 
Due to related party7,553
 20,848
Due to related parties (refer to Note P)Due to related parties (refer to Note P)15,402 15,495 
Current portion, long-term debt5,685
 5,685
Current portion, long-term debt10,000 10,000 
Other current liabilities15,493
 23,435
Other current liabilities36,951 36,545 
Current liabilities of discontinued operationsCurrent liabilities of discontinued operations— 11,148 
Total current liabilities211,206
 202,521
Total current liabilities330,874 359,831 
Deferred income taxes122,033
 110,838
Deferred income taxes137,466 145,643 
Long-term debt569,755
 551,652
Long-term debt1,757,673 1,824,468 
Other non-current liabilities18,570
 17,600
Other non-current liabilities152,075 141,535 
Non-current liabilities of discontinued operationsNon-current liabilities of discontinued operations— 16,192 
Total liabilities921,564
 882,611
Total liabilities2,378,088 2,487,669 
Commitments and contingencies (refer to Note O)Commitments and contingencies (refer to Note O)
Stockholders’ equity   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)
Trust preferred shares, 50,000 authorized; 12,600 shares issued and outstanding at June 30, 2023 and December 31, 2022Trust preferred shares, 50,000 authorized; 12,600 shares issued and outstanding at June 30, 2023 and December 31, 2022
Series A preferred shares, no par value; 4,000 shares issued and outstanding at June 30, 2023 and December 31, 2022Series A preferred shares, no par value; 4,000 shares issued and outstanding at June 30, 2023 and December 31, 202296,417 96,417 
Series B preferred shares, no par value; 4,000 shares issued and outstanding at June 30, 2023 and December 31, 2022Series B preferred shares, no par value; 4,000 shares issued and outstanding at June 30, 2023 and December 31, 202296,504 96,504 
Series C preferred shares, no par value; 4,600 shares issued and outstanding at June 30, 2023 and December 31, 2022Series C preferred shares, no par value; 4,600 shares issued and outstanding at June 30, 2023 and December 31, 2022110,997 110,997 
Trust common shares, no par value, 500,000 authorized; 71,896 shares issued and outstanding at June 30, 2023 and 72,203 issued and outstanding at December 31, 2022Trust common shares, no par value, 500,000 authorized; 71,896 shares issued and outstanding at June 30, 2023 and 72,203 issued and outstanding at December 31, 20221,206,953 1,207,044 
Treasury shares, at costTreasury shares, at cost(5,856)— 
Accumulated other comprehensive income (loss)Accumulated other comprehensive income (loss)282 (1,136)
Accumulated deficit(167,297) (58,760)Accumulated deficit(328,507)(372,906)
Total stockholders’ equity attributable to Holdings851,616
 856,405
Total stockholders’ equity attributable to Holdings1,176,790 1,136,920 
Noncontrolling interest47,626
 38,139
Noncontrolling interest240,815 223,509 
Noncontrolling interest of discontinued operationsNoncontrolling interest of discontinued operations— 1,533 
Total stockholders’ equity899,242
 894,544
Total stockholders’ equity1,417,605 1,361,962 
Total liabilities and stockholders’ equity$1,820,806
 $1,777,155
Total liabilities and stockholders’ equity$3,795,693 $3,849,631 
See notes to condensed consolidated financial statements.

5

COMPASS DIVERSIFIED HOLDINGS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended 
 June 30,		Six months ended 
 June 30,
(in thousands, except per share data)2023202220232022
Net revenues$524,159 $515,597 $1,066,387 $1,026,110 
Cost of revenues287,269 303,840 591,666 613,538 
Gross profit236,890 211,757 474,721 412,572 
Operating expenses:
Selling, general and administrative expense148,218 125,624 294,383 246,296 
Management fees16,920 14,901 33,315 29,337 
Amortization expense26,677 20,921 53,051 42,026 
Operating income45,075 50,311 93,972 94,913 
Other income (expense):
Interest expense, net(26,615)(17,519)(52,795)(34,938)
Amortization of debt issuance costs(1,024)(865)(2,029)(1,731)
Other income (expense), net(101)737 1,026 2,773 
Income from continuing operations before income taxes17,335 32,664 40,174 61,017 
Provision for income taxes4,444 6,132 14,280 16,108 
Income from continuing operations12,891 26,532 25,894 44,909 
Income (loss) from discontinued operations, net of income taxes— 5,004 (1,391)10,374 
Gain (loss) on sale of discontinued operations, net of income taxes4,232 (579)102,221 5,414 
Net income17,123 30,957 126,724 60,697 
Less: Net income from continuing operations attributable to noncontrolling interest3,517 3,635 8,498 8,572 
Less: Net income (loss) from discontinued operations attributable to noncontrolling interest— 955 (777)1,996 
Net income attributable to Holdings$13,606 $26,367 $119,003 $50,129 
Amounts attributable to Holdings
Income from continuing operations$9,374 $22,897 $17,396 $36,337 
Income (loss) from discontinued operations, net of income tax— 4,049 (614)8,378 
Gain (loss) on sale of discontinued operations, net of income tax4,232 (579)102,221 5,414 
Net income attributable to Holdings$13,606 $26,367 $119,003 $50,129 
Basic income (loss) per common share attributable to Holdings (refer to Note J)
Continuing operations$(0.41)$0.13 $(0.43)$0.19 
Discontinued operations0.06 0.04 1.41 0.18 
Basic income (loss) per common share attributable to Holdings (refer to Note J)$(0.35)$0.17 $0.98 $0.37 
Basic weighted average number of shares of common shares outstanding71,932 70,227 72,055 69,804 
Cash distributions declared per Trust common share (refer to Note J)$0.25 $0.25 $0.50 $0.50 
 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 
 June 30,		Six months ended 
 June 30,
(in thousands)2023202220232022
Net income$17,123 $30,957 $126,724 $60,697 
Other comprehensive income (loss)
Foreign currency translation adjustments610 (1,501)1,856 (1,476)
Pension benefit liability, net86 1,064 (438)1,839 
Other comprehensive income (loss)696 (437)1,418 363 
Total comprehensive income, net of tax$17,819 $30,520 128,142 61,060 
Less: Net income attributable to noncontrolling interests3,517 4,590 7,721 10,568 
Less: Other comprehensive income (loss) attributable to noncontrolling interests16 (8)36 (2)
Total comprehensive income attributable to Holdings, net of tax$14,286 $25,938 $120,385 $50,494 
 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 — April 1, 2022$96,417 $96,504 $110,997 $1,143,354 $— $(313,902)$(228)$1,133,142 $171,735 $(1,449)$1,303,428 
Net income— — — — — 26,367 — 26,367 3,635 955 30,957 
Total comprehensive loss, net— — — — — — (437)(437)— — (437)
Issuance of Trust common shares— — — 41,994 — — — 41,994 — — 41,994 
Option activity attributable to noncontrolling shareholders— — — — — — — — 2,681 124 2,805 
Effect of subsidiary stock option exercise— — — — — — — — 50 — 50 
Purchase of noncontrolling interest— — — — — — — — (394)— (394)
Distributions paid - Trust Common Shares— — — — (17,511)— (17,511)— — (17,511)
Distributions paid - Trust Preferred Shares— — — — (6,046)— (6,046)— — (6,046)
Balance — June 30, 2022$96,417 $96,504 $110,997 $1,185,348 $— $(311,092)$(665)$1,177,509 $177,707 $(370)$1,354,846 
Balance — April 1, 2023$96,417 $96,504 $110,997 $1,206,996 $(3,954)$(291,605)$(414)$1,214,941 $229,692 $— $1,444,633 
Net income— — — — — 13,606 — 13,606 3,517 — 17,123 
Total comprehensive income, net— — — — — — 696 696 — — 696 
Issuance of Trust common shares— — — (43)— — — (43)— — (43)
Purchase of Trust common shares for treasury— — — — (1,902)— — (1,902)— — (1,902)
Option activity attributable to noncontrolling shareholders— — — — — — — — 3,666 — 3,666 
Effect of subsidiary stock option exercise— — — — — — — — 52 — 52 
Purchase of noncontrolling interest— — — — — — — — (267)— (267)
Acquisition of Baum Bat— — — — — — — — 4,155 — 4,155 
Distributions paid - Allocation Interests (refer to Note J)— — — — — (26,475)— (26,475)— — (26,475)
Distributions paid - Trust Common Shares— — — — — (17,987)— (17,987)— — (17,987)
Distributions paid - Trust Preferred Shares— — — — — (6,046)— (6,046)— — (6,046)
Balance — June 30, 2023$96,417 $96,504 $110,997 $1,206,953 $(5,856)$(328,507)$282 $1,176,790 $240,815 $— $1,417,605 

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 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, 2022$96,417 $96,504 $110,997 $1,123,193 $— $(314,267)$(1,028)$1,111,816 $175,328 $(2,614)$1,284,530 
Net income— — — — — 50,129 — 50,129 8,572 1,996 60,697 
Total comprehensive income, net— — — — — — 363 363 — — 363 
Issuance of Trust common shares— — — 62,155 — — — 62,155 — — 62,155 
Option activity attributable to noncontrolling shareholders— — — — — — — — 5,362 248 5,610 
Effect of subsidiary stock option exercise— — — — — — — — 440 — 440 
Purchase of noncontrolling interest— — — — — — — — (703)— (703)
Distributions paid to noncontrolling shareholders— — — — — — — — (11,292)— (11,292)
Distributions paid - Trust Common Shares— — — — — (34,863)— (34,863)— — (34,863)
Distributions paid - Trust Preferred Shares— — — — — (12,091)— (12,091)— — (12,091)
Balance — June 30, 2022$96,417 $96,504 $110,997 $1,185,348 $— $(311,092)$(665)$1,177,509 $177,707 $(370)$1,354,846 
Balance — January 1, 2023$96,417 $96,504 $110,997 $1,207,044 $— $(372,906)$(1,136)$1,136,920 $223,509 $1,533 $1,361,962 
Net income (loss)— — — — — 119,003 — 119,003 8,498 (777)126,724 
Total comprehensive income, net— — — — — — 1,418 1,418 — — 1,418 
Issuance of Trust common shares— — — (91)— — — (91)— — (91)
Purchase of Trust common shares for treasury— — — — (5,856)— — (5,856)— — (5,856)
Option activity attributable to noncontrolling shareholders— — — — — — — — 5,711 973 6,684 
Effect of subsidiary stock option exercise— — — — — — — — 57 — 57 
Purchase of noncontrolling interest— — — — — — — — (1,115)— (1,115)
Acquisition of Baum Bat— — — — — — — — 4,155 — 4,155 
Disposition of ACI— — — — — — — — — (1,729)(1,729)
Distributions paid - Allocation Interests (refer to Note J)— — — — (26,475)— (26,475)— — (26,475)
Distributions paid - Trust Common Shares— — — — — (36,038)— (36,038)— — (36,038)
Distributions paid - Trust Preferred Shares— — — — — (12,091)— (12,091)— — (12,091)
Balance — June 30, 2023$96,417 $96,504 $110,997 $1,206,953 $(5,856)$(328,507)$282 $1,176,790 $240,815 $— $1,417,605 
See notes to condensed consolidated financial statements.

9


COMPASS DIVERSIFIED HOLDINGS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Six months ended June 30,
(in thousands)20232022
Cash flows from operating activities:
Net income$126,724 $60,697 
Income (loss) from discontinued operations(1,391)10,374 
Gain on sale of discontinued operations102,221 5,414 
Income from continuing operations25,894 44,909 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense24,574 20,281 
Amortization expense - intangibles53,051 42,026 
Amortization expense - inventory step-up1,134 3,812 
Amortization of debt issuance costs2,029 1,731 
Noncontrolling stockholder stock based compensation5,711 5,361 
Provision for receivable and inventory reserves(2,201)(2,173)
Deferred taxes(7,516)(3,756)
Other1,047 239 
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable33,982 (2,279)
Inventories(58,387)(136,498)
Other current and non-current assets(1,459)(13,320)
Accounts payable and accrued expenses(39,333)(7,098)
Cash provided by (used in) operating activities - continuing operations38,526 (46,765)
Cash provided by (used in) operating activities - discontinued operations(1,287)11,428 
Cash provided by (used in) provided by operating activities37,239 (35,337)
Cash flows from investing activities:
Acquisitions, net of cash acquired(22,816)(3,636)
Purchases of property and equipment(31,540)(24,435)
Proceeds from sale of businesses105,123 6,898 
Other investing activities(1,107)(903)
Cash provided by (used in) investing activities - continuing operations49,660 (22,076)
Cash provided by (used in) investing activities - discontinued operations68,169 (162)
Cash provided by (used in) investing activities117,829 (22,238)
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)
 Six months ended June 30,
(in thousands)20232022
Cash flows from financing activities:
Proceeds and expenses from issuance of Trust common shares, net(91)62,155 
Purchase of treasury shares, net(5,856)— 
Borrowings under credit facility217,000 24,000 
Repayments under credit facility(280,000)(24,000)
Principal payments - term loan(5,000)— 
Distributions paid - common shares(36,038)(34,863)
Distributions paid - preferred shares(12,091)(12,091)
Distributions paid - allocation interests(26,475)— 
Distributions paid to noncontrolling shareholders— (11,292)
Net proceeds provided by noncontrolling shareholders57 440 
Purchase of noncontrolling interest(1,115)(703)
Debt issuance costs— (35)
Other(10)(14)
Net cash provided by (used in) financing activities(149,619)3,597 
Foreign currency impact on cash634 (1,132)
Net increase (decrease) in cash and cash equivalents6,083 (55,110)
Cash and cash equivalents — beginning of period (1)
61,271 160,733 
Cash and cash equivalents — end of period (2)
$67,354 $105,623 

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$3.4 million at January 1, 2016.2023 and $3.6 million at January 1, 2022.

(2) Includes cash from discontinued operations of $2.9 million at June 30, 2022.






















See notes to condensed consolidated financial statements.

11

COMPASS DIVERSIFIED HOLDINGS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SeptemberJune 30, 20172023


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 SeptemberJune 30, 2017.2023. 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"), Wheelhouse Holdings, Inc. ("Marucci Sports" or "Marucci"), Relentless Intermediate, Inc. ("PrimaLoft"), Velocity Outdoor, Inc. ("Velocity Outdoor" or "Velocity"), AMT Acquisition Corporation ("Arnold"), FFI Compass, Inc. ("Altor Solutions" or "Arnold Magnetics""Altor"), Clean Earth Holdings, Inc. ("Clean Earth" (formerly "Foam Fabricators"), and Sterno Products, LLC ("Sterno"). The segments are referred to interchangeably as “businesses”, “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 ninesix month periods ended SeptemberJune 30, 20172023 and SeptemberJune 30, 2016,2022 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.2022.
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 thirdfirst quarter of 2016,2023, the Company completed the sale of Tridien Medical,Compass AC Holdings, Inc. ("Tridien"(“Advanced Circuits or ACI”). The results of operations of TridienACI are reported as discontinued operations in the condensed consolidated statements of operations for the six months ended June 30, 2023 and the three and ninesix months ended SeptemberJune 30, 2016.2022. 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
12

In January 2017, the FASB issued new accounting guidanceSeasonality
Earnings of certain of our operating segments are seasonal in nature due to simplify 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 test is necessary. The guidance is effective for fiscal yearsvarious recurring events, holidays 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, on a prospective basis, and will apply the guidance as necessary to annual and interim goodwill testing performed subsequent to January 1, 2017.
Recently Issued Accounting Pronouncements
In March 2017, the FASB issued new guidance that will require employers that sponsor defined benefit plans to present the service cost component 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 presentation of the service cost component and the other components of net periodic pension cost. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. 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, and interim periods within those years, beginning after December 15, 2017. The adoption of this guidance is not expected to have a material impact upon our financial condition or results of operations.
In August 2016, the FASB issued an accounting standard update which updates the 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 key 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 disclose qualitative and quantitative information about leasing arrangements to enable a user of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, the new standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires modified retrospective adoption, with early adoption permitted. Accordingly, this standard is effective for the Company on January 1, 2019. The Company is currently assessing the impact of the new standard on our consolidated financial statements.
In May 2014, the FASB issued 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 principle of the revenue model is that an entity should recognize revenue to depict 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 disclosure of the nature, amount, timing and uncertainty 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 for the Company beginning January 1, 2018. The FASB issued four subsequent standards in 2016 containing implementation guidance related to the new standard. These standards provide additional guidance related to principal versus agent considerations, licensing, and identifying performance obligations. Additionally, these standards provide narrow-scope improvements and practical expedientsseasonal weather patterns, 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 have on the Company’s financial

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 recognitionour acquisitions during a given year. Historically, the third and fourth quarters produce the highest net sales during our fiscal year, however, due to various acquisitions since 2020, there is generally less seasonality in our net sales on a consolidated basis than there has been historically.
Note B — Acquisitions
The acquisitions of our businesses are accounted for these two reportable segments will change, these changes will not have a material impact onunder 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,acquisition method of accounting. For each platform acquisition, the Company is currently analyzing our internal control over financial reporting framework to determine if controls should be added or modified astypically structures the transaction so that 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 Crosman
On June 2, 2017, CBCP Acquisition Corp. (the "Buyer"), a wholly owned subsidiary of the Company, entered into an equity purchase agreement pursuant to which it acquired all of the outstanding equity interests of Bullseye Acquisition Corporation, the indirect ownernewly created holding company acquires 100% of the equity interests in the acquired business. The entirety of Crosman Corp. ("Crosman"). Crosmanthe purchase consideration is paid by the newly created holding company to the selling shareholders. The total purchase consideration is the amount paid to the selling shareholders and we will, from time to time, allow the selling shareholder to reinvest a designer, manufacturerportion of their proceeds alongside the Company 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 marketer of airguns, archery products, laser aiming devices and related accessories. Headquarteredare not retaining their existing equity 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 portfoliothe acquired business, the Company includes the widely known Crosman, Benjaminamount 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 CenterPoint brands.manage is to provide both equity capital and debt capital, raised at the parent level, typically through our existing credit facility. The debt capital is in the form of “intercompany loans” made by the LLC to the 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 intercompany loans eliminate in consolidation and are not reflected on the Company's consolidated balance sheets.

Acquisition of PrimaLoft
On July 12, 2022, the LLC, through its newly formed indirect acquisition subsidiary, Relentless Intermediate, Inc. ("PrimaLoft Buyer"), acquired PrimaLoft Technologies Holdings, Inc. (“PrimaLoft”) pursuant to a Stock Purchase Agreement (the “PrimaLoft Purchase Agreement”), dated June 4, 2022, by and between PrimaLoft Buyer and VP PrimaLoft Holdings, LLC ("PrimaLoft Seller"). The Company made loans to, and purchasedacquired PrimaLoft for a 98.9% controlling interest in, Crosman. Thetotal purchase price, including proceeds from noncontrolling interestsshareholders, of approximately $541.1 million. The Company funded the acquisition through a draw on its 2022 Revolving Credit Facility and net of transaction costs, was approximately $150.4 million. Crosmanthe proceeds from its $400 million 2022 Term Loan Facility. PrimaLoft management invested in the transaction along with the Company, representing approximately 1.1%9.2% of the initial noncontrollingequity interest onin PrimaLoft. Concurrent with the closing, the Company provided a primarycredit facility to PrimaLoft pursuant to which a secured revolving loan commitment and fully diluted basis.secured term loan were made available to PrimaLoft (the "PrimaLoft Credit Agreement"). The fair value of the noncontrolling interest was determined basedinitial revolving loan and term loan commitments under these facilities 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.closing date were $178 million. 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 Crosman. CGM will receivereceived integration service fees of $1.5$4.8 million payable quarterly over a twelve monththe twelve-month period as services are rendered beginning in the quarter ended SeptemberJune 30, 2017.2023. The Company incurred $1.5$5.7 million of transaction costs in conjunction with the CrosmanPrimaLoft acquisition, which was included in selling, general and administrative expense in the consolidated statements of incomeoperations during the secondthird quarter of 2017.2022.

PrimaLoft, Inc. is a branded, advanced material technology company based in Latham, New York and is focused on the research and innovative development of high-performance material solutions, specializing in insulations and fabrics.
The results of operations of CrosmanPrimaLoft have been included in the consolidated results of operations since the date of acquisition. Crosman'sPrimaLoft'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(in thousands)Preliminary Purchase Price AllocationMeasurement Period AdjustmentsFinal Purchase Price Allocation
Assets:      
Purchase ConsiderationPurchase Consideration$539,576 $1,536 $541,112 
Fair value of identifiable assets acquired:Fair value of identifiable assets acquired:
Cash $429
 $781
 $1,210
Cash$6,951 $— $6,951 
Accounts receivable (1)
 16,751
 —
 16,751
Accounts receivable (1)
2,992 — 2,992 
Inventory 25,598
 3,166
 28,764
Inventory1,991 — 1,991 
Property, plant and equipment 10,963
 6,610
 17,573
Property, plant and equipment
1,058 — 1,058 
Intangible assets —
 82,773
 82,773
Intangible assets248,200 58,700 306,900 
Other current and noncurrent assetsOther current and noncurrent assets3,581 (1,187)2,394 
Total identifiable assetsTotal identifiable assets264,773 57,513 322,286 
Fair value of liabilities assumed:Fair value of liabilities assumed:
Current liabilitiesCurrent liabilities8,865 (1,080)7,785 
Other liabilitiesOther liabilities360 — 360 
Deferred tax liabilitiesDeferred tax liabilities51,268 12,108 63,376 
Total liabilitiesTotal liabilities60,493 11,028 71,521 
Net identifiable assets acquiredNet identifiable assets acquired204,280 46,485 250,765 
Goodwill 139,434
 (91,316) 48,118
Goodwill$335,296 $(44,949)$290,347 
Other current and noncurrent assets 2,348
 —
 2,348
Total assets $195,523
 $2,014
 $197,537
      

Acquisition consideration
Purchase price$530,000 $— $530,000 
Cash acquired7,319 (368)6,951 
Net working capital adjustment2,257 1,904 4,161 
Total purchase consideration$539,576 $1,536 $541,112 
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 allocation of the purchase price presented above is based on management's estimate of the fair values using valuation techniques including the income, cost and market approach. In estimating the fair value of the 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 and current and other liabilities are valued at historical carrying values. 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 appraisalat fair value which approximates book value 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$290.3 million reflects the strategic fit of CrosmanPrimaLoft in the Company's branded consumer business and is not expected to be deductible for income tax purposes. The PrimaLoft purchase accounting for Crosman is expected to beprice allocation was finalized during the fourth quarter of 2017.in 2023.

14

The intangible assets recorded related to the CrosmanPrimaLoft acquisition are as follows (in thousands):
Intangible AssetsFair ValueEstimated Useful Lives
Customer relationships$209,100 15 years
Tradename48,200 20 years
Technology49,100 11 years
In-process research and development (1)
500 N/a
$306,900 
Intangible Assets Amount Estimated Useful Life
Tradename $51,642
 20 years
Customer relationships 28,718
 15 years
Technology 2,413
 15 years
  $82,773
  
(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.

The customer relationships were considered the primary intangible asset and was valued at $209.1 million using a multi-period excess earnings method. The technology was valued at $49.1 million using a multi-period excess earnings methodology with an assumed obsolescence factor. The tradename was valued at $51.6$48.2 million using a multi-periodmulti period excess earnings methodology. method. The customer relationships intangible asset was valued at $28.7 million using the distributor method, a variation of the multi-periodmulti period excess earnings methodology, in whichmethod 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 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 million reflects the strategic fit of 5.11 in the Company's branded consumer business and is not expected to be deductible for income tax purposes.
The customer relationships intangible asset was valued at $75.2 million using an 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 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 and six months ended SeptemberJune 30, 2017 and the three and nine months ended September 30, 20162022 gives effect to the acquisition of Crosman and 5.11 Tactical,PrimaLoft, as described above, as if the acquisitionsthis transaction had been completed as of January 1, 2016, and the sale of Tridien as if the disposition had been completed on January 1, 2016.2022. 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 endedSix months ended
(in thousands, except per share data)June 30, 2022June 30, 2022
Net sales$542,715 $1,078,976 
Gross profit$228,296 $444,607 
Operating income$54,808 $103,665 
Net income from continuing operations$25,035 $41,152 
Net income from continuing operations attributable to Holdings$21,205 $32,071 
Basic and fully diluted net income per share attributable to Holdings$0.11 $0.13 
  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

Other acquisitions
ErgobabyMarucci
Baum Bat - On May 11, 2016, the Company's Ergobaby subsidiaryApril 3, 2023, Marucci acquired all of the outstanding membership interests in New Baby TulaBaum Bat LLC ("Baby Tula"Baum Bat"), a makermanufacturer and marketer of premium baby carriers, toddler carriers, slings, blankets and wraps. Thebranded wood composite baseball bats, for a purchase price was $73.8of approximately $27.5 million, net ofexcluding customary closing adjustments. The acquisition and related transaction costs plus a potential earn-outwere funded through an additional loan of $8.2$25.0 million based on 2017 financial performance. Ergobabyunder the Marucci intercompany loan agreement, and rollover equity from the selling shareholder of Baum Bat which was used to purchase common shares of Marucci. Marucci issued 11,783 shares to the selling shareholder in exchange for the rollover equity, which represents an ownership interest of approximately 1.0% in Marucci. Marucci paid $0.8approximately $0.4 million in transaction costsexpenses in connection with 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. ErgobabyBaum Bat. Marucci recorded a preliminary purchase price allocation at June 30, 2023, including goodwill of $13.2$7.0 million, in goodwill, which is expected to be deductible for income tax purposes, $55.3and intangible assets of $20.0 million.
Velocity
Kings Camo - On July 8, 2022, Velocity acquired the assets of King's Camo LC, a manufacturer of outdoor performance apparel and gear, for a purchase price of approximately $25.2 million and included a potential earnout of $3.0 million. The final earnout amount was $1.3 million and was paid in the second quarter of 2023. The acquisition and related transaction costs were funded through an additional term loan of $25.7 million under the
15

Velocity intercompany credit agreement. Velocity paid approximately $0.2 million in transaction fees. Velocity recorded a purchase price allocation, including goodwill of approximately $9.7 million, which is expected to be deductible for income tax purposes, and 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 provision of the purchase price was allocated a fair value of $3.8$7.1 million. The remainder of the purchase consideration was allocated to net assets acquired. The Company finalized the purchase price for the Baby Tula acquisition duringallocation was finalized in the fourth quarter of 2016.2022.
Clean Earth
Note C — Discontinued Operations
Sale of Advanced Circuits
On June 1, 2016,January 10, 2023, the Company's Clean Earth subsidiary acquired certainLLC, solely in its capacity as the representative of the assetsholders of stock and liabilitiesoptions of EWS Alabama,Compass AC Holdings, Inc. ("EWS"). Clean Earth funded, a majority owned subsidiary of the acquisitionLLC, entered into a definitive Agreement and the related transaction costs through the issuancePlan of additional intercompany debtMerger 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"APCT Inc. (“ACI Purchaser”), Circuit Merger Sub, Inc. (“ACI Merger Sub”) and WIC, LLC (togetherAdvanced 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 Phoenix Soil,and into Advanced Circuits, with Advanced Circuits surviving the "Sellers"). Phoenix Soil is based in Plainville, Connecticutmerger 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 the Company, acquired all of the outstanding stock of Northern International, Inc. ("NII"ACI Purchaser (the “ACI Merger”), for a total purchase. The ACI Merger was completed on February 14, 2023. 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 considerationAdvanced Circuits 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.$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 sale proceedssales price to noncontrollingAdvanced 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 gain of $1.7 million for the year ended December 31, 2016 as a result ofon the sale of Tridien. Approximately $1.6ACI of $102.2 million, net of an income tax provision of $4.6 million, in the proceeds received byfirst half of 2023.
Summarized results of operations of ACI for the period of January 1, 2023 through the date of disposition and the three and sixmonths ended June 30, 2022 and are as follows (in thousands):
For the period January 1, 2023 through dispositionThree months ended 
 June 30, 2022		Six months ended 
June 30, 2022
Net sales$8,829 $22,157 $45,406 
Gross profit$3,663 $10,095 $21,025 
Operating income$1,058 $5,806 $12,330 
Income (loss) from continuing operations before income taxes (1)
$(2,464)$5,826 $12,303 
Provision (benefit) for income taxes$(1,073)$822 $1,929 
Income (loss) from discontinued operations (1)
$(1,391)$5,004 $10,374 
(1) The results of operations for the period from January 1, 2023 through disposition and the three and six months ended June 30, 2022, each exclude $1.4 million,$1.6 million and $3.3 million, respectively, of intercompany interest expense.
16

The following table presents summary balance sheet information of ACI that is presented as discontinued operations as of December 31, 2022 (in thousands):
December 31,
2022
Assets
Cash and cash equivalents$3,391 
Accounts receivable, net10,044 
Inventories, net4,345 
Prepaid expenses and other current assets346 
Current assets of discontinued operations$18,126 
Property, plant and equipment, net6,949 
Goodwill66,678 
Other non-current assets6,220 
Non-current assets of discontinued operations$79,847 
Liabilities
Accounts payable$3,810 
Accrued expenses5,570 
Due to related party250 
Other current liabilities1,518 
Current liabilities of discontinued operations$11,148 
Deferred income taxes10,999 
Other non-current liabilities5,193 
Non-current liabilities of discontinued operations$16,192 
Noncontrolling interest of discontinued operations$1,533 
Note D — Revenue
The Company recognizes revenue when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration 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. This disaggregation also represents how the Company evaluates its financial performance, as well as how the Company communicates its 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.
17

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 ninesix months ended SeptemberJune 30, 2016 are as follows:2023 and 2022 (in thousands):
Three months ended June 30, 2023
United StatesCanadaEuropeAsia PacificOther InternationalTotal
5.11$100,627 $2,772 $9,365 $3,815 $9,451 $126,030 
BOA10,378 — 14,801 12,867 77 38,123 
Ergobaby10,014 1,249 6,129 8,650 107 26,149 
Lugano60,949 — — — — 60,949 
Marucci35,094 591 18 1,546 21 37,270 
PrimaLoft209 128 770 21,006 47 22,160 
Velocity Outdoor34,253 1,500 1,033 132 921 37,839 
Altor52,870 — — — 8,016 60,886 
Arnold27,906 295 9,106 1,433 1,398 40,138 
Sterno72,385 1,655 575 — — 74,615 
$404,685 $8,190 $41,797 $49,449 $20,038 $524,159 
Three months ended June 30, 2022
United StatesCanadaEuropeAsia PacificOther InternationalTotal
5.11$96,543 $2,693 $8,774 $4,086 $7,952 $120,048 
BOA15,976 97 20,830 22,440 43 59,386 
Ergobaby9,841 1,330 8,085 7,144 106 26,506 
Lugano39,065 — — — — 39,065 
Marucci26,641 392 23 575 5 27,636 
Velocity Outdoor46,337 2,931 2,587 488 1,503 53,846 
Altor59,736 — — — 6,408 66,144 
Arnold27,433 244 8,928 1,567 605 38,777 
Sterno81,684 2,068 437 — — 84,189 
$403,256 $9,755 $49,664 $36,300 $16,622 $515,597 
Six months ended June 30, 2023
United StatesCanadaEuropeAsia PacificOther InternationalTotal
5.11$199,154 $6,131 $15,972 $7,998 $21,227 $250,482 
BOA21,677 124 29,453 24,563 292 76,109 
Ergobaby18,843 2,664 12,994 13,184 882 48,567 
Lugano124,836 — — — — 124,836 
Marucci90,672 1,652 214 2,977 50 95,565 
PrimaLoft375 175 1,490 44,425 224 46,689 
Velocity Outdoor64,145 3,436 2,373 261 1,664 71,879 
Altor106,332 — — — 16,066 122,398 
Arnold54,555 458 20,089 2,844 2,282 80,228 
Sterno143,973 3,839 1,822 — — 149,634 
$824,562 $18,479 $84,407 $96,252 $42,687 $1,066,387 
18

(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
Six months ended June 30, 2022
United StatesCanadaEuropeAsia PacificOther InternationalTotal
5.11$177,346 $5,081 $16,319 $8,050 $17,275 $224,071 
BOA36,178 637 37,930 41,344 107 116,196 
Ergobaby18,014 2,123 15,675 10,614 290 46,716 
Lugano86,084 — — — — 86,084 
Marucci77,723 944 29 994 38 79,728 
Velocity Outdoor90,150 6,492 5,013 842 2,795 105,292 
Altor117,517 — — — 12,455 129,972 
Arnold53,606 437 18,437 3,349 1,113 76,942 
Sterno156,382 3,867 739 102 19 161,109 
$813,000 $19,581 $94,142 $65,295 $34,092 $1,026,110 

(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 SeptemberJune 30, 2017,2023, 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.

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 medical 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 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 Los Angeles,Newport Beach, California.


Liberty Safe•Marucci Sports is a leading designer, manufacturer, and marketer of premium home, gunwood and office safes in North America. From its over 300,000 square foot manufacturing facility, Liberty produces a wide range of homemetal baseball bats, composite bats, fielding gloves, batting gloves, bags, protective gear, sunglasses, on and gun safe models in a broad assortment of sizes, featuresoff-field apparel, and styles. Libertyother baseball and softball equipment used by professional and amateur athletes. Marucci also develops corporate-owned and franchised sports training facilities. Marucci is headquartered in Payson, Utah.Baton Rouge, Louisiana.
19


Manitoba Harvest•PrimaLoft is a pioneer and leader in the manufacture and distributionleading provider of branded, hemp-based foodshigh-performance synthetic insulation and hemp-based ingredients. Manitoba Harvest’smaterials used primarily in consumer outerwear, and accessories. The portfolio of PrimaLoft synthetic insulations offers products which include Hemp Hearts™, Hemp Heart Bites™,that can both mimic natural down aesthetics and Hemp protein powders, are currently carried in over 13,000 retail stores acrossprovide the United Statesfreedom to design garments ranging from stylish puffers to lightweight performance apparel. PrimaLoft insulations also offer superior economics to the brand partner and Canada. Manitoba Harvestenable better sustainability characteristics through the use of recycled, low-carbon inputs. PrimaLoft is headquartered in Winnipeg, Manitoba.
Latham, New York.

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 highly recognizable 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 18 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 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 candles and outdoor lighting products 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, 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.
20

Summary of Operating Segments
Net RevenuesThree months ended June 30,Six months ended June 30,
(in thousands)2023202220232022
5.11$126,030 $120,048 $250,482 $224,071 
BOA38,123 59,386 76,109 116,196 
Ergobaby26,149 26,506 48,567 46,716 
Lugano60,949 39,065 124,836 86,084 
Marucci37,270 27,636 95,565 79,728 
PrimaLoft22,160 — 46,689 — 
Velocity Outdoor37,839 53,846 71,879 105,292 
Altor Solutions60,886 66,144 122,398 129,972 
Arnold40,138 38,777 80,228 76,942 
Sterno74,615 84,189 149,634 161,109 
Total segment revenue524,159 515,597 1,066,387 1,026,110 
Corporate— — — — 
Total consolidated revenues$524,159 $515,597 $1,066,387 $1,026,110 


Segment Profit (Loss)Three months ended June 30,Six months ended June 30,
(in thousands)2023202220232022
5.11$10,582 $12,305 $18,252 $18,210 
BOA8,050 18,451 16,001 37,262 
Ergobaby2,526 3,549 2,914 3,273 
Lugano17,133 9,644 36,909 23,250 
Marucci2,962 (1,436)17,302 6,449 
PrimaLoft2,817 — 7,838 — 
Velocity Outdoor(1,610)5,429 (4,886)8,496 
Altor Solutions9,223 5,908 16,157 11,742 
Arnold5,613 5,325 10,651 8,613 
Sterno7,088 7,954 11,581 10,988 
Total segment operating income64,384 67,129 132,719 128,283 
Corporate(19,309)(16,818)(38,747)(33,370)
Total consolidated operating income45,075 50,311 93,972 94,913 
Reconciliation of segment operating income (loss) to consolidated income from continuing operations before income taxes:
Interest expense, net(26,615)(17,519)(52,795)(34,938)
Amortization of debt issuance costs(1,024)(865)(2,029)(1,731)
Other income (expense), net(101)737 1,026 2,773 
Total consolidated income from continuing operations before income taxes$17,335 $32,664 $40,174 $61,017 

21

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
Depreciation and Amortization ExpenseThree months ended June 30,Six months ended June 30,
(in thousands)2023202220232022
5.11$6,774 $5,535 $13,151 $10,947 
BOA5,756 5,390 11,392 10,644 
Ergobaby2,015 1,995 4,029 3,990 
Lugano1,891 2,945 4,609 5,114 
Marucci3,358 2,827 6,372 6,979 
PrimaLoft5,282 — 10,560 — 
Velocity Outdoor3,295 3,218 6,579 6,413 
Altor Solutions4,116 4,079 8,220 8,007 
Arnold2,063 1,862 4,041 4,047 
Sterno4,892 4,975 9,806 9,978 
Total39,442 32,826 78,759 66,119 
Reconciliation of segment to consolidated total:
Amortization of debt issuance costs1,024 865 2,029 1,731 
Consolidated total$40,466 $33,691 $80,788 $67,850 





Accounts ReceivableIdentifiable Assets
June 30,December 31,June 30,December 31,
(in thousands)20232022
2023 (1)
2022 (1)
5.11$43,703 $53,589 $465,469 $450,537 
BOA1,939 1,630 236,165 240,359 
Ergobaby15,365 11,213 77,201 84,657 
Lugano92,100 85,911 425,528 327,795 
Marucci15,588 35,185 189,148 181,528 
PrimaLoft1,713 2,486 300,711 310,914 
Velocity Outdoor29,158 33,159 225,452 224,356 
Altor Solutions41,955 42,368 189,857 198,943 
Arnold22,291 23,666 107,706 105,196 
Sterno44,368 54,400 189,371 210,780 
Sales allowance accounts(11,889)(12,211)— — 
Total296,291 331,396 2,406,608 2,335,065 
Reconciliation of segment to consolidated totals:
Corporate and other identifiable assets
— — 19,843 18,471 
Total$296,291 $331,396 $2,426,451 $2,451,509 

(1)Does not include accounts receivable balances per schedule above or goodwill balances - refer to Note G - "Goodwill and Other Intangible Assets".
22
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

(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



 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 SeptemberJune 30, 20172023 and December 31, 2016 2022 (in thousands)thousands):
September 30, 2017 December 31, 2016June 30, 2023December 31, 2022
Machinery and equipment$168,621
 $155,591
Machinery and equipment$234,512 $225,027 
Furniture, fixtures and other27,005
 13,737
Furniture, fixtures and other71,469 66,445 
Leasehold improvements18,337
 14,156
Leasehold improvements91,682 75,318 
Buildings and land39,964
 35,392
Buildings and land13,546 13,386 
Construction in process24,699
 8,308
Construction in process16,569 18,091 
278,626
 227,184
427,778 398,267 
Less: accumulated depreciation(107,799) (84,814)Less: accumulated depreciation(222,974)(199,742)
Total$170,827
 $142,370
Total$204,804 $198,525 
Depreciation expense was $8.7$12.8 million and $24.5$24.6 million for the three and ninesix months ended SeptemberJune 30, 2017,2023, respectively and $7.3$10.4 million and $19.5$20.3 million for the three and ninesix months ended SeptemberJune 30, 2016,2022, respectively.
Inventory
Inventory is comprised of the following at SeptemberJune 30, 20172023 and December 31, 2016 2022 (in thousands):
June 30, 2023December 31, 2022
Raw materials$98,089 $104,735 
Work-in-process29,668 30,158 
Finished goods687,166 621,854 
Less: obsolescence reserve(26,640)(28,664)
Total$788,283 $728,083 
 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.
2023 Annual 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. At March 31, 2017, weCompany determined that the Manitoba HarvestVelocity 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 exceeded the carrying value of these reporting units.
23

The quantitative test of Velocity was performed using an income approach to determine the fair value of thosethe reporting unit. The discount rate used in the income approach was 15% and the results of the quantitative impairment testing indicated that the fair value of the Velocity reporting unit exceeded the carrying value by 21%.
2022 Annual Impairment Testing
The results of the qualitative analysis indicated that it was more-likely-than-not that the fair value of each of our reporting units exceeded their carrying value and that a quantitative analysis was not necessary.for the 2022 annual impairment testing.
Manitoba HarvestInterim Impairment Testing
2022 Interim Impairment Testing
Ergobaby - The Company performed Step 1 testing during the 2017 annual impairment testing for Manitoba Harvest. Subsequent 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 goodwillquantitative impairment testing at Manitoba HarvestErgobaby of goodwill and the indefinite lived tradename at December 31, 2017.
2016 Interim goodwill impairment testing
Arnold
2022. As a result of decreases in forecasted revenue, operating incomeresults that were below historical and cash flows at Arnold, as well as a shortfall in revenue and operating income during the latter half of 2016 as compared to budgetedforecast amounts, the Company determined that it was necessary to perform interim goodwill impairment testing on each of the three reporting unitsa triggering event had occurred at Arnold.Ergobaby. The Company performed Step 1 of the goodwill impairment assessment at December 31, 2016. In Step 1 of the goodwill impairment test, the Company compared the fair value of the reporting units to the carrying amount. Based on the results of the valuation, the fair value of the Flexmag and PTM reporting units exceeded the carrying amount, therefore, no additional goodwill testing was required. The results of the Step 1 testused an income approach for the PMAG unit indicated a potential impairment of goodwill and the Company performed the second step of goodwill 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 estimated the fair value of the reporting unit using an income approach, 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 16% 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'sErgobaby'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. The CompanyErgobaby did not exceed its carrying value. We recorded an estimatedgoodwill impairment loss for PMAG of $16$20.6 million at December 31, 2016 based on that range. The Company completed2022. For 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 (which is reported as a discontinued operation in the accompanying financial statements after the sale of the reporting unit in September 2016) required furtherindefinite lived tradename, 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 itsthe 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.

AThe following is a summary of the net carrying valueamount of goodwill at SeptemberJune 30, 20172023 and December 31, 2016,2022, is as follows (in thousands):
Six months ended June 30, 2023Year ended 
 December 31, 2022
Goodwill - gross carrying amount$1,151,248 $1,145,023 
Accumulated impairment losses (1)
(78,297)(78,297)
Goodwill - net carrying amount$1,072,951 $1,066,726 
(1) Includes goodwill impairment expense of $20.6 million recorded at Ergobaby, $32.9 million at Velocity and $24.9 million at Arnold.
24

 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 ninesix months ended SeptemberJune 30, 20172023 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, 2023Acquisitions/Measurement Period AdjustmentsBalance at June 30, 2023
5.11$92,966 $— $92,966 
BOA254,153 — 254,153 
Ergobaby40,896 — 40,896 
Lugano86,337 — 86,337 
Marucci75,719 7,028 82,747 
PrimaLoft291,150 (803)290,347 
Velocity Outdoor39,773 — 39,773 
Altor91,129 — 91,129 
Arnold39,267 — 39,267 
Sterno55,336 — 55,336 
Total$1,066,726 $6,225 $1,072,951 

(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 20172023 and 2016.2022. 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 SeptemberJune 30, 20172023 and December 31, 2016 (in2022 (in thousands):
June 30, 2023December 31, 2022
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Customer relationships$785,303 $(268,811)$516,492 $785,303 $(239,752)$545,551 
Technology and patents226,580 (60,717)165,863 211,648 (52,811)158,837 
Trade names, subject to amortization487,823 (133,907)353,916 483,179 (118,684)364,495 
Non-compete agreements6,424 (4,450)1,974 4,637 (3,824)813 
Other contractual intangible assets1,960 (1,410)550 1,960 (1,185)775 
Total1,508,090 (469,295)1,038,795 1,486,727 (416,256)1,070,471 
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$1,565,555 $(469,295)$1,096,260 $1,544,192 $(416,256)$1,127,936 
 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$26.7 million and $39.3$53.1 million for the three and ninesix months ended SeptemberJune 30, 2017,2023, respectively, and $8.4$20.9 million and $24.0$42.0 million for the three and ninesix months ended SeptemberJune 30, 2016,2022, respectively.
25

Estimated charges to amortization expense of intangible assets overfor the remainder of 2023 and the next fivefour years, is as follows (in thousands):
20232024202520262027
$53,095 $104,508 $99,215 $92,873 $82,018 
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, Marucci, 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 six months ended June 30, 2023 and the year ended December 31, 2022 is as follows (in thousands):

Warranty liabilitySix months ended June 30, 2023Year ended December 31, 2022
Beginning balance$1,754 $2,062 
Provision for warranties issued during the period1,470 3,301 
Fulfillment of warranty obligations(1,648)(3,609)
Ending balance$1,576 $1,754 
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.

26


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$505.8 million at SeptemberJune 30, 2017.2023. Letters of credit outstanding at SeptemberJune 30, 20172023 totaled approximately $1.3$2.2 million. At SeptemberJune 30, 2017,2023, 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.
2021 Credit Facility
On March 23, 2021, we entered into a Second Amended and Restated Credit Agreement (the "2021 Credit Facility") to amend and restate the 2018 Credit Facility (as previously restated and amended) among the LLC, the lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent. The 2021 Credit Facility provided for revolving loans, swing line loans and letters of credit (the “2021 Revolving Credit Facility”) up to a maximum aggregate amount of $600 million and also permitted the LLC, prior to the applicable maturity date, to increase the revolving loan commitment and/or obtain term loans in an aggregate amount of up to $250 million, subject to certain restrictions and conditions. The LLC repaid the outstanding amounts under the 2021 Credit Facility in the third quarter of 2022 in connection with entering into the 2022 Credit Facility.
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, 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.
The proceeds from the sale of the 2029 Notes was used to repay debt outstanding under the 2018 Credit Facility in connection with entering into the 2021 Credit Facility, as described above, and to redeem our 8.000% Senior Notes due 2026 (the “2026 Senior Notes”).
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The following table provides the Company’s outstanding long-term debt and effective interest rates at June 30, 2023 and December 31, 2022 (in thousands):
June 30, 2023December 31, 2022
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 Loan7.10 %390,000 5.20 %395,000 
2022 Revolving Credit Facility7.17 %92,000 5.98 %155,000 
Less: Unamortized debt issuance costs(14,327)(15,532)
Total debt$1,767,673 $1,834,468 
Less: Current Portion, term loan facilities(10,000)(10,000)
Long-term debt$1,757,673 $1,824,468 
Annual maturities of the Company's debt obligations are as follows (in thousands):
2023$10,000 
202410,000 
202515,000 
202625,000 
2027422,000 
2028 and thereafter1,300,000 
$1,782,000 
The Senior Notes consisted of the following carrying value and estimated fair value (in thousands):
Fair Value Hierarchy LevelJune 30, 2023
Maturity DateRateCarrying ValueFair Value
2032 Senior NotesJanuary 15, 20325.000 %2300,000 241,500 
2029 Senior NotesApril 15, 20295.250 %21,000,000 875,000 
Debt Issuance Costs
Deferred debt issuance costs represent the costs associated with the issuance of the Company's financing arrangements. In connection with entering into the 20142022 Credit Facility, as well as amendmentsthe Company recognized $2.5 million in deferred financing costs associated with the 2022 Term Loan, and $2.8 million in deferred financing costs associated with the 2022 Revolving Credit Facility. In connection with the 2032 Senior Notes offering in November 2021, the Company recorded $4.3 million in deferred financing costs, and the Company recorded $12.0 million in deferred financing costs related to the 2014 Credit Facility, and are amortized over the term of the related debt instrument. 2029 Senior Notes offering in March 2021.
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.

28



The following table summarizes debt issuance costs at SeptemberJune 30, 20172023 and December 31, 2016,2022, and the balance sheet classification in each of the periods presentspresented (in thousands):
June 30, 2023December 31, 2022
Deferred debt issuance costs$32,526 $32,526 
Accumulated amortization(11,770)(9,760)
Deferred debt issuance costs, net$20,756 $22,766 
Balance sheet classification:
Other noncurrent assets$6,429 $7,234 
Long-term debt14,327 15,532 
$20,756 $22,766 
 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.
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 96,800 shares for approximately $1.9 million and 306,800 shares for approximately $5.9 million during the three and six months ended June 30, 2023, respectively. As of June 30, 2023, $44.1 million remained available to purchase under the share repurchase program.
At-The-Market Equity Offering Program
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 “Sales Agreement”) with B. Riley Securities, Inc. and Goldman Sachs & Co. LLC (each a “Sales Agent” and, collectively, the “Sales Agents”). The 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 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 and six months ended June 30, 2023, there were no sales of Trust common shares under the Sales Agreement as the at-the-market program is not active when the share repurchase program is active.
During the three and six months ended June 30, 2022, the Company sold 1,817,505 and 2,529,938 Trust common shares under the Sales Agreement, respectively. During the same periods, the Company received total net proceeds of approximately $42.1 million and $62.3 million, respectively, from these sales, and incurred approximately $0.7 million and $1.1 million in commissions payable to the Sales Agents.
29

The Company incurred approximately $0.1 million in total costs related to the ATM program during both the three and six months ended June 30, 2023 and 2022.
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 trust preferredTrust interests.
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 June 30, 2023, $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.
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 June 30, 2023, $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.
30

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 sharesAdvanced Circuits in March 2017 (refer to Note F - "Investment in FOX") qualified asFebruary 2023 represented a Sale Event underand the Company's LLC Agreement.board of director's approved a distribution of $24.4 million in the second quarter of 2023. In April 2017, with respect to the March 2017 Offering,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.
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 
 June 30,		Six months ended 
 June 30,
2023202220232022
Net income from continuing operations attributable to Holdings$9,374 $22,897 $17,396 $36,337 
Less: Distributions paid - Allocation Interests26,475 — 26,475 — 
Less: Distributions paid - Preferred Shares6,046 6,046 12,091 12,091 
Less: Accrued distributions - Preferred Shares2,869 2,869 2,869 2,869 
Net income (loss) from continuing operations attributable to common shares of Holdings$(26,016)$13,982 $(24,039)$21,377 
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 ninesix months ended SeptemberJune 30, 20172023 and 20162022 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 ninesix months ended SeptemberJune 30, 20172023 and 20162022 attributable to the common shares of Holdings is calculated as follows (in thousands, except per share data):
31

Three months ended 
 June 30,		Six months ended 
 June 30,
 Three months ended 
 September 30,		 Nine months ended 
 September 30,		2023202220232022
 2017 2016 2017 2016
Income (loss) from continuing operations attributable to Holdings $7,706
 $47,862
 $(18,351) $50,198
Less: Profit Allocation paid to Holders —
 8,196
 39,120
 16,829
Net income (loss) from continuing operations attributable to common shares of HoldingsNet income (loss) from continuing operations attributable to common shares of Holdings$(26,016)$13,982 $(24,039)$21,377 
Less: Effect of contribution based profit - Holding Event 1,620
 812
 3,954
 1,292
Less: Effect of contribution based profit - Holding Event3,206 4,641 6,608 7,884 
Income (loss) from continuing operation attributable to common shares $6,086
 $38,854
 $(61,425) $32,077
Net income (loss) from continuing operations attributable to common shares of HoldingsNet income (loss) from continuing operations attributable to common shares of Holdings$(29,222)$9,341 $(30,647)$13,493 
        
Income from discontinued operations attributable to Holdings $—
 $1,843
 $340
 $2,723
Income from discontinued operations attributable to Holdings$4,232 $3,470 $101,607 $13,792 
Less: Effect of contribution based profit - Holding Event —
 —
 —
 —
Less: Effect of contribution based profit - Holding Event— 569 — 1,198 
Income from discontinued operations attributable to common shares $—
 $1,843
 $340
 $2,723
Income from discontinued operations attributable to common shares of HoldingsIncome from discontinued operations attributable to common shares of Holdings$4,232 $2,901 $101,607 $12,594 
        
Basic and diluted weighted average common shares outstanding 59,900
 54,300
 59,900
 54,300
Basic and diluted weighted average common shares outstanding71,932 70,227 72,055 69,804 
        
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 $0.10
 $0.72
 $(1.03) $0.59
Continuing operations$(0.41)$0.13 $(0.43)$0.19 
Discontinued operations —
 0.03
 0.01
 0.05
Discontinued operations0.06 0.04 1.41 0.18 
 $0.10
 $0.75
 $(1.02) $0.64
$(0.35)$0.17 $0.98 $0.37 
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:
April 1, 2023 - June 30, 2023 (1)
$0.25 $17,974 July 20, 2023July 27, 2023
January 1, 2023 - March 31, 2023$0.25 $17,987 April 20, 2023April 27, 2023
October 1, 2022 - December 31, 2022$0.25 $18,051 January 19, 2023January 26, 2023
July 1, 2022 - September 30, 2022$0.25 $18,051 October 20, 2022October 27, 2022
April 1, 2022 - June 30, 2022$0.25 $17,931 July 21, 2022July 28, 2022
January 1, 2022 - March 31, 2022$0.25 $17,510 April 21, 2022April 28, 2022
Series A Preferred Shares:
April 30, 2023 - July 29, 2023 (1)
$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
July 30, 2022 - October 29, 2022$0.453125 $1,813 October 15, 2022October 30, 2022
April 30, 2022 - July 29, 2022$0.453125 $1,813 July 15, 2022July 30, 2022
January 30, 2022 - April 29, 2022$0.453125 $1,813 April 15, 2022April 30, 2022
October 30, 2021 - January 29, 2022$0.453125 $1,813 January 15, 2022January 30, 2022
Series B Preferred Shares:
April 30, 2023 - July 29, 2023 (1)
$0.4921875 $1,969 July 15, 2023July 30, 2023
32

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
July 30, 2022 - October 29, 2022$0.4921875 $1,969 October 15, 2022October 30, 2022
April 30, 2022 - July 29, 2022$0.4921875 $1,969 July 15, 2022July 30, 2022
January 30, 2022 - April 29, 2022$0.4921875 $1,969 April 15, 2022April 30, 2022
October 30, 2021 - January 29, 2022$0.4921875 $1,969 January 15, 2022January 30, 2022
Series C Preferred Shares:
April 30, 2023 - July 29, 2023 (1)
$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
July 30, 2022 - October 29, 2022$0.4921875 $2,264 October 15, 2022October 30, 2022
April 30, 2022 - July 29, 2022$0.4921875 $2,264 July 15, 2022July 30, 2022
January 30, 2022 - April 29, 2022$0.4921875 $2,264 April 15, 2022April 30, 2022
October 30, 2021 - January 29, 2022$0.4921875 $2,264 January 15, 2022January 30, 2022
(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.
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, 2017.5, 2023.
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’s 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 SeptemberJune 30, 20172023 and December 31, 2016:2022:

% Ownership (1)
June 30, 2023
% Ownership (1)
December 31, 2022
PrimaryFully
Diluted		PrimaryFully
Diluted
5.1197.5 88.3 97.7 88.3 
BOA91.8 83.3 91.8 83.5 
Ergobaby81.6 72.8 81.6 72.8 
Lugano59.9 54.9 59.9 55.2 
Marucci90.0 80.9 91.0 82.1 
PrimaLoft90.7 82.0 90.7 83.7 
Velocity Outdoor99.4 87.7 99.4 87.7 
Altor99.8 87.9 99.8 88.2 
Arnold98.0 85.5 98.0 85.5 
Sterno99.4 90.7 99.4 90.7 
(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.
33

 
% 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
Noncontrolling Interest Balances
(in thousands)June 30, 2023December 31, 2022
5.11$17,841 $17,186 
BOA38,448 36,215 
Ergobaby16,487 16,020 
Lugano90,581 82,967 
Marucci25,892 20,045 
PrimaLoft36,164 36,263 
Velocity Outdoor6,516 6,115 
Altor5,657 5,077 
Arnold1,587 1,475 
Sterno1,542 2,046 
Allocation Interests100 100 
$240,815 $223,509 

Note L — Fair Value Measurement
The following table provides the assets and liabilities carried at fair value measured on a recurring basis during the year ended December 31, 2022. There were no assets or liabilities measured on a recurring basis during the six months ended June 30, 2023.
Fair Value Measurements at December 31, 2022
(in thousands)Carrying
Value		Level 1Level 2Level 3
Liabilities:
Put option of noncontrolling shareholders (1)
$(142)$— $— $(142)
Contingent consideration - acquisition (2)
(1,300)— — (1,300)
Total recorded at fair value$(1,442)$— $— $(1,442)

(1)Represents 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.
(2)Represents potential earn-out payable as additional purchase price consideration by Velocity in connection with the acquisition of King's Camo. The payment of the earn-out occurred during the second quarter of 2023.
Reconciliations of the change in the carrying value of the Level 3 fair value measurements from January 1, 2022 through June 30, 2023 are as follows (in thousands):
(1)
The principal difference between primary and diluted percentagesLevel 3
Balance at January 1, 2022$(1,501)
Contingent consideration - King's Camo(1,600)
Adjustment to contingent consideration - King's Camo300 
Payment of our operating segments is duecontingent consideration - Polyfoam1,350 
Increase in the fair value of put option of noncontrolling shareholder - 5.119 
Balance at December 31, 2022$(1,442)
Termination of put option of noncontrolling shareholder - 5.11142 
Adjustment to stock option issuancescontingent consideration - King's Camo25 
Payment of operating segment stock to management of the respective businesses.contingent consideration - King's Camo1,275 
Balance at June 30, 2023$— 

34

 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
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, 2022.

Nonrecurring Fair Value Measurements
The following table provides the assets and liabilities carried at fair value measured on a non-recurring basis as of December 31, 2022. 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. There were no assets or liabilities measured on a non-recurring basis during the six months ended June 30, 2023.
Expense
Fair Value Measurements at December 31, 2022Year ended
(in thousands)Carrying
Value		Level 1Level 2Level 3December 31, 2022
Goodwill - Ergo$40,896 — — $40,896 $20,552 
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.
The reconciliation between the Federal Statutory Rate and the effective income tax rate for the ninesix months ended SeptemberJune 30, 20172023 and 20162022 is as follows:

Six months ended June 30,
20232022
United States Federal Statutory Rate21.0 %21.0 %
State income taxes (net of Federal benefits)1.6 5.2 
Foreign income taxes4.6 3.0 
Impact of subsidiary employee stock options(1.8)0.9 
Utilization of tax credits(2.9)(4.4)
Non-recognition of various carryforwards at subsidiaries13.1 (0.1)
United States tax on foreign income(1.3)— 
Other1.2 0.8 
Effective income tax rate35.5 %26.4 %
35
 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$1.7 million is recognized in the consolidated balance sheet as a component of other non-current liabilities at SeptemberJune 30, 2017.2023. Net periodic benefit cost consists of the following for the three and ninesix months ended SeptemberJune 30, 20172023 and 20162022 (in thousands):

Three months ended June 30,Six months ended June 30,
2023202220232022
Service cost$91 $107 $181 $217 
Interest cost62 10 122 21 
Expected return on plan assets(55)(18)(109)(37)
Amortization of unrecognized loss(9)(7)(18)(14)
Effect of curtailment— (28)(13)(31)
Net periodic benefit cost$89 $64 $163 $156 
 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 ninesix months ended SeptemberJune 30, 2017,2023, per the terms of the pension agreement, Arnold contributed $0.1 million and $0.3$0.2 million to the plan utilizing reserves from prior years over funding of the plan, respectively.plan. For the remainder of 2017,2023, the expected contribution to the plan will be approximately $0.1$0.2 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 SeptemberJune 30, 20172023 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 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 and six months ended June 30, 2023 and 2022. The Company recognized $13.6 million and $25.9 million in the three and six months ended June 30, 2023 and $10.6 million and $21.0 million in the three and six months ended June 30, 2022, respectively, in expense related to operating leases in the condensed consolidated statements of operations.
36

The maturities of lease liabilities at June 30, 2023 are as follows (in thousands):
2023 (excluding six months ended June 30, 2023)$19,337 
202440,287 
202536,936 
202633,561 
202729,124 
Thereafter73,014 
Total undiscounted lease payments$232,259 
Less: Interest53,113 
Present value of lease liabilities$179,146 
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 RateJune 30, 2023June 30, 2022
Weighted-average remaining lease term (years)6.315.98
Weighted-average discount rate7.89 %7.18 %
Supplemental balance sheet information related to leases was as follows (in thousands):
Line Item in the Company’s Consolidated Balance SheetJune 30, 2023December 31, 2022
Operating lease right-of-use assetsOther non-current assets$156,918 $147,518 
Current portion, operating lease liabilitiesOther current liabilities$29,441 $28,497 
Operating lease liabilitiesOther non-current liabilities$149,705 $139,529 
Supplemental cash flow information related to leases was as follows (in thousands):
Six months ended June 30, 2023Six months ended June 30, 2022
Cash paid for amounts included in the measurement of lease liabilities:
   Operating cash flows from operating leases$21,297 $13,929 
Right-of-use assets obtained in exchange for lease obligations:
   Operating leases$22,994 $19,947 
37

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
PrimaLoft, which was acquired in July 2022, entered into an Integration Services Agreement ("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.
Lugano, which was acquired in September 2021, entered into an ISA with CGM whereby Lugano paid CGM an integration services fee of $2.3 million quarterly over a twelve month period as services were rendered, beginning in the quarter ended December 31, 2021.
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 ISAs, 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 Company and its businesses have the following significant related party transactions
5.11
Related Party Vendor Purchases - Subsequent Event5.11 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 $1.0 million during the three and six months endedJune 30, 2023, respectively and $0.5 million and $0.8 million during the three and six months ended June 30, 2022, respectively in inventory from the vendor.
BOA
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 $10.7 million and $20.4 million from this supplier during the three and six months ended June 30, 2023, respectively and $15.9 million and $31.1 million during the three and six months ended and June 30, 2022, respectively.
Ergobaby
Recapitalization - In October 2017,February 2022, the Company further amendedcompleted a recapitalization of Ergobaby whereby 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”). PursuantLLC entered into an amendment to the First Refinancing Amendment, outstanding Term Loans at LIBOR Rate bear interest at LIBOR plus an applicable rateintercompany loan agreement with Ergobaby (the "Ergo Loan Agreement"). The Ergo Loan Agreement was amended to provide for additional loan borrowings of 2.25% and outstanding Term Loans at Base Rate bear interest at Base Rate plus 1.25%. Prior$61.5 million to the amendment,fund a distribution to shareholders. The LLC owned 81.6% of the outstanding Term Loans bore interest at LIBOR plus 2.75% or Base Rate plus 1.75%. In connection withshares of Ergobaby on the First Refinancing Amendment,date of the Company incurred $1.4 milliondistribution and received $50.2 million. The remaining amount of debt issuance costs associated with fees charged by term loan lenders.the distribution was paid to minority shareholders.

38


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, 20162022 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 June 30, 2023. 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"), Marucci Sports, LLC Agreement, of the Company. Pursuant to the("Marucci" or "Marucci Sports"), PrimaLoft Technologies Holdings, Inc. ("PrimaLoft"), Velocity Outdoor, Inc. ("Velocity Outdoor" or "Velocity"), FFI Compass, Inc. ("Altor Solutions" or "Altor" (formerly "Foam Fabricators")), AMT Acquisition Corporation ("Arnold"), and The Sterno Group, 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 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 LLC ("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 SeptemberJune 30, 20172023 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 - June 30, 2023
BusinessAcquisition DatePrimaryDiluted
ErgobabySeptember 16, 201081.6%72.8%
ArnoldMarch 5, 201298.0%85.5%
SternoOctober 10, 201499.4%90.7%
5.11August 31, 201697.5%88.3%
Velocity OutdoorJune 2, 201799.4%87.7%
Altor SolutionsFebruary 15, 201899.8%87.9%
Marucci SportsApril 20, 202090.0%80.9%
BOAOctober 16, 202091.8%83.3%
LuganoSeptember 3, 202159.9%54.9%
PrimaLoftJuly 12, 202290.7%82.0%
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 industrial 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
39

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, footwear 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 - 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 medical 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 ownertoughest 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 dedicated to building a global community of Crosman Corp. ("Crosman"). Crosmanconfident parents with smart, ergonomic solutions that enable and encourage bonding between parents and babies. Ergobaby offers a broad range of award-winning baby carriers, strollers, bouncers, swaddlers, nursing pillows, and related products that fit into families’ daily lives seamlessly, comfortably and safely.
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.
Marucci Sports - Marucci is a leading designer, manufacturer, and marketer of premium wood and metal baseball bats, composite bats, fielding gloves, batting gloves, bags, protective gear, sunglasses, on and off-field apparel, and other baseball and softball equipment used by professional and amateur athletes. Marucci also develops corporate-owned and franchised sports training facilities. Marucci is headquartered in Baton Rouge, Louisiana.
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.
Velocity Outdoor - A leading designer, manufacturer, and marketer of airguns, archery products, laser aiming devices, hunting apparel and related accessories. Headquarteredaccessories, Velocity offers its products under the highly recognizable 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, CrosmanYork.
Niche Industrial
Altor Solutions - Altor Solutions is a designer and manufacturer of custom molded protective foam solutions and original equipment manufacturer (OEM) components made from expanded polystyrene (EPS) and expanded polypropylene (EPP). Altor operates 18 molding and fabricating facilities across North America and provides products to a variety of end-markets, including appliances and electronics, pharmaceuticals, health and wellness, automotive, building products and others. Altor Solutions is headquartered in Scottsdale, Arizona.
40

Arnold - Arnold serves over 425a variety of markets including aerospace and defense, general industrial, motorsport/ automotive, oil and gas, medical, energy, reprographics and advertising specialties. Over the course of more than 100 years, Arnold has successfully evolved and adapted its products, technologies, and manufacturing presence to meet the demands of current and emerging markets. Arnold produces high performance permanent magnets (PMAG), turnkey 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. Arnold has expanded globally and built strong relationships with its customers worldwide,worldwide. Arnold is the largest and, we believe, the most technically advanced U.S. manufacturer of engineered magnetic systems. Arnold is headquartered in Rochester, New York.
Sterno - Sterno, headquartered in Plano, Texas, is the parent company of Sterno Products, LLC ("Sterno Products") and Rimports, LLC ("Rimports"). Sterno is a leading manufacturer and marketer of portable food warming fuels for the hospitality and consumer markets, flameless candles and house and garden lighting for the home decor market, and wickless candle products used for home decor and fragrance systems.
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 mass merchants, sporting goods retailers, online channelsmaking selective capital investments to expand geographic reach, increase capacity or reduce manufacturing costs of our subsidiary businesses; improving and distributors serving smaller specialty storesexpanding 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 continues to remain dynamic as global macroeconomic trends, including inflationary pressures and rising interest rates, are weakening consumer sentiment and negatively impacting consumer spending behavior. We expect changing market conditions and continued inflationary pressures to impact consumer spending, particularly for discretionary items purchased by low and middle income consumers. We continue to experience modest inflationary cost increases in our materials, labor and transportation costs, although transportation costs have normalized after reaching a peak in the first half of 2022. We took numerous actions during 2022 to build capacity as well as increase our supply chain related resources, including increasing inventory levels and investing in automated systems to increase production efficiency. We have begun seeing our lead-times for inventory begin to stabilize, which we expect will allow for more accurate forecasting in the second half of 2023. We are experiencing continued uncertainty in our business and the global economy due to inflation, changes in consumer spending patterns, and global supply chain disruptions. Accordingly, our liquidity and financial results could be impacted in ways that we are not able to predict today.
Business Outlook
The Company anticipates that the areas of focus for the second half of 2023, 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;
•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;
•Continuing to grow through disciplined, strategic acquisitions and rigorous integration processes; and
•Driving free cash flow through increased net income and effective working capital management, enabling continued investment in our businesses.
41

Recent Events
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. (“Advanced Circuits”), 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 purchaseACI Merger was completed on February 14, 2023. The sale price includingof 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 $170.9 million of total proceeds from noncontrolling interests andat closing of which $66.9 million related to the repayment of intercompany loans with the Company. We recorded a gain on sale of $98.0 million, net of transaction costs, was approximately $150.4 million. Crosman management investedan income tax provision of $6.8 million related to the sale of Advanced Circuits in the transaction along with the Company, representing approximately 1.1%first quarter of the initial noncontrolling interest.
Divestiture of FOX shares
On March 13, 2017, Fox Factory Holding Corp. ("FOX") closed2023. We recorded additional gain 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, the Company no longer holds an ownership interest in FOX.
This sale of the portion of our FOX shares$2.1 million in March 2017 qualified as a Sale Event under the Company's LLC Agreement. During the second quarter of 2017, our board of directors declared a distribution2023 related to the Holdersworking capital settlement, and adjusted the income tax provision to $4.6 million, reflecting the loss at the LLC during the first half of the Allocation Interests of $25.8 million in connection with the Sale Event of FOX. The profit allocation payment 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.

year.
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 and six months ended June 30, 2023 and June 30, 2022, and components of the results of operations as well 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 ninesix months ended SeptemberJune 30, 20172023 and 2016,2022, 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 ninesix months ended SeptemberJune 30, 20172023 and 2016,2022, where all periods presented include relevant proformapro forma adjustments for pre-acquisition periods and explanations where applicable. For the acquisition of PrimaLoft in July 2022, the pro forma results of operations for the PrimaLoft business segment has been prepared as if we purchased this business on January 1, 2022. 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."
42

Results of Operations – Compass Diversified Holdings- Consolidated
The following table sets forth our unaudited results of operations for the three and Compass Group Diversified Holdings LLCsix months ended June 30, 2023 and 2022:
Three months endedSix months ended
(in thousands)June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Net revenues$524,159 $515,597 $1,066,387 $1,026,110 
Cost of revenues287,269 303,840 591,666 613,538 
Gross profit236,890 211,757 474,721 412,572 
Selling, general and administrative expense148,218 125,624 294,383 246,296 
Fees to manager16,920 14,901 33,315 29,337 
Amortization of intangibles26,677 20,921 53,051 42,026 
Operating income45,075 50,311 93,972 94,913 
Interest expense(26,615)(17,519)(52,795)(34,938)
Amortization of debt issuance costs(1,024)(865)(2,029)(1,731)
Other income (expense)(101)737 1,026 2,773 
Income from continuing operations before income taxes17,335 32,664 40,174 61,017 
Provision for income taxes4,444 6,132 14,280 16,108 
Net income from continuing operations$12,891 $26,532 $25,894 $44,909 

 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 SeptemberJune 30, 20172023 compared to three months ended SeptemberJune 30, 20162022
Net salesrevenues
On a consolidated basis,Consolidated net salesrevenues for the three months ended SeptemberJune 30, 20172023 increased by approximately $71.7$8.6 million, or 28.4%1.7%, compared to the corresponding period in 2016.2022. Our acquisition of 5.11 Tactical on August 31, 2016PrimaLoft business, which we acquired in July 2022, contributed $44.8$22.2 million to the increase in net sales, while our acquisition of Crosman on June 2, 2017 contributed $34.4 million.increase. During the three months ended SeptemberJune 30, 20172023 compared to 2016,2022, we also saw a notableincreases in net sales increase at Clean Earth5.11 ($4.26.0 million primarily due to two acquisitions in 2016increase), Marucci ($9.6 million increase), Lugano ($21.9 million increase), and one acquisition in 2017)Arnold ($1.4 million increase), partially offset by a decrease in salesnet revenue at our LibertyBOA ($5.421.3 million decrease), ErgobabyVelocity Outdoor ($1.816.0 million decrease), Manitoba HarvestAltor Solutions ($2.05.3 million decrease) and Sterno ($2.99.6 million decrease) subsidiaries.. 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 Company 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.

Cost of salesrevenues
On a consolidated basis, cost of sales increasedrevenues decreased approximately $36.4$16.6 million during the three month periodmonths ended SeptemberJune 30, 2017,2023 compared to the corresponding period in 2016. 5.11 Tactical accounted for $17.2 million of the increase, while our Crosman acquisition accounted for $29.0 million of 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 acquisitions in the prior and current year. These increases were offset by2022. We saw notable decreases in cost of salesrevenues at other operating segments, particularly ErgobabyBOA ($4.8 million)7.7 million decrease), LibertyVelocity ($4.7 million)11.0 million decrease), Altor ($11.0 million decrease), and ArnoldSterno ($1.4 million).9.0 million decrease) that corresponded to the decrease in revenue noted above. These decreases were offset by increases in cost of revenue at several of our businesses. Our PrimaLoft business contributed $8.2 million in cost of revenues for the quarter ended June 30, 2022. We also saw increases in cost of revenues at 5.11 ($3.2 million increase), Lugano ($7.8 million increase) and Marucci ($2.0 million increase) that correspond to the revenue increases noted above. Gross profit as a percentage of salesnet revenues was approximately 36.3%45.2% in the three months ended SeptemberJune 30, 20172023 compared to 32.7%41.1% in the three months ended SeptemberJune 30, 2016. 2022. The increase in gross profit as a percentage of net sales in the quarter ended June 30, 2023 as compared to the quarter ended June 30, 2022 is primarily attributable to the implementation of price increases at most of our subsidiary businesses in response to rising costs, and the mix of products with the increase in net revenue at our higher margin businesses. Refer to "Results of Operations - Our Businesses"Business Segments" for a more detailed analysis of cost of salesgross profit by subsidiary business segment.
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Selling, general and administrative expense
On a consolidated basis,Consolidated selling, general and administrative expense increased approximately $27.2$22.6 million during the three month periodmonths ended SeptemberJune 30, 2017,2023, compared to the corresponding period in 2016. The2022. A portion of the increase in selling general and administrative expense in the 2017second quarter comparedof 2023 is due to 2016 is principally the resultour PrimaLoft acquisition in July 2022 ($5.7 million of the increase, of which $1.2 million was attributable to integration services fees). We also saw increases in selling, general and administrative expenses at several of our consumer brands due to increased investment in marketing and headcount, particularly 5.11 Tactical acquisition in August 2016 ($23.6 million)4.5 million of the increase), Lugano ($6.6 million of the increase) and Crosman in June 2017Marucci ($5.1 million, including $0.3 million in transaction costs incurred for acquisition costs during the quarter)2.8 million). 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$4.1 million in the thirdsecond quarter of 20172023 and $2.7$3.4 million in the thirdsecond quarter of 2016.

2022, an increase of $0.7 million primarily due to an increase in professional fees.
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 SeptemberJune 30, 2017,2023, we incurred approximately $8.3$16.9 million in management fees as compared to $8.4$14.9 million in fees in the three months ended SeptemberJune 30, 2016.2022. The increase in management fees is primarily attributable to our acquisition of PrimaLoft in July 2022. CGM entered into a waiver of the MSA for a 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 paid in the second quarter of 2023 than would have normally been due.
Amortization expense
Amortization expense for the three months ended SeptemberJune 30, 20172023 increased $5.7$5.8 million as compared to the three months ended SeptemberJune 30, 2016 primarily2022 as a result of the acquisitionsamortization expense associated with the intangibles that were recognized in conjunction with the purchase price allocation for PrimaLoft, which was acquired in July 2022.
Interest expense
We recorded interest expense totaling $26.6 million for the three months ended June 30, 2023 compared to $17.5 million for the comparable period in 2022, an increase of 5.11$9.1 million. The increase in August 2016interest expense in the current quarter reflects higher amounts outstanding on our revolving credit facility in the current year, the interest expense associated with our 2022 Term Loan that we entered into in July 2022 in connection with our acquisition of PrimaLoft, and Crosmanthe higher interest rate environment in the current quarter versus the comparable quarter in the prior year.
Other income (expense)
For the quarter ended June 2017.30, 2023, we recorded $0.1 million in other expense as compared to $0.7 million in other income in the quarter ended June 30, 2022, a decrease in other expense of $0.8 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.
Loss on disposalIncome taxes
We had an income tax provision of assets
Ergobaby recorded a $0.6$4.4 million loss on disposal of assets during the thirdthree months ended June 30, 2023 compared to an income tax provision of $6.1 million during the same period in 2022, a decrease of $1.7 million. Our income before income taxes for the quarter ended June 30, 2023 decreased by approximately $15.3 million as compared to the prior year quarter. During the second quarter of 2016 related2023, we had an effective income tax rate of 35.5% as compared to its decisionan effective income tax rate of 26.4% for the second quarter of 2022. During the second quarter of 2023, the effective income tax rate differed from the U.S. statutory rate of 21.0% primarily due to disposeforeign income taxes and limitations on the use of net operating loss carryforwards and the Orbit Baby product line. Referdeduction of interest expense at our subsidiaries, while in the second quarter of 2022, the difference with the U.S. statutory rate was primarily attributable to the Ergobaby section under "Resultseffect of Operations - Our Businesses" for additional details regarding the loss on disposal.state and local income taxes.

44

NineSix months endedJune 30, 2023 compared to six months ended SeptemberJune 30, 2017 compared to nine2022
Net revenues
Consolidated net revenues for the six months ended SeptemberJune 30, 2016

Net sales
On a consolidated basis, net sales for the nine months ended September 30, 20172023 increased by approximately $261.6$40.3 million, or 39.6%3.9%, compared to the corresponding period in 2016.2022. Our acquisition of 5.11PrimaLoft business, which we acquired in August 2016July 2022, contributed $201.3 million to the increase in net sales and our acquisition of Crosman in June 2016 contributed $44.2$46.7 million to the increase. During the ninesix months ended SeptemberJune 30, 20172023 compared to 2016,2022, we also saw notablesignificant increases in net sales increases at 5.11 ($26.4 million increase), Marucci ($15.8 million increase), Lugano ($38.8 million increase), Ergobaby ($2.71.9 million primarily due to the acquisition of Baby Tula)increase) and Arnold ($3.3 million increase), Clean Earthpartially offset by a decrease in net revenue at BOA ($19.340.1 million primarily due to two acquisitions in 2016 and one in 2017)decrease), Velocity Outdoor ($33.4 million decrease), Altor Solutions ($7.6 million decrease) and Sterno ($6.411.5 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)decrease). 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 Company 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.

Cost of salesrevenues
On a consolidated basis, cost of sales increasedrevenues decreased approximately $163.0$21.9 million during the nine month periodsix months ended SeptemberJune 30, 2017,2023 compared to the corresponding period in 2016. 5.11 accounted for $121.42022. We saw notable decreases in cost of revenues at BOA ($13.6 million ofdecrease), Velocity ($23.1 million decrease), Altor ($15.9 million decrease), and Sterno ($12.9 million decrease) that corresponded to the increasedecrease in revenue noted above. Our Marucci business also saw a decrease in cost of sales including $21.7of $1.2 million, despite an increase in expense related to the amortization 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 acquisitionsrevenue in the prior and current year, and Sterno accounted for $6.3 millionperiod versus the comparable period in 2022. In the first half of the increase.2022, Marucci had increased air freight costs as they worked to offset supply chain shortages. These increasesdecreases were offset by decreasesincreases in cost of salesrevenue at other operating segments, particularly Libertyseveral of our businesses. Our PrimaLoft business contributed $17.1 million in cost of revenues for the six months ended June 30, 2023. We also saw increases in cost of revenues at 5.11 ($6.0 million)12.9 million increase), and ArnoldLugano ($5.0 million).13.9 million increase) that correspond to the revenue increases noted above. Gross profit as a percentage of salesnet revenues was approximately 34.9%44.5% in the ninesix months ended SeptemberJune 30, 20172023 compared to 33.8%40.2% in the ninesix months ended SeptemberJune 30, 2016. 2022. The increase in gross profit as a percentage of net sales in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 is primarily attributable to the implementation of price increases at most of our subsidiary businesses in response to rising costs, and the mix of products sold, with increases in net revenue at our higher margin businesses. 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 $98.4$48.1 million during the nine month periodsix months ended SeptemberJune 30, 2017,2023, compared to the corresponding period in 2016. The2022. A portion of the increase in selling general and administrative expense in 2017 comparedthe six months ended June 30, 2023 is due to 2016 is principally the resultour PrimaLoft acquisition in July 2022 ($10.8 million of the 5.11 acquisition in August 2016 ($85.3 million), and Crosman in June 2017 ($7.7increase, of which $2.4 million including $1.8 million in acquisition related expenses)was attributable to integration services fees). We also saw an increaseincreases in selling, general and administrative expense for the nine months ended September 30, 2017expenses at Clean Earth ($2.9 millionseveral of our consumer brands due to acquisitionsincreased investment in marketing and headcount, particularly 5.11 ($13.5 million of the currentincrease), Lugano ($11.1 million of the increase) and prior year), and an increase in selling, general and administrative expense at Ergobaby and Liberty due to the effect of bankruptcy filings by two major retailers during 2017.Marucci ($5.5 million). 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 increased from $8.6was $8.9 million in the nine months ended September 30, 2016 to $9.0first half of 2023 and $7.0 million in the nine months ended September 30, 2017.

first half of 2022, an increase of $1.9 million due to the timing of investor relation events and an increase in professional fees.
Fees to manager
Pursuant to the MSA,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 ninesix months ended SeptemberJune 30, 2017,2023, we incurred approximately $24.3$33.3 million in expense for thesemanagement fees as compared to $21.4$29.3 million forin fees in the corresponding period in 2016.six months ended June 30, 2022. The increase in the management fees that occurred is primarily dueattributable to the increase in consolidated net assets resulting from theour acquisition of 5.11PrimaLoft in August 2016, andJuly 2022. CGM entered into a waiver of the acquisitionMSA for a 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 paid in the first half of Crosman in June 2017.2023 than would have normally been due.
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Amortization expense
Amortization expense for the ninesix months ended SeptemberJune 30, 20172023 increased $15.3$11.0 million as compared to the ninesix months ended SeptemberJune 30, 20162022 as a result of the amortization expense associated with the intangibles that were recognized in conjunction with the purchase price allocation for PrimaLoft, which was acquired in July 2022.
Interest expense
We recorded interest expense totaling $52.8 million for the six months ended June 30, 2023 compared to $34.9 million for the comparable period in 2022, an increase of $17.9 million. The increase in interest expense in the current period reflects higher amounts outstanding on our revolving credit facility in the current year, the interest expense associated with our 2022 Term Loan that we entered into in July 2022 in connection with our acquisition of 5.11 in August 2016PrimaLoft, and Crosman in June 2017.
Impairment expense
Arnold performed an interim impairment test at each of its reporting unitsthe higher interest rate environment in the fourth quarter of 2016, which resultedcurrent year versus the comparable period in the recordingprior year.
Other income (expense)
For the six months ended June 30, 2023, we recorded $1.0 million in other income as compared to $2.8 million in other income in the six months ended June 30, 2022, a decrease in other income of preliminary impairment expense$1.7 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 the PMAG reporting unitproperty, plant and equipment, and expenses incurred or income earned that are not considered a part of $16.0 million.our operations. In the prior year, we recognized a non-recurring settlement of $1.8 million at Marucci, which contributed to the decrease in the current period.
Income taxes
We had an income tax provision of $14.3 million during the sixmonths ended June 30, 2023 compared to an income tax provision of $16.1 million during the same period in 2022, a decrease of $1.8 million. Our income before income taxes for the six months ended June 30, 2023 decreased by approximately $20.8 million as compared to the prior year six months ended. During the first quarterhalf of 2017, Arnold completed2023, we had an effective income tax rate of 35.5% as compared to an effective income tax rate of 26.4% for the impairment testingfirst half of 2022. During the PMAG reporting unitfirst half of 2023, the effective income tax rate differed from the U.S. statutory rate of 21.0% primarily due to foreign income taxes and recorded an additional $8.9 million impairment expense basedlimitations on the resultsuse of net operating loss carryforwards and interest expense deductions at our subsidiaries, while in the Step 2 impairment testing.

Loss on disposalfirst half of assets
Ergobaby recorded a $7.2 million loss on disposal of assets during 2016 related to its decision to dispose of2022, the Orbitbaby product line. Referdifference with the U.S. statutory rate was primarily attributable to the Ergobaby section under "Resultseffect of Operations - Our Businesses" for additional details regarding the loss on disposal.state and local income taxes.


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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 endedSix months ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Net sales$126,030 100.0 %$120,048 100.0 %$250,482 100.0 %$224,071 100.0 %
Gross profit$67,893 53.9 %$65,104 54.2 %$132,836 53.0 %$119,285 53.2 %
SG&A$54,870 43.5 %$50,358 41.9 %$109,701 43.8 %$96,192 42.9 %
Segment operating income$10,582 8.4 %$12,305 10.3 %$18,252 7.3 %$18,210 8.1 %
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 SeptemberJune 30, 20172023 compared to the pro forma three months ended SeptemberJune 30, 20162022
Net sales
Net sales for the three months ended SeptemberJune 30, 20172023 were $72.0$126.0 million as compared to net sales of $74.7$120.0 million for the three months ended SeptemberJune 30, 2016, a decrease2022, an increase of $2.7$6.0 million, or 3.5%5.0%. This decrease is due primarily to a $3.8 million decrease in international direct-to-agency business. Direct-to-agency sales represent large non-recurring contracts consisting primarily of special-make-up ("SMU") uniform product designed for large law enforcement divisions. Retail and e-commerce sales grew $4.3 million or 56%,increase was driven by growing demanda $9.0 million increase in direct to consumer channels. Retaildirect-to-consumer sales grew largely due to sixteenstrong demand in digital sales, in addition to sales from thirty new retail store openings since September 2016June 2022 (bringing the total store count to 24121 as of SeptemberJune 30, 2017). 5.11 implemented2023), as well as a new Enterprise Resource Planning (ERP) system$1.6 million increase in international sales resulting from strong demand and inventory availability. These increases in sales were offset by a decrease of $5.5 million in domestic wholesale sales due to a greater fulfillment of backorders in the prior comparable period.
Gross profit
Gross profit as parta percentage of net sales was 53.9% in 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 2017three months ended June 30, 2023 as compared to 54.2% for the prior year, which resulted in approximately $4 million to $5 million in sales shifting to the fourth quarterthree months ended June 30, 2022. Gross profit as a percentage of 2017. The warehouse reopened on October 9, 2017, and 5.11 has resumed warehouse and shipping operations.
Cost of sales
Cost ofnet sales for the three months ended SeptemberJune 30, 2017 were $37.5 million as compared to $46.8 million for the comparable period in 2016, a decrease of $9.3 million. Gross profit as a percentage of sales2023 was 48.0% in the three months ended September 30, 2017 as compared to 37.3% in the three months ended September 30, 2016. Cost of 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 lowerunfavorably impacted by increased product costs from efficiency in sourcing operations, improved gross margins on newand promotional activity to drive sales, which was offset favorably by price increases, as well as customer mix and 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.mix.
Selling, general and administrative expense
Selling, general and administrative expense for the three months ended SeptemberJune 30, 20172023 was $32.4$54.9 million, or 45.0%,43.5% of net sales compared to $26.0$50.4 million, or 34.8%41.9% of net sales for the comparable period in 2016. This2022. 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 open in the prior comparable period, strategic investments intoincreased headcount from June 30, 2022, as well as increased sales and marketing spend related to the increase in digital sales, and integration service fees billed by CGM to 5.11.increased usage of temporary labor during the current quarter.
Loss from operationsSegment operating income
Loss from operationsSegment operating income for the three months ended SeptemberJune 30, 20172023 was $0.3$10.6 million, an increasea decrease of $0.1$1.7 million when compared to loss from operationssegment operating income of $0.4$12.3 million for the same period in 2016,2022, based on the factors described above.
NineSix Months ended June 30, 2023 compared to six months ended SeptemberJune 30, 2017 compared to the pro forma nine months ended September 30, 20162022
Net sales
Net sales for the ninesix months ended SeptemberJune 30, 20172023 were $228.5$250.5 million as compared to net sales of $212.7$224.1 million for the ninesix months ended SeptemberJune 30, 2016,2022, an increase of $15.8$26.4 million, or 7.4%11.8%. This increase is due primarily todriven by an $8.7$18.0 million increase in international direct-to-agency business, and increased retail and e-commerce sales. Direct-to-agencydirect-to-consumer 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 sixteenstrong demand in digital sales, in addition to sales from thirty new retail store openings since September 2016June 2022 (bringing the total store count to 24121 as of SeptemberJune 30, 2017)2023). The consumerAdditionally, international sales increased $6.5 million and domestic wholesale channel experienced a $4.2sales increased $3.6 million decrease due primarily to the bankruptcy of a large outdoor retail customer. 5.11 implemented a new Enterprise Resource Planning (ERP) systemresulting from strong demand 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 2017inventory availability improvement as compared to the prior year, which resultedyear. These
47

increases were offset by a $1.9 million decrease in approximately $4 milliondirect to $5 millionagency sales due to a large contract fulfillment 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.prior comparable period.
Cost of salesGross profit
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 net sales was 38.0%53.0% in the ninesix months ended SeptemberJune 30, 20172023 as compared to 41.8% in53.2% for the ninesix months ended SeptemberJune 30, 2016. Cost of sales2022. Gross profit percentage for the ninesix months ended SeptemberJune 30, 2017 includes $21.7 million in expense related2023 was unfavorably impacted by increased product costs, promotional activity to a $39.1 million inventory step-up resulting from the acquisition purchasedrive sales and lower margin on direct to agency sales, which was offset favorably by 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 profitincreases, 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 lowerwell as customer mix and 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 2017mix.
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 ninesix months ended SeptemberJune 30, 20172023 was $13.7$109.7 million, or 16.0%43.8% of net sales compared to $11.1$96.2 million, or 13.4%,42.9% of net sales for the nine months ended September 30, 2016. Selling,comparable period in 2022. The increase in selling, general and administrative expense for the ninesix months ended SeptemberJune 30, 2017 includes $1.8 million in transaction2023 was largely driven by the costs paid in relation to the acquisition of Crosman inassociated with additional retail stores, increased headcount from June 2017 and an add-on acquisition at Crosman completed during the third quarter of 2017,30, 2022, as well as $0.4 millionincreased sales and marketing spend related to the increase in integration services fees payable to CGM. Excluding the transaction costsdigital sales, increased usage of temporary labor, and integration services fee from the selling, general and administrative expense, there was no material change in expense items.bonus related expenses.

Segment operating income
Income from operations
Income from operationsSegment operating income for the ninesix months ended SeptemberJune 30, 20172023 was $1.2$18.3 million, which represents a decrease of $5.8 millionslight increase when compared to segment operating income from operations of $7.0$18.2 million for the comparablesame period in 2016,2022, based on the factors described above.
Ergobaby
OverviewBOA
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.
Three months endedSix months ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Net sales$38,123 100.0%$59,386 100.0%$76,109 100.0%$116,196 100.0%
Gross profit$22,807 59.8%$36,406 61.3%$45,598 59.9%$72,098 62.0%
SG&A$10,573 27.7%$13,785 23.2%$21,233 27.9%$26,498 22.8%
Segment operating income$8,050 21.1%$18,451 31.1%$16,001 21.0%$37,262 32.1%

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 SeptemberJune 30, 20172023 compared to the three months ended SeptemberJune 30, 20162022
Net sales
Net sales for the three months ended SeptemberJune 30, 20172023 were $27.8$38.1 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$59.4 million for the three months ended SeptemberJune 30, 2016. During the three months ended September 30, 2017, international sales were approximately $17.0 million, representing2022, a decrease of $0.3$21.3 million, overor 35.8%. The main factor of 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, 2017 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 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 thehigher than anticipated end market 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, 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 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,levels due to supply chain normalization and corresponding inventory ordering surge experienced in many of our industries in 2022. We anticipate a normalization of inventory levels by the increases in direct market sales, to increases in employee related costs due to increased staffing levels, due in part to the additionend 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 priorthis year.
Loss on disposal of assetsGross profit
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 profit as a percentage of net sales totaled approximately 29.3% and 25.7% for the quarters ended September 30, 2017 and September 30, 2016, respectively. The increasewas 59.8% in gross profit as a percentage of sales during the three months ended SeptemberJune 30, 20172023 as 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 million61.3% for the three months ended SeptemberJune 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 2017 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.2022. 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 material 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 pioneerwas driven by fixed manufacturing overhead expenses 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. Thean increase in gross profit as a percentage of sales in the third quarter of 2017 as compareddepreciation related 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.tooling.
Selling, general and administrative expense
Selling, general and administrative expense for the three months ended SeptemberJune 30, 20172023 was approximately $5.1$10.6 million, in both the third quarter of 2017 and 2016. Selling, general and administrative expense was 36.3%or 27.7% of net sales in the third quarter of 2017 as compared to 31.9%$13.8 million, or 23.2% of net sales for the samecomparable period in 2016.2022. The increasedecrease in selling, general, and administrative expense as a percentage of sales in the three months ended September 30, 2017 compared to the same period in 2016 wasis primarily due to ongoing investments in keydecreased employee costs related to BOA’s bonus plan.
Segment operating capability initiatives such as marketing, sales and research and development.income
Income (loss) from operations
Income from operationsSegment operating income for the three months ended SeptemberJune 30, 2017 decreased $0.72023 was $8.1 million, a decrease of $10.4 million when compared to segment operating income of $18.5 million for the same period in 2016,2022, based on the factors described above.

48

NineSix Months ended June 30, 2023 compared to six months ended SeptemberJune 30, 2017 compared to nine months ended September 30, 20162022
Net sales
Net sales for the ninesix months ended SeptemberJune 30, 20172023 were approximately $42.6$76.1 million as compared to $44.3net sales of $116.2 million for the ninesix months ended SeptemberJune 30, 2016,2022, a decrease of $1.7$40.1 million, or 3.8%34.5%. Manitoba HarvestThe main factor of the decrease in sales was higher than anticipated end market inventory levels due to supply chain normalization and corresponding inventory ordering surge experienced declines in bulk hemp seed ingredient sales to international markets. This was partially offsetmany of our industries in 2022. We anticipate a normalization of inventory levels by growth in their Canadian retail, U.S. club and online businesses, driven by salesthe end of branded hemp heart products and hemp oil.this year.

Gross profit
Cost of sales
Cost of sales for the nine months ended September 30, 2017 was approximately $23.4 million compared to approximately $24.4 million for the same period in 2016. Gross profit as a percentage of net sales was 45.1%59.9% in the ninesix months ended SeptemberJune 30, 2017 and 44.9% in2023 as compared to 62.0% for the ninesix months ended SeptemberJune 30, 2016. For the first nine months of the year,2022. The decrease in gross profit marginsas a percentage of net sales was driven by fixed manufacturing overhead expenses and an increase in our branded business expanded duedepreciation related 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.

tooling.
Selling, general and administrative expense
Selling, general and administrative expense for the ninesix months ended SeptemberJune 30, 2017 decreased to approximately $15.52023 was $21.2 million, or 36.4%27.9% of net sales compared to $17.1$26.5 million, or 38.5%22.8% of net sales for the comparable period in 2022. The decrease in selling, general, and administrative expense is primarily due to decreased employee costs related to BOA’s bonus plan.
Segment operating income
Segment operating income for the six months ended June 30, 2023 was $16.0 million, a decrease of $21.3 million when compared to segment operating income of $37.3 million for the same period in 2022, based on the factors described above.
Ergobaby
Three months endedSix months ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Net sales$26,149 100.0 %$26,506 100.0 %$48,567 100.0 %$46,716 100.0 %
Gross profit$16,804 64.3 %$16,795 63.4 %$30,919 63.7 %$28,972 62.0 %
SG&A$12,286 47.0 %$11,258 42.5 %$24,023 49.5 %$21,725 46.5 %
Segment operating income$2,526 9.7 %$3,549 13.4 %$2,914 6.0 %$3,273 7.0 %
Three months ended June 30, 2023 compared to three months ended June 30, 2022
Net sales
Net sales for the three months ended June 30, 2023 were $26.1 million, a decrease of $0.4 million, or 1.3%, compared to the same period in 2022. During the three months ended June 30, 2023, international sales were approximately $16.1 million, representing a decrease of $0.5 million over the corresponding period in 2022, primarily as a result of European distributor sales. Domestic sales were $10.0 million in the second quarter of 2023, reflecting an increase of $0.2 million compared to the corresponding period in 2022. The increase in sales was primarily due to increases on our owned websites which were offset by the closure of a large domestic retailer.
Gross profit
Gross profit as a percentage of net sales was 64.3% for the three months ended June 30, 2023, as compared to 63.4% for the three months ended June 30, 2022. The increase in gross profit as a percentage of sales was due to shifts in channel mix.
Selling, general and administrative expense
Selling, general and administrative expense increased $1.0 million quarter over quarter, with expense of $12.3 million, or 47.0% of net sales for the three months ended June 30, 2023 as compared to $11.3 million or 42.5% of net sales for the same period of 2022. The increase in 2016. The $1.6 million decreaseselling, general and administrative expense in the ninethree months ended SeptemberJune 30, 20172023 as compared to the comparable period in the prior year is due to payroll expenses and accruals, transportation costs and warehousing as well as increased marketing expenses.
49

Segment operating income
Ergobaby had segment operating income of $2.5 million for the three months ended June 30, 2023, a decrease of $1.0 million compared to the same period in 20162022, based on the factors noted above.
Six Months ended June 30, 2023 compared to six months ended June 30, 2022
Net sales
Net sales for the six months ended June 30, 2023 were $48.6 million, an increase of $1.9 million, or 4.0%, compared to the same period in 2022. During the six months ended June 30, 2023, international sales were approximately $29.7 million, representing an increase of $1.0 million over the corresponding period in 2022, primarily as a result of Asia-Pacific and Latin America distributor sales. Domestic sales were $18.8 million in the first half of 2023, reflecting an increase of $0.8 million compared to the corresponding period in 2022. The increase in sales was primarily due to lower customer shipping costs, more efficient field selling operations and the timingour owned websites as well as key accounts. Both groups saw increases in existing product categories as well as continued sales from products launched late last year.
Gross profit
Gross profit as a percentage of our consumer promotion spending.
Income (loss) from operations
Income from operationsnet sales was 63.7% for the ninesix months ended SeptemberJune 30, 20172023, as compared to 62.0% for the six months ended June 30, 2022. The increase in gross profit as a percentage of sales was approximately $0.1due to a reduction in inbound freight compared to the prior year as well as shifts in channel mix.
Selling, general and administrative expense
Selling, general and administrative expense increased $2.3 million in the six months ended June 30, 2023 compared to the six months ended June 30, 2022, with expense of $24.0 million, or 49.5% of net sales for the six months ended June 30, 2023 as compared to $21.7 million or 46.5% of net sales for the same period of 2022. The increase in selling, general and administrative expense in the six months ended June 30, 2023 as compared to the comparable period in the prior year is due to payroll expenses and accruals, transportation costs and warehousing as well as increased marketing expenses.
Segment operating income
Ergobaby had segment operating income of $2.9 million for the six months ended June 30, 2023, a decrease of $0.4 million compared to loss from operations of $0.9 million in the same period in 2016,2022, based on the factors describednoted above.

Lugano
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 premium 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 endedSix months ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Net sales$60,949 100.0 %$39,065 100.0 %$124,836 100.0 %$86,084 100.0 %
Gross profit$33,698 55.3 %$19,647 50.3 %$67,975 54.5 %$43,079 50.0 %
SG&A$15,138 24.8 %$8,575 22.0 %$28,211 22.6 %$17,063 19.8 %
Segment operating income$17,133 28.1 %$9,644 24.7 %$36,909 29.6 %$23,250 27.0 %
Three months ended SeptemberJune 30, 20172023 compared to the three months ended SeptemberJune 30, 20162022
Net sales
Net sales for the three monthsquarter ended SeptemberJune 30, 20172023 increased approximately $0.8$21.9 million, or 56.0%, to $22.4$60.9 million, compared to the three monthscorresponding quarter ended SeptemberJune 30, 2016. The increase2022. Lugano sells high-end jewelry primarily through retail salons in netCalifornia, Florida, Texas, Washington D.C. and Colorado, and via pop-up showrooms at multiple equestrian, social and charitable functions each year. In the current year, Lugano has experienced strong same store sales was duegrowth as it has invested in 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 Washington D.C. location in March 2023 and expects to increasedopen more retail locations in the near term to further expand 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.opportunities.

50

Cost of salesGross profit
Cost of sales for both the three months ended September 30, 2017 and the three months ended September 30, 2016 were $12.1 million. Gross profit as a percentage of net sales increased 160 basis points duringtotaled approximately 55.3% and 50.3% for the three monthsquarters ended SeptemberJune 30, 2017 compared2023 and June 30, 2022, 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 the corresponding periodpricing and product mix, especially in 2016 (45.9% at September 30, 2017 compared to 44.3% at September 30, 2016) primarily as a result of sales mix.its higher priced jewelry pieces.
Selling, general and administrative expense
Selling, general and administrative expense was approximately $3.7$15.1 million for the three months ended June 30, 2023 as compared to $8.6 million in selling, general and administrative expense in the three months ended SeptemberJune 30, 2017 and $3.4 million in the three months ended September 30, 2016.2022. Selling, general and administrative expense represented 16.4%24.8% of net sales in the three months ended March 31, 2023 and 22.0% of net sales for the same period of 2022. The increase in selling, general and administrative expense is primarily due to increased marketing spend and personnel costs. Lugano has increased its head count in the last year as it invests in additional professionals to support its growth.
Segment operating income
Segment operating income increased during the three months ended SeptemberJune 30, 20172023 to $17.1 million, as compared to 15.8% of net sales$9.6 million in the corresponding period in 2016.
Income from operations
Income from operations for the three months ended September 30, 20172022. This increase was approximately $6.2 million compared to $5.8 million in the same period in 2016, an increase of approximately $0.4 million, principally as a result of the factors describednoted above.

NineSix Months ended June 30, 2023 compared to six months ended SeptemberJune 30, 2017 compared to nine months ended September 30, 20162022
Net sales
Net sales for the ninesix months ended SeptemberJune 30, 20172023 increased approximately $1.5$38.8 million, or 45.0%, to $66.4$124.8 million, as compared to the ninecorresponding six months ended SeptemberJune 30, 2016. The2022. Lugano sells high-end jewelry primarily through retail salons in California, Florida, Texas, Washington D.C. and Colorado, and via pop-up showrooms at multiple equestrian, social and charitable functions each year. In the current year, Lugano has experienced an increase in net sales duringfrom its existing locations as it has invested in building out its inventory as well as its sales, marketing and event staff, while increasing the nine months ended September 30, 2017 was duenumber of social and charitable functions it has attended. Lugano also opened its Washington D.C. location in March 2023 and expects to increasedopen more retail locations in the near term to further expand 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 Septemberopportunities.

Gross profit
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. Gross profit as a percentage of net sales increased 110 basis pointstotaled approximately 54.5% and 50.0% for the six months ended June 30, 2023 and June 30, 2022, 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 uniqueness of the Lugano jewelry can lead to fluctuations in margins from period to period based on what designs are sold during the nine months ended September 30, 2017 compared to the same period in 2016 (45.6% at September 30, 2017 compared to 44.5% at September 30, 2016) primarily as a result of sales mix.

period.
Selling, general and administrative expense
Selling, general and administrative expense was approximately $10.9$28.2 million infor the ninesix months ended SeptemberJune 30, 20172023 as compared to $10.4$17.1 million in selling, general and administrative expense in the ninesix months ended SeptemberJune 30, 2016.2022. Selling, general and administrative expense represented 16.4%22.6% of net sales in the six months ended June 30, 2023 and 19.8% of net sales for the ninesame period of 2022. The increase in selling, general and administrative expense is attributable to increased marketing spend and personnel costs in support of Lugano’s growth in sales and expansion into new markets as well as rent and operating costs for its new locations.
Segment operating income
Segment operating income increased during the six months ended SeptemberJune 30, 20172023 to $36.9 million, as 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, 2017 was approximately $18.1 million compared to $17.2$23.3 million in the samecorresponding period in 2016, an2022. This increase of approximately $0.9 million, principally aswas a result of the factors describednoted above.

51

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 sites 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


Marucci Sports

Three months endedSix months ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Net sales$37,270 100.0 %$27,636 100.0 %$95,565 100.0 %$79,728 100.0 %
Gross profit$20,249 54.3 %$12,612 45.6 %$53,016 55.5 %$35,958 45.1 %
SG&A$14,462 38.8 %$11,710 42.4 %$30,364 31.8 %$24,833 31.1 %
Segment operating income (loss)$2,962 7.9 %$(1,436)(5.2)%$17,302 18.1 %$6,449 8.1 %
Three months ended SeptemberJune 30, 20172023 compared to the three months ended SeptemberJune 30, 20162022
Net sales
Net sales for the three months ended SeptemberJune 30, 20172023 were approximately $26.5$37.3 million, a decreasean increase of $0.4$9.6 million as compared to net sales of $27.6 million for the three months ended June 30, 2022. The increase in net sales was due to increased customer demand, particularly at big-box retailers and through direct-to-consumer channels, and market share growth in Marucci's key product lines, including aluminum and wood bats, and batting gloves. Marucci completed an add-on acquisition in early April, Baum Bat, a designer and manufacturer of composite bats, which allowed further penetration of the wood bat market during the quarter.
Gross profit
Gross profit for the quarter ended June 30, 2023 increased $7.6 million as compared to the three months ended June 30, 2022. Gross profit as a percentage of net sales for the three months ended June 30, 2023 was 54.3%, as compared to gross profit as a percentage of sales of 45.6% for the three months ended June 30, 2022. The increase in gross profit as a percentage of net sales during the quarter ended June 30, 2023 as compared to the quarter ended June 30, 2022, was primarily due to higher spending on air-freight in the prior year quarter as supply chain issues led to increased transportation costs, and higher direct to consumer sales during the current quarter, which carry higher margins.
Selling, general and administrative expense
Selling, general and administrative expense for the three months ended June 30, 2023 was $14.5 million, or 38.8% of net sales compared to $11.7 million, or 42.4% of net sales for the three months ended June 30, 2022. The increase in selling, general and administrative expense for the three months ended June 30, 2023 partially correlates to the increase in net sales, with increases in credit card expenses, royalties, commissions, business development fees, and other variable expenses. Marucci also incurred additional promotional and marketing expenses in the current quarter due to seasonal programs at several retail customers, and increased operational expenses to support its growth.
Segment operating income (loss)
Segment operating income for the three months ended June 30, 2023 was $3.0 million, an increase of $4.4 million when compared to segment operating loss of $1.4 million for the same period in 2016. The decrease in net sales is primarily a result of a decrease in reprographic sales 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,2022, primarily as a result of the decreasefactors noted above.
Six Months ended June 30, 2023 compared to six months ended June 30, 2022
Net sales
Net sales for the six months ended June 30, 2023 were $95.6 million, an increase of $15.8 million as compared to net sales of $79.7 million for the six months ended June 30, 2022. The increase in net sales at PMAG.was primarily due to increased customer demand and market share in many of Marucci's key product lines, including aluminum and wood bats, and batting gloves.
CostGross profit
Gross profit for the six months ended June 30, 2023 increased $17.1 million as compared to the six months ended June 30, 2022. Gross profit as a percentage of net sales for the six months ended June 30, 2023 was 55.5%, as compared to gross profit as a percentage of sales of 45.1% for the six months ended June 30, 2022. The increase
Cost
52

in gross profit as a percentage of net sales during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, was primarily due to higher spending on air-freight in the prior year as supply chain issues led to increased transportation costs, and higher direct to consumer sales during the current year, which carry higher margins.
Selling, general and administrative expense
Selling, general and administrative expense for the six months ended June 30, 2023 was $30.4 million, or 31.8% of net sales compared to $24.8 million, or 31.1% of net sales for the six months ended June 30, 2022. The increase in selling, general and administrative expense for the six months ended June 30, 2023 partially correlates to the increase in net sales, with increases in credit card expenses, royalties, commissions, business development fees, and other variable expenses. Marucci also incurred additional promotional and marketing expenses in the current period due to seasonal programs at several retail customers, and increased operational expenses to support its growth.
Segment operating income
Segment operating income for the six months ended June 30, 2023 was $17.3 million, an increase of $10.9 million when compared to segment operating income of $6.4 million for the same period in 2022, primarily as a result of the factors noted above.
PrimaLoft
In the following results of operations, we provide comparative pro forma results of operations for PrimaLoft for the three and six months ended June 30, 2022 as if we had acquired the business on January 1, 2022. The results of operations that follows include relevant pro-forma adjustments for pre-acquisition periods and explanations where applicable. The operating results for PrimaLoft have been included in the consolidated results of operation from the date of acquisition in July 2022.
Three months endedSix months ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Pro formaPro forma
Net sales$22,160 100.0 %$27,118 100.0 %$46,689100.0 %$52,866 100.0 %
Gross profit$13,977 63.1 %$16,539 61.0 %$29,55763.3 %$32,035 60.6 %
SG&A$5,706 25.7 %$5,514 20.3 %$10,81223.2 %$10,226 19.3 %
Segment operating income$2,817 12.7 %$5,572 20.5 %$7,83816.8 %$10,902 20.6 %
Pro forma results of operations include the following pro form adjustments as if we had acquired PrimaLoft January 1, 2022:
•Additional amortization expense associated with the intangible assets recorded in connection with the purchase price allocation of PrimaLoft of $4.1 million and $8.1 million, respectively, for the three months and six months ended June 30, 2022.
•Management fees that would have been payable to the Manager during the period.
Three months ended June 30, 2023 compared to proforma three months ended June 30, 2022
Net sales
Net sales for the three months ended SeptemberJune 30, 20172023 were approximately $19.1$22.2 million, a decrease of $5.0 million as compared to approximately $20.5net sales of $27.1 million for the three months ended June 30, 2022. The decrease in net sales in the same periodcurrent quarter versus the quarter ended June 30, 2022 is attributable to lower ordering from existing customers as a result of 2016.higher inventory levels at retail customers which more than offset new customer wins. We expect that retail ordering will begin to normalize by the end of this year.
Gross profit
Gross profit for the quarter ended June 30, 2023 decreased $2.6 million as compared to the three months ended June 30, 2022. Gross profit as a percentage of net sales increased from 23.8% for the quarterthree months ended SeptemberJune 30, 20162023 was 63.1%, as compared to 27.8%gross profit as a percentage of sales of 61.0% for the three months ended June 30, 2022. The increase in gross profit as a percentage of net sales in the quarter ended SeptemberJune 30, 2017 principally2023 as compared to the quarter
53

ended June 30, 2022 is due to manufacturing efficiencies and favorable sales mix.

price increases implemented in the fourth quarter of 2022.
Selling, general and administrative expense
Selling, general and administrative expense in the three month period ended September 30, 2017 was $4.4 million, comparable to approximately $4.5 million for the three months ended SeptemberJune 30, 2016.

Income from operations
Income from operations2023 was $5.7 million, or 25.7% of net sales compared to $5.5 million, or 20.3% of net sales for the three months ended SeptemberJune 30, 20172022. Selling, general and administrative expense in the current quarter includes $1.2 million in integration services fees.
Segment operating income
Segment operating income for the three months ended June 30, 2023 was approximately $2.0$2.8 million, an increasea decrease of $1.1$2.8 million when compared to segment operating income of $5.6 million for the same period in 2016, principally2022, primarily as a result of the factors noted above.

NineSix Months ended June 30, 2023 compared to proforma six months ended SeptemberJune 30, 20172022
Net sales
Net sales for the six months ended June 30, 2023 were $46.7 million, a decrease of $6.2 million as compared to ninenet sales of $52.9 million for the six months ended SeptemberJune 30, 20162022. The decrease in net sales in the current period versus the six months ended June 30, 2022 is attributable to higher than anticipated end market inventory levels leading to lower ordering from existing customers in the first half of the year. We expect that retail ordering will begin to normalize by the end of this year.
Gross profit
Gross profit for the six months ended June 30, 2023 decreased $2.5 million as compared to the six months ended June 30, 2022. Gross profit as a percentage of net sales for the six months ended June 30, 2023 was 63.3%, as compared to gross profit as a percentage of sales of 60.6% for the six months ended June 30, 2022. The increase in gross profit as a percentage of net sales in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 is due to price increases implemented in the fourth quarter of 2022.
Selling, general and administrative expense
Selling, general and administrative expense for the six months ended June 30, 2023 was $10.8 million, or 23.2% of net sales compared to $10.2 million, or 19.3% of net sales for the six months ended June 30, 2022. Selling, general and administrative expense in the six months ended includes $2.4 million in integration services fees. Excluding the integration services fee, selling, general and administrative expense decreased due to reduced selling expenses resulting from the lower level of sales in the first half of 2023 as compared to the prior year.
Segment operating income
Segment operating income for the six months ended June 30, 2023 was $7.8 million, a decrease of $3.1 million when compared to segment operating income of $10.9 million for the same period in 2022, primarily as a result of the factors noted above.
Velocity Outdoor
Three months endedSix months ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Net sales$37,839 100.0 %$53,846 100.0 %$71,879 100.0 %$105,292 100.0 %
Gross profit$10,001 26.4 %$14,992 27.8 %$18,016 25.1 %$28,364 26.9 %
SG&A$9,090 24.0 %$7,154 13.3 %$17,860 24.8 %$15,051 14.3 %
Segment operating (loss) income$(1,610)(4.3)%$5,429 10.1 %$(4,886)(6.8)%$8,496 8.1 %
54

Three months ended June 30, 2023 compared to three months ended June 30, 2022
Net sales
Net sales for the ninethree months ended SeptemberJune 30, 20172023 were approximately $79.4$37.8 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$16.0 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 September 30, 2017 compared to the three months ended September 30, 2016.
Service revenues
Revenues for the three months ended September 30, 2017 were approximately $55.7 million, an increase of $4.2 million, or 8.1%29.7%, compared to the same period in 2016.2022. The increasedecrease in revenues is primarily due to acquisitions made 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% principally as a result of acquisitions. Revenue from dredged material decreasednet sales for the three months ended SeptemberJune 30, 20172023 is primarily due to softening consumer demand caused by macro-economic factors.
Gross profit
Gross profit for the quarter ended June 30, 2023 decreased $5.0 million 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 monthsquarter ended SeptemberJune 30, 2017 and the three months ended September 30, 2016.

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.2022. Gross profit as a percentage of service revenues was flat quarter over quarter, increasing from 28.4%net sales decreased to 26.4% for the three month periodmonths ended SeptemberJune 30, 20162023 as compared to 28.5% for27.8% in the same periodthree months ended SeptemberJune 30, 2017.

2022 due to product mix along with reduced absorption of operating costs.
Selling, general and administrative expense
Selling, general and administrative expense for the three months ended SeptemberJune 30, 2017 decreased to approximately $6.82023 was $9.1 million, or 12.2%,24.0% of service revenues,net sales compared to $7.2 million, or 13.3% of net sales for the three months ended June 30, 2022. The increase in selling, general and administrative expense as a percentage in net sales for the three months ended June 30, 2023 as compared to $7.4the prior period is driven by reduced revenue, marketing investments associated with the King's acquisition and non-recurring expenses.
Segment operating income (loss)
Segment operating loss for the three months ended June 30, 2023 was $1.6 million, or 14.3%,a decrease of service revenues$7.0 million when compared to segment operating income of $5.4 million for the same period in 2016. The decrease was primarily due2022 based on the factors noted above.
Six Months ended June 30, 2023 compared to decreased labor costs.six months ended June 30, 2022

Net sales

Income from operations
Income from operationsNet sales for the threesix months ended SeptemberJune 30, 2017 was approximately $5.62023 were $71.9 million, as compared to income from operationsa decrease of $3.6 million for the three months ended September 30, 2016, an increase of $2.0 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$33.4 million or 14.4%31.7%, compared to the same period in 2016.2022. The increasedecrease in service revenuesnet sales for the six months ended June 30, 2023 is principallyprimarily due to two acquisitions in 2016 and one in 2017, as well as increased contaminated soil revenue, offset in part by lower dredge revenue.softening consumer demand among our target customer base due to macro-economic factors.

Gross profit
ForGross profit for the ninesix months ended SeptemberJune 30, 2017, contaminated soil revenue increased 13%2023 decreased $10.3 million 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 ninesix months ended SeptemberJune 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 2016.2022. Gross profit as a percentage of service revenuesnet sales decreased from 28.4%to 25.1% 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 ninesix months ended SeptemberJune 30, 2017 was primarily2023 as compared to 26.9% in the six months ended June 30, 2022 due to product mix along with reduced dredged material volume.

absorption of operating costs.
Selling, general and administrative expense
Selling, general and administrative expense for the ninesix months ended SeptemberJune 30, 2017 increased to approximately $25.22023 was $17.9 million, or 16.4%,24.8% of service revenues, asnet sales compared to $22.3$15.1 million, or 16.6%,14.3% of service revenuesnet sales for the same period in 2016.six months ended June 30, 2022. The $2.9 million increaseincrease in selling, general and administrative expense inas a percentage of net sales for the ninesix months ended SeptemberJune 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 million2023 as compared to the nineprior period is driven by reduced revenue, marketing investments associated with the King's acquisition and non-recurring expenses.
Segment operating income (loss)
Segment operating loss for the six months ended SeptemberJune 30, 2016, primarily as2023 was $4.9 million, a resultdecrease of those factors described above.

Sterno Products
Overview
Sterno Products, headquartered in Corona, California, is a manufacturer and marketer$13.4 million when compared to segment operating income of portable food warming fuel and creative table lighting solutions$8.5 million 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 formedsame period in 2012 with2022 based on 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.factors noted above.
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.


55

 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
Niche Industrial Businesses
Altor Solutions
Three months endedSix months ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Net sales$60,886 100.0 %$66,144 100.0 %$122,398 100.0 %$129,972 100.0 %
Gross profit$19,558 32.1 %$13,823 20.9 %$36,271 29.6 %$27,962 21.5 %
SG&A$7,739 12.7 %$5,285 8.0 %$14,921 12.2 %$11,005 8.5 %
Segment operating income$9,224 15.1 %$5,908 8.9 %$16,158 13.2 %$11,742 9.0 %
Three months ended SeptemberJune 30, 20172023 compared to the three months ended SeptemberJune 30, 20162022
Net sales
Net sales for the three monthsquarter ended SeptemberJune 30, 20172023 were approximately $52.7$60.9 million, a decrease of $2.9$5.3 million, or 5.2%7.9%, compared to the same period in 2016. quarter ended June 30, 2022. The sales variance reflects a decrease in net sales atduring the candlequarter was due to lower volume versus the second quarter of 2022, primarily in construction and outdoor divisions of Sterno Home, offset by the timing of stocking programs of key Sterno food service customers.building products.
Cost of salesGross profit
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 net sales decreased from 28.5%was 32.1% and 20.9% for the three months ended SeptemberJune 30, 2016 to 26.2% for the same period ended September 30, 2017.2023 and 2022, respectively. The decreaseincrease in gross profit duringas a percentage of net sales in the three monthsquarter ended SeptemberJune 30, 20172023, was primarily reflects an increase in chemicaldue to favorable raw material costs and lower margins on certain sales.market decreases.
Selling, general and administrative expense
Selling, general and administrative expense for the three months ended SeptemberJune 30, 20172023 was $7.7 million as compared to $5.3 million for the three months ended June 30, 2022, an increase of $2.5 million. The increase in selling, general and 2016administrative expense in the second quarter of 2023 was approximately $7.5due to operational and administrative investments made in the business in the latter part of 2022.
Segment operating income
Segment operating income was $9.2 million in the three months ended June 30, 2023, an increase of $3.3 million as compared to the three months ended June 30, 2022, based on the factors noted above.
Six Months ended June 30, 2023 compared to six months ended June 30, 2022
Net sales
Net sales for the six months ended June 30, 2023 were $122.4 million, a decrease of $7.6 million, or 5.8%, compared to the six months ended June 30, 2022. The decrease in net sales during the period was due to lower volume as compared to the prior year, primarily in construction and $8.6 million,building products.
Gross profit
Gross profit as a percentage of net sales was 29.6% and 21.5% for the six months ended June 30, 2023 and 2022, respectively. The increase in gross profit as a percentage of net sales in the six months ended June 30, 2023, was primarily due to the combination of customer and raw material pricing adjustments.
Selling, general and administrative expense
Selling, general and administrative expense for the six months ended June 30, 2023 was $14.9 million as compared to $11.0 million for the six months ended June 30, 2022, an increase of $3.9 million. The increase in selling, general and administrative expense in the first half of 2023 was due to investments in organizational structure and the implementation of various strategic initiatives.
Segment operating income
Segment operating income was $16.2 million in the six months ended June 30, 2023, an increase of $4.4 million as compared to the six months ended June 30, 2022, based on the factors noted above.
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Arnold
Three months endedSix months ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Net sales$40,138 100.0 %$38,777 100.0 %$80,228 100.0 %$76,942 100.0 %
Gross profit$12,453 31.0 %$12,275 31.7 %$24,494 30.5 %$22,257 28.9 %
SG&A$6,090 15.2 %$6,199 16.0 %$12,342 15.4 %$11,822 15.4 %
Segment operating income$5,613 14.0 %$5,325 13.7 %$10,651 13.3 %$8,613 11.2 %
Three months ended June 30, 2023 compared to three months ended June 30, 2022
Net sales
Net sales for the three months ended June 30, 2023 were approximately $40.1 million, an increase of $1.4 million compared to the same period in 2022. International sales were $12.2 million in the three months ended June 30, 2023 and $11.3 millionin the three months ended June 30, 2022. The increase in net sales is primarily a result of increased demand in several markets including aerospace and defense, and industrial.
Gross profit
Gross profit for the three months ended June 30, 2023 was approximately $12.5 million compared to approximately $12.3 million in the same period of 2022. Gross profit as a percentage of net sales decreased to 31.0% for the quarter ended June 30, 2023 from 31.7% in the quarter ended June 30, 2022 principally due to product mix and higher staffing related costs.
Selling, general and administrative expense
Selling, general and administrative expense in the three months ended June 30, 2023 was $6.1 million, a decrease in expense of approximately $0.1 millioncompared to $6.2 million for the three months ended June 30, 2022. Selling, general and administrative expense was 15.2% of net sales in the three months ended June 30, 2023 and 16.0% in the three months ended June 30, 2022.
Segment operating income
Segment operating income for the three months ended June 30, 2023 was approximately $5.6 million, an increase of $0.3 million when compared to the same period in 2022, as a result of the factors noted above.
Six Months ended June 30, 2023 compared to six months ended June 30, 2022
Net sales
Net sales for the six months ended June 30, 2023 were approximately $80.2 million, an increase of $3.3 million compared to the same period in 2022. International sales were $25.7 million in the six months ended June 30, 2023 and $23.3 millionin the six months ended June 30, 2022. The increase in net sales is primarily a result of increased demand in several markets including aerospace and defense, and industrial.
Gross profit
Gross profit for the six months ended June 30, 2023 was approximately $24.5 million compared to approximately $22.3 million in the same period of 2022. Gross profit as a percentage of net sales increased to 30.5% for the six months ended June 30, 2023 from 28.9% in the six months ended June 30, 2022 principally due to increased volume, product mix and operational improvements.
Selling, general and administrative expense
Selling, general and administrative expense in the six months ended June 30, 2023 was $12.3 million, an increase in expense of approximately $0.5 millioncompared to $11.8 million for the six months ended June 30, 2022. Selling, general and administrative expense was 15.4% of net sales in both the six months ended June 30, 2023 and the six months ended June 30, 2022. The increase in selling general and administrative expense was due to increased staffing related costs and increased travel and legal expenses.
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Segment operating income
Segment operating income for the six months ended June 30, 2023 was approximately $10.7 million, an increase of $2.0 million when compared to the same period in 2022, as a result of the factors noted above.
Sterno
Three months endedSix months ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Net sales$74,615 100.0 %$84,189 100.0 %$149,634 100.0 %$161,109 100.0 %
Gross profit$19,479 26.1 %$20,101 23.9 %$36,039 24.1 %$34,597 21.5 %
SG&A$8,154 10.9 %$7,880 9.4 %$15,984 10.7 %$15,074 9.4 %
Segment operating income$7,088 9.5 %$7,954 9.4 %$11,581 7.7 %$10,988 6.8 %
Three months ended June 30, 2023 compared to three months ended June 30, 2022
Net sales
Net sales for the three months ended June 30, 2023 were approximately $74.6 million, a decrease of $9.6 million, or 11.4%, compared to the same period in 2022. The net sales variance reflects lower sales at Rimports due to changes in consumer discretionary buying behaviors as a result of inflationary pressures, partially offset by stronger sales at Sterno Products with increased spending in travel, entertainment, weddings and conventions.
Gross profit
Gross profit as a percentage of net sales increased from 23.9% for the three months ended June 30, 2022 to 26.1% for the three months ended June 30, 2023. The increase in gross profit percentage in the second quarter of 2023 as compared to the second quarter of 2022 was primarily attributable to favorable labor, overhead, and freight costs across the businesses, the effect of a price increase at Sterno Products and the mix of product sales.
Selling, general and administrative expense
Selling, general and administrative expense for the three months ended June 30, 2023 was approximately $8.2 million as compared to $7.9 million for the three months ended June 30, 2022, an increase of $0.3 million reflecting an increase in marketing related salaries and promotional activity for both divisions of the company in the current period. Selling, general and administrative expense represented 14.2%10.9% of net sales for the three months ended SeptemberJune 30, 2017 as compared to 15.4% of net sales for the same period in 2016. The decrease in selling, general2023 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 operations9.4% for the three months ended SeptemberJune 30, 20172022.
Segment operating income
Segment operating income for the three months ended June 30, 2023 was approximately $4.4$7.1 million, a decrease of $1.1$0.9 million when compared to the same period in 2016, as a result of those factors described above.
Ninethree months ended SeptemberJune 30, 20172022 based on the factors noted above.
Six Months ended June 30, 2023 compared to ninesix months ended SeptemberJune 30, 20162022
Net sales
Net sales for the ninesix months ended SeptemberJune 30, 20172023 were approximately $163.1$149.6 million, an increasea decrease of $6.4$11.5 million, or 4.1%or 7.1%, compared to the same period in 2016. 2022. The increase in net sales isvariance reflects lower sales at Rimports due to changes in consumer discretionary buying behaviors as a result of the acquisition of Sterno Home in January 2016,inflationary pressures, partially offset by strong sales shortfall at Sterno Home's candle division due to reduced demandProducts with increased spending in travel, entertainment, weddings and non-repeating orders. Sterno Home had net sales of $9.0 million in the period prior to acquisition in January 2016.conventions.

Gross profit
Cost of sales
Cost of sales for the nine months ended September 30, 2017 were approximately $120.0 million compared to approximately $113.7 million in the same period of 2016. Gross profit as a percentage of net sales decreasedincreased from 27.4%21.5% for the ninesix months ended SeptemberJune 30, 20162022 to 26.4%24.1% for the same periodsix months ended SeptemberJune 30, 2017.2023. The decreaseincrease in gross margin duringprofit percentage in the nine months ended September 30, 2017first half of 2023 as compared to the first half of 2022 was primarily reflects anattributable to favorable labor, overhead, and freight costs across the businesses and the effect of a price increase in chemical material costs.at Sterno Products.

58

Selling, general and administrative expense
Selling, general and administrative expense for the ninesix months ended SeptemberJune 30, 2017 and 20162023 was approximately $23.9$16.0 million as compared to $15.1 million for the six months ended June 30, 2022, an increase of $0.9 million reflecting an increase in marketing related salaries and $23.6 million, respectively. promotional activity for both divisions of the company in the current period. Selling, generalgeneral and administrative expense represented 14.6%10.7% of net sales for the ninesix months ended SeptemberJune 30, 2017 as compared to 15.0% of net sales2023 and 9.4% for the same period in 2016. The decrease as a percentage of net sales during the ninesix months ended SeptemberJune 30, 2017 as2022.
Segment operating income
Segment operating income for the six months ended June 30, 2023 was approximately $11.6 million, an increase of $0.6 million 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 ninesix months ended SeptemberJune 30, 2017 was approximately $13.4 million, a decrease of $0.7 million when compared to2022 based on the same period in 2016, as a result of those factors describednoted above.

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. 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.
Liquidity

Our 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 June 30, 2023, we had $1,000.0 million of indebtedness associated with our 5.250% 2029 Notes, $300 million of indebtedness associated with our 5.000% 2032 Notes, $390.0 million outstanding on our 2022 Term Loan, and $92.0 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, 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 June 30, 2023, approximately 27% of our outstanding debt was subject to interest rate changes.
At SeptemberJune 30, 2017,2023, we had approximately $41.5$67.4 million of cash and cash equivalents on hand, an increase of $1.7$9.5 million as compared to the year ended December 31, 2016. The increase in cash is due primarily to 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, and the issuance of preferred shares in the second quarter of 2017, offset by our acquisition of Crosman and our common share distributions.2022. 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 June 30, 2023 was $505.8 million. The change in cash and cash equivalents for the six months ended June 30, 2023 and 2022 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:
Six months ended
(in thousands)June 30, 2023June 30, 2022
Cash provided by (used in) operating activities$37,239 $(35,337)
For the ninesix months ended SeptemberJune 30, 2017,2023, cash flows provided by operating activities totaled approximately $59.2$37.2 million, which represents a $1.4$72.6 million decrease in cash use compared to cash provided byused in operating activities of $60.6$35.3 million during the nine monthsix-month period ended SeptemberJune 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 2016.2022. Cash used in operating activities for working capital for the ninesix months ended SeptemberJune 30, 20172023 was $24.3$65.2 million, as compared to cash used in operating activities for working capital of $5.0$159.2 million for the ninesix months ended SeptemberJune 30, 2016.2022. 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. In the fourth quarter of 2021 and continuing into 2022, several of our subsidiary businesses increased inventory levels to combat supply chain issues given longer lead times leading to higher use of working capital for inventory in the prior year. We believe that the use of working capital in the first half of 2023 reflects a more normalized use of cash by our businesses as supply chains have normalized over the past year. The increase was primarily due toin cash used in operating activities for inventory by our branded consumer businesses during working capital in the first half of 2022 also reflects the acquisition of Lugano in
59

the third quarter.quarter of the prior year. Lugano has used significant cash to build inventory to support its sales growth strategy.
Investing Activities:
Six months ended
(in thousands)June 30, 2023June 30, 2022
Cash provided by (used in) investing activities$117,829 $(22,238)
Cash flows used inprovided by investing activities for the ninesix months ended SeptemberJune 30, 20172023 totaled approximately $63.0$117.8 million, compared to cash used in investing activities of $417.3$22.2 million in the same period of 2016.2022. In the current year, weinvesting activities reflects the sale of Advanced Circuits and the proceeds received approximately $136.1 million related to the sale, and an add-on acquisition at Marucci in the second quarter 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 ($164.7 million in total) and capital expenditures ($31.0 million).2022. Capital expenditures inspend increased $7.1 million during the ninesix months ended SeptemberJune 30, 2017 increased approximately $15.4 million2023 as compared to the prior year, duesix months ended June 30, 2022, with $31.5 million in capital expenditures in 2023 and $24.4 million in capital expenditures in 2022. The increase in capital expenditures is primarily to expendituressupport the retail store growth at ourboth 5.11 business.and Lugano. We expect capital expenditures for the full year of 20172023 to be approximately $42between approximately $60 million to $47$70 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:
Six months ended
(in thousands)June 30, 2023June 30, 2022
Cash provided by (used in) financing activities$(149,619)$3,597 
Cash flows provided byused in financing activities totaled approximately $7.9$149.6 million during the ninesix months ended SeptemberJune 30, 20172023 compared to cash flows provided by financing activities of $300.4$3.6 million during the ninesix months ended SeptemberJune 30, 2016.2022. Financing activities in the current year reflects $5.9 million in purchases under our share repurchase program, while financing activities in the first six months of 2022 reflects $62.2 million of Trust common shares issued under our at-the market share offering program. In the current year, we paid back $68.0 million, net, against our 2022 Credit Facility. 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 reflect the payment of athe profit allocation related tofrom the sale of FOX shares ($39.2 million in 2017 and $16.8 million in 2016). InAdvanced Circuits to the nine months ended September 30, 2017, activity on our credit facility totaled $16.8 million 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 million.Allocation Interest Holders.
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.

In February 2022, we completed a recapitalization at Ergobaby whereby the LLC entered into an amendment to the intercompany loan agreement with Ergobaby (the "Ergobaby Loan Agreement"). The Ergobaby Loan Agreement was amended to provide for additional term loan borrowings of $61.5 million to fund a distribution to shareholders. The LLC owned 81.6% of the outstanding shares of Ergobaby on the date of the distribution and received $50.2 million. The remaining amount of the distribution was paid to minority shareholders.
As a resultIn the second quarter of significant2023, we amended the Marucci intercompany credit agreement to increase the borrowing availability under their credit agreement to allow for the financing of an add-on acquisition, and we amended the Velocity intercompany credit agreement to extend the term of the facility and to increase the borrowing availability under the facility. In the second quarter of 2023 and the fourth quarter of 2022, we amended the Lugano intercompany credit agreement to increase the borrowing availability under their credit agreement to allow Lugano
60

to continue to expand their operations. In the first quarter of 2022, we amended the 5.11 and Lugano intercompany credit agreements. The 5.11 amendment increased the capital expenditure allowable under the credit agreement to account for additional growth capital expenditure opportunities primarily related to retail expansion, and amended the financial covenants to reflect the increased allowable expenditure. The Lugano amendment increased the amount available under the revolving credit facility to permit additional investment in operational improvements to enhance its competitive position, including planned capital expendituresto reposition Arnold for future growth, we have granted Arnold a waiver for certaininventory, and amended the financial covenants to reflect the increase in the revolving credit facility. We amended the Lugano intercompany credit agreement again in the second quarter of 2022 to increase the amount in available under the revolving credit facility to permit additional investment in inventory, and amended the financial covenants to reflect the increase in the revolving credit facility. We amended the Velocity intercompany credit agreement in the third quarter of 2022 to increase the amount of the Velocity term loan to allow for the financing of an add-on acquisition.
All of our subsidiaries were in compliance with the financial covenants included within their intercompany debt agreement effective the quarter endedcredit arrangements at June 30, 2017 through December 31, 2017. Additionally, due to significant capital expenditures related to2023.
All intercompany loans eliminate in consolidation and are not reflected in 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 of the fixed charge coverage ratio.
consolidated balance sheet. As of SeptemberJune 30, 2017,2023, 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$212,435 
BOA62,420 
Ergobaby85,625 
Lugano313,648 
Marucci83,894 
PrimaLoft160,000 
Velocity Outdoor125,012 
Altor97,893 
Arnold64,297 
Sterno144,736 
Total intercompany debt$1,349,960 
Corporate and eliminations(1,349,960)
Total$— 
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 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.)2022 Term Loan’s maturity date.

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In March 2017, we amended the 2014 Credit Facility (the "Fourth Amendment") to reduce the applicable rate of interest for the 2014 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%.

We had $523.2$505.8 million in net availability under the 20142022 Revolving Credit Facility at SeptemberJune 30, 2017.2023. The outstanding borrowings under the 20142022 Revolving Credit Facility includes $1.3include $2.2 million at September 30, 2017 of outstanding letters of credit.credit at June 30, 2023, which are not reflected on our balance sheet.

2021 Credit Facility
On March 23, 2021, we entered into a Second Amended and Restated Credit Agreement to amend and restate the 2018 Credit Facility. The 2021 Credit Facility provided for revolving loans, swing line loans and letters of credit up to a maximum aggregate amount of $600 million and also permits the LLC, prior to the applicable maturity date, to increase the revolving loan commitment and/or obtain term loans in an aggregate amount of up to $250 million, subject to certain restrictions and conditions. The LLC repaid the outstanding amounts under the 2021 Credit Facility in the third quarter of 2022 in connection with entering into the 2022 Credit Facility.
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, 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 SeptemberJune 30, 20172023 included as part of the affirmative covenants in our 20142022 Credit Facility: 
Facility.
Description of Required Covenant RatioCovenant Ratio RequirementActual Ratio
Description of Required Covenant RatioCovenant Ratio RequirementActual Ratio
Consolidated Fixed Charge Coverage RatiogreaterGreater than or equal to 1.50:1.03.12:2.28:1.0
Total Debt to EBITDAConsolidated Senior Secured Leverage RatiolessLess than or equal to 3.50:1.02.76:1.03:1.0
Consolidated Total Leverage RatioLess than or equal to 5.50:1.04.08:1.0


We intend to use the availabilityexercised an option under our 2014 Credit Facility and cash on hand to pursue acquisitions of additional businesses to the extent permitted under our 20142022 Credit Facility to fund distributionsincrease our Consolidated Total Leverage Ratio to 5.75:1.0 as of December 31, 2022. This increase declined to 5.50 on June 30, 2023, and declines to provide for other working capital needs.5.00 on December 31, 2023.

62

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):
 Six months ended June 30,
 20232022
Interest on credit facilities$17,854 $40 
Interest on Senior Notes33,750 33,750 
Unused fee on Revolving Credit Facility990 1,050 
Other interest expense216 124 
Interest income(15)(26)
Interest expense, net$52,795 $34,938 
 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 June 30, 2023 and December 31, 2022 (in thousands):

June 30, 2023December 31, 2022
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 Loan7.10%390,000 5.20%395,000 
2022 Revolving Credit Facility7.17%92,000 5.98%155,000 
Unamortized debt issuance costs(14,327)(15,532)
Total debt outstanding$1,767,673 $1,834,468 
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" 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 Earnings before Interest, Income Taxes, Depreciation and Amortization ("EBITDA"), Adjusted EBITDA, and Cash Flow Available for Distribution and Reinvestment ("CAD").

Adjusted Earnings.
Reconciliation of Net income (Loss)(loss) from continuing operations to EBITDA, and Adjusted EBITDA and Net income (loss) to Adjusted Earnings
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 – Adjusted EBITDA is calculated utilizing the same calculation as described above in arriving at EBITDA further adjusted by;by: (i) noncontrolling stockholder compensation, which generally consists of non-cash
63

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) managementintegration service 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;companies to the Manager for integration services performed during the first year of ownership; and (iv) impairment charges,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 reflect write downsmanagement 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 expense that may be material to goodwill or other intangible assets; (v) gains or losses recordeda subsidiary and non-recurring in connection with our investment; (vi) gains or losses recorded in connection with 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 currency to U.S. dollar.nature.
We believe that EBITDA, 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 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 provide useful information to investors and reflects important financial measures as they 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 EBITDA allows investors to view the performance of our businesses in a manner similar to the methods used by us and the management of our subsidiaries, provides additional insight into our operating results and provides a measure for evaluating targeted businesses for acquisition. The presentation of Adjusted Earnings provides insight into our operating results and provides a measure for evaluating earnings from continuing operations available to common shareholders. EBITDA, 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.
The following tables reconcile EBITDA and Adjusted EBITDA to net income (loss) from continuing operations, which we consider to be the most comparable GAAP financial measure (in thousands):
64



Adjusted EBITDA
Six months ended June 30, 2023
Corporate5.11BOAErgobabyLuganoMarucci SportsPrimaLoftVelocity OutdoorAltorArnoldSternoConsolidated
Net income (loss) from continuing operations$(22,352)$6,016 10,894 $(853)$16,884 $9,419 $(607)$(7,981)$7,202 $4,808 $2,464 $25,894 
Adjusted for:
Provision (benefit) for income taxes— 2,070 1,359 (652)6,085 3,040 (559)(2,954)2,634 2,388 869 14,280 
Interest expense, net52,598 (2)(5)— 4 2 (6)194 — 10 — 52,795 
Intercompany interest(69,453)10,221 3,461 4,340 13,730 4,728 8,708 6,437 5,634 3,372 8,822 — 
Depreciation and amortization594 13,293 11,506 4,079 4,890 6,455 10,723 6,751 8,343 4,122 10,032 80,788 
EBITDA(38,613)31,598 27,215 6,914 41,593 23,644 18,259 2,447 23,813 14,700 22,187 173,757 
Other (income) expense(128)(201)180 29 (76)29 139 (754)563 (9)(798)(1,026)
Noncontrolling shareholder compensation— 730 1,333 624 840 863 (43)458 566 18 322 5,711 
Acquisition expenses— — — — — 364 — — — — — 364 
Integration services fee— — — — — — 2,375 — — — — 2,375 
Other— — — — — — — — — — 780 780 
Adjusted EBITDA$(38,741)$32,127 $28,728 $7,567 $42,357 $24,900 $20,730 $2,151 $24,942 $14,709 $22,491 $181,961 



65



Adjusted EBITDA
Six months ended June 30, 2022
Corporate5.11BOAErgobabyLuganoMarucci SportsVelocity OutdoorAltorArnoldSternoConsolidated
Net income (loss) from continuing operations
$(24,771)$9,635 $28,187 $125 $13,776 $4,144 $3,147 $4,384 $3,742 $2,540 $44,909 
Adjusted for:
Provision (benefit) for income taxes(4,338)3,093 5,043 842 4,697 1,212 956 2,102 2,231 270 16,108 
Interest expense, net34,834 10 (12)2 9 10 72 — 13 — 34,938 
Intercompany interest(39,735)5,998 3,826 2,263 4,578 2,837 3,990 5,023 2,545 8,675 — 
Depreciation and amortization637 11,038 10,768 4,028 5,302 7,054 6,561 8,130 4,129 10,203 67,850 
EBITDA(33,373)29,774 47,812 7,260 28,362 15,257 14,726 19,639 12,660 21,688 163,805 
Other (income) expense— (616)95 4 2 (1,828)183 109 — (722)(2,773)
Noncontrolling shareholder compensation— 829 1,268 792 444 552 502 535 25 414 5,361 
Acquisition expenses— — — — — — — 216 — — 216 
Integration services fee— — — — 1,125 — — — — — 1,125 
Other— — — 250 — 1,802 — — 777 2,829 
Adjusted EBITDA$(33,373)$29,987 $49,175 $8,306 $29,933 $15,783 $15,411 $20,499 $12,685 $22,157 $170,563 



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Reconciliation of Net income (loss) to Adjusted Earnings and Adjusted EBITDA
The following table reconciles Adjusted Earnings to net income (loss), which we consider to be the most comparable GAAP financial measure, and Adjusted Earnings to Adjusted EBITDA (in thousands):


Six months ended June 30,
20232022
Net income$126,724 $60,697 
Income (loss) from discontinued operations, net of tax(1,391)10,374 
Gain on sale of discontinued operations, net of tax102,221 5,414 
Net income from continuing operations$25,894 $44,909 
Less: income from continuing operations attributable to noncontrolling interest8,498 8,572 
Net income attributable to Holdings - continuing operations$17,396 $36,337 
Adjustments:
Distributions paid - preferred shares(12,091)(12,091)
Amortization expense - intangibles and inventory step-up54,185 45,837 
Stock compensation5,711 5,361 
Acquisition expenses364 216 
Integration Services Fee2,375 1,125 
Unrealized corporate tax effect— (4,338)
Other780 2,829 
Adjusted Earnings$68,720 $75,276 
Plus (less):
Depreciation expense24,574 20,282 
Income tax provision14,280 16,108 
Unrealized corporate tax effect— 4,338 
Interest expense52,795 34,938 
Amortization of debt issuance costs2,029 1,731 
Income from continuing operations attributable to noncontrolling interest8,498 8,572 
Distributions paid - preferred shares12,091 12,091 
Other (income) expense(1,026)(2,773)
Adjusted EBITDA$181,961 $170,563 
Adjusted EBITDA
Nine months ended September 30, 2017


 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
Nine months ended September 30, 2016


 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.

(2) As a result of the sale of our Tridien subsidiary in September 2016, Adjusted EBITDA for the nine months ended September 30, 2016 does not include 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 CAD to net income (loss) and cash flows provided by (used in) operating activities, which we consider to be the most directly comparable financial measure calculated and presented in accordance with GAAP.
 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)

Distribution paid in October 2017/ 2016(21,564) (19,548)
 $(64,692) $(58,644)
(1)Represents fees paid by newly acquired companies to the Manager for integration services performed during the first year of ownership, payable quarterly.
(2) Represents maintenance capital expenditures that were funded from operating cash flow, net of proceeds from the sale of property, plant and equipment, and excludes growth capital expenditures of approximately $17.5 million for 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 gain 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 quarternature due to lower demand for safes atvarious recurring events, holidays and seasonal weather patterns, as well as the onsettiming of summer. Crosman typically has higher sales inour acquisitions during a given year. Historically, the third and fourth quarter eachhave produced the highest net sales in our fiscal year, reflecting the hunting and holiday seasons. Earnings from Clean Earth are typically lower during the winter monthshowever, due to the limitsvarious acquisitions since 2020, there is generally less seasonality in our net sales on outdoor construction and development activity because of the colder weather in the Northeastern United States. Sterno Products typicallya consolidated basis than there has higher sales in the second and fourth quarter of each year, reflecting the outdoor summer and holiday seasons, respectively.

been historically.
Related Party Transactions
Equity method investmentManagement Services Agreement
We entered into the MSA with CGM effective May 16, 2006. The MSA provides for, among other things, CGM to perform services for the LLC in FOXexchange for a management fee paid quarterly and equal to 0.5% of the Company's adjusted net assets, as defined in the MSA.
InDuring 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 2017, FOX closed on31, and June 30, 2023 than would normally have been due. At June 30, 2022 and March
67

31, 2022, CGM entered into a secondary offeringwaiver to exclude cash balances held at the LLC from the calculation of the management fee.
For the three and six months ended June 30, 2023 and 2022, the Company incurred the following management fees to CGM, by entity:
Three months ended June 30,Six Months ended June 30,
(in thousands)2023202220232022
5.11$250 $250 $500 $500 
BOA250250 500 500 
Ergobaby125125 250 250 
Lugano188188 375 375 
Marucci125125 250 250 
PrimaLoft250— 500 — 
Velocity125125 250 250 
Altor188188 375 375 
Arnold Magnetics125125 250 250 
Sterno125125 250 250 
Corporate15,169 13,400 29,815 26,337 
$16,920 $14,901 $33,315 $29,337 
Integration Services Agreements
PrimaLoft, which was acquired in July 2022, entered into an Integration Services Agreement ("ISA") with CGM whereby PrimaLoft paid CGM an integration services fee of $4.8 million quarterly over a twelve-month period ended June 30, 2023. Lugano, which was acquired in September 2021, entered into an ISA with CGM whereby Lugano paid CGM an integration services fee of $2.3 million quarterly over a twelve-month period ended September 30, 2022. Under the ISAs, 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.
Allocation Interests
The Allocation Interests represent the original equity interest in the Company. The holders of the Allocation Interests (“Holders”), through which we sold our remaining 5,108,718 shares in FOX for total net proceedsSostratus LLC, are entitled to receive distributions pursuant to a profit allocation formula upon the occurrence of $136.1 million, aftercertain events. The distributions of the underwriter's discountprofit allocation are paid upon the occurrence of $8.9 million. Subsequent to the sale of FOX shares in March 2017, we no longer hold an ownership interest in FOX.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 dividends declared on Allocation Interests to stockholders’ equity when they are approved by the Company’s board of directors. 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 Allocation Member in connection with the FOX Sale Event of $25.8 million. The profit allocation payment was made during 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 Interests in FOX.

April 2023.
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. During5.11 purchased approximately $0.4 million and $1.0 million during the three and ninesix months ended SeptemberJune 30, 2017, 5.11 purchased approximately $1.02023, respectively and $0.5 million and $4.7$0.8 million during the three and six months ended June 30, 2022, respectively in inventory from the vendor.
68

BOA
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 $10.7 million and $20.4 million from this vendor.supplier during the three and six months ended June 30, 2023, respectively and $15.9 million and $31.1 million during the three and six months ended and June 30, 2022, respectively.
Ergobaby
Recapitalization - In February 2022, the Company completed a recapitalization of Ergobaby whereby the LLC entered into an amendment to the intercompany loan agreement with Ergobaby (the "Ergo Loan Agreement"). The Ergo Loan Agreement was amended to provide for additional loan borrowings of $61.5 million to fund a distribution to shareholders. The LLC owned 81.6% of the outstanding shares of Ergobaby on the date of the distribution and received $50.2 million. The remaining amount of the distribution was paid to minority shareholders.
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, 2016,2022, as filed with the Securities and Exchange Commission ("SEC")SEC on March 2, 2017.1, 2023.
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 market approach results in relevant data points for market multiples or comparative data from comparable public companies since most of Arnold's competitors are privately held and do not publish data that can be used in a market approach. In the income approach, we used a weighted average cost of capital adjusted for the relevant risk associated with the business and the uncertainty associated with the reporting unit's ability to execute on the projected cash flows. Under the market approach, we estimate fair value based on market multiples of 12.5% for PMAG, 12.0% for Flexmagrevenue and 13.0% for PTM. Resultsearnings derived from comparable public companies with operating characteristics that are similar to the reporting unit. When market comparables are not meaningful or available, we estimate the fair value of the Step 1reporting 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
69

estimates and the judgments and assumptions upon which the estimates are based will most likely differ from actual future results.
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 tests 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 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 unit exceeded the carrying value by approximately 21%. The prospective financial information that is used to determine the fair values of the Velocity reporting unit requires us to make assumptions regarding future operational results including revenue growth rates and gross margins. If we do not achieve the forecasted revenue growth rates and gross margins, the results of the quantitative testing could change, potentially leading to additional testing and impairment at the reporting unit that was tested quantitatively.
2022 Interim goodwill and indefinite lived intangible asset impairment testing - As a result of operating results below forecasts in the current period and expectations that macroeconomic conditions and decreases in consumer discretionary spending in the upcoming year will impact 2023 operating results, we determined that a triggering event had occurred at Ergobaby in the fourth quarter of 2022 and performed an interim impairment test of the Ergobaby goodwill and indefinite-lived tradename as of December 31, 2022. The Company used an income approach for the impairment test, whereby the Company estimated the fair value of the reporting unit based on the present value of expected future cash flows, including terminal value, and utilized a discount rate of 16.0%. The prospective financial information considers reporting unit specific facts and circumstances and was our best estimate of operational results and cash flows for Ergobaby as of the date of our impairment testing. The results of the quantitative impairment testing indicated that the fair value of the Ergobaby reporting unit did not exceed the carrying value. We recorded goodwill impairment expense of $20.6 million at December 31, 2022. For the indefinite lived tradename, the results of the quantitative testing indicated that the fair value exceeded the carrying value.
2022 Annual Impairment Testing - For our annual impairment testing at March 31, 2022, 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 exceeded their carrying value by 34% and 38%, respectively. 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) to determine the amount of impairment of the PMAG reporting unit.
We had not completed the Step 2 testing for PMAG at December 31, 2016, 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 after the results of the Step 2 indicated total goodwill impairment 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.

value.
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, 2017,2023, 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, 2016.2022. 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, 2016,2022, as filed with the SEC on March 2, 2017.1, 2023.


70

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 SeptemberJune 30, 2017.2023. 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 SeptemberJune 30, 2017.2023.


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.

71

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, 20162022, as filed with the SEC on March 2, 2017.1, 2023.

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 filed2022 should be considered together with information included in this Quarterly Report on Form 10-Q for the SEC on March 2, 2017 except as noted below relatedquarter ended June 30, 2023 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.operations, liquidity and financial condition. We believe there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
As a manufacturer
ITEM 2. Unregistered Sales of recreational airguns, archery products, laser aiming devicesEquity Securities and related accessories, Crosman is involved in various litigation matters that occur inUse of Proceeds
Issuer Purchases of Equity Securities
The following table presents 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 atotal number of years later.

While Crosman maintains product liability insurance to insure against potential claims, there isshares of common stock purchased during the second quarter of 2023, the average price paid per share, the number of shares that were purchased as part of a risk such insurance may not be sufficient to cover all liabilities incurred in connection with such claimspublicly announced repurchase program, if any, and the financial consequences of these claims and lawsuits will have a material adverse effect on its business, financial condition, liquidity and results of operations.
Risks Related to the Series A Preferred Shares
Distributions on the Series A Preferred Shares are discretionary and non-cumulative.
Distributions on the Series A Preferred Shares are discretionary and non-cumulative. Holdersapproximate dollar value of the Series A Preferred Shares will only receive distributionsmaximum number of shares that may yet be purchased under the share repurchase program:
Period
Total Number of Shares Purchased (1)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2)
April 1 - April 30, 202345,000 $18.79 45,000 $45,200,000 
May 1 - May 31, 202325,000 $19.99 25,000 $44,700,000 
June 1 - June 30, 202326,800 $20.06 26,800 $44,100,000 
Total96,800 $19.44 96,800 $44,100,000 

(1)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 $50.0 million of outstanding common shares of the Series A Preferred Shares when, as and if declared byTrust. All common shares repurchased during the boardsecond quarter of directors2023 were repurchased pursuant to this publicly-announced share repurchase program.
(2) As of June 30, 2023, the Company. Consequently, ifremaining authorization under 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.


publicly-announced share repurchase program was $44.1 million.
72

ITEM 6.EXHIBITS
Exhibit NumberDescription
10.1*31.1*
12.1*
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Distributions
31.1*
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Registrant
31.2*
32.1*+
32.2*+
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.

73

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: August 2, 2023COMPASS DIVERSIFIED HOLDINGS
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: August 2, 2023COMPASS GROUP DIVERSIFIED HOLDINGS LLC
By:/s/ Ryan J. Faulkingham
Ryan J. Faulkingham
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: 11/8/2017

EXHIBIT INDEX
By:Description/s/ Ryan J. Faulkingham
Ryan J. Faulkingham
10.1*
First Refinancing Amendment to the Credit Agreement, dated October 25, 2017, by
Chief Financial Officer
(Principal Financial and among Compass Group Diversified Holdings LLC, Bank of America, N.A., and the lenders theretoAccounting Officer)
74

EXHIBIT INDEX
Exhibit NumberDescription
12.1*
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Distributions
31.1*
31.1*
31.2*
32.1*+
32.2*+
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.



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