UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2022~~2023


☐			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)

Delaware

001-34927

57-6218917

(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)

Delaware

001-34926

20-3812051

(State or other jurisdiction of
incorporation or organization)

(Commission
file number)

(I.R.S. employer
identification number)

301 Riverside Avenue, Second Floor, Westport, CT 06880

(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 Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Shares representing beneficial interests in Compass Diversified Holdings

CODI

New York Stock Exchange

Series A Preferred Shares representing beneficial interests in Compass Diversified Holdings

CODI PR A

New York Stock Exchange

Series B Preferred Shares representing beneficial interests in Compass Diversified Holdings

CODI PR B

New York Stock Exchange

Series C Preferred Shares representing beneficial interests in Compass Diversified Holdings

CODI PR C

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

As of April ~~29, 2022,~~28, 2023, there were ~~70,172,175~~71,947,729 Trust common shares of Compass Diversified Holdings outstanding.

COMPASS DIVERSIFIED HOLDINGS

QUARTERLY REPORT ON FORM 10-Q

For the period ended March 31, ~~2022~~2023

TABLE OF CONTENTS

Page
Number

FORWARD-LOOKING STATEMENTS

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS (UNAUDITED)

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

3736

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

6160

ITEM 4.

CONTROLS AND PROCEDURES

PART II. OTHER INFORMATION

ITEM 1.

ITEM 1A.

ITEM 6.

NOTE TO READER

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

•the “Trust” and “Holdings” refer to Compass Diversified Holdings;

•the “LLC” refer to Compass Group Diversified Holdings LLC;

•the "Company" refer to Compass Diversified Holdings and Compass Group Diversified Holdings LLC, collectively;

•“businesses”, “operating segments”, “subsidiaries” and “reporting units” all refer to, collectively, the businesses controlled by the Company;

•the “Manager” refer to Compass Group Management LLC (“CGM”);

•the "Trust Agreement" refer to the Third Amended and Restated Trust Agreement of the Trust dated as of August 3, 2021;

•the "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 the $400 million term loan provided by the 2022 Credit Facility;

•the "2021 Credit Facility" refer to the second amended and restated credit agreement entered into on March 23, 2021 among the ~~LLC,~~Company, the ~~Lenders~~lenders from time to time party thereto, ~~(the "Lenders"),~~ Bank of America, N.A., as Administrative 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 that matures in 2026;

•the "2018 Credit Facility" refer to the amended and restated credit agreement entered into on April 18, 2018 among the ~~LLC,~~Company, the ~~Lenders~~lenders from time to time party thereto, ~~(the "Lenders"),~~ 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 2021 Credit Facility;

•the ~~"2018 Revolving Credit Facility" refers to the $600 million in revolving loans, swing line loans and letters of credit provided by the 2018 Credit Facility;~~

•~~the "2018 Term Loan" refer to the $500 million term loan provided by the 2018 Credit Facility;~~

•~~the~~ "LLC Agreement" refer to the Sixth Amended and Restated Operating Agreement of the ~~LLC~~Company dated as of August 3, 2021, as further amended; and

•"we," "us" and "our" refer to the Trust, the ~~LLC~~Company and the businesses together.

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, such 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, ~~2021~~2022 filed with the United States Securities and Exchange Commission (“SEC”) on ~~February 24, 2022,~~March 1, 2023, as such factors may be updated from time to time in our filings with the SEC. Many of these risks and uncertainties are beyond our control. 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:

•the adverse impact on the U.S. and global economy, including the markets in which we operate, of the novel coronavirus, which causes the Coronavirus disease 2019 (COVID-19), and the impact in the near, medium and long-term on our business, results of operations, financial position, liquidity or cash flows;

•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 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 legal and regulatory environment in which our ~~businesses~~subsidiaries operate;

•trends in the industries in which our ~~businesses~~subsidiaries 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;

•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 ~~businesses~~subsidiaries 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.

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

COMPASS DIVERSIFIED HOLDINGS

CONDENSED CONSOLIDATED BALANCE SHEETS


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
(in thousands)	(in thousands)	(Unaudited)				(in thousands)	(Unaudited)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	97,345	$	157,125	Cash and cash equivalents	$	53,656	$	57,880
Accounts receivable, net	Accounts receivable, net	265,287		268,262		Accounts receivable, net	326,744		331,396
Inventories, net		617,159		562,084
Inventories						Inventories	764,029		728,083
Prepaid expenses and other current assets	Prepaid expenses and other current assets	69,108		56,575		Prepaid expenses and other current assets	64,189		74,700
Current assets held for sale		102,293		99,423

Current assets of discontinued operations						Current assets of discontinued operations	—		18,126
Total current assets	Total current assets	1,151,192		1,143,469		Total current assets	1,208,618		1,210,185
Property, plant and equipment, net	Property, plant and equipment, net	179,177		178,393		Property, plant and equipment, net	202,729		198,525
Goodwill	Goodwill	791,174		815,405		Goodwill	1,066,726		1,066,726
Intangible assets, net	Intangible assets, net	879,345		872,677		Intangible assets, net	1,102,360		1,127,936
Other non-current assets	Other non-current assets	136,641		134,317		Other non-current assets	177,492		166,412

Non-current assets of discontinued operations						Non-current assets of discontinued operations	—		79,847
Total assets	Total assets	$	3,137,529	$	3,144,261	Total assets	$	3,757,925	$	3,849,631

Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	93,354	$	120,405	Accounts payable	$	78,718	$	90,404
Accrued expenses	Accrued expenses	176,964		174,801		Accrued expenses	201,044		196,239

Due to related party		13,099		11,705
Due to related parties (refer to Note P)						Due to related parties (refer to Note P)	15,034		15,495
Current portion, long-term debt						Current portion, long-term debt	10,000		10,000
Other current liabilities						Other current liabilities	40,075		36,545

Other current liabilities		41,942		45,490
Current liabilities held for sale		30,905		29,127

Current liabilities of discontinued operations						Current liabilities of discontinued operations	—		11,148
Total current liabilities	Total current liabilities	356,264		381,528		Total current liabilities	344,871		359,831
Deferred income taxes	Deferred income taxes	82,858		84,344		Deferred income taxes	139,645		145,643
Long-term debt	Long-term debt	1,285,304		1,284,826		Long-term debt	1,675,571		1,824,468
Other non-current liabilities	Other non-current liabilities	109,675		109,033		Other non-current liabilities	153,205		141,535

Non-current liabilities of discontinued operations						Non-current liabilities of discontinued operations	—		16,192
Total liabilities	Total liabilities	1,834,101		1,859,731		Total liabilities	2,313,292		2,487,669

Commitments and contingencies

Commitments and contingencies (refer to Note O)						Commitments and contingencies (refer to Note O)
Stockholders’ equity	Stockholders’ equity					Stockholders’ equity
Trust preferred shares, 50,000 authorized; 12,600 shares issued and outstanding at March 31, 2022 and December 31, 2021
Series A preferred shares, no par value; 4,000 shares issued and outstanding at March 31, 2022 and December 31, 2021		96,417		96,417
Series B preferred shares, no par value; 4,000 shares issued and outstanding at March 31, 2022 and December 31, 2021		96,504		96,504
Series C preferred shares, no par value; 4,600 shares issued and outstanding at March 31, 2022 and December 31, 2021		110,997		110,997
Trust common shares, no par value, 500,000 authorized; 69,450 shares issued and outstanding at March 31, 2022 and 68,738 issued and outstanding at December 31, 2021		1,143,354		1,123,193
Trust preferred shares, 50,000 authorized; 12,600 shares issued and outstanding at March 31, 2023 and December 31, 2022						Trust preferred shares, 50,000 authorized; 12,600 shares issued and outstanding at March 31, 2023 and December 31, 2022
Series A preferred shares, no par value; 4,000 shares issued and outstanding at March 31, 2023 and December 31, 2022						Series A preferred shares, no par value; 4,000 shares issued and outstanding at March 31, 2023 and December 31, 2022	96,417		96,417
Series B preferred shares, no par value; 4,000 shares issued and outstanding at March 31, 2023 and December 31, 2022						Series B preferred shares, no par value; 4,000 shares issued and outstanding at March 31, 2023 and December 31, 2022	96,504		96,504
Series C preferred shares, no par value; 4,600 shares issued and outstanding at March 31, 2023 and December 31, 2022						Series C preferred shares, no par value; 4,600 shares issued and outstanding at March 31, 2023 and December 31, 2022	110,997		110,997
Trust common shares, no par value, 500,000 authorized; 71,993 shares issued and outstanding at March 31, 2023 and 72,203 issued and outstanding at December 31, 2022						Trust common shares, no par value, 500,000 authorized; 71,993 shares issued and outstanding at March 31, 2023 and 72,203 issued and outstanding at December 31, 2022	1,206,996		1,207,044
Treasury shares, at cost						Treasury shares, at cost	(3,954)		—
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(228)		(1,028)		Accumulated other comprehensive loss	(414)		(1,136)
Accumulated deficit	Accumulated deficit	(313,902)		(314,267)		Accumulated deficit	(291,605)		(372,906)
Total stockholders’ equity attributable to Holdings	Total stockholders’ equity attributable to Holdings	1,133,142		1,111,816		Total stockholders’ equity attributable to Holdings	1,214,941		1,136,920
Noncontrolling interest	Noncontrolling interest	171,735		175,328		Noncontrolling interest	229,692		223,509
Noncontrolling interest held for sale		(1,449)		(2,614)

Noncontrolling interest of discontinued operations						Noncontrolling interest of discontinued operations	—		1,533
Total stockholders’ equity	Total stockholders’ equity	1,303,428		1,284,530		Total stockholders’ equity	1,444,633		1,361,962
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	3,137,529	$	3,144,261	Total liabilities and stockholders’ equity	$	3,757,925	$	3,849,631

See notes to condensed consolidated financial statements.

COMPASS DIVERSIFIED HOLDINGS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three months ended March 31,				Three months ended March 31,
(in thousands, except per share data)	(in thousands, except per share data)	2022		2021			(in thousands, except per share data)	2023		2022
Net revenues	Net revenues	$	510,513	$	408,556		Net revenues	$	542,228	$	510,513
Cost of revenues	Cost of revenues	309,698		240,008			Cost of revenues	304,397		309,698
Gross profit	Gross profit	200,815		168,548			Gross profit	237,831		200,815
Operating expenses:	Operating expenses:						Operating expenses:
Selling, general and administrative expense	Selling, general and administrative expense	120,672		104,052			Selling, general and administrative expense	146,165		120,672
Management fees	Management fees	14,436		10,798			Management fees	16,395		14,436
Amortization expense	Amortization expense	21,105		18,589			Amortization expense	26,374		21,105

Operating income	Operating income	44,602		35,109			Operating income	48,897		44,602
Other income (expense):	Other income (expense):						Other income (expense):
Interest expense, net	Interest expense, net	(17,419)		(13,805)			Interest expense, net	(26,180)		(17,419)
Amortization of debt issuance costs	Amortization of debt issuance costs	(866)		(686)			Amortization of debt issuance costs	(1,005)		(866)

Other income (expense), net	Other income (expense), net	2,036		(2,228)			Other income (expense), net	1,127		2,036
Income from continuing operations before income taxes	Income from continuing operations before income taxes	28,353		18,390			Income from continuing operations before income taxes	22,839		28,353
Provision for income taxes	Provision for income taxes	9,976		5,308			Provision for income taxes	9,836		9,976
Income from continuing operations	Income from continuing operations	18,377		13,082			Income from continuing operations	13,003		18,377
Income from discontinued operations, net of income tax		5,370		8,914
Gain on sale of discontinued operations		5,993		—
Income (loss) from discontinued operations, net of income taxes							Income (loss) from discontinued operations, net of income taxes	(1,391)		5,370
Gain on sale of discontinued operations, net of income taxes							Gain on sale of discontinued operations, net of income taxes	97,989		5,993
Net income	Net income	29,740		21,996			Net income	109,601		29,740
Less: Net income from continuing operations attributable to noncontrolling interest	Less: Net income from continuing operations attributable to noncontrolling interest	4,937		1,903			Less: Net income from continuing operations attributable to noncontrolling interest	4,981		4,937
Less: Net income from discontinued operations attributable to noncontrolling interest		1,041		1,099
Less: Net income (loss) from discontinued operations attributable to noncontrolling interest							Less: Net income (loss) from discontinued operations attributable to noncontrolling interest	(777)		1,041
Net income attributable to Holdings	Net income attributable to Holdings	$	23,762	$	18,994		Net income attributable to Holdings	$	105,397	$	23,762

Amounts attributable to Holdings	Amounts attributable to Holdings						Amounts attributable to Holdings
Income from continuing operations	Income from continuing operations	$	13,440	$	11,179		Income from continuing operations	$	8,022	$	13,440
Income from discontinued operations, net of income tax		4,329		7,815
Income (loss) from discontinued operations, net of income tax							Income (loss) from discontinued operations, net of income tax	(614)		4,329
Gain on sale of discontinued operations, net of income tax	Gain on sale of discontinued operations, net of income tax	5,993		—			Gain on sale of discontinued operations, net of income tax	97,989		5,993
Net income attributable to Holdings	Net income attributable to Holdings	$	23,762	$	18,994		Net income attributable to Holdings	$	105,397	$	23,762

Basic income per common share attributable to Holdings (refer to Note J)
Basic income (loss) per common share attributable to Holdings (refer to Note J)							Basic income (loss) per common share attributable to Holdings (refer to Note J)
Continuing operations	Continuing operations	$	0.00	$	(0.10)		Continuing operations	$	(0.06)	$	0.00
Discontinued operations	Discontinued operations	0.14		0.11			Discontinued operations	1.35		0.14
Basic income per common share attributable to Holdings (refer to Note J)	Basic income per common share attributable to Holdings (refer to Note J)	$	0.14	$	0.01		Basic income per common share attributable to Holdings (refer to Note J)	$	1.29	$	0.14

Basic weighted average number of shares of common shares outstanding	Basic weighted average number of shares of common shares outstanding	69,375		64,900			Basic weighted average number of shares of common shares outstanding	72,178		69,375

Cash distributions declared per Trust common share (refer to Note J)	Cash distributions declared per Trust common share (refer to Note J)	$	0.25	$	0.36		Cash distributions declared per Trust common share (refer to Note J)	$	0.25	$	0.25

See notes to condensed consolidated financial statements.

COMPASS DIVERSIFIED HOLDINGS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


		Three months ended March 31,				Three months ended March 31,
(in thousands)	(in thousands)	2022		2021			(in thousands)	2023		2022

Net income	Net income	$	29,740	$	21,996		Net income	$	109,601	$	29,740
Other comprehensive income	Other comprehensive income						Other comprehensive income
Foreign currency translation adjustments	Foreign currency translation adjustments	25		(281)			Foreign currency translation adjustments	1,246		25
Pension benefit liability, net	Pension benefit liability, net	775		763			Pension benefit liability, net	(524)		775
Other comprehensive income	Other comprehensive income	800		482			Other comprehensive income	722		800
Total comprehensive income, net of tax	Total comprehensive income, net of tax	$	30,540	$	22,478		Total comprehensive income, net of tax	$	110,323	$	30,540
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	5,978		3,002			Less: Net income attributable to noncontrolling interests	4,204		5,978
Less: Other comprehensive income attributable to noncontrolling interests	Less: Other comprehensive income attributable to noncontrolling interests	5		2			Less: Other comprehensive income attributable to noncontrolling interests	20		5
Total comprehensive income attributable to Holdings, net of tax	Total comprehensive income attributable to Holdings, net of tax	$	24,557	$	19,474		Total comprehensive income attributable to Holdings, net of tax	$	106,099	$	24,557

See notes to condensed consolidated financial statements.

COMPASS DIVERSIFIED HOLDINGS

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

(in thousands) Trust Preferred Shares Trust Common Shares Accumulated Deficit Accumulated Other
Comprehensive
Income (Loss) Stockholders' Equity Attributable
to Holdings Non-
Controlling
Interest Non-
Controlling
Interest Attributable to Disc. Ops. Total
Stockholders’
Equity
Series A Series B Series C
Balance — January 1, 2021 $ 96,417 $ 96,504 $ 110,997 $ 1,008,564 $ (211,002) $ (1,456) $ 1,100,024 $ 123,463 $ (3,339) $ 1,220,148
Net income — — — — 18,994 — 18,994 1,903 1,099 21,996
Total comprehensive income, net — — — — — 482 482 — — 482
Option activity attributable to noncontrolling shareholders — — — — — — — 2,640 131 2,771
Effect of subsidiary stock option exercise — — — — — — — — 70 70
Distributions paid - Allocation interests — — — — (5,214) — (5,214) — — (5,214)
Distributions paid - Trust Common Shares — — — — (23,364) — (23,364) — — (23,364)
Distributions paid - Trust Preferred Shares — — — — (6,045) — (6,045) — — (6,045)
Balance — March 31, 2021 $ 96,417 $ 96,504 $ 110,997 $ 1,008,564 $ (226,631) $ (974) $ 1,084,877 $ 128,006 $ (2,039) $ 1,210,844
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 — — — — 23,762 — 23,762 4,937 1,041 29,740
Total comprehensive income, net — — — — — 800 800 — — 800
Issuance of Trust common shares — — — 20,161 — — 20,161 — — 20,161
Option activity attributable to noncontrolling shareholders — — — — — — — 2,681 124 2,805
Effect of subsidiary stock option exercise — — — — — — — 390 — 390
Purchase of noncontrolling interest — — — — — — — (309) — (309)
Distributions paid to noncontrolling shareholders — — — — — — — (11,292) — (11,292)
Distributions paid - Trust Common Shares — — — — (17,352) — (17,352) — — (17,352)
Distributions paid - Trust Preferred Shares — — — — (6,045) — (6,045) — — (6,045)
Balance — March 31, 2022 $ 96,417 $ 96,504 $ 110,997 $ 1,143,354 $ (313,902) $ (228) $ 1,133,142 $ 171,735 $ (1,449) $ 1,303,428


(in thousands)	Trust Preferred Shares						Trust Common Shares				Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Stockholders' Equity Attributable to Holdings		Non- Controlling Interest		Non- Controlling Interest Attributable to Disc. Ops.		Total Stockholders’ Equity
	Series A		Series B		Series C				Treasury 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	—		—		—		—		—		23,762		—		23,762		4,937		1,041		29,740
Total comprehensive income, net	—		—		—		—		—		—		800		800		—		—		800
Issuance of Trust common shares	—		—		—		20,161		—		—		—		20,161		—		—		20,161
Option activity attributable to noncontrolling shareholders	—		—		—		—		—		—		—		—		2,681		124		2,805
Effect of subsidiary stock option exercise	—		—		—		—		—		—		—		—		390		—		390
Purchase of noncontrolling interest	—		—		—		—		—		—		—		—		(309)		—		(309)
Distributions paid to noncontrolling shareholders	—		—		—		—		—		—		—		—		(11,292)		—		(11,292)

Distributions paid - Trust Common Shares	—		—		—		—		—		(17,352)		—		(17,352)		—		—		(17,352)
Distributions paid - Trust Preferred Shares	—		—		—		—		—		(6,045)		—		(6,045)		—		—		(6,045)
Balance — March 31, 2022	$	96,417	$	96,504	$	110,997	$	1,143,354	$	—	$	(313,902)	$	(228)	$	1,133,142	$	171,735	$	(1,449)	$	1,303,428

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)	—		—		—		—		—		105,397		—		105,397		4,981		(777)		109,601
Total comprehensive income, net	—		—		—		—		—		—		722		722		—		—		722
Issuance of Trust common shares	—		—		—		(48)		—		—		—		(48)		—		—		(48)
Purchase of Trust common shares for treasury	—		—		—		—		(3,954)		—		—		(3,954)		—		—		(3,954)
Option activity attributable to noncontrolling shareholders	—		—		—		—		—		—		—		—		2,045		973		3,018
Effect of subsidiary stock option exercise	—		—		—		—		—		—		—		—		5		—		5
Purchase of noncontrolling interest	—		—		—		—		—		—		—		—		(848)		—		(848)
Disposition of ACI	—		—		—		—				—		—		—		—		(1,729)		(1,729)


Distributions paid - Trust Common Shares	—		—		—		—		—		(18,051)		—		(18,051)		—		—		(18,051)
Distributions paid - Trust Preferred Shares	—		—		—		—		—		(6,045)		—		(6,045)		—		—		(6,045)
Balance — March 31, 2023	$	96,417	$	96,504	$	110,997	$	1,206,996	$	(3,954)	$	(291,605)	$	(414)	$	1,214,941	$	229,692	$	—	$	1,444,633

See notes to condensed consolidated financial statements.

~~COMPASS DIVERSIFIED HOLDINGS~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~


COMPASS DIVERSIFIED HOLDINGS						COMPASS DIVERSIFIED HOLDINGS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS						CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)						(Unaudited)

		Three months ended March 31,					Three months ended March 31,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	29,740	$	21,996	Net income	$	109,601	$	29,740
Income from discontinued operations		5,370		8,914
Income (loss) from discontinued operations						Income (loss) from discontinued operations	(1,391)		5,370
Gain on sale of discontinued operations	Gain on sale of discontinued operations	5,993		—		Gain on sale of discontinued operations	97,989		5,993
Income from continuing operations	Income from continuing operations	18,377		13,082		Income from continuing operations	13,003		18,377
Adjustments to reconcile net income to net cash provided by (used in) operating activities:	Adjustments to reconcile net income to net cash provided by (used in) operating activities:					Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense	Depreciation expense	9,927		8,557		Depreciation expense	11,809		9,927
Amortization expense - intangibles	Amortization expense - intangibles	21,105		18,589		Amortization expense - intangibles	26,374		21,105
Amortization expense - inventory step-up	Amortization expense - inventory step-up	2,261		—		Amortization expense - inventory step-up	1,134		2,261
Amortization of debt issuance costs and premium		866		603
Amortization of debt issuance costs						Amortization of debt issuance costs	1,005		866
Noncontrolling stockholder stock based compensation	Noncontrolling stockholder stock based compensation	2,681		2,640		Noncontrolling stockholder stock based compensation	2,045		2,681
Provision for receivable and inventory reserves	Provision for receivable and inventory reserves	(1,572)		3,501		Provision for receivable and inventory reserves	(1,483)		(1,572)
Deferred taxes	Deferred taxes	692		1,673		Deferred taxes	(5,900)		692

Other	Other	147		31		Other	389		147
Changes in operating assets and liabilities, net of acquisitions:	Changes in operating assets and liabilities, net of acquisitions:					Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	Accounts receivable	1,830		(9,153)		Accounts receivable	4,927		1,830
Inventories	Inventories	(56,153)		(17,526)		Inventories	(35,910)		(56,153)
Other current and non-current assets	Other current and non-current assets	(4,798)		(3,957)		Other current and non-current assets	2,732		(4,798)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	(36,596)		5,077		Accounts payable and accrued expenses	(3,294)		(36,596)
Cash (used in) provided by operating activities - continuing operations		(41,233)		23,117
Cash provided by operating activities - discontinued operations		7,704		13,273
Cash (used in) provided by operating activities		(33,529)		36,390
Cash provided by (used in) operating activities - continuing operations						Cash provided by (used in) operating activities - continuing operations	16,831		(41,233)
Cash provided by (used in) operating activities - discontinued operations						Cash provided by (used in) operating activities - discontinued operations	(1,286)		7,704
Cash provided by (used in) provided by operating activities						Cash provided by (used in) provided by operating activities	15,545		(33,529)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(3,636)		(34,257)		Acquisitions, net of cash acquired	(104)		(3,636)
Purchases of property and equipment	Purchases of property and equipment	(10,391)		(7,303)		Purchases of property and equipment	(16,080)		(10,391)
Proceeds from sale of businesses	Proceeds from sale of businesses	5,993		—		Proceeds from sale of businesses	103,042		5,993
Other investing activities	Other investing activities	(205)		(305)		Other investing activities	(303)		(205)
Cash used in investing activities - continuing operations		(8,239)		(41,865)
Cash used in investing activities - discontinued operations		(53)		(402)
Cash used in investing activities		(8,292)		(42,267)
Cash provided by (used in) investing activities - continuing operations						Cash provided by (used in) investing activities - continuing operations	86,555		(8,239)
Cash provided by (used in) investing activities - discontinued operations						Cash provided by (used in) investing activities - discontinued operations	68,169		(53)
Cash provided by (used in) investing activities						Cash provided by (used in) investing activities	154,724		(8,292)


COMPASS DIVERSIFIED HOLDINGS						COMPASS DIVERSIFIED HOLDINGS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS						CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)						(Unaudited)

		Three months ended March 31,					Three months ended March 31,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from issuance of Trust common shares, net	Proceeds from issuance of Trust common shares, net	20,161		—		Proceeds from issuance of Trust common shares, net	(48)		20,161
Purchase of treasury shares, net						Purchase of treasury shares, net	(3,954)		—
Borrowings under credit facility	Borrowings under credit facility	—		143,000		Borrowings under credit facility	76,000		—
Repayments under credit facility	Repayments under credit facility	—		(445,000)		Repayments under credit facility	(223,000)		—
Proceeds from issuance of Senior Notes		—		1,000,000
Redemption of Senior Notes		—		(647,688)
Principal payments - term loan						Principal payments - term loan	(2,500)		—
Distributions paid - common shares	Distributions paid - common shares	(17,352)		(23,364)		Distributions paid - common shares	(18,051)		(17,352)
Distributions paid - preferred shares	Distributions paid - preferred shares	(6,045)		(6,045)		Distributions paid - preferred shares	(6,045)		(6,045)
Distributions paid - allocation interests		—		(5,214)
Distributions paid to noncontrolling shareholders	Distributions paid to noncontrolling shareholders	(11,292)		—		Distributions paid to noncontrolling shareholders	—		(11,292)
Net proceeds provided by noncontrolling shareholders	Net proceeds provided by noncontrolling shareholders	390		70		Net proceeds provided by noncontrolling shareholders	5		390
Purchase of noncontrolling interest	Purchase of noncontrolling interest	(309)		—		Purchase of noncontrolling interest	(848)		(309)
Debt issuance costs		—		(17,158)
Other	Other	(5)		(94)		Other	(5)		(5)
Net cash used in financing activities	Net cash used in financing activities	(14,452)		(1,493)		Net cash used in financing activities	(178,446)		(14,452)
Foreign currency impact on cash	Foreign currency impact on cash	(259)		(182)		Foreign currency impact on cash	562		(259)
Net decrease in cash and cash equivalents	Net decrease in cash and cash equivalents	(56,532)		(7,552)		Net decrease in cash and cash equivalents	(7,615)		(56,532)
Cash and cash equivalents — beginning of period (1)	Cash and cash equivalents — beginning of period (1)	160,733		70,744		Cash and cash equivalents — beginning of period (1)	61,271		160,733
Cash and cash equivalents — end of period (2)	Cash and cash equivalents — end of period (2)	$	104,201	$	63,192	Cash and cash equivalents — end of period (2)	$	53,656	$	104,201

(1) Includes cash from discontinued operations of $3.4 million at January 1, 2023 and $3.6 million at January 1, ~~2022 and $10.7 million at January 1, 2021.~~2022..

(2) Includes cash from discontinued operations of $6.9 million at March 31, ~~2022 and $7.6 million at March 31, 2021.~~

2022.

See notes to condensed consolidated financial statements.

COMPASS DIVERSIFIED HOLDINGS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

March 31, ~~2022~~2023

Note A - Presentation and Principles of Consolidation

Compass Diversified Holdings, a Delaware statutory trust (the "Trust") and Compass Group Diversified Holdings LLC, a Delaware limited liability company (the "LLC"), 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 Third Amended and Restated Trust Agreement, dated as of August 3, 2021 (as ~~further~~ amended and restated, the "Trust Agreement"), the Trust is sole owner of 100% of the Trust Interests (as defined in the ~~LLC’s~~Company’s Sixth Amended and Restated Operating Agreement, dated as of August 3, 2021 (as ~~further~~ amended and restated, the "LLC Agreement")) of the LLC and, pursuant to the LLC Agreement, the LLC has, outstanding, the identical number of Trust Interests as the number of outstanding common shares of the Trust. The LLC is the operating entity with a board of directors and other corporate governance responsibilities, similar to that of a Delaware corporation.

The LLC is a controlling owner of 10ten businesses, or ~~reportable~~ operating segments, at March 31, ~~2022.~~2023. The segments are as follows: 5.11 Acquisition Corp. ("5.11"), Boa Holdings Inc. ("BOA"), The Ergo Baby Carrier, Inc. ("Ergobaby"), Lugano ~~Diamonds & Jewelry,~~Holdings, Inc. ("Lugano Diamonds" or "Lugano"), ~~Marucci Sports, LLC~~Wheelhouse Holdings, Inc. ("Marucci Sports" or "Marucci"), Relentless Intermediate, Inc. ("PrimaLoft"), Velocity Outdoor, Inc. ("Velocity Outdoor" or "Velocity"~~), Compass AC Holdings, Inc. ("ACI" or "Advanced Circuits"~~), AMT Acquisition Corporation ("Arnold"), FFI Compass, Inc. ("Altor Solutions" or "Altor") (formerly "Foam Fabricators"), and ~~The~~ Sterno ~~Group,~~Products, LLC ("Sterno"). ~~At March 31, 2021, Advanced Circuits has been classified~~The segments are referred to interchangeably as ~~held-for-sale. Refer to~~ ~~Note C - "Discontinued Operations"~~ ~~and~~ ~~Note Q- "Subsequent Events"~~ ~~for further discussion of Advanced Circuits.~~“businesses”, “operating segments” or “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 ~~company~~Company ("CGM" or the "Manager"), manages the day to day operations of the LLC and oversees the management and operations of our businesses pursuant to a ~~Management~~management services agreement ( the "Management Services ~~Agreement ("MSA"~~Agreement" or "MSA").

Basis of Presentation

The condensed consolidated financial statements for the three month periods ended March 31, ~~2022~~2023 and March 31, ~~2021~~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, ~~2021.~~2022.

Consolidation

The condensed consolidated financial statements include the accounts of the Trust and the Company, as well as the businesses acquired as of their respective acquisition date. All significant intercompany accounts and transactions 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

~~On October 13, 2021,~~During the ~~LLC entered into a definitive Agreement and Plan~~first quarter of ~~Merger to sell its majority owned subsidiary, Compass AC Holdings, Inc. ("ACI" or "Advanced Circuits"), which met~~2023, the criteria to be classified as a discontinued operation as of December 31, 2021 and March 31, 2022. As a result, the Company reported the results of operations of ACI as discontinued operations in the condensed consolidated statements of operations for all periods presented. In addition, the assets and liabilities associated with this business have been reclassified as held for sale in the consolidated balance sheets.

~~The~~ Company completed the sale of ~~Liberty Safe Holding Corporation ("Liberty"~~Compass AC Holdings, Inc. (“Advanced Circuits or ACI”) ~~during the third quarter of 2021.~~. The results of operations of ~~Liberty~~ACI are reported as discontinued operations in the condensed consolidated statements of operations for the three months ended March 31, ~~2021.~~2023 and March 31, 2022. Refer to Note C - ~~"Discontinued Operations"~~"Dis continued Operations " for additional information. Unless otherwise indicated, the disclosures accompanying the condensed consolidated financial statements reflect the Company's continuing operations.

Seasonality

~~Change~~year, however, due to various acquisitions since 2020, there is generally less seasonality in ~~Tax Status Election~~

~~Effective September 1, 2021 (the "Effective Date"), the Trust elected to be treated as~~our net sales on a corporation for U.S. federal income tax purposes. Prior to the Effective Date, the Trust was treated as a partnership for U.S. federal income tax purposes and the Trust’s items of income, gain, loss and deduction flowed through from the Trust to the shareholders, and the Trust shareholders were subject to income taxes on their allocable share of the Trust’s income and gain. After the Effective Date, the Trust is taxed as a corporation and is subject to U.S. federal corporate income tax at the Trust level, but items of income, gain, loss and deduction will not flow through to Trust shareholders. Trust shareholders will no longer receive an IRS Schedule K-1. After the Effective Date, distributions from the Trust will be treated as dividends to the extent the Trustconsolidated basis than there has accumulated or current earnings and profits. If the Trust does not have current or accumulated earnings and profits available for distribution, then the distribution will be treated as a return of capital and reduce Trust shareholders’ basis in their shares.

Prior to the Effective Date, each of the LLC’s majority owned subsidiaries were treated as corporations for U.S. federal income tax purposes. The election did not change the tax status of any LLC subsidiary, and each majority owned LLC subsidiary is still treated as a corporation for U.S. federal income tax purposes.

After the Effective Date, the Trust will no longer be taxed as a pass through entity for U.S. federal income tax purposes. Accordingly, the Trust will no longer issue Schedule K-1’s, nor will Trust shareholders be allocated any pass through income, loss, expense, deduction or credit (including “UBIT”) from the Trust.been historically.

Note B — Acquisitions

The acquisitions of our businesses are accounted for under the acquisition method of accounting. For each platform acquisition, the Company typically structures the transaction so that a newly created holding company acquires 100% of the equity interests in the acquired business. The entirety of the 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 portion 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 are not retaining their existing equity in the acquired business, the Company includes the amount provided by noncontrolling shareholders in the total purchase consideration.

A component of our acquisition financing strategy that we utilize in acquiring the businesses we own and manage is to provide both equity capital and debt capital, raised at the parent level, typically through our existing credit facility. The 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 ~~Lugano Diamonds & Jewelry, Inc.~~PrimaLoft

On ~~September 3, 2021,~~July 12, 2022, the LLC, through its newly formed indirect acquisition ~~subsidiaries, Lugano Holding,~~subsidiary, Relentless Intermediate, Inc.~~, a Delaware corporation (“Lugano Holdings”~~ ("PrimaLoft Buyer"), ~~and Lugano Buyer,~~acquired PrimaLoft Technologies Holdings, Inc.~~, a Delaware corporation~~ (“~~Lugano Buyer”~~PrimaLoft”) and a wholly-owned subsidiary of Lugano Holdings, acquired the issued and outstanding shares of stock of Lugano Diamonds & Jewelry Inc. ("Lugano") other than the certain rollover shares (the “Lugano Transaction”). The Lugano Transaction was effectuated pursuant to a Stock Purchase Agreement (the ~~“Lugano~~“PrimaLoft Purchase Agreement”), ~~also~~ dated ~~September 3, 2021,~~June 4, 2022, by and ~~among Lugano~~between PrimaLoft Buyer ~~the Sellers named therein (“Sellers”)~~ and ~~Mordechai Haim Ferder in his individual capacity and as initial representative of the Sellers. Lugano is~~VP PrimaLoft Holdings, LLC ("PrimaLoft Seller"). The Company acquired PrimaLoft for 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.

~~The LLC made loans to, and purchased a 60% equity interest in, Lugano. The~~total purchase price, including proceeds from noncontrolling shareholders, of approximately $541.1 million, before working capital and ~~net of transaction costs, was $263.3 million.~~other customary adjustments. The ~~selling shareholders~~Company funded the acquisition through a draw on its 2022 Revolving Credit Facility and the proceeds from its $400 million 2022 Term Loan Facility. PrimaLoft management invested in the transaction along with the ~~LLC,~~Company, representing ~~40% initial noncontrolling interest on both a primary and fully diluted basis. The fair value~~9.2% of the ~~noncontrolling~~initial equity interest ~~was determined based~~in PrimaLoft. Concurrent with the closing, the Company provided a credit facility to PrimaLoft pursuant to which a secured revolving loan commitment and secured term loan were made available to PrimaLoft (the "PrimaLoft Credit Agreement"). The initial 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. CGM acted as an advisor to the LLC in the acquisition and will continue to provide integration services during the first year of the LLC's ownership of Lugano.closing date were $178 million. CGM will receive integration service fees of ~~$2.3~~$4.8 million payable quarterly over a twelve month period as services are rendered which payments began in the quarter ended ~~December 31, 2021.~~September 30, 2022. The ~~LLC~~Company incurred ~~$1.8~~$5.7 million of transaction costs in conjunction with the ~~Lugano~~PrimaLoft acquisition, which was included in selling, general and administrative expense in the consolidated statements of operations during the third quarter of ~~2021. The LLC funded~~2022.

PrimaLoft, Inc. is a branded, advanced material technology company based in Latham, New York and is focused on the ~~acquisition with cash on hand~~research and ~~a $120 million draw on its 2021 Revolving Credit Facility.~~

innovative development of high-performance material solutions, specializing in insulations and fabrics.

The results of operations of ~~Lugano~~PrimaLoft have been included in the consolidated results of operations since the date of acquisition. ~~Lugano's~~PrimaLoft's results of operations are reported as a separate operating segment as a branded consumer business. The table below provides the recording of the fair value of assets acquired and liabilities assumed as of the date of acquisition.

(in thousands) Preliminary Purchase Price Allocation Measurement Period Adjustments Final Purchase Price Allocation
Assets:
Cash $ 1,433 $ — $ 1,433
Accounts receivable (1)
20,954 — 20,954
Inventory 85,794 9,419 95,213
Property, plant and equipment
2,743 392 3,135
Intangible assets — 82,454 82,454
Goodwill 158,780 (72,443) 86,337
Other current and noncurrent assets 4,979 4,114 9,093
Total assets $ 274,683 $ 23,936 $ 298,619
Liabilities and noncontrolling interest:
Current liabilities $ 7,129 $ 58 $ 7,187
Other liabilities 99,381 755 100,136
Deferred tax liabilities — 23,123 23,123
Noncontrolling interest 68,000 — 68,000
Total liabilities and noncontrolling interest $ 174,510 $ 23,936 $ 198,446
Net assets acquired $ 100,173 $ — $ 100,173
Noncontrolling interest 68,000 — 68,000
Intercompany loans to business 99,381 (2,420) 96,961
$ 267,554 $ (2,420) $ 265,134

Acquisition consideration
Purchase price $ 256,000 $ — $ 256,000
Cash acquired (estimated) 1,554 (120) 1,434
Net working capital adjustment 10,000 (2,300) 7,700
Total purchase consideration $ 267,554 $ (2,420) $ 265,134
Less: Transaction costs 1,827 — 1,827
Net purchase price $ 265,727 $ (2,420) $ 263,307


(in thousands)	Preliminary Purchase Price Allocation		Measurement Period Adjustments		Final Purchase Price Allocation
Purchase Consideration	$	539,576	$	1,536	$	541,112

Fair value of identifiable assets acquired:
Cash	$	6,951	$	—	$	6,951
Accounts receivable (1)	2,992		—		2,992
Inventory	1,991		—		1,991
Property, plant and equipment	1,058		—		1,058
Intangible assets	248,200		58,700		306,900
Other current and noncurrent assets	3,581		(1,187)		2,394
Total identifiable assets	264,773		57,513		322,286

Fair value of liabilities assumed:
Current liabilities	8,865		(868)		7,997
Other liabilities	360		—		360
Deferred tax liabilities	51,268		12,699		63,967
Total liabilities	60,493		11,831		72,324

Net identifiable assets acquired	204,280		45,682		249,962

Goodwill	$	335,296	$	(44,147)	$	291,149


Acquisition consideration
Purchase price	$	530,000	$	—	$	530,000
Cash acquired	7,319		(368)		6,951
Net working capital adjustment	2,257		1,904		4,161

Total purchase consideration	$	539,576	$	1,536	$	541,112

(1) The fair value of accounts receivable approximates 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 appraisal~~at 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 $~~86.3~~291.1 million reflects the strategic fit of ~~Lugano~~PrimaLoft in the Company's branded consumer business and is not expected to be deductible for income tax purposes. The PrimaLoft purchase price allocation was finalized in the first quarter of 2023.

The intangible assets recorded related to the ~~Lugano~~PrimaLoft acquisition are as follows (in thousands):

Intangible Assets

Fair Value

Estimated Useful Lives

~~Tradename~~Customer relationships

~~48,433~~

~~18 years~~

~~Customer relationships~~

~~34,021~~209,100

15 years

Tradename

48,200

20 years

Technology

49,100

11 years

In-process research and development (1)

500

N/a

~~82,454~~306,900

(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 ~~tradename was~~customer relationships were considered the primary intangible asset and was valued at $~~48.4~~209.1 million using a multi-period excess earnings method. The ~~customer relationships were~~technology was valued at $49.1 million using a multi-period excess earnings methodology with an assumed obsolescence factor. The tradename was valued at $~~34.0~~48.2 million using a multi period excess earnings method. The multi period excess earnings method assumes an asset has value to the extent that it enables its owners to earn a return in excess of the other assets utilized in the business.

Unaudited pro forma information

The following unaudited pro forma data for the three months ended March 31, ~~2021~~2022 gives effect to the acquisition of ~~Lugano,~~PrimaLoft, as described above, ~~and the dispositions of Liberty Safe and ACI,~~ as if ~~these transactions~~this transaction had been completed as of January 1, ~~2021.~~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 ended

(in thousands, except per share data)

March 31, ~~2021~~2022

Net sales

~~437,995~~536,261

Gross profit

~~183,722~~216,311

Operating income

~~43,260~~48,857

Net income from continuing operations

~~18,090~~16,118

Net income from continuing operations attributable to Holdings

~~13,861~~10,966

Basic and fully diluted net loss per share attributable to Holdings

~~0.00~~ (0.03)

Other acquisitions

~~Marucci~~Velocity

~~Lizard Skins~~Kings Camo - - On ~~October 22, 2021, Marucci Sports~~July 8, 2022, Velocity acquired ~~Lizard Skins, LLC ("Lizard Skins"), an industry leading provider~~the assets of ~~sporting goods accessories that revolve around the hand-to-grip interface,~~King's Camo LC, a manufacturer of outdoor performance apparel and gear, for ~~an enterprise value~~a purchase price of approximately ~~$47.0~~$25.2 million ~~excluding customary closing adjustments.~~and included a potential earnout of $3.0 million. The acquisition and related transaction costs were funded through an additional term loan of ~~$44.1~~$25.7 million under the ~~Marucci inter-company~~Velocity intercompany credit agreement with the LLC, a draw on the existing Marucci revolving credit facility with the Company, and rollover equity from the selling shareholders of Lizard Skins. Marucci issued 11,915 shares to the selling shareholders in exchange for the rollover equity, which represents an ownership interest of approximately 1% in Marucci. Marucciagreement. Velocity paid approximately ~~$1.4~~$0.2 million in transaction expenses in connection with the acquisition of Lizard Skins. Lizard Skins is a designer and seller of branded grip products, protective equipment, bags and apparel for use in baseball, cycling, hockey, Esports and lacrosse. The acquisition of Lizard Skins will allow Marucci to build on its leading position in diamond sports while simultaneously developing Marucci's presence in new sports markets such as hockey and cycling. Maruccifees. Velocity recorded a purchase price allocation, including goodwill of approximately ~~$10.1~~$9.7 million, which is expected to be deductible for income tax purposes, and intangible assets of ~~$27.9~~$7.1 million. ~~The purchase price allocation is expected to be finalized in the second quarter of 2022.~~

~~Altor Solutions~~

~~Plymouth Foam~~ - On October 5, 2021, Altor acquired Plymouth Foam, LLC (“Plymouth”), a manufacturer of protective packaging and componentry, for an enterprise value of approximately $56.0 million, excluding customary closing adjustments. The acquisition and related transaction costs were funded through an additional term loan of $52.0 million under the Altor intercompany credit agreement and a draw on the existing Altor intercompany revolving credit facility with the LLC. Altor paid approximately $0.4 million in transaction fees in connection with the acquisition

of Plymouth. Plymouth was founded in 1978 and is based in Plymouth, Wisconsin. Plymouth supplies a wide array of high value products, including custom protective packaging, cold chain packaging and internal components made from expanded polystyrene and expanded polypropylene. Plymouth’s complementary product portfolio will allow Altor to be able to further expand its business and capabilities. Altor recorded a purchase price allocation, including goodwill of approximately $15.5 million, which is not expected to be deductible for income tax purposes, and intangible assets of $20.1 million. The purchase price allocation was finalized in the first quarter of 2022.

~~Polyfoam~~ - On July 1, 2020, Altor acquired substantially all of the assets of Polyfoam Corp. ("Polyfoam"), a Massachusetts-based manufacturer of protective and temperature-sensitive packaging solutions for the medical, pharmaceutical, grocery and food industries, among others. Founded in 1974, Polyfoam operates two manufacturing facilities producing highly engineered foam and injection-molded plastic solutions across a variety of end-markets. The acquisition complements Altor's current operating footprint and provides access to a new customer base and product offerings, including Polyfoam's significant end-market exposure to cold chain (including seafood boxes, insulated shipping containers and grocery delivery totes). The purchase price was approximately $12.8 million and included a potential earnout of $1.4 million if Polyfoam achieved certain financial metrics. The full amount of the earnout was paid during the first quarter of 2022.

~~Arnold~~

~~Ramco~~ - On March 1, 2021, Arnold acquired Ramco Electric Motors, Inc. ("Ramco"), a manufacturer of stators, rotors and full electric motors, for a purchase price of approximately $34.3 million. The acquisition and related transaction costs were funded through an additional equity investment in Arnold by the LLC of $35.5 million. Ramco was founded in 1987 and is based in Greenville, Ohio. Ramco supplies their custom electric motor solutions for general industrial, aerospace and defense, and oil and gas end-markets. Ramco’s complementary product portfolio will allow Arnold to be able to offer more comprehensive, turnkey solutions to their customers. In connection with the acquisition, Arnold recorded a purchase price allocation ~~of $12.4 million of goodwill, which is not expected to be deductible for income tax purposes and $12.7 million in intangible assets.~~ The remainder of the purchase consideration was allocated to net assets acquired. The purchase price allocation was finalized in the fourth quarter of ~~2021.~~2022.

Note C — Discontinued Operations

Sale of Advanced Circuits ~~Merger Agreement~~

On ~~October 13, 2021,~~January 10, 2023, the LLC, solely in its capacity as the representative ~~(the “Sellers Representative”)~~ of the holders ~~(the “AC Sellers”)~~ 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 ~~(the “AC Agreement”)~~ with ~~Tempo Automation,~~APCT Inc. (“~~AC Buyer”~~ACI Purchaser”), ~~Aspen Acquisition~~Circuit Merger Sub, Inc. (“ACACI Merger Sub”) and Advanced Circuits,

pursuant to which ~~AC Buyer will~~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 ACACI Merger Sub with and into Advanced Circuits, with Advanced Circuits surviving the merger and becoming a wholly owned subsidiary of ~~AC Buyer~~ACI Purchaser (the ~~“AC~~“ACI Merger”). ~~Under~~The ACI Merger was completed on February 14, 2023. The sale price of Advanced Circuits was based on an enterprise value of $220 million, subject to certain adjustments based on matters such as the terms of the Agreement, the AC Sellers will receive consideration in the amount of $310 million, composed of $240 million in cash and $70 million in common stock of a publicly traded special purpose acquisition company (“SPAC”) selected by AC Buyer to acquire AC Buyer upon the closing of the transaction, excluding certain working capital and other adjustments. In addition, the AC Sellers may receive 2.4 million additional shares of SPAC common stock within five years, subject to SPAC stock price performance. The LLC owns approximately 67% of the outstanding stockcash and debt balances of Advanced Circuits ~~on a fully diluted basis and expects to receive approximately 77%~~at the time of the ~~gross consideration payable under~~closing. After the ~~Agreement. This amount is in respect~~allocation of the ~~LLC’s outstanding loans~~sales price to Advanced Circuits non-controlling equity holders and ~~its equity interests in Advanced Circuits. The AC Merger is conditioned on, among other things,~~ the payment of transaction expenses, CODI received approximately $170.9 million of total proceeds at closing, of ~~a business combination between AC Buyer and a SPAC.In connection~~which $66.9 million related to the repayment of intercompany loans with the ~~AC Merger, AC Buyer announced its entry into~~Company. The Company recorded a ~~definitive merger agreement for a business combination (the “SPAC Transaction”) with a SPAC, ACE Convergence Acquisition Corp. (“ACE”). In order to obtain shareholder approval of~~gain on the SPAC Transaction, ACE had previously scheduled and announced an extraordinary general meeting of shareholders for May 5, 2022. On May 2, 2022, ACE postponed the extraordinary general meeting to allow additional time to revise and finalize its financing arrangements with respect to the SPAC Transaction. There can be no assurances that all of the conditions to closing of the AC Merger, which include the closing of the SPAC Transaction, will be satisfied.

~~The~~ sale of ~~Advanced Circuits met the criteria for the assets to be classified as held for sale as~~ACI of ~~December 31, 2021 and March 31, 2022, and is presented as discontinued operations~~$98.0 million, net of an income tax provision of $6.8 million, in the ~~accompanying consolidated financial statements for all periods presented.~~ first quarter of 2023.

Summarized results of operations of ~~Advanced Circuits are as follows (in thousands):~~

Three months ended March 31, 2022 Three months ended March 31, 2021
Net sales $ 23,249 $ 21,562
Gross profit $ 10,930 $ 9,404
Operating income $ 6,524 $ 5,495
Income from continuing operations before income taxes (1)
$ 6,477 $ 5,491
Provision for income taxes $ 1,107 $ 771
Income from discontinued operations (1)
$ 5,370 $ 4,720

~~(1)~~ ~~The results of operations~~ACI for the three months ended March 31, 2023 and 2022 through the date of disposition are as follows (in thousands):


	For the period January 1, 2023 through disposition		Three months ended March 31, 2022
Net sales	$	8,829	$	23,249
Gross profit	$	3,663	$	10,930
Operating income	$	1,058	$	6,524
Income (loss) from continuing operations before income taxes (1)	$	(2,464)	$	6,477
Provision (benefit) for income taxes	$	(1,073)	$	1,107
Income (loss) from discontinued operations (1)	$	(1,391)	$	5,370

(1) The results of operations for the period from January 1, 2023 through disposition and ~~2021,~~the three months ended March 31, 2022, each exclude ~~$1.7~~$1.4 million and ~~$1.9~~$1.7 million, respectively, of intercompany interest expense.

The following table presents summary balance sheet information of ACI that is presented as ~~held for sale~~discontinued operations as of ~~March~~December 31, 2022 ~~and December 31, 2021 (in thousands):~~

March 31,
2022 December 31,
2021
Assets
Cash and cash equivalents $ 6,857 $ 3,610
Accounts receivable, net 9,502 9,447
Inventories, net 3,928 3,660
Prepaid expenses and other current assets 688 430
Current assets held for sale $ 20,975 $ 17,147
Property, plant and equipment, net 7,624 8,083
Goodwill 66,668 66,668
Intangible assets, net 13 23
Other non-current assets 7,013 7,502
Non-current assets held for sale (1)
$ 81,318 $ 82,276
Liabilities
Accounts payable $ 5,838 $ 3,798
Accrued expenses 4,014 3,718
Due to related party 125 125
Other current liabilities 1,600 1,580
Current liabilities held for sale $ 11,577 $ 9,221
Deferred income taxes 13,369 13,419
Other non-current liabilities 5,959 6,487
Non-current liabilities held for sale (1)
$ 19,328 $ 19,906
Noncontrolling interest held for sale $ (1,449) $ (2,614)

~~(1)~~ The closing of the transaction is expected to occur in the second quarter of 2022, and therefore all assets and liabilities have been classified as current on the consolidated balance sheets as of March 31, 2022 and December 31, 2021.

~~Sale of Liberty~~

On July 16, 2021, the LLC, as majority stockholder of Liberty Safe Holding Corporation and as sellers representative, entered into a definitive Stock Purchase Agreement (the “Liberty Purchase Agreement”) with Independence Buyer, Inc. (“Liberty Buyer”), Liberty and the other holders of stock and options of Liberty to sell to Liberty Buyer all of the issued and outstanding securities of Liberty, the parent company of the operating entity, Liberty Safe and Security Products, Inc.

On August 3, 2021, Liberty Buyer and the LLC, as sellers representative, entered into the Amendment to Stock Purchase Agreement (the “Amendment”) which amended the Liberty Purchase Agreement to, among other things, provide that, immediately prior to the closing, certain investors in Liberty will, instead of selling all of the shares of Liberty owned by them to Liberty Buyer, contribute a portion of such shares (the “Rollover Shares”) to an indirect parent company of Liberty Buyer in exchange for equity securities of such entity.

On August 3, 2021, Liberty Buyer completed the acquisition of all the issued and outstanding securities of Liberty (other than the Rollover Shares) pursuant to the Liberty Purchase Agreement and Amendment (the “Liberty Transaction”). The sale price of Liberty was based on an aggregate total enterprise value of $147.5 million, subject to customary adjustments. After the allocation of the sale proceeds to Liberty's non-controlling shareholders, the repayment of intercompany loans to the LLC (including accrued interest) of $26.5 million, and the payment of transaction expenses of approximately $4.5 million, the LLC received approximately $128.0 million of total proceeds from the sale at closing. The LLC recognized a gain on the sale of Liberty of $72.8 million ~~in the year ended December 31, 2021.~~

~~Summarized results of operations of Liberty for the three months ended March 31, 2021 are as follows~~ (in thousands):


	~~Three months ended~~ December 31, ~~March 31, 2021~~2022
~~Net sales~~Assets
Cash and cash equivalents	$	~~31,479~~3,391
~~Gross profit~~Accounts receivable, net	10,044
Inventories, net	4,345
Prepaid expenses and other current assets	346
Current assets of discontinued operations	$	~~8,897~~18,126
~~Operating income~~Property, plant and equipment, net	6,949
Goodwill	66,678
Other non-current assets	6,220
Non-current assets of discontinued operations	$	~~5,630~~79,847
~~Income from continuing operations before income taxes~~ ~~(1)~~	$	~~5,636~~
~~Provision for income taxes~~Liabilities
Accounts payable	$	~~1,441~~3,810
~~Income from~~Accrued expenses	5,570
Due to related party	250
Other current liabilities	1,518
Current liabilities of discontinued operations~~(1)~~	$	~~4,195~~11,148
Deferred income taxes	10,999
Other non-current liabilities	5,193
Non-current liabilities of discontinued operations	$	16,192
Noncontrolling interest of discontinued operations	$	1,533

~~(1)~~ ~~The results of operations for the three months ended March 31, 2021, excludes $0.7 million of intercompany interest expense.~~

~~Sale of Clean Earth~~

On May 8, 2019, the LLC, as majority stockholder of CEHI Acquisition Corporation ("Clean Earth" or CEHI") and as sellers’ representative, entered into a definitive Stock Purchase Agreement (the “Clean Earth Purchase Agreement”) with Calrissian Holdings, LLC (“Clean Earth Buyer”), CEHI, the other holders of stock and options of CEHI and, as Clean Earth Buyer’s guarantor, Harsco Corporation, pursuant to which Clean Earth Buyer would acquire all of the issued and outstanding securities of CEHI, the parent company of the operating entity, Clean Earth, Inc. On June 28, 2019, Clean Earth Buyer completed the acquisition of all of the issued and outstanding securities of CEHI pursuant to the Clean Earth Purchase Agreement. The Company recognized a gain on the sale of Clean Earth of $209.3 million during the year ended December 31, 2019. In the first quarter of 2022, the LLC received an income tax refund of approximately $6.0 million related to Clean Earth which was recognized as gain on sale of discontinued operations in the accompanying consolidated statement of operations.

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 nature, amount and uncertainty of revenue 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 the investors and other users of its financial statements. Each strategic business unit represents the Company’s reportable segments and offers different products and services.

The following tables provide disaggregation of revenue by reportable segment geography for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):

Three months ended March 31, 2022
5.11 BOA Ergo Lugano Marucci Velocity Altor Arnold Sterno Total
United States $ 80,803 $ 20,202 $ 8,173 $ 47,019 $ 51,082 $ 43,813 $ 57,781 $ 26,173 $ 74,698 $ 409,744
Canada 2,388 540 793 — 552 3,561 — 193 1,799 9,826
Europe 7,545 17,100 7,590 — 6 2,426 — 9,509 302 44,478
Asia Pacific 3,964 18,904 3,470 — 419 354 — 1,782 102 28,995
Other international 9,323 64 184 — 33 1,292 6,047 508 19 17,470
$ 104,023 $ 56,810 $ 20,210 $ 47,019 $ 52,092 $ 51,446 $ 63,828 $ 38,165 $ 76,920 $ 510,513


Three months ended March 31, 2023
	United States		Canada		Europe		Asia Pacific		Other International		Total
5.11	$	98,527	$	3,359	$	6,607	$	4,183	$	11,776	$	124,452
BOA	11,299		124		14,652		11,696		215		37,986
Ergobaby	8,829		3		6,865		4,534		2,187		22,418
Lugano	63,887		—		—		—		—		63,887
Marucci	55,578		1,061		196		1,431		29		58,295
PrimaLoft	166		47		720		23,419		177		24,529
Velocity Outdoor	29,892		1,936		1,340		129		743		34,040
Altor	53,462		—		—		—		8,050		61,512
Arnold	26,649		163		10,983		1,411		884		40,090
Sterno	71,588		2,184		1,247		—		—		75,019
	$	419,877	$	8,877	$	42,610	$	46,803	$	24,061	$	542,228

Three months ended March 31, 2021
5.11 Boa Ergo Marucci Velocity Altor Arnold Sterno Total
United States $ 80,783 14,081 $ 8,799 $ 36,096 $ 58,269 $ 32,744 $ 21,361 $ 74,025 $ 326,158
Canada 2,554 224 754 341 3,223 — 205 3,000 10,301
Europe 7,155 13,350 7,345 29 2,521 — 8,858 249 39,507
Asia Pacific 3,813 8,728 5,261 182 276 — 1,293 15 19,568
Other international 5,572 69 169 — 1,343 5,076 768 25 13,022
$ 99,877 $ 36,452 $ 22,328 $ 36,648 $ 65,632 $ 37,820 $ 32,485 $ 77,314 $ 408,556


Three months ended March 31, 2022
	United States		Canada		Europe		Asia Pacific		Other International		Total
5.11	$	80,803	$	2,388	$	7,545	$	3,964	$	9,323	$	104,023
BOA	20,202		540		17,100		18,904		64		56,810
Ergobaby	8,173		793		7,590		3,470		184		20,210
Lugano	47,019		—		—		—		—		47,019
Marucci	51,082		552		6		419		33		52,092

Velocity Outdoor	43,813		3,561		2,426		354		1,292		51,446
Altor	57,781		—		—		—		6,047		63,828
Arnold	26,173		193		9,509		1,782		508		38,165
Sterno	74,698		1,799		302		102		19		76,920
	$	409,744	$	9,826	$	44,478	$	28,995	$	17,470	$	510,513

Note E — Operating Segment Data

At March 31, ~~2022,~~2023, the Company had 9ten reportable operating segments. Each operating segment represents a platform acquisition. ~~Advanced Circuits has been classified as held for sale at March 31, 2022 and is not considered a reportable segment.~~ The Company’s operating segments are strategic business units that offer different products and services. ~~They~~While 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 is a leading provider of purpose-built technical apparel and gear for law enforcement, firefighters, EMS, and military special operations as well as outdoor and adventure enthusiasts. 5.11 is a brand known for innovation and authenticity, and works directly with end users to create purpose-built apparel and gear designed to enhance the 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.

•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, ~~hiking/trekking, golf, running, court sports,~~outdoor, athletic, workwear as well as performance headwear and medical bracing. The system consists of three integral parts: a micro-adjustable dial, high-tensile lightweight laces, and low friction lace guides ~~combined with unique configuration applications, which together create~~creating a superior alternative to laces, buckles, ~~hook and loop (Velcro),~~Velcro, and other traditional closure ~~and fit systems.~~mechanisms. Each unique BOA configuration is designed ~~and engineered~~with brand partners to deliver superior fit and performance for athletes, is engineered to perform in the toughest 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, is a designer, marketer and distributor of wearable baby carriers and accessories, blankets and swaddlers, nursing pillows, strollers, bouncers and related products. Ergobaby primarily sells its Ergobaby and Baby Tula branded products through brick-and-mortar retailers, national chain stores, online retailers, its own websites and distributors and derives more than 50% of its sales from outside of the United States.

•Lugano 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 Newport Beach, California.

•Marucci Sports is a leading designer, manufacturer, and marketer of premium wood and metal baseball 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 ~~retail~~corporate-owned and franchised sports training ~~facilities, both as a corporate owned entity as well as licensing these facilities as franchises.~~facilities. Marucci is headquartered in Baton Rouge, Louisiana.

•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 is a 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, ~~LaserMax~~CenterPoint and ~~CenterPoint~~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.

•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 1718 molding and fabricating facilities across North ~~America subsequent to the acquisition of Polyfoam.~~America.

•Arnold is a global ~~designer~~solutions provider and manufacturer of engineered ~~electric motor and 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, energy, reprographics and advertising specialties. Arnold engineers solutions for and produces high performance permanent magnets (PMAG), stators, rotors and full electric motors ("Ramco"), precision foil products (Precision Thin Metals or "PTM"), and flexible magnets (Flexmag™) that are mission critical in motors, generators, sensors and other systems and components. Based on its long-term relationships, Arnold has built a diverse and blue-chip customer base totaling more than 2,000 ~~clients worldwide.~~customers and leading systems-integrators worldwide with a focus on North America, Europe, and Asia. Arnold has built a preferred rare earth supply chain and has leading rare earth and other permanent magnet production capabilities. Arnold is headquartered in Rochester, New York.

•Sterno is a leading manufacturer and marketer of portable food warming ~~fuel~~systems, creative indoor and ~~creative table~~outdoor lighting, and home fragrance solutions for the ~~foodservice industry and flameless candles, outdoor lighting products, scented wax cubes and warmer products for its consumers. Sterno's products include~~consumer 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, ~~and~~ warmer products, outdoor lighting and essential oils used for home decor and fragrance systems ~~catering equipment and outdoor lighting products.~~through Rimports. Sterno is headquartered in Corona, California.

The tabular information that follows shows data for each of the operating segments reconciled to amounts reflected in the consolidated financial statements. The ~~results of~~ operations of each of the operating segments are included in consolidated operating results as of their date of acquisition. Segment profit is determined based on internal performance measures used by the Manager to assess the performance of each business. Corporate consists of corporate overhead and management fees that are not allocated to any of the Company's reportable segments. There were no significant inter-segment transactions.

Summary of Operating Segments


Net Revenues	Three months ended March 31,
(in thousands)	2023		2022

5.11	$	124,452	$	104,023
BOA	37,986		56,810
Ergobaby	22,418		20,210
Lugano	63,887		47,019
Marucci	58,295		52,092
PrimaLoft	24,529		—
Velocity Outdoor	34,040		51,446
Altor Solutions	61,512		63,828
Arnold	40,090		38,165
Sterno	75,019		76,920
Total segment revenue	542,228		510,513
Corporate	—		—
Total consolidated revenues	$	542,228	$	510,513


Segment Profit (Loss)	Three months ended March 31,
(in thousands)	2023		2022

5.11	$	7,670	$	5,905
BOA	7,951		18,811
Ergobaby	388		(276)
Lugano	19,776		13,606
Marucci	14,340		7,885
PrimaLoft	5,021		—
Velocity Outdoor	(3,276)		3,067
Altor Solutions	6,934		5,834
Arnold	5,038		3,288
Sterno	4,493		3,034
Total segment operating income	68,335		61,154
Corporate	(19,438)		(16,552)
Total consolidated operating income	48,897		44,602
Reconciliation of segment operating income (loss) to consolidated income from continuing operations before income taxes:
Interest expense, net	(26,180)		(17,419)
Amortization of debt issuance costs	(1,005)		(866)

Other income (expense), net	1,127		2,036
Total consolidated income from continuing operations before income taxes	$	22,839	$	28,353


Depreciation and Amortization Expense	Three months ended March 31,
(in thousands)	2023		2022

5.11	$	6,377	$	5,412
BOA	5,636		5,254
Ergobaby	2,014		1,995
Lugano	2,718		2,169
Marucci	3,014		4,152
PrimaLoft	5,278		—
Velocity Outdoor	3,284		3,195
Altor Solutions	4,104		3,928
Arnold	1,978		2,185
Sterno	4,914		5,003
Total	39,317		33,293
Reconciliation of segment to consolidated total:
Amortization of debt issuance costs	1,005		866
Consolidated total	$	40,322	$	34,159

~~Summary of Operating Segments~~

Net Revenues Three months ended March 31,
(in thousands) 2022 2021
5.11 $ 104,023 $ 99,877
BOA 56,810 36,452
Ergobaby 20,210 22,328
Lugano 47,019 —
Marucci 52,092 36,648
Velocity Outdoor 51,446 65,632
Altor 63,828 37,820
Arnold 38,165 32,485
Sterno 76,920 77,314
Total segment revenue 510,513 408,556
Corporate and other — —
Total consolidated revenues $ 510,513 $ 408,556

Segment profit (loss) (1)
Three months ended March 31,
(in thousands) 2022 2021
5.11 $ 5,905 $ 5,836
BOA 18,811 7,254
Ergobaby (276) 1,964
Lugano 13,606 —
Marucci 7,885 10,507
Velocity Outdoor 3,067 11,034
Altor 5,834 4,684
Arnold 3,288 2,996
Sterno 3,034 4,284
Total 61,154 48,559
Reconciliation of segment profit (loss) to consolidated net income before income taxes:
Interest expense, net (17,419) (13,805)
Other income (expense), net 2,036 (2,228)
Corporate and other (2)
(17,418) (14,136)
Total consolidated income before income taxes $ 28,353 $ 18,390

~~(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 Expense Three months ended March 31,
(in thousands) 2022 2021
5.11 $ 5,412 $ 5,358
BOA 5,254 4,890
Ergobaby 1,995 2,217
Lugano 2,169 —
Marucci 4,152 2,139
Velocity Outdoor 3,195 3,073
Altor 3,928 2,563
Arnold 2,185 1,721
Sterno 5,003 5,185
Total 33,293 27,146
Reconciliation of segment to consolidated total:
Amortization of debt issuance costs and bond premium 866 603
Consolidated total $ 34,159 $ 27,749


		Accounts Receivable				Identifiable Assets					Accounts Receivable				Identifiable Assets
		March 31,		December 31,		March 31,		December 31,			March 31,		December 31,		March 31,		December 31,
(in thousands)	(in thousands)	2022		2021		2022 (1)		2021 (1)		(in thousands)	2023		2022		2023 (1)		2022 (1)
5.11	5.11	$	46,644	$	50,461	$	361,564	$	354,666	5.11	$	51,552	$	53,589	$	468,015	$	450,537
BOA	BOA	3,700		2,387		256,196		263,052		BOA	2,069		1,630		236,956		240,359
Ergobaby	Ergobaby	11,069		11,167		88,769		86,530		Ergobaby	14,206		11,213		81,975		84,657
Lugano	Lugano	30,633		27,812		270,623		233,720		Lugano	92,474		85,911		370,884		327,795
Marucci	Marucci	31,891		23,261		165,096		146,087		Marucci	35,881		35,185		171,659		181,528
PrimaLoft										PrimaLoft	2,677		2,486		303,708		310,914
Velocity Outdoor	Velocity Outdoor	33,328		36,017		231,439		219,545		Velocity Outdoor	24,617		33,159		223,365		224,356
Altor		42,325		38,457		210,942		205,631
Altor Solutions										Altor Solutions	44,022		42,368		194,606		198,943
Arnold	Arnold	22,359		20,372		98,771		101,591		Arnold	23,983		23,666		107,993		105,196
Sterno	Sterno	57,356		72,179		241,800		244,338		Sterno	46,564		54,400		196,897		210,780
Allowance for doubtful accounts		(14,018)		(13,851)		—		—
Sales allowance accounts										Sales allowance accounts	(11,301)		(12,211)		—		—
Total	Total	265,287		268,262		1,925,200		1,855,160		Total	326,744		331,396		2,356,058		2,335,065
Reconciliation of segment to consolidated total:
Reconciliation of segment to consolidated totals:										Reconciliation of segment to consolidated totals:
Corporate and other identifiable assets	Corporate and other identifiable assets	—		—		53,574		106,011		Corporate and other identifiable assets	—		—		8,397		18,471
Assets held for sale		—		—		102,293		99,423

Consolidated total		$	265,287	$	268,262	$	2,081,067	$	2,060,594
Total										Total	$	326,744	$	331,396	$	2,364,455	$	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".

Note F — Property, Plant and Equipment and Inventory

Property, plant and equipment

Property, plant and equipment is comprised of the following at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Machinery and equipment	Machinery and equipment	$	208,231	$	206,919	Machinery and equipment	$	230,445	$	225,027
Furniture, fixtures and other	Furniture, fixtures and other	55,753		52,794		Furniture, fixtures and other	67,288		66,445
Leasehold improvements	Leasehold improvements	57,577		56,988		Leasehold improvements	80,430		75,318
Buildings and land	Buildings and land	13,345		13,345		Buildings and land	13,540		13,386
Construction in process	Construction in process	19,971		15,340		Construction in process	21,749		18,091
		354,877		345,386			413,452		398,267
Less: accumulated depreciation	Less: accumulated depreciation	(175,700)		(166,993)		Less: accumulated depreciation	(210,723)		(199,742)
Total	Total	$	179,177	$	178,393	Total	$	202,729	$	198,525

Depreciation expense was ~~$9.9~~$11.8 million and ~~$8.6~~$9.9 million for the three months ended March 31, 2023 and March 31, 2022, ~~and March 31, 2021,~~ respectively.

Inventory

Inventory is comprised of the following at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):

March 31, 2022 December 31, 2021
Raw materials $ 106,966 $ 105,654
Work-in-process 37,003 27,026
Finished goods 497,393 457,274
Less: obsolescence reserve (24,203) (27,870)
Total $ 617,159 $ 562,084


	March 31, 2023		December 31, 2022
Raw materials	$	99,944	$	104,735
Work-in-process	29,645		30,158
Finished goods	660,523		621,854
Less: obsolescence reserve	(26,083)		(28,664)
Total	$	764,029	$	728,083

Note G — 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.

Goodwill

~~2022~~ Annual Impairment 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 quantitative goodwill 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.~~

~~2021~~2023 Annual Impairment Testing

The Company uses a qualitative approach to test goodwill 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 quantitative goodwill impairment testing. We determined that the ~~Arnold~~Velocity reporting unit required additional quantitative testing because we could not conclude that the fair value of the reporting unit exceeded its carrying value based on qualitative factors alone. For the reporting units that were tested only on a qualitative basis for the ~~2021~~2023 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.

The quantitative test of ~~Arnold~~Velocity was performed using an income approach to determine the fair value of the reporting unit. The discount rate used in the income ~~approach~~approach was ~~13.0%~~15% and the results of the quantitative impairment testing indicated that the fair value of the ~~Arnold~~Velocity reporting unit exceeded the carrying value by ~~272%~~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 for the 2022 annual impairment testing.

Interim Impairment Testing

2022 Interim Impairment Testing

AErgobaby - The Company performed interim quantitative impairment testing at Ergobaby of goodwill and the indefinite lived tradename at December 31, 2022. As a result of operating results that were below historical and forecast amounts, the Company determined that a triggering event had occurred at Ergobaby. The Company used an income approach for the impairment test, whereby we estimate the fair value of the reporting unit based on the present value of future cash flows. Cash flow projections are based on management's estimate of revenue growth rates and operating margins, and take into consideration industry and market conditions as well as company specific economic factors. The Company used a weighted average cost of capital of 16% in the income approach. The discount rate used was based on the weighted average cost of capital adjusted for the relevant risk associated with business specific characteristics and Ergobaby's ability to execute on projected cash flows. Based on the results of the impairment test, the fair value of Ergobaby did not exceed its carrying value. We recorded goodwill

impairment of $20.6 million at December 31, 2022. For the indefinite lived tradename, quantitative testing indicated that the fair value exceeded the carrying value.

The following is a summary of the net carrying ~~value~~amount of goodwill at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, is as follows (in thousands):


		Three months ended March 31, 2022		Year ended December 31, 2021			Three months ended March 31, 2023		Year ended December 31, 2022

Goodwill - gross carrying amount	Goodwill - gross carrying amount	$	848,919	$	873,150	Goodwill - gross carrying amount	$	1,145,023	$	1,145,023
Accumulated impairment losses(1)	Accumulated impairment losses(1)	(57,745)		(57,745)		Accumulated impairment losses(1)	(78,297)		(78,297)
Goodwill - net carrying amount	Goodwill - net carrying amount	$	791,174	$	815,405	Goodwill - net carrying amount	$	1,066,726	$	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.

The following is a reconciliation of the change in the carrying value of goodwill for the three months ended March 31, ~~2022~~2023 by operating segment (in thousands):


		Balance at January 1, 2022		Acquisitions/Measurement Period Adjustments		Balance at March 31, 2022			Balance at January 1, 2023		Acquisitions/Measurement Period Adjustments		Balance at March 31, 2023
5.11	5.11	$	92,966	$	—	$	92,966	5.11	$	92,966	$	—	$	92,966
BOA	BOA	254,153		—		254,153		BOA	254,153		—		254,153
Ergobaby	Ergobaby	61,448		—		61,448		Ergobaby	40,896		—		40,896
Lugano	Lugano	83,458		2,879		86,337		Lugano	86,337		—		86,337
Marucci	Marucci	107,855		(29,657)		78,198		Marucci	75,719		—		75,719
PrimaLoft								PrimaLoft	291,150		—		291,150
Velocity Outdoor	Velocity Outdoor	30,079		—		30,079		Velocity Outdoor	39,773		—		39,773
Altor	Altor	90,843		2,547		93,390		Altor	91,129		—		91,129
Arnold	Arnold	39,267		—		39,267		Arnold	39,267		—		39,267
Sterno	Sterno	55,336		—		55,336		Sterno	55,336		—		55,336
Total	Total	$	815,405	$	(24,231)	$	791,174	Total	$	1,066,726	$	—	$	1,066,726

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 indefinite lived intangible asset in connection with the annual impairment testing for ~~2022~~2023 and ~~2021.~~2022. Results of the qualitative analysis indicate that it is more likely than not that the fair value of the reporting units that maintain indefinite lived intangible assets exceeded the carrying value.

2322

Other intangible assets are comprised of the following at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		March 31, 2022						December 31, 2021							March 31, 2023						December 31, 2022
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount			Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	Customer relationships	$	574,834	$	(200,260)	$	374,574	$	566,805	$	(180,581)	$	386,224	Customer relationships	$	785,303	$	(254,279)	$	531,024	$	785,303	$	(239,752)	$	545,551
Technology and patents	Technology and patents	158,334		(41,982)		116,352		153,124		(49,898)		103,226		Technology and patents	212,385		(56,862)		155,523		211,648		(52,811)		158,837
Trade names, subject to amortization	Trade names, subject to amortization	425,348		(96,242)		329,106		411,100		(87,178)		323,922		Trade names, subject to amortization	483,197		(126,259)		356,938		483,179		(118,684)		364,495
Non-compete agreements	Non-compete agreements	4,617		(3,613)		1,004		4,617		(3,502)		1,115		Non-compete agreements	4,637		(3,889)		748		4,637		(3,824)		813
Other contractual intangible assets	Other contractual intangible assets	2,243		(899)		1,344		1,960		(735)		1,225		Other contractual intangible assets	1,960		(1,298)		662		1,960		(1,185)		775
Total	Total	1,165,376		(342,996)		822,380		1,137,606		(321,894)		815,712		Total	1,487,482		(442,587)		1,044,895		1,486,727		(416,256)		1,070,471
Trade names, not subject to amortization	Trade names, not subject to amortization	56,965		—		56,965		56,965		—		56,965		Trade names, not subject to amortization	56,965		—		56,965		56,965		—		56,965
In-process research and development (1)														In-process research and development (1)	500		—		500		500		—		500
Total intangibles, net	Total intangibles, net	$	1,222,341	$	(342,996)	$	879,345	$	1,194,571	$	(321,894)	$	872,677	Total intangibles, net	$	1,544,947	$	(442,587)	$	1,102,360	$	1,544,192	$	(416,256)	$	1,127,936

(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 $26.4 million and $21.1 million ~~and $18.6 million~~for the three months ended March 31, ~~2022~~2023 and March 31, ~~2021,~~2022, respectively.

Estimated charges to amortization expense of intangible assets for the remainder of ~~2022~~2023 and the next four years, is as follows (in thousands):


2022		2023		2024		2025		2026
2023										2023	2024		2025		2026		2027

$	62,608	$	82,965	$	81,372	$	76,035	$	69,685	78,564	$	103,128	$	97,803	$	91,447	$	80,713

Note H — Warranties

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 three months ended March 31, ~~2022~~2023 and the year ended December 31, ~~2021~~2022 is as follows (in thousands):


Warranty liability	Warranty liability	Three months ended March 31, 2022		Year ended December 31, 2021		Warranty liability	Three months ended March 31, 2023		Year ended December 31, 2022

Beginning balance	Beginning balance	$	2,062	$	1,558	Beginning balance	$	1,754	$	2,062
Provision for warranties issued during the period	Provision for warranties issued during the period	184		4,257		Provision for warranties issued during the period	618		3,301
Fulfillment of warranty obligations	Fulfillment of warranty obligations	(429)		(3,753)		Fulfillment of warranty obligations	(922)		(3,609)
Ending balance	Ending balance	$	1,817	$	2,062	Ending balance	$	1,450	$	1,754

Note I — Debt

~~2021~~2022 Credit Facility

On ~~March 23, 2021, we~~July 12, 2022, the LLC entered into ~~a Second~~the Third Amended and Restated Credit Agreement (the ~~"2021~~"2022 Credit Facility") to amend and restate the ~~2018 Credit Facility (as previously restated and amended) among the Company, the lenders from time to time party thereto (the “Lenders”), and Bank of America, N.A., as Administrative Agent. The~~ 2021 Credit ~~Facility is secured by all of the assets of the Company, including all of its equity interests in, and loans to, its consolidated subsidiaries.~~Facility. The ~~2021~~2022 Credit Facility provides for revolving loans, swing line loans and letters of credit ~~(the “2021~~("the 2022 Revolving ~~Credit Facility”~~Line of Credit") up to a maximum aggregate amount of $600 million ("the 2022 Revolving Loan Commitment") and a $400 million term loan (the “ 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. All amounts outstanding under the 2022 Revolving Line of Credit 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~~Revolving Loan Commitment and/or obtain additional term loans in an aggregate amount of up to $250 million, subject to certain restrictions and conditions. ~~All~~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 ~~Revolving~~ Credit Facility, ~~will become due on March 23, 2026, which is~~pay fees and expenses incurred in connection with the ~~maturity date~~2022 Credit Facility and fund the acquisition of ~~loans advanced under the 2021 Credit Facility.~~

PrimaLoft.

The LLC may borrow, prepay and reborrow principal under the ~~2021~~2022 Revolving Credit Facility from time to time during its term. Advances under the ~~2021~~2022 Revolving Line of Credit ~~Facility~~ can be either ~~Eurodollar rate~~term Secured Overnight Financing Rate ("SOFR") loans or base rate loans. ~~Eurodollar rate~~Term SOFR revolving loans bear interest on the outstanding principal amount thereof for each interest period at a rate per annum based on the ~~London Interbank Offered Rate or~~applicable SOFR as administered by the Federal Reserve Bank of New York (or a ~~Successor Rate,~~successor administrator), as ~~defined, (the “Eurodollar Rate”) for such interest period~~adjusted, plus a margin ranging from 1.50% to 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 Total Leverage Ratio”). Base rate revolving loans bear interest on the outstanding principal amount thereof at a rate per annum equal to the highest of (i) Federal Funds rate plus 0.50%, (ii) the “prime rate”, and (iii) ~~Eurodollar Rate~~the applicable SOFR plus 1.0% (the “Base Rate”), plus a margin ranging from 0.50% to 1.50%, based on the Company's Consolidated Total Leverage Ratio.

Advances under the 2022 Term Loan can be either term SOFR loans or base rate loans. The 2022 Term Loan was advanced in full on the closing date for the 2022 Credit Facility as a Term SOFR loan with an interest period of one month. On the last day of an interest period, Term SOFR loans may be converted to Term SOFR loans of a different interest period or to Base Rate loans. Term SOFR term loans bear interest on the outstanding principal amount thereof for each interest period at a rate per annum based on the Term SOFR for such interest period plus a margin ranging from 1.50% to 2.50%, based on the Consolidated Total Leverage Ratio. Base rate term 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 a margin ranging from 0.50% to 1.50%, based on the Consolidated Total Leverage Ratio.

Under the ~~2021~~2022 Revolving Credit Facility, 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 ~~2021~~2022 Revolving Credit Facility.

Net availability under the ~~2021~~2022 Revolving Credit Facility was approximately ~~$599.0~~$589.8 million at March 31, ~~2022.~~2023. Letters of credit outstanding at March 31, ~~2022~~2023 totaled approximately ~~$1.0~~$2.2 million. At March 31, ~~2022,~~2023, the Company was in compliance with all covenants as defined in the ~~2021~~2022 Credit Facility.

~~2018~~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 ~~April 18, 2018, the LLC~~March 23, 2021, we entered into ana Second Amended and Restated Credit Agreement (the ~~"2018~~"2021 Credit Facility")~~. The~~ 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 ~~(i)~~ revolving loans, swing line loans and letters of credit (the ~~“2018~~“2021 Revolving Credit Facility”) up to a maximum aggregate amount of $600 million and ~~(ii) a $500~~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, ~~term loan (the “2018 Term Loan”).~~subject to certain restrictions and conditions. The Company repaid the outstanding amounts under the ~~2018 Term Loan~~2021 credit facility in ~~2019, and used a portion~~the third quarter of 2022 in connection with entering into the ~~proceeds from the issuance of the 2029 Senior Notes to repay the amount outstanding under the 2018 Revolving~~2022 Credit ~~Facility in March 2021.~~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” ofor "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 ~~LLC~~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 ~~LLC~~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 ~~will be~~was October 15, 2021. The 2029 Notes are general unsecured obligations of the ~~LLC~~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”).

~~2026 Senior Notes~~

Our 2026 Senior Notes bore interest at 8.000% per annum and were scheduled to mature on May 1, 2026. On March 2, 2021, pursuant to an indenture, dated as of April 18, 2018 between the LLC and U.S. Bank National Association, as trustee ("Trustee"), the Trustee delivered redemption notices, on behalf of the LLC, to holders of the LLC’s 2026 Senior Notes to redeem the 2026 Senior Notes on April 1, 2021. The principal amount of the 2026 Senior Notes redeemed was $600 million, which represented all of the outstanding principal of the 2026 Senior Notes. The 2026 Senior Notes were redeemed at 100% of their principal, plus an applicable premium, and accrued and unpaid interest as of the redemption date. On March 23, 2021, the proceeds required for the redemption of the 2026 Senior Notes, the applicable premium and accrued interest totaling $647.7 million was irrevocably deposited with the Trustee and held by the Trustee until the date of redemption, April 1, 2021. The redemption of the 2026 Senior Notes resulted in a Loss on Debt Extinguishment of approximately $33.3 million, which is comprised of the premium paid for early redemption of the 2026 Senior Notes, and the expensing of the deferred financing costs and bond premium associated with the 2026 Senior Notes.

The following table provides the Company’s outstanding long-term debt ~~holdings~~and effective interest rates at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		March 31, 2022				December 31, 2021					March 31, 2023				December 31, 2022
		Effective Interest Rate		Amount		Effective Interest Rate		Amount			Effective Interest Rate		Amount		Effective Interest Rate		Amount
2029 Senior Notes	2029 Senior Notes	5.25	%	$	1,000,000	4.89	%	$	1,000,000	2029 Senior Notes	5.25	%	$	1,000,000	5.25	%	$	1,000,000
2032 Senior Notes	2032 Senior Notes	5.00	%	300,000		5.29	%	300,000		2032 Senior Notes	5.00	%	300,000		5.00	%	300,000

Less: Unamortized premiums and debt issuance costs				(14,696)				(15,174)

2022 Term Loan										2022 Term Loan	6.97	%	392,500		5.20	%	395,000
2022 Revolving Credit Facility										2022 Revolving Credit Facility	6.89	%	8,000		5.98	%	155,000
Less: Unamortized debt issuance costs										Less: Unamortized debt issuance costs			(14,929)				(15,532)
Total debt										Total debt			$	1,685,571			$	1,834,468
Less: Current Portion, term loan facilities										Less: Current Portion, term loan facilities			(10,000)				(10,000)
Long-term debt	Long-term debt			$	1,285,304			$	1,284,826	Long-term debt			$	1,675,571			$	1,824,468

Annual maturities of the Company's debt obligations are as follows (in thousands):


2023	$	10,000
2024	10,000
2025	15,000
2026	25,000
2027	340,500
2028 and thereafter	1,300,000
	$	1,700,500

The Senior Notes consisted of the following carrying value and estimated fair value (in thousands):


					Fair Value Hierarchy Level		March 31, 2022												Fair Value Hierarchy Level		March 31, 2023
		Maturity Date	Rate			Carrying Value		Fair Value			Maturity Date			Rate						Carrying Value		Fair Value
2032 Senior Notes	2032 Senior Notes	January 15, 2032	5.000	%		2		300,000		271,500		2032 Senior Notes		January 15, 2032			5.000	%		2		300,000		243,000
2029 Senior Notes	2029 Senior Notes	April 15, 2029	5.250	%	2		1,000,000		930,000	2029 Senior Notes			April 15, 2029		5.250	%			2		1,000,000		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 2022 Credit Facility, the 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. In addition, the Company recorded~~costs, and $12.0 million in deferred financing costs related to the 2029 Senior Notes offering in March 2021. The net deferred financing costs associated with the 2026 Senior Notes were $7.2 million at March 31, 2021, and were expensed on April 1, 2021, the date of the redemption of the 2026 Senior Notes. In connection with entering into the 2021 Credit Facility, the Company recorded $5.4 million in deferred financing costs.

Since the Company can borrow, repay and reborrow principal under the ~~2021~~2022 Revolving Credit Facility, the debt issuance costs associated with the ~~2021~~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 2022 Term Loan and Senior Notes are classified as a reduction of long-term debt in the accompanying condensed consolidated balance ~~sheet.~~

sheets.

The following table summarizes ~~unamortized premiums and~~ debt issuance costs at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, and the balance sheet classification in each of the periods presented (in thousands):


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Unamortized premiums and debt issuance costs		$	27,784	$	27,784
Deferred debt issuance costs						Deferred debt issuance costs	$	32,526	$	32,526
Accumulated amortization	Accumulated amortization	(6,886)		(6,021)		Accumulated amortization	(10,765)		(9,760)
Unamortized premiums and debt issuance costs, net		$	20,898	$	21,763
Deferred debt issuance costs, net						Deferred debt issuance costs, net	$	21,761	$	22,766

Balance sheet classification:	Balance sheet classification:					Balance sheet classification:
Other noncurrent assets	Other noncurrent assets	$	6,202	$	6,589	Other noncurrent assets	$	6,832	$	7,234
Long-term debt	Long-term debt	14,696		15,174		Long-term debt	14,929		15,532
		$	20,898	$	21,763		$	21,761	$	22,766

~~630Note~~Note J — Stockholders’ Equity

Trust Common Shares

The Trust is authorized to issue 500,000,000 Trust common shares and the LLC is authorized to issue a corresponding number of ~~trust~~LLC interests. The Company will at all times have the identical number of ~~trust~~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 ~~Company~~LLC 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 210,000 shares for $4.0 million during the three months ended March 31, 2023. As of March 31, 2023, $46.0 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 ~~Trust~~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 months ended March 31, 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 months ended March 31, 2022, the Company sold 712,433 Trust common shares under the Sales Agreement. For the same period, the Company received total net proceeds of approximately $20.2 million from these sales, and incurred approximately $0.4 million in commissions payable to the Sales Agents.

The Company incurred approximately $0.1 million in total costs related to the ATM program during both the three months ended March 31, 2023 and 2022.

Trust Preferred Shares

The Trust is authorized to issue up to 50,000,000 Trust preferred shares and the ~~LLC~~Company is authorized to issue a corresponding number of ~~trust preferred~~Trust 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 million net of underwriters' discount and issuance costs. Distributions on the Series C Preferred Shares will be payable quarterly in arrears, when and as declared by the Company's board of directors on January 30, April 30, July 30, and October 30 of each year, beginning on January 30, 2020, at a rate per annum of 7.875%. Distributions on the Series C Preferred Shares are cumulative and at March 31, ~~2022,~~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 ~~Trust~~ 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 ~~will be~~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%. ~~Distributions on~~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 three-month LIBOR (or at a successor rate) plus a spread of 4.985% per annum. Subsequent to April 30, 2028, the distribution rate will be reset quarterly. At March 31, ~~2022,~~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 ~~preferred shares.~~Series B Preferred Shares. The Series B Preferred Shares may be redeemed at the Company's option, in whole or in part, at any time after April 30, 2028, at a price of $25.00 per share, plus any accumulated and unpaid distributions (thereon whether authorized or declared) to, but excluding, the redemption date. Holders of Series B Preferred Shares will have no right to require the redemption of the Series B Preferred Shares and there is no maturity date.

Series A Preferred Shares

On June 28, 2017, the Trust issued 4,000,000 7.250% Series A ~~Trust~~ 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 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 any declared and unpaid 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. 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.~~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 ~~are~~is 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 ~~distributions~~dividends declared on Allocation Interests to stockholders’ equity when they are approved by the Company’s board of directors.

~~Holding Events~~Sale Event

The ~~fifteen-year anniversary~~sale of ~~ACI occurred~~Advanced Circuits in ~~May 2021 which~~February 2023 represented a ~~Holding Event. The Company declared~~Sale Event and ~~paid~~the Company's board of director's approved a distribution of $24.4 million in April 2023, subsequent to the ~~Holders~~end of ~~$12.1~~the first quarter. In addition, the Company's board of directors approved a distribution of $2.1 million ~~in July 2021. The ten-year anniversary of Liberty occurred in March 2020 and the ten-year anniversary of Ergobaby occurred in September 2020. Both of these represented a Holding Event, and~~related to various sale proceeds received related to previous Sale Events. These distributions were paid to the Holders of the Allocation Interests elected to defer the distribution until after the end of 2020. The profit allocation payment of $3.3 million related to the Liberty Holding Event and the profit allocation payment of $2.0 million related to the Ergobaby Holding Event were both paid in ~~January 2021.~~

~~Sale Event~~

The Sale of Liberty in August 2021 qualified as a Sale Event under the LLC Agreement. During the fourth quarter of 2021, the Company's Board declared a distribution to the Allocation Member of $16.8 million. The distribution was paid in the fourth quarter of 2021.April 2023.

Reconciliation of net income (loss) available to common shares of Holdings

The following table reconciles net income (loss) attributable to Holdings to net ~~loss~~income (loss) attributable to the common shares of Holdings (in thousands):


		Three months ended March 31,				Three months ended March 31,
		2022		2021				2023		2022
Net income from continuing operations attributable to Holdings	Net income from continuing operations attributable to Holdings	$	13,440	$	11,179		Net income from continuing operations attributable to Holdings	$	8,022	$	13,440
Less: Distributions paid - Allocation Interests		—		5,214

Less: Distributions paid - Preferred Shares	Less: Distributions paid - Preferred Shares	6,045		6,045			Less: Distributions paid - Preferred Shares	6,045		6,045
Less: Accrued distributions - Preferred Shares	Less: Accrued distributions - Preferred Shares	2,869		2,869			Less: Accrued distributions - Preferred Shares	2,869		2,869
Net income (loss) from continuing operations attributable to common shares of Holdings	Net income (loss) from continuing operations attributable to common shares of Holdings	$	4,526	$	(2,949)		Net income (loss) from continuing operations attributable to common shares of Holdings	$	(892)	$	4,526

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 months ended March 31, ~~2022~~2023 and ~~2021~~2022 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 months ended March 31, ~~2022~~2023 and ~~2021~~2022 attributable to the common shares of Holdings is calculated as follows (in thousands, except per share data):

Three months ended
March 31,
2022 2021
Net income (loss) from continuing operations attributable to common shares of Holdings $ 4,526 $ (2,949)
Less: Effect of contribution based profit - Holding Event 4,254 3,516
Net loss from continuing operations attributable to common shares of Holdings $ 272 $ (6,465)

2928


							Three months ended March 31,
							2023		2022
Net income (loss) from continuing operations attributable to common shares of Holdings						Net income (loss) from continuing operations attributable to common shares of Holdings	$	(892)	$	4,526
Less: Effect of contribution based profit - Holding Event						Less: Effect of contribution based profit - Holding Event	3,593		4,254
Net income (loss) from continuing operations attributable to common shares of Holdings						Net income (loss) from continuing operations attributable to common shares of Holdings	$	(4,485)	$	272

Income from discontinued operations attributable to Holdings	Income from discontinued operations attributable to Holdings	$	10,322	$	7,815	Income from discontinued operations attributable to Holdings	$	97,375	$	10,322
Less: Effect of contribution based profit - Holding Event	Less: Effect of contribution based profit - Holding Event	630		538		Less: Effect of contribution based profit - Holding Event	—		630
Income from discontinued operations attributable to common shares of Holdings	Income from discontinued operations attributable to common shares of Holdings	$	9,692	$	7,277	Income from discontinued operations attributable to common shares of Holdings	$	97,375	$	9,692

Basic and diluted weighted average common shares outstanding	Basic and diluted weighted average common shares outstanding	69,375		64,900		Basic and diluted weighted average common shares outstanding	72,178		69,375

Basic and fully diluted income (loss) per common share attributable to Holdings	Basic and fully diluted income (loss) per common share attributable to Holdings					Basic and fully diluted income (loss) per common share attributable to Holdings
Continuing operations	Continuing operations	$	0.00	$	(0.10)	Continuing operations	$	(0.06)	$	—
Discontinued operations	Discontinued operations	0.14		0.11		Discontinued operations	1.35		0.14
		$	0.14	$	0.01		$	1.29	$	0.14

Distributions

The following table summarizes information related to our quarterly cash distributions on our Trust common and preferred shares (in thousands, except per share data):

Period Cash Distribution per Share Total Cash Distributions Record Date Payment Date
Trust Common Shares:
January 1, 2022 - March 31, 2022 (1)
$ 0.25 $ 17,510 April 21, 2022 April 28, 2022
October 1, 2021 - December 31, 2021 $ 0.25 $ 17,352 January 13, 2022 January 20, 2022
July 1, 2021 - September 30, 2021 $ 0.36 $ 23,742 October 15, 2021 October 22, 2021
August 3, 2021 (2)
$ 0.88 $ 57,112 August 31, 2021 September 7, 2021
April 1, 2021 - June 30, 2021 $ 0.36 $ 23,364 July 15, 2021 July 22, 2021
January 1, 2021 - March 31, 2021 $ 0.36 $ 23,364 April 15, 2021 April 22, 2021
October 1, 2020 - December 31, 2020 $ 0.36 $ 23,364 January 15, 2021 January 22, 2021
Series A Preferred Shares:
January 30, 2022 - April 29, 2022 (1)
$ 0.453125 $ 1,813 April 15, 2022 April 30, 2022
October 30, 2021 - January 29, 2022 $ 0.453125 $ 1,813 January 15, 2022 January 30, 2022
July 30, 2021 - October 29, 2021 $ 0.453125 $ 1,813 October 15, 2021 October 30, 2021
April 30, 2021 - July 29, 2021 $ 0.453125 $ 1,813 July 15, 2021 July 30, 2021
January 30, 2021 - April 29, 2021 $ 0.453125 $ 1,813 April 15, 2021 April 30, 2021
October 30, 2020 - January 29, 2021 $ 0.453125 $ 1,813 January 15, 2021 January 30, 2021
Series B Preferred Shares:
January 30, 2022 - April 29, 2022 (1)
$ 0.4921875 $ 1,969 April 15, 2022 April 30, 2022
October 30, 2021 - January 29, 2022 $ 0.4921875 $ 1,969 January 15, 2022 January 30, 2022
July 30, 2021 - October 29, 2021 $ 0.4921875 $ 1,969 October 15, 2021 October 30, 2021
April 30, 2021 - July 29, 2021 $ 0.4921875 $ 1,969 July 15, 2021 July 30, 2021
January 30, 2021 - April 29, 2021 $ 0.4921875 $ 1,969 April 15, 2021 April 30, 2021
October 30, 2020 - January 29, 2021 $ 0.4921875 $ 1,969 January 15, 2021 January 30, 2021
Series C Preferred Shares:
January 30, 2022 - April 29, 2022 (1)
$ 0.4921875 $ 2,264 April 15, 2022 April 30, 2022
October 30, 2021 - January 29, 2022 $ 0.4921875 $ 2,264 January 15, 2022 January 30, 2022
July 30, 2021 - October 29, 2021 $ 0.4921875 $ 2,264 October 15, 2021 October 30, 2021
April 30, 2021 - July 29, 2021 $ 0.4921875 $ 2,264 July 15, 2021 July 30, 2021
January 30, 2021 - April 29, 2021 $ 0.4921875 $ 2,264 April 15, 2021 April 30, 2021
October 30, 2020 - January 29, 2021 $ 0.4921875 $ 2,264 January 15, 2021 January 30, 2021


Period	Cash Distribution per Share		Total Cash Distributions		Record Date	Payment Date

Trust Common Shares:
January 1, 2023 - March 31, 2023 (1)	$	0.25	$	17,987	April 20, 2023	April 27, 2023
October 1, 2022 - December 31, 2022	$	0.25	$	18,051	January 19, 2023	January 26, 2023
July 1, 2022 - September 30, 2022	$	0.25	$	18,051	October 20, 2022	October 27, 2022
April 1, 2022 - June 30, 2022	$	0.25	$	17,931	July 21, 2022	July 28, 2022
January 1, 2022 - March 31, 2022	$	0.25	$	17,510	April 21, 2022	April 28, 2022

Series A Preferred Shares:
January 30, 2023 - April 29, 2023 (1)	$	0.453125	$	1,813	April 15, 2023	April 30, 2023
October 30, 2022 - January 29, 2023	$	0.453125	$	1,813	January 15, 2023	January 30, 2023
July 30, 2022 - October 29, 2022	$	0.453125	$	1,813	October 15, 2022	October 30, 2022
April 30, 2022 - July 29, 2022	$	0.453125	$	1,813	July 15, 2022	July 30, 2022
January 30, 2022 - April 29, 2022	$	0.453125	$	1,813	April 15, 2022	April 30, 2022
October 30, 2021 - January 29, 2022	$	0.453125	$	1,813	January 15, 2022	January 30, 2022

Series B Preferred Shares:
January 30, 2023 - April 29, 2023 (1)	$	0.4921875	$	1,969	April 15, 2023	April 30, 2023
October 30, 2022 - January 29, 2023	$	0.4921875	$	1,969	January 15, 2023	January 30, 2023
July 30, 2022 - October 29, 2022	$	0.4921875	$	1,969	October 15, 2022	October 30, 2022

3029


April 30, 2022 - July 29, 2022	$	0.4921875	$	1,969	July 15, 2022	July 30, 2022
January 30, 2022 - April 29, 2022	$	0.4921875	$	1,969	April 15, 2022	April 30, 2022
October 30, 2021 - January 29, 2022	$	0.4921875	$	1,969	January 15, 2022	January 30, 2022

Series C Preferred Shares:
January 30, 2023 - April 29, 2023 (1)	$	0.4921875	$	2,264	April 15, 2023	April 30, 2023
October 30, 2022 - January 29, 2023	$	0.4921875	$	2,264	January 15, 2023	January 30, 2023
July 30, 2022 - October 29, 2022	$	0.4921875	$	2,264	October 15, 2022	October 30, 2022
April 30, 2022 - July 29, 2022	$	0.4921875	$	2,264	July 15, 2022	July 30, 2022
January 30, 2022 - April 29, 2022	$	0.4921875	$	2,264	April 15, 2022	April 30, 2022
October 30, 2021 - January 29, 2022	$	0.4921875	$	2,264	January 15, 2022	January 30, 2022

(1) This distribution was declared on April ~~1, 2022.~~

~~(2)~~ ~~On August~~ 3, 2021, in order to offset a portion of the tax liability to the shareholders as a result of the election to cause the Trust to be treated as a corporation for U.S. federal income tax purposes, the Company's Board of Directors declared a special cash distribution on the Trust’s common shares. A distribution of $57.1 million was made on August 31, 2021 to Trust common shareholders. Beginning with the quarter ended December 31, 2021, the Company has declared a quarterly distribution of $0.25 per share, which was reduced from $0.36 per share in prior periods to reflect the effect of the Trust being taxed as a corporation.2023.

Note K — 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 LLC’s ownership percentage of its majority owned operating segments and related noncontrolling interest balances as of March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:


		% Ownership (1) March 31, 2022		% Ownership (1) December 31, 2021			% Ownership (1) March 31, 2023		% Ownership (1) December 31, 2022
		Primary	Fully Diluted	Primary	Fully Diluted		Primary	Fully Diluted	Primary	Fully Diluted
5.11	5.11	97.7	88.4	97.6	88.4	5.11	97.7	88.3	97.7	88.3
BOA	BOA	91.8	83.2	91.8	83.8	BOA	91.8	83.3	91.8	83.5
Ergobaby	Ergobaby	81.6	72.8	81.7	72.7	Ergobaby	81.6	72.8	81.6	72.8
Lugano	Lugano	59.9	56.2	59.9	58.1	Lugano	59.9	54.9	59.9	55.2
Marucci	Marucci	91.1	82.8	91.1	82.8	Marucci	91.0	81.8	91.0	82.1
PrimaLoft						PrimaLoft	90.7	83.7	90.7	83.7
Velocity Outdoor	Velocity Outdoor	99.4	87.7	99.3	87.6	Velocity Outdoor	99.4	87.7	99.4	87.7
Altor	Altor	100.0	91.2	100.0	91.2	Altor	99.8	88.0	99.8	88.2
Arnold	Arnold	98.0	85.5	98.0	85.5	Arnold	98.0	85.5	98.0	85.5
Sterno	Sterno	99.4	90.8	100.0	87.1	Sterno	99.4	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.

Noncontrolling Interest Balances
(in thousands) March 31, 2022 December 31, 2021
5.11 $ 15,929 $ 15,458
BOA 32,392 30,581
Ergobaby 18,110 29,435
Lugano 74,232 70,585
Marucci 18,380 17,175
Velocity Outdoor 5,373 5,250
Altor 4,204 3,936
Arnold 1,316 1,284
Sterno 1,699 1,524
Allocation Interests 100 100
$ 171,735 $ 175,328

3130


	Noncontrolling Interest Balances
(in thousands)	March 31, 2023		December 31, 2022
5.11	$	17,488	$	17,186
BOA	37,325		36,215
Ergobaby	16,105		16,020
Lugano	87,360		82,967
Marucci	21,259		20,045
PrimaLoft	35,441		36,263
Velocity Outdoor	6,310		6,115
Altor	5,398		5,077
Arnold	1,529		1,475
Sterno	1,377		2,046
Allocation Interests	100		100
	$	229,692	$	223,509

Note L — Fair Value Measurement

The following table provides the assets and liabilities carried at fair value measured on a recurring basis at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		Fair Value Measurements at March 31, 2022									Fair Value Measurements at March 31, 2023
		Carrying Value		Level 1		Level 2		Level 3			Carrying Value		Level 1		Level 2		Level 3

Liabilities:	Liabilities:									Liabilities:
Put option of noncontrolling shareholders (1)		$	(151)	$	—	$	—	$	(151)

Contingent consideration - acquisition (1)										Contingent consideration - acquisition (1)	(1,300)		—		—		(1,300)

Total recorded at fair value	Total recorded at fair value	$	(151)	$	—	$	—	$	(151)	Total recorded at fair value	$	(1,300)	$	—	$	—	$	(1,300)

(1) Represents potential earn-out payable as additional purchase price consideration by Velocity in connection with the acquisition of King's Camo.


	Fair Value Measurements at December 31, 2022
	Carrying Value		Level 1		Level 2		Level 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 ~~put option issued to noncontrolling shareholders in connection with the 5.11 acquisition.~~

Fair Value Measurements at December 31, 2021
Carrying
Value Level 1 Level 2 Level 3
Liabilities:
Put option of noncontrolling shareholders (1)
$ (151) $ — $ — $ (151)
Contingent consideration - acquisition (2)
(1,350) — — (1,350)
Total recorded at fair value $ (1,501) $ — $ — $ (1,501)

~~(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 ~~Altor~~Velocity in connection with the acquisition of ~~Polyfoam. The payment of the earn-out occurred on March~~ King's Camo.

31 ~~2022.~~

Reconciliations of the change in the carrying value of the Level 3 fair value measurements from January 1, ~~2021~~2022 through March 31, ~~2022~~2023 are as follows (in thousands):


	Level 3
Balance at January 1, ~~2021~~2022	$	~~(1,785)~~(1,501)
~~Termination of put option of noncontrolling shareholder~~Contingent consideration - ~~Liberty~~King's Camo	~~314~~(1,600)
Adjustment to contingent consideration - King's Camo	300
Payment of contingent consideration - Polyfoam	1,350
Increase in the fair value of put option of noncontrolling shareholder - 5.11	~~(30)~~9
Balance at December 31, ~~2021~~2022	$	~~(1,501)~~(1,442)
Termination of put option of noncontrolling shareholder - 5.11	142

~~Payment of contingent consideration - Polyfoam~~	~~1,350~~
Balance at March 31, ~~2022~~2023	$	~~(151)~~(1,300)

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, ~~2021.~~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 ~~quarter~~three months ended March 31, ~~2022 and December 31, 2021, respectively.~~2023.


							Expense
	Fair Value Measurements at December 31, 2022						Year ended
(in thousands)	Carrying Value		Level 1	Level 2	Level 3		December 31, 2022
Goodwill - Ergo	$	40,896	—	—	$	40,896	$	20,552

Note M — Income taxes

Effective September 1, 2021, the LLC’s parent (i.e., the Trust) elected to be treated as a corporation for U.S federal income tax purposes. Prior to September 1, 2021, the Company’s items of income, gain, loss and deduction flowed through to owners of the Trust without being subject to income taxes at the Trust level. Consequently, the Company’s earnings did not reflect a provision for income taxes except those for foreign, state, city and local income taxes incurred at the entity level. From and after September 1, 2021, the Trust will be subject to entity-level U.S. federal, state, and local corporate income taxes on the Company’s earnings that flow through to the Trust.

However, the Trust itself will no longer be taxed as a flow through entity for U.S. federal income tax purposes. Trust shareholders will no longer receive Schedule K-1’s, nor will Trust shareholders be allocated any pass through income, loss, deduction, expense, or credit (including “UBIT”) from the Trust.

The 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 computation of the annual estimated effective tax rate for each interim period requires certain assumptions, estimates, and significant judgment, including with respect to the projected operating income for the year, projections of income earned and taxes incurred in various jurisdictions, permanent and temporary differences and the likelihood of recovering deferred tax 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 laws change. Certain foreign operations are subject to foreign income taxation under existing provisions of the laws of those jurisdictions.

The reconciliation between the Federal Statutory Rate and the effective income tax rate for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 is as follows:

Three months ended March 31,
2022 2021
United States Federal Statutory Rate 21.0 % 21.0 %
State income taxes (net of Federal benefits) 3.9 3.7
Foreign income taxes 3.2 3.0
Expenses of Compass Group Diversified Holdings LLC representing a pass through to shareholders (1)
— 13.0
Impact of subsidiary employee stock options 1.6 0.3
Credit utilization (4.3) (2.4)
Non-recognition of NOL carryforwards at subsidiaries (0.4) 0.9
Foreign-derived intangible income (FDII) and GILTI tax (0.9) (7.5)
Effect of classification of assets held for sale 10.5 —
Other 0.6 (3.1)
Effective income tax rate 35.2 % 28.9 %

~~(1)~~ The effective income tax rate for the three months ended March 31, 2021 included a loss at the Trust, which was taxed as a partnership through August 31, 2021. Beginning September 1, 2021, the Trust was taxed as a corporation.


	Three months ended March 31,
	2023		2022
United States Federal Statutory Rate	21.0	%	21.0	%
State income taxes (net of Federal benefits)	1.5		3.9
Foreign income taxes	7.5		3.2
Impact of subsidiary employee stock options	(0.9)		1.6
Utilization of tax credits	(1.5)		(4.3)
Non-recognition of various carryforwards at subsidiaries	11.4		(0.4)
United States tax on foreign income	2.8		(0.9)
Effect of classification of assets held for sale	—		10.5
Other	1.3		0.6
Effective income tax rate	43.1	%	35.2	%

Note N — Defined Benefit Plan

In connection with the acquisition of Arnold, the company 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 ~~$1.9~~$1.8 million is recognized in the consolidated balance sheet as a component of other non-current liabilities at March 31, ~~2022.~~2023. Net periodic benefit cost consists of the following for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Three months ended March 31,				Three months ended March 31,
		2022		2021				2023		2022
Service cost	Service cost	$	110	$	109		Service cost	$	90	$	110
Interest cost	Interest cost	11		6			Interest cost	60		11
Expected return on plan assets	Expected return on plan assets	(19)		(19)			Expected return on plan assets	(54)		(19)
Amortization of unrecognized loss	Amortization of unrecognized loss	(7)		9			Amortization of unrecognized loss	(9)		(7)
Effect of curtailment	Effect of curtailment	(3)		57			Effect of curtailment	(13)		(3)
Net periodic benefit cost	Net periodic benefit cost	$	92	$	162		Net periodic benefit cost	$	74	$	92

During the three months ended March 31, ~~2022~~2023, per the terms of the pension agreement, Arnold contributed $0.1 million to the plan. For the remainder of ~~2022,~~2023, the expected contribution to the plan will be approximately ~~$0.2~~$0.3 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 March 31, ~~2022~~2023 were considered Level 3.

Note O - 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, ~~warehouses, office facilities, retail stores,~~computer equipment and ~~vehicles~~software under various ~~operating~~ 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 months ended March 31, ~~2022~~2023 and ~~2021.~~2022. The Company recognized ~~$10.4~~$12.3 million and ~~$8.6~~$10.4 million in the three months ended March 31, ~~2022~~2023 and March 31, ~~2021,~~2022, respectively, in expense related to operating leases in the condensed consolidated statements of operations.

The maturities of lease liabilities at March 31, ~~2022~~2023 are as follows (in thousands):


2022 (excluding three months ended March 31, 2022)		$	24,965
2023		30,267
2023 (excluding three months ended March 31, 2023)				2023 (excluding three months ended March 31, 2023)	$	29,731
2024	2024	25,970		2024	39,311
2025	2025	21,491		2025	35,924
2026	2026	18,046		2026	32,550
2027				2027	28,140
Thereafter	Thereafter	37,555		Thereafter	68,197
Total undiscounted lease payments	Total undiscounted lease payments	$	158,294	Total undiscounted lease payments	$	233,853
Less: Interest	Less: Interest	26,141		Less: Interest	53,300
Present value of lease liabilities	Present value of lease liabilities	$	132,153	Present value of lease liabilities	$	180,553

The calculated amount of the right-of-use assets and lease liabilities in the table above 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. ~~Regarding~~As the discount ~~rate, lease accounting guidance requires the use of a rate implicit in the lease whenever this rate is readily determinable. As this~~ 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 Rate	Lease Term and Discount Rate	March 31, 2022		March 31, 2021		Lease Term and Discount Rate	March 31, 2023		March 31, 2022
Weighted-average remaining lease term (years)	Weighted-average remaining lease term (years)	5.77		5.46		Weighted-average remaining lease term (years)	6.35		5.77
Weighted-average discount rate	Weighted-average discount rate	7.39	%	7.41	%	Weighted-average discount rate	7.80	%	7.39	%

Supplemental balance sheet information related to leases was as follows (in thousands):


		Line Item in the Company’s Consolidated Balance Sheet	March 31, 2022		December 31, 2021			Line Item in the Company’s Consolidated Balance Sheet	March 31, 2023		December 31, 2022

Operating lease right-of-use assets	Operating lease right-of-use assets	Other non-current assets	$	119,382	$	116,992	Operating lease right-of-use assets	Other non-current assets	$	159,479	$	147,518
Current portion, operating lease liabilities	Current portion, operating lease liabilities	Other current liabilities	$	26,323	$	25,663	Current portion, operating lease liabilities	Other current liabilities	$	29,844	$	28,497
Operating lease liabilities	Operating lease liabilities	Other non-current liabilities	$	105,830	$	103,800	Operating lease liabilities	Other non-current liabilities	$	150,709	$	139,529

Supplemental cash flow information related to leases was as follows (in thousands):


		Three months ended March 31, 2022		Three months ended March 31, 2021			Three months ended March 31, 2023		Three months ended March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	10,409	$	8,568	Operating cash flows from operating leases	$	10,535	$	10,409
Right-of-use assets obtained in exchange for lease obligations:	Right-of-use assets obtained in exchange for lease obligations:					Right-of-use assets obtained in exchange for lease obligations:
Operating leases	Operating leases	$	7,903	$	11,776	Operating leases	$	17,882	$	7,903

Note P — Related Party Transactions

Management Services Agreement

The LLC entered into the ~~Mangement~~Management Services Agreement ("MSA") with CGM effective May 16, ~~2006.~~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 ~~Company's~~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, 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.

~~During 2021,~~ ~~CGM~~Integration Services Agreements

PrimaLoft, which was acquired in July 2022, entered into a waiver of the MSA for a period through December 31, 2021 to receive a 1% annual management fee related to BOA, rather than the 2% called for under the MSA, which resulted in a lower management fee paid during 2021 than would have normally been due. In the first quarter of 2021, the LLC and CGM entered into a waiver agreement whereby CGM agreed to waive the portion of the management fee related to the amount of the proceeds deposited with the Trustee that was in excess of the amount payable related to the 2026 Senior Notes at March 31, 2021. Additionally, CGM entered into a waiver of the MSA at December 31, 2021 to exclude the cash balances held at the LLC from the calculation of the management fee.

an Integration Services ~~Agreements~~Agreement ("ISA") with CGM whereby PrimaLoft will pay 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 ~~Integration Services Agreement ("ISA")~~ISA with CGM whereby Lugano ~~will pay~~paid CGM an integration services fee of $2.3 million quarterly over a twelve month period as services are rendered, beginning in the quarter ended December 31, 2021. BOA, which was acquired in October 2020, entered into an ISA with CGM whereby BOA paid CGM an integration service fee of $4.4 million quarterly over a twelve month period as services were rendered, beginning in the quarter ended December 31, ~~2020. Marucci Sports, which was acquired~~2021.

Integration service fees are included in ~~April 2020, entered into an ISA with CGM. Marucci paid CGM an integration service fee~~selling, general and administrative expense on the subsidiaries' statement of ~~$2.0 million quarterly over a twelve month period as services were rendered, beginning~~operations in the ~~quarter ended September 30, 2020.~~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

~~Recapitalization~~ ~~- In August 2021, the Company completed a recapitalization of 5.11 whereby the LLC entered into an amendment to the intercompany loan agreement with 5.11 (the "5.11 Loan Agreement").~~ The 5.11 Loan Agreement was amended to provide for additional term loan borrowings of $55.0 million to fund a distribution to shareholders. The LLC owned 97.7% of the outstanding shares of 5.11 on the date of the distribution and received $53.7 million. The remaining amount of the distribution was paid to minority shareholders.

Related Party Vendor Purchases - 5.11 purchases inventory from a vendor who is a related party to 5.11 through one of the executive officers of 5.11 via the executive's 40% ownership interest in the vendor. 5.11 purchased approximately ~~$0.3~~$0.6 million and ~~$0.4~~$0.3 million during the three months ended March 31, ~~2022~~2023 and March 31, ~~2021,~~2022, respectively in inventory from the vendor.

BOA

~~Repurchase of Noncontrolling Interest~~ - In September 2021, BOA repurchased shares of its issued and outstanding common shares from its largest minority shareholder for a total payment of$48.0 million, which BOA financed by borrowing under their intercompany credit facility with the LLC (the "BOA Credit Agreement"). The BOA Credit Agreement was amended to (i) provide for additional term loan borrowings of $38.0 million, and (ii) consent to the repurchase of the shares from the minority shareholder. The transaction was accounted for in accordance with ASC 810 - Consolidation, whereby the carrying amount of the noncontrolling interest was adjusted to reflect the change in the ownership interest in BOA that occurred as a result of the share repurchase. The difference between the fair value of the consideration paid of $48.0 million and the amount by which the noncontrolling interest was adjusted of $39.4 million was recognized in equity attributable to the LLC.

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 ~~had~~purchased approximately ~~$15.2~~$9.7 million and ~~$9.8~~$15.2 million ~~in purchases~~ from this supplier during the three months ended March 31, ~~2022~~2023 and March 31, ~~2021,~~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.

~~Note Q - Subsequent Event~~

On October 13, 2021, the LLC, as the Sellers Representative of the AC Sellers of stock and options of Advanced Circuits, a majority owned subsidiary of the LLC, entered into a definitive Agreement and Plan of Merger with Tempo Automation, Inc. (“AC Buyer”), Aspen Acquisition Sub, Inc. (“AC Merger Sub”) and Advanced Circuits, pursuant to which AC Buyer will 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 AC Merger Sub with and into Advanced Circuits, with Advanced Circuits surviving the merger and becoming a wholly owned subsidiary of AC Buyer (the “AC Merger”). The AC Merger is conditioned on, among other things, the closing of a business combination between AC Buyer and a publicly traded special purpose acquisition company (a “SPAC”). In connection with the AC Merger, AC Buyer announced its entry into a definitive merger agreement for a business combination (the “SPAC Transaction”) with a SPAC, ACE Convergence Acquisition Corp. (“ACE”). In order to obtain shareholder approval of the SPAC Transaction, ACE had previously scheduled and announced an extraordinary general meeting of shareholders for May 5, 2022. On May 2, 2022, ACE postponed the extraordinary general meeting to allow additional time to revise and finalize its financing arrangements with respect to the SPAC Transaction.

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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 section 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, ~~2021~~2022 and in the section entitled "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Overview

Compass Diversified Holdings ("Holdings", or the "Trust") was incorporated in Delaware on November 18, 2005. Compass Group Diversified Holdings LLC (the "LLC") was also formed on November 18, 2005. Holdings and the LLC (collectively, the "Company") were formed to acquire and manage a group of small and middle-market businesses headquartered in North America. The LLC is ~~the operating entity and is~~ a controlling owner of ~~nine~~ten businesses, or operating segments, at March 31, ~~2022.~~2023. The segments are as follows: 5.11 Acquisition Corp. ("5.11"), Boa Holdings Inc. ("BOA"), The Ergo Baby Carrier, Inc. ("Ergobaby"), Lugano Holdings, Inc.~~, Inc.~~ ("Lugano Diamonds" or "Lugano"), Marucci Sports, LLC ("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 ("Sterno"). ~~At December 31, 2021 and March 31, 2022, Advanced Circuits has been classified as held-for-sale. Refer to~~ ~~Note C - "Discontinued Operations"~~ ~~and~~ ~~Note Q- "Subsequent Events"~~ ~~for further discussion of Advanced Circuits.~~

We acquired our existing businesses (segments) that we own at March 31, ~~2022~~2023 as follows:

Ownership Interest - March 31, 2022
Business Acquisition Date Primary Diluted
Advanced Circuits (1)
May 16, 2006 71.8% 67.6%
Ergobaby September 16, 2010 81.6% 72.8%
Arnold March 5, 2012 98.0% 85.5%
Sterno October 10, 2014 99.4% 90.8%
5.11 August 31, 2016 97.7% 88.4%
Velocity Outdoor June 2, 2017 99.4% 87.7%
Altor Solutions February 15, 2018 100.0% 91.2%
Marucci Sports April 20, 2020 91.1% 82.8%
BOA October 16, 2020 91.8% 83.2%
Lugano September 3, 2021 59.9% 56.2%

~~(1)~~ On October 13, 2021, the LLC, as the representative of the holders of stock and options of Advanced Circuits, entered into a definitive plan of merger to sell all of the outstanding securities of Advanced Circuits. Advanced Circuits has been classified as held for sale at March 31, 2022.


		Ownership Interest - March 31, 2023
Business	Acquisition Date	Primary	Diluted
Ergobaby	September 16, 2010	81.6%	72.8%
Arnold	March 5, 2012	98.0%	85.5%
Sterno	October 10, 2014	99.4%	90.7%
5.11	August 31, 2016	97.7%	88.3%
Velocity Outdoor	June 2, 2017	99.4%	87.7%
Altor Solutions	February 15, 2018	99.8%	88.0%
Marucci Sports	April 20, 2020	91.0%	81.8%
BOA	October 16, 2020	91.8%	83.3%
Lugano	September 3, 2021	59.9%	54.9%
PrimaLoft	July 12, 2022	90.7%	83.7%

We categorize ~~the~~our 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.

3736

The following is an overview of each of our subsidiary businesses:

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 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.

BOA - BOA ~~Technology,~~ 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, ~~hiking/trekking, golf, running, court sports,~~outdoor, athletic, workwear as well as performance headwear and medical bracing. The system consists of three integral parts: a micro-adjustable dial, high-tensile lightweight laces, and low friction lace guides ~~combined with unique configuration applications, which together create~~creating a superior alternative to laces, buckles, ~~hook and loop (Velcro),~~Velcro, and other traditional closure ~~and fit systems.~~mechanisms. Each unique BOA configuration is designed ~~and engineered~~with brand partners to deliver superior fit and performance for athletes, is engineered to perform in the toughest 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 ~~designer, marketer~~global community of confident parents with smart, ergonomic solutions that enable and ~~distributor~~encourage bonding between parents and babies. Ergobaby offers a broad range of ~~wearable~~award-winning baby carriers, ~~and accessories, blankets and~~strollers, bouncers, swaddlers, nursing pillows, ~~strollers~~ and related ~~products. Ergobaby primarily sells its Ergobaby~~products that fit into families’ daily lives seamlessly, comfortably and Baby Tula branded products through brick-and-mortar retailers, national chain stores, online retailers, its own websites and distributors and derives more than half of its sales from outside the United States.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 - ~~Founded in 2009 and headquartered in Baton Rouge, Louisiana,~~- Marucci is a leading designer, manufacturer, and marketer of premium wood and metal baseball bats, fielding gloves, batting gloves, bags, ~~grips,~~ protective gear, sunglasses, on and off-field apparel, and other baseball and softball equipment used by professional and amateur athletes. Marucci also develops ~~retail~~corporate-owned and franchised sports training ~~facilities,~~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 ~~as a corporate owned entity as well as licensing these facilities as franchises. Marucci products are available~~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 ~~owned websites, their team sales organization, Big Box Retailers, and third party e-commerce & resellers.~~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, ~~Velocity Outdoor~~ offers its products under the highly recognizable Crosman, Benjamin, LaserMax, Ravin, CenterPoint and ~~CenterPoint~~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.

Niche Industrial

Altor Solutions - Founded in 1957 and headquartered in Scottsdale, Arizona, 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 1618 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.

Arnold - Arnold serves a 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 ~~our~~its products, technologies, and manufacturing presence to meet the demands of current and emerging markets. Arnold ~~engineers solutions for and~~ produces high performance permanent magnets (PMAG), ~~stators, rotors and full~~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 ~~our~~its customers worldwide. Arnold is the largest and, we believe, the most technically advanced U.S. ~~designer and~~ manufacturer of engineered magnetic systems. Arnold is headquartered in Rochester, New York.

Sterno - Sterno, headquartered in Corona, California, is the parent company of Sterno Products, LLC ("Sterno ~~Products"~~Products")~~, Sterno Home Inc. ("Sterno Home"),~~ and Rimports, ~~Inc.~~LLC ("Rimports"). Sterno is a leading manufacturer and marketer of portable food warming ~~systems, creative indoor and outdoor lighting, and home fragrance solutions~~fuels for the hospitality and consumer ~~markets. Sterno offers a broad range of wick and gel chafing systems, butane stoves and accessories, liquid and traditional wax candles, catering equipment and lamps through Sterno Products,~~markets, flameless candles and ~~outdoor~~house and garden lighting ~~products through Sterno Home,~~for the home decor market, and ~~scented wax cubes and warmer~~wickless candle products used for home decor and fragrance ~~systems through Rimports. During 2021, Sterno made the strategic decision to incorporate the product lines of Sterno Home into Rimports.~~systems.

While our subsidiary businesses have different growth opportunities and potential rates of growth, we ~~work with the management teams of~~actively manage each of our subsidiary businesses to increase the value of, and cash generated by, each business through various initiatives, including making selective capital investments to expand geographic reach, increase capacity or reduce manufacturing costs of our subsidiary businesses; improving and expanding existing sales and marketing programs; and assisting in the acquisition and integration of complementary businesses.

Significant Trends Impacting Our Subsidiary Businesses

~~COVID-19 Update~~

The continued spread of COVID-19 and new variants of the virus around the world continue to present significant risks to our business. The economic and health conditions in the United States and across most of the globe have continued to change since the beginning of the pandemic and the ultimate impact of COVID-19 on our business is dependent on future developments, including the duration of the pandemic, the emergence of variants of the virus and the related length of its impact on the global economy, which are highly uncertain and difficult to accurately predict. The public health situation, global response measures and corresponding impacts on various markets remain fluid and uncertain. The health of our team and various stakeholders is our highest priority, and we have taken multiple steps to provide support and a safe work environment. The Company anticipates that COVID-19 will continue to impact the results of operations, including a potential decrease in gross margins, operating income and Adjusted EBITDA at certain of our businesses during 2022.

~~The following are two significant trends resulting from the COVID-19 pandemic that we anticipate may negatively impact our operating performance in 2022:~~Macroeconomic Trends

~~Global Supply Chain Trends~~

The ~~disruption in the~~macroeconomic environment continues to remain dynamic as global supply chain due to transportation delays and U.S. port congestion have continued in the first quarter of 2022 and are expected to continue to place constraints on several of our businesses. Surges in demand, shifts in shopping patterns related to COVID-19, and the resurgence of COVID-19 variants in manufacturing hubs, as well as other factors, have continued to strain the global supply chain network, which has resulted in carrier-imposed capacity restrictions, carrier delays, and longer lead times. U.S. ports that have been unable to keep pace with unprecedented inbound container volume, which has led to shipping and unloading backlogs, and ports in Asia have been subject to intermittent closures due to the impact of COVID-19 variants. Due to the backlog at the ports and other supply chain disruptions, most of our businesses are experiencing shortages in materials and products, and significant increases in freight costs. Many of our companies are relying on expensive air freight to import goods to meet customer demand. We are also seeing the availability of raw materials, components and finished goods impacted by the supply chain challenges which has led to shortages of certain materials and led to pressure on revenue growth. In addition, the closure of certain Asian manufacturing facilities as a result of local government quarantine efforts has impacted our ability to import products timely. Further, in the U.S., the surge in demand along with COVID-19 related labor shortagesmacroeconomic trends, including inflationary pressures and rising ~~hourly labor wages,~~interest rates, are ~~creating labor shortages~~weakening consumer sentiment and ~~higher labor costs.~~negatively impacting consumer spending behavior. We ~~expect these cost trends to continue through 2022.~~

~~Inflationary Cost Environment~~

We continue to experienced inflationary cost increases in our materials, labor and transportation costs. We expect that these inflationary cost increases will continue but will be partially mitigated by pricing actions implemented in the prior year, as well as those that we plan to implement in 2022. In 2022, we expect changing market conditions and continued inflationary pressures to impact consumer spending.g, particularly for discretionary items purchased by low and middle income consumers. With price pressures unlikely to abate and expected changes in monetary policies, we expect consumer spending ~~may~~to be negatively impacted during 2023. 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 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 ~~2022,~~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 expansion;

•Raising prices, when appropriate, on our goods due to rising input costs to preserve operating ~~margins,~~margins;

•Taking market share, where possible, in each of our niche market leading companies, generally at the expense of less well capitalized competitors;

•Striving for excellence in supply chain management, manufacturing and technological capabilities;

•Continuing to pursue expense reduction and cost savings in lower margin business lines or in response to lower production volume;

•Continuing to ~~pursue growth~~grow through disciplined, strategic acquisitions and rigorous integration processes; and

•~~Working to drive~~Driving free cash flow through increased net income and effective working capital management, enabling continued investment in our businesses.

Recent Events

Sale of Advanced Circuits ~~Merger Agreement~~

On ~~October 13, 2021,~~January 10, 2023, the LLC, solely in its capacity as the representative of the holders ~~(the “AC Sellers”)~~ 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 ~~(the “AC Agreement”)~~ with ~~Tempo Automation,~~APCT Inc. (“~~AC Buyer”~~ACI Purchaser”), ~~Aspen Acquisition~~Circuit Merger Sub, Inc. (“ACACI Merger Sub”) and Advanced Circuits, pursuant to which ~~AC Buyer will~~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 ACACI Merger Sub with and into Advanced Circuits, with Advanced Circuits surviving the merger and becoming a wholly owned subsidiary of ~~AC Buyer~~ACI Purchaser (the ~~“AC~~“ACI Merger”). ~~Under~~The ACI Merger was completed on February 14, 2023. The sale price of Advanced Circuits was based on an enterprise value of $220 million, subject to certain adjustments based on matters such as the terms of the AC Agreement, the AC Sellers will receive consideration in the amount of $310 million, composed of $240 million in cash and $70 million in common stock of a publicly traded special purpose acquisition company (“SPAC”) selected by AC Buyer to acquire AC Buyer upon the closing of the transaction, excluding certain working capital and other adjustments. In addition, the AC Sellers may receive 2.4 million additional shares of SPAC common stock within five years, subject to SPAC stock price performance. The LLC owns approximately 67% of the outstanding stockcash and debt balances of Advanced Circuits ~~on a fully diluted basis and expects to receive approximately 77%~~at the time of the ~~gross consideration payable under~~closing. After the ~~AC Agreement. This amount is in respect~~allocation of the ~~LLC’s outstanding loans~~sales price to Advanced Circuits non-controlling equity holders and ~~its equity interests in~~the payment of transaction expenses, CODI received approximately $170.9 million of total proceeds at 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 an income tax provision of $6.8 million related to the sale of Advanced Circuits. ~~The AC Merger is conditioned on, among other things, the closing of a business combination between AC Buyer and a SPAC.~~In connection with the AC Merger, AC Buyer announced its entry into a definitive merger agreement for a business combination (the “SPAC Transaction”) with a SPAC, ACE Convergence Acquisition Corp. (“ACE”). In order to obtain shareholder approval of the SPAC Transaction, ACE had previously scheduled and announced an extraordinary general meeting of shareholders for May 5, 2022. On May 2, 2022, ACE postponed the extraordinary general meeting to allow additional time to revise and finalize its financing arrangements with respect to the SPAC Transaction. There can be no assurances that all of the conditions to closing the AC Merger, which include the closing of the SPAC Transaction, will be satisfied.

Non-GAAP Financial Measures

"U.S. GAAP" 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.

See “Reconciliation of Non-GAAP Financial Measures” for further discussion of our non-GAAP financial measures and related reconciliations.

Results of Operations

The following discussion reflects a comparison of the historical results of operations of our consolidated business for the three months ended March 31, ~~2022~~2023 and March 31, ~~2021,~~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 Results of Operations for the three months ended March 31, 2023 and 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 months ended March 31, 2023 and 2022, where all periods presented include relevant pro forma adjustments for pre-acquisition periods and explanations where applicable. For the acquisition of ~~Lugano~~PrimaLoft in ~~September 2021,~~July 2022, the pro forma results of operations for the ~~Lugano~~PrimaLoft business segment ~~have~~has been prepared as if we purchased ~~that~~this business on January 1, ~~2021. Where appropriate, relevant pro forma adjustments are reflected as part of the historical operating results of Lugano.~~2022. We believe this is the most meaningful comparison for the operating results of acquired business segments. ~~The consolidated results of operations reflect the operating results of Lugano from the date of acquisition.~~ The following results of operations at each of our businesses are not necessarily indicative of the results to be expected for a full year.

All dollar amounts in the financial tables are presented in thousands. References in the financial tables to percentage changes that are not meaningful are denoted by "NM."

Results of Operations - Consolidated

The following table sets forth our unaudited results of operations for the three months ended March 31, ~~2022~~2023 and ~~2021:~~2022:


		Three months ended				Three months ended
(in thousands)	(in thousands)	March 31, 2022		March 31, 2021			(in thousands)	March 31, 2023		March 31, 2022
Net revenues	Net revenues	$	510,513	$	408,556		Net revenues	$	542,228	$	510,513
Cost of revenues	Cost of revenues	309,698		240,008			Cost of revenues	304,397		309,698
Gross profit	Gross profit	200,815		168,548			Gross profit	237,831		200,815
Selling, general and administrative expense	Selling, general and administrative expense	120,672		104,052			Selling, general and administrative expense	146,165		120,672
Fees to manager	Fees to manager	14,436		10,798			Fees to manager	16,395		14,436
Amortization of intangibles	Amortization of intangibles	21,105		18,589			Amortization of intangibles	26,374		21,105
Operating income	Operating income	44,602		35,109			Operating income	48,897		44,602
Interest expense	Interest expense	(17,419)		(13,805)			Interest expense	(26,180)		(17,419)
Amortization of debt issuance costs	Amortization of debt issuance costs	(866)		(686)			Amortization of debt issuance costs	(1,005)		(866)

Other income (expense)	Other income (expense)	2,036		(2,228)			Other income (expense)	1,127		2,036
Income from continuing operations before income taxes	Income from continuing operations before income taxes	28,353		18,390			Income from continuing operations before income taxes	22,839		28,353
Provision for income taxes	Provision for income taxes	9,976		5,308			Provision for income taxes	9,836		9,976
Net income from continuing operations	Net income from continuing operations	$	18,377	$	13,082		Net income from continuing operations	$	13,003	$	18,377

Three months ended March 31, ~~2022~~2023 compared to three months ended March 31, ~~2021~~2022

Net revenues

Consolidated net revenues for the three months ended March 31, ~~2022~~2023 increased by approximately ~~$102.0~~$31.7 million, or ~~25.0%~~6.2%, compared to the corresponding period in ~~2021.~~2022. Our ~~Lugano~~PrimaLoft business, which we acquired in ~~September 2021,~~July 2022, contributed ~~$47.0~~$24.5 million ~~in net revenue in~~to the ~~first quarter of 2022.~~increase. During the three months ended March 31, ~~2022~~2023 compared to ~~2021,~~2022, we also saw significant increases in net sales at 5.11 ($~~4.1~~20.4 million increase), ~~BOA ($20.4 million),~~ Marucci ($~~15.4~~6.2 million increase), ~~Arnold~~Lugano ($~~5.7~~16.9 million increase), Ergobaby ($2.2 million increase) and ~~Altor Solutions~~Arnold ($~~26.0~~1.9 million increase), partially offset by a decrease in net revenue at BOA ($18.8 million decrease), Velocity Outdoor ($~~14.2~~17.4 million decrease)~~. Add-on acquisitions at Marucci (Lizard Skins in October 2021)~~, Altor ~~(Plymouth Foam in October 2021)~~Solutions ($2.3 million decrease) and Arnold (Ramco Motors in March 2021) contributed to the growth in revenue at these businesses in the first quarter of 2022. During the comparable period in 2021, we saw notable increases in revenue at several of our branded consumer businesses as a result of an increased consumer focus on outdoor related brands during the pandemic. Historically, the third and fourth quarters have been seasonably stronger than the first half of the year in earnings for certain of our businesses. However, in the first quarter of 2021 several of our businesses saw significant revenue growth due to unfulfilled orders from the fourth quarter of 2020 being fulfilled in the first quarter of 2021.~~Further, we believe~~

~~domestic government stimulus boosted spending in the first quarter of 2021 that did not repeat in the first quarter of 2022.~~Notwithstanding this significant demand increase we experienced in the first quarter of 2021, on a consolidated level our businesses were able to increase revenue in the first quarter of 2022 as compared to the prior year as a result of acquisitions and continued strong performance. We expect our 2022 results of operations will be negatively impacted as inflationary pressures will impact demand and discretionary consumer spending both our branded consumer and niche industrial businesses and as the world economy continues to face supply chain constraints which we believe will lead to product fulfillment delays and resulting increased inventory acquisition costs. We expect revenue to be impacted by product and material availability through the first half of 2022.Sterno ($1.9 million decrease). Refer to "Results of Operations - Business Segments" for a more detailed analysis of net revenues by subsidiary business segment.

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

Cost of revenues

On a consolidated basis, cost of revenues ~~increased~~decreased approximately ~~$69.7~~$5.3 million during the three months ended March 31, ~~2022~~2023 compared to the corresponding period in ~~2021.~~2022. We saw notable decreases in cost of revenues at BOA ($5.9 million decrease), Velocity ($12.0 million decrease), Altor ($4.9 million decrease), and Sterno ($4.0 million decrease) that corresponded to the decrease in revenue noted above. Our ~~Lugano~~Marucci business also saw a decrease on cost of sales of $3.2 million, despite an increase in revenue in the current quarter versus the comparable quarter in 2022. In the first quarter of 2022, Marucci had increased air freight costs as they worked to offset supply chain shortages. These decreases were offset by increases in cost of revenue at several of our businesses. Our PrimaLoft business contributed ~~$23.6~~$8.9 million ~~of the increase~~ in ~~net~~cost of revenues for the quarter ended March 31, 2022. We also saw ~~notable~~ increases in cost of revenues at 5.11 ($~~2.0 million increase), Marucci ($13.9 million increase), Altor ($22.0~~9.7 million increase), and ~~Arnold~~Lugano ($~~5.1~~6.0 million increase) that correspond to the revenue increases noted above. Gross profit as a percentage of net revenues was approximately 43.9% in the three months ended March 31, 2023 compared to 39.3% in the three months ended March 31, ~~2022 compared to 41.3% in the three months ended March 31, 2021.~~2022. The ~~decrease~~increase in gross profit as a percentage of net sales in the quarter ended March 31, ~~2022~~2023 as compared to the quarter ended March 31, ~~2021~~2022 is primarily ~~related~~attributable to ~~increased~~ ~~material, labor and transportation costs. The gross margins at both our branded consumer businesses and our niche industrial businesses have been impacted by global supply chain constraints and inflation~~ ~~that is leading to pressure on revenue and costs.Our businesses are implementing~~the implementation of price increases at

most of our subsidiary businesses in ~~order~~response to ~~offset these~~ rising ~~costs which should positively impact gross margins in 2022.~~ costs. Refer to "Results of Operations - Business Segments" for a more detailed analysis of gross profit by subsidiary business segment.

Selling, general and administrative expense

Consolidated selling, general and administrative expense increased approximately ~~$16.6~~$25.5 million during the three months ended March 31, ~~2022,~~2023, compared to the corresponding period in ~~2021.~~2022. A portion of the increase in selling general and administrative expense in the first quarter of ~~2022~~2023 is due to our ~~Lugano~~PrimaLoft acquisition in ~~the current year~~July 2022 ($~~8.5~~5.1 million of the ~~increase)~~increase, of which $1.2 million was attributable to integration services fees). We also saw increases in selling, general and administrative expenses at ~~Marucci and Altor related~~several of our consumer brands due to ~~the add-on acquisitions that occurred in the fourth quarter of 2021, as well as~~ increased investment in marketing and headcount, ~~at several~~particularly 5.11 ($9.0 million of ~~our businesses.~~the increase), Lugano ($4.6 million of the increase) and Marucci ($2.8 million). Refer to "Results of Operations - 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 $4.8 million in the first quarter quarter of 2023 and $3.6 million in the first quarter of 2022, ~~and $3.0~~an increase of $1.2 million indue to the ~~first quarter~~timing of ~~2021. The increase in expense at the corporate level in the current quarter is primarily attributable to~~investor relation events and 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 March 31, ~~2022,~~2023, we incurred approximately ~~$14.4~~$16.4 million in management fees as compared to ~~$10.8~~$14.4 million in fees in the three months ended March 31, ~~2021.~~2022. The increase in Management fees is primarily attributable to our acquisition of ~~Lugano~~PrimaLoft in ~~September 2021, offset by our sale of Liberty in August 2021.~~July 2022. CGM ~~had~~ entered into a waiver of the MSA for a period through ~~December 31, 2021~~June 30, 2023 to receive a 1% annual management fee related to ~~BOA,~~PrimaLoft, rather than the 2% called for under the MSA, which resulted in a lower management fee paid in the first quarter of ~~2021~~2023 than would have normally been due. In the first quarter of 2021, the LLC and CGM entered into a waiver agreement whereby CGM agreed to waive the portion of the management fee related to the amount of the cash proceeds deposited with the Trustee that was in excess of the amount payable related to the 2026 Notes at March 31, 2021. Additionally, CGM has entered into a waiver of the MSA at March 31, 2022 to exclude the cash balances held at the LLC from the calculation of the management fee.

Amortization expense

Amortization expense for the three months ended March 31, ~~2022~~2023 increased ~~$2.5~~$5.3 million as compared to the three months ended March 31, ~~2021~~2022 as a result of the amortization expense associated with the intangibles that were recognized in conjunction with the purchase price allocation for ~~Lugano,~~PrimaLoft, which was acquired in ~~September 2021.~~July 2022.

Interest expense

We recorded interest expense totaling ~~$17.4~~$26.2 million for the three months ended March 31, ~~2022~~2023 compared to ~~$13.8~~$17.4 million for the comparable period in ~~2021,~~2022, an increase of ~~$3.6~~$8.8 million. The increase in interest expense in the current ~~year~~quarter reflects ~~the~~ higher ~~amount~~amounts outstanding on our ~~senior notes during~~revolving credit facility in the current year, ~~after~~the interest expense associated with our 2022 Term Loan that we ~~redeemed $600.0 million~~entered into in July 2022 in connection with our acquisition of ~~8.000% 2026 Senior Notes~~PrimaLoft, and ~~issued $1000.0 million of 5.250% 2029 senior Notes~~the higher interest rate environment in ~~March of 2021, and issued an additional $300.0 million of 5.000% 2032 Senior Notes~~the current quarter versus the comparable quarter in ~~November 2021.~~the prior year.

Other income (expense)

For the quarter ended March 31, ~~2022,~~2023, we recorded ~~$2.0~~$1.1 million in other income as compared to ~~$2.2~~$2.0 million in other ~~expense~~income in the quarter ended March 31, ~~2021,~~2022, a decrease in ~~expense~~other income of ~~$4.3~~$0.9 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.

Income taxes

We had an income tax provision of ~~$10.0~~$9.8 million during the three months ended March 31, ~~2022~~2023 compared to an income tax provision of ~~$5.3~~$10.0 million during the same period in ~~2021.~~2022, a decrease of $0.1 million. Our income before income taxes for the quarter ended March 31, ~~2022 increased~~2023 decreased by approximately ~~$10.0~~$5.5 million as compared to the prior year quarter. During the first quarter ~~driven by~~of 2023, we had an effective income tax rate of 43.1% as compared to an effective income tax rate of 35.2% for the ~~acquisitions~~first quarter of ~~Lugano in September 2021,~~2022. During the first quarter of 2023, the effective income tax rate differed from the U.S. statutory rate of 21.0% primarily due to foreign income taxes and ~~an increase in earnings~~limitations on the use of net operating loss carryforwards at ~~several of~~ our businesses, during the quarter, particularly 5.11 and BOA. Our tax provision increased $4.7 million as the tax provision reflects an annual effective tax rate at our subsidiaries, the effect of state and local taxes and the related allocation of income, and the losses at our parent company, which was previously taxed as a partnership.

On September 1, 2021, the Trust elected to “check-the-box” to have the Trust treated as a corporation for U.S. federal income tax purposes. This election did not have a material impact on our consolidated tax provisionwhile in the first quarter of ~~2022.~~2022, the difference was primarily attributable to the classification of our Advanced Circuits business as held-for-sale.

Results of Operations - Business Segments

Branded Consumer Businesses

5.11


		Three months ended								Three months ended
		March 31, 2022				March 31, 2021					March 31, 2023		March 31, 2022
Net sales	Net sales	$	104,023	100.0	%	$	99,877	100.0	%			Net sales	$	124,452	100.0	%	$	104,023	100.0	%
Gross profit	Gross profit	$	54,180	52.1	%	$	52,074	52.1	%			Gross profit	$	64,943	52.2	%	$	54,180	52.1	%
SG&A	SG&A	$	45,833	44.1	%	$	43,775	43.8	%			SG&A	$	54,831	44.1	%	$	45,833	44.1	%
Operating income		$	5,905	5.7	%	$	5,836	5.8	%
Segment operating income												Segment operating income	$	7,670	6.2	%	$	5,905	5.7	%

Three months ended March 31, ~~2022~~2023 compared to three months ended March 31, ~~2021~~2022

Net sales

Net sales for the three months ended March 31, ~~2022~~2023 were ~~$104.0~~$124.5 million as compared to net sales of ~~$99.9~~$104.0 million for the three months ended March 31, ~~2021,~~2022, an increase of ~~$4.1~~$20.4 million, or ~~4.2%~~19.6%. This increase is due ~~in part~~ to ~~direct-to-consumer~~domestic wholesale growth of $9.1 million and international sales growth of ~~$2.8~~$4.9 million ~~up 7%~~resulting from ~~the prior year comparable period. Retail sales grew largely due to positive growth in same-store sales for the three months ended March 31, 2022~~strong demand and inventory availability improvement as compared to the ~~same period last year, as well as increased sales from twelve new retail store openings since March 2021 (bringing the total store count to eighty-eight as of March 31, 2022).~~prior year. Net sales were also positively impacted by a ~~$2.7~~$9.0 million increase in ~~direct-to-agency~~direct-to-consumer sales ~~following~~largely due to sales from thirty new retail store openings since March 2022 (bringing the ~~completion~~total store count to 118 as of ~~a large contract and $1.4 million increase~~March 31, 2023), as well as strong demand in ~~other international channel~~digital sales. These increases in sales were partially offset by a decrease of ~~$2.3~~$2.0 million in direct to agency sales resulting from the ~~domestic wholesale channel due to supply chain challenges limiting inventory availability.~~

fulfillment of a large contract in the prior year.

Gross profit

Gross profit as a percentage of net sales was ~~52.1%~~52.2% in ~~both~~ the three months ended March 31, ~~2022 and~~2023 as compared to 52.1% for the three months ended March 31, ~~2021.~~2022. Gross profit percentage ~~was driven by channel mix as direct to consumer sales, which realize higher gross profit than wholesale sales, grew versus~~for the ~~prior period. Gross profit percentage~~three months ended March 31, 2023, was ~~also~~ favorably impacted by ~~a domestic~~ price ~~increase which went into effect early in July 2021,~~increases, as well as customer mix and product mix, which was largely offset by ~~continued increases in inbound ocean~~increased product costs, and ~~air freight charges during the period due~~lower margin on direct to ~~logistic challenges.~~agency sales.

Selling, general and administrative expense

Selling, general and administrative expense for the three months ended March 31, ~~2022~~2023 was ~~$45.8~~$54.8 million, or 44.1% of net sales compared to ~~$43.8~~$45.8 million, or ~~43.8%~~44.1% of net sales for the comparable period in ~~2021.~~2022. The increase in selling, general and administrative expense for the three months ended March 31, ~~2022~~2023 as compared to the prior year comparable period was largely driven by the costs associated with additional retail stores, as well as increased sales and marketing spend, ~~to drive digital sales,~~increased usage of temporary labor, and increased travel and entertainment spend coming out of the COVID-19 pandemic. These increases were partially offset by a decrease in variable marketplace expenses based on decreased sales in the wholesale channel.bonus related expenses.

~~Income from operations~~Segment operating income

~~Income from operations~~Segment operating income for the three months ended March 31, ~~2022~~2023 was ~~$5.9~~$7.7 million, an increase of ~~$0.1~~$1.8 million when compared to segment operating income ~~from operations~~ of ~~$5.8~~$5.9 million for the same period in ~~2021,~~2022, based on the factors described above.

BOA


		Three months ended						Three months ended
		March 31, 2022			March 31, 2021				March 31, 2023		March 31, 2022
Net sales	Net sales	$	56,810	100.0%	$	36,452	100.0%			Net sales	$	37,986	100.0%	$	56,810	100.0%
Gross profit	Gross profit	$	35,692	62.8%	$	22,764	62.4%			Gross profit	$	22,791	60.0%	$	35,692	62.8%
SG&A	SG&A	$	12,713	22.4%	$	11,424	31.3%			SG&A	$	10,660	28.1%	$	12,713	22.4%

Operating income		$	18,811	33.1%	$	7,254	19.9%
Segment operating income										Segment operating income	$	7,951	20.9%	$	18,811	33.1%

Three months ended March 31, ~~2022~~2023 compared to three months ended March 31, ~~2021~~2022

Net sales

Net sales for the three months ended March 31, ~~2022~~2023 were ~~$56.8~~$38.0 million as compared to net sales of ~~$36.5~~$56.8 million for the three months ended March 31, ~~2021, an increase~~2022, a decrease of ~~$20.4~~$18.8 million, or ~~55.8%~~33.1%. The ~~increase~~main factor of the decrease in sales was ~~reflected across key industries including Snow Sports, Outdoor, Athletic and Workwear. The three factors impacting their growth rates were~~higher than anticipated end market ~~share gains, increased consumer participation as well as accelerated production ordering by BOA’s customers~~inventory levels due to ~~longer lead times resulting from overall global~~ supply chain ~~constraints.~~normalization and corresponding inventory ordering surge experienced in many of our industries in 2022. We anticipate a normalization of inventory levels by the end of this year.

Gross profit

Gross profit as a percentage of net sales was ~~62.8%~~60.0% in the three months ended March 31, ~~2022~~2023 as compared to ~~62.4%~~62.8% for the three months ended March 31, ~~2021.~~2022. The ~~increase~~decrease in gross profit as a percentage of net sales was driven by ~~product mix.~~fixed manufacturing overhead expenses and an increase in depreciation related to tooling.

Selling, general and administrative expense

Selling, general and administrative expense for the three months ended March 31, ~~2022~~2023 was ~~$12.7~~$10.7 million, or ~~22.4%~~28.1% of net sales compared to ~~$11.4~~$12.7 million, or ~~31.3%~~22.4% of net sales for the comparable period in ~~2021.~~2022. The ~~increase~~decrease in selling, general, and administrative expense is dueprimarily due to ~~increased~~decreased employee costs related to ~~BOA's~~BOA’s bonus plan, incremental headcount and marketing investments. Selling general and administrative expense in the three months ended March 31, 2021 included $1.1 million in integration services fees paid to CGM that did not recur in the current quarter.plan.

~~Income from operations~~Segment operating income

~~Income from operations~~Segment operating income for the three months ended March 31, ~~2022~~2023 was ~~$18.8~~$8.0 million, ~~an increase~~a decrease of ~~$11.6~~$10.9 million when compared to segment operating income ~~from operations~~ of ~~$7.3~~$18.8 million for the same period in ~~2021,~~2022, based on the factors described above.

Ergobaby


		Three months ended								Three months ended
		March 31, 2022				March 31, 2021					March 31, 2023		March 31, 2022
Net sales	Net sales	$	20,210	100.0	%	$	22,328	100.0	%			Net sales	$	22,418	100.0	%	$	20,210	100.0	%
Gross profit	Gross profit	$	12,177	60.3	%	$	15,029	67.3	%			Gross profit	$	14,115	63.0	%	$	12,177	60.3	%
SG&A	SG&A	$	10,467	51.8	%	$	10,925	48.9	%			SG&A	$	11,737	52.4	%	$	10,467	51.8	%
Operating income		$	(276)	(1.4)	%	$	1,964	8.8	%
Segment operating income (loss)												Segment operating income (loss)	$	388	1.7	%	$	(276)	(1.4)	%

Three months ended March 31, ~~2022~~2023 compared to three months ended March 31, ~~2021~~2022

Net sales

Net sales for the three months ended March 31, ~~2022~~2023 were ~~$20.2~~$22.4 million, ~~a decrease~~an increase of ~~$2.1~~$2.2 million, or ~~9.5%~~10.9%, compared to the same period in ~~2021.~~2022. During the three months ended March 31, ~~2022,~~2023, international sales were approximately ~~$12.0~~$13.6 million, representing ~~a decrease~~an increase of ~~$1.5~~$1.6 million over the corresponding period in ~~2021,~~2022, primarily as a result o~~f reduced~~of Asia-Pacific and Latin America distributor ~~sales in the Asia-Pacific region.~~sales. Domestic sales were ~~$8.2~~$8.8 million in the first quarter of ~~2022,~~2023, reflecting ~~a decrease~~an increase of $0.6 million compared to the corresponding period in ~~2021.~~2022. The ~~decrease~~increase in ~~domestic~~ sales was primarily ~~attributable~~due to ~~lower Tula e-commerce~~our owned websites as well as key accounts. Both groups saw increases in existing product categories as well as continued sales ~~and a one-time royalty payment received in 2021.~~from products launched late last year.

Gross profit

Gross profit as a percentage of net sales was 63.0% for the three months ended March 31, 2023, as compared to 60.3% for the three months ended March 31, ~~2022, as compared to 67.3% for the three months ended March 31, 2021.~~2022. The ~~decrease~~increase in gross profit as a percentage of sales was due to ~~increased material costs as well as~~ ~~increased~~a reduction in inbound freight ~~(including air freight) as a result of continued supply chain shortages.~~compared to the prior year.

Selling, general and administrative expense

Selling, general and administrative expense ~~decreased $0.5~~increased $1.3 million quarter over quarter, with expense of ~~$10.5~~$11.7 million, or ~~51.8%~~52.4% of net sales for the three months ended March 31, ~~2022~~2023 as compared to ~~$10.9~~$10.5 million or ~~48.9%~~51.8% of net sales for the same period of ~~2021.~~2022. The ~~decrease~~increase in selling, general and administrative expense in the three months ended March 31, ~~2022~~2023 as compared to the comparable period in the prior year is duedue to ~~favorable~~ payroll ~~expense~~expenses and ~~a reduction in variable expenses that correlated to the lower revenues in the first quarter of 2022.~~accruals, transportation costs and warehousing as well as increased marketing expenses.

~~Income~~

Segment operating income (loss) ~~from operations~~

Ergobaby had ~~a loss from operations~~segment operating income of ~~$0.3~~$0.4 million for the three months ended March 31, ~~2022, a decrease~~2023, an increase of ~~$2.2~~$0.7 million compared to the same period in ~~2021,~~2022, based on the factors noted above.

Lugano

In the following results of operations, we provide comparative pro forma results of operations for Lugano for the three months ended March 31, 2021 as if we had acquired the business on January 1, 2021. ~~The results of operations that follows include relevant pro-forma adjustments for pre-acquisition periods and explanations where applicable.~~ ~~The operating results for Lugano have been included in the consolidated results of operation from the date of acquisition in September 2021.~~

Three months ended
March 31, 2022 March 31, 2021
Pro forma
Net sales $ 47,019 100.0 % $ 29,439 100.0 %
Gross profit $ 23,432 49.8 % $ 15,174 51.5 %
SG&A $ 8,487 18.1 % $ 4,454 15.1 %
Operating income $ 13,606 28.9 % $ 9,292 31.6 %

~~Pro forma results of operations include the following pro form adjustments as if we had acquired Lugano January 1, 2021:~~

•~~Depreciation expense associated with the increase in depreciable lives of capital assets of $0.5 million for the three months ended March 31, 2021.~~

•~~Amortization expense associated with the intangible assets recorded in connection with the purchase price allocation for Lugano of $1.2 million for the three months ended March 31, 2021.~~

•~~Management fees that would have been payable to the Manager during each period.~~


	Three months ended
	March 31, 2023				March 31, 2022
Net sales	$	63,887	100.0	%	$	47,019	100.0	%
Gross profit	$	34,277	53.7	%	$	23,432	49.8	%
SG&A	$	13,073	20.5	%	$	8,487	18.1	%
Segment operating income	$	19,776	31.0	%	$	13,606	28.9	%

Three months ended March 31, ~~2022~~2023 compared to ~~Pro forma~~ three months ended March 31, ~~2021~~2022

Net sales

Net sales for the quarter ended March 31, ~~2022~~2023 increased approximately ~~$17.6~~$16.9 million, or ~~59.7%~~35.9%, to ~~$47.0~~$63.9 million, compared to the corresponding quarter ended March 31, ~~2021.~~2022. Lugano sells high-end jewelry primarily through retail salons in California, Florida, Texas and Colorado, and via pop-up showrooms at multiple equestrian, social and charitable functions each year. The sales in the first quarter of the prior year were still impacted by the effects of the COVID-19 pandemic which limited the number of events attended by Lugano and led to reduced net sales as compared to the current year. In the current year, Lugano has experienced an increase in sales as it has invested in building out its inventory as well as its sales, marketing and event staff, ~~and increased~~while increasing the number of functions it has attended. Lugano expects to open more retail locations in the near term to expand sales opportunities.

Gross profit

Gross profit as a percentage of net sales totaled approximately ~~49.8%~~53.7% and ~~51.5%~~49.8% for the quarters ended March 31, ~~2022~~2023 and March 31, ~~2021,~~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 period.

Selling, general and administrative expense

Selling, general and administrative expense was ~~$8.5~~$13.1 million for the three months ended March 31, ~~2022~~2023 as compared to ~~$4.5~~$8.5 million in selling, general and administrative expense in the three months ended March 31, ~~2021.~~2022. Selling, general and administrative expense represented ~~18.1%~~20.5% of net sales in the three months ended March 31, ~~2022~~2023 and ~~15.1%~~18.1% of net sales for the same period of ~~2021.~~2022. The ~~effects of the COVID-19 pandemic were still being felt at the beginning of 2021, leading~~increase in selling, general and administrative expense is primarily due to ~~a reduction in variable costs, particularly~~increased marketing ~~and advertising~~ spend and ~~shows, in the three months ended March 31, 2021. Additionally,~~personnel costs. Lugano has increased its head count in the last year as it invests in additional professionals to support its growth.

~~Income from operations~~Segment operating income

~~Income from operations~~Segment operating income increased during the three months ended March 31, ~~2022~~2023 to ~~$13.6~~$19.8 million, as compared to ~~$9.3~~$13.6 million in the corresponding period in ~~2021.~~2022. This increase was a result of the factors noted above.

Marucci Sports


		Three months ended								Three months ended
		March 31, 2022				March 31, 2021					March 31, 2023		March 31, 2022
Net sales	Net sales	$	52,092	100.0	%	$	36,648	100.0	%			Net sales	$	58,295	100.0	%	$	52,092	100.0	%
Gross profit	Gross profit	$	23,346	44.8	%	$	21,788	59.5	%			Gross profit	$	32,767	56.2	%	$	23,346	44.8	%
SG&A	SG&A	$	13,123	25.2	%	$	9,454	25.8	%			SG&A	$	15,902	27.3	%	$	13,123	25.2	%
Amortization expense		$	2,213	4.2	%	$	1,702	4.6	%
Operating income		$	7,885	15.1	%	$	10,507	28.7	%

Segment operating income												Segment operating income	$	14,340	24.6	%	$	7,885	15.1	%

4644

Three months ended March 31, ~~2022~~2023 compared to three months ended March 31, ~~2021~~2022

Net sales

Net sales for the three months ended March 31, ~~2022~~2023 were ~~$52.1~~$58.3 million, an increase of ~~$15.4~~$6.2 million as compared to net sales of ~~$36.6~~$52.1 million for the three months ended March 31, ~~2021.~~2022. The increase in net sales was primarily due to ~~Marucci's acquisition of Lizard Skins in the fourth quarter of 2022, as well as~~ increased customer demand and market share in many of Marucci's key product lines, including aluminum and wood bats, and batting gloves.

Gross profit

Gross profit for the quarter ended March 31, ~~2022~~2023 increased ~~$1.6~~$9.4 million as compared to the three months ended March 31, ~~2021.~~2022. Gross profit as a percentage of net sales for the three months ended March 31, ~~2022~~2023 was ~~44.8%~~56.2%, as compared to gross profit as a percentage of sales of ~~59.5%~~44.8% for the three months ended March 31, 2021. In the current quarter, Marucci recorded $1.5 million in amortization of the inventory step-up resulting from the acquisition purchase price allocation of Lizard Skins. Excluding the effect of the step-up amortization, the gross profit as a percentage of net sales for the three months ended March 31, 2022 was 47.6%.2022. The ~~decrease~~increase in gross profit as a percentage of net sales during the quarter ended March 31, ~~2022~~2023 as compared to the quarter ended March 31, ~~2021,~~2022, was primarily due to ~~increased freight costs,~~higher spending on air-freight in the prior year quarter as ~~delays in Marucci's~~ supply chain ~~coupled with demand exceeding the company's forecast,~~issues led to increased ~~use of air freight to meet increased demand from Marucci's customer base.~~transportation costs.

Selling, general and administrative expense

Selling, general and administrative expense for the three months ended March 31, ~~2022~~2023 was ~~$13.1~~$15.9 million, or ~~25.2%~~27.3% of net sales compared to ~~$9.5~~$13.1 million, or ~~25.8%~~25.2% of net sales for the three months ended March 31, ~~2021.~~2022. The increase in selling, general and administrative expense for the three months ended March 31, ~~2022~~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.

~~Income from operations~~Segment operating income

~~Income from~~Segment operating income for the three months ended March 31, 2023 was $14.3 million, an increase of $6.5 million when compared to segment operating income of $7.9 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 months ended March 31, 2022 ~~was $7.9 million, a decrease~~as if we had acquired the business on January 1, 2022. The results of ~~$2.6 million when compared to income~~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 ended
	March 31, 2023				March 31, 2022
					Pro forma
Net sales	$	24,529	100.0	%	$	25,748	100.0	%
Gross profit	$	15,580	63.5	%	$	15,496	60.2	%
SG&A	$	5,101	20.8	%	$	4,712	18.3	%
Segment operating income	$	5,026	20.5	%	$	5,331	20.7	%

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 ~~$10.5~~PrimaLoft of $4.0 million for the ~~same period in 2021, primarily as a result of the factors noted above and an increase in amortization expense related~~three months ended March 31, 2022.

•Management fees that would have been payable to the ~~Lizard Skins intangibles assets.~~Manager during the period.

~~Velocity Outdoor~~

Three months ended
March 31, 2022 March 31, 2021
Net sales $ 51,446 100.0 % $ 65,632 100.0 %
Gross profit $ 13,372 26.0 % $ 21,156 32.2 %
SG&A $ 7,897 15.4 % $ 7,714 11.8 %
Operating income $ 3,067 6.0 % $ 11,034 16.8 %

Three months ended March 31, ~~2022~~2023 compared to proforma three months ended March 31, ~~2021~~2022

Net sales

Net sales for the three months ended March 31, ~~2022~~2023 were ~~$51.4~~$24.5 million, a decrease of ~~$14.2~~$1.2 million as compared to net sales of $25.7 million for the three months ended March 31, 2022. The decrease in net sales in the current quarter versus the quarter ended March 31, 2022 is attributable to lower ordering from existing customers as a result of higher inventory levels at retail customers which more than offset new customer wins.

Gross profit

Gross profit for the quarter ended March 31, 2023 increased $0.1 million as compared to the three months ended March 31, 2022. Gross profit as a percentage of net sales for the three months ended March 31, 2023 was 63.5%, as compared to gross profit as a percentage of sales of 60.2% for the three months ended March 31, 2022. The increase in gross profit as a percentage of net sales in the quarter ended March 31, 2023 as compared to the quarter ended March 31, 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 three months ended March 31, 2023 was $5.1 million, or ~~21.6%~~20.8% of net sales compared to $4.7 million, or 18.3% of net sales for the three months ended March 31, 2022. 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 March 31, 2023 was $5.0 million, a decrease of $0.3 million when compared to segment operating income of $5.3 million for the same period in 2022, primarily as a result of the factors noted above.

Velocity Outdoor


	Three months ended
	March 31, 2023				March 31, 2022
Net sales	$	34,040	100.0	%	$	51,446	100.0	%
Gross profit	$	8,015	23.5	%	$	13,372	26.0	%
SG&A	$	8,770	25.8	%	$	7,897	15.4	%
Segment operating (loss) income	$	(3,276)	(9.6)	%	$	3,067	6.0	%

Three months ended March 31, 2023 compared to three months ended March 31, 2022

Net sales

Net sales for the three months ended March 31, 2023 were $34.0 million, a decrease of $17.4 million or 33.8%, compared to the same period in ~~2021.~~2022. The decrease in net sales for the three months ended March 31, ~~2022~~2023 is primarily due to ~~softness in the Airgun market driven in part by~~ inflationary pressures ~~along with delays in our shipping channels.~~on retail demand.

Gross profit

Gross profit for the quarter ended March 31, ~~2022~~2023 decreased ~~$7.8~~$5.4 million as compared to the quarter ended March 31, ~~2021.~~2022. Gross profit as a percentage of net sales decreased to ~~26.0%~~23.5% for the three months ended March 31, ~~2022~~2023 as compared to ~~32.2%~~26.0% in the three months ended March 31, ~~2021 due to product mix as we sold 2021 models received in~~ 2022 ~~at lower margins~~ due to ~~supply chain disruptions.~~

reduced absorption of operating costs.

Selling, general and administrative expense

Selling, general and administrative expense for the three months ended March 31, ~~2022~~2023 was ~~$7.9~~$8.8 million, or ~~15.4%~~25.8% of net sales compared to ~~$7.7~~$7.9 million, or ~~11.8%~~15.4% of net sales for the three months ended March 31, ~~2021.~~2022. The increase in selling, general and administrative expense ~~as a percentage of net sales~~ for the three months ended March 31, ~~2022~~2023 as compared to the prior period is driven by reduced revenue along with marketing investments associated with the ~~decrease in net sales as spending on selling, general and administrative expense was flat year-over-year, with Velocity continuing to invest in consumer marketing.~~King's

~~Income from operations~~

~~Income from operations~~acquisition.

Segment operating income (loss)

Segment operating loss for the three months ended March 31, ~~2022~~2023 was ~~$3.1~~$3.3 million, a decrease of ~~$8.0~~$6.3 million when compared to segment operating income ~~from operations~~ of ~~$11.0~~$3.1 million for the same period in ~~2021~~2022 based on the factors noted above.

Niche Industrial Businesses

Altor Solutions


		Three months ended								Three months ended
		March 31, 2022				March 31, 2021					March 31, 2023		March 31, 2022
Net sales	Net sales	$	63,828	100.0	%	$	37,820	100.0	%			Net sales	$	61,512	100.0	%	$	63,828	100.0	%
Gross profit	Gross profit	$	14,139	22.2	%	$	10,084	26.7	%			Gross profit	$	16,713	27.2	%	$	14,139	22.2	%
SG&A	SG&A	$	5,719	9.0	%	$	3,736	9.9	%			SG&A	$	7,182	11.7	%	$	5,719	9.0	%
Operating income		$	5,834	9.1	%	$	4,684	12.4	%
Segment operating income												Segment operating income	$	6,934	11.3	%	$	5,834	9.1	%

Three months ended March 31, ~~2022~~2023 compared to three months ended March 31, ~~2021~~2022

Net sales

Net sales for the quarter ended March 31, ~~2022~~2023 were ~~$63.8~~$61.5 million, ~~an increase~~a decrease of ~~$26.0~~$2.3 million, or ~~68.8%~~3.6%, compared to the quarter ended March 31, ~~2021.~~2022. The ~~increase~~decrease in net sales during the quarter was due to ~~the acquisition of Plymouth Foam~~lower than expected volume, primarily in ~~October 2021, organic growth in Altor's appliance~~construction and cold chain customer sectors, and contractual and general increases in selling prices during the latter half of 2021 and the first quarter of 2022. Plymouth Foam sales for the quarter ended March 31, 2022 were $15.2 million.building products.

Gross profit

Gross profit as a percentage of net sales was ~~22.2%~~27.2% and ~~26.7%~~22.2% for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~decrease~~increase in gross profit as a percentage of net sales in the quarter ended March 31, ~~2022,~~2023, was primarily due to ~~increases in the price of Altor's primary~~favorable raw material ~~expanded polystyrene ("EPS"), and increased operating costs, particularly labor.~~market decreases.

Selling, general and administrative expense

Selling, general and administrative expense for the three months ended March 31, ~~2022~~2023 was ~~$5.7~~$7.2 million as compared to ~~$3.7~~$5.7 million for the three months ended March 31, ~~2021,~~2022, an increase of ~~$2.0~~$1.5 million. The increase in selling, general and administrative expense in the first quarter of ~~2022~~2023 was due to operational and administrative investments made in the ~~acquisition~~business in the latter part of ~~Plymouth Foam.~~2022.

~~Income from operations~~Segment operating income

~~Income from operations~~Segment operating income was ~~$5.8~~$6.9 million in the three months ended March 31, ~~2022,~~2023, an increase of ~~$1.2~~$1.1 million as compared to the three months ended March 31, ~~2021,~~2022, based on the factors noted above.

Arnold


	Three months ended
	March 31, 2023				March 31, 2022
Net sales	$	40,090	100.0	%	$	38,165	100.0	%
Gross profit	$	12,041	30.0	%	$	9,982	26.2	%
SG&A	$	6,252	15.6	%	$	5,623	14.7	%
Segment operating income	$	5,038	12.6	%	$	3,288	8.6	%

~~Arnold~~

Three months ended
March 31, 2022 March 31, 2021
Net sales $ 38,165 100.0 % $ 32,485 100.0 %
Gross profit $ 9,982 26.2 % $ 9,373 28.9 %
SG&A $ 5,623 14.7 % $ 5,442 16.8 %
Operating income $ 3,288 8.6 % $ 2,996 9.2 %

Three months ended March 31, ~~2022~~2023 compared to three months ended March 31, ~~2021~~2022

Net sales

Net sales for the three months ended March 31, ~~2022~~2023 were approximately ~~$38.2~~$40.1 million, an increase of ~~$5.7~~$1.9 million compared to the same period in ~~2021.~~2022. International sales were ~~$12.0~~$13.4 million in the three months ended March 31, ~~2022~~2023 and ~~$11.1~~$12.0 million in the three months ended March 31, ~~2021.~~2022. The increase in net sales is primarily a result of increased demand in ~~oil~~several markets including aerospace and ~~gas, transportation~~defense, and ~~industrial markets, driven in part by the acquisition of Ramco Electric Motors, Inc. in March 2021.~~industrial.

Gross profit

Gross profit for the three months ended March 31, ~~2022~~2023 was approximately ~~$10.0~~$12.0 million compared to approximately ~~$9.4~~$10.0 million in the same period of ~~2021.~~2022. Gross profit as a percentage of net sales ~~decreased~~increased to ~~26.2%~~30.0% for the quarter ended March 31, ~~2022~~2023 from ~~28.9%~~26.2% in the quarter ended March 31, ~~2021~~2022 principally ~~due~~due to to increased volume, product mix and ~~increased costs of labor, supplies and raw materials.~~operational improvements.

Selling, general and administrative expense

Selling, general and administrative expense in the three months ended March 31, ~~2022~~2023 was ~~$5.6~~$6.3 million, an increase in expense of approximately ~~$0.2~~$0.6 million compared to ~~$5.4~~$5.6 million for the three months ended March 31, ~~2021.~~2022. Selling, general and administrative expense was ~~14.7%~~15.6% of net sales in the three months ended March 31, ~~2022~~2023 and ~~16.8%~~14.7% in the three months ended March 31, ~~2021; a decrease of 2.1% in selling, general and administrative expenses as a percent of net sales.~~2022. The ~~slight~~ increase in selling general and administrative expense was due to increased staffing related costs ~~driven in part by the acquisition of Ramco Electric Motors, Inc. in March 2021~~ and ~~partially offset by non-recurring acquisition~~increased travel and ~~legal costs.~~commission expenses.

~~Income from operations~~Segment operating income

~~Income from operations~~Segment operating income for the three months ended March 31, ~~2022~~2023 was approximately ~~$3.3~~$5.0 million, an increase of ~~$0.3~~$1.8 million when compared to the same period in ~~2021,~~2022, as a result of the factors noted above.

Sterno


		Three months ended								Three months ended
		March 31, 2022				March 31, 2021					March 31, 2023		March 31, 2022
Net sales	Net sales	$	76,920	100.0	%	$	77,314	100.0	%			Net sales	$	75,019	100.0	%	$	76,920	100.0	%
Gross profit	Gross profit	$	14,496	18.8	%	$	16,280	21.1	%			Gross profit	$	16,560	22.1	%	$	14,496	18.8	%
SG&A	SG&A	$	7,194	9.4	%	$	7,618	9.9	%			SG&A	$	7,830	10.4	%	$	7,194	9.4	%
Operating income		$	3,034	3.9	%	$	4,284	5.5	%
Segment operating income												Segment operating income	$	4,493	6.0	%	$	3,034	3.9	%

Three months ended March 31, ~~2022~~2023 compared to three months ended March 31, ~~2021~~2022

Net sales

Net sales for the three months ended March 31, ~~2022~~2023 were approximately ~~$76.9~~$75.0 million, a decrease of ~~$0.4~~$1.9 million, or ~~0.5%~~2.5%, compared to the same period in ~~2021.~~2022. The net sales variance reflects ~~softer~~lower sales at Rimports due to ~~change~~changes in consumer discretionary ~~consumer~~ buying behaviors ~~due to inflation~~as a result of inflationary pressures, partially offset by strong sales at Sterno Products with increased ~~business~~spending in travel, entertainment, weddings and conventions.

Gross profit

Gross profit as a percentage of net sales ~~decreased~~increased from ~~21.1%~~18.8% for the three months ended March 31, ~~2021~~2022 to ~~18.8%~~22.1% for the ~~same period~~three months ended March 31, ~~2022.~~2023. The ~~decrease~~increase in gross profit percentage in the first quarter of ~~2022~~2023 as compared to the first quarter of ~~2021~~2022 was primarily attributable to ~~increased material~~favorable labor, overhead, and freight ~~costs. These are driven by~~costs across the ~~strong demand driving metals~~businesses and ~~chemical inflation combined with higher freight due to disruptions in~~ the ~~global supply chain.~~effect of a price increase at Sterno Products.

Selling, general and administrative expense

Selling, general and administrative expense for the three months ended March 31, ~~2022~~2023 was approximately ~~$7.2~~$7.8 million as compared to ~~$7.6~~$7.2 million for the three months ended March 31, ~~2021, a decrease~~2022, an increase of ~~$0.4~~$0.6 million reflecting ~~lower~~an increase in marketing related salaries and ~~bonus~~promotional activity for both divisions of the company in the current ~~quarter~~quarter. . Selling, general and administrative expense represented ~~9.4%~~10.4% of net sales for the three months ended March 31, ~~2022~~2023 and ~~9.9%~~9.4% for the three months ended March 31, ~~2021.~~2022.

~~Income from operations~~

~~Income from operations~~Segment operating income

Segment operating income for the three months ended March 31, ~~2022~~2023 was approximately ~~$3.0~~$4.5 million, ~~a decrease~~an increase of ~~$1.3~~$1.5 million compared to the three months ended March 31, ~~2021~~2022 based on the factors noted above.

Liquidity and Capital Resources

We generate cash primarily from the operations of our subsidiaries, and we have the ability to borrow under our ~~2021~~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 ~~shares~~ 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.

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 March 31, ~~2022,~~2023, we had $1,000.0 million of indebtedness associated with our 5.250% 2029 ~~Senior~~ Notes, ~~and~~ $300 million of indebtedness associated with our 5.000% 2032 ~~Senior Notes. There are no required quarterly principal payments~~Notes, $392.5 million outstanding on our ~~2029 Senior Notes or 2032 Senior Notes.~~2022 Term Loan, and $8.0 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.~~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 March 31, 2023, approximately 24% of our outstanding debt was subject to interest rate changes.

At March 31, ~~2022,~~2023, we had approximately ~~$97.3~~$53.7 million of cash and cash equivalents on hand, a decrease of ~~$59.8~~$4.2 million as compared to the year ended December 31, ~~2021.~~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 March 31, 2023 was $589.8 million. The change in cash and cash equivalents for the three months ended March 31, 2023 and 2022 is as follows:

Operating Activities:


		Three months ended					Three months ended
(in thousands)	(in thousands)	March 31, 2022		March 31, 2021		(in thousands)	March 31, 2023		March 31, 2022
Cash provided by (used in) operating activities	Cash provided by (used in) operating activities	$	(33,529)	$	36,390	Cash provided by (used in) operating activities	$	15,545	$	(33,529)

For the three months ended March 31, ~~2022,~~2023, cash flows provided by operating activities totaled approximately $15.5 million, which represents a $49.1 million decrease in cash use compared to cash used in operating activities ~~totaled approximately~~of $33.5 ~~million, which represents a $69.9 million decrease compared to cash provided by operating activities of $36.4~~ million during the three-month period ended March 31, ~~2021.~~2022. Cash used in operating activities for working capital for the three months ended March 31, ~~2022~~2023 was ~~$95.7~~$31.5 million, as compared to cash used in operating activities for working capital of ~~$25.6~~$95.7 million for the three months ended March 31, ~~2021.~~2022. We typically have a higher usage of cash for working capital in the first half of the year as most of our ~~companies~~subsidiaries will build up inventories after the fourth quarter. In the fourth quarter of 2021 and ~~the first quarter of~~continuing into 2022, several of our subsidiary businesses increased inventory levels to combat supply chain issues given longer lead ~~times.~~times leading to higher use of working capital for inventory in the prior year. The increase in cash used in operating activities for working capital in the first quarter of 2022 also reflects the acquisition of Lugano in the third quarter of the prior year. Further, Lugano has used ~~and will continue to use,~~significant cash to build inventory to support its ~~anticipated~~ sales ~~growth.~~growth strategy.

Investing Activities:


	Three months ended
(in thousands)	March 31, 2023		March 31, 2022
Cash provided by (used in) investing activities	$	154,724	$	(8,292)

5049

~~Investing Activities:~~

Three months ended
(in thousands) March 31, 2022 March 31, 2021
Cash used in investing activities $ (8,292) $ (42,267)

Cash flows ~~used in~~provided by investing activities for the three months ended March 31, ~~2022~~2023 totaled ~~$8.3~~$154.7 million, compared to cash used in investing activities of ~~$42.3~~$8.3 million in the same period of ~~2021.~~2022. In the ~~first quarter~~current year, investing activities reflects the sale of ~~2022 we~~Advanced Circuits and the proceeds received ~~approximately $6.0 million in proceeds~~ related to the ~~sale of our Clean Earth business in 2019. In the prior year, our investing activities reflect an add-on acquisition at our Arnold subsidiary for $34.3 million.~~sale. Capital expenditures spend increased ~~$3.1~~$5.7 million during the three months ended March 31, ~~2022~~2023 as compared to the three months ended March 31, ~~2021,~~2022, with $16.1 million in capital expenditures in 2023 and $10.4 million in capital expenditures in ~~2022 and $7.3 million~~2022. The increase in capital expenditures ~~in 2021.~~is primarily to support the retail store growth at both 5.11 and Lugano. We expect capital expenditures for the full year of ~~2022~~2023 to be between approximately ~~$70~~$60 million to ~~$80 million, with a majority of this spend falling in the latter half of the year.~~$70 million.

Financing Activities:


		Three months ended					Three months ended
(in thousands)	(in thousands)	March 31, 2022		March 31, 2021		(in thousands)	March 31, 2023		March 31, 2022
Cash provided used in financing activities		$	(14,452)	$	(1,493)
Cash used in financing activities						Cash used in financing activities	$	(178,446)	$	(14,452)

Cash flows used in financing activities totaled approximately $178.4 million during the three months ended March 31, 2023 compared to cash flows used in financing activities of $14.5 million during the three months ended March 31, ~~2022 compared to cash flows used~~2022. Financing activities in the current quarter reflects $4.0 million in purchases under our share repurchase program, while financing activities ~~of $1.5 million during the three months ended March 31, 2021. During~~in the first quarter of ~~2021, we completed an offering of $1,000.0~~2022 reflects $20.2 million of Trust common shares issued under our ~~2029 Senior Notes, and used~~at-the market share offering program. In the ~~proceeds to pay down~~current quarter, we paid back $149.5 million, net, against our ~~2018 Revolving~~2022 Credit ~~Facility and pay off the existing 2026 Senior Notes.~~Facility. Financing activities in both periods reflect the payment of our common and preferred share distributions. In September 2021, we filed a prospectus supplement and entered into a Sales Agreement for an At The Market program pursuant to which we may sell common shares of the Trust. We received $20.2 million in net cash proceeds from the sale of Trust common shares under this program in the current year. During the three months ended March 31, 2021, we made a distribution to the Allocation Member of $5.2 million related to the five-year holding event of our Liberty and Ergobaby business.

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 our 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 subsidiaries have paid down their respective intercompany debt balances through the cash flow generated by these subsidiaries and we have recapitalized, and expect to continue to recapitalize, these subsidiaries 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 applicable ~~Credit Facility,~~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.

In the fourth quarter of 2022, we amended the Lugano intercompany credit agreem

ent to increase the borrowing availability under their credit agreement to allow Lugano 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 inventory, 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 credit arrangements at March 31, ~~2022.~~2023.

As of March 31, ~~2022,~~2023, we had the following outstanding loans due from each of our subsidiary businesses:

(in thousands)
5.11 $ 170,789
BOA 106,720
Ergobaby 88,342
Lugano 164,936
Marucci 93,159
Velocity Outdoor 113,178
Advanced Circuits (1)
79,611
Altor 137,536
Arnold 70,052
Sterno 210,602
Total intercompany debt $ 1,234,925
Corporate and eliminations (1,234,925)
Total $ —

~~(1)~~ ~~In October 2021, the LLC entered into a merger agreement to sell all of the outstanding securities of Advanced Circuits. Advanced Circuits has been presented as held-for-sale at March 31, 2022.~~


(in thousands)
5.11	$	215,606
BOA	67,695
Ergobaby	89,477
Lugano	271,311
Marucci	85,369
PrimaLoft	158,021
Velocity Outdoor	119,350
Altor	109,937
Arnold	69,552
Sterno	160,643
Total intercompany debt	$	1,346,961
Corporate and eliminations	(1,346,961)
Total	$	—

Our primary source of cash is from the receipt of interest and principal on the outstanding loans to our 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 ~~2021 Credit Facility~~applicable credit facility and interest on our Senior Notes; (iii) payments to CGM due pursuant to the MSA 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

2022 Credit Facility

On July 12, 2022, we entered into the Third Amended and Restated Credit Agreement (the "2022 Credit Facility") to amend and restate the 2021 Credit Facility. The 2022 Credit Facility provides for revolving loans, swing line loans and letters of credit up to a maximum aggregate amount of $600 million (the "2022 Revolving Credit Facility") 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. 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 $400 million term loan (the “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.

We had $589.8 million in net availability under the 2022 Revolving Credit Facility at March 31, 2023. The outstanding borrowings under the 2022 Revolving Credit Facility include $2.3 million of outstanding letters of credit at March 31, 2023.

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 ~~provides~~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. ~~All~~The Company repaid the outstanding amounts ~~outstanding~~ under the 2021 ~~Revolving Credit Facility will become due on March 23, 2026, which is~~credit facility in the ~~maturity date~~third quarter of ~~loans advanced under~~2022 in connection with entering into the ~~Revolving~~2022 Credit Facility.

We had $599.0 million in net availability under the 2021 Revolving Credit Facility at March 31, 2022. The outstanding borrowings under the 2021 Revolving Credit Facility include $1.0 million of outstanding letters of credit at March 31, 2022.

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 March 31, ~~2022~~2023 included as part of the affirmative covenants in our ~~2021~~2022 Credit Facility.

Description of Required Covenant Ratio

Covenant Ratio Requirement

Actual Ratio

Consolidated Fixed Charge Coverage Ratio

Greater than or equal to 1.50:1.0

~~5.10:~~2.60:1.0

Consolidated Senior Secured Leverage Ratio

Less than or equal to 3.50:1.0

~~0.00:~~0.85:1.0

Consolidated Total Leverage Ratio

Less than or equal to ~~5.00:~~5.75:1.0

~~3.05:~~3.87:1.0

We exercised an option under our 2022 Credit Facility to increase our Consolidated Total Leverage Ratio to 5.75:1.0. This increase declines to 5.50 on June 30, 2023, and 5.00 on December 31, 2023.

Interest Expense

The components of interest expense and periodic interest charges on outstanding debt are as follows (in thousands):


		Three months ended March 31,					Three months ended March 31,
		2022		2021			2023		2022
Interest on credit facilities	Interest on credit facilities	$	—	$	1,503	Interest on credit facilities	$	8,728	$	—
Interest on Senior Notes	Interest on Senior Notes	16,875		12,109		Interest on Senior Notes	16,875		16,875
Unused fee on Revolving Credit Facility	Unused fee on Revolving Credit Facility	524		223		Unused fee on Revolving Credit Facility	491		524
Amortization of bond premium		—		(83)

Other interest expense	Other interest expense	38		53		Other interest expense	92		38
Interest income	Interest income	(18)		—		Interest income	(6)		(18)
Interest expense, net	Interest expense, net	$	17,419	$	13,805	Interest expense, net	$	26,180	$	17,419

The following table provides the effective interest rate of the Company’s outstanding ~~long-term~~ debt at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):

March 31, 2022 December 31, 2021
Effective Interest Rate Amount Effective Interest Rate Amount
2029 Senior Notes 5.25% $ 1,000,000 4.89% $ 1,000,000
2032 Senior Notes 5.00% 300,000 5.29% 300,000
Unamortized premiums and debt issuance costs (14,696) (15,174)
Long-term debt $ 1,285,304 $ 1,284,826


	March 31, 2023			December 31, 2022
	Effective Interest Rate	Amount		Effective Interest Rate	Amount
2029 Senior Notes	5.25%	$	1,000,000	5.25%	$	1,000,000
2032 Senior Notes	5.00%	300,000		5.00%	300,000
2022 Term Loan	6.97%	392,500		5.20%	395,000
2022 Revolving Credit Facility	6.89%	8,000		5.98%	155,000
Unamortized debt issuance costs		(14,929)			(15,532)
Total debt outstanding		$	1,685,571		$	1,834,468

Reconciliation of Non-GAAP Financial Measures

GAAP or U.S. GAAP refer 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 intended to replace 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 Adjusted Earnings.

Reconciliation of Net income (loss) from continuing operations to EBITDA, Adjusted EBITDA and Net income (loss) to Adjusted Earnings

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: (i) noncontrolling stockholder compensation, which generally consists of non-cash stock option expense; (ii) successful acquisition costs, which consist of transaction costs (legal, accounting, due diligence, etc.) incurred in connection with the successful acquisition of a business expensed during the period in compliance with ASC 805; (iii) ~~management fees, which reflect fees due quarterly to our Manager in connection with our MSA, (iv)~~ integration service fees, which reflect fees paid by newly acquired companies to the Manager for integration services performed during the first year of ownership; and ~~(v)~~(iv) items of other income or expense that are material to a subsidiary and non-recurring in nature.

Adjusted Earnings - Adjusted earnings is calculated as net income (loss) adjusted to include the cost of the distributions to preferred shareholders, and adjusted to exclude the impact of certain costs, expenses, gains and losses and other specified items the exclusion of which management believes provides insight regarding our ongoing operating performance. Depending on the period presented, these adjusted measures exclude the impact of certain of the following items: gains (losses) and income (loss) from discontinued operations, income (loss) from noncontrolling interest, amortization expense, subsidiary stock compensation expense, acquisition-related expenses and items of other income or expense that may be material to a subsidiary and non-recurring in nature.

We believe that EBITDA, Adjusted EBITDA and Adjusted Earnings provide useful information to investors and reflect important financial measures that are used by management in the monthly analysis of our operating 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 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 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 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):

5554

																					Adjusted EBITDA
Three months ended March 31, 2022
Three months ended March 31, 2023																						Three months ended March 31, 2023
		Corporate		5.11		BOA		Ergobaby		Lugano		Marucci Sports		Velocity Outdoor		Altor		Arnold		Sterno				Consolidated				Corporate			5.11			BOA			Ergobaby			Lugano			PrimaLoft			Marucci Sports			Velocity Outdoor			Altor			Arnold			Sterno		Consolidated
Net income (loss) from continuing operations ~~(1)~~	Net income (loss) from continuing operations ~~(1)~~	$	(14,981)	$	2,645	14,199		$	(1,479)	$	8,494	$	6,134	$	713	$	1,936	$	960	$	(244)			$	18,377	Net income (loss) from continuing operations ~~(1)~~		$	(11,835)		$	2,150		5,368			$	(1,235)		$	9,968		$	(1,227)		$	9,014		$	(4,501)		$	2,701		$	2,305		$	295	$	13,003
Adjusted for:	Adjusted for:																									Adjusted for:
Provision for income taxes		—		819		2,477		399		2,895		2,006		202		1,059		1,012		(893)				9,976
Provision (benefit) for income taxes																						Provision (benefit) for income taxes	—				726			622			(551)			3,387			1,949			2,916			(1,455)			1,094			1,040			108			9,836
Interest expense, net	Interest expense, net	17,368		26		(5)		1		5		1		17		—		6		—				17,419		Interest expense, net		26,051			(1)			(2)			—			4			(2)			1			124			—			5			—		26,180
Intercompany interest	Intercompany interest	(19,275)		2,920		2,028		787		2,125		1,517		1,853		2,465		1,267		4,313				—		Intercompany interest		(33,806)			4,799			1,792			2,149			6,284			4,322			2,339			3,128			2,874			1,649			4,470		—

Depreciation and amortization	Depreciation and amortization	336		5,454		5,317		2,008		2,254		4,189		3,269		3,990		2,226		5,116				34,159		Depreciation and amortization		279			6,452			5,693			2,039			2,850			5,360			3,051			3,387			4,165			2,019			5,027		40,322
EBITDA	EBITDA	(16,552)		11,864		24,016		1,716		15,773		13,847		6,054		9,450		5,471		8,292				79,931		EBITDA		(19,311)			14,126			13,473			2,402			22,493			10,402			17,321			683			10,834			7,018			9,900		89,341
Other (income) expense	Other (income) expense	—		(548)		50		4		2		(1,810)		209		312		—		(255)				(2,036)		Other (income) expense		(127)			(77)			114			—			—			(104)			32			(675)			204			(2)			(492)		(1,127)
Noncontrolling shareholder compensation	Noncontrolling shareholder compensation	—		411		635		413		240		276		251		268		13		174				2,681		Noncontrolling shareholder compensation		—			252			664			312			395			(708)			404			230			316			9			171		2,045
Acquisition expenses		—		—		—		—		—		—		—		216		—		—				216

Integration services fee	Integration services fee	—		—		—		—		563		—		—		—		—		—				563		Integration services fee		—			—			—			—			—			1,188			—			—			—			—			—		1,188
Other	Other	—		—		—		—		—		1,802				—		—		—				1,802		Other		—			—			—			—			—			—			—			—			—			—			432		432
Management fees		12,935		250		250		125		188		125		125		188		125		125				14,436
Adjusted EBITDA	Adjusted EBITDA	$	(3,617)	$	11,977	$	24,951	$	2,258	$	16,766	$	14,240	$	6,639	$	10,434	$	5,609	$	8,336			$	97,593	Adjusted EBITDA		$	(19,438)		$	14,301		$	14,251		$	2,714		$	22,888		$	10,778		$	17,757		$	238		$	11,354		$	7,025		$	10,011	$	91,879

~~(1)~~ ~~Net income does not include income from discontinued operations for the three months ended March 31, 2022.~~

5655

																									Adjusted EBITDA
Three months ended March 31, 2021
Three months ended March 31, 2022																						Three months ended March 31, 2022
		Corporate		5.11		BOA		Ergobaby		Marucci Sports		Velocity Outdoor		Altor		Arnold		Sterno		Consolidated			Corporate			5.11		BOA		Ergobaby		Lugano		Marucci Sports		Velocity Outdoor		Altor		Arnold		Sterno		Consolidated
Net income (loss) from continuing operations ~~(1)~~	Net income (loss) from continuing operations ~~(1)~~	$	(11,407)	$	1,999	$	5,544	$	1,043	$	7,528	$	5,225	$	2,215	$	958	$	(23)	$	13,082	Net income (loss) from continuing operations ~~(1)~~	$	(14,981)		$	2,645	$	14,199	$	(1,479)	$	8,494	$	6,134	$	713	$	1,936	$	960	$	(244)	$	18,377
Adjusted for:	Adjusted for:																					Adjusted for:
Provision (benefit) for income taxes	Provision (benefit) for income taxes	—		768		(707)		347		2,398		1,506		935		536		(475)		5,308		Provision (benefit) for income taxes	—			819		2,477		399		2,895		2,006		202		1,059		1,012		(893)		9,976
Interest expense, net	Interest expense, net	13,759		—		—		—		2		44		—		—		—		13,805		Interest expense, net	17,368			26		(5)		1		5		1		17		—		6		—		17,419
Intercompany interest	Intercompany interest	(16,131)		2,984		2,286		566		552		1,818		1,738		1,462		4,725		—		Intercompany interest	(19,275)			2,920		2,028		787		2,125		1,517		1,853		2,465		1,267		4,313		—

Depreciation and amortization	Depreciation and amortization	206		5,455		4,967		2,225		2,169		3,128		2,623		1,761		5,298		27,832		Depreciation and amortization	336			5,454		5,317		2,008		2,254		4,189		3,269		3,990		2,226		5,116		34,159
EBITDA	EBITDA	(13,573)		11,206		12,090		4,181		12,649		11,721		7,511		4,717		9,525		60,027		EBITDA	(16,552)			11,864		24,016		1,716		15,773		13,847		6,054		9,450		5,471		8,292		79,931
Other (income) expense	Other (income) expense	120		(12)		55		—		(2)		2,386		(264)		—		(55)		2,228		Other (income) expense	—			(548)		50		4		2		(1,810)		209		312		—		(255)		(2,036)
Noncontrolling shareholder compensation	Noncontrolling shareholder compensation	—		628		560		404		275		262		257		—		254		2,640		Noncontrolling shareholder compensation	—			411		635		413		240		276		251		268		13		174		2,681
Acquisition expenses	Acquisition expenses	—		—		—		—		—		—		—		299		—		299		Acquisition expenses	—			—		—		—		—		—		—		216		—		—		216
Integration services fee	Integration services fee	—		—		1,100		—		500		—		—		—		—		1,600		Integration services fee	—			—		—		—		563		—		—		—		—		—		563
Other	Other	199		—		—		—				(2,300)		—		—		—		(2,101)		Other	—			—		—		—		—		1,802				—		—		—		1,802
Management fees		9,485		250		250		125		125		125		188		125		125		10,798
Adjusted EBITDA (2)		$	(3,769)	$	12,072	$	14,055	$	4,710	$	13,547	$	12,194	$	7,692	$	5,141	$	9,849	$	75,491
Adjusted EBITDA																						Adjusted EBITDA	$	(16,552)		$	11,727	$	24,701	$	2,133	$	16,578	$	14,115	$	6,514	$	10,246	$	5,484	$	8,211	$	83,157

~~(1)~~ ~~Net income (loss) does not include income from discontinued operations for the three months ended March 31, 2021.~~

~~(2)~~ As a result of the sale of Liberty Safe in August 2021 and the classification of Advanced Circuits as held for sale at March 31, 2022, Adjusted EBITDA for the three months ended March 31, 2021 does not include $6.2 million in Adjusted EBITDA from Liberty and $6.3 million in Adjusted EBITDA from Advanced Circuits.

5756

Reconciliation of Net income (loss) to Adjusted ~~earnings~~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):


		Three months ended March 31,					Three months ended March 31,
		2022		2021				2023		2022
Net income	Net income	$	29,740	$	21,996	Net income		$	109,601	$	29,740
Income (loss) from discontinued operations, net of tax						Income (loss) from discontinued operations, net of tax		(1,391)		5,370
Gain on sale of discontinued operations, net of tax	Gain on sale of discontinued operations, net of tax	5,993		—		Gain on sale of discontinued operations, net of tax		97,989		5,993
Income from discontinued operations, net of tax		5,370		8,914
Net income from continuing operations	Net income from continuing operations	$	18,377	$	13,082	Net income from continuing operations		$	13,003	$	18,377
Less: income from continuing operations attributable to noncontrolling interest	Less: income from continuing operations attributable to noncontrolling interest	4,937		1,903		Less: income from continuing operations attributable to noncontrolling interest		4,981		4,937
Net income attributable to Holdings - continuing operations	Net income attributable to Holdings - continuing operations	$	13,440	$	11,179	Net income attributable to Holdings - continuing operations		$	8,022	$	13,440
Adjustments:	Adjustments:					Adjustments:
Distributions paid - Preferred Shares		(6,045)		(6,045)
Amortization expense - intangibles and inventory step up		23,366		18,589
Distributions paid - preferred shares						Distributions paid - preferred shares		(6,045)		(6,045)
Amortization expense - intangibles and inventory step-up						Amortization expense - intangibles and inventory step-up		27,508		23,366

Stock compensation	Stock compensation	2,681		2,640		Stock compensation		2,045		2,681
Acquisition expenses	Acquisition expenses	216		299		Acquisition expenses		—		216
Integration Services Fee	Integration Services Fee	563		1,600		Integration Services Fee		1,188		563

Other	Other	1,802		(2,101)		Other		432		1,802
Adjusted earnings		$	36,023	$	26,161
Adjusted Earnings						Adjusted Earnings		$	33,150	$	36,023
Plus (less):	Plus (less):					Plus (less):
Depreciation expense	Depreciation expense	9,927		8,557		Depreciation expense		11,809		9,927
Income tax provision	Income tax provision	9,976		5,308		Income tax provision		9,836		9,976

Interest expense	Interest expense	17,419		13,805		Interest expense		26,180		17,419
Amortization of debt issuance costs	Amortization of debt issuance costs	866		686		Amortization of debt issuance costs		1,005		866
Management fees		14,436		10,798
Income from continuing operations attributable to noncontrolling interest	Income from continuing operations attributable to noncontrolling interest	4,937		1,903		Income from continuing operations attributable to noncontrolling interest		4,981		4,937
Distributions paid - Preferred Shares		6,045		6,045
Other		(2,036)		2,228
Distributions paid - preferred shares						Distributions paid - preferred shares		6,045		6,045
Other (income) expense						Other (income) expense		(1,127)		(2,036)
Adjusted EBITDA	Adjusted EBITDA	$	97,593	$	75,491	Adjusted EBITDA		$	91,879	$	83,157

Seasonality

Earnings of certain of our operating segments are seasonal in nature due to various recurring events, holidays and seasonal weather patterns, as well as the timing of our acquisitions during a given year. Historically, the third and fourth quarter ~~produce~~have produced the highest net sales ~~during~~in our fiscal ~~year.~~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.

Related Party Transactions

Management 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 exchange for a management fee paid quarterly and equal to 0.5% of the Company'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, 2023 than would normally have been due. At June 30, 2022 and March 31, 2022, CGM entered into a waiver to exclude cash balances held at the LLC from the calculation of the management fee.

During 2021, CGM entered into a waiver of the MSA for a period through December 31, 2021 to receive a 1% annual management fee related to BOA, rather than the 2% called for under the MSA, which resulted in a lower management fee paid during 2021 than would have normally been due. In the first quarter of 2021, the LLC and CGM entered into a waiver agreement whereby CGM agreed to waive the portion of the management fee related to

5857

For the ~~amount of the proceeds deposited with the Trustee that was in excess of the amount payable related to the 2026 Senior Notes at~~three months ended March 31, ~~2021. Additionally,~~2023 and 2022, the Company incurred the following management fees to CGM, ~~has entered into a waiver of the MSA at December 31, 2021 to exclude cash balances held at the LLC from the calculation of the management fee.~~by entity:


	Three months ended March 31,
(in thousands)	2023		2022
5.11	$	250	$	250
BOA	250		250
Ergobaby	125		125
Lugano	188		188
Marucci	125		125
PrimaLoft	250		—
Velocity	125		125
Altor	188		188
Arnold Magnetics	125		125
Sterno	125		125
Corporate	14,644		12,935
	$	16,395	$	14,436

Integration Services Agreements

~~Lugano,~~PrimaLoft, which was acquired in ~~September 2021,~~July 2022, entered into an Integration Services Agreement ("ISA") with CGM whereby ~~Lugano~~PrimaLoft will pay 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.

~~Profit~~ Allocation ~~Payments~~Interests

The ~~ten-year anniversary of Liberty occurred~~Allocation Interests represent the original equity interest in ~~March 2020 and~~ the ~~ten-year anniversary of Ergobaby occurred in September 2020. Both of these represented a Holding Event, and the~~Company. The holders of the Allocation Interests ~~elected~~(“Holders”), through Sostratus LLC, are entitled to ~~defer the distribution until after the end of 2020. The~~receive distributions pursuant to a profit allocation ~~payment~~formula upon the occurrence of ~~$3.3 million related to the Liberty Holding Event and~~certain events. The distributions of the profit allocation are paid upon the occurrence of ~~$2.0 million related to~~ the ~~Ergobaby~~ 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 were both paid in January 2021.~~Event”). The ~~fifteen-year anniversary~~Company records distributions of ~~ACI occurred in May 2021 which represented a Holding Event. The Company's Board declared a distribution of $12.1 million that was paid~~the profit allocation to the Holders ~~in July 2021.~~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 ~~Liberty~~Advanced Circuits in ~~August 2021~~February 2023 represented a Sale Event and the Company's board ~~declared~~of director's approved a ~~profit allocation~~ distribution of $24.4 million in April 2023, subsequent to the end of the first quarter. In addition, the Company's board of directors approved a distribution of $2.1 million related to various sale proceeds received related to previous Sale Events. These distributions were paid to the Holders of ~~$16.8 million. This distribution was paid~~the Allocation Interests in ~~the fourth quarter of 2021.~~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. ~~During~~5.11 purchased approximately $0.6 million and $0.3 million during the three months endedMarch 31, 2023 and March 31, 2022, ~~and March 31, 2021, 5.11 purchased approximately $0.3 million and $0.4 million,~~ respectively in inventory from the vendor.

~~BOA~~

~~Repurchase of Noncontrolling Interest -~~ ~~In September 2021,~~ BOA repurchased shares of its issued and outstanding common shares from its largest minority shareholder for a total payment of $48.0 million, which BOA financed by borrowing under their intercompany credit facility with the LLC (the "BOA Credit Agreement"). The BOA Credit Agreement was amended to (i) provide for additional term loan borrowings of $38.0 million, and (ii) consent to the repurchase of the shares from the minority shareholder. The transaction was accounted for in accordance with ASC 810 - Consolidation, whereby the carrying amount of the noncontrolling interest was adjusted to reflect the change in the ownership interest in BOA that occurred as a result of the share repurchase. The difference between the fair value of the consideration paid of $48.0 million and the amount by which the noncontrolling interest was adjusted of $39.4 million was recognized in equity attributable to the LLC.

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 ~~had~~purchased approximately ~~$15.2~~$9.7 million and ~~$9.8~~$15.2 million ~~respectively, in purchases~~ from this supplier during the three months ended March 31, ~~2022~~2023, and March 31, ~~2021,~~2022, respectively.

Ergobaby

Off-Balance Sheet Arrangements

We have no special purpose entities or off-balance sheet arrangements.

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, ~~2021,~~2022, as filed with the SEC on ~~February 24, 2022.~~March 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. Each of our subsidiary businesses represents a reporting unit.

We use a qualitative approach to test goodwill 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 greater than its carrying amount as a basis for determining whether it is necessary to perform the 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. If qualitative factors are not sufficient 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 whereby we estimate the fair value of the reporting unit using an income approach or market approach, or a weighting of the two methods. Under the income approach, we estimate the fair value of our reporting unit based on the present value of future cash flows. Cash flow projections are based on management's estimate of revenue growth rates and operating margins and take into consideration industry and market conditions as well as company specific economic factors. The discount rate used is based on the 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 revenue and earnings 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 reporting unit using only the income approach. The valuation approaches are subject to key judgments and assumptions that are sensitive to change such as judgments and assumptions about appropriate sales growth rates, operating margins, weighted average cost of capital, and comparable company market multiples. When developing these key judgments and assumptions, we consider economic, operational and market conditions that could impact the fair value of the reporting unit. Estimates are inherently uncertain and represent only management’s reasonable expectations regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will most likely differ from actual future results.

~~2022 An~~

~~nual~~2023 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.~~

~~2021 Annual Impairment Testing -~~ For our annual impairment testing at March 31, 2021, we performed a qualitative assessment of our reporting units. The qualitative factors we consider include, in part, the general macroeconomic environment, industry and market specific conditions for each reporting unit, financial performance including actual versus planned results and results of relevant prior periods, operating costs and cost impacts, as well as issues or events specific to the reporting unit. As a result of the COVID-19 pandemic, we also considered how we expected COVID-19 to impact our future operating results and short and long term financial condition as part of our qualitative

assessment, including the effects on our end customers, potential short-term supply chain constraints, and the continued restrictions imposed by government and regulatory authorities. 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 ~~Arnold~~Velocity exceeded their carrying value. Based on our analysis, we determined that the ~~Arnold~~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 ~~Arnold~~Velocity using an income approach to determine the fair value of the reporting units. We do not believe that the market approach results in relevant data points for market multiples or data from comparable companies since most of Arnold's competitors are privately held and do not publish data that can be used in an income approach.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 ~~COVID-19 pandemic and its~~current economic ~~fallout.~~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 ~~Arnold~~Velocity reporting unit as of the date of our impairment testing. The discount rate used in the income approach was ~~13.0%~~15.0%, and thethe results of the quantitative impairment testing indicated that the fair value of the ~~Arnold~~Velocity reporting unit exceeded the carrying value byby approximately ~~272%~~21%. TheThe prospective financial information that is used to determine the fair values of the ~~Arnold~~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.

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 $57.0 million. The results of the qualitative analysis of our reporting unit's indefinite-lived intangible assets, which we completed as of March 31, 2022, indicated that the fair value of the indefinite lived intangible assets exceeded their carrying value.

Recent Accounting Pronouncements

Refer to Note A - "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, ~~2021.~~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, ~~2021,~~2022, as filed with the SEC on ~~February 24, 2022.~~March 1, 2023.

ITEM 4. CONTROLS AND PROCEDURES

As required by Securities Exchange Act of 1934, as amended (the "Exchange Act") Rule 13a-15(b), the Trust's Regular Trustees and the LLC’s management, including the Chief Executive Officer and Chief Financial Officer of the LLC, conducted an evaluation of the effectiveness of the Trust's and the LLC’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), as of March 31, ~~2022.~~2023. Based on that evaluation, the Trust's Regular Trustees and the Chief Executive Officer and Chief Financial Officer of the LLC concluded that the Trust's and the LLC’s disclosure controls and procedures were effective as of March 31, ~~2022.~~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.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no material changes to those legal proceedings associated with the Company’s 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, ~~2021,~~2022, as filed with the SEC on ~~February 24, 2022.~~March 1, 2023.

ITEM 1A. RISK FACTORS

The risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 should be considered together with information included in this Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2022~~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 business, including our results of 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, ~~2021.~~2022.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table presents the total number of shares of common stock purchased during the first quarter of 2023, the average price paid per share, the number of shares that were purchased as part of a publicly announced repurchase program, if any, and the approximate dollar value of the maximum 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)
January 1, 2023- January 31, 2023	—	N/a		N/a	N/a
February 1, 2023- February 28, 2023	—	N/a		N/a	N/a
March 1, 2023 - March 31, 2023	210,000	$	18.64	210,000	$	46,000,000
Total	210,000	$	18.64	210,000	$	46,000,000

(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 Trust. All common shares repurchased during the first quarter of 2023 were repurchased pursuant to this publicly-announced share repurchase program.

(2) As of March 31, 2023, the remaining authorization under the publicly-announced share repurchase program was $46.0 million.


ITEM 6. EXHIBITS

Exhibit Number						Description

~~3.1~~2.1						~~Sixth Amended~~Agreement and ~~Restated Operating Agreement~~Plan of Merger, dated January 10, 2023, by and among (i) APCT Inc.; (ii) Circuit Merger Sub, Inc.; (iii) Compass AC Holdings, Inc.; and (iv) Compass Group Diversified Holdings LLC, as the ~~LLC~~Equityholders’ Representative (incorporated by reference to Exhibit ~~3.2~~2.1 of the Form 8-K filed on ~~August 4, 2021).~~

~~3.2~~						~~First Amendment to the Sixth Amended and Restated Operating Agreement of the LLC (incorporated by reference to Exhibit 3.1 of the Form 8-K filed on February 14, 2022)~~January 11, 2023).

31.1*						Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Registrant

31.2*						Rule 13a-14(a)/15d-14(a) Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Registrant

32.1*+						Certification of Chief Executive Officer of Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*+						Certification of Chief Financial Officer of Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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

104						Cover page formatted as Inline XBRL and contained in Exhibit 101


*			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.

SIGNATURES

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


Date: May 3, 2023	COMPASS DIVERSIFIED HOLDINGS

	By:	/s/ Ryan J. Faulkingham
		Ryan J. Faulkingham
		Regular Trustee

~~Date: May 5, 2022~~

SIGNATURES

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


Date: May 3, 2023	COMPASS GROUP DIVERSIFIED HOLDINGS LLC

	By:	/s/ Ryan J. Faulkingham
		Ryan J. Faulkingham
		Chief Financial Officer (Principal Financial and Accounting Officer)

~~Date: May 5, 2022~~

EXHIBIT INDEX


Exhibit Number						Description

~~3.1~~2.1						~~Sixth Amended~~Agreement and ~~Restated Operating Agreement~~Plan of Merger, dated January 10, 2023, by and among (i) APCT Inc.; (ii) Circuit Merger Sub, Inc.; (iii) Compass AC Holdings, Inc.; and (iv) Compass Group Diversified Holdings LLC, as the ~~LLC~~Equityholders’ Representative (incorporated by reference to Exhibit ~~3.2~~2.1 of the Form 8-K filed on ~~August 4, 2021).~~

~~3.2~~						~~First Amendment to the Sixth Amended and Restated Operating Agreement of the LLC (incorporated by reference to Exhibit 3.1 of the Form 8-K filed on February 14, 2022)~~January 11, 2023).

31.1*						Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Registrant

31.2*						Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Registrant

32.1*+						Certification of Chief Executive Officer of Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*+						Certification of Chief Financial Officer of Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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

104						Cover page formatted as Inline XBRL and contained in Exhibit 101


*			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.


Acquisition consideration
Purchase price	$	256,000	$	—	$	256,000
Cash acquired (estimated)	1,554		(120)		1,434
Net working capital adjustment	10,000		(2,300)		7,700

Total purchase consideration	$	267,554	$	(2,420)	$	265,134
Less: Transaction costs	1,827		—		1,827
Net purchase price	$	265,727	$	(2,420)	$	263,307


Three months ended March 31, 2022
	5.11		BOA		Ergo		Lugano		Marucci		Velocity		Altor		Arnold		Sterno		Total
United States	$	80,803	$	20,202	$	8,173	$	47,019	$	51,082	$	43,813	$	57,781	$	26,173	$	74,698	$	409,744
Canada	2,388		540		793		—		552		3,561		—		193		1,799		9,826
Europe	7,545		17,100		7,590		—		6		2,426		—		9,509		302		44,478
Asia Pacific	3,964		18,904		3,470		—		419		354		—		1,782		102		28,995
Other international	9,323		64		184		—		33		1,292		6,047		508		19		17,470
	$	104,023	$	56,810	$	20,210	$	47,019	$	52,092	$	51,446	$	63,828	$	38,165	$	76,920	$	510,513


Segment profit (loss) (1)	Three months ended March 31,
(in thousands)	2022		2021

5.11	$	5,905	$	5,836
BOA	18,811		7,254
Ergobaby	(276)		1,964
Lugano	13,606		—
Marucci	7,885		10,507
Velocity Outdoor	3,067		11,034
Altor	5,834		4,684
Arnold	3,288		2,996
Sterno	3,034		4,284
Total	61,154		48,559
Reconciliation of segment profit (loss) to consolidated net income before income taxes:
Interest expense, net	(17,419)		(13,805)
Other income (expense), net	2,036		(2,228)
Corporate and other (2)	(17,418)		(14,136)
Total consolidated income before income taxes	$	28,353	$	18,390


		Ownership Interest - March 31, 2022
Business	Acquisition Date	Primary	Diluted
Advanced Circuits (1)	May 16, 2006	71.8%	67.6%
Ergobaby	September 16, 2010	81.6%	72.8%
Arnold	March 5, 2012	98.0%	85.5%
Sterno	October 10, 2014	99.4%	90.8%
5.11	August 31, 2016	97.7%	88.4%
Velocity Outdoor	June 2, 2017	99.4%	87.7%
Altor Solutions	February 15, 2018	100.0%	91.2%
Marucci Sports	April 20, 2020	91.1%	82.8%
BOA	October 16, 2020	91.8%	83.2%
Lugano	September 3, 2021	59.9%	56.2%


(in thousands)
5.11	$	170,789
BOA	106,720
Ergobaby	88,342
Lugano	164,936
Marucci	93,159
Velocity Outdoor	113,178
Advanced Circuits (1)	79,611
Altor	137,536
Arnold	70,052
Sterno	210,602
Total intercompany debt	$	1,234,925
Corporate and eliminations	(1,234,925)
Total	$	—