Compass Diversified (NYSE:CODI) Q4 2023 Earnings Conference Call February 28, 2024 5:00 PM ET Company Participants Cody Slach - Gateway Group, IR Elias Sabo - Chief Executive Officer Ryan Faulkingham - Chief Financial Officer Pat Maciariello - Chief Operating Officer, Compass Group Management Conference Call Participants Larry Solow - CJS Securities Mike Zabran - ROTH MKM Kyle Joseph - Jefferies Marc Feldman - William Blair Robert Dodd - Raymond James Operator Good afternoon. And welcome to Compass Diversif ...

Identifying New Opportunities for Growth Platform Acquisitions ▪ Continue the same strategy acquiring leading industrial and branded consumer companies, and more recently launching our healthcare opportunity ▪ Target 1 to 2 platform acquisitions per year ▪ Target companies in the $200M–$600M enterprise value D Investment in Subsidiaries ▪ Strategic Add-Ons – Target 2-3 per year ▪ Growth Capex Optimal Future Structure ~15 subsidiary companies mixed among industrial, branded consumer and healthcare Each subsi ...

For the fiscal year ended December 31, 2023 For the transition period from to Commission File Number: 001-34927 Commission File Number: 001-34926 301 Riverside Avenue, Second Floor Westport, CT 06880 (Address of principal executive office) (Zip Code) | --- | --- | --- | |---------------------------------------------------------------------------------------------------------------|-------------------|-------------------------------------------| | Title of Each Class | Trading Symbol(s) | Name of Each Exchan ...

Exhibit 99.1 Compass Diversified Reports Fourth Quarter and Full Year 2023 Financial Results "Our fourth quarter results exceeded our expectations and demonstrate that owning premium businesses with defensible competitive moats drives strong financial performance," said Elias Sabo, CEO of Compass Diversified. "At a consolidated level, our business saw strong revenue, net income, and Subsidiary Adjusted EBITDA growth in the fourth quarter led by Lugano Diamonds. While the economic backdrop remains uncertain ...

WESTPORT, Conn., Feb. 14, 2024 (GLOBE NEWSWIRE) -- Compass Diversified (NYSE:CODI) ("CODI" or the "Company"), an owner of leading middle market businesses, announced today that it plans to release financial results for the fourth quarter and full year ended December 31, 2023, on Wednesday, February 28, 2024, after the close of market trading. The Company has scheduled a conference call to discuss the results on Wednesday, February 28, 2024, at 5:00 p.m. ET. To participate in the call, please dial (888) 259- ...

WESTPORT, Conn., Feb. 01, 2024 (GLOBE NEWSWIRE) -- Compass Diversified (NYSE:CODI) ("CODI" or the "Company"), an owner of leading middle market businesses, today announced the completion of the Company's previously announced partnership with The Honey Pot Company, LLC ("The Honey Pot Co."), pursuant to an agreement entered into on January 14, 2024. Based in Atlanta, Georgia, the idea for The Honey Pot Co.'s feminine wash began in an apartment kitchen in 2012, fueled by Co-Founder Beatrice Dixon's personal e ...

Financial Performance & Strategy - Compass Diversified (CODI) has invested over $3.2 billion in capital[49] and has aggregate acquisitions of $7.0 billion across 23 platforms and 33 add-ons[53] - CODI's TTM Proforma Revenue is $2.2 billion[65], with a TTM Adjusted EBITDA of $446 million[50] and Adjusted Earnings of $134 million[66] - The company has approximately $551 million available in revolver and cash[51] - CODI aims to reach $1 billion of Adjusted EBITDA by 2028 through business transformation, capital allocation, and healthcare vertical expansion[73] - Full Year 2023 Pro Forma Subsidiary Adjusted EBITDA guidance is between $450 million and $465 million[84] and full year 2023 Adjusted Earnings guidance is between $130 million and $140 million[117] Subsidiary Performance (Nine Months Ended 9/30/2023) - 5.11's Revenue was $126.3 million and Adjusted EBITDA was $9.6 million[122] - BOA Technology's Revenue was $113.4 million and Adjusted EBITDA was $42.0 million[144] - Ergo's Revenue was $203.6 million and Adjusted EBITDA was $72.7 million[2] - Lugano's Revenue was $71.8 million and Adjusted EBITDA was $11.2 million[106] - Marucci Sports' Revenue was $144.1 million and Adjusted EBITDA was $39.8 million[109] - PrimaLoft's Revenue was $57.6 million and Adjusted EBITDA was $23.5 million[129] - Velocity Outdoor's Revenue was $122.0 million and Adjusted EBITDA was $21.5 million[150] - Altor Solutions' Revenue was $181.6 million and Adjusted EBITDA was $38.1 million[132] - Arnold's Revenue was $385.7 million and Adjusted EBITDA was $52.3 million[190] - Sterno's Revenue was $350.6 million and Adjusted EBITDA was $48.2 million[190]

Compass Diversified (NYSE:CODI) Q3 2023 Earnings Conference Call November 2, 2023 5:00 PM ET Company Participants Cody Slach - Gateway Group Elias Sabo - Chief Executive Officer Pat Maciariello - Chief Operating Officer, Compass Group Management Ryan Faulkingham - Chief Financial Officer Conference Call Participants Larry Solow - CJS Securities Robert Dodd - Raymond James Chris Kennedy - William Blair Barry Haimes - Sage Asset Management Operator Good afternoon, and welcome to Compass Diversified's Third Qu ...

```markdown FORWARD-LOOKING STATEMENTS [Forward-Looking Statements Disclosure](index=4&type=section&id=Forward-Looking%20Statements%20Disclosure) This section identifies forward-looking statements, cautioning that actual results may differ due to various risks and uncertainties - The report contains forward-looking statements identified by specific words (e.g., "project," "predict," "believe") that convey uncertainty of future events or outcomes[12](index=12&type=chunk) - Forward-looking statements are subject to numerous risks and uncertainties, many beyond the company's control, which could cause actual results to differ materially from projections[12](index=12&type=chunk) - Important factors that could cause material differences include changes in economic conditions (interest rates, inflation), supply chain disruptions, labor shortages, acquisition integration difficulties, ability to maintain credit facilities, and legal/regulatory environment[12](index=12&type=chunk) PART I. FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) This section presents the unaudited condensed consolidated financial statements, providing a snapshot of the company's financial position and performance [CONDENSED CONSOLIDATED BALANCE SHEETS](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) The condensed consolidated balance sheets present the company's financial position, showing slight decreases in total assets and liabilities, with increased stockholders' equity | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Total assets | **$3,810,812** | **$3,849,631** | | Total liabilities | **$2,421,063** | **$2,487,669** | | Total stockholders' equity | **$1,389,749** | **$1,361,962** | - Current assets increased from **$1,210,185 thousand** at December 31, 2022, to **$1,315,437 thousand** at September 30, 2023, primarily driven by increases in inventories and accounts receivable[14](index=14&type=chunk) - Goodwill decreased from **$1,066,726 thousand** to **$1,041,469 thousand**, and intangible assets, net, decreased from **$1,127,936 thousand** to **$1,069,995 thousand**[14](index=14&type=chunk) [CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Consolidated statements of operations show a net loss for the three months, but increased net income for the nine months, largely due to a gain on discontinued operations | Metric (in thousands, except per share data) | Three months ended Sep 30, 2023 | Three months ended Sep 30, 2022 | | :------------------------------------------- | :------------------------------ | :------------------------------ | | Net revenues | **$569,565** | **$575,819** | | Gross profit | **$254,218** | **$229,559** | | Operating income | **$28,435** | **$43,775** | | Net income (loss) attributable to Holdings | **$(10,154)** | **$(1,774)** | | Basic income (loss) per common share | **$(0.33)** | **$(0.21)** | | Metric (in thousands, except per share data) | Nine months ended Sep 30, 2023 | Nine months ended Sep 30, 2022 | | :------------------------------------------- | :----------------------------- | :----------------------------- | | Net revenues | **$1,635,952** | **$1,601,929** | | Gross profit | **$728,939** | **$642,131** | | Operating income | **$122,407** | **$138,688** | | Net income (loss) attributable to Holdings | **$108,849** | **$48,355** | | Basic income (loss) per common share | **$0.69** | **$0.20** | - Impairment expense of **$32,568 thousand** was recorded for both the three and nine months ended September 30, 2023, compared to zero in the prior year periods, significantly impacting operating income[24](index=24&type=chunk) [CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Consolidated statements of comprehensive income show a worsened comprehensive loss for the three months, but significantly increased comprehensive income for the nine months | Metric (in thousands) | Three months ended Sep 30, 2023 | Three months ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | | Net income (loss) | **$(3,760)** | **$2,585** | | Other comprehensive loss | **$(1,468)** | **$(1,928)** | | Total comprehensive income (loss) attributable to Holdings | **$(11,600)** | **$(3,672)** | | Metric (in thousands) | Nine months ended Sep 30, 2023 | Nine months ended Sep 30, 2022 | | :-------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | **$122,964** | **$63,282** | | Other comprehensive loss | **$(50)** | **$(1,565)** | | Total comprehensive income (loss) attributable to Holdings | **$108,785** | **$46,822** | [CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) Consolidated statements of stockholders' equity detail changes in equity components, showing an increase primarily due to net income, partially offset by share repurchases | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Total stockholders' equity attributable to Holdings | **$1,139,580** | **$1,136,920** | | Noncontrolling interest | **$250,169** | **$223,509** | | Total stockholders' equity | **$1,389,749** | **$1,361,962** | - The company repurchased **75,600** shares for approximately **$1.5 million** during the three months ended September 30, 2023, and **382,400** shares for approximately **$7.4 million** during the nine months ended September 30, 2023, under a **$50 million** share repurchase program[272](index=272&type=chunk) - Cash distributions declared per Trust common share remained constant at **$0.25** for both the three and nine months ended September 30, 2023 and 2022[24](index=24&type=chunk) [CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=10&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Consolidated statements of cash flows show a shift to cash provided by operating and investing activities, while financing activities used cash due to debt repayments and share repurchases | Metric (in thousands) | Nine months ended Sep 30, 2023 | Nine months ended Sep 30, 2022 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | **$56,952** | **$(39,923)** | | Net cash provided by (used in) investing activities | **$104,291** | **$(598,951)** | | Net cash provided by (used in) financing activities | **$(157,927)** | **$542,128** | | Net increase (decrease) in cash and cash equivalents | **$3,466** | **$(99,481)** | - Cash provided by operating activities increased by **$96.9 million**, primarily due to a more normalized use of cash for working capital as supply chains stabilized[139](index=139&type=chunk) - Investing activities were significantly impacted by the sale of Advanced Circuits, generating **$105.1 million** in proceeds, and an add-on acquisition at Marucci[33](index=33&type=chunk)[499](index=499&type=chunk) [NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=12&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed notes to the unaudited condensed consolidated financial statements, offering critical context on accounting policies, transactions, and segment performance [Note A - Presentation and Principles of Consolidation](index=13&type=section&id=Note%20A%20-%20Presentation%20and%20Principles%20of%20Consolidation) This note outlines the company's structure and ten operating segments, clarifying that financial statements are unaudited, U.S. GAAP-compliant, and include consolidated accounts with discontinued operations reported separately - Compass Diversified Holdings (Trust) and Compass Group Diversified Holdings LLC (LLC) collectively form the 'Company,' which controls **ten** operating segments as of September 30, 2023[40](index=40&type=chunk)[41](index=41&type=chunk) - The condensed consolidated financial statements are unaudited, prepared under U.S. GAAP, and include all adjustments necessary for fair presentation, consisting solely of normal recurring items[42](index=42&type=chunk) - Discontinued operating entities, such as Advanced Circuits (ACI) sold in Q1 2023, are reported as discontinued operations[43](index=43&type=chunk)[44](index=44&type=chunk) [Note B - Acquisitions](index=14&type=section&id=Note%20B%20-%20Acquisitions) This note details the company's acquisition accounting, highlighting the PrimaLoft acquisition for $541.1 million and Baum Bat by Marucci for $27.5 million, including their funding and allocations - The Company acquired PrimaLoft Technologies Holdings, Inc. on July 12, 2022, for approximately **$541.1 million**, funded by its **2022** Revolving Credit Facility and a **$400 million** **2022** Term Loan Facility[49](index=49&type=chunk) - PrimaLoft's purchase price allocation included **$306.9 million** in intangible assets (customer relationships, tradename, technology) and **$290.3 million** in goodwill[54](index=54&type=chunk)[61](index=61&type=chunk) - Marucci acquired Baum Bat LLC on April 3, 2023, for approximately **$27.5 million**, funded by an additional loan under the Marucci intercompany loan agreement and rollover equity from the selling shareholder[63](index=63&type=chunk) [Note C - Discontinued Operations](index=17&type=section&id=Note%20C%20-%20Discontinued%20Operations) This note details the sale of Advanced Circuits (ACI) for an enterprise value of $220 million, resulting in a net gain of $98.0 million, with ACI's results reported as discontinued operations - The Company completed the sale of Advanced Circuits (ACI) on February 14, 2023, for an enterprise value of **$220 million**[65](index=65&type=chunk) - Total proceeds received at closing were approximately **$170.9 million**, including **$66.9 million** for repayment of intercompany loans[65](index=65&type=chunk) - A gain on the sale of ACI of **$98.0 million**, net of income tax provision, was recorded in Q1 2023, with an additional **$2.1 million** gain in Q2 2023 and a tax provision adjustment in Q3 2023[65](index=65&type=chunk) [Note D - Revenue](index=18&type=section&id=Note%20D%20-%20Revenue) This note explains the company's revenue recognition policy and provides a detailed disaggregation of revenue by reportable segment and geography, highlighting the diverse global sales footprint - Revenue is recognized when a customer obtains control of promised goods or services, excluding sales incentives or collected taxes[68](index=68&type=chunk) - Revenue is disaggregated by strategic business unit and geography, reflecting how the company evaluates financial performance and communicates it to investors[69](index=69&type=chunk) | Segment | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | | :--------------- | :--------------------------------------- | :--------------------------------------- | | 5.11 | **$135,213** | **$126,537** | | BOA | **$37,281** | **$50,019** | | Ergobaby | **$23,218** | **$21,540** | | Lugano | **$78,735** | **$51,145** | | Marucci | **$48,500** | **$42,753** | | PrimaLoft | **$10,930** | **$10,712** | | Velocity Outdoor | **$54,469** | **$75,482** | | Altor Solutions | **$59,215** | **$69,618** | | Arnold | **$41,819** | **$39,377** | | Sterno | **$80,185** | **$88,636** | | **Total** | **$569,565** | **$575,819** | | Segment | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | | :--------------- | :--------------------------------------- | :--------------------------------------- | | 5.11 | **$385,695** | **$350,608** | | BOA | **$113,390** | **$166,215** | | Ergobaby | **$71,785** | **$68,256** | | Lugano | **$203,571** | **$137,229** | | Marucci | **$144,065** | **$122,481** | | PrimaLoft | **$57,619** | **$10,712** | | Velocity Outdoor | **$126,348** | **$180,774** | | Altor Solutions | **$181,613** | **$199,590** | | Arnold | **$122,047** | **$116,319** | | Sterno | **$229,819** | **$249,745** | | **Total** | **$1,635,952** | **$1,601,929** | [Note E - Operating Segment Data](index=20&type=section&id=Note%20E%20-%20Operating%20Segment%20Data) This note describes the company's ten operating segments, providing a summary of net revenues and segment profit (loss) for each, reconciled to consolidated amounts - The Company operates **ten** reportable segments, each a platform acquisition offering different products and services, managed separately due to distinct technology and marketing strategies[74](index=74&type=chunk) - Segment profit is determined by internal performance measures used by the Manager to assess each business's performance[85](index=85&type=chunk) | Segment | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | | :--------------- | :--------------------------------------- | :--------------------------------------- | | 5.11 | **$13,400** | **$12,091** | | BOA | **$6,684** | **$12,975** | | Ergobaby | **$1,288** | **$593** | | Lugano | **$27,963** | **$12,635** | | Marucci | **$11,062** | **$7,692** | | PrimaLoft | **$(2,756)** | **$(8,469)** | | Velocity Outdoor | **$(28,581)** | **$10,225** | | Altor Solutions | **$8,749** | **$6,561** | | Arnold | **$4,739** | **$5,462** | | Sterno | **$6,438** | **$2,795** | | **Total segment operating income** | **$48,986** | **$62,560** | | Segment | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | | :--------------- | :--------------------------------------- | :--------------------------------------- | | 5.11 | **$31,652** | **$30,301** | | BOA | **$22,685** | **$50,237** | | Ergobaby | **$4,202** | **$3,866** | | Lugano | **$64,872** | **$35,885** | | Marucci | **$28,364** | **$14,141** | | PrimaLoft | **$5,082** | **$(8,469)** | | Velocity Outdoor | **$(33,467)** | **$18,721** | | Altor Solutions | **$24,906** | **$18,303** | | Arnold | **$15,390** | **$14,075** | | Sterno | **$18,019** | **$13,783** | | **Total segment operating income** | **$181,705** | **$190,843** | [Note F - Property, Plant and Equipment and Inventory](index=24&type=section&id=Note%20F%20-%20Property,%20Plant%20and%20Equipment%20and%20Inventory) This note breaks down property, plant, and equipment, net, which increased to $203.5 million, and details inventory composition, showing a rise to $801.9 million, with finished goods as the largest component | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Property, plant and equipment, net | **$203,512** | **$198,525** | | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Inventories | **$801,887** | **$728,083** | | - Raw materials | **$101,002** | **$104,735** | | - Work-in-process | **$30,805** | **$30,158** | | - Finished goods | **$699,606** | **$621,854** | | - Obsolescence reserve | **$(29,526)** | **$(28,664)** | - Depreciation expense for property, plant, and equipment was **$12.7 million** for the three months and **$37.3 million** for the nine months ended September 30, 2023[91](index=91&type=chunk) [Note G - Goodwill and Other Intangible Assets](index=24&type=section&id=Note%20G%20-%20Goodwill%20and%20Other%20Intangible%20Assets) This note details goodwill and intangible assets, outlining impairment testing procedures and reporting a $32.6 million goodwill impairment expense for Velocity Outdoor in Q3 2023 due to underperforming results - Goodwill and indefinite-lived intangibles are tested for impairment annually (March 31st) or more frequently if circumstances warrant, comparing fair value to carrying value for each reporting unit[93](index=93&type=chunk) - The Company recorded a goodwill impairment expense of **$32.6 million** for the Velocity Outdoor operating segment in the quarter ended September 30, 2023, following an interim quantitative impairment test due to operating results below forecast[209](index=209&type=chunk)[516](index=516&type=chunk) | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Goodwill - net carrying amount | **$1,041,469** | **$1,066,726** | | Total intangibles, net | **$1,069,995** | **$1,127,936** | [Note H - Warranties](index=27&type=section&id=Note%20H%20-%20Warranties) This note describes the company's warranty policy, where certain operating segments estimate claims based on sales data and costs, showing a slight decrease in warranty liability - Ergobaby, Marucci, BOA, and Velocity Outdoor estimate warranty claims based on current and historical product sales data and incurred warranty costs[215](index=215&type=chunk) | Metric (in thousands) | Nine months ended Sep 30, 2023 | Year ended Dec 31, 2022 | | :-------------------- | :----------------------------- | :---------------------- | | Beginning balance | **$1,754** | **$2,062** | | Provision for warranties issued | **$2,507** | **$3,301** | | Fulfillment of warranty obligations | **$(2,624)** | **$(3,609)** | | Ending balance | **$1,637** | **$1,754** | [Note I - Debt](index=27&type=section&id=Note%20I%20-%20Debt) This note details the company's debt structure, including the 2022 Credit Facility and Senior Notes, outlining interest rates, maturities, and covenant compliance, with total debt outstanding at $1,785.8 million - The **2022** Credit Facility includes a **$600 million** revolving loan commitment (**2022** Revolving Line of Credit) and a **$400 million** **2022** Term Loan, both maturing on July 12, **2027**[216](index=216&type=chunk)[529](index=529&type=chunk) - The company has **$1,000 million** in **5.250%** Senior Notes due **2029** and **$300 million** in **5.000%** Senior Notes due **2032**[173](index=173&type=chunk)[242](index=242&type=chunk)[504](index=504&type=chunk) | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | 2029 Senior Notes | **$1,000,000** | **$1,000,000** | | 2032 Senior Notes | **$300,000** | **$300,000** | | 2022 Term Loan | **$387,500** | **$395,000** | | 2022 Revolving Credit Facility | **$112,000** | **$155,000** | | Total debt outstanding | **$1,785,776** | **$1,834,468** | - Net availability under the **2022** Revolving Credit Facility was approximately **$485.8 million** at September 30, 2023, and the company was in compliance with all covenants[144](index=144&type=chunk)[241](index=241&type=chunk) [Note J - Stockholders' Equity](index=30&type=section&id=Note%20J%20-%20Stockholders'%20Equity) This note outlines the company's equity structure, including common and preferred shares, detailing the share repurchase program, equity offering, preferred share distributions, and EPS calculation - The Board of Directors approved a share repurchase program in January 2023, authorizing up to **$50 million** of common shares through December 31, 2023. As of September 30, 2023, **$42.6 million** remained available[272](index=272&type=chunk)[522](index=522&type=chunk) - The company has Series A, B, and C Preferred Shares with liquidation preferences of **$25.00** per share and annual distribution rates of **7.250%**, **7.875%**, and **7.875%**, respectively[250](index=250&type=chunk)[274](index=274&type=chunk)[359](index=359&type=chunk) - Allocation Interests holders are entitled to profit distributions upon a Sale Event or Holding Event. The sale of Advanced Circuits in February 2023 triggered a **$24.4 million** distribution to Allocation Interests holders[181](index=181&type=chunk)[252](index=252&type=chunk)[403](index=403&type=chunk) | Metric (in thousands, except per share data) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | | :------------------------------------------- | :-------------------------- | :-------------------------- | | Basic and fully diluted income (loss) per common share attributable to Holdings | **$(0.33)** | **$(0.21)** | | Metric (in thousands, except per share data) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------------- | :-------------------------- | :-------------------------- | | Basic and fully diluted income (loss) per common share attributable to Holdings | **$0.69** | **$0.20** | [Note K - Noncontrolling Interest](index=34&type=section&id=Note%20K%20-%20Noncontrolling%20Interest) This note details the noncontrolling interest, representing equity and net income (loss) of majority-owned subsidiaries not owned by the Company, providing ownership percentages and balances - Noncontrolling interest represents the equity and net income (loss) of majority-owned subsidiaries not owned by the Company[280](index=280&type=chunk) | Subsidiary | LLC's Primary Ownership % (Sep 30, 2023) | | :--------------- | :------------------------------------- | | 5.11 | **97.5** | | BOA | **91.8** | | Ergobaby | **81.6** | | Lugano | **59.9** | | Marucci | **90.0** | | PrimaLoft | **90.7** | | Velocity Outdoor | **99.4** | | Altor | **99.3** | | Arnold | **98.0** | | Sterno | **99.4** | | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Noncontrolling Interest Balances | **$250,169** | **$223,509** | [Note L - Fair Value Measurement](index=35&type=section&id=Note%20L%20-%20Fair%20Value%20Measurement) This note discusses fair value measurements for non-recurring items like goodwill impairment, noting no recurring fair value measurements and detailing impairment measurements for Velocity Outdoor - No assets or liabilities were measured on a recurring basis at fair value during the nine months ended September 30, 2023[259](index=259&type=chunk) | Metric (in thousands) | Sep 30, 2023 (Level 3) | 9 Months Ended Sep 30, 2023 Expense | | :-------------------- | :--------------------- | :---------------------------------- | | Goodwill - Velocity | **$7,205** | **$32,568** | - The put option of noncontrolling shareholders related to **5.11** was terminated during the period ended March 31, 2023[260](index=260&type=chunk)[384](index=384&type=chunk) [Note M - Income taxes](index=36&type=section&id=Note%20M%20-%20Income%20taxes) This note explains the company's income tax provision approach, including quarterly effective tax rate estimation and reconciliation to the U.S. Federal Statutory Rate, highlighting impacts like foreign taxes and impairment expense - The Company estimates its annual effective tax rate each fiscal quarter, applying it to interim pre-tax earnings and reflecting unusual items or tax law changes when they occur[262](index=262&type=chunk)[315](index=315&type=chunk) | Metric | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------------- | :-------------------------- | :-------------------------- | | U.S. Federal Statutory Rate | **21.0%** | **21.0%** | | State income taxes (net of Federal benefits) | **7.4%** | **3.7%** | | Foreign income taxes | **5.2%** | **2.0%** | | Impairment expense | **7.5%** | — | | Effective income tax rate | **49.2%** | **46.6%** | - The effective income tax rate for the nine months ended September 30, 2023, was **49.2%**, differing from the U.S. statutory rate primarily due to foreign income taxes, limitations on carryforwards, and the tax effect of impairment expense at Velocity[356](index=356&type=chunk) [Note N - Defined Benefit Plan](index=37&type=section&id=Note%20N%20-%20Defined%20Benefit%20Plan) This note describes Arnold's defined benefit plan for Swiss employees, reporting an unfunded liability of $2.0 million and detailing net periodic benefit costs - Arnold has a defined benefit plan for its employees at its Lupfig, Switzerland location, with an unfunded liability of **$2.0 million** recognized in other non-current liabilities at September 30, 2023[385](index=385&type=chunk) | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | | Net periodic benefit cost | **$87** | **$90** | | Metric (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | | Net periodic benefit cost | **$250** | **$247** | [Note O - Commitments and Contingencies](index=37&type=section&id=Note%20O%20-%20Commitments%20and%20Contingencies) This note addresses legal proceedings, expecting no material adverse effects, and details operating lease arrangements, including right-of-use assets, liabilities, and maturities with a 6.12-year weighted-average term - The Company does not believe that any unfavorable outcomes from current claims and legal proceedings will have a material adverse effect on its consolidated financial position or results of operations[318](index=318&type=chunk) - Operating lease right-of-use assets were **$162.4 million**, and operating lease liabilities were **$155.1 million** (non-current) at September 30, 2023[268](index=268&type=chunk) | Metric | Sep 30, 2023 | | :---------------------------- | :----------- | | Weighted-average remaining lease term (years) | **6.12** | | Weighted-average discount rate | **8.02%** | [Note P - Related Party Transactions](index=39&type=section&id=Note%20P%20-%20Related%20Party%20Transactions) This note details significant related party transactions, including management fees paid to CGM under the MSA, integration service fees from acquired businesses, and inventory purchases from related party vendors - The LLC pays CGM a quarterly management fee equal to **0.5%** of its adjusted net assets under the Management Services Agreement (MSA)[292](index=292&type=chunk) - PrimaLoft paid CGM integration service fees of **$4.8 million** quarterly over a twelve-month period ended June 30, 2023, and Lugano paid **$2.3 million** quarterly over a twelve-month period ended September 30, 2022[154](index=154&type=chunk)[293](index=293&type=chunk) - **5.11** purchased **$1.6 million** in inventory from a related party vendor during the nine months ended September 30, 2023, and BOA purchased **$30.4 million** from a noncontrolling shareholder contract manufacturer during the same period[294](index=294&type=chunk)[295](index=295&type=chunk) [Note Q - Subsequent Event](index=40&type=section&id=Note%20Q%20-%20Subsequent%20Event) This note discloses the definitive agreement for the sale of Marucci Sports to Fox Factory, Inc. for an enterprise value of $572 million, expected to close in Q4 2023 - On November 1, 2023, the Company entered into a definitive agreement for the sale of Wheelhouse Holdings Inc. (Marucci Sports) to Fox Factory, Inc[324](index=324&type=chunk)[336](index=336&type=chunk) - The sale price is based on an enterprise value of **$572 million**, subject to adjustments for transaction tax benefits, expenses, net working capital, and cash/debt balances[324](index=324&type=chunk)[336](index=336&type=chunk) - The closing of the transaction is expected to occur in the fourth quarter of 2023, though there are no assurances all conditions will be satisfied[324](index=324&type=chunk)[336](index=336&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=40&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on financial condition and results of operations, covering overall performance, trends, recent events, segment analysis, liquidity, and financing arrangements [Overview](index=41&type=section&id=Overview) The Company acquires and manages small to middle-market businesses in North America, controlling ten operating segments categorized into branded consumer and niche industrial, with a new focus on healthcare - The Company acquires and manages small and middle-market businesses in North America, controlling **ten** operating segments as of September 30, 2023[326](index=326&type=chunk) - Subsidiary businesses are categorized into branded consumer and niche industrial, with a new strategic focus on healthcare for diversification and stability[327](index=327&type=chunk) - Management actively increases business value and cash generation through capital investments, improved sales/marketing, and strategic acquisitions/integrations[333](index=333&type=chunk) [Significant Trends Impacting Our Subsidiary Businesses](index=43&type=section&id=Significant%20Trends%20Impact%20Our%20Subsidiary%20Businesses) The macroeconomic environment, with inflation and rising interest rates, impacts consumer spending, while the company focuses on sales growth, free cash flow, price adjustments, and strategic acquisitions - Global macroeconomic trends, including inflation and rising interest rates, are weakening consumer sentiment and negatively impacting discretionary spending[411](index=411&type=chunk) - The company anticipates continued modest inflationary cost increases in materials and labor, although transportation costs have normalized[411](index=411&type=chunk) - Pursuing sales growth through new product development, increased distribution, new customer acquisitions, and international expansion - Driving free cash flow through increased net income and effective working capital management - Raising prices, when appropriate, to preserve operating margins - Striving for excellence in supply chain management, manufacturing, and technological capabilities - Continuing to grow through disciplined, strategic acquisitions and rigorous integration processes[308](index=308&type=chunk) [Recent Events](index=44&type=section&id=Recent%20Events) Recent events include the sale of Advanced Circuits for $220 million, yielding a $98.0 million net gain, and the definitive agreement to sell Marucci Sports for $572 million, expected to close in Q4 2023 - The sale of Compass AC Holdings, Inc. (Advanced Circuits) was completed on February 14, 2023, for an enterprise value of **$220 million**, yielding approximately **$170.9 million** in total proceeds[364](index=364&type=chunk) - A net gain on sale of **$98.0 million** was recorded in Q1 2023 from the Advanced Circuits disposition, with subsequent adjustments[364](index=364&type=chunk) - A definitive agreement for the sale of Wheelhouse Holdings Inc. (Marucci Sports) to Fox Factory, Inc. was signed on November 1, 2023, with an enterprise value of **$572 million**, expected to close in Q4 2023[336](index=336&type=chunk) [Non-GAAP Financial Measures](index=44&type=section&id=Non-GAAP%20Financial%20Measures) This section defines non-GAAP financial measures like EBITDA and Adjusted EBITDA, which provide investors an alternative method for assessing financial condition and operating results, supplementing GAAP presentations - Non-GAAP financial measures are numerical measures of historical or future performance, financial position, or cash flow that exclude or adjust amounts included in GAAP financial statements[365](index=365&type=chunk)[533](index=533&type=chunk) - These measures (e.g., EBITDA, Adjusted EBITDA, Adjusted Earnings) provide investors with an alternative method for assessing financial condition and operating results, supplementing GAAP presentations[148](index=148&type=chunk)[177](index=177&type=chunk)[484](index=484&type=chunk) - They are used by management for monthly analysis, annual budget preparation, and evaluating targeted businesses for acquisition, offering additional insight into operating results[177](index=177&type=chunk)[484](index=484&type=chunk) [Results of Operations - Consolidated](index=45&type=section&id=Results%20of%20Operations%20-%20Consolidated) Consolidated net revenues decreased slightly for three months but increased for nine months, driven by acquisitions and growth, with improved gross profit margins, though operating income was impacted by impairment expense and higher interest | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change (YoY) | | :-------------------- | :-------------------------- | :-------------------------- | :----------- | | Net revenues | **$569,565** | **$575,819** | **-1.1%** | | Gross profit | **$254,218** | **$229,559** | **+10.7%** | | Operating income | **$28,435** | **$43,775** | **-35.1%** | | Impairment expense | **$32,568** | **$0** | NM | | Interest expense | **$(27,560)** | **$(22,799)** | **+20.9%** | | Metric (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change (YoY) | | :-------------------- | :-------------------------- | :-------------------------- | :----------- | | Net revenues | **$1,635,952** | **$1,601,929** | **+2.1%** | | Gross profit | **$728,939** | **$642,131** | **+13.5%** | | Operating income | **$122,407** | **$138,688** | **-11.7%** | | Impairment expense | **$32,568** | **$0** | NM | | Interest expense | **$(80,355)** | **$(57,737)** | **+39.2%** | - Gross profit as a percentage of net revenues increased to **44.6%** for both the three and nine months ended September 30, 2023, driven by price increases, reduced transportation costs, and a favorable product mix[341](index=341&type=chunk)[375](index=375&type=chunk) - Management fees increased to **$18.6 million** (3 months) and **$51.9 million** (9 months) due to the PrimaLoft acquisition in July 2022[343](index=343&type=chunk)[351](index=351&type=chunk) [Results of Operations - Business Segments](index=49&type=section&id=Results%20of%20Operations%20-%20Business%20Segments) This section details the financial performance of ten operating segments, showing strong sales growth in some, declines in others due to market conditions, improved gross profit margins, and a significant goodwill impairment at Velocity Outdoor | Segment | 9 Months Ended Sep 30, 2023 Net Sales (in thousands) | 9 Months Ended Sep 30, 2022 Net Sales (in thousands) | YoY Change | | :--------------- | :--------------------------------------- | :--------------------------------------- | :--------- | | 5.11 | **$385,695** | **$350,608** | **+10.0%** | | BOA | **$113,390** | **$166,215** | **-31.8%** | | Ergobaby | **$71,785** | **$68,256** | **+5.2%** | | Lugano | **$203,571** | **$137,229** | **+48.3%** | | Marucci | **$144,065** | **$122,481** | **+17.6%** | | PrimaLoft | **$57,619** | **$10,712** | **+437.9%** | | Velocity Outdoor | **$126,348** | **$180,774** | **-30.1%** | | Altor Solutions | **$181,613** | **$199,590** | **-9.0%** | | Arnold | **$122,047** | **$116,319** | **+4.9%** | | Sterno | **$229,819** | **$249,745** | **-8.0%** | - Lugano Diamonds experienced significant sales growth (**48.3%** for nine months) due to strong same-store sales, inventory investment, increased marketing, and new retail salon openings[121](index=121&type=chunk)[169](index=169&type=chunk) - BOA's net sales decreased by **31.8%** for the nine months due to higher end-market inventory levels from supply chain normalization and an inventory ordering surge in 2022[105](index=105&type=chunk) - Velocity Outdoor recorded a **$32.6 million** goodwill impairment expense in Q3 2023 due to operating results falling below forecast, leading to a significant segment operating loss[435](index=435&type=chunk)[436](index=436&type=chunk) [Liquidity and Capital Resources](index=62&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is derived from subsidiary operations and its 2022 Credit Facility, with increased cash and cash equivalents, improved operating cash flows, and investing activities boosted by asset sales, while financing activities used cash - Cash and cash equivalents increased to **$64.7 million** at September 30, 2023, from **$57.9 million** at December 31, 2022[139](index=139&type=chunk) - Net availability under the **2022** Revolving Credit Facility was **$485.8 million** at September 30, 2023[139](index=139&type=chunk)[144](index=144&type=chunk) - Cash provided by operating activities for the nine months ended September 30, 2023, was **$57.0 million**, a **$96.9 million** improvement from cash used in the prior year, reflecting normalized working capital use[139](index=139&type=chunk)[474](index=474&type=chunk) - Cash provided by investing activities totaled **$104.3 million**, primarily from the sale of Advanced Circuits, contrasting with **$599.0 million** used in the prior year for acquisitions[475](index=475&type=chunk)[499](index=499&type=chunk) - Cash used in financing activities was **$157.9 million**, reflecting share repurchases and debt repayments, compared to **$542.1 million** provided in the prior year from equity offerings and new debt[141](index=141&type=chunk)[500](index=500&type=chunk) [Financing Arrangements](index=64&type=section&id=Financing%20Arrangements) The company's financing arrangements include the 2022 Credit Facility and Senior Notes, detailing intercompany debt and confirming compliance with financial covenants, including a Consolidated Total Leverage Ratio of 4.03:1.0 - The **2022** Credit Facility provides a **$600 million** revolving credit facility and a **$400 million** term loan, both maturing on July 12, 2027[529](index=529&type=chunk) - The company has **$1,000 million** in **5.250%** Senior Notes due **2029** and **$300 million** in **5.000%** Senior Notes due **2032**[173](index=173&type=chunk)[504](index=504&type=chunk) | Covenant Ratio Description | Covenant Ratio Requirement | Actual Ratio (Sep 30, 2023) | | :------------------------- | :------------------------- | :-------------------------- | | Consolidated Fixed Charge Coverage Ratio | Greater than or equal to **1.50:1.0** | **2.27:1.0** | | Consolidated Senior Secured Leverage Ratio | Less than or equal to **3.50:1.0** | **1.05:1.0** | | Consolidated Total Leverage Ratio | Less than or equal to **5.50:1.0** | **4.03:1.0** | - Intercompany loans to subsidiaries totaled **$1,342.6 million** at September 30, 2023, serving as a primary source of cash flow to the parent company[143](index=143&type=chunk)[502](index=502&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=66&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section reconciles GAAP to non-GAAP financial measures like EBITDA and Adjusted EBITDA, which management uses to evaluate operating results and acquisition targets by excluding specific non-recurring items for ongoing performance insight - 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[176](index=176&type=chunk) - Adjusted EBITDA further adjusts EBITDA by excluding noncontrolling stockholder compensation, successful acquisition costs, integration service fees, and other material non-recurring income or expense items[149](index=149&type=chunk)[483](index=483&type=chunk) | Metric (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | | Adjusted EBITDA | **$285,863** | **$262,435** | | Adjusted Earnings | **$109,716** | **$116,896** | - Adjusted Earnings is calculated by adjusting net income (loss) to include preferred shareholder distributions and exclude specific costs, expenses, gains, and losses that management believes are not indicative of ongoing operating performance[507](index=507&type=chunk) [Seasonality](index=70&type=section&id=Seasonality) Certain operating segments experience seasonality due to recurring events and weather, with Q3 and Q4 historically generating highest net sales, though consolidated net sales now exhibit less seasonality due to acquisitions - Certain operating segments experience seasonality in earnings due to recurring events, holidays, and seasonal weather patterns[46](index=46&type=chunk)[510](index=510&type=chunk) - Historically, the third and fourth quarters have produced the highest net sales in the fiscal year[46](index=46&type=chunk)[510](index=510&type=chunk) - Due to various acquisitions since 2020, there is generally less seasonality in the company's net sales on a consolidated basis[46](index=46&type=chunk)[510](index=510&type=chunk) [Management Services Agreement](index=71&type=section&id=Management%20Services%20Agreement) The LLC has an MSA with CGM, requiring a quarterly management fee of 0.5% of adjusted net assets, with CGM also receiving integration service fees from acquired companies, and waivers implemented for PrimaLoft management fees - The LLC pays CGM a quarterly management fee equal to **0.5%** (**2.0%** annually) of its consolidated adjusted net assets under the MSA[511](index=511&type=chunk) - CGM provides integration services for new platform acquisitions, assisting with corporate governance, Sarbanes-Oxley compliance, and policy alignment[154](index=154&type=chunk)[539](index=539&type=chunk) - CGM waived a portion of the management fee for PrimaLoft through June 30, 2023, receiving **1%** annually instead of **2%**, and also waived excluding cash balances from the fee calculation[511](index=511&type=chunk) | Entity | 3 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2023 (in thousands) | | :--------------- | :--------------------------------------- | :--------------------------------------- | | Corporate | **$16,845** | **$46,660** | | 5.11 | **$250** | **$750** | | BOA | **$250** | **$750** | | Ergobaby | **$125** | **$375** | | Lugano | **$188** | **$563** | | Marucci | **$125** | **$375** | | PrimaLoft | **$250** | **$750** | | Velocity | **$125** | **$375** | | Altor | **$188** | **$563** | | Arnold Magnetics | **$125** | **$375** | | Sterno | **$125** | **$375** | | **Total** | **$18,596** | **$51,911** | [Allocation Interests](index=71&type=section&id=Allocation%20Interests) Allocation Interests entitle holders to profit distributions upon Sale or Holding Events, with the Advanced Circuits sale in February 2023 triggering a $24.4 million distribution to holders - Allocation Interests represent the original equity interest in the Company, entitling holders to profit distributions[512](index=512&type=chunk) - Distributions are paid upon a Sale Event (material sale of capital stock or assets) or a Holding Event (five-year acquisition anniversary)[181](index=181&type=chunk)[512](index=512&type=chunk) - The sale of Advanced Circuits in February 2023 triggered a **$24.4 million** distribution to Allocation Interests holders in April 2023, plus an additional **$2.1 million** from previous Sale Events[155](index=155&type=chunk)[181](index=181&type=chunk) [Related Party Transactions](index=72&type=section&id=Related%20Party%20Transactions) This section details related party transactions, including inventory purchases by 5.11 from a vendor with an executive officer's interest, and purchases by BOA from a noncontrolling shareholder contract manufacturer - **5.11** purchased approximately **$1.6 million** in inventory from a related party vendor during the nine months ended September 30, 2023[182](index=182&type=chunk)[713](index=713&type=chunk) - BOA purchased approximately **$30.4 million** from a contract manufacturer who is a noncontrolling shareholder during the nine months ended September 30, 2023[156](index=156&type=chunk)[541](index=541&type=chunk) - In February 2022, Ergobaby underwent a recapitalization, with the LLC providing **$61.5 million** in additional term loan borrowings to fund a distribution to shareholders, of which the LLC received **$50.2 million**[183](index=183&type=chunk)[323](index=323&type=chunk) [Critical Accounting Policies and Estimates](index=72&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights critical accounting policies and estimates, emphasizing management's judgments and assumptions, particularly for goodwill and indefinite-lived intangible asset impairment testing, which involves qualitative and quantitative assessments - The preparation of financial statements requires management to adopt accounting policies and make estimates and judgments that affect reported amounts, which could differ from actual results[184](index=184&type=chunk)[543](index=543&type=chunk) - Goodwill and indefinite-lived intangible assets are tested for impairment annually (March 31st) and on an interim basis if triggering events occur[515](index=515&type=chunk) - Impairment testing involves qualitative assessments and, if necessary, quantitative tests using income or market approaches, which rely on key judgments and assumptions about sales growth, operating margins, and discount rates[159](index=159&type=chunk)[185](index=185&type=chunk) [Goodwill and Indefinite-lived Intangible Asset Impairment Testing](index=72&type=section&id=Goodwill%20and%20Indefinite-lived%20Intangible%20Asset%20Impairment%20Testing) The company performs annual and interim impairment tests for goodwill and indefinite-lived intangible assets, with Velocity Outdoor undergoing a Q3 2023 quantitative test resulting in a $32.6 million goodwill impairment due to underperforming results - Velocity Outdoor underwent an interim quantitative goodwill impairment test as of August 31, 2023, due to operating results falling below forecast[205](index=205&type=chunk)[516](index=516&type=chunk) - The impairment test for Velocity Outdoor resulted in a **$32.6 million** goodwill impairment expense recorded in the quarter ended September 30, 2023[209](index=209&type=chunk)[516](index=516&type=chunk) - The quantitative test for Velocity used an income approach with a **17%** weighted average cost of capital, an increase from **15%** in March 2023, reflecting additional uncertainty[209](index=209&type=chunk)[516](index=516&type=chunk) - Qualitative assessments for other reporting units and indefinite-lived intangible assets (trade names) indicated that fair value exceeded carrying value for both **2023** and **2022** annual tests[186](index=186&type=chunk)[212](index=212&type=chunk)[231](index=231&type=chunk)[546](index=546&type=chunk) [Recent Accounting Pronouncements](index=74&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note A for a discussion of recent accounting pronouncements, where relevant updates or adoptions are detailed - Information regarding recent accounting pronouncements is discussed in Note A - "Presentation and Principles of Consolidation" of the condensed consolidated financial statements[518](index=518&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=73&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section states no material changes to market risk since December 31, 2022, directing readers to the Annual Report on Form 10-K for a comprehensive discussion of market risk exposure - There have been no material changes to the company's market risk since December 31, 2022[547](index=547&type=chunk) - For a further discussion of market risk exposure, readers are referred to Part II, Item 7A of the Annual Report on Form 10-K for the year ended December 31, 2022[547](index=547&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=73&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of disclosure controls and procedures as of September 30, 2023, following evaluation by the Trust's Regular Trustees and the LLC's management, including the CEO and CFO - The Trust's Regular Trustees and the LLC's management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of September 30, 2023[519](index=519&type=chunk) - Based on the evaluation, it was concluded that the disclosure controls and procedures were effective as of September 30, 2023[519](index=519&type=chunk) - There have been no material changes in internal control over financial reporting during the most recently completed fiscal quarter[189](index=189&type=chunk) PART II. OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=74&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section states no material changes to legal proceedings since the disclosure in the Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes to legal proceedings associated with the Company's business since the Annual Report on Form 10-K for the year ended December 31, 2022[190](index=190&type=chunk) [ITEM 1A. RISK FACTORS](index=74&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section advises considering risk factors from the Annual Report on Form 10-K, noting no material changes but acknowledging potential impact from unknown or currently immaterial risks - Risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022, should be considered with this Quarterly Report[164](index=164&type=chunk) - No material changes to the previously disclosed risk factors have occurred since the Annual Report on Form 10-K[164](index=164&type=chunk) - Additional risks not currently known or deemed immaterial could still impair the business, including its results of operations, liquidity, and financial condition[164](index=164&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=75&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on the company's share repurchase program, with 75,600 common shares repurchased in Q3 2023 at an average price of $20.08, leaving $42.6 million available - The Company's Board of Directors approved a share repurchase program in January 2023, authorizing up to **$50.0 million** of outstanding common shares through December 31, 2023[522](index=522&type=chunk) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------------- | :------------------------------- | :--------------------------- | | August 1 - August 31, 2023 | **15,000** | **$20.81** | | September 1 - September 30, 2023 | **60,600** | **$19.90** | | **Total** | **75,600** | **$20.08** | - As of September 30, 2023, **$42.6 million** remained available for purchase under the publicly announced share repurchase program[165](index=165&type=chunk)[522](index=522&type=chunk) [ITEM 6. EXHIBITS](index=75&type=section&id=ITEM%206.%20EXHIBITS) This section lists exhibits filed with Form 10-Q, including CEO and CFO certifications and Inline XBRL Taxonomy Extension documents, clarifying that certifications accompany but are not "filed" for certain purposes - **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** - **32.2*** Certification of Chief Financial Officer of Registrant pursuant to **18** U.S.C. Section **1350** - **101.SCH*** Inline XBRL Taxonomy Extension Schema Document - **101.DEF*** Inline XBRL Taxonomy Extension Definition Linkbase Document - **101.PRE*** Inline XBRL Taxonomy Extension Presentation Linkbase Document - **101.CAL*** Inline XBRL Taxonomy Extension Calculation Linkbase Document - **101.LAB*** Inline XBRL Taxonomy Extension Label Linkbase Document - **101.INS*** Inline XBRL Instance Document - **104** Cover page formatted as Inline XBRL and contained in Exhibit **101**[166](index=166&type=chunk)[167](index=167&type=chunk)[193](index=193&type=chunk)[198](index=198&type=chunk)[523](index=523&type=chunk)[526](index=526&type=chunk)[527](index=527&type=chunk) - Certifications furnished in Exhibit **32.1** and Exhibit **32.2** are deemed to accompany the Form **10-Q** but are not considered "filed" for purposes of Section **18** of the Exchange Act[198](index=198&type=chunk) SIGNATURES [Signatures and Certifications](index=76&type=section&id=Signatures%20and%20Certifications) This section contains signatures of authorized representatives of Compass Diversified Holdings and Compass Group Diversified Holdings LLC, confirming due authorization and filing of the report - The report is signed by Ryan J. Faulkingham, Chief Financial Officer and Regular Trustee, on behalf of Compass Diversified Holdings and Compass Group Diversified Holdings LLC[196](index=196&type=chunk)[525](index=525&type=chunk) - The signatures confirm that the report is duly authorized and filed pursuant to the requirements of the Securities Exchange Act of **1934**, as amended[199](index=199&type=chunk)[201](index=201&type=chunk) ```

Compass Diversified (NYSE:CODI) Q2 2023 Earnings Conference Call August 2, 2023 5:00 PM ET Company Participants Elias Sabo - Chief Executive Officer Pat Maciariello - Chief Operating Officer, Compass Group Management Ryan Faulkingham - Chief Financial Officer Conference Call Participants Larry Solow - CJS Securities Derek Sommers - Jefferies Matthew Howlett - B. Riley Operator Good afternoon, and welcome to Compass Diversified's Second Quarter 2023 Conference call. Representing the company today are Elias S ...