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•	the "Trust" and "Holdings" refer to Compass Diversified Holdings;

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

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

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

•	the "Trust Agreement" refer to the Second Amended and Restated Trust Agreement of the Trust dated as of December 6, 2016;

•	the "2014 Credit Facility" refer to the credit agreement, as amended, entered into on June 14, 2014 with a group of lenders led by Bank of America N.A. as administrative agent, as amended from time to time, which provides for a Revolving Credit Facility and a Term Loan;

•	the "2018 Credit Facility" refer to the amended and restated credit agreement entered into on April 18, 2018 among the Company, the 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, as further amended.

•	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 that matures in 2023;

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

•	the "LLC Agreement" refer to the fifth amended and restated operating agreement of the Company dated as of December 6, 2016; and

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

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•	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) global pandemic, and the impact in the near, medium and long-term on our business, results of operations, financial position, liquidity or cash flows;

•	our ability to successfully operate our businesses on a combined basis, and to effectively integrate and improve future acquisitions;

•	our ability to remove CGM and CGM’s right to resign;

•	our organizational structure, which may limit our ability to meet our dividend and distribution policy;

•	our ability to service and comply with the terms of our indebtedness;

•	our cash flow available for distribution and reinvestment and our ability to make distributions in the future to our shareholders;

•	our ability to pay the management fee and profit allocation if and when due;

•	our ability to make and finance future acquisitions;

•	our ability to implement our acquisition and management strategies;

•	the regulatory environment in which our businesses operate;

•	trends in the industries in which our businesses operate;

•	changes in general economic or business conditions or economic or demographic trends in the United States and other countries in which we have a presence, including changes in interest rates and inflation;

•	environmental risks affecting the business or operations of our businesses;

•	our and CGM’s ability to retain or replace qualified employees of our businesses and CGM;

•	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 businesses.

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⁽¹⁾ Includes cash from discontinued operations of $4.6 million at January 1, 2019.

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Compass Diversified Holdings, a Delaware statutory trust (the "Trust" or "Holdings") and Compass Group Diversified Holdings LLC, a Delaware limited liability company (the "Company"), were formed to acquire and manage a group of small and middle-market businesses headquartered in North America. In accordance with the second amended and restated Trust Agreement, dated as of December 6, 2016 (as amended and restated, the "Trust Agreement"), the Trust is sole owner of 100% of the Trust Interests (as defined in the Company’s fifth amended and restated operating agreement, dated as of December 6, 2016 (as amended and restated, the "LLC Agreement")) of the Company and, pursuant to the LLC Agreement, the Company has, outstanding, the identical number of Trust Interests as the number of outstanding shares of the Trust. The Company is the operating entity with a board of directors and other corporate governance responsibilities, similar to that of a Delaware corporation.

The Company is a controlling owner of nine businesses, or reportable operating segments, at June 30, 2020. The segments are as follows: 5.11 Acquisition Corp. ("5.11"), Velocity Outdoor, Inc. (formerly Crosman Corp.) ("Velocity Outdoor" or "Velocity"), The Ergo Baby Carrier, Inc. ("Ergobaby"), Liberty Safe and Security Products, Inc. ("Liberty Safe" or "Liberty"), Marucci Sports, LLC ("Marucci Sports" or "Marucci"), Compass AC Holdings, Inc. ("ACI" or "Advanced Circuits"), AMT Acquisition Corporation ("Arnold"), FFI Compass, Inc. ("Foam Fabricators" or "Foam"), and The Sterno Group, LLC ("Sterno"). Refer to Note E - "Operating Segment Data" for further discussion of the operating segments. Compass Group Management LLC, a Delaware limited liability company ("CGM" or the "Manager"), manages the day to day operations of the Company and oversees the management and operations of our businesses pursuant to a Management Services Agreement ("MSA").

Basis of Presentation

The condensed consolidated financial statements for the three and six month periods ended June 30, 2020 and June 30, 2019 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, 2019.

Consolidation

The condensed consolidated financial statements include the accounts of Holdings and all majority owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Discontinued Operations

During the first quarter of 2019, the Company completed the sale of FHF Holdings Ltd. ("Manitoba Harvest"), the parent company of Fresh Hemp Foods Ltd. Additionally, during the second quarter of 2019, the Company completed the sale of CEHI Acquisition Corp. ("Clean Earth"), the parent company of Clean Earth Holdings, Inc. and Clean Earth Inc. The results of operations of Manitoba Harvest and Clean Earth are reported as discontinued operations in the condensed consolidated statements of operations for the three and six months ended June 30, 2019. Refer to Note C - "Discontinued Operations" for additional information. Unless otherwise indicated, the disclosures accompanying the condensed consolidated financial statements reflect the Company's continuing operations.

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 the highest net sales during our fiscal year.

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Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-13, Financial Instruments—Credit Losses, which requires companies to present assets held at amortized cost, trade receivables and available for sale debt securities net of the amount expected to be collected. The guidance requires the measurement of expected credit losses to be based on relevant information from past events, including historical experiences, current conditions and reasonable and supportable forecasts that affect collectibility. The guidance was effective for fiscal years and interim periods beginning after December 15, 2019, with early adoption permitted. The adoption of this guidance on January 1, 2020 did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements

Acquisition of Marucci Sports, LLC

On April 20, 2020, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) entered into on March 6, 2020, the Company, through a wholly-owned subsidiary, Wheelhouse Holdings Inc., a Delaware corporation (“Buyer”) and Wheelhouse Holdings Merger Sub LLC, a Delaware limited liability company and a wholly owned Subsidiary of Buyer (“Merger Sub”), completed a merger (the “Transaction”) with Marucci Sports, LLC, a Delaware limited liability company (“Marucci”). Upon the completion of the Transaction, Marucci became a wholly owned subsidiary of Buyer and an indirect subsidiary of the Company. Headquartered in Baton Rouge, Louisiana, Marucci is a leading manufacturer and distributor of baseball and softball equipment. Founded in 2009, Marucci has a product portfolio that includes wood and metal bats, apparel and accessories, batting and fielding gloves and bags and protective gear.

The Company made loans to, and purchased a 92.2% equity interest in, Marucci. The purchase price, including proceeds from noncontrolling shareholders and net of transaction costs, was $199.4 million. Marucci management and certain existing shareholders invested in the Transaction along with the Company, representing 7.8% initial noncontrolling interest on both a primary and fully diluted basis. The fair value of the noncontrolling interest was determined based on the enterprise value of the acquired entity multiplied by the ratio of the number of shares acquired by the minority holders to total shares. The transaction was accounted for as a business combination. CGM acted as an advisor to the Company in the acquisition and will continue to provide integration services during the first year of the Company's ownership of Marucci. CGM will receive integration service fees of $2.0 million payable quarterly over a twelve month period as services are rendered beginning in the quarter ended September 30, 2020. The Company incurred $2.0 million of transaction costs in conjunction with the Marucci acquisition, which was included in selling, general and administrative expense in the consolidated statements of operations during the second quarter of 2020.

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

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		Preliminary Allocation
(in thousands)		As of April 20, 2020
Assets
Cash		$	2,730
Accounts Receivable (1)		11,471
Inventory (2)		14,795
Property, plant and equipment (3)		10,681
Intangible assets		99,249
Goodwill		67,733
Other current and noncurrent assets		956
Total Assets		207,615
Liabilities and noncontrolling interest
Current liabilities		6,207
Other liabilities		42,100
Noncontrolling interest		11,127
Total liabilities and noncontrolling interest		59,434
Net assets acquired		148,181
Noncontrolling interest		11,127
Intercompany loans		42,100
		$	201,408

(1) Includes $12.7 million in gross contractual accounts receivable, of which $1.2 million is not expected to be collected. The fair value of accounts receivable approximates book value acquired.

(2) Includes $4.3 million in inventory basis step-up, which will be charged to cost of goods sold. $3.0 million was amortized to cost of goods sold in the second quarter of 2020, and $1.3 million will be charged to cost of goods sold in the third quarter of 2020.

(3) Includes $2.5 million of property, plant and equipment basis step-up. The fair value of property, plant and equipment will be depreciated over the remaining useful lives of the assets.

Acquisition consideration
Purchase price		$	200,000
Cash acquired		3,750
Net working capital adjustment		158
Other adjustments		(2,500		)
Total purchase consideration		$	201,408
Less: Transaction costs		2,042
Net purchase price		$	199,366

The preliminary 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. Property, plant and equipment is valued through a purchase price appraisal and will be depreciated on a straight-line basis over the respective remaining useful lives of the assets. Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual relationships, as well as

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expected future synergies. The goodwill of $67.7 million reflects the strategic fit of Marucci in the Company's branded consumer business and is expected to be deductible for income tax purposes. The purchase accounting for Marucci is preliminary and is expected to be finalized in the third quarter of 2020.

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

Intangible Assets		Amount				Estimated Useful Life
Tradename		$	83,929			15 years
Customer relationships		11,120				15 years
Technology		4,200				15 years
		$	99,249

The tradename was valued at $83.9 million using a multi-period excess earnings methodology. The customer relationships intangible asset was valued at $11.1 million using the distributor method, a variation of the multi-period excess earnings methodology, in which an asset is valuable to the extent it enables its owners to earn a return in excess of the required returns on the other assets utilized in the business. The technology was valued at $4.2 million using a relief from royalty method.

Unaudited pro forma information

The following unaudited pro forma data for the three and six months ended June 30, 2020 and 2019 gives effect to the acquisition of Marucci, as described above, as if the acquisition had been completed as of January 1, 2019. 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						Six months ended
(in thousands)	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Net sales	333,892			349,759			689,576			709,982
Gross profit	117,471			129,651			249,318			260,302
Operating income	10,912			17,738			26,193			31,923
Net loss from continuing operations	(9,483	)		(7,361	)		(5,885	)		(21,685	)
Net loss from continuing operations attributable to Holdings	(10,422	)		(8,659	)		(8,132	)		(24,427	)
Basic and fully diluted net loss per share attributable to Holdings	(0.33	)		(0.38	)		(0.56	)		(0.72	)

Other acquisitions

Foam Fabricators

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Note C — Discontinued Operations

Sale of Clean Earth

On May 8, 2019, the Company, as majority stockholder of CEHI Acquisition Corporation ("Clean Earth" or “CEHI”) and as Sellers’ Representative, entered into a definitive Stock Purchase Agreement (the “Purchase Agreement”) with Calrissian Holdings, LLC (“Buyer”), CEHI, the other holders of stock and options of CEHI and, as Buyer’s guarantor, Harsco Corporation, pursuant to which 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, Buyer completed the acquisition of all of the issued and outstanding securities of CEHI pursuant to the Purchase Agreement. The sale price for Clean Earth was based on an aggregate total enterprise value of $625 million, subject to customary working capital adjustments. After the allocation of the sale proceeds to Clean Earth non-controlling equity holders, the repayment of intercompany loans to the Company (including accrued interest) of $224.6 million, and the payment of transaction expenses of approximately $10.7 million, the Company received approximately $327.3 million of total proceeds at closing related to our equity interests in Clean Earth. The Company recognized a gain on the sale of Clean Earth of $209.3 million during the year ended December 31, 2019.

Summarized results of operations of Clean Earth for the periods April 1, 2019 and January 1, 2019 through the date of disposition are as follows (in thousands):

	For the period April 1, 2019 through disposition				For the period January 1, 2019 through disposition
Net sales	$	69,105			$	132,737
Gross profit	23,045				39,678
Operating income	4,976				6,232
Income from continuing operations before income taxes	4,889				5,880
Benefit for income taxes	(10,585		)		(11,607		)
Income from discontinued operations (1)	$	15,474			$	17,487

⁽¹⁾ The results of operations for the periods from April 1, 2019 through disposition and January 1, 2019 through disposition, excludes $5.6 million and $10.2 million, respectively, of intercompany interest expense.

Sale of Manitoba Harvest

On February 19, 2019, the Company entered into a definitive agreement with Tilray, Inc. ("Tilray") and a wholly-owned subsidiary of Tilray, 1197879 B.C. Ltd. (“Tilray Subco”), to sell to Tilray, through Tilray Subco, all of the issued and outstanding securities of our majority owned subsidiary, Manitoba Harvest, for total consideration of up to C$419 million. The completion of the sale of Manitoba Harvest was subject to approval by the British Columbia Supreme Court, which occurred on February 21, 2019. The sale closed on February 28, 2019. Subject to certain customary adjustments, the shareholders of Manitoba Harvest, including the Company, received the following from Tilray as consideration for their shares of Manitoba Harvest: (i) C$150 million in cash to the holders of preferred shares of Manitoba Harvest and the holders of common shares of Manitoba Harvest (“Common Holders”) and C$127.5 million in shares of class 2 Common Stock of Tilray (“Tilray Common Stock”) to the Common Holders on the closing date of the sale (the “Closing Date Consideration”), and (ii) C$50 million in cash and C$42.5 million in Tilray Common Stock to the Common Holders on the date that was six months after the closing date of the arrangement (the “Deferred Consideration”). The sale consideration also included a potential earnout of up to C$49 million in Tilray Common Stock to the Common Holders, if Manitoba Harvest achieved certain levels of U.S. branded gross sales of edible or topical products containing broad spectrum hemp extracts or cannabidiols prior to December 31, 2019. The threshold for the earnout was not achieved and no additional amount was recorded related to sale of Manitoba Harvest at December 31, 2019.

The cash portion of the Closing Date Consideration was reduced by the amount of the net indebtedness (including accrued interest) of Manitoba Harvest on the closing date of C$71.3 million ($53.7 million) and transaction expenses of approximately C$5.0 million. The Company's share of the net proceeds after accounting for the redemption of the noncontrolling shareholders and the payment of net indebtedness of Manitoba Harvest and transaction expenses was approximately $124.2 million in cash proceeds and in Tilray Common Stock. The Company recognized a gain on the sale of Manitoba Harvest of $121.7 million in the first quarter of 2019. In August 2019, the Company received the

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Deferred Consideration related to the sale. The Company's portion of the Deferred Consideration totaled $28.4 million in cash proceeds and $19.6 million in Tilray Common Stock.

The Tilray Common Stock consideration was issued in reliance on the exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act") and pursuant to exemptions from applicable securities laws of any state of the United States, such that any shares of Tilray Common Stock received by the Common Holders were freely tradeable. The Company sold the Tilray Common Stock received as part of the Closing Consideration during March 2019, recognizing a net loss of $5.3 million in Other income/ (expense) during the quarter ended March 31, 2019. In August 2019, the Company sold the Tilray Common Stock received as part of the Deferred Consideration, recognizing a loss of $4.9 million in Other income/ (expense) during the quarter ended September 30, 2019.

Summarized results of operations of Manitoba Harvest for the period from January 1, 2019 through the date of disposition are as follows (in thousands):

	For the period January 1, 2019 through disposition
Net revenues	$	10,024
Gross profit	4,874
Operating loss	(1,118		)
Loss before income taxes	(1,127		)
Benefit for income taxes	(541		)
Income (loss) from discontinued operations (1)	$	(586	)

⁽¹⁾ The results of operations for the period from January 1, 2019 through the date of disposition excludes $1.0 million of intercompany interest expense.

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 and six months ended June 30, 2020 and 2019 (in thousands):

	Three months ended June 30, 2020
	5.11				Ergo				Liberty				Marucci				Velocity				ACI				Arnold				Foam				Sterno				Total
United States	$	70,677			$	7,100			$	23,467			$	5,035			$	41,900			$	22,956			$	15,293			$	20,873			$	73,913			$	281,214
Canada	1,791				1,016				986				16				2,852				—				83				—				3,143				9,887
Europe	7,245				6,812				—				4				1,774				—				7,282				—				165				23,282
Asia Pacific	3,882				5,007				—				199				188				—				1,153				—				6				10,435
Other international	4,040				109				—				2				507				—				459				3,556				136				8,809
	$	87,635			$	20,044			$	24,453			$	5,256			$	47,221			$	22,956			$	24,270			$	24,429			$	77,363			$	333,627

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	Three months ended June 30, 2019
	5.11				Ergo				Liberty				Velocity				ACI				Arnold				Foam				Sterno				Total
United States	$	76,864			$	6,898			$	20,000			$	24,953			$	22,439			$	17,635			$	26,538			$	82,608			$	277,935
Canada	2,650				827				633				1,774				—				184				—				3,184				9,252
Europe	5,872				7,544				—				1,632				—				9,056				—				253				24,357
Asia Pacific	3,164				7,530				—				203				—				1,541				—				418				12,856
Other international	4,286				172				—				1,049				—				1,065				5,110				2				11,684
	$	92,836			$	22,971			$	20,633			$	29,611			$	22,439			$	29,481			$	31,648			$	86,465			$	336,084

	Six months ended June 30, 2020
	5.11				Ergo				Liberty				Marucci				Velocity				ACI				Arnold				Foam				Sterno				Total
United States	$	143,104			$	13,358			$	48,123			$	5,035			$	67,779			$	44,652			$	33,856			$	44,460			$	153,928			$	554,295
Canada	3,265				1,716				1,290				16				4,772				—				239				—				6,071				17,369
Europe	13,552				12,599				—				4				3,472				—				15,610				—				223				45,460
Asia Pacific	7,393				10,910				—				199				434				—				2,548				—				34				21,518
Other international	16,102				1,110				—				2				1,154				—				1,575				8,352				139				28,434
	$	183,416			$	39,693			$	49,413			$	5,256			$	77,611			$	44,652			$	53,828			$	52,812			$	160,395			$	667,076

	Six months ended June 30, 2019
	5.11				Ergo				Liberty				Velocity				ACI				Arnold				Foam				Sterno				Total
United States	$	147,341			$	14,233			$	41,736			$	51,117			$	45,508			$	35,551			$	52,675			$	167,742			$	555,903
Canada	4,314				1,646				1,101				3,251				—				363				—				8,216				18,891
Europe	13,154				14,075				—				3,833				—				18,826				—				936				50,824
Asia Pacific	6,578				14,836				—				432				—				2,801				—				708				25,355
Other international	9,538				633				—				2,115				—				1,968				9,655				59				23,968
	$	180,925			$	45,423			$	42,837			$	60,748			$	45,508			$	59,509			$	62,330			$	177,661			$	674,941

At June 30, 2020, the Company had nine reportable operating segments. Each operating segment represents a platform acquisition. The Company’s operating segments are strategic business units that offer different products and services. 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:

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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, California, 5.11 operates sales offices and distribution centers globally, and 5.11 products are widely distributed in uniform stores, military exchanges, outdoor retail stores, its own retail stores and on 511tactical.com.

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Ergobaby is a designer, marketer and distributor of wearable baby carriers and accessories, blankets and swaddlers, nursing pillows, strollers 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. Ergobaby is headquartered in Los Angeles, California.

•	Liberty Safe is a designer, manufacturer and marketer of premium home, gun and office safes in North America. From its over 300,000 square foot manufacturing facility, Liberty produces a wide range of home and gun safe models in a broad assortment of sizes, features and styles. Liberty is headquartered in Payson, Utah.

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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 and licenses franchises for sports training facilities. Marucci is headquartered in Baton Rouge, Louisiana.

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Velocity Outdoor is a leading designer, manufacturer, and marketer of airguns, archery products, laser aiming devices and related accessories. Velocity Outdoor offers its products under the highly recognizable Crosman, Benjamin, Ravin, LaserMax and CenterPoint brands that are available through national retail chains, mass merchants, dealer and distributor networks. Velocity Outdoor is headquartered in Bloomfield, New York.

•	Advanced Circuits is an electronic components manufacturing company that provides small-run, quick-turn and volume production rigid printed circuit boards. ACI manufactures and delivers custom printed circuit boards to customers primarily in North America. ACI is headquartered in Aurora, Colorado.

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Arnold is a global manufacturer of engineered magnetic solutions for a wide range of specialty applications and end-markets, including aerospace and defense, general industrial, motorsport/automotive, oil and gas, medical, energy, reprographics and advertising specialties. Arnold produces high performance permanent magnets (PMAG), 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. Arnold is headquartered in Rochester, New York.

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Foam Fabricators is a designer and manufacturer of custom molded protective foam solutions and original equipment manufacturer components made from expanded polystyrene and expanded polypropylene. Foam Fabricators provides products to a variety of end markets, including appliances and electronics, pharmaceuticals, health and wellness, automotive, building and other products. In July 2020, Foam Fabricators acquired the assets of Polyfoam, a Massachusetts-based manufacturer of protective and temperature-sensitive packaging solutions for the medical, pharmaceutical, grocery and food industries, among others. Foam Fabricators is headquartered in Scottsdale, Arizona and operates 14 molding and fabricating facilities across North America subsequent to the acquisition of Polyfoam.

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Sterno is a manufacturer and marketer of portable food warming fuel and creative table lighting solutions for the food service industry and flameless candles, outdoor lighting products, scented wax cubes and warmer products for consumers. Sterno's products include wick and gel chafing fuels, butane stoves and accessories, liquid and traditional wax candles, scented wax cubes and warmer products used for home decor and fragrance systems, catering equipment and outdoor lighting products. 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. There were no significant inter-segment transactions.

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Summary of Operating Segments

Net Revenues	Three months ended June 30,								Six months ended June 30,
(in thousands)	2020				2019				2020				2019
5.11	$	87,635			$	92,836			$	183,416			$	180,925
Ergobaby	20,044				22,971				39,693				45,423
Liberty	24,453				20,633				49,413				42,837
Marucci	5,256				—				5,256				—
Velocity Outdoor	47,221				29,611				77,611				60,748
ACI	22,956				22,439				44,652				45,508
Arnold	24,270				29,481				53,828				59,509
Foam Fabricators	24,429				31,648				52,812				62,330
Sterno	77,363				86,465				160,395				177,661
Total segment revenue	333,627				336,084				667,076				674,941
Corporate and other	—				—				—				—
Total consolidated revenues	$	333,627			$	336,084			$	667,076			$	674,941

Segment profit (loss) (1)	Three months ended June 30,								Six months ended June 30,
(in thousands)	2020				2019				2020				2019
5.11	$	4,702			$	5,073			$	9,288			$	7,411
Ergobaby	2,026				2,795				3,580				5,931
Liberty	3,400				1,671				6,545				3,086
Marucci	(7,743		)		—				(7,743		)		—
Velocity Outdoor	3,998				(74		)		2,834				267
ACI	6,329				6,484				12,067				12,965
Arnold	1,443				2,227				3,096				3,704
Foam Fabricators	2,847				4,364				6,359				7,870
Sterno	3,963				8,115				9,232				16,097
Total	20,965				30,655				45,258				57,331
Reconciliation of segment profit (loss) to consolidated income (loss) before income taxes:
Interest expense, net	(11,174		)		(18,445		)		(19,771		)		(36,899		)
Other income (expense), net	(2,386		)		(90		)		(1,725		)		(524		)
Corporate and other (2)	(8,122		)		(11,375		)		(19,377		)		(30,667		)
Total consolidated income (loss) before income taxes	$	(717	)		$	745			$	4,385			$	(10,759	)

(1)	Segment profit (loss) represents operating income (loss).

(2)	Primarily relates to management fees expensed and payable to CGM, and corporate overhead expenses.

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Depreciation and Amortization Expense	Three Months ended   June 30, 2020								Six months ended   June 30,
(in thousands)	2020				2019				2020				2019
5.11	$	5,286			$	5,298			$	10,438			$	10,455
Ergobaby	2,038				2,113				4,091				4,224
Liberty	415				390				821				797
Marucci	4,687				—				4,687				—
Velocity Outdoor	3,113				3,289				6,360				6,540
ACI	626				523				1,272				1,192
Arnold	1,641				1,580				3,272				3,202
Foam Fabricators	2,935				3,013				5,982				6,010
Sterno	5,639				5,545				11,263				10,917
Total	26,380				21,751				48,186				43,337
Reconciliation of segment to consolidated total:
Amortization of debt issuance costs, original issue discount and bond premium	554				1,080				1,079				2,159
Consolidated total	$	26,934			$	22,831			$	49,265			$	45,496

	Accounts Receivable								Identifiable Assets
	June 30,				December 31,				June 30,				December 31,
(in thousands)	2020				2019				2020 (1)				2019 (1)
5.11	$	43,240			$	49,543			$	365,683			$	357,292
Ergobaby	9,679				10,460				89,236				91,798
Liberty	13,144				13,574				37,501				38,558
Marucci	4,359				—				131,226				—
Velocity Outdoor	32,030				20,290				181,197				192,288
ACI	8,004				8,318				28,125				24,408
Arnold	16,347				19,043				73,382				72,650
Foam Fabricators	21,716				24,455				163,497				156,914
Sterno	58,723				60,522				239,266				263,530
Allowance for doubtful accounts	(15,065		)		(14,800		)		—				—
Total	192,177				191,405				1,309,113				1,197,438
Reconciliation of segment to consolidated total:
Corporate and other identifiable assets	—				—				133,982				64,531
Total	$	192,177			$	191,405			$	1,443,095			$	1,261,969

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

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Property, plant and equipment

Property, plant and equipment is comprised of the following at June 30, 2020 and December 31, 2019 (in thousands):

	June 30, 2020				December 31, 2019
Machinery and equipment	$	198,531			$	191,897
Furniture, fixtures and other	41,600				36,604
Leasehold improvements	44,893				40,851
Buildings and land	10,147				7,992
Construction in process	9,954				10,559
	305,125				287,903
Less: accumulated depreciation	(154,896		)		(141,475		)
Total	$	150,229			$	146,428

Depreciation expense was $8.6 million and $16.9 million for the three and six months ended June 30, 2020 and $8.2 million and $16.2 million for the three and six months ended June 30, 2019, respectively.

Inventory

Inventory is comprised of the following at June 30, 2020 and December 31, 2019 (in thousands):

	June 30, 2020				December 31, 2019
Raw materials	$	66,370			$	59,888
Work-in-process	14,354				14,318
Finished goods	257,883				262,352
Less: obsolescence reserve	(21,306		)		(19,252		)
Total	$	317,301			$	317,306

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

2020 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 Ergobaby, Foam Fabricators and Velocity reporting units 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 qualitatively for the 2020 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.

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The quantitative tests of Ergobaby, Foam Fabricators and Velocity were performed using an income approach to determine the fair value of the reporting units. For Ergobaby, the discount rate used in the income approach was 15.9% and the results of the quantitative impairment testing indicated that the fair value of the Ergobaby reporting unit exceeded the carrying value by 14.0%. For Foam Fabricators, the discount rate used in the income approach was 13.3%, and the results of the quantitative impairment testing indicated that the fair value of the Foam Fabricators reporting unit exceeded the carrying value by 3.8%. For Velocity, the discount rate used in the income approach was 12.8%, and the results of the quantitative impairment testing indicated that the fair value of the Velocity reporting unit exceeded the carrying value by 16.4%.

2019 Interim Impairment Testing

Velocity Outdoor

The Company performed interim quantitative impairment testing of Velocity Outdoor at September 30, 2019. As a result of operating results below forecasts in the current period as well as a re-forecast of the Velocity business in which planned earnings and revenue fell below the forecasts of prior periods, the Company determined that a triggering event occurred in the third quarter of 2019. The Company used an income approach for the impairment test, whereby we estimate the fair value of the reporting unit based on the present value of future cash flows. Cash flow projections are based on management's estimate of revenue growth rates and operating margins, and take into consideration industry and market conditions as well as company specific economic factors. The Company used a weighted average cost of capital of 12.2% 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 Velocity's ability to execute on the projected cash flows. Based on the results of the impairment test, the fair value of Velocity did not exceed the carrying value, indicating that the goodwill at Velocity was impaired. The difference between the carrying value and fair value of the Velocity business was $32.9 million, which the Company recorded as impairment expense in the consolidated statement of operations for the year ended December 31, 2019.

2019 Annual Impairment Testing

All of the Company's reporting units except Liberty were tested qualitatively at March 31, 2019. We determined that the Liberty 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. We used an income approach and market approach for the quantitative impairment test that was performed of the Liberty business at March 31, 2019, with equal weighting assigned to each. The discount rate used in the income approach was 14.8%. The results of the quantitative impairment testing indicated that the fair value of the Liberty reporting unit exceeded the carrying value. For the reporting units that were tested qualitatively for the 2019 annual impairment testing, the results of the qualitative analysis indicated that it is more likely than not that the fair value exceeded their carrying value.

A summary of the net carrying value of goodwill at June 30, 2020 and December 31, 2019, is as follows (in thousands):

	Six months ended June 30, 2020				Year ended   December 31, 2019
Goodwill - gross carrying amount	$	563,997			$	496,264
Accumulated impairment losses	(57,745		)		(57,745		)
Goodwill - net carrying amount	$	506,252			$	438,519

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The following is a reconciliation of the change in the carrying value of goodwill for the six months ended June 30, 2020 by operating segment (in thousands):

		Balance at January 1, 2020				Acquisitions				Goodwill Impairment				Other				Balance at June 30, 2020
5.11		$	92,966			$	—			$	—			$	—			$	92,966
Ergobaby		61,031				—				—				—				61,031
Liberty		32,828				—				—				—				32,828
Marucci		—				67,733				—				—				67,733
Velocity Outdoor		30,079				—				—				—				30,079
ACI		58,019				—				—				—				58,019
Arnold		26,903				—				—				—				26,903
Foam Fabricators		72,708				—				—				—				72,708
Sterno		55,336				—				—				—				55,336
Corporate (1)		8,649				—				—				—				8,649
Total		$	438,519			$	67,733			$	—			$	—			$	506,252

(1)	Represents goodwill resulting from purchase accounting adjustments not "pushed down" to the ACI segment. This amount is allocated back to the ACI segment for purposes of goodwill impairment testing.

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 2020 and 2019. 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. The Ergobaby and Liberty reporting units have indefinite lived trade names that were tested in conjunction with the goodwill impairment tests at March 31, 2020 and March 31, 2019, respectively. The results of the quantitative impairment testing indicated that the trade names were not impaired.

Other intangible assets are comprised of the following at June 30, 2020 and December 31, 2019 (in thousands):

	June 30, 2020												December 31, 2019
	Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount				Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Customer relationships	$	473,807			$	(172,536	)		$	301,271			$	462,686			$	(155,200	)		$	307,486
Technology and patents	84,699				(31,458		)		53,241				80,082				(28,748		)		51,334
Trade names, subject to amortization	273,112				(54,571		)		218,541				189,183				(46,507		)		142,676
Licensing and non-compete agreements	7,515				(7,222		)		293				7,515				(7,050		)		465
Distributor relations and other	726				(726		)		—				726				(726		)		—
Total	839,859				(266,513		)		573,346				740,192				(238,231		)		501,961
Trade names, not subject to amortization	59,985				—				59,985				59,985				—				59,985
Total intangibles, net	$	899,844			$	(266,513	)		$	633,331			$	800,177			$	(238,231	)		$	561,946

Amortization expense related to intangible assets was $14.8 million and $28.3 million for the three and six months ended June 30, 2020, respectively and $13.5 million and $27.1 million for the three and six months ended June 30, 2019, respectively.

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Estimated charges to amortization expense of intangible assets for the remainder of 2020 and the next four years, is as follows (in thousands):

2020				2021				2022				2023				2024
$	30,353			$	59,893			$	58,261			$	57,864			$	56,772

The Company’s Ergobaby, Liberty, Marucci and Velocity Outdoor operating segments estimate their exposure to warranty claims based on both current and historical product sales data and warranty costs incurred. The Company assesses the adequacy of its recorded warranty liability quarterly and adjusts the amount as necessary. Warranty liability is included in accrued expenses in the accompanying consolidated balance sheets. A reconciliation of the change in the carrying value of the Company’s warranty liability for the six months ended June 30, 2020 and the year ended December 31, 2019 is as follows (in thousands):

Warranty liability	Six months ended June 30, 2020				Year ended   December 31, 2019
Beginning balance	$	1,583			$	1,624
Provision for warranties issued during the period	1,295				2,238
Fulfillment of warranty obligations	(1,388		)		(2,279		)
Other (1)	104				—
Ending balance	$	1,594			$	1,583

⁽¹⁾    Represents the warranty liability recorded in relation to the Marucci acquisition in April 2020.

2018 Credit Facility

On April 18, 2018, the Company entered into an Amended and Restated Credit Agreement (the "2018 Credit Facility") to amend and restate the 2014 Credit Facility, originally dated as of June 6, 2014 (as previously amended) among the Company, the lenders from time to time party thereto (the “Lenders”), and Bank of America, N.A., as Administrative Agent. The 2018 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. The 2018 Credit Facility provides for (i) revolving loans, swing line loans and letters of credit (the “2018 Revolving Credit Facility”) up to a maximum aggregate amount of $600 million, and (ii) a $500 million term loan (the “2018 Term Loan”). The 2018 Credit Facility also permits the Company, prior to the applicable maturity date, to increase the revolving loan commitment and/or obtain additional term loans in an aggregate amount of up to $250 million (the “Incremental Loans”), subject to certain restrictions and conditions.

2018 Revolving Credit Facility

All amounts outstanding under the 2018 Revolving Credit Facility will become due on April 18, 2023, which is the maturity date of loans advanced under the 2018 Revolving Credit Facility. The Company may borrow, prepay and reborrow principal under the 2018 Revolving Credit Facility from time to time during its term.

Under the 2018 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 2018 Revolving Credit Facility.

2018 Term Loan

The 2018 Term Loan was issued at an original issuance discount of 99.75%. The 2018 Term Loan required quarterly payments of $1.25 million commencing June 30, 2018, with a final payment of all remaining principal and interest due on April 18, 2025, the maturity date of the 2018 Term Loan. In July 2019, the Company repaid approximately $193.8 million of the 2018 Term Loan using a portion of the proceeds received from the sale of Clean Earth, and in November 2019, the Company repaid the remaining $298.8 million balance due under the 2018 Term Loan.

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Net availability under the 2018 Revolving Credit Facility was approximately $598.8 million at June 30, 2020. Letters of credit outstanding at June 30, 2020 totaled approximately $1.2 million. At June 30, 2020, the Company was in compliance with all covenants as defined in the 2018 Credit Facility.

Senior Notes

On April 18, 2018, the Company consummated the issuance and sale of $400 million aggregate principal amount of its 8.000% Senior Notes due 2026 (the “Existing 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 Existing Notes were issued pursuant to an indenture, dated as of April 18, 2018 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee.

On May 7, 2020, the Company consummated the issuance and sale of $200 million aggregate principal amount of its 8.000% Senior Notes due 2026 (the "Additional Notes", and, together with the Existing Notes, the "Senior Notes"). The Additional Notes were issued under the Indenture between the Company and U.S. Bank National Association, as trustee. The proceeds from the Additional Notes were used to pay down the amount outstanding on the Company's 2018 Revolving Credit Facility. The Additional Notes were issued at 101% of par value and the resulting $2 million premium will be amortized over the remaining term of the Additional Notes.

The Senior Notes bear interest at the rate of 8.000% per annum and will mature on May 1, 2026. Interest on the Senior Notes is payable in cash on May 1st and November 1st of each year. The first interest payment date on the Additional Notes will be November 1, 2020. The Senior Notes are general senior unsecured obligations of the Company and are not guaranteed by the subsidiaries through which the Company currently conducts substantially all of its operations. The Senior Notes rank equal in right of payment with all of the Company’s existing and future senior unsecured indebtedness, and rank senior in right of payment to all of the Company’s future subordinated indebtedness, if any. The Senior Notes will be effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including the indebtedness under the Company’s credit facilities described above.

The Indenture contains several restrictive covenants including, but not limited to, limitations on the following: (i) the incurrence of additional indebtedness, (ii) restricted payments, (iii) dividends and other payments affecting restricted subsidiaries, (iv) the issuance of preferred stock of restricted subsidiaries, (v) transactions with affiliates, (vi) asset sales and mergers and consolidations, (vii) future subsidiary guarantees and (viii) liens, subject in each case to certain exceptions.

The following table provides the Company’s debt holdings at June 30, 2020 and December 31, 2019 (in thousands):

	June 30, 2020				December 31, 2019
Senior Notes	$	600,000			$	400,000
Less: Unamortized premiums and debt issuance costs	(8,213		)		(5,555		)
Long term debt	$	591,787			$	394,445

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

Fair Value Hierarchy Level

June 30, 2020

Maturity Date

Rate

Carrying Value

Fair Value

Senior Notes

May 1, 2026

8.000

%

2

600,000

615,000

Debt Issuance Costs

Deferred debt issuance costs represent the costs associated with the issuance of the Company's financing arrangements. In connection with the Additional Notes offering in May 2020, the Company recorded $3.2 million in deferred financing costs.

Since the Company can borrow, repay and reborrow principal under the 2018 Revolving Credit Facility, the debt issuance costs associated with the 2018 Revolving Credit Facility have been classified as other non-current assets in the accompanying consolidated balance sheet. The debt issuance costs associated with the Senior Notes are classified as a reduction of long-term debt in the accompanying consolidated balance sheet.

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The following table summarizes unamortized premiums and debt issuance costs at June 30, 2020 and December 31, 2019, and the balance sheet classification in each of the periods presents (in thousands):

	June 30, 2020				December 31, 2019
Unamortized premiums and debt issuance costs	$	16,433			$	13,252
Accumulated amortization	(4,802		)		(3,667		)
Unamortized premiums and debt issuance costs, net	$	11,631			$	9,585
Balance sheet classification:
Other noncurrent assets	$	3,418			$	4,030
Long-term debt	8,213				5,555
	$	11,631			$	9,585

Trust Common Shares

The Trust is authorized to issue 500,000,000 Trust common shares and the Company is authorized to issue a corresponding number of trust interests. The Company will at all times have the identical number of trust 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 are entitled to vote.

Secondary Offering

In May 2020, the Company completed an offering of 5,000,000 Trust common shares at a public offering price of $17.60 per share. The net proceeds to the Company, after deducting the underwriter's discount and offering costs, totaled approximately $83.9 million.

Trust Preferred Shares

The Trust is authorized to issue up to 50,000,000 Trust preferred shares and the Company is authorized to issue a corresponding number of trust preferred 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 June 30, 2020, $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 payable quarterly

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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 the Series B Preferred Shares are cumulative and at June 30, 2020, $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. 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.

Profit Allocation Interests

The Allocation Interests represent the original equity interest in the Company. The holders of the Allocation Interests ("Holders") are entitled to receive distributions pursuant to a profit allocation formula upon the occurrence of certain events. The distributions of the profit allocation are paid upon the occurrence of the sale of 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 declared on Allocation Interests to stockholders’ equity when they are approved by the Company’s board of directors.

Holding Event

The five-year anniversary of the acquisition of Sterno Products occurred in October 2019 which represented a Holding Event. The Company declared and paid a distribution to the Allocation Member of $9.1 million in February 2020. The ten-year anniversary of Liberty occurred in March 2020 which represented a Holding Event. The Holders elected to defer the distribution of $3.3 million until after the end of 2020.

Sale Events

The sales of Manitoba Harvest in February 2019 and Clean Earth in June 2019 each qualified as a Sale Event under the Company's LLC Agreement. During the second quarter of 2019, the Company declared and paid a distribution to the Allocation Member of $8.0 million related to the sale of Manitoba Harvest and working capital settlements from prior Sale Events. The profit allocation distribution was calculated based on the portion of the gain on sale related to the Closing Date Consideration, less the loss on sale of shares that were received as part of the Closing Consideration. During the third quarter of 2019, the Company declared and paid a distribution to the Allocation Member of $43.3 million related to the sale of Clean Earth. During the fourth quarter of 2019, the Company declared and paid a distribution to the Allocation Member of $9.1 million related to the Deferred Consideration from the Manitoba Harvest sale and the working capital settlement received from the sale of Clean Earth.

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

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

		Three months ended   June 30,								Six months ended   June 30,
		2020				2019				2020				2019
Net loss from continuing operations attributable to Holdings		$	(8,437	)		$	(5,193	)		$	(4,772	)		$	(19,489	)
Less: Distributions paid - Allocation Interests		—				7,983				9,087				7,983
Less: Distributions paid - Preferred Shares		6,045				3,782				11,587				7,563
Less: Accrued distributions - Preferred Shares		2,869				1,334				2,869				1,334
Net loss from continuing operations attributable to common shares of Holdings		$	(17,351	)		$	(18,292	)		$	(28,315	)		$	(36,369	)

Earnings per share

The Company calculates basic and diluted earnings per share using the two-class method which requires the Company to allocate to participating securities that have rights to earnings that otherwise would have been available only to Trust shareholders as a separate class of securities in calculating earnings per share. The Allocation Interests are considered participating securities that contain participating rights to receive profit allocations upon the occurrence of a Holding Event or Sale Event. The calculation of basic and diluted earnings per share for the three and six months ended June 30, 2020 and 2019 reflects the incremental increase during the period in the profit allocation distribution to Holders related to Holding Events.

Basic and diluted earnings per share for the three and six months ended June 30, 2020 and 2019 attributable to the common shares of Holdings is calculated as follows (in thousands, except per share data):

		Three months ended   June 30,								Six months ended   June 30,
		2020				2019				2020				2019
Loss from continuing operations attributable to common shares of Holdings		$	(17,351	)		$	(18,292	)		$	(28,315	)		$	(36,369	)
Less: Effect of contribution based profit - Holding Event		1,249				896				2,537				1,853
Loss from continuing operations attributable to common shares of Holdings		$	(18,600	)		$	(19,188	)		$	(30,852	)		$	(38,222	)
Income from discontinued operations attributable to Holdings		$	—			$	221,727			$	—			$	345,331
Less: Effect of contribution based profit - Holding Event		—				—				—				—
Income from discontinued operations attributable to common shares of Holdings		$	—			$	221,727			$	—			$	345,331
Basic and diluted weighted average common shares outstanding		62,844				59,900				61,364				59,900
Basic and fully diluted income (loss) per common share attributable to Holdings
Continuing operations		$	(0.30	)		$	(0.32	)		$	(0.50	)		$	(0.64	)
Discontinued operations		—				3.70				—				5.77
		$	(0.30	)		$	3.38			$	(0.50	)		$	5.13

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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:
April 1, 2020 - June 30, 2020 (1)		$	0.36			$	23,364			July 16, 2020		July 23, 2020
January 1, 2020 - March 31, 2020		$	0.36			$	21,564			April 16, 2020		April 23, 2020
October 1, 2019 - December 31, 2019		$	0.36			$	21,564			January 16, 2020		January 23, 2020
July 1, 2019 - September 30, 2019		$	0.36			$	21,564			October 17, 2019		October 24, 2019
April 1, 2019 - June 30, 2019		$	0.36			$	21,564			July 18, 2019		July 25, 2019
January 1, 2019 - March 31, 2019		$	0.36			$	21,564			April 18, 2019		April 25, 2019
October 1, 2018 - December 31, 2018		$	0.36			$	21,564			January 17, 2019		January 24, 2019
Series A Preferred Shares:
April 30, 2020 - July 29, 2020 (1)		$	0.453125			$	1,813			July 15, 2020		July 30, 2020
January 30, 2020 - April 29, 2020		$	0.453125			$	1,813			April 15, 2020		April 30, 2020
October 30, 2019 - January 29, 2020		$	0.453125			$	1,813			January 15, 2020		January 30, 2020
July 30, 2019 - October 29, 2019		$	0.453125			$	1,813			October 15, 2019		October 30, 2019
April 30, 2019 - July 29, 2019		$	0.453125			$	1,813			July 15, 2019		July 30, 2019
January 30, 2019 - April 29, 2019		$	0.453125			$	1,813			April 15, 2019		April 30, 2019
October 30, 2018 - January 29, 2019		$	0.453125			$	1,813			January 15, 2019		January 30, 2019
Series B Preferred Shares:
April 30, 2020 - July 29, 2020 (1)		$	0.4921875			$	1,969			July 15, 2020		July 30, 2020
January 30, 2020 - April 29, 2020		$	0.4921875			$	1,969			April 15, 2020		April 30, 2020
October 30, 2019 - January 29, 2020		$	0.4921875			$	1,969			January 15, 2020		January 30, 2020
July 30, 2019 - October 29, 2019		$	0.4921875			$	1,969			October 15, 2019		October 30, 2019
April 30, 2019 - July 29, 2019		$	0.4921875			$	1,969			July 15, 2019		July 30, 2019
January 30, 2019 - April 29, 2019		$	0.4921875			$	1,969			April 15, 2019		April 30, 2019
October 30, 2018 - January 29, 2019		$	0.4921875			$	1,969			January 15, 2019		January 30, 2019
Series C Preferred Shares:
April 30, 2020 - July 29, 2020 (1)		$	0.4921875			$	2,264			July 15, 2020		July 30, 2020
January 30, 2020 - April 29, 2020		$	0.4921875			$	2,264			April 15, 2020		April 30, 2020
November 20, 2019 - January 29, 2020		$	0.38281			$	1,531			January 15, 2020		January 30, 2020

⁽¹⁾ This distribution was     declared on July 2, 2020.

Noncontrolling interest represents the portion of the Company’s majority owned subsidiary’s net income (loss) and equity that is owned by noncontrolling shareholders. The following tables reflect the Company’s ownership percentage of its majority owned operating segments and related noncontrolling interest balances as of June 30, 2020 and December 31, 2019:

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	% Ownership (1) June 30, 2020				% Ownership (1) December 31, 2019
	Primary		Fully Diluted		Primary		Fully Diluted
5.11	97.6		88.7		97.6		88.9
Ergobaby	81.9		75.8		81.9		75.8
Liberty	91.2		86.0		91.2		86.0
Marucci	92.2		83.8		N/a		N/a
Velocity Outdoor	99.3		88.0		99.3		93.9
ACI	69.3		65.4		69.4		65.4
Arnold	96.7		81.4		96.7		80.2
Foam Fabricators	100.0		91.5		100.0		91.5
Sterno	100.0		88.5		100.0		88.5

(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)	June 30, 2020				December 31, 2019
5.11	$	13,042			$	12,056
Ergobaby	27,663				27,036
Liberty	3,254				2,936
Marucci	10,721				—
Velocity Outdoor	3,430				2,506
ACI	6,336				3,670
Arnold	1,340				1,255
Foam Fabricators	2,388				1,873
Sterno	(458		)		(884		)
Allocation Interests	100				100
	$	67,816			$	50,548

The following table provides the assets and liabilities carried at fair value measured on a recurring basis at June 30, 2020 and December 31, 2019 (in thousands):

	Fair Value Measurements at June 30, 2020
	Carrying Value				Level 1				Level 2				Level 3
Liabilities:
Put option of noncontrolling shareholders (1)	$	(215	)		$	—			$	—			$	(215	)
Total recorded at fair value	$	(215	)		$	—			$	—			$	(215	)

(1)	Represents put option issued to noncontrolling shareholders in connection with the 5.11 and Liberty acquisitions.

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	Fair Value Measurements at December 31, 2019
	Carrying Value				Level 1				Level 2				Level 3
Liabilities:
Put option of noncontrolling shareholders (1)	$	(111	)		$	—			$	—			$	(111	)
Total recorded at fair value	$	(111	)		$	—			$	—			$	(111	)

(1)	Represents put option issued to noncontrolling shareholders in connection with the 5.11 and Liberty acquisitions.

Reconciliations of the change in the carrying value of the Level 3 fair value measurements from January 1, 2019 through June 30, 2020 are as follows (in thousands):

	Level 3
Balance at January 1, 2019	$	(4,547	)
Decrease in the fair value of put option of noncontrolling shareholder - Liberty	72
Increase in the fair value of put option of noncontrolling shareholder - 5.11	(10		)
Adjustment to Ravin contingent consideration (1)	(2,022		)
Payment of contingent consideration - Ravin (1)	6,396
Balance at December 31, 2019	$	(111	)
Increase in the fair value of put option of noncontrolling shareholder - Liberty	(63		)
Increase in the fair value of put option of noncontrolling shareholder - 5.11	(41		)
Balance at June 30, 2020	$	(215	)

⁽¹⁾ The contingent consideration related to Velocity's acquisition of Ravin in September 2018. The purchase price of Ravin included a potential earn-out of up to $25.0 million contingent on the achievement of certain financial metrics for the trailing twelve month period ending December 31, 2018. The fair value of the contingent consideration was estimated at $4.7 million at acquisition date and was calculated using a risk-adjusted option pricing model. The earnout was adjusted to $6.4 million and paid out during the year ended December 31, 2019.

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, 2019.

Nonrecurring Fair Value Measurements

There were no assets or liabilities measured on a non-recurring basis during the quarter ended June 30, 2020. The following table provides the assets and liabilities carried at fair value measured on a non-recurring basis as of December 31, 2019. Refer to "Note G – Goodwill and Other Intangible Assets", for a description of the valuation techniques used to determine fair value of the assets measured on a non-recurring basis in the table below.

																	Expense
	Fair Value Measurements at December 31, 2019																Year ended
(in thousands)	Carrying Value				Level 1				Level 2				Level 3				December 31, 2019
Goodwill - Velocity Outdoor	$	30,079			$	—			$	—			$	30,079			$	32,881

Each fiscal quarter, the Company estimates its annual effective tax rate and applies that 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 in each interim period requires certain estimates and significant judgment, including the projected operating income for the year, projections of the proportion of income

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earned and taxed in other jurisdictions, permanent and temporary differences and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, as additional information is obtained or as the tax environment changes. 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 six months ended June 30, 2020 and 2019 is as follows:

	Six months ended June 30,
	2020			2019
United States Federal Statutory Rate	21.0	%		(21.0	)%
State income taxes (net of Federal benefits)	80.0			8.5
Foreign income taxes	(7.6	)		3.0
Expenses of Compass Group Diversified Holdings LLC representing a pass through to shareholders (1)	16.9			47.9
Impact of subsidiary employee stock options	141.5			5.2
Credit utilization	(55.8	)		(4.8	)
Non-recognition of NOL carryforwards at subsidiaries	(54.9	)		9.5
Effect of Tax Act	10.0			7.0
Other	5.6			0.2
Effective income tax rate	156.7	%		55.5	%

(1)	The effective income tax rate for the six months ended June 30, 2020 and 2019 includes a loss at the Company's parent, which is taxed as a partnership.

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 $4.5 million is recognized in the consolidated balance sheet as a component of other non-current liabilities at June 30, 2020. Net periodic benefit cost consists of the following for the three and six months ended June 30, 2020 and 2019 (in thousands):

	Three months ended June 30,								Six months ended June 30,
	2020				2019				2020				2019
Service cost	$	138			$	127			$	277			$	256
Interest cost	7				33				15				66
Expected return on plan assets	(20		)		(40		)		(41		)		(80		)
Amortization of unrecognized loss	56				34				113				69
Net periodic benefit cost	$	181			$	154			$	364			$	311

During the six months ended June 30, 2020, per the terms of the pension agreement, Arnold contributed $0.2 million to the plan. For the remainder of 2020, the expected contribution to the plan will be approximately $0.2 million.

The plan assets are pooled with assets of other participating employers and are not separable; therefore, the fair values of the pension plan assets at June 30, 2020 were considered Level 3.

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.

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Leases

The Company and its subsidiaries lease manufacturing facilities, warehouses, office facilities, retail stores, equipment and vehicles 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 has not been material on a historic basis and no amount was incurred during the quarter ending June 30, 2020. In the three and six months ended June 30, 2020, the Company recognized $7.6 million and $14.9 million, respectively, in expense related to operating leases in the condensed consolidated statements of operations.

The maturities of lease liabilities at June 30, 2020 were as follows (in thousands):

2020 (excluding six months ended June 30, 2020)		$	12,318
2021		26,249
2022		24,057
2023		17,247
2024		13,382
Thereafter		42,455
Total undiscounted lease payments		$	135,708
Less: Interest		37,124
Present value of lease liabilities		$	98,584

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 the discount rate, Topic 842 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 as of June 30, 2020:

Lease Term and Discount Rate
Weighted-average remaining lease term (years)		6.18
Weighted-average discount rate		7.68	%

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

		Line Item in the Company’s Consolidated Balance Sheet		June 30, 2020
Operating lease right-of-use assets		Other non-current assets		$	94,765
Current portion, operating lease liabilities		Other current liabilities		$	19,981
Operating lease liabilities		Other non-current liabilities		$	78,603

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

		Six months ended June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	14,924
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		$	6,630

Management Services Agreement

The Company entered into the MSA with CGM effective May 16, 2006. The MSA provides for, among other things, CGM to perform services for the Company 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. Concurrent with the June 2019 sale of Clean Earth (refer to Note C - Discontinued Operations), CGM agreed to waive the management fee on cash balances held at the Company, commencing with the quarter ended June 30, 2019 and continuing until the quarter during which the Company next borrowed under the 2018 Revolving Credit Facility. In March 2020, as a proactive measure to provide the Company with additional cash liquidity in light of the COVID-19 pandemic, the Company elected to draw down $200 million on our 2018 Revolving Credit Facility. The Company and CGM entered into a waiver agreement whereby CGM agreed to waive the portion of the management fee attributable to the cash balances held at the Company as of March 31, 2020. In addition, due to the unprecedented uncertainty as a result of the COVID-19 pandemic, CGM agreed to waive 50% of the management fee calculated at June 30, 2020 that was paid in July 2020.

Integration Services Agreements

Marucci Sports, which was acquired in April 2020, entered into an Integration Services Agreement ("ISA") with CGM. The ISA provides for CGM to provide 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.  CGM will receive integration service fees of $2.0 million payable quarterly over a twelve month period as services are rendered beginning in the quarter ended September 30, 2020. Foam Fabricators, which was acquired in 2018, entered into an ISA with CGM.  Foam Fabricators paid CGM $2.3 million over the term of the ISA, with $2.0 million paid in 2018 and $0.3 million in 2019. Integration service fees are included in selling, general and administrative expense on the subsidiaries' statement of operations in the period in which they are incurred.

The Company and its businesses have the following significant related party transactions:

5.11

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•	utilizing structured incentive compensation programs tailored to each business to attract, recruit and retain talented managers to operate our businesses;

•	regularly monitoring financial and operational performance, instilling consistent financial discipline, and supporting management in the development and implementation of information systems to effectively achieve these goals;

•	assisting management in their analysis and pursuit of prudent organic cash flow growth strategies (both revenue and cost related);

•	identifying and working with management to execute attractive external growth and acquisition opportunities; and

•	forming strong subsidiary level boards of directors to supplement management in their development and implementation of strategic goals and objectives.

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•	Depreciation expense associated with the increase in depreciable lives of capital assets of $0.1 million and $0.2 million, respectively, for the three and six months ended June 30, 2020, and $0.3 million and $0.5 million, respectively, for the three and six months ended June 30, 2019.

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•	Amortization expense associated with the intangible assets recorded in connection with the purchase price allocation for Marucci of $0.4 million and $0.8 million, respectively, for the three and six months ended June 30, 2020, and $1.6 million and $3.1 million, respectively, for the three and six months ended June 30, 2019.

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

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(3)	Represents maintenance capital expenditures that were funded from operating cash flow, net of proceeds from the sale of property, plant and equipment, and excludes growth capital expenditures of approximately $5.6 million for the six months ended June 30, 2020 and $8.5 million for the six months ended June 30, 2019.

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(1)	Reflects amounts due under our 2018 Credit Facility, as well as our Senior Notes, together with interest on our debt obligations.

(2)	Reflects various operating leases for office space, manufacturing facilities and equipment from third parties with various lease terms.

(3)

Reflects non-cancelable commitments as of June 30, 2020, including: (i) shareholder distributions of $110.4 million; (ii) estimated management fees of $30.9 million per year over the next five years; and (iii) other obligations including amounts due under employment agreements. Distributions to our shareholders are approved by our board of directors each quarter. The amount ultimately approved as future quarterly distributions may differ from the amount included in this schedule.

(4)	The contractual obligation table does not include approximately $1.1 million in liabilities associated with unrecognized tax benefits as of June 30, 2020 as the timing of the recognition of this liability is not certain. The amount of the liability is not expected to significantly change in the next twelve months.

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