Compass Diversified Holdings
For the period ended Dec 31, 2025. Filed Feb 27, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Feb 27, 2026
CODI$11.31-1.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-02-27.
0001345126-25-000015
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-27.
0001345126-26-000026
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 328 previous paragraphs and 347 current paragraphs.
150 unchanged; 85 reworded; 92 added; 80 removed; 13 previous and 20 current paragraphs rearranged.
Tables are not compared: 24 previous and 22 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (92)
Current report
Lugano Investigation and Restatement
Current report
As previously disclosed, following concerns reported to the Company’s management, the Company commenced the Lugano Investigation. As a result of the Lugano Investigation, the Company determined that the Company’s previously issued financial statements for fiscal years 2022, 2023, 2024, and the first three fiscal quarters of 2025 including other interim and full-year financial information should no longer be relied upon. The Company corrected these errors in its 2024 Form 10-K/A which was filed on December 8, 2025, and its Quarterly Reports on Form 10-Q for the first, second, and third quarters of 2025, which were filed on December 18, 2025, December 29, 2025 and January 14, 2026 respectively. The financial information discussed herein reflects the correction of these errors.
Current report
Initial public offering (subsequent acquisitions and dispositions)
Current report
Lugano was deconsolidated on November 16, 2025. The Company retained its equity interest in Lugano at December 31, 2025.
Current report
2025 Recent Events
Current report
Lugano Bankruptcy and Deconsolidation
Current report
On November 16, 2025, Lugano and certain of its subsidiaries filed the Lugano Bankruptcy. As a result of the Lugano Bankruptcy, effective November 16, 2025, Lugano and its subsidiaries were deconsolidated from the Company’s financial statements pursuant to ASC 810 -Consolidation. Refer to "Note C - Deconsolidation" in the accompanying notes to the consolidated financial statements for additional information.
Current report
Amendments and Waivers under the 2022 Credit Facility
Current report
In 2025, in connection with the Lugano matters and related events of default, the Company entered into the Forbearance Agreements and amendments under its 2022 Credit Facility to provide the Company with time to complete the restatement process and address Lugano-related defaults. These interim arrangements were superseded by the Fifth Amendment to the Credit Agreement and related Transaction Letter described below.
Current report
On December 19, 2025, the Company entered into the Fifth Amendment and the related Transaction Letter with the Administrative Agent and the required Lenders. Among other things, the Fifth Amendment and Transaction Letter (i) waived specified Lugano-related events of default that were outstanding prior to the Fifth Amendment, (ii) set the aggregate revolving commitments at $100.0 million, (iii) revised pricing and certain financial and other covenant requirements, including revised financial covenant levels for periods after the quarter ended March 31, 2025, (iv) imposed additional reporting and budgeting requirements (including periodic cash flow forecasting) and restrictions related to Lugano bankruptcy matters, (v) required the Company to use 100% of net cash proceeds from certain dispositions and deleveraging transactions to repay indebtedness, and (vi) imposed additional limitations on certain restricted payments and management fee payments. The Transaction Letter also provides for milestone fees payable to the lenders if certain leverage thresholds are not achieved on specified dates. Please see "Note I - Debt” in the notes to the consolidated financial statements for additional information concerning the 2022 Credit Facility.
Current report
Indenture Forbearance and Related PIK Payments
Current report
On August 29, 2025, the Company entered into the Indenture Forbearance Agreement with certain holders of its senior notes to provide additional time to complete its restatement and file its delayed periodic reports, and in connection therewith the Company agreed to pay the PIK Payments, which were effected through supplemental indentures dated September 9, 2025. Please see "Note I - Debt” in the notes to the consolidated financial statements for additional information concerning the Senior Notes.
Current report
The macroeconomic environment remains choppy, as geopolitical uncertainty and evolving trade dynamics continue to impact the operating environment; however, we believe that our diversified businesses have characteristics that may help them navigate these conditions, including leading positions in a number of categories and a disciplined focus on operating execution. We continue to monitor how changing market conditions and trade-related costs may impact consumer sentiment and behavior, particularly for discretionary categories purchased by low- and middle- income consumers. While inflation moderated domestically in 2025, price levels for certain inputs remain elevated, and labor costs continue to create margin pressure in certain parts of our business. Although the Federal Reserve reduced interest rates in 2025, the outlook for monetary policy remains uncertain and financial conditions may remain volatile in 2026. Ultimately, our focus remains on disciplined capital allocation, operating execution and balance sheet strength, supported by our permanent capital structure and the quality of our subsidiaries.
Current report
Geopolitics and Trade Policy
Current report
Geopolitical conditions were volatile throughout 2025 and we expect geopolitical uncertainty to persist in 2026. Our subsidiaries have, over time, taken actions to diversify sourcing and reduce concentrated exposure to China; however, trade-war dynamics have broadened, and the risk of new or expanded tariffs across multiple regions and product categories remains a headwind. The rare earth and strategic minerals dispute created significant disruption for one of our subsidiaries, Arnold Magnetic Technologies, including constraints on its ability to ship certain products out of China due to heightened export licensing requirements. Over the longer term, these dynamics could support higher demand for Arnold’s solutions as customers seek more resilient and predictable sourcing and supply chain alternatives; however, the timing and magnitude of any such demand shift remains uncertain. During 2025, our businesses incurred increased costs and working capital requirements due to inventory pre-buys and front-loading of goods ahead of anticipated tariff actions and supply uncertainty. The extent to which similar actions are needed in 2026 will depend on the timing and scope of trade policy changes and the level of supply chain disruption. The Company continues to monitor tariff policies and tariff announcements, including various executive orders issued subsequent to year-end and will adjust its strategies to mitigate the impact of tariffs as trade policy evolves.
Current report
Technology and AI Investment
Current report
AI-related investment has been a meaningful contributor to global economic activity, but the durability of that cycle and its broader impacts remain uncertain. The effect of AI adoption on productivity and employment trends is unclear over the short, medium, and long term. We remain focused on targeted, ROI-driven technology investments to enhance operational efficiency at the subsidiary level, while maintaining disciplined capital allocation as these technologies evolve.
Current report
Our near-term focus is on strengthening the balance sheet and enhancing financial flexibility. In 2026, we expect to prioritize deleveraging through organic free cash flow generation and selective strategic actions, while continuing to execute our strategy and operating playbook across our subsidiaries.
Current report
•Driving profitable growth through new product development, expanded distribution, and new customer acquisition where returns are attractive;
Current report
•Managing pricing and costs by implementing pricing actions where appropriate and executing productivity and cost initiatives to protect margins in the face of inflation, tariffs, and other input cost volatility;
Current report
•Evaluating strategic alternatives and actions for certain businesses, where doing so would enhance financial flexibility and improve risk-adjusted returns;
Current report
•Pursuing opportunities to take market share where possible in our niche market-leading businesses as customers prioritize reliability, quality, and supplier resiliency;
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•Continuing to strengthen our supply chain resilience through supplier diversification, improved planning and inventory management, and ongoing enhancements in manufacturing and operational capabilities;
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•Leveraging technology, including targeted AI initiatives, to improve efficiency, decision-making, and service levels, while maintaining a disciplined, ROI-driven approach to investment; and
Current report
•Continuing to enhance our governance and oversight practices, and, as appropriate, financial reporting processes and internal controls.
Current report
Lugano Bankruptcy
Current report
In November 2025, Lugano and certain of its subsidiaries filed the Lugano Bankruptcy. As a result of the bankruptcy filing, the Company no longer maintained a controlling financial interest in Lugano and, accordingly, deconsolidated Lugano and its subsidiaries in accordance with ASC 810 -Consolidation. The results of operations of Lugano are included in the Company’s consolidated results through the date control was lost. From that date forward, Lugano is no longer included as an operating segment of the Company. Following deconsolidation, the Company’s continuing involvement with Lugano is limited to its claims in the bankruptcy proceedings, including any secured positions. Any retained interest recognized in connection with deconsolidation was measured at fair value and reflects the Company’s estimate of recoveries expected from the bankruptcy proceedings as of December 31, 2025.
Current report
Consolidated selling, general and administrative expense increased approximately $73.2 million during the year ended December 31, 2025, compared to the corresponding period in 2024, driven primarily by increases at Corporate ($60.0 million increase), 5.11 ($9.6 million increase) and Altor ($12.1 million increase) due to the acquisition of Lifoam in the prior year and related integration costs. The increase in selling, general and administrative expense was partially offset by a decrease in expense at Velocity after their disposition of the Crosman product line in the second quarter of 2024, and at Arnold ($6.4 million decrease) due to non-recurring costs incurred in the prior year associated with the move of two of their facilities in the United States. Refer to "Results of Operations - Business Segments" for a more detailed analysis of selling, general and administrative expense by subsidiary business segment.
Current report
At the corporate level, general and administrative expense was $79.7 million in 2025 and $19.7 million in 2024. The increase in corporate general and administrative expense in 2025 related to the ongoing costs of an investigation at our Lugano subsidiary. The Company incurred $60.8 million in the year ended December 31, 2025 related to the investigation at Lugano, which began in April 2025. The Company also saw increased legal and professional fees incurred during 2025, offset by decreases in salary and bonus expense.
Current report
As a result of the restatement of the financial statements as of December 31, 2024, 2023 and 2022 and for the years ended December 31, 2024, 2023 and 2022, as well as for the period ended December 31, 2021 and revisions made in the quarter ended March 31, 2025, the management fees paid to CGM were in excess of the amounts that should have been due under the MSA. While the MSA does not contain an express mechanism that permits the Company to immediately clawback the overpayment of management fees during the aforementioned periods, the MSA provides that future payments under the MSA will be reduced, on a dollar-for-dollar basis, by the aggregate amount of all overpaid management fees. The Company calculated the aggregate amount of excess management fees paid as of December 31, 2025 as $33.8 million and recorded an asset that reduced the management fee expense for the year ended December 31, 2025. For the year ended December 31, 2025, we incurred management fee expense of approximately $17.9 million as compared to $74.8 million in fees in the year ended December 31, 2024, with the reduction in the 2025 management fee expense reflecting the adjustment for excess management fees recorded.
Current report
As a result of the preliminary findings of the Lugano Investigation, the Company determined that a triggering event had occurred in the second quarter of 2025 and tested the long-lived assets of Lugano for impairment. The impairment testing indicated that the fair value of the assets was less than the carrying value and the Company recorded impairment expense to write the long-lived assets down to fair value. The write down of the long-lived assets resulted in the Company recording impairment expense of $29.5 million related to property, plant and equipment and $1.9 million related to right-of-use assets in the quarter ended June 30, 2025. The right-of-use asset related to a retail salon in Toronto, Canada which had not yet opened.
Current report
We recorded interest expense totaling $175.3 million for the year ended December 31, 2025 compared to $122.8 million for the comparable period in 2024, an increase of $52.5 million. As consideration for entering into the Indenture Forbearance Agreement, the LLC agreed to pay to each holder of Notes such holder’s pro rata share of (a) an upfront fee, paid in kind by increasing the principal amount of the applicable series of Notes, equal to 1.75% of the aggregate principal amount of Notes outstanding, and (b) additional interest, paid in kind by increasing the principal amount of the applicable series of Notes, equal to the equivalent of a 5.00% per annum increase in the interest rate for the applicable series of Notes for the period between August 1, 2025 and October 24, 2025. The Company recorded $38.2 million in paid-in-kind interest expense in the third and fourth quarter of 2025 related to the upfront fee required by the Indenture Forbearance Agreement. The Company also incurred an increase in interest expense in the current year of $5.3 million as a result of the increase in the 2022 Term Loan that occurred in January 2025, and elevated interest rates as a result of the Forbearance Agreements and amendments related to the 2022 Credit Facility, offset by lower amounts outstanding on the 2022 Revolving Credit Facility in 2025 as compared to 2024.
Current report
The interest expense also reflects an increase of $23.3 million in interest expense related to financing arrangements at our Lugano business incurred prior to the deconsolidation.
Current report
Loss on debt modification
Current report
During the second quarter of 2025, the Company entered into a forbearance agreement which reduced the aggregate borrowing amount available for revolving commitments to $100 million from $600 million. As a result of the reduction in available revolving commitments, the Company recognized $2.8 million in loss on debt modification in the second quarter of 2025.
Current report
Loss on Deconsolidation
Current report
The Company recorded a Loss on deconsolidation of $111.9 million related to the deconsolidation of Lugano in the fourth quarter of 2025 as a result of the Lugano Bankruptcy. Refer to "Note – CDeconsolidation" in the Consolidated Financial Statements for additional information.
Current report
Lugano performed an interim impairment test of their long-lived assets at December 31, 2023 that resulted in a $1.2 million impairment charge related to the customer relationship intangible.
Current report
Net sales for the year ended December 31, 2025 were $551.8 million, an increase of $19.7 million, or 3.7%, compared to the same period in 2024. The increase was driven primarily by a $19.5 million increase in domestic wholesale sales, reflecting strong demand and the fulfillment of large contracts; a $2.1 million increase in direct-to-consumer sales, resulting from higher full-price sales of new products; and a $2.8 million increase in international sales, supported by continued demand across key markets. These increases were partially offset by a $3.4 million decline in direct-to-agency sales, which are typically non-recurring.
Current report
Selling, general and administrative expenses for the year ended December 31, 2025 increased to $234.2 million or 42.4% of net sales compared to $224.7 million or 42.2% of net sales for the year ended December 31, 2024. The increase in selling, general and administrative expense was primarily driven by non-recurring payroll costs associated with restructuring, higher performance-based bonuses, and increased marketing investments to support sales growth.
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Removed paragraphs (80)
Previous report
◦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;
Previous report
In addition, because we intend to fund acquisitions through the utilization of our 2022 Revolving Credit Facility, we do not expect to be subject to delays in or conditions by closing acquisitions that would be typically associated with transaction specific financing, as is typically the case in such acquisitions. We believe this advantage is a powerful one and is highly unusual in the marketplace for acquisitions in which we operate.
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Initial public offering and Company formation
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2024 Highlights and Recent Events
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Disposition of Ergobaby
Previous report
On December 27, 2024, the LLC, solely in its capacity as the representative of the holders of stock and options of EBP Lifestyle Brands Holdings, Inc. (“Ergobaby”), a majority owned subsidiary of the Company, entered into a definitive Agreement and Plan of Merger (the “Ergobaby Merger Agreement”) with ERGO Acquisition LLC (“Ergo Acquiror”), Aloha Merger Sub LLC ( “Aloha Merger Sub”) and Ergobaby, to sell to Ergo Acquiror all of the issued and outstanding securities of Ergobaby, the parent company of the operating entity, The ERGO Baby Carrier, Inc., through a merger of Aloha Merger Sub with and into Ergobaby, with Ergobaby surviving the merger and becoming a wholly owned subsidiary of Acquiror (the “Ergobaby Merger”). On the same day, December 27, 2024, the parties completed the Ergobaby Merger pursuant to the Ergobaby Merger Agreement.
Previous report
The sale price of Ergobaby was based on an enterprise value of $104 million and will be subject to certain adjustments based on matters such as transaction expenses of Ergobaby, the net working capital and cash and debt balances of Ergobaby at the time of the closing. The LLC owned approximately 82% of the outstanding stock of Ergobaby on a fully diluted basis prior to the Ergobaby Merger. After the allocation of the sales price to Ergobaby non-controlling equityholders and the payment of transaction expenses, the Company received approximately $99.1 million of total proceeds at closing. This amount was in respect of its debt and equity interests in Ergobaby (which was acquired by the Company on September 16, 2010) and the payment of accrued interest. The Company recorded a pre-tax gain on the sale of Ergobaby of $6.1 million.
Previous report
Disposition of Crosman
Previous report
On January 31, 2024, the LLC, through its newly formed acquisition subsidiaries, THP Topco, Inc., a Delaware corporation (“THP Topco”) and THP Intermediate, Inc., a Delaware corporation (“THP Buyer”), acquired THP and certain of its affiliated entities pursuant to a Merger and Stock Purchase Agreement (the “THP Purchase Agreement”) dated January 14, 2024 by and among THP Buyer, THP, VMG Honey Pot Blocker, Inc. (“Blocker I”), NVB1, Inc. (“Blocker II”), VMG Tax-Exempt IV, L.P., New Voices Fund, LP, THP Merger Sub, LLC (“THP Merger Sub”), VMG Honey Pot Holdings, LLC, as the Sellers’ Representative, and certain remaining equity holders of THP. Pursuant to the THP Purchase Agreement, subsequent to certain internal reorganizations, THP Buyer acquired all of the issued and outstanding equity of Blocker I and Blocker II and, thereafter, THP Merger Sub merged with and into THP (the “THP Merger”), such that the separate existence of THP Merger Sub ceased, with THP surviving the THP Merger as a wholly-owned, indirect subsidiary of THP Topco. THP Topco is the parent company of The Honey Pot Company (DE), LLC, the operating entity of The Honey Pot Co. business.
Previous report
The Company purchased The Honey Pot Co. for a total enterprise value of $380 million, before working capital and certain other adjustments (the “THP Purchase Price”). The Company funded the THP Purchase Price with cash on hand. Certain minority equity holders of THP executed agreements pursuant to which they contributed a portion of their THP equity (the “THP Rollover Equity”) to THP Topco in exchange for THP Topco common stock. THP Topco contributed the THP Rollover Equity to THP Buyer. Certain other members of The Honey Pot Co. management team also contributed cash in exchange for equity in THP Topco. Immediately subsequent to the acquisition, the LLC owned approximately 85% of the outstanding equity of THP Topco.
Previous report
The macroeconomic environment remains dynamic as global macroeconomic trends, including inflationary pressures and elevated interest rates, are impacting consumer spending behavior. We expect uncertainty regarding changing market conditions, inflationary pressures and interest rates to impact consumer spending, particularly for discretionary items purchased by low and middle income consumers, even as overall consumer sentiment among other income brackets improves. Overall inflation has increased at a slower pace domestically in 2024, but prices remain significantly elevated as compared to the pre-COVID-19 environment, and inflation rates remain above central banks' targets. While the Federal Reserve has cut interest rates several times in the past year, it continues to quantitatively tighten the money supply to combat inflation. We continue to experience rising labor costs, particularly at our businesses where hourly employees comprise a larger part of the workforce as the labor market remains historically tight. We expect that increasing benefit costs in particular will continue to have an impact on margins at our businesses in 2025. Certain locales that our businesses operate in have also significantly increased the minimum wage over the past two years with more increases scheduled in coming years, which adds additional wage pressure to the rates we pay hourly workers in these locales.
Previous report
During the latter half of 2024, our businesses began to see increases in freight costs, particularly ocean freight, as logistics costs, which had begun to moderate after remaining relatively high post pandemic, were negatively impacted by geopolitical conflicts and higher fuel costs. We do not expect these higher freight costs to moderate in the near term. Accordingly, our liquidity and financial results could be impacted in ways that we are not able to predict today.
Previous report
Additionally, we expect there to be ongoing uncertainty regarding changes to U.S. trade policy and potential tariffs on imports to the U.S., particularly for goods that flow through China. The effect of these potential changes on our subsidiaries will be influenced by the specific details of any changes in trade policy, length and duration of any implemented tariffs and our effectiveness in responding to them.
Previous report
•Pursuing sales growth through a combination of new product development, increasing distribution, new customer acquisitions and selective international expansion;
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•Raising prices, when appropriate, on our goods due to rising input costs to preserve operating margins;
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•Taking market share, where possible, in each of our niche market leading companies, generally at the expense of less focused or less well capitalized competitors;
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•Striving for excellence in supply chain management, manufacturing and technological capabilities;
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•Continuing to pursue expense reduction and cost savings in lower margin business lines or in response to lower production volume; and
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•Continuing to grow through disciplined, strategic acquisitions and rigorous integration processes.
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Net revenues for the year ended December 31, 2023 increased by approximately $44.3 million or 2.3% compared to the corresponding period in 2022. Our PrimaLoft business, which we acquired in July 2022, contributed $48 million in incremental net revenue in 2023. During the year ended December 31, 2023 compared to 2022, we also saw significant increases in net sales at 5.11 ($46.9 million increase), Lugano ($106.8 million increase) and Arnold ($12.9 million increase), partially offset by a decrease in net revenue at BOA ($52.9 million decrease), Velocity Outdoor ($60.0 million decrease), Altor Solutions ($23.3 million decrease), and Sterno ($28.3 million decrease). On a consolidated level, growth in net revenues at our 5.11 and Lugano businesses offset decreases in net revenues at several of our businesses as compared to the prior year. Several of our consumer brand businesses, particularly BOA, PrimaLoft and Velocity, had a decrease in net revenues resulting from higher than anticipated end market inventory levels due to supply chain normalization and a corresponding inventory ordering surge experienced in 2022. Our industrial businesses faced inflationary pressures in the current year, with both Altor and Sterno experiencing decreases in sales as a result. Refer to "Results of Operations - Our Businesses" for a more detailed analysis of net revenue by business segment.
Previous report
Consolidated selling, general and administrative expense increased approximately $60.4 million during the year ended December 31, 2023, compared to the corresponding period in 2022. Approximately $11 million of the increase was due to our PrimaLoft acquisition in July 2022. We also saw increases in selling, general and administrative expenses at several of our consumer brands due to increased investment in marketing and headcount, particularly 5.11 ($17.2 million of the increase) and Lugano ($27.6 million of the increase). Refer to "Results of Operations - Business Segments" for a more detailed analysis of selling, general and administrative expense by subsidiary business segment. At the corporate level, general and administrative expense was $18.2 million in 2023 and $16.3 million in 2022, an increase of $1.9 million due to increases in professional fees resulting from increasing regulatory requirements, the timing of investor relation events, and higher staffing costs.
Previous report
We recorded interest expense totaling $105.2 million for the year ended December 31, 2023 compared to $83.5 million for the comparable period in 2022, an increase of $21.7 million. The increase in interest expense in the current period reflects the higher interest rate environment in the current year versus the comparable period in the prior year, and higher average amounts outstanding on our revolving credit facility in the current year. While the actual timing and extent of any future increases or decreases in interest rates remains unknown, higher long-term interest rates are expected to affect interest expense on the debt outstanding under our 2022 Credit Facility.
Previous report
Net sales for the year ended December 31, 2023 were $533.1 million, an increase of $46.9 million, or 9.6%, compared to the same period in 2022. This increase is primarily driven by a $29.8 million increase in direct-to-consumer sales largely due to strong demand in digital sales, in addition to sales from new retail store openings since December 2022 (bringing the total store count to 123 as of December 31, 2023). Additionally, international sales increased $8.0 million while domestic wholesale sales increased $7.9 million both resulting from strong demand and inventory availability improvement as compared to the prior year.
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Gross profit as a percentage of net sales was 52.0% in the year ended December 31, 2023 as compared to 52.9% in the year ended December 31, 2022. Gross profit as a percentage of net sales in 2023 was unfavorably impacted by increased product costs, promotional activity to sell through seasonal inventory and an increase in inventory reserves, which was offset favorably by price increases, as well as customer mix and product mix.
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Selling, general and administrative expenses for the year ended December 31, 2023 increased to $220.9 million or 41.4% of net sales compared to $203.7 million or 41.9% of net sales for the year ended December 31, 2022. The increase in selling, general and administrative expense for the year ended December 31, 2023 was largely driven by the costs associated with additional retail stores, increased headcount from December 31, 2022, as well as increased bonus related expenses. These increases were offset by decreases in expenses related to the usage of temporary labor, bad debt expense and other expenses.
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Net sales for the year ended December 31, 2023 were $155.8 million, a decrease of $52.9 million or 25.3% when compared to net sales of $208.7 million for the year ended December 31, 2022. The decrease was reflected across key industries including Snow Sports, Cycling, Outdoor, Athletic, Workwear and Performance Bracing. The main factor of the decrease in sales was higher than anticipated end market inventory levels due to supply chain normalization and corresponding inventory ordering surge experienced in many of our industries in 2022.
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Gross profit as a percentage of net sales was 59.7% for the year ended December 31, 2023 compared to 60.7% for the same period in 2022. The decrease in gross profit as a percentage of net sales during 2023 was driven by fixed manufacturing overhead expenses and an increase in depreciation expense related to tooling.
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Selling, general and administrative expense for the year ended December 31, 2023 was $49.0 million, or 31.5% of net sales, compared to $52.3 million, or 25.0% of net sales for the year ended December 31, 2022. The decrease in selling, general and administrative expense of $3.2 million in 2023 was primarily due to decreased employee costs related to BOA’s bonus plan.
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Segment operating income was $27.3 million for the year ended December 31, 2023 as compared to $57.8 million in segment operating income in the year ended December 31, 2022, a decrease of $30.5 million based on the factors noted above.
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Lugano is a leading designer, manufacturer and marketer of high-end, one-of-a-kind jewelry sought after by some of the world’s most discerning clientele. Lugano conducts sales via its own retail salons as well as pop-up showrooms at Lugano-hosted or sponsored events in partnership with influential organizations in the equestrian, art and philanthropic communities. Lugano is headquartered in Newport Beach, California.
Previous report
Net sales for the year ended December 31, 2024 increased approximately $162.3 million or 52.7%, to $470.7 million, compared to the corresponding year ended December 31, 2023. Lugano sells high-end jewelry primarily through retail salons in California, Florida, Texas, Washington D.C., Colorado, Connecticut, and London, England, as well as via pop-up showrooms at multiple equestrian, social and charitable functions each year. In the current year period, Lugano has experienced strong same store sales growth as it has invested in building out its inventory as well as its sales, marketing and event staff, while increasing the number of social and charitable functions it has attended. The average sale price per retail transaction increased from approximately $400,000 in the prior year to approximately $450,000 in the current year. Lugano opened its Greenwich, Connecticut location in September 2023, and its London, England salon in the second quarter of 2024, and expects to open more retail locations in the near term to further expand sales opportunities.
Previous report
Gross profit as a percentage of net sales totaled approximately 60.8% in the year ended December 31, 2024 compared to 56.3% in the year ended December 31, 2023. Lugano has an extensive network of suppliers through which they procure high quality diamonds and gemstones, which make up a significant percentage of the cost of sales. The uniqueness of the Lugano jewelry can lead to fluctuations in margins from period to period based on what designs are sold during the period.
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Selling, general and administrative expense for the year ended December 31, 2024 increased to approximately $97.2 million or 20.6% of net sales compared to $67.5 million or 21.9% of net sales for the same period of 2023. The increase in selling, general and administrative expense is primarily due to overhead expenses from newly opened locations, increased marketing spend and personnel costs, and variable costs that correlate to the increase in revenue. Lugano continues to increase its head count as it invests in additional professionals to support its growth and geographic expansion.
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Segment operating income increased $82.9 million during the year ended December 31, 2024 to $183.2 million compared to segment operating income of $100.3 million during the same period in 2023, principally as a result of the increase in sales and gross profit in 2024, as described above.
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Net sales for the year ended December 31, 2023 increased approximately $106.8 million or 53.0%, to $308.3 million, compared to the corresponding year ended December 31, 2022. Lugano sells high-end jewelry primarily through retail salons in California, Florida, Texas, Washington D.C., Colorado and Connecticut, and via pop-up showrooms at multiple equestrian, social and charitable functions each year. In the current year, Lugano has experienced an increase in sales from its existing locations as it has invested in building out its inventory as well as its sales, marketing and event staff, while increasing the number of social and charitable functions it has attended. Lugano also opened its Washington D.C. location in March 2023, its Greenwich, Connecticut location in September
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2023, and its Palm Beach, Florida flagship location in November 2023, and expects to open more retail locations in the near term to further expand sales opportunities.
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Gross profit as a percentage of net sales totaled approximately 56.3% in the year ended December 31, 2023 compared to 48.9% in the year ended December 31, 2022. Lugano has an extensive network of suppliers through which they procure high quality diamonds and gemstones, which make up a significant percentage of the cost of sales. The uniqueness of the Lugano jewelry can lead to fluctuations in margins from period to period based on what designs are sold during the period. In the prior year, Lugano recorded $5.5 million in amortization of the inventory step-up resulting from the acquisition purchase price allocation. Excluding the effect of the step-up amortization, the gross profit as a percentage of net sales for the year ended December 31, 2022 was 51.7%.
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Selling, general and administrative expense for the year ended December 31, 2023 increased to approximately $67.5 million or 21.9% of net sales compared to $40.0 million or 19.8% of net sales for the same period of 2022. The increase in selling, general and administrative expense is attributable to increased marketing spend and personnel costs in support of Lugano’s growth in sales and expansion into new markets as well as rent and operating costs for its new locations.
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Segment operating income increased $47.3 million during the year ended December 31, 2023 to $100.3 million compared to segment operating income of $53.0 million during the same period in 2022, principally as a result of the increase in sales and gross profit in 2023, as described above.
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• Amortization expense associated with the intangible assets recorded in connection with the purchase price allocation of PrimaLoft of an additional $6.4 millionfor the year ended December 31, 2022.
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Reworded paragraphs (85)
Previous wording
Compass Diversified Holdings, a Delaware statutory trust, was incorporated in Delaware on November 18, 2005. Compass Group Diversified Holdings LLC, a Delaware limited liability company, was also formed on November 18, 2005. In accordance with the Trust Agreement, the Trust is sole owner of 100% of the Trust Interests (as defined in 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. Sostratus LLC owns all of our Allocation Interests. The Company is the operating entity with a board of directors and other corporate governance responsibilities, similar to that of a Delaware corporation.
Current wording
Compass Diversified Holdings, a Delaware statutory trust, was formed in Delaware on November 18, 2005. Compass Group Diversified Holdings LLC, a Delaware limited liability company, was also formed on November 18, 2005. In accordance with the Trust Agreement, the Trust is the sole owner of 100% of the Trust Interests (as defined in the LLC Agreement of the Company). Pursuant to the LLC Agreement, the Company has outstanding an identical number of Trust Interests as the number of outstanding shares of the Trust. Sostratus LLC owns all of our Allocation Interests. The Company is the operating entity with a board of directors and corporate governance responsibilities similar to those of a Delaware corporation.
Previous wording
The Trust and the Company were formed to acquire and manage a group of small and middle-market businesses headquartered in North America. We characterize small and middle market businesses as those that generate annual cash flows of up to $100 million. We focus on companies of this size because we believe that these companies are more able to achieve growth rates above those of their relevant industries and are also frequently more amenable to efforts to improve earnings and cash flow.
Current wording
The Trust and the LLC were formed to acquire and manage a group of small and middle-market businesses headquartered in North America. We characterize small and middle market businesses as those that generate annual cash flows of up to $100 million. We focus on companies of this size because we believe they are better able to achieve growth rates above those of their relevant industries and efforts to improve earnings and cash flow are often more effective in companies of this size. In pursuing new acquisitions, we seek businesses with the following characteristics:
Previous wording
•stable and growing earnings and cash flow;
Current wording
•Stable and growing earnings and cashflow;
Previous wording
•maintains a significant market share in defensible industry niche (i.e., has a “reason to exist”);
Current wording
•Significant market share in defensible industry niches (i.e., has a “reason to exist”);
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•a diversified customer and supplier base.
Current wording
•Diversified customer and supplier bases.
Previous wording
◦utilizing structured incentive compensation programs tailored to each business in order to attract, recruit and retain talented managers to operate our businesses;
Current wording
•Utilizing structured incentive compensation programs tailored to each business to attract and retain talented managers;
Previous wording
◦assisting management in their analysis and pursuit of prudent organic cash flow growth strategies (both revenue and cost related);
Current wording
•Assisting management in its analysis and pursuit of prudent organic cash flow growth strategies;
Previous wording
◦forming strong subsidiary level boards of directors, including independent directors, to supplement management in their development and implementation of strategic goals and objectives.
Current wording
•Forming strong subsidiary-level boards of directors, including independent directors, to supplement management in developing and implementing strategic goals and objectives.
Previous wording
Based on the experience of our management team and its ability to identify and negotiate acquisitions, we believe we are well positioned to acquire additional attractive businesses. Our management team has a large network of deal intermediaries to whom it actively markets and who we expect to expose us to potential acquisitions. Through this network, as well as our management team’s active proprietary transaction sourcing efforts, we typically have a substantial pipeline of potential acquisition targets. In consummating transactions, our management team has, in the past, been able to successfully navigate complex situations surrounding acquisitions, including corporate spin-offs, transitions of family-owned businesses, management buy-outs and reorganizations. We believe the flexibility, creativity, experience and expertise of our management team in structuring transactions provides us with a strategic advantage by allowing us to consider non-traditional and complex transactions tailored to fit a specific acquisition target.
Current wording
Our management team leverages a network of intermediaries, advisors, and other sources of opportunities who expose us to potential acquisitions. Through these relationships, we regularly evaluate a range of potential acquisition opportunities. Our management team also has experience navigating complex acquisition situations, including corporate spin-offs, family-owned business transitions, management buy-outs, and reorganizations. We believe this flexibility, creativity, experience and expertise in structuring transactions provides a strategic advantage to us in executing non-traditional and complex transactions tailored to fit a specific acquisition target.
Previous wording
On May 16, 2006, we completed our initial public offering of 13,500,000 shares of the Trust (the “IPO”). Subsequent to the IPO the Board engaged our Manager to externally manage the day-to-day operations and affairs of the Company, oversee the management and operations of the businesses and to perform those services customarily performed by executive officers of a public company.
Current wording
On May 16, 2006, we completed our initial public offering of 13,500,000 shares of the Trust (the “IPO”). Subsequent to the IPO the Board engaged our Manager to externally manage the day-to-day operations and affairs of the Company, oversee the management and operations of the businesses and perform those services customarily performed by executive officers of a public company.
Previous wording
From May 16, 2006 through December 31, 2024, we purchased twenty-four businesses (each of our businesses is treated as a separate operating segment) and disposed of fourteen businesses. The tables below reflect summarized information relating to our acquisitions and dispositions from the date of our IPO through December 31, 2024 (in thousands):
Current wording
The tables below reflect summarized information relating to our acquisitions and dispositions from the date of our IPO through December 31, 2025 (in thousands):
Previous wording
(2) Velocity Outdoor (formerly "Crosman Corp.") was purchased by the Company in May 2006 and subsequently sold in January 2007. We reacquired Velocity Outdoor in June 2017.
Current wording
(2) Velocity Outdoor (formerly "Crosman Corporation") was purchased by the Company in May 2006 and subsequently sold in January 2007. We reacquired Velocity Outdoor in June 2017.
Previous wording
Common shares - For the 2024 fiscal year we declared distributions to our common shareholders totaling $1.00 per share.
Current wording
Common shares - For the 2025 fiscal year we declared distributions to our common shareholders totaling $0.50 per share. On May 27, 2025, the Company announced that it suspended the quarterly cash distribution historically paid to common shareholders. No common distributions were paid subsequent to April 24, 2025.
Previous wording
Preferred shares - For the 2024 fiscal year we declared distributions to our preferred shareholders totaling $1.8125 per share on our Series A Preferred Shares and $1.96875 on our Series B Preferred Shares and $1.96875 on our Series C Preferred Shares.
Current wording
Preferred shares - For the 2025 fiscal year we declared distributions to our preferred shareholders totaling $1.8125 per share on our Series A Preferred Shares, $1.96875 on our Series B Preferred Shares and $1.96875 on our Series C Preferred Shares.
Previous wording
•Driving free cash flow through increased net income and effective working capital management, enabling continued investment in our businesses;
Current wording
•Generating free cash flow through increased net income, disciplined capital investment, and effective working capital management, while maintaining flexibility amid a choppy operating environment;
Previous wording
The following discussion reflects a comparison of the historical results of operations of our consolidated business for the years ended December 31, 2024, 2023 and 2022, and components of the results of operations as well as those components presented as a percent of net revenues, for each of our businesses on a stand-alone basis.
Current wording
The following discussion reflects a comparison of the historical results of operations of our consolidated business for the years ended December 31, 2025, 2024 and 2023, and components of the results of operations as well as those components presented as a percent of net revenues, for each of our businesses on a standalone basis.
Previous wording
We acquired The Honey Pot Co. in January 2024 and PrimaLoft in July 2022. In the following results of operations, we provide (i) our actual Consolidated Results of Operations for the years ended December 31, 2024, 2023 and 2022, which includes the historical results of operations of each of our businesses (operating segments) from the date of acquisition in accordance with generally accepted accounting principles in the United States ("GAAP" or "US GAAP") and (ii) comparative historical components of the results of operations for each of our businesses on a stand-alone basis (“Results of Operations – Our Businesses”), for each of the years ended December 31, 2024, 2023 and 2022, where all years presented include relevant pro-forma adjustments for pre-acquisition periods and explanations where applicable. For the 2024 acquisition of The Honey Pot Co., the pro forma results of operations have been prepared as if we purchased this business on January 1, 2023. For the 2022 acquisition of PrimaLoft, the pro forma results of operations have been prepared as if we purchased this business on January 1, 2022. We believe this presentation enhances the discussion and provides a more meaningful comparison of operating results. The following operating results of our businesses are not necessarily indicative of the results to be expected for a full year, going forward.
Current wording
We acquired The Honey Pot Co. in January 2024. In the following results of operations, we provide (i) our actual Consolidated Results of Operations for the years ended December 31, 2025, 2024 and 2023, which includes the historical results of operations of each of our businesses (operating segments) from the date of acquisition in accordance with generally accepted accounting principles in the United States ("GAAP" or "US GAAP") and (ii) comparative historical components of the results of operations for each of our businesses on a standalone basis (“Results of Operations – Our Businesses”), for each of the years ended December 31, 2025, 2024 and 2023, where all years presented include relevant pro-forma adjustments for pre-acquisition periods and explanations where applicable. For the 2024 acquisition of The Honey Pot Co., the pro forma results of operations have been prepared as if we purchased this business on January 1, 2023. We believe this presentation enhances the discussion and provides a more meaningful comparison of operating results. The following operating results of our businesses are not necessarily indicative of the results to be expected for a full year, going forward.
Previous wording
Refer to "Part 2, Item 7 Management’ Discussion and Analysis of Financial Condition and Results of Operations, "Results of Operations - Our Businesses" for a more detailed analysis of net revenue by operating segment.
Current wording
Net revenues for the year ended December 31, 2025 increased by approximately $85.6 million or 4.8% compared to the corresponding period in 2024. During the year ended December 31, 2025, we saw notable increases in net revenue at 5.11 ($19.7 million increase), Lugano ($18.7 million increase), PrimaLoft ($2.3 million increase), The Honey Pot Co. ($35.2 million increase) and Altor ($64.0 million increase). The Honey Pot Co. was acquired on January 31, 2024 and had an incremental revenue increase of $24.4 million year over year. The increase in net revenue at Altor was attributable to the acquisition of Lifoam in October 2024. The increase in revenue at Lugano was due to an expansion of their salon footprint during the latter half of 2024 and into 2025. These increases in net revenue were offset by decreases in net revenue at Velocity ($20.0 million decrease, primarily due to the sale of Crosman, Velocity's airgun division, in April 2024), Arnold ($20.9 million decrease) and Sterno ($12.9 million decrease). Refer to "Part II, Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Results of Operations - Our Businesses" for a more detailed analysis of net revenue by operating segment.
Previous wording
Amortization expense for the year ended December 31, 2023 increased $11.2 million to $88.4 million as compared to the prior year, primarily as a result of the amortization expense associated with the intangibles that were recognized in conjunction with the purchase price allocation for PrimaLoft, which was acquired in July 2022, and an add-on acquisition at Velocity in July 2022.
Current wording
Amortization expense for the year ended December 31, 2025 decreased $1.7 million to $93.2 million as compared to the prior year, due to the reduction in expense associated with the sale of Crosman in the second quarter of 2024 and certain intangibles at Sterno that were fully amortized in 2024, partially offset by the amortization expense associated with the intangibles that were recognized in conjunction with the purchase price allocation for Lifoam, the add-on acquisition that Altor completed in the fourth quarter of 2024.
Previous wording
We had income tax expense of $22.6 million during the year ended December 31, 2023 compared to income tax expense of $41.4 million in 2022, a decrease of $18.7 million in 2023 as compared to 2022. Our effective tax rate in the year ended December 31, 2023 was (102.0)%, compared to an effective income tax rate of 71.8% during the same period in 2022. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. In addition to state income taxes, the items with the most significant impact on the difference between our statutory U.S. federal income tax rate of 21% percent and our effective income tax rate in 2023 was the goodwill impairment expense recorded at PrimaLoft in 2023, which is a permanent difference for tax purposes and therefore did not result in an income tax benefit, and the distribution received by the Trust as a result of the BOA recapitalization.
Current wording
We had income tax benefit of $0.9 million during the year ended December 31, 2025 compared to income tax expense of $18.6 million in 2024, a decrease of $19.6 million. Our effective tax rate in the year ended December 31, 2025 was 0.3%, compared to an effective income tax rate of (6.0)% during the same period in 2024. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. In addition to state income taxes, the items with the most significant impact on the difference between our statutory U.S. federal income tax rate of 21% and our effective income tax rate in 2025 was the limitations on the net operating loss carryforwards and the deconsolidation of Lugano, while in 2024 the most significant impact was the limitations on net operating loss carryforwards, utilization of tax credits at our subsidiaries, and the loss on the sale of Crosman in the second quarter of 2024.
Previous wording
On April 30, 2024, Velocity Outdoor entered into a stock purchase agreement to sell Crosman Corporation ("Crosman"), its airgun product division, to Daisy Manufacturing Company, for an enterprise value of approximately $63 million. The sale was completed on the same day. The Company recorded a loss of $24.2 million on the sale of Crosman in the year ended December 31, 2024. Velocity received net proceeds of approximately $61.9 million related to the sale of Crosman, which was used to repay amounts outstanding under its intercompany credit agreement. The results of operation of Crosman are included in the accompanying financial statements through the date of sale.
Current wording
Year ended December 31, 2024 as compared to the Year ended December 31, 2023
Previous wording
Net revenues for the year ended December 31, 2024 increased by approximately $233.2 million or 11.9% compared to the corresponding period in 2023. During the year ended December 31, 2024, we saw notable increases in net revenue at BOA ($35.0 million increase), Lugano ($162.3 million increase), PrimaLoft ($7.2 million increase) and Arnold ($5.2 million increase), offset by decreases in net revenue at Velocity ($75.8 million decrease, primarily due to the sale of Crosman, Velocity's airgun division, in April 2024) and Sterno ($5.4 million decrease). The Honey Pot Co., which we acquired on January 31, 2024, contributed $104.6 million in net revenues in 2024 post-acquisition.
Current wording
Net revenues for the year ended December 31, 2024 increased by approximately $98.1 million or 5.8% compared to the corresponding period in 2023. During the year ended December 31, 2024, we saw notable increases in net revenue at BOA ($35.0 million increase), Lugano ($27.2 million increase), PrimaLoft ($7.2 million increase) and Arnold ($5.2 million increase), offset by decreases in net revenue at Velocity ($75.8 million decrease, primarily due to the sale of Crosman, Velocity's airgun division, in April 2024) and Sterno ($5.4 million decrease). The Honey Pot Co., which we acquired on January 31, 2024, contributed $104.6 million in net revenues in 2024 post-acquisition. Refer to "Part II, Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Results of Operations - Our Businesses" for a more detailed analysis of net revenue by operating segment.
Previous wording
We do not generate any revenues apart from those generated by the businesses we own. We may generate interest income on the investment of available funds, but expect such earnings to be minimal. Our investment in our businesses is typically in the form of loans from the Company to such businesses, as well as equity interests in those businesses. Cash flows coming to the Trust and the Company are the result of interest payments on those loans, amortization of those loans and additional principal payments on those loans. However, on a consolidated basis these items will be eliminated.
Current wording
We do not generate any revenues apart from those generated by the businesses we own. We may generate interest income on the investment of available funds but expect such earnings to be minimal. Our investment in ourbusinesses is typically in the form of loans from the Company to such businesses, as well as equity interests in those businesses. Cash flows coming to the Trust and the Company are the result of interest payments on those loans, amortization of those loans and additional principal payments on those loans. However, on a consolidated basis these items will be eliminated.
Previous wording
On a consolidated basis, cost of revenues increased approximately $65.9 million during the year ended December 31, 2024, compared to the corresponding period in 2023, primarily as a result of the increase in net revenues at certain of our subsidiaries. We saw notable increases in cost of revenues at BOA ($8.8 million increase), Lugano ($49.7 million increase) and Arnold ($8.9 million increase) that correspond to the revenue increases noted above. We also saw a decrease in cost of revenues at Velocity ($57.0 million decrease) and Sterno ($12.1 million decrease) that corresponded to the decrease in revenue noted above. The Honey Pot Co. had cost of revenues of $53.3 million in 2024 post-acquisition. Gross profit as a percentage of net revenues was approximately 45.5% in the year ended December 31, 2024 compared to 42.4% in the year ended December 31, 2023. The increase in gross profit as a percentage of net revenues in the year ended December 31, 2024 as compared to the year ended December 31, 2023 is primarily attributable to the mix of products sold, with increases in net revenue at our higher margin businesses, particularly Lugano. Our branded consumer businesses had gross profit as a percentage of net revenuesof 54.7% in the 2024 as compared to 51.0% in 2023, while our industrial businesses had gross profit as a percentage of net revenues of 27.1% in 2024 as compared to 27.7% in 2023. Refer to "Part 2, Item 7 Management’ Discussion and Analysis of Financial Condition and Results of Operations, "Results of Operations - Our Businesses" for a more detailed analysis of gross profit by business segment.
Current wording
On a consolidated basis, cost of revenues increased approximately $22.4 million during the year ended December 31, 2024, compared to the corresponding period in 2023, primarily as a result of the increase in net revenues at certain of our subsidiaries. We saw notable increases in cost of revenues at BOA ($8.8 million increase), Lugano ($6.2 million increase) and Arnold ($8.9 million increase) that correspond to the revenue increases noted above. We also saw a decrease in cost of revenues at Velocity ($57.0 million decrease) and Sterno ($12.1 million decrease) that corresponded to the decrease in revenue noted above. The Honey Pot Co. had cost of revenues of $53.3 million in 2024 post-acquisition. Gross profit as a percentage of net revenues was approximately 42.0% in the year ended December 31, 2024 compared to 39.9% in the year ended December 31, 2023. The increase in gross profit as a percentage of net revenues in the year ended December 31, 2024 as compared to the year ended December 31, 2023 is primarily attributable to the mix of products sold, with increases in net revenue at our higher margin businesses. Our branded consumer businesses had gross profit as a percentage of net revenuesof 52.2% in the 2024 as compared to 49.2% in 2023, while our industrial businesses had gross profit as a percentage of net revenues of 27.1% in 2024 as compared to 27.7% in 2023. Refer to Part II, Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Results of Operations - Our Businesses" for a more detailed analysis of gross profit by business segment.
Previous wording
Consolidated selling, general and administrative expense increased approximately $85.5 million during the year ended December 31, 2024, compared to the corresponding period in 2023. We saw increases in selling, general and administrative expenses at several of our consumer brands due to increased investment in marketing and headcount, and increases in employee compensation Lugano ($29.6 million of the increase). The Honey Pot Co. had selling, general and administrative expense of $37.7 million in the 2024 post-acquisition period, of which $3.5 million was transaction costs and $2.6 million was integration service fees associated with the acquisition. Our Arnold operating segment also saw a notable increase in selling, general and administrative costs in 2024 ($10.3 million increase) as compared to the prior year due to non-recurring costs incurred associated with the move of two of their facilities in the United States. Refer to "Results of Operations - Business Segments" for a more detailed analysis of selling, general and administrative expense by subsidiary business segment. At the corporate level, general and administrative expense was $19.7 million in 2024 and $18.2 million in 2023, an increase of $1.5 million. The increase in corporate general and administrative expense in 2024 related to severance paid to our former chief financial officer, who departed during the third quarter, and professional fees associated with the recruitment of our new chief financial officer.
Current wording
Consolidated selling, general and administrative expense increased approximately $85.5 million during the year ended December 31, 2024, compared to the corresponding period in 2023. We saw increases in selling, general and administrative expenses at several of our consumer brands due to increased investment in marketing and headcount, and increases in employee compensation, particularly Lugano ($29.6 million of the increase) with spending associated with the opening of new salons in the latter part of 2023 and 2024. The Honey Pot Co. had selling, general and administrative expense of $37.7 million in the 2024 post-acquisition period, of which $3.5 million was transaction costs and $2.6 million was integration service fees associated with the acquisition. Our Arnold operating segment also saw a notable increase in selling, general and administrative costs in 2024 ($10.3 million increase) as compared to the prior year due to non-recurring costs incurred associated with the move of two of their facilities in the United States. Refer to "Results of Operations - Business Segments" for a more detailed analysis of selling, general and administrative expense by subsidiary business segment. At the corporate level, general and administrative expense was $19.7 million in 2024 and $18.2 million in 2023, an increase of $1.5 million. The increase in corporate general and administrative expense in 2024 related to severance paid to our former chief financial officer, who departed during the third quarter, and professional fees associated with the recruitment of our new chief financial officer.
Previous wording
During the year ended December 31, 2024 and 2023, we paid CGM a quarterly management fee equal to 0.5% (2.0% annually) of our consolidated adjusted net assets. We accrue for the management fee on a quarterly basis. For the year ended December 31, 2024, we incurred approximately $74.8 million in management fees as compared to $67.9 million in fees in the year ended December 31, 2023. The increase in management fees is primarily attributable to our acquisition of The Honey Pot Co. in 2024, and increases in net asset balances at certain of our businesses in the current year. CGM entered into a waiver of the MSA for a period through June 30, 2023 to receive a 1% annual management fee related to PrimaLoft, rather than the 2% called for under the MSA, which resulted in a lower management fee paid in the second half of 2022 and the first half of 2023 than would have normally been due. Additionally, CGM had entered into a waiver of the MSA at December 31, 2023 to exclude the cash balances held at the LLC from the calculation of the management fee.
Current wording
For the year ended December 31, 2024, we incurred approximately $74.8 million in management fees as compared to $67.9 million in fees in the year ended December 31, 2023. The increase in management fees is primarily attributable to our acquisition of The Honey Pot Co. in 2024, and increases in net asset balances at certain of our businesses in 2024. CGM entered into a waiver of the MSA for a period through June 30, 2023 to receive a 1% annual management fee related to PrimaLoft, rather than the 2% called for under the MSA, which resulted in a lower management fee paid in the second half of 2022 and the first half of 2023 than would have normally been due. Additionally, CGM had entered into a waiver of the MSA at December 31, 2023 to exclude the cash balances held at the LLC from the calculation of the management fee.
Previous wording
Amortization expense for the year ended December 31, 2024 increased $11.4 million to $99.8 million as compared to the prior year, primarily as a result of the amortization expense associated with the intangibles that were recognized in conjunction with the purchase price allocation for The Honey Pot Co., which was acquired in January 2024, partially offset by the reduction in amortization expense at Velocity related to the intangible assets that were included in the sale of Crosman.
Current wording
Amortization expense for the year ended December 31, 2024 increased $11.2 million to $94.8 million as compared to the prior year, primarily as a result of the amortization expense associated with the intangibles that were recognized in conjunction with the purchase price allocation for The Honey Pot Co., which was acquired in January 2024, partially offset by the reduction in amortization expense at Velocity related to the intangible assets that were included in the sale of Crosman.
Previous wording
PrimaLoft performed an interim impairment test of their goodwill during the period ended December 31, 2023 as a result of operating results that were below forecast amounts that were used as the basis for the purchase price allocation at acquisition. The impairment test resulted in PrimaLoft recording impairment expense of $57.8 million. Velocity performed an interim impairment test of their goodwill during the third quarter of 2023 as a result of operating results that were below the forecast that we used in the quantitative annual impairment test of Velocity at March 31, 2023. The impairment test resulted in Velocity recording $31.6 million impairment expense in the year ended December 31, 2023.
Current wording
Velocity performed an interim impairment test of their goodwill during the third quarter of 2023 as a result of operating results that were below the forecast that we used in the quantitative annual impairment test of Velocity at March 31, 2023. The impairment test resulted in Velocity recording $31.6 million impairment expense in the year ended December 31, 2023.
Previous wording
We recorded interest expense totaling $106.7 million for the year ended December 31, 2024 compared to $105.2 million for the comparable period in 2023, an increase of $1.5 million. The increase in interest expense in the current period reflects higher average amounts outstanding on our revolving credit facility in the current year.
Current wording
We recorded interest expense totaling $122.8 million for the year ended December 31, 2024 compared to $109.9 million for the comparable period in 2023, an increase of $12.9 million. The increase in interest expense in 2024 reflects higher average amounts outstanding on our revolving credit facility in 2024, and an increase of $11.4 million in interest expense related to financing arrangements at our Lugano business.
Previous wording
On April 30, 2024, Velocity Outdoor sold Crosman Corporation ("Crosman"), its airgun product division. Velocity recorded a loss on the sale of Crosman $24.2 million in the year ended December 31, 2024.
Current wording
On April 30, 2024, Velocity Outdoor sold Crosman, its airgun product division. Velocity recorded a loss on the sale of Crosman $24.2 million in the year ended December 31, 2024.
Previous wording
We had income tax expense of $49.0 million during the year ended December 31, 2024 compared to income tax expense of $22.6 million in 2023, an increase of $26.4 million in 2024 as compared to 2023. Our effective tax rate in the year ended December 31, 2024 was 53.7%, compared to an effective income tax rate of (102.0)% during the same period in 2023. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. In addition to state income taxes, the items with the most significant impact on the difference between our statutory U.S. federal income tax rate of 21% and our effective income tax rate in 2024 was the limitations on the net operating loss carryforwards and utilization of tax credits at our subsidiaries, the impairment expense recognized at Velocity in the first quarter of 2024 and the third quarter of 2023, and the loss on the sale of Crosman in the second quarter of 2024.
Current wording
We had income tax expense of $18.6 million during the year ended December 31, 2024 compared to income tax expense of $8.2 million in 2023, an increase of $10.4 million in 2024 as compared to 2023. Our effective tax rate in the year ended December 31, 2024 was (6.0)%, compared to an effective income tax rate of (3.1)% during the same period in 2023. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. In addition to state income taxes, the items with the most significant impact on the difference between our statutory U.S. federal income tax rate of 21% and our effective income tax rate in 2024 was the limitations on the net operating loss carryforwards and utilization of tax credits at our subsidiaries, and the loss on the sale of Crosman in the second quarter of 2024.
Previous wording
We categorize the businesses we own into two separate groups of businesses (i) branded consumer businesses, and (ii) industrial businesses. Branded consumer businesses are characterized as those businesses that we believe capitalize on a valuable brand name in their respective market sector. We believe that our branded consumer businesses are leaders in their particular category. Industrial businesses are characterized as those businesses that focus on manufacturing and selling particular products or services within a specific market sector. We believe that our industrial businesses are leaders in their specific market sector. We previously announced our desire to acquire businesses in the healthcare sector, with a focus on outsourced pharma, medical manufacturing services and provider services. We have not yet acquired a business in the healthcare sector.
Current wording
We categorize the businesses we own into two separate groups of businesses (i) branded consumer businesses, and (ii) industrial businesses. Branded consumer businesses are characterized as those businesses that we believe capitalize on a valuable brand name in their respective market sector. We believe that our branded consumer businesses have leading positions in their particular category. Industrial businesses are characterized as those businesses that focus on manufacturing and selling particular products or services within a specific market sector. We believe that our industrial businesses have leading positions in their specific market sector. We previously announced our desire to acquire businesses in the healthcare sector, with a focus on outsourced pharma, medical manufacturing services and provider services. We have not yet acquired a business in the healthcare sector.
Previous wording
5.11 is a leading provider of purpose-built technical apparel and gear for law enforcement, firefighters, EMS, and military special operations as well as outdoor and adventure enthusiasts. 5.11 is a brand known for innovation and authenticity and works directly with end users to create purpose-built apparel, footwear and gear designed to enhance the safety, accuracy, speed and performance of tactical professionals and enthusiasts worldwide. 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.
Current wording
5.11 is a global apparel, footwear, and gear company serving consumers who demand performance, durability, and versatility across work, training, and adventure. 5.11 is a brand known for innovation and authenticity and works directly with end users to create purpose-built apparel, footwear and gear designed to enhance the safety, accuracy, speed and performance of tactical professionals and enthusiasts worldwide. 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.
Previous wording
Segment operating income for the year ended December 31, 2023 was $46.7 million, an increase of $3.2 million when compared to the same period in 2022, based on the factors described above.
Current wording
Segment operating income for the year ended December 31, 2025 was $51.4 million, an increase of $12.6 million when compared to the same period in 2024, based on the factors described above.
Previous wording
BOA, creatorof the revolutionary, award-winning, patented BOA Fit System, partners with market-leading brands to make the best gear even better. Delivering fit solutions purpose-built for performance, the BOA Fit System is featured in footwear across snow sports, cycling, outdoor, athletic, workwear as well as performance headwear and bracing. The system consists of three integral parts: a micro-adjustable dial, high-tensile lightweight laces, and low friction lace guides creating a superior alternative to laces, buckles, Velcro, and other traditional closure mechanisms. Each unique BOA configuration is designed with brand partners to deliver superior fit and performance for athletes, is engineered to perform in the toughest conditions and is backed by The BOA Lifetime Guarantee. BOA is headquartered in Denver, Colorado and has offices in Austria, China, South Korea, and Japan.
Current wording
BOA, creatorof the award-winning, patented BOA Fit System, partners with market-leading brands to make the best gear even better. Delivering fit solutions purpose-built for performance, the BOA Fit System is featured in footwear across snow sports, cycling, outdoor, athletic, workwear as well as performance headwear and bracing. The system consists of three integral parts: a micro-adjustable dial, high-tensile lightweight laces, and low friction lace guides creating a superior alternative to laces, buckles, Velcro, and other traditional closure mechanisms. Each unique BOA configuration is designed with brand partners to deliver superior fit and performance for athletes, is engineered to perform in the toughest conditions and is backed by The BOA Lifetime Guarantee. BOA is headquartered in Denver, Colorado and has operations in Austria, China, South Korea, Japan and Vietnam.
Previous wording
Gross profit was $119.2 million for the year ended December 31, 2024 as compared to $93.0 million for the year ended December 31, 2023. Gross profit as a percentage of net sales was 62.5% for the year ended December 31,
Current wording
Gross profit was $122.4 million for the year ended December 31, 2025 as compared to $119.2 million for the year ended December 31, 2024. Gross profit as a percentage of net sales was 64.2% for the year ended December 31, 2025 compared to 62.5% for the same period in 2024. The increase in gross profit as a percentage of net sales wasdriven by manufacturing efficiencies and product mix .
Previous wording
2024 compared to 59.7% for the same period in 2023. The increase in gross profit as a percentage of net sales was driven by manufacturing overhead leverage as well as product mix.
Current wording
Gross profit was $119.2 million for the year ended December 31, 2024 as compared to $93.0 million for the year ended December 31, 2023. Gross profit as a percentage of net sales was 62.5% for the year ended December 31, 2024 compared to 59.7% for the same period in 2023. The increase in gross profit as a percentage of net sales was driven by manufacturing overhead leverage as well as product mix.
Previous wording
The Honey Pot Co. is a leading “better-for-you” feminine care brand, powered by plant-derived ingredients and clinically tested formulas. Founded in 2012, The Honey Pot Co. is rooted in the belief that all products should be made with healthy and efficacious ingredients that are kind to and safe for skin. The company offers an extensive range of holistic wellness products across the feminine hygiene, menstrual, personal care, and sexual wellness categories. The Honey Pot Co.'s mission is to educate, support, and provide consumers around the world with tools and resources that promote menstrual health and vaginal wellness. Its products can be found in more than 33,000 stores across the U.S. through mass merchants, drug and grocery retail chains, and online. The Honey Pot Co. is headquartered in Atlanta, Georgia.
Current wording
The Honey Pot Co. is a leading “better-for-you” feminine care brand, powered by plant-derived ingredients and clinically tested formulas. Founded in 2012, The Honey Pot Co. is rooted in the belief that all products should be made with healthy and efficacious ingredients that are kind to and safe for skin. The Honey Pot Co. offers an extensive range of holistic wellness products across the feminine hygiene, menstrual, personal care, and sexual wellness categories. The Honey Pot Co.'s mission is to educate, support, and provide consumers around the world with tools and resources that promote menstrual health and vaginal wellness. Its products can be found in more than 33,000 stores across the U.S. through mass merchants, drug and grocery retail chains, and online. The Honey Pot Co. is headquartered in Atlanta, Georgia.
Previous wording
•Amortization expense associated with the intangible assets recorded in connection with the purchase price allocation for THP of $1.3 million for the year ended December 31, 2024 and $16.1 million for the year ended December 31, 2023. This amount reduces segment operating income.
Current wording
•Amortization expense associated with the intangible assets recorded in connection with the purchase price allocation for The Honey Pot Co. of $1.3 million for the year ended December 31, 2024 and $16.1 million for the year ended December 31, 2023. This amount reduces segment operating income.
Previous wording
•Management fees that would have been payable to the Manager during each period. THP will pay a management fee of $1.0 million per year ($0.25 million per quarter) to CGM. This amount reduces segment operating income.
Current wording
•Management fees that would have been payable to the Manager during each period. The Honey Pot Co. pays a management fee of $1.0 million per year ($0.25 million per quarter) to CGM. This amount reduces segment operating income.
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Rearranged current paragraphs (20)
Current report — wording carried from elsewhere
On a consolidated basis, cost of revenues increased approximately $21.6 million during the year ended December 31, 2025, compared to the corresponding period in 2024, primarily as a result of the increase in net revenues at certain of our subsidiaries. We saw notable increases in cost of revenues at Lugano ($9.1 million increase), The Honey Pot Co. ($4.9 million increase) and Altor ($55.8 million increase) that correspond to the revenue increases noted above. We also saw a decrease in cost of revenues at Velocity ($17.1 million decrease),
Current report — wording carried from elsewhere
Arnold ($10.4 million decrease) and Sterno ($19.0 million decrease) that corresponded to the decrease in revenue noted above.
Current report — wording carried from elsewhere
Gross profit as a percentage of net revenues was approximately 43.5% in the year ended December 31, 2025 compared to 42.0% in the year ended December 31, 2024. The increase in gross profit as a percentage of net revenues in the year ended December 31, 2025 as compared to the year ended December 31, 2024 is primarily attributable to the mix of products sold, with the increase in gross profit attributable to our branded consumer products. Our branded consumer businesses had gross profit as a percentage of net revenuesof 55.0% in the 2025 as compared to 52.2% in 2024, while our industrial businesses had gross profit as a percentage of net revenues of 26.5% in 2025 as compared to 27.1% in 2023. Refer to Part II, Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Results of Operations - Our Businesses" for a more detailed analysis of gross profit by business segment.
Current report — wording carried from elsewhere
Under the MSA, we pay CGM (i) a base management fee equal to (a) 2% of the Company’s adjusted net assets when the adjusted net assets are less than or equal to $3.5 billion (the “Initial Threshold Fee”), (b) the Initial Threshold Fee plus 1.25% of the amount of adjusted net assets exceeding $3.5 billion when the adjusted net assets are more than $3.5 billion but less than $10 billion, or (c) 1.5% of the adjusted net assets when the adjusted net assets are $10 billion or more, and (ii) an incentive management fee equal to 0.25% of the amount of adjusted net assets exceeding $3.5 billion only when the adjusted net assets are more than $3.5 billion but less than $10 billion and only if the Company’s annualized internal rate of return on equity for the trailing three-years exceeds 12%. Any incentive management fee paid to the Manager may only be distributed by the Manager among the then-current Employees (as defined in the MSA) of the Manager. Such incentive management fee is subject to approval by the Compensation Committee of the Company’s Board.
Current report — wording carried from elsewhere
In connection with our annual goodwill impairment test in 2024, we tested the goodwill at the Velocity reporting unit quantitatively. The impairment test resulted in Velocity recording impairment expense of$8.2 million in the year ended December 31, 2024.
Current report — wording carried from elsewhere
During the year ended December 31, 2024 and 2023, we paid CGM a quarterly management fee equal to 0.5% (2.0% annually) of our consolidated adjusted net assets. We accrue for the management fee on a quarterly basis.
Current report — wording carried from elsewhere
PrimaLoft performed an interim impairment test of their goodwill during the period ended December 31, 2023 as a result of operating results that were below forecast amounts that were used as the basis for the purchase price allocation at acquisition. The impairment test resulted in PrimaLoft recording impairment expense of $57.8 million.
Current report — wording carried from elsewhere
Gross profit as a percentage of net sales was 53.5% in the year ended December 31, 2025 as compared to 51.3% in the year ended December 31, 2024. Gross profit as a percentage of net sales was unfavorably impacted in the prior year by a non-recurring increase in specific inventory reserves for finished goods that include PFAS.
Current report — wording carried from elsewhere
Selling, general and administrative expense for both the year ended December 31, 2025 and December 31, 2024 was $55.3 million, or 29.0% of net sales.
Current report — wording carried from elsewhere
Year ended December 31, 2025 compared to the Pro Forma Year ended December 31, 2024
Current report — wording carried from elsewhere
Gross profit for the year ended December 31, 2025 increased $19.6 million as compared to the year ended December 31, 2024. Gross profit as a percentage of net sales for the year ended December 31, 2025 was 55.2%, as compared to gross profit as a percentage of sales of 50.0% for the year ended December 31, 2024. Cost of sales in the year ended December 31, 2024 includes $3.8 million in amortization of the inventory step-up resulting from the acquisition purchase allocation. Excluding the effect of the step-up amortization, gross profit as a percentage of net sales for the year ended December 31, 2024 was 53.2%. The increase in gross profit as a percentage of net sales in the year December 31, 2025 as compared to the year ended December 31, 2024 is attributable primarily to channel mix shift.
Current report — wording carried from elsewhere
Selling, general and administrative expense for the year ended December 31, 2025 was $44.8 million, or 32.0% of net sales compared to $40.5 million, or 35.1% of net sales for the year ended December 31, 2024. The increase in selling, general and administrative expense in the year ended December 31, 2025 as compared to the year ended December 31, 2024 was due to increased investment in marketing, increased headcount to support the growth in sales, andincreases in bonus and compensation plans. Selling, general and administrative expense for the year ended December 31, 2024 included $3.5 million in transaction costs associated with the Company's acquisition of The Honey Pot Co. and $2.6 million in integration services fees paid to CGM during the year.
Current report — wording carried from elsewhere
Net sales for the year ended December 31, 2025 were $76.4 million compared to net sales of $96.4 million for the year ended December 31, 2024, a decrease of $20.0 million or 20.8%. The decrease in net sales during the year ended December 31, 2025 as compared to the prior year is driven by the divestiture of Crosman, which was sold on April 30, 2024. The remaining product categories, which consist of the archery and hunting apparel product categories, increased 9.8% compared to the same period in 2024 due to increased archery sales across all channels.
Current report — wording carried from elsewhere
The Velocity reporting unit was tested quantitatively in connection with the Company's annual goodwill impairment testing in March 2024. The impairment test resulted in Velocity recording impairment expense of $8.2 million in the year ended December 31, 2024 after the fair value of the reporting unit did not exceed the carrying value.
Current report — wording carried from elsewhere
Cash flows provided by operating activities totaled approximately$16.6 million for the year ended December 31, 2023. Cash provided by operating activities for working capital for the year ended December 31, 2023 was$5.0 million. Cash provided by working capital in 2023 primarily reflects inventory management strategies as several of our businesses worked through higher inventory levels than normal during 2023.
Current report — wording carried from elsewhere
Cash flows used in investing activities totaled approximately $42.6 million for the year ended December 31, 2025, compared to $422.5 million provided by investing activities during the year ended December 31, 2024. Investing activities in 2024 reflected our acquisition of The Honey Pot Co. in January 2024, and an add-on acquisition at our Altor business (total cash use of $517.9 million), offset by proceeds received from the sale of the Crosman division of Velocity Outdoor and our equity in Ergobaby (total proceeds of $74.7 million), while investing activities in the current year are primarily capital expenditures.
Current report — wording carried from elsewhere
Our spending on capital expenditures incr eased $1.7 million during the year ended December 31, 2024 as compared to the year ended December 31, 2023, with $56.7 million in capital expenditures in 2024 and $55.0 million in capital expenditures in 2023. Capital expenditures in 2024 included significant investment at our Arnold business related to a facility move, and the opening of additional retail salons by our Lugano business.
Current report — wording carried from elsewhere
(1) Other represents non-recurring operating expenses that are included by management in the calculation of Adjusted EBITDA when analyzing monthly operating results of our subsidiaries. In the current year, the calculation of Adjusted EBITDA for Arnold includes the add-back of certain expenses that have been incurred related to the relocation of two of Arnold's facilities in the United States and costs related to the retirement of the chief executive officer at Arnold. For Altor, other includes the add-back of certain expenses incurred related to restructuring of their facilities after the acquisition of Lifoam.
Current report — wording carried from elsewhere
The Allocation Interest Holders received $48.9 million in the year ended December 31, 2024, and $26.5 million in the year ended December 31, 2023. Refer to "Note K - Stockholders' Equity"included in the "Notes to the Consolidated Financial Statements" in this Form 10-K, for a description of the profit allocation payments.
Current report — wording carried from elsewhere
Definite-Lived Intangible Asset Impairment Testing
Rearranged previous paragraphs (13)
Previous report — wording carried elsewhere
In pursuing new acquisitions, we seek businesses with the following characteristics:
Previous report — wording carried elsewhere
On a consolidated basis, cost of revenues decreased approximately $60.1 million during the year ended December 31, 2023, compared to the corresponding period in 2022, primarily as a result of the decrease in net revenues at certain of our subsidiaries. Our PrimaLoft business contributed $18.0 million in incremental cost of revenues for 2023 based on the timing of the acquisition in the prior year. We also saw notable increases in cost of revenues at 5.11 ($26.6 million increase), Lugano ($31.9 million increase) and Arnold ($7.4 million increase) that correspond to the revenue increases noted above. We also saw a decrease in cost of revenues at BOA ($19.1 million decrease), Altor ($38.9 million decrease), Velocity ($42.5 million decrease) and Sterno ($39.4 million decrease) that corresponded to the decrease in revenue noted above. Gross profit as a percentage of net revenues was approximately 42.4% in the year ended December 31, 2023 compared to 37.9% in the year ended December 31, 2022. The increase in gross profit as a percentage of net sales in the year ended December 31, 2023 as compared to the year ended December 31, 2022 is primarily attributable to the mix of products sold, with increases in net revenue at our higher margin businesses, particularly Lugano. Refer to "Results of Operations - Our Businesses" for a more detailed analysis of gross profit by business segment.
Previous report — wording carried elsewhere
Pursuant to the Management Services Agreement, we pay CGM a quarterly management fee equal to 0.5% (2.0% annually) of our consolidated adjusted net assets. We accrue for the management fee on a quarterly basis. For the year ended December 31, 2023, we incurred approximately $67.9 million in management fees as compared to $62.1 million in fees in the year ended December 31, 2022. The increase in management fees is primarily attributable to our acquisition of PrimaLoft in July 2022. CGM entered into a waiver of the MSA for a period through June 30, 2023 to receive a 1% annual management fee related to PrimaLoft, rather than the 2% called for under the MSA, which resulted in a lower management fee paid in the second half of 2022 and the first half of 2023 than would have normally been due. Additionally, CGM had entered into a waiver of the MSA at December 31, 2023, March 31, 2022 and June 30, 2022 to exclude the cash balances held at the LLC from the calculation of the management fee.
Previous report — wording carried elsewhere
PrimaLoft performed an interim impairment test of their goodwill during the period ended December 31, 2023 as a result of operating results that were below forecast amounts that were used as the basis for the purchase price allocation at acquisition. The impairment test resulted in PrimaLoft recording impairment expense of $57.8 million. Velocity performed an interim impairment test of their goodwill during the third quarter of 2023 as a result of operating results that were below the forecast that we used in the quantitative annual impairment test of Velocity at March 31, 2023. The impairment test resulted in Velocity recording $31.6 million impairment expense in the year ended December 31, 2023.
Previous report — wording carried elsewhere
In the following results of operations, we provide comparative pro forma results of operations for PrimaLoft for the year ended December 31, 2022 as if we had acquired the business on January 1, 2022. The results of operations that follow include relevant pro-forma adjustments for pre-acquisition periods and explanations where applicable. The operating results for PrimaLoft have been included in the consolidated results of operation from the date of acquisition, July 12, 2022.
Previous report — wording carried elsewhere
Pro forma results of operations include the following pro forma adjustments as if we had acquired PrimaLoft January 1, 2022:
Previous report — wording carried elsewhere
• Management fees of $0.5 million that would have been payable to the Manager during the year ended December 31, 2022.
Previous report — wording carried elsewhere
PrimaLoft performed an interim impairment test of their goodwill as of December 31, 2023 as a result of operating results that were below forecast amounts that were used as the basis for the purchase price allocation at acquisition. The impairment test resulted in PrimaLoft recording impairment expense of $57.8 million in the year ended December 31, 2023.
Previous report — wording carried elsewhere
Velocity performed an interim impairment test of their goodwill during the quarter ended September 30, 2023 as a result of operating results that were below forecast amounts that were used in quantitative impairment testing performed in March 2023. The impairment test resulted in Velocity recording impairment expense of $31.6 million in the year ended December 31, 2023.
Previous report — wording carried elsewhere
Gross profit as a percentage of net sales was 30.9% and 22.2%, respectively, for the years ended December 31, 2023 and 2022. The increase in gross profit as a percentage of net sales in the year ended December 31, 2023 was primarily due to the combination of customer sales mix and raw material pricing adjustments.
Previous report — wording carried elsewhere
Net sales for the year ended December 31, 2023 were approximately $166.7 million, an increase of $12.9 million compared to the same period in 2022. The increase in net sales is primarily a result of increased demand in several markets including aerospace and defense, and industrial. International sales were $51.1 million and $47.9 million for the years ended December 31, 2023 and 2022, respectively, an increase of $3.2 million.
Previous report — wording carried elsewhere
Net sales for the year ended December 31, 2023 were approximately $323.8 million, a decrease of $28.3 million or 8.0% compared to net sales for the year ended December 31, 2022. The net sales variance reflects lower sales due to increased competition in the market as well as changes in consumer discretionary buying behaviors at Rimports as a result of inflationary pressures.
Previous report — wording carried elsewhere
PrimaLoft. The fair value of the goodwill balance at PrimaLoft could be subject to additional impairment testing if actual cash flows and our estimates of future performance differ materially from those used in the impairment testing at December 31, 2023.