Company: CODI-PB
Filing Date: 2025-02-27
Form Type: 10-K
Source: 0001345126-25-000015
Chunk: 26

Company: Compass Diversified Holdings
Filing Date: 2025-02-27
Form: 10-K
Item: Item 7
Chunk 26
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, 2023. The impairment test resulted in Velocity recording $31.6 million impairment expense in the year ended December 31, 2023. 

Interest Expense

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. 

Provision for income Taxes

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. 

Results of Operations — Our Businesses

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