##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 0-51937
 Compass Diversified Holdings
 (Exact name of registrant as specified in its charter)
 Delaware(Jurisdiction of incorporation or organization)
    
    57-6218917(I.R.S. Employer Identification No.)
 Commission File Number: 0-51938
 Compass Group Diversified Holdings LLC
 (Exact name of registrant as specified in its charter)
 Delaware(Jurisdiction of incorporation or organization)
    
    20-3812051(I.R.S. Employer Identification No.)Sixty One Wilton Road 
Second Floor 
Westport, CT(Address of principal executive offices)
    
    06880(Zip Code)
 (203) 221-1703  (Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredShares representing beneficial interests in Compass Diversified Holdings
(trust shares)
    
    New York Stock Exchange
 Securities registered pursuant to Section 12 (g) of the Act: None
 o þ
 o þ
 þ o
 o þ
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
   Documents Incorporated by Reference




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##### 



Table of Contents
 PagePART IItem 1. Business
    
    
    4Item 1A. Risk Factors
    
    
    56Item 1B. Unresolved Staff Comments
    
    
    71Item 2. Properties
    
    
    72Item 3. Legal Proceedings
    
    
    74Item 4. (Removed and Reserved)
    
    
    75PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    76Item 6 Selected Financial Data
    
    
    78Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    80Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    113Item 8. Financial Statements and Supplementary Data
    
    
    114Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    115Item 9A Controls and Procedures
    
    
    116Item 9B. Other Information
    
    
    117PART IIIItem 10. Directors, and Executive Officers and Corporate Governance
    
    
    118Item 11. Executive Compensation
    
    
    118Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    118Item 13. Certain Relationships and Related Transactions and Director Independence
    
    
    118Item 14. Principal Accountant Fees and Services
    
    
    118PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    119EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2
  1




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NOTE TO READER
  
    
    the Trust and Holdings refer to Compass Diversified Holdings;
 
    
    businesses, operating segments, subsidiaries and reporting units all
refer to, collectively, the businesses controlled by the Company;
 
    
    the Company refer to Compass Group Diversified Holdings LLC;
 
    
    the Manager refer to Compass Group Management LLC (CGM);
 
    
    the initial businesses refer to, collectively, Staffmark Holdings, Inc.,
Crosman Acquisition Corporation, Compass AC Holdings, Inc. and Silvue Technologies
Group, Inc.;
 
    
    the 2007 acquisitions refer to, collectively, the acquisitions of Aeroglide
Corporation, HALO Branded Solutions and American Furniture Manufacturing;
 
    
    the 2008 acquisitions refer to, collectively, the acquisitions of Fox Factory Inc. and
Staffmark Investment LLC;
 
    
    the 2010 acquisitions refer to, collectively, the acquisitions of Liberty Safe and
Security Products, LLC and ERGObaby Carrier, Inc.;
 
    
    the 2007 disposition refers to, the sale of Crosman Acquisition Corporation;
 
    
    the 2008 dispositions refer to, collectively, the sales of Aeroglide Corporation and
Silvue Technologies Group, Inc.;
 
    
    the Trust Agreement refer to the amended and restated Trust Agreement of the
Trust dated as of April 25, 2007;
 
    
    the Credit Agreement refer to the Credit Agreement with a group of lenders
led by Madison Capital, LLC which provides for a Revolving Credit Facility and a Term
Loan Facility;
 
    
    the Revolving Credit Facility refer to the $340 million Revolving Credit
Facility provided by the Credit Agreement that matures in December 2012;
 
    
    the Term Loan Facility refer to the $74.0 million Term Loan Facility, as of
December 31, 2010, provided by the Credit Agreement that matures in December 2013;
 
    
    the LLC Agreement refer to the second amended and restated operating
agreement of the Company dated as of January 9, 2007; and
 
    
    we, us and our refer to the Trust, the Company and the businesses
together.
 2




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##### Table of Contents



Statement Regarding Forward-Looking Disclosure
  
    
    our ability to successfully operate our businesses on a combined basis, and to effectively integrate and improve
any future acquisitions;
    
    our ability to remove our Manager and our Managers right to resign;
    
    our trust and organizational structure, which may limit our ability to meet our dividend and distribution policy;
    
    our ability to service and comply with the terms of our indebtedness;
    
    our cash flow available for distribution and our ability to make distributions in the future to our shareholders;
    
    our ability to pay the management fee, profit allocation when due and pay the put price if and when due;
    
    our ability to make and finance future acquisitions;
    
    our ability to implement our acquisition and management strategies;
    
    the regulatory environment in which our businesses operate;
    
    trends in the industries in which our businesses operate;
    
    changes in general economic or business conditions or economic or demographic trends in the United States and
other countries in which we have a presence, including changes in interest rates and inflation;
    
    environmental risks affecting the business or operations of our businesses;
    
    our and our Managers ability to retain or replace qualified employees of our businesses and our Manager;
    
    costs and effects of legal and administrative proceedings, settlements, investigations and claims; and
    
    extraordinary or force majeure events affecting the business or operations of our businesses.
   3




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PART I
 
 ITEM 1. BUSINESS
   Overview
     
    
    provide ongoing strategic and financial support for their businesses;
 
    
    maintain a long-term outlook as to the ownership of those businesses where such
an outlook is required for maximization of our shareholders return on investment; and
 
    
    consummate transactions efficiently without being dependent on third-party
financing on a transaction-by-transaction basis.
   4




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2010 Highlights
 Acquisitions
 
    
    On March 11, 2010, our majority owned subsidiary, Advanced Circuits, acquired
Circuit Express, Inc. (Circuit Express or CEI), based in Tempe, Arizona for
approximately $16.1 million. Circuit Express focuses on quick-turn manufacturing of
prototype and low-volume quantities of rigid PCBs, as defined below, primarily for
aerospace and defense related customers.
 
    
    On March 31, 2010, we purchased a controlling interest in Liberty Safe and
Security Products, Inc. (Liberty or Liberty Safe), with headquarters in Payson, Utah.
Liberty is a premier designer, manufacturer and marketer of home and gun safes in North
America. Liberty manufactures and sells a wide range of home and gun safes in a broad
assortment of sizes, features and styles which are sold in various sporting goods, farm and
fleet and home improvement retailers. We made loans to and purchased a controlling
interest in Liberty for approximately $70.2 million.
 
    
    On September 16, 2010, we purchased a controlling interest in ERGO Baby
Carrier, Inc. (ERGObaby) with headquarters in Pukalani, Hawaii. ERGObaby is a premier
designer, marketer and distributor of baby wearing products and accessories. ERGObaby
offers a broad range of wearable baby carriers and related products that are sold through
more than 800 retailers and web shops in the United States and internationally in
approximately 20 countries. We made loans to and purchased a controlling interest in
ERGObaby for approximately $85.2 million.
 Common stock offerings
 
    
    On April 13, 2010, we completed a public offering of 5,250,000 Trust shares
(including the underwriters over-allotment completed April 23, 2010) at an offering price
of $15.10 per share. The net proceeds to us, after deducting underwriters discount and
offering costs, totaled approximately $75.0 million. We used $70.0 million of the net
proceeds to pay down our Revolving Credit Facility.
 
    
    On November 12, 2010, we completed a public offering of 4,850,000 Trust shares
(including the underwriters over-allotment completed December 8, 2010) at an offering
price of $16.90 per share. The net proceeds to us, after deducting underwriters discount
and offering costs, totaled approximately $78.0 million.
 NYSE listing
 
    
    On October 14, 2010, we provided written notice to The NASDAQ Stock Market LLC
of our intention to transfer the listing of our shares to the New York Stock Exchange (the
NYSE) and to voluntarily delist our shares from the NASDAQ Global Select Market in
connection with the transfer. Our shares commenced trading on the NYSE under the stock
symbol CODI on November 1, 2010.
 2010 Distributions
  The following is a brief summary of the businesses in which we own a controlling interest at
December 31, 2010:
 Advanced Circuits
  American Furniture
  5




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ERGObaby
  Fox
  HALO
  Liberty Safe
  Staffmark
    Tridien
  6




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Tax Reporting
  WHERE YOU CAN FIND ADDITIONAL INFORMATION
 http://www.compassdiversifiedholdings.com
 7




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(1)
    
    CGI and its affiliates beneficially own approximately 13.6% of the Trust shares and is our
single largest holder. Mr. Massoud and Mr. Offenberg are not directors, officers or members
of CGI or any of its affiliates.
 (2)
    
    Owned by members of our Manager, including Mr. Massoud as managing member.
 (3)
    
    Mr. Massoud is the managing member.
 (4)
    
    The Allocation Interests, which carry the right to receive a profit allocation, represent
less than 0.1% equity interest in the Company.
 (5)
    
    Mr. Day is a non-managing member.
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Our Manager
     Market Opportunity
  
    
    there are fewer potential acquirers for these businesses;
 
    
    third-party financing generally is less available for these acquisitions;
 
    
    sellers of these businesses frequently consider non-economic factors, such as continuing
board membership or the effect of the sale on their employees; and
 
    
    these businesses are less frequently sold pursuant to an auction process.
  Our Strategy
  9




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Management Strategy
  
    
    recruiting and retaining talented managers to operate our businesses using structured
incentive compensation programs, including minority equity ownership, tailored to each
business;
 
    
    regularly monitoring financial and operational performance, instilling consistent
financial discipline, and supporting management in the development and implementation of
information systems to effectively achieve these goals;
 
    
    assisting management in their analysis and pursuit of prudent organic growth strategies;
 
    
    identifying and working with management to execute attractive external growth and
acquisition opportunities;
 
    
    assist management in controlling and right-sizing overhead costs, particularly in the
current challenging economic environment; and
 
    
    forming strong subsidiary level boards of directors to supplement management in their
development and implementation of strategic goals and objectives.
  
    
    making selective capital investments to expand geographic reach, increase capacity, or
reduce manufacturing costs of our businesses;
 
    
    investing in product research and development for new products, processes or services
for customers;
 
    
    improving and expanding existing sales and marketing programs;
 
    
    pursuing reductions in operating costs through improved operational efficiency or
outsourcing of certain processes and products; and
 
    
    consolidating or improving management of certain overhead functions.
   
    
    leverage manufacturing and distribution operations;
 
    
    leverage branding and marketing programs, as well as customer relationships;
 
    
    add experienced management or management expertise;
 
    
    increase market share and penetrate new markets; and
 
    
    realize cost synergies by allocating the corporate overhead expenses of our businesses
across a larger number of businesses and by implementing and coordinating improved
management practices.
  10




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Acquisition Strategy
   
    
    is an established North American based company;
 
    
    maintains a significant market share in defensible industry niche (i.e., has a
reason to exist);
 
    
    has a solid and proven management team with meaningful incentives;
 
    
    has low technological and/or product obsolescence risk; and
 
    
    maintains a diversified customer and supplier base.
  
    
    engages in a substantial level of internal and third-party due diligence;
 
    
    critically evaluates the management team;
 
    
    identifies and assesses any financial and operational strengths and weaknesses of the
target business;
 
    
    analyzes comparable businesses to assess financial and operational performances relative
to industry competitors;
 
    
    actively researches and evaluates information on the relevant industry; and
 
    
    thoroughly negotiates appropriate terms and conditions of any acquisition.
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Strategic Advantages
    Valuation and Due Diligence
  
    
    discounted cash flow analyses;
 
    
    evaluation of trading values of comparable companies;
 
    
    expected value matrices; and
 
    
    examination of recent transactions.
   12




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Financing
      Our Businesses
 Advanced Circuits
 Overview
   13




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History of Advanced Circuits
     Industry
    
    
    Prototype PCBs These PCBs are typically manufactured for customers in research and
development departments of original equipment manufacturers, or OEMs, and academic
institutions. Prototype PCBs are manufactured to the specifications of the customer,
within certain manufacturing guidelines designed to increase speed and reduce production
costs. Prototyping is a critical stage in the research and development of new products.
These prototypes are used in the design and launch of new electronic equipment and are
typically ordered in volumes of 1 to 50 PCBs. Because the prototype is used primarily in
the research and development phase of a new electronic product, the life cycle is
relatively short and requires accelerated delivery time frames of usually less than five
days and very high, error-free quality. Order, production and delivery time, as well as
responsiveness with respect to each, are key factors for customers as PCBs are
indispensable to their research and development activities.
 
    
    Quick-Turn Production PCBs These PCBs are used for intermediate stages of testing for
new products prior to full scale production. After a new product has successfully completed
the prototype phase, customers undergo test marketing and other technical testing. This
stage requires production of larger quantities of PCBs in a short
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period of time, generally 10 days or less, while it does not yet require high production
volumes. This transition stage between low-volume prototype production and volume
production is known as quick-turn production. Manufacturing specifications conform strictly
to end product requirements and order quantities are typically in volumes of 10 to 500.
Similar to prototype PCBs, response time remains crucial as the delivery of quick-turn PCBs
can be a gating item in the development of electronic products. Orders for quick-turn
production PCBs conform specifically to the customers exact end product requirements.
 
    
    Volume Production PCBs These PCBs, which we sometimes refer to as long lead and
sub-contract are used in the full scale production of electronic equipment and
specifications conform strictly to end product requirements. Volume Production PCBs are
ordered in large quantities, usually over 100 units, and response time is less important,
ranging between 15 days to 10 weeks or more.
   
    
    Increasing Customer Demand for Quick-Turn Production Services Rapid advances in
technology are significantly shortening product life-cycles and placing increased pressure
on OEMs to develop new products in shorter periods of time. In response to these
pressures, OEMs invest heavily in research and development, which results in a demand for
PCB companies that can offer engineering support and quick-turn production services to
minimize the product development process.
 
    
    Increasing Complexity of Electronic Equipment OEMs are continually designing more
complex and higher performance electronic equipment, requiring sophisticated PCBs. To
satisfy the demand for more advanced electronic products, PCBs are produced using exotic
materials and increasingly have higher layer counts and greater component densities.
Maintaining the production infrastructure necessary to manufacture PCBs of increasing
complexity often requires significant capital expenditures and has acted to reduce the
competitiveness of local and regional PCB manufacturers lacking the scale to make such
investments.
 
    
    Shifting of High Volume Production to Asia Asian based manufacturers of PCBs are
capitalizing on their lower labor costs and are increasing their market share of volume
production of PCBs used, for example, in high-volume consumer electronics applications,
such as personal computers and cell phones. Asian based manufacturers have been generally
unable to meet the lead time requirements for prototype or quick-turn PCB production or the
volume production of the most complex PCBs. This off shoring of high-volume production
orders has placed increased pricing pressure and margin compression on many small domestic
manufacturers that are no longer operating at full capacity. Many of these small producers
are choosing to cease operations, rather than operate at a loss, as their scale, plant
design and customer relationships do not allow them to focus profitably on the prototype
and quick-turn sectors of the market.
 Products and Services
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TM
   Gross Sales by Products and Services (1)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Prototype Production
    
    
    28.9
    %
    
    
    30.6
    %
    
    
    31.6
    %Quick-Turn Production
    
    
    32.6
    %
    
    
    36.4
    %
    
    
    34.4
    %Volume Production (including assembly)
    
    
    36.1
    %
    
    
    30.1
    %
    
    
    27.5
    %Third Party
    
    
    2.4
    %
    
    
    2.9
    %
    
    
    6.5
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 
 (1)
    
    As a percentage of gross sales, exclusive of sale discounts. Competitive Strengths
  
    
    Numerous Unique Orders Per Day For the year ended December 31, 2010, Advanced
Circuits received on average over 300 customer orders per day. Due to the large quantity
of orders received, Advanced Circuits is able to combine multiple orders in a single panel
design prior to production. Through this process, Advanced Circuits is able to reduce the
number of costly, labor intensive equipment set-ups required to complete several
manufacturing orders. As labor represents the single largest cost of production,
management believes this capability gives Advanced Circuits a unique advantage over other
industry participants. Advanced Circuits maintains proprietary software that maximizes the
number of units placed on any one panel design. A single panel set-up typically
accommodates 1 to 12 orders. Further, as a critical mass of like orders is required to
maximize the efficiency of this process, management believes Advanced Circuits is uniquely
positioned as a low cost manufacturer of prototype and quick-turn PCBs.
 
    
    Diverse Customer Base Advanced Circuits possesses a customer base with little
industry or customer concentration exposure. During fiscal year ended December 31, 2010,
Advanced Circuits did business with over 11,000 customers and added approximately 210 new
customers per month. For each of the years ended December 31, 2010, 2009 and 2008, no
customer represented over 2% of net sales.
 
    
    Highly Responsive Culture and Organization A key strength of Advanced Circuits is its
ability to quickly respond to customer orders and complete the production process. In
contrast to many competitors that require a day or more to offer price quotes on prototype
or quick-turn production, Advanced Circuits offers its customers quotes within seconds and
the ability to place or track orders any time of day. In addition, Advanced Circuits
production facility operates three shifts per day and is able to ship a customers product
within 24 hours of receiving its order.
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
    
    Proprietary FreeDFM.com Software Advanced Circuits offers its customers unique design
verification services through its online FreeDFM.com tool. This tool, which was launched
in 2002, enables customers to receive a free manufacturability assessment report, within
minutes, resolving design problems before customers place their orders. The service is
relied upon by many of Advanced Circuits customers to reduce design errors and minimize
production costs. Beyond improved customer service, FreeDFM.com has the added benefit of
improving the efficiency of Advanced Circuits engineers, as many routine design problems,
which typically require an engineers time and attention to identify, are identified and
sent back to customers automatically.
 
    
    Established Partner Network Advanced Circuits has established third party production
relationships with PCB manufacturers in North America and Asia. Through these
relationships, Advanced Circuits is able to offer its customers a complete suite of
products including those outside of its core production capabilities. Additionally, these
relationships allow Advanced Circuits to outsource orders for volume production and focus
internal capacity on higher margin, short lead time, production and quick-turn
manufacturing.
 Business Strategies
  
    
    Increase Portion of Revenue from Prototype and Quick-Turn Production Advanced
Circuits management believes it can grow revenues and cash flow by continuing to leverage
its core prototype and quick-turn capabilities. Over its history, Advanced Circuits has
developed a suite of capabilities that management believes allow it to offer a combination
of price and customer service unequaled in the market. Advanced Circuits intends to
leverage this factor, as well as its core skill set, to increase net sales derived from
higher margin prototype and quick-turn production PCBs. In this respect, marketing and
advertising efforts focus on attracting and acquiring customers that are likely to require
these premium services. And while production composition may shift, growth in these
products and services is not expected to come at the expense of declining sales in volume
production PCBs, as Advanced Circuits intends to leverage its extensive network of
third-party manufacturing partners to continue to meet customers demand for these
services.
 
    
    Acquire Customers from Local and Regional Competitors Advanced Circuits management
believes the majority of its competition for prototype and quick-turn PCB orders comes from
smaller scale local and regional PCB manufacturers. As an early mover in the prototype and
quick-turn sector of the PCB market, Advanced Circuits has been able to grow faster and
achieve greater production efficiencies than many industry participants. Management
believes Advanced Circuits can continue to use these advantages to gain market share.
Further, Advanced Circuits has begun to enter into prototype and quick-turn manufacturing
relationships with several subscale local and regional PCB manufacturers. According to a
November 2009 IPC study, approximately 309 PCB manufacturers operate in the United States
with only 26 generating annual sales in excess of $20 million. Management believes that
while many of these manufacturers maintain strong, longstanding customer relationships,
they are unable to produce PCBs with short turn-around times at competitive prices. As a
result, Advanced Circuits has an opportunity for growth by providing production support to
these manufacturers or direct support to the customers of these manufacturers, whereby the
manufacturers act more as a broker for the relationship.
 
    
    Remain Committed to Customers and Employees Advanced Circuits has remained focused on
providing the highest quality product and service to its customers. We believe this focus
has allowed Advanced Circuits to achieve its outstanding delivery and quality record.
Advanced Circuits management believes this reputation is a key competitive differentiator
and is focused on maintaining and building upon it. Similarly, management believes its
committed base of employees is a key differentiating factor. Advanced Circuits currently
has a profit sharing program and tri-annual bonuses for all of its employees. Management
also occasionally sets additional performance targets for individuals and departments and
establishes rewards, such as lunch celebrations or paid vacations, if these goals are met.
Management believes that Advanced Circuits emphasis on sharing rewards and creating a
positive work environment has led to increased loyalty. As a result, Advanced Circuits
plans on continuing to focus on similar programs to maintain this competitive advantage.
 Research and Development
  17




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Customers
  20092010 Customer
    
    
    Customer
    
    
    2008 CustomerIndustry Sector
    
    Distribution
    
    
    Distribution
    
    
    DistributionElectrical Equipment and Components
    
    
    27
    %
    
    
    33
    %
    
    
    32
    %Measuring Instruments
    
    
    9
    %
    
    
    13
    %
    
    
    12
    %Electronics Manufacturing Services
    
    
    17
    %
    
    
    15
    %
    
    
    16
    %Engineer Services
    
    
    10
    %
    
    
    5
    %
    
    
    5
    %Defense
    
    
    7
    %
    
    
    
    
    
    
    Industrial and Commercial Machinery
    
    
    6
    %
    
    
    8
    %
    
    
    8
    %Business Services
    
    
    1
    %
    
    
    2
    %
    
    
    2
    %Wholesale Trade-Durable Goods
    
    
    1
    %
    
    
    1
    %
    
    
    2
    %Educational Institutions
    
    
    7
    %
    
    
    8
    %
    
    
    6
    %Transportation Equipment
    
    
    7
    %
    
    
    10
    %
    
    
    8
    %All Other Sectors Combined
    
    
    8
    %
    
    
    5
    %
    
    
    9
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  Sales and Marketing
     18




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Competition
    Suppliers
   Intellectual Property
 FreeDFM.com TM
 FreeDFM.com TM 4pcb.com TM 4PCB.com TM 33each.com TM barebonespcb.com TM Advanced Circuits TM
 Regulatory Environment
  19




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Employees
  American Furniture
 Overview
     History of American Furniture
  20




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Industry
       Off-shore Imports
    21




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Products and Services
  
  Product Development
  Manufacturing
   22




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Competitive Strengths
  
    
    Long runs of a limited number of standardized frames;
 
    
    The application of common components throughout the entire production line; and
 
    
    A standard offering of only two to four fabric options per frame.
    Barriers to Significant Asian Competition
  
    
    AFMs efficient, low-cost production model;
 
    
    Mass retailers short lead-time demands and unwillingness to accept excess
inventory risk; and
 
    
    High costs (e.g., freight, damage, shrink) of shipping upholstered furniture
direct from Asia.
  Business Strategies
 
    
    Increase sales with new and existing customers
 While AFM currently supplies many of the top furniture retailers, AFM believes it can further
augment its customer base and is pursuing new business opportunities with selected national
and regional furniture retailers, as well as in other channels, including Rent-To-Own (RTO)
and mass merchandisers. In addition, many existing customers currently purchase only a
portion of AFMs product line, representing an opportunity for AFM to increase sales to
existing customers by augmenting customers entire promotional product line. In order to
focus additional attention to major customers and expand productline sell-through to these
customers, the Company added significant infrastructure to its sales and marketing
organization since 2005, increasing its sales representative network while also subdividing
sales territories to allow representatives to focus more closely on the expansion of existing
relationships and the addition of new customers. Online sales expanded in 2010 growing to
approximately 7% of sales. This was accomplished through sales to national and regional
internet marketing firms.
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
    
    Product development
 AFMs merchandising strategy focuses on satisfying the changing needs of retailers and
consumers in a manner that meets AFMs production strategy. AFMs management and sales staff
monitor the furniture market to identify new trends and popular styles at higher price
points. AFM subsequently ensures that it can cost effectively replicate a new style with
standardized components and limited cover options, after which AFM will build a prototype to
determine if the product can be reproduced at acceptable margin levels.
 
    
    Asian sourcing of components
 In 2004, AFM implemented a program to purchase raw materials from the lowest-cost source
available in the marketplace. The Company hired a director of Asian sourcing in May 2005 to
lead this effort. Currently, AFM sources the vast majority of its fabric, legs, show wood,
chaises, ottomans, correlate chairs and accent tables from Asian vendors. AFM believes there
are additional opportunities to lower purchasing costs through this initiative.
 
    
    Strategic acquisitions
 AFM has in the past and will continue to evaluate strategic acquisitions to augment its
existing business. In particular, acquisitions may provide AFM with an opportunity to expand
geographically, add additional product lines or achieve operational synergies.
 
    
    Pursue cost savings initiatives
 Currently, AFM is aggressively pursuing expense reduction, cost cutting programs and cash
preservation initiatives throughout all parts of its business.
 Customers
  Sales and Marketing
     Competition
  24




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##### Table of Contents



Suppliers
  Regulatory Environment
  Employees
  ERGObaby
 Overview
    History of ERGObaby
   25




---



##### Table of Contents



Industry
      Wearable Carriers and Babywearing Trends 
  Products and Services
  26




---



##### Table of Contents




    
    4 styles of baby carriers   $105   $120
 
    
    1 style of organic carrier in 7 colors  $120  $148
 
    
    2 styles of Infant Inserts  $25  $38
 
    
    10 different accessory products  $10  $64
 Competitive Strengths
 Superior Design Resulting in Improved Comfort for Both Parent and Child
 Baby
Carriers Provide Less Expensive Alternative to Strollers
 Business Strategy
 Increase Penetration of Current U.S. Distribution Channels
 Cultivate Attractive New Distribution Channels
 International Market Expansion
 27




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##### Table of Contents



New
Product Development
 Customers
  Sales & Marketing
      Competition
   28




---



##### Table of Contents



Suppliers
  Intellectual Property
  Regulatory Environment
  Employees
  Fox
 Overview
     29




---



##### Table of Contents



History of Fox
     Industry
  Mountain Biking 
  Snowmobiles
  All-Terrain Vehicles
  30




---



##### Table of Contents



Motorcycles/Motocross
 Off-Road Vehicles
 Products and Services
   Competitive Strengths
 Proprietary Engineering Expertise 
 Highly Recognizable Brand
 Strong Blue-Chip Customer Relationships
 Business Strategies
 Expand Revenues from Powered Vehicles Business 
 Expand Aftermarket Sales 
 31




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##### Table of Contents



International Growth
 Pursue New Market Trends and Opportunities
 Research and Development
    Customers
   Sales and Marketing
  32




---



##### Table of Contents



Competition
   Mountain Biking
 Snowmobiles
 All-Terrain Vehicles
  Off-Road Vehicles
 Suppliers
    33




---



##### Table of Contents



Intellectual Property
   Regulatory Environment
   Employees
  HALO
 Overview
    34




---



##### Table of Contents



History of HALO
    Industry
     Products and Services
  Examples of Common Promotional Products
 Categories
    
    ExamplesApparel
    
    Jackets, sweaters, hats, golf shirtsBusiness Accessories
    
    Calculators, briefcases, desk accessoriesCalendars
    
    Wall and desk calendars, appointment plannersWriting Instruments
    
    Pens, pencils, markers, highlightersRecognition Awards
    
    Trophies, plaquesOther Items
    
    Crystal ware, key chains, watches, mugs, golf accessories
 35




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##### Table of Contents



Competitive Strengths
  
    
    Industry Leading, Scalable Back Office Infrastructure HALOs
management team believes that an important factor in attracting and
retaining high quality account executives is providing an efficient
and effective order processing and administrative system. HALOs
customer service organization provides critical support functions for
its sales force including order entry, product sourcing, order
tracking, vendor payment, customer billing and collections. HALOs
scale in the industry has allowed it to make information technology
and personnel investments to create a sophisticated infrastructure
that management believes differentiates it from many smaller industry
participants.
    
    Diverse Customer Base Characterized by Long-Standing
Relationships HALOs revenue base possesses little
customer, end market or geographic concentration. It
currently does business with over 40,000 customers in
various end markets. For the fiscal years ended December
31, 2010, 2009 and 2008, HALOs top ten customers
represented less than 20% of its revenues. HALOs team of
account executives are often deeply involved in their local
communities and possess deep and long standing
relationships with customers of all sizes.
    
    Extensive Relationships with a Broad Base of Suppliers
HALOs management believes its relationships with a wide
range of suppliers of promotional products allows HALO to
offer its end customers the most complete line of items in
the industry.
 Business Strategies
 
    
    Attract and Retain
Account Executives
As HALOs
infrastructure is
relatively fixed, it
derives significant
incremental
contribution from the
addition of account
executives. Further,
HALOs management
believes it has
developed a
combination of service
and compensation that
allows it to offer
account executives a
value proposition
superior to those
offered by its
competitors.
    
    Optimize the
Productivity of
Account Executives
The management team of
HALO continuously
strives to increase
the productivity of
its account
executives. HALO
routinely provides its
account executives
with marketing support
tools and training. In
addition, for larger
accounts, HALO works
with account
executives to develop
proprietary solutions
that allow customers
to better measure and
track their programs,
thereby increasing
their loyalty.
    
    Selectively Acquire and Integrate HALOs management believes that HALO is well positioned to take
advantage of the industrys fragmentation and economies of scale. In the past, HALO has achieved significant synergies by
acquiring and integrating other distributors. Recognizing this opportunity, HALOs management team is constantly evaluating potential
acquisition opportunities. We believe that current economic conditions may enhance our opportunities to make desirable acquisitions.
 Customers
  36




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Sales and Marketing
    Product category
    
    % of sales 2010
    
    

%
of sales 2009
    
    

%
of sales 2008Apparel
    
    
    19.5
    %
    
    
    19.5
    %
    
    
    19.9
    %Office accessories
    
    
    11.0
    %
    
    
    12.0
    %
    
    
    15.1
    %Bags
    
    
    11.0
    %
    
    
    11.0
    %
    
    
    14.1
    %Writing instruments
    
    
    11.0
    %
    
    
    11.0
    %
    
    
    13.8
    %Calendars
    
    
    11.0
    %
    
    
    11.9
    %
    
    
    11.6
    %Jewelry/awards
    
    
    1.0
    %
    
    
    1.0
    %
    
    
    5.0
    %Drink ware
    
    
    7.0
    %
    
    
    5.0
    %
    
    
    4.0
    %Other
    
    
    28.5
    %
    
    
    28.6
    %
    
    
    16.5
    %100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
   Competition
  
    
    Full Service Companies that provide a wide array of services to a range of
customers, including multinational clients. Full service offerings include both the drop
shipment and fulfillment business models. HALO is a full service distributor.
 
    
    Inventory Based Distributors that provide inventory programs for large
corporations. Inventory based providers are generally capital intensive, often requiring
a large investment to maintain a broad inventory of SKUs.
 
    
    Franchisers Distributors that process and finance orders for a franchise
fee. Franchisers do not offer back office support and typically attract distributors
with lower credit profiles and those with available time to perform customer service
functions.
 
    
    Consumer Products Manufacturers Some customer product manufacturers
provide promotional products. Consumer product manufacturers, for whom promotional
products is a non-core business, do not customarily invest in the necessary
infrastructure to meet the support needs of industry sales professionals.
  37




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Suppliers
  Employees
  Liberty Safe
 Overview
    History of Liberty Safe
     38




---



##### Table of Contents



Industry
   Products & Services
   Competitive Strengths
 #1
Premium Home and Gun Safe Brand with Strong Momentum in the Market
 State-of-the-Art and Scalable Operations
  39




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##### Table of Contents



Reputation for High Quality Products
 Trusted Supplier to National Retailer and Dealer Accounts
 Business Strategies
  
    
    Expand Libertys product line into the broader home and office safe market through
current customers or new distribution strategies;
 
    
    Enter the military secure enclosures market, about which Liberty has recently been
approached;
 
    
    Further develop international distribution by entering new countries and expanding
current limited presence in Canada, Mexico and Europe;
 
    
    Enter the residential security market through a strategic partnership with a provider of
residential security service solutions to provide a more complete physical and electronic
security solution; and
 
    
    Acquire businesses within the premium home and gun safe industry and/or leverage
Libertys platform into new products or channels.
 Customers
    40




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##### Table of Contents



Sales & Marketing
   Competition
    Suppliers
    Intellectual Property
  41




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##### Table of Contents



Research and Development
   Product
    
    Function / benefitCool Pocket
    
    Keeps documents 50% cooler than rest of safeIntegrated lighting system
    
    Automatic on/off interior lightsPalusol Heat activated door
    
    Seal expands to 7 times its size in a fireLiberty Tough Doors
    
    Enhanced protection against side bolt pryingMarble gloss powder coat paint
    
    Provides smooth glass finish4-in-1 Flex storage system
    
    Adjustable shelving configurationsDoor panels
    
    Pocket variety to store handguns and other items
 Fatboy® Series,
 Fatboy® Fatboy® Fatboy Jr.® Fatboy®
 Regulatory Environment
  Employees
   Staffmark
 Overview
  42




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##### Table of Contents



www.staffmark.com
   History of Staffmark
       Industry
  43




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##### Table of Contents



Services
  
    
    providing excellent service to existing clients in a consistent and efficient manner;
 
    
    cross selling service offerings to existing clients to increase revenue per client;
 
    
    marketing services to prospective clients to expand the client base; and
 
    
    providing incentives to employees through well-balanced incentive and bonus plans to
encourage increased sales per client and the establishment of new client relationships.
  
    
    temporary staffing services in categories such as light industrial, clerical,
transportation, professional and cost-per-unit staffing;
 
    
    employee leasing and related administrative services; and
 
    
    temporary-to-hire and direct hire services.
 Temporary Staffing Services
   
    
    Light Industrial A substantial portion of Staffmarks temporary staffing revenues are
derived from the placement of low-to mid-skilled temporary workers in the light industrial
category, which comprises primarily the distribution (pick-and-pack and forklift) and
light manufacturing (such as assembly-line work in factories)
 44




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##### Table of Contents



sectors of the economy. In
addition Staffmark provides contract employees for positions such as line supervisors,
operations managers and quality control personnel. Approximately 72%, 68% and 69% of
Staffmarks temporary staffing revenues were derived from light industrial in the years
2010, 2009 and 2008, respectively.
 
    
    Clerical/Administrative Staffmark provides temporary workers that perform clerical,
administrative, contact center, and healthcare office support services. Administrative
workers are often employed at business operations centers and corporate offices.
Approximately 18%, 22% and 23% of Staffmarks temporary staffing revenues were derived from
clerical/administrative in the years 2010, 2009 and 2008, respectively.
 
    
    Specialty Lines Staffmark provides contract employees in specialty lines such as
Transportation, Output Solutions and Professional Services.
 
    
    Transportation  Staffmark is a large national supplier of drivers in
the staffing industry. We provide fully screened drivers that meet all DOT
requirements through a network of 20 offices across the U.S..
 
    
    Output Solutions  provides contract employees that perform specific
functions under Staffmark supervision to meet production contract requirements for
clients. Clients are charged a per unit cost versus an hourly bill rate most common
in the staffing industry.
 
    
    Professional Services  Staffmark provides contract services for higher
skilled professionals in the Engineering, IT, Finance and Accounting and Corporate
Services disciplines.
 Approximately 7%, 6% and 6% of Staffmarks temporary staffing revenues were derived from
Specialty Lines for the fiscal years ended December 31, 2010, 2009 and 2008, respectively.
 
    
    Other Staffmark provides administrative services to its clients by functioning as a
managed services provider. These services include managing other staffing firms as second
source providers and/or payroll services. By having Staffmark manage second source
providers, the customer can rely on one company to provide all temporary staffing needs by
filling those needs either with Staffmarks employees or from temporary employees provided
by other staffing firms. Payroll service employees are recruited by the client and then
become employees of Staffmark with all employment responsibilities. Approximately 3%, 2% and
2% of Staffmarks temporary staffing revenues were derived from Other for the fiscal years
ended December 31, 2010, 2009 and 2008, respectively.
  Employee Leasing Services
   Temporary-to-Hire and Direct Hire Services
  45




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##### Table of Contents



Competitive Strengths
  
    
    Large Employee Database/Customer List Over the course of its history, Staffmarks
management believes Staffmark has built a significant presence in most of its markets in
terms of both clients and employees. Staffmark is successful in recruiting additional
employees because of its reputation as having numerous job openings with a wide variety of
clients. Staffmark attracts clients due in part to its large database of reliable employees
with wide ranging skill sets. Staffmarks employee database and client list have been built
over a number of years in each of its markets and serve as a major competitive strength in
most of its markets.
 
    
    Higher Operating Margins By establishing multiple offices in the majority of the
markets in which it operates, Staffmark is able to better leverage its selling, general and
administrative expenses at the regional and field level and create higher operating income
margins than its less dense competitors.
 
    
    Scalable Business Model By having multiple office locations in each of its markets,
Staffmark is able to quickly scale its business model in both good and bad economic
environments. In response to the recent economic downturn, Staffmark enacted a successful
strategy which included reducing costs and consolidating offices. As the economy improves,
Staffmark has not abandoned the market and therefore can take advantage of the upturn in
business.
 
    
    Marketing Synergies By having multiple offices in the majority of its markets,
Staffmark allocates additional resources to marketing and selling and amortizes those costs
over a larger office network. For example, while many of its competitors exclusively use
selling branch managers who split time between operations and sales, Staffmark also invests
in a dedicated sales force that is focused on bringing in new sales.
 Business Strategies
  
    
    Invest in its Existing Markets In many of its existing markets, Staffmark has multiple
branch locations. Staffmark plans on continuing to invest in these existing markets through
the opening of additional branch locations and the hiring of additional sales and operations
employees when it is economically prudent to do so. In addition, Staffmark is offering
complementary human resource services to its existing clients such as full time recruiting,
consulting, and administrative outsourcing. Staffmark has implemented an incentive plan
that highly rewards its employees for selling services beyond its traditional temporary
staffing services.
 
    
    Grow Specialty Lines of Business Staffmark is focused on driving its specialty lines
of business, including transportation, cost-per-unit pricing, and professional services
through cross selling efforts. Many of Staffmarks current clients are buyers of these
multiple lines of services. Staffmark is focused on leveraging these relationships in order
to grow these business lines and deliver more value to its clients.
    
    Pursue Selective Acquisitions Staffmark views acquisitions, such as
the SES acquisition in November 2006 and Staffmark in January 2008, as attractive means to enter into a new
geographical market, and in the case of Staffmark, increasing its market share in existing markets.
 Clients
  46




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Sales, Marketing and Recruiting Efforts
        Competition
   
    
    multiple offices in its core markets;
 
    
    well-recognized brands and leadership positions in its core markets;
 
    
    long-standing relationships with its clients;
 
    
    a large database of qualified temporary workers which enables Staffmark to fill orders
rapidly;
    
    a reputation for treating employees well and offering competitive benefits; and
 
    
    expertise to fulfill a wide range of staffing services to an individual client.
 47




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##### Table of Contents



Trade names
 CBS Personnel TM , CBS Personnel
Services TM and Venturi Staffing Partners TM and currently
uses the tradenames Staffmark TM , Columbia Staffing TM Columbia Healthcare Services TM.
 48




---



##### Table of Contents



Facilities
  EmployeeNumber of
    
    
    HoursState
    
    Branch Offices
    
    

Billed
(000s)CA
    
    
    28
    
    
    
    9,269OH
    
    
    20
    
    
    
    9,680TN
    
    
    13
    
    
    
    12,236AR
    
    
    16
    
    
    
    4,999TX
    
    
    17
    
    
    
    4,912KY
    
    
    10
    
    
    
    3,395NC
    
    
    10
    
    
    
    3,611PA
    
    
    8
    
    
    
    3,269IL
    
    
    10
    
    
    
    2,940IN
    
    
    7
    
    
    
    2,937GA
    
    
    7
    
    
    
    2,914SC
    
    
    8
    
    
    
    2,319MD
    
    
    4
    
    
    
    855MA
    
    
    2
    
    
    
    229VA
    
    
    5
    
    
    
    1,371NV
    
    
    4
    
    
    
    1,190NJ
    
    
    4
    
    
    
    1,059WA
    
    
    2
    
    
    
    301AZ
    
    
    3
    
    
    
    653NY
    
    
    3
    
    
    
    734KS
    
    
    2
    
    
    
    1,455MS
    
    
    2
    
    
    
    580AL
    
    
    2
    
    
    
    492CO
    
    
    2
    
    
    
    435CT
    
    
    1
    
    
    
    442OK
    
    
    2
    
    
    
    185DE
    
    
    1
    
    
    
    1,407OR
    
    
    1
    
    
    
    273MO
    
    
    1
    
    
    
    699WI
    
    
    0
    
    
    
    415195
    
    
    
    75,266
  Regulatory Environment
  49




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Workers Compensation Program
    Employees
   Rebranding of CBS Personnel to Staffmark
  50




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##### Table of Contents



Tridien
 Overview
     History
      Industry
  51




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##### Table of Contents



Products and Services
  
    
    Powered Support Surfaces:Mattresses which can be used for therapy or
prevention and are typically manufactured using an electronic power source with air
cylinders or a combination of air cylinders and foam and provide either Alternating
Pressure, Low Air Loss, or Lateral Rotation. Alternating Pressure Systems are designed to
inflate alternate cylinders while contiguous cylinders deflate in an alternating pattern.
The alternating inflation and deflation prevents sustained pressure on an area of skin by
shifting pressure from one area to another. This type of therapy provides movement under
the patients skin to eliminate both excessive and constant pressure, the leading cause of
bed sores. The powered control unit provides automatic changes in the distribution of air
pressure. Tridiens Alternating Pressure Systems in the SenTech line incorporate its
intellectual property in the way these automatic changes take place. This patented
technology allows for a more comfortable surface with aggressive therapeutic alternating
pressure. Another typical type of powered surface is Lateral Rotation which can aid in
laterally turning a patient to reduce risks associated with fluid building up in a
patients lungs. A feature often found in Powered Surfaces is Low Air Loss that allows
air to flow from the mattress to address the moisture and temperature environment on the
patients skin, contributing factors to bed sores. Tridien currently produces patented
designs for the performance of both Alternating Pressure and Low Air Loss mattress systems
which management believes provides the optimum healing therapy for the patient. Powered
support surfaces are typically used in acute care settings and when more aggressive
therapy is needed.
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Powered Support Surfaces represented approximately 21.2% of net sales in 2010 and 2009 and
33.8% of net sales in 2008.
 
    
    Non-Powered Support Surfaces:Consists of mattresses which have no powered
elements. Their support material can be composed of foam, air, water, gel or a
combination of these. In the case of water, air or gel materials, they are held in place
with containment bladders. Non-powered mattress replacement systems help redistribute a
patients body weight to lessen forces on pressure points by envelopment into the surface.
These products address the excessive pressure under a patient, but do not address the
constant pressure applied to an area. Non-powered surfaces are generally used for
prevention rather than treatment and currently comprise the majority of support surfaces.
Currently Tridien manufactures a broad range of non-powered mattress systems using air,
foam and gel. Non- powered support surfaces represented 53.2%, 52.7% and 45.0% of net
sales in each of the years ended December 31, 2010, 2009 and 2008, respectively.
 
    
    Positioning devices:Positioning devices are used to position patients for
procedures as well as to minimize the likelihood of developing a pressure ulcer during
those procedures. Tridien offers a complete range of foam positioning devices. Patient
positioning devices represented 25.6%, 26.1% and 21.2% of net sales in each of the years
ended December 31, 2010, 2009 and 2008, respectively.
 Competition
   Gaymar Industries, Inc.:
 Span
America Medical Systems (NASDAQ: SPAN):
 Business Strategies
  
    
    Offer customers high quality, consistent product, on a national basis 
Products produced by Tridien and its competitors are typically bulky in nature and may not
be conducive to shipping. Management believes that many of its competitors do not have
the scale or resources required to produce support surfaces for national distributors and
believes that customers value manufacturers with the scale and sophistication required to
meet these needs. All Tridien facilities have achieved ISO-13485, offering customers the
highest standards of quality.
 
    
    Leverage scale to provide industry leading research and development Medical
therapeutic surfaces are becoming increasingly technologically advanced. Tridiens
management believes that many smaller competitors do not have the resources required to
effectively meet the changing needs of their customers and believes that increased
 53




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##### Table of Contents



scale and investments in engineering and technology will allow it to better serve its
customers through industry leading research, technology and development.
 
    
    Pursue cost savings through scale purchasing and operational improvements 
Many of the products used to manufacture medical support surfaces are standard in nature
and management believes that increased scale achieved through acquisitions will allow it
to benefit from lower cost of materials and therefore lower cost of sales.
 Research and Development
   Sales and Marketing
   Customers
    Suppliers
  54




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Intellectual Property
  Regulatory Environment
  Employees
  55




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##### Table of Contents



ITEM 1A   RISK FACTORS
 Risks Related to Our Business and Structure
 We are a Company with limited history and may not be able to continue to successfully manage
our businesses on a combined basis.
  Our Chief Executive Officer has taken a temporary leave of absence
  Our future success is dependent on the employees of our Manager and the management teams of our
businesses, the loss of any of whom could materially adversely affect our financial condition,
business and results of operations.
   We face risks with respect to the evaluation and management of future platform or add-on
acquisitions.
  We may not be able to successfully fund future acquisitions of new businesses due to the lack
of availability of debt or equity financing at the Company level on acceptable terms, which could
impede the implementation of our acquisition strategy and materially adversely impact our
financial condition, business and results of operations.
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While we intend to make regular cash distributions to our shareholders, the Companys board of
directors has full authority and discretion over the distributions of the Company, other than the
profit allocation, and it may decide to reduce or eliminate distributions at any time, which may
materially adversely affect the market price for our shares.
  We will rely entirely on receipts from our businesses to make distributions to our
shareholders.
   The Companys board of directors has the power to change the terms of our shares in its sole
discretion in ways with which you may disagree.
  Certain provisions of the LLC Agreement of the Company and the Trust Agreement make it difficult
for third parties to acquire control of the Trust and the Company and could deprive you of the
opportunity to obtain a takeover premium for your shares.
  
    
    restrictions on the Companys ability to enter into certain transactions with our major
shareholders, with the exception of our Manager, modeled on the limitation contained in
Section 203 of the Delaware General Corporation Law, or DGCL;
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##### Table of Contents




    
    allowing only the Companys board of directors to fill newly created directorships, for
those directors who are elected by our shareholders, and allowing only our Manager, as
holder of the Allocation Interests, to fill vacancies with respect to the class of
directors appointed by our Manager;
    
    requiring that directors elected by our shareholders be removed, with or without cause,
only by a vote of 85% of our shareholders;
    
    requiring advance notice for nominations of candidates for election to the Companys
board of directors or for proposing matters that can be acted upon by our shareholders
at a shareholders meeting;
    
    having a substantial number of additional authorized but unissued shares that may be
issued without shareholder action;
    
    providing the Companys board of directors with certain authority to amend the LLC
Agreement and the Trust Agreement, subject to certain voting and consent rights of the
holders of trust interests and Allocation Interests;
    
    providing for a staggered board of directors of the Company, the effect of which could
be to deter a proxy contest for control of the Companys board of directors or a
hostile takeover; and
    
    limitations regarding calling special meetings and written consents of our shareholders.
  We may have conflicts of interest with the minority shareholders of our businesses.
  Our third party credit facility exposes us to additional risks associated with leverage and
inhibits our operating flexibility and reduces cash flow available for distributions to our
shareholders.
  
    
    maintain a minimum level of cash flow;
    
    leverage new businesses we acquire to a minimum specified level at the time of acquisition;
    
    keep our total debt to cash flow at or below a ratio of 3.5 to 1; and
    
    make acquisitions that satisfy certain specified minimum criteria.
  Changes in interest rates could materially adversely affect us.
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##### Table of Contents



We may engage in a business transaction with one or more target businesses that have
relationships with our officers, our directors, our Manager or CGI, which may create potential
conflicts of interest.
  We are exposed to risks relating to evaluations of controls required by Section 404 of the
Sarbanes-Oxley Act of 2002.
  CGI may exercise significant influence over the Company.
  If, in the future, we cease to control and operate our businesses, we may be deemed to be an
investment company under the Investment Company Act of 1940, as amended.
  Risks Relating to Our Manager
 Our Chief Executive Officer, directors, Manager and management team may allocate some of
their time to other businesses, thereby causing conflicts of interest in their determination as to
how much time to devote to our affairs, which may materially adversely affect our operations.
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Our Manager and its affiliates, including members of our management team, may engage in
activities that compete with us or our businesses.
  Our Manager need not present an acquisition or disposition opportunity to us if our Manager
determines on its own that such acquisition or disposition opportunity does not meet the Companys
acquisition or disposition criteria.
  We cannot remove our Manager solely for poor performance, which could limit our ability to improve
our performance and could materially adversely affect the market price of our shares.
  We may have difficulty severing ties with Mr. Massoud.
  If the management services agreement is terminated, our Manager, as holder of the Allocation
Interests in the Company, has the right to cause the Company to purchase such Allocation
Interests, which may materially adversely affect our liquidity and ability to grow.
  Our Manager can resign on 90 days notice and we may not be able to find a suitable
replacement within that time, resulting in a disruption in our operations that could materially
adversely affect our financial condition, business and results of operations as well as the market
price of our shares.
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The liability associated with the supplemental put agreement is difficult to estimate and may
be subject to substantial period-to-period changes, thereby significantly impacting our future
results of operations.
  We must pay our Manager the management fee regardless of our performance.
  We cannot determine the amount of the management fee that will be paid over time with any
certainty.
  We cannot determine the amount of profit allocation that will be paid over time with any
certainty.
  The fees to be paid to our Manager pursuant to the management services agreement, the
offsetting management services agreements and transaction services agreements and the profit
allocation to be paid to our Manager, as holder of the Allocation Interests, pursuant to the LLC
Agreement may significantly reduce the amount of cash available for distribution to our
shareholders.
  61




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Our Managers influence on conducting our operations, including on our conducting of
transactions, gives it the ability to increase its fees, which may reduce the amount of cash flow
available for distribution to our shareholders.
  Fees paid by the Company and our businesses pursuant to transaction services agreements do
not offset fees payable under the management services agreement and will be in addition to the
management fee payable by the Company under the management services agreement.
   Our Managers profit allocation may induce it to make suboptimal decisions regarding our
operations.
  The obligations to pay the management fee and profit allocation, including the put price, may
cause the Company to liquidate assets or incur debt.
  Risks Related to Taxation
 Our shareholders will be subject to tax on their share of the Companys taxable income, which
taxes or taxable income could exceed the cash distributions they receive from the Trust.
  62




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All of the Companys income could be subject to an entity-level tax in the United States,
which could result in a material reduction in cash flow available for distribution to holders of
shares of the Trust and thus could result in a substantial reduction in the value of the shares.
   A shareholder may recognize a greater taxable gain (or a smaller tax loss) on a disposition
of shares than expected because of the treatment of debt under the partnership tax accounting
rules.
  Our structure involves complex provisions of U.S. federal income tax law for which no clear
precedent or authority may be available. Our structure also is subject to potential legislative,
judicial or administrative change and differing interpretations, possibly on a retroactive basis.
  63




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Risks Relating Generally to Our Businesses
 The recent disruption in the overall economy and the financial markets will adversely impact
our business.
  Impairment of our intangible assets could result in significant charges that would adversely
impact our future operating results.
   
    
    significant underperformance relative to historical or projected future operating results;
    
    significant changes in the manner of or use of the acquired assets or the strategy for our overall business;
    
    significant negative industry or economic trends;
    
    significant decline in our stock price for a sustained period;
    
    changes in our organization or management reporting structure could result in additional reporting units,
which may require alternative methods of estimating fair values or greater desegregation or aggregation in
our analysis by reporting unit; and
    
    a decline in our market capitalization below net book value.
   64




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Our businesses are subject to unplanned business interruptions which may adversely affect our
performance.
  Our businesses rely and may rely on their intellectual property and licenses to use others
intellectual property, for competitive advantage. If our businesses are unable to protect their
intellectual property, are unable to obtain or retain licenses to use others intellectual
property, or if they infringe upon or are alleged to have infringed upon others intellectual
property, it could have a material adverse affect on their financial condition, business and
results of operations.
   The operations and research and development of some of our businesses services and
technology depend on the collective experience of their technical employees. If these employees
were to leave our businesses and take this knowledge, our businesses operations and their ability
to compete effectively could be materially adversely impacted.
  If our businesses are unable to continue the technological innovation and successful commercial
introduction of new products and services, their financial condition, business and results of
operations could be materially adversely affected.
  65




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Our businesses could experience fluctuations in the costs of raw materials as a result of
inflation and other economic conditions, which fluctuations could have a material adverse effect
on their financial condition, business and results of operations.
  Our businesses do not have and may not have long-term contracts with their customers and
clients and the loss of customers and clients could materially adversely affect their financial
condition, business and results of operations.
  Our businesses are and may be subject to federal, state and foreign environmental laws and
regulations that expose them to potential financial liability. Complying with applicable
environmental laws requires significant resources, and if our businesses fail to comply, they
could be subject to substantial liability.
  Defects in the products provided by our companies could result in financial or other damages to
those customers, which could result in reduced demand for our companies products and/or liability
claims against our companies.
  66




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Some of our businesses are subject to certain risks associated with the movement of businesses
offshore.
  Loss of key customers of some of our businesses could negatively impact financial condition.
  Our businesses are subject to certain risks associated with their foreign operations or
business they conduct in foreign jurisdictions.
  Risks Related to Advanced Circuits
 Unless Advanced Circuits is able to respond to technological change at least as quickly as its
competitors, its services could be rendered obsolete, which could materially adversely affect its
financial condition, business and results of operations.
  Advanced Circuits customers operate in industries that experience rapid technological change
resulting in short product life cycles and as a result, if the product life cycles of its
customers slow materially, and research and development expenditures are reduced, its financial
condition, business and results of operations will be materially adversely affected.
  67




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Electronics manufacturing services corporations are increasingly acting as intermediaries,
positioning themselves between PCB manufacturers and OEMS, which could reduce operating margins.
  Risks Related to American Furniture Manufacturing
 Competition from larger furniture manufacturers may adversely affect American Furniture
Manufacturings business and operating results.
  Risks Related to Tridien
 Certain of Tridiens products are subject to regulation by the FDA.
  A change in Medicare Reimbursement Guidelines may reduce demand for Tridiens products.
  Two of Tridiens largest customers represented approximately 63.5% of its gross sales in 2010.
  Risks Related to Fox
 Growth in popularity of alternative recreational activities may reduce demand for mountain bikes
and off road products which would reduce demand for Foxs products.
  68




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Risks Related to HALO
 Increases in the portion of existing customers and potential customers buying directly from
manufacturers or exclusively over the internet could have a material adverse effect on the
business of HALO.
  The loss of a significant number of account executives could adversely affect the business of
HALO.
  HALO relies on suppliers for the timely delivery of products to end customers. Delays in the
delivery of promotional products to customers could adversely affect HALOs results of operations.
  Risks Related to Staffmark
 Staffmarks business depends on its ability to attract and retain qualified staffing
personnel that possess the skills demanded by its clients.
  Customer relocation of positions filled by Staffmark may materially adversely affect
Staffmarks financial condition, business and results of operations
  Staffmark assumes the obligation to make wage, tax and regulatory payments for its employees,
and as a result, it is exposed to client credit risks.
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Staffmark is exposed to employment-related claims and costs and periodic litigation that
could materially adversely affect its financial condition, business and results of operations.
  Staffmarks workers compensation loss reserves may be inadequate to cover its ultimate liability
for workers compensation costs.
   Any significant economic downturn could result in our clients using fewer temporary and contract
workers or becoming unable to pay us for our services on a timely basis or at all, which would
materially adversely affect our business .
    70




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ITEM 1B. UNRESOLVED STAFF COMMENTS
  71




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ITEM 2.  PROPERTIES
 Advanced Circuits
  American Furniture
  ERGObaby
  Fox
  HALO
   State
    
    Function
    
    Offices
    
    Square feetCalifornia
    
    Sales and warehouse
    
    
    3
    
    
    
    11,222Illinois
    
    Administration
    
    
    2
    
    
    
    25,450Information Technology
    
    
    1
    
    
    
    4,766Warehousing
    
    
    2
    
    
    
    72,000Louisiana
    
    Sales
    
    
    1
    
    
    
    1,919Ohio
    
    Administration
    
    
    2
    
    
    
    3,796Tennessee
    
    Sales
    
    
    1
    
    
    
    8,804Missouri
    
    Administration
    
    
    1
    
    
    
    5,960Kansas
    
    Sales
    
    
    1
    
    
    
    2,618Maryland
    
    Sales
    
    
    1
    
    
    
    4,000Florida
    
    Sales
    
    
    1
    
    
    
    1,000Oklahoma
    
    Administration
    
    
    1
    
    
    
    5,500Georgia
    
    Sales
    
    
    1
    
    
    
    1,550
 Liberty Safe
  Staffmark
  72




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Tridien
    73




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ITEM 3.  LEGAL PROCEEDINGS
  74




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ITEM 4.   REMOVED AS RESERVED
  75




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Part II
 
 Item 5.  Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
 Market Information
  DistributionQuarter Ended
    
    High
    
    
    Low
    
    
    DeclaredDecember 31, 2010
    
    
    18.16
    
    
    
    15.92
    
    
    
    0.34September 30, 2010
    
    
    16.30
    
    
    
    13.03
    
    
    
    0.34June 30, 2010
    
    
    16.30
    
    
    
    11.00
    
    
    
    0.34March 31, 2010
    
    
    16.08
    
    
    
    11.45
    
    
    
    0.34December 31, 2009
    
    
    13.33
    
    
    
    9.87
    
    
    
    0.34September 30, 2009
    
    
    11.15
    
    
    
    7.94
    
    
    
    0.34June 30, 2009
    
    
    10.32
    
    
    
    7.63
    
    
    
    0.34March 31, 2009
    
    
    12.20
    
    
    
    6.89
    
    
    
    0.34
 COMPARATIVE PERFORMANCE OF SHARES OF TRUST STOCK
  
 76




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September 30,
    
    
    December 31,Data
    
    June 30, 2006
    
    
    2006
    
    
    2006Compass Diversified Holdings
    
    $
    94.88
    
    
    $
    102.73
    
    
    $
    117.00NASDAQ Stock Market Index
    
    $
    97.44
    
    
    $
    101.31
    
    
    $
    108.35NASDAQ Other Finance Index
    
    $
    94.03
    
    
    $
    104.02
    
    
    $
    107.59NYSE Financial Sector Index
    
    $
    96.28
    
    
    $
    102.56
    
    
    $
    109.91NYSE Composite Index
    
    $
    97.39
    
    
    $
    100.98
    
    
    $
    108.96
 September 30,
    
    
    December 31,Data
    
    March 31, 2007
    
    
    June 30, 2007
    
    
    2007
    
    
    2007Compass Diversified Holdings
    
    $
    116.32
    
    
    $
    125.83
    
    
    $
    115.41
    
    
    $
    109.10NASDAQ Stock Market Index
    
    $
    108.64
    
    
    $
    116.78
    
    
    $
    121.19
    
    
    $
    118.98NASDAQ Other Finance Index
    
    $
    104.70
    
    
    $
    112.86
    
    
    $
    107.18
    
    
    $
    108.11NYSE Financial Sector Index
    
    $
    108.12
    
    
    $
    110.18
    
    
    $
    106.81
    
    
    $
    95.51NYSE Composite Index
    
    $
    110.42
    
    
    $
    117.71
    
    
    $
    119.69
    
    
    $
    116.13
 September 30,
    
    
    December 31,Data
    
    March 31, 2008
    
    
    June 30, 2008
    
    
    2008
    
    
    2008Compass Diversified Holdings
    
    $
    98.39
    
    
    $
    87.54
    
    
    $
    109.45
    
    
    $
    90.41NASDAQ Stock Market Index
    
    $
    102.24
    
    
    $
    102.86
    
    
    $
    93.84
    
    
    $
    70.75NASDAQ Other Finance Index
    
    $
    86.86
    
    
    $
    85.52
    
    
    $
    90.56
    
    
    $
    57.91NYSE Financial Sector Index
    
    $
    83.31
    
    
    $
    71.39
    
    
    $
    69.23
    
    
    $
    44.28NYSE Composite Index
    
    $
    104.88
    
    
    $
    103.25
    
    
    $
    89.81
    
    
    $
    68.64
 September 30,
    
    
    December 31,Data
    
    March 31, 2009
    
    
    June 30, 2009
    
    
    2009
    
    
    2009Compass Diversified Holdings
    
    $
    73.55
    
    
    $
    68.75
    
    
    $
    91.64
    
    
    $
    114.42NASDAQ Stock Market Index
    
    $
    68.57
    
    
    $
    82.32
    
    
    $
    95.21
    
    
    $
    101.80NASDAQ Other Finance Index
    
    $
    55.01
    
    
    $
    68.57
    
    
    $
    74.63
    
    
    $
    75.76NYSE Financial Sector Index
    
    $
    33.01
    
    
    $
    44.86
    
    
    $
    56.70
    
    
    $
    54.32NYSE Composite Index
    
    $
    59.39
    
    
    $
    70.40
    
    
    $
    82.39
    
    
    $
    85.66
 September 30,
    
    
    December 31,Data
    
    March 31, 2010
    
    
    June 30, 2010
    
    
    2010
    
    
    2010Compass Diversified Holdings
    
    $
    139.58
    
    
    $
    124.69
    
    
    $
    152.90
    
    
    $
    169.77NASDAQ Stock Market Index
    
    $
    107.57
    
    
    $
    94.62
    
    
    $
    106.26
    
    
    $
    119.01NASDAQ Other Finance Index
    
    $
    77.58
    
    
    $
    67.39
    
    
    $
    70.23
    
    
    $
    84.52NYSE Financial Sector Index
    
    $
    58.00
    
    
    $
    49.31
    
    
    $
    53.76
    
    
    $
    57.05NYSE Composite Index
    
    $
    88.80
    
    
    $
    77.13
    
    
    $
    86.81
    
    
    $
    94.95
 Shareholders
  Distributions
  Quarter Ended
    
    Declaration Date
    
    Payment Date
    
    Distribution Per ShareDecember 31, 2010
    
    January 5, 2011
    
    January 28, 2011
    
    $0.34September 30, 2010
    
    October 7, 2010
    
    October 29, 2010
    
    $0.34June 30, 2010
    
    July 9, 2010
    
    July 30, 2010
    
    $0.34March 31, 2010
    
    April 8, 2010
    
    April 30, 2010
    
    $0.34December 31, 2009
    
    January 11, 2010
    
    January 28, 2010
    
    $0.34September 30, 2009
    
    October 8, 2009
    
    October 29, 2009
    
    $0.34June 30, 2009
    
    July 10, 2009
    
    July 30, 2009
    
    $0.34March 31, 2009
    
    April 9, 2009
    
    April 30, 2009
    
    $0.34
  77




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ITEM 6.   SELECTED FINANCIAL DATA
   Acquisitions:
    
    Acquisition Date
    
    Disposition DateAdvanced Circuits(1)
    
    May 16, 2006
    
    n/aCBS Personnel(1)
    
    May 16, 2006
    
    n/aCrosman(1)
    
    May 16, 2006
    
    January 5, 2007Silvue(1)
    
    May 16, 2006
    
    June 25, 2008Tridien
    
    August 1, 2006
    
    n/aAeroglide
    
    February 28, 2007
    
    June 24, 2008HALO
    
    February 28, 2007
    
    n/aAmerican Furniture
    
    August 31, 2007
    
    n/aFox
    
    January 4, 2008
    
    n/aStaffmark LLC(2)
    
    January 21, 2008
    
    n/aLiberty
    
    March 31, 2010
    
    n/aERGObaby
    
    September 16, 2010
    
    n/a
 
 (1)
    
    Represent initial operating subsidiaries.(2)
    
    Staffmark LLC was acquired by Staffmark.  Year ended December 31,Statements of Operations Data:
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Net sales
    
    $
    1,657,609
    
    
    $
    1,248,740
    
    
    $
    1,538,473
    
    
    $
    841,791
    
    
    $
    395,173Cost of sales
    
    
    1,302,202
    
    
    
    976,991
    
    
    
    1,196,206
    
    
    
    636,008
    
    
    
    307,014Gross profit
    
    
    355,407
    
    
    
    271,749
    
    
    
    342,267
    
    
    
    205,783
    
    
    
    88,159Operating expenses:Staffing
    
    
    81,250
    
    
    
    74,279
    
    
    
    102,438
    
    
    
    56,207
    
    
    
    34,345Selling, general and administrative
    
    
    179,154
    
    
    
    145,948
    
    
    
    165,768
    
    
    
    94,426
    
    
    
    31,605Supplemental put expense (reversal)
    
    
    32,516
    
    
    
    (1,329
    )
    
    
    6,382
    
    
    
    7,400
    
    
    
    22,456Management fees
    
    
    15,380
    
    
    
    13,100
    
    
    
    15,205
    
    
    
    10,120
    
    
    
    4,158Amortization expense
    
    
    29,312
    
    
    
    24,609
    
    
    
    24,605
    
    
    
    12,679
    
    
    
    5,814Impairment expense (3)
    
    
    38,835
    
    
    
    59,800
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    $
    (21,040
    )
    
    $
    (44,658
    )
    
    $
    27,869
    
    
    $
    24,951
    
    
    $
    (10,219
    )Income (loss) from continuing operations
    
    $
    (44,770
    )
    
    $
    (39,645
    )
    
    $
    3,817
    
    
    $
    10,051
    
    
    $
    (27,973
    )Income and gain from discontinued operations
    
    
    
    
    
    
    
    
    
    
    77,970
    
    
    
    41,314
    
    
    
    9,831Net income (loss)
    
    
    (44,770
    )
    
    
    (39,645
    )
    
    
    81,787
    
    
    
    51,365
    
    
    
    (18,142
    )Net income (loss) attributable to noncontrolling interest
    
    
    3,987
    
    
    
    (13,375
    )
    
    
    3,493
    
    
    
    10,997
    
    
    
    1,107Net income (loss) attributable to Holdings (1), (2)
    
    $
    (48,757
    )
    
    $
    (26,270
    )
    
    $
    78,294
    
    
    $
    40,368
    
    
    $
    (19,249
    )Basic and fully diluted income (loss) per share attributable to Holdings:Continuing operations
    
    $
    (1.19
    )
    
    $
    (0.76
    )
    
    $
    0.01
    
    
    $
    (0.04
    )
    
    $
    (2.29
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    2.47
    
    
    
    1.50
    
    
    
    0.77Basic and fully diluted income (loss) per share attributable to Holdings
    
    $
    (1.19
    )
    
    $
    (0.76
    )
    
    $
    2.48
    
    
    $
    1.46
    
    
    $
    (1.52
    )Cash Flow Data:Cash provided by operating activities
    
    $
    44,841
    
    
    $
    20,213
    
    
    $
    40,549
    
    
    $
    41,772
    
    
    $
    20,563Cash used in investing activities
    
    
    (182,392
    )
    
    
    (4,982
    )
    
    
    (24,793
    )
    
    
    (114,158
    )
    
    
    (362,286
    )Cash (used in) provided by financing activities
    
    
    119,592
    
    
    
    (81,209
    )
    
    
    (37,561
    )
    
    
    184,882
    
    
    
    351,073Net (decrease) increase in cash and cash equivalents
    
    
    (17,959
    )
    
    
    (65,978
    )
    
    
    (21,885
    )
    
    
    112,352
    
    
    
    9,610
 
 (1)
    
    Includes gains on the sales of Aeroglide and Silvue in 2008 of $34.0 million and
$39.4 million, respectively, and Crosman in 2007 of $36.0 million.(2)
    
    Includes a charge to net income of $10.0 million for distributions made at the subsidiary
(ACI) level in excess of cumulative earnings in 2007.(3)
    
    Includes goodwill and intangible asset impairment at AFM during the year ended December 31,
2010, and includes goodwill impairment and intangible asset impairment at Staffmark during the
year ended December 31, 2009. 78




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December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Balance Sheet Data:Current assets
    
    $
    333,339
    
    
    $
    275,027
    
    
    $
    335,201
    
    
    $
    299,241
    
    
    $
    135,121Total assets
    
    
    984,041
    
    
    
    831,012
    
    
    
    984,336
    
    
    
    828,002
    
    
    
    496,382Current liabilities
    
    
    151,404
    
    
    
    129,887
    
    
    
    139,370
    
    
    
    106,613
    
    
    
    155,534Long-term debt
    
    
    94,000
    
    
    
    74,000
    
    
    
    151,000
    
    
    
    148,000
    
    
    
    Total liabilities
    
    
    408,131
    
    
    
    322,946
    
    
    
    440,458
    
    
    
    373,285
    
    
    
    221,934Noncontrolling interests
    
    
    87,840
    
    
    
    70,905
    
    
    
    79,431
    
    
    
    21,867
    
    
    
    17,734Shareholders equity attributable to Holdings
    
    
    488,070
    
    
    
    437,161
    
    
    
    464,447
    
    
    
    432,850
    
    
    
    255,711
 79




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##### Table of Contents



ITEM 7.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 This item 7 contains forward-looking statements. Forward-looking statements in this Annual
Report on Form 10-K are subject to a number of risks and uncertainties, some of which are beyond
our control. Our actual results, performance, prospects or opportunities could differ materially
from those expressed in or implied by the forward-looking statements. Additional risks of which
we are not currently aware or which we currently deem immaterial could also cause our actual
results to differ, including those discussed in the sections entitled Forward-Looking Statements
and Risk Factors included elsewhere in this Annual Report.
 Overview
    
    
    North American base of operations;
    
    stable and growing earnings and cash flow;
    
    maintains a significant market share in defensible industry niche (i.e., has a
reason to exist);
    
    solid and proven management team with meaningful incentives;
    
    low technological and/or product obsolescence risk; and
    
    a diversified customer and supplier base.
  
    
    utilizing structured incentive compensation programs tailored to each business in order
to attract, recruit and retain talented managers to operate our businesses;
    
    regularly monitoring financial and operational performance, instilling consistent
financial discipline, and supporting management in the development and implementation of
information systems to effectively achieve these goals;
    
    assisting management in their analysis and pursuit of prudent organic cash flow growth
strategies (both revenue and cost related);
    
    identifying and working with management to execute attractive external growth and
acquisition opportunities; and
    
    forming strong subsidiary level boards of directors to supplement management in their
development and implementation of strategic goals and objectives.
  80




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Initial public offering and Company formation
    Acquisitions
 
    
    On May 16, 2006, we made loans to and purchased a controlling interest in
Staffmark Holdings, Inc., which we refer to as Staffmark,for approximately $128
million. As of December 31, 2010, we own approximately 76.2% of the common stock on a
primary basis and 68.5% on a fully diluted basis.
    
    On May 16, 2006, we made loans to and purchased a controlling interest in
Crosmanfor approximately $73 million representing at the time of purchase
approximately 75.4% of the outstanding common stock on both a primary and fully diluted
basis.
    
    On May 16, 2006, we made loans to and purchased a controlling interest in
Advanced Circuits for approximately $81 million. As of December 31, 2010, we
own approximately 69.6% of the common stock on a primary basis and 69.4% fully diluted
basis.
    
    On May 16, 2006, we made loans to and purchased a controlling interest in
Silvuefor approximately $36 million, representing at the time of purchase
approximately 72.3% of the outstanding stock on both a primary and fully diluted basis.
    
    On August 1, 2006, we made loans to and purchased a controlling interest in
Tridienfor approximately $31 million. As of December 31, 2010, we own
approximately 73.9% of the common stock on a primary basis and 61.8% on a fully diluted
basis.
    
    On February 28, 2007, we made loans to and purchased a controlling interest
in Aeroglide for approximately $58 million, representing at the time of purchase
approximately 88.9% of the outstanding stock on a primary basis and approximately 73.9%
on a fully diluted basis.
    
    On February 28, 2007, we made loans to and purchased a controlling interest
in HALO for approximately $62 million. As of December 31, 2010, we own
approximately 88.7% of the common stock on a primary basis and 72.8% on a fully diluted
basis.
    
    On August 28, 2007, we made loans to and purchased a controlling interest in
American Furniture for approximately $97 million. As of December 31, 2010, we
own approximately 99.9% of the common stock on a primary basis and 91.4% on a fully
diluted basis.
 81




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##### Table of Contents




    
    On January 4, 2008, we made loans to and purchased a controlling interest in
Fox for approximately $80.4 million. As of December 31, 2010, we own
approximately 75.7% of the common stock on a primary basis and 68.1% on a fully diluted
basis.
    
    On March 31, 2010, we made loans to and purchased a controlling interest in
Liberty Safefor approximately $70.2 million. As of December 31, 2010 we own
approximately 96.2% on a primary basis and 87.7% on a fully diluted basis.
    
    On September 16, 2010, we made loans to and purchased a controlling interest
in ERGObabyfor approximately $85.2 million. As of December 31, 2010, we own
approximately 83.9% on a primary basis and 79.9% on a fully diluted basis.
 Dispositions
 
    
    On January 5, 2007, we sold all of our interest in Crosman, for
approximately $143 million. We recorded a gain on the sale in the first quarter of 2007
of approximately $36 million.
    
    On June 24, 2008, we sold all of our interest in Aeroglide, for
approximately $95 million. We recorded a gain on the sale in the second quarter of 2008
of approximately $34 million.
    
    On June 25, 2008, we sold all of our interest in Silvue, for approximately
$95 million. We recorded a gain on the sale in the second quarter of 2008 of
approximately $39 million.
  
    
    meet capital expenditure requirements, management fees and corporate overhead
charges;
    
    fund distributions from the businesses to the Company; and
    
    be distributed by the Trust to shareholders.
 2010 Highlights
 Acquisitions
 
    
    On March 11, 2010, our majority owned subsidiary Advanced Circuits, acquired
Circuit Express, Inc. (Circuit Express), based in Tempe, Arizona for approximately $16.1
million. Circuit Express focuses on quick-turn manufacturing of prototype and low-volume
quantities of rigid PCBs primarily for aerospace and defense related customers. We
incurred approximately $0.3 million in transaction costs.
    
    On March 31, 2010, we purchased a controlling interest in Liberty Safe and
Security Products, Inc. (Liberty or Liberty Safe), with headquarters in Payson, Utah.
Liberty is a premier designer, manufacturer and marketer of home and gun safes in North
America. Liberty manufactures and sells a wide range of home and gun safes in a broad
assortment of sizes, features and styles which are sold in various sporting goods, farm
and fleet and home improvement retailers. We made loans to and purchased a controlling
interest in Liberty for approximately $70.2 million, representing approximately 88% of the
equity in Liberty on a fully diluted basis. We incurred approximately $1.5 million in
transaction costs.
    
    On September 16, 2010, we purchased a controlling interest in ERGO Baby
Carrier, Inc. (ERGObaby) with headquarters in Pukalani, Hawaii. ERGObaby is a premier
designer, marketer and distributor of baby wearing products and accessories. ERGObaby
offers a broad range of wearable baby carriers and related products that are sold through
more than 800 retailers and web shops in the United States and internationally in
approximately 20 countries. We made loans to and purchased a controlling interest in
ERGObaby for approximately $85.2 million, representing approximately 84% of the equity in
ERGObaby on a fully diluted basis. We incurred approximately $2.0 million in transaction
costs.
 Common stock offerings
 
    
    On April 13, 2010, we completed a public offering of 5,250,000 Trust shares
(including the underwriters over-allotment completed April 23, 2010) at an offering price
of $15.10 per share. The net proceeds to us, after deducting underwriters discount and
offering costs, totaled approximately $75.0 million. We used $70.0 million of the net
proceeds to pay down our Revolving Credit Facility.
 82




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##### Table of Contents




    
    On November 12, 2010, we completed a public offering of 4,850,000 Trust shares
(including the underwriters over-allotment completed December 8, 2010) at an offering
price of $16.90 per share. The net proceeds to us, after deducting underwriters discount
and offering costs, totaled approximately $78.0 million. We used $70.0 million of the net
proceeds to pay down our Revolving Credit Facility.
 Impairment charge
   2010 Distributions
  Areas for focus in 2011
  
    
    Taking advantage, where possible, of the recent economic downturn by growing
market share in each of our market niche leading companies at the expense of less well
capitalized competitors;
    
    Achieving sales growth, technological excellence and manufacturing capability
through global expansion;
    
    Continuing to grow through disciplined, strategic acquisitions and rigorous
integration processes;
    
    Continue to pursue expense reduction and cost savings through contraction in
discretionary spending, and reductions in workforce and production levels in response to
lower production volume; and
    
    Driving free cash flow through increased net income and effective working
capital management enabling continued investment in our businesses, strategic
acquisitions, and enabling us to return value to our shareholders.
 83




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##### Table of Contents



Results of Operations
   May 16, 2006
    
    August 1, 2006
    
    February 28, 2007
    
    August 31, 2007
    
    January 4, 2008
    
    March 31, 2010
    

September
16, 2010Advanced Circuits
    
    Tridien
    
    HALO
    
    American Furniture
    
    Fox
    
    Liberty Safe
    
    ERGObabyStaffmark
  Consolidated Results of Operations  Compass Diversified Holdings
 Years Ended December 31,2010
    
    
    2009
    
    
    2008(in thousands)Net sales
    
    $
    1,657,609
    
    
    $
    1,248,740
    
    
    $
    1,538,473Cost of sales
    
    
    1,302,202
    
    
    
    976,991
    
    
    
    1,196,206Gross profit
    
    
    355,407
    
    
    
    271,749
    
    
    
    342,267Staffing, selling, general and administrative expense
    
    
    260,404
    
    
    
    220,227
    
    
    
    268,206Management fees
    
    
    15,380
    
    
    
    13,100
    
    
    
    15,205Supplemental put expense (reversal)
    
    
    32,516
    
    
    
    (1,329
    )
    
    
    6,382Amortization of intangibles
    
    
    29,312
    
    
    
    24,609
    
    
    
    24,605Impairment expense
    
    
    38,835
    
    
    
    59,800
    
    
    
    Operating income (loss)
    
    $
    (21,040
    )
    
    $
    (44,658
    )
    
    $
    27,869
 Net sales
   84




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##### Table of Contents



Cost of sales
  Staffing, selling, general and administrative expense
  Management fees
  Supplemental put expense
  Impairment expense
  85




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##### Table of Contents



Results of Operations  Our Businesses
  Advanced Circuits
 Overview
    86




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##### Table of Contents



Results of Operations
  Year Ended December 31,2010
    
    
    2009
    
    
    2008(in thousands)Net sales
    
    $
    74,481
    
    
    $
    46,518
    
    
    $
    55,449Cost of sales
    
    
    33,396
    
    
    
    19,958
    
    
    
    23,781Gross profit
    
    
    41,085
    
    
    
    26,560
    
    
    
    31,668Selling, general and administrative expenses
    
    
    17,333
    
    
    
    7,367
    
    
    
    10,872Management fees
    
    
    500
    
    
    
    375
    
    
    
    500Amortization of intangibles
    
    
    2,864
    
    
    
    2,521
    
    
    
    2,631Income from operations
    
    $
    20,388
    
    
    $
    16,297
    
    
    $
    17,665
 Fiscal Year Ended December 31, 2010 Compared to Fiscal Year Ended December 31, 2009
 Net sales
   Cost of sales
  Selling, general and administrative expenses
  87




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##### Table of Contents



Income from operations
  Fiscal Year Ended December 31, 2009 Compared to Fiscal Year Ended December 31, 2008
 Net sales
   Cost of sales
  Selling, general and administrative expenses
 Significant Related Party Transactions  Advanced Circuits.
 Income from operations
  American Furniture
 Overview
    88




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##### Table of Contents



Results of Operations
  Year Ended December 31,2010
    
    
    2009
    
    
    2008(in thousands)Net sales
    
    $
    136,901
    
    
    $
    141,971
    
    
    $
    130,949Cost of sales
    
    
    115,003
    
    
    
    114,345
    
    
    
    104,540Gross profit
    
    
    21,898
    
    
    
    27,626
    
    
    
    26,409Selling, general and administrative expenses
    
    
    17,468
    
    
    
    18,081
    
    
    
    17,853Management fees
    
    
    500
    
    
    
    375
    
    
    
    500Amortization of intangibles
    
    
    2,183
    
    
    
    2,683
    
    
    
    2,933Impairment expense
    
    
    38,835
    
    
    
    
    
    
    
    Income (loss) from operations
    
    $
    (37,088
    )
    
    $
    6,487
    
    
    $
    5,123
 Fiscal Year Ended December 31, 2010 Compared to Fiscal Year Ended December 31, 2009
 Net sales
  Cost of sales
  Selling, general and administrative expense
  89




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Amortization of intangibles
  Impairment expense
  Income (loss) from operations
  Fiscal Year Ended December 31, 2009 Compared to Fiscal Year Ended December 31, 2008
 Net sales
  Cost of sales
  Selling, general and administrative expenses
  Income from operations
  90




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##### Table of Contents



ERGObaby
 Overview
   Pro-forma Results of Operations
  Year ended December 31,2010
    
    
    2009(in thousands)
    
    (Pro-forma)
    
    
    (Pro-forma)Net sales
    
    $
    34,472
    
    
    $
    22,767Cost of sales (a)
    
    
    10,833
    
    
    
    6,055Gross profit
    
    
    23,639
    
    
    
    16,712Selling, general and administrative expenses (b)
    
    
    11,985
    
    
    
    7,976Management fees (c)
    
    
    500
    
    
    
    500Amortization of intangibles (d)
    
    
    1,715
    
    
    
    1,716Income from operations
    
    $
    9,439
    
    
    $
    6,520
 Pro-forma results of operations of ERGObaby for the annual periods ended December 31, 2010 and
2009 include the following pro-forma adjustment applied to historical results
 
 (a)
    
    Cost of sales for the year ended December 31, 2010 does not include $3.8 million of
amortization expense associated with the inventory fair value step-up recorded in 2010 as
a result of and derived from the purchase price allocation in connection with our purchase
of ERGObaby.(b)
    
    Selling, general and administrative costs were reduced by approximately $10.0 million
in the year ended December 31, 2010, representing an adjustment for one-time transaction
costs incurred as a result of our purchase.(c)
    
    Represents management fees that would have been payable to the Manager.(d)
    
    An increase in amortization of intangible assets totaling $1.2 million in 2010 and
$1.7 million in 2009. This adjustment is a result of and was derived from the purchase
price allocation in connection with our acquisition of ERGObaby. Pro forma year ended December 31, 2010 compared to the pro forma year ended December 31, 2009.
 Net sales
  91




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##### Table of Contents



Cost of sales
  Selling, general and administrative expenses
  Income from operations
  Fox
 Overview
    Results of Operations
  Year Ended December 31,2010
    
    
    2009
    
    
    2008(in thousands)Net sales
    
    $
    170,983
    
    
    $
    121,519
    
    
    $
    131,734Cost of sales
    
    
    122,373
    
    
    
    87,038
    
    
    
    95,844Gross profit
    
    
    48,610
    
    
    
    34,481
    
    
    
    35,890Selling, general and administrative expenses
    
    
    23,317
    
    
    
    18,231
    
    
    
    19,182Management fees
    
    
    500
    
    
    
    375
    
    
    
    500Amortization of intangibles
    
    
    5,217
    
    
    
    5,217
    
    
    
    5,501Income from operations
    
    $
    19,576
    
    
    $
    10,658
    
    
    $
    10,707
 Fiscal Year Ended December 31, 2010 Compared to Fiscal Year Ended December 31, 2009
 92




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##### Table of Contents



Net sales
   Cost of sales
  Selling, general and administrative expenses
  Income from operations
  Fiscal Year Ended December 31, 2009 Compared to Fiscal Year Ended December 31, 2008
 Net sales
   Cost of sales
  93




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##### Table of Contents



Selling, general and administrative expenses
  Income from operations
  HALO
 Overview
     Results of Operations
  Year Ended December 31,2010
    
    
    2009
    
    
    2008(in thousands)Net sales
    
    $
    159,940
    
    
    $
    139,317
    
    
    $
    159,797Cost of sales
    
    
    97,264
    
    
    
    84,883
    
    
    
    98,845Gross profit
    
    
    62,676
    
    
    
    54,434
    
    
    
    60,952Selling, general and administrative expenses
    
    
    54,887
    
    
    
    48,714
    
    
    
    52,806Management fees
    
    
    500
    
    
    
    375
    
    
    
    500Amortization of intangibles
    
    
    2,419
    
    
    
    2,498
    
    
    
    2,357Income from operations
    
    $
    4,870
    
    
    $
    2,847
    
    
    $
    5,289
 Fiscal Year Ended December 31, 2010 Compared to Fiscal Year Ended December 31, 2009
 Net sales
  94




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##### Table of Contents



Cost of sales
  Selling, general and administrative expenses
  Amortization expense
  Income from operations
  Fiscal Year Ended December 31, 2009 Compared to Fiscal Year Ended December 31, 2008
 Net sales
  Cost of sales
  Selling, general and administrative expenses
  Amortization expense
  95




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##### Table of Contents



Income from operations
  Liberty Safe
 Overview
   Pro-forma Results of Operations
  Year ended December 31,2010
    
    
    2009(in thousands)
    
    (Pro-forma)
    
    
    (Pro-forma)Net sales
    
    $
    64,899
    
    
    $
    73,839Cost of sales (a)
    
    
    48,404
    
    
    
    54,081Gross profit
    
    
    16,495
    
    
    
    19,758Selling, general and administrative expenses (b)
    
    
    8,092
    
    
    
    8,211Management fees (c)
    
    
    500
    
    
    
    500Amortization of intangibles (d)
    
    
    5,177
    
    
    
    5,160Income from operations
    
    $
    2,726
    
    
    $
    5,887
 Pro-forma results of operations of Liberty Safe for the years ended December 31, 2010 and 2009
include the following pro-forma adjustments applied to historical results
 
 (a)
    
    Cost of sales for the year ended December 31, 2010 does not include $0.4 million of
amortization expense associated with the inventory fair value step-up recorded in 2010 as
a result of and derived from the purchase price allocation in connection with our purchase
of Liberty.(b)
    
    Selling, general and administrative costs were reduced by approximately $1.6 million
in the year ended December 31, 2010, representing an adjustment for one-time transaction
costs incurred as a result of our purchase.(c)
    
    Represents management fees that would have been payable to the Manager.(d)
    
    An increase in amortization of intangible assets totaling $1.3 million in 2010 and
$2.3 million in 2009. This adjustment is a result of and was derived from the purchase
price allocation in connection with our acquisition of Liberty. Pro-forma year ended December 31, 2010 compared to the pro-forma year ended December 31, 2009.
 96




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##### Table of Contents



Net sales
  Cost of sales
  Selling, general and administrative expense
  Income from operations
  Staffmark
 Overview
    97




---



##### Table of Contents



Results of Operations
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Pro-forma(in thousands)Service revenues
    
    $
    1,002,511
    
    
    $
    745,340
    
    
    $
    1,037,418Cost of services
    
    
    854,698
    
    
    
    632,800
    
    
    
    859,026Gross profit
    
    
    147,813
    
    
    
    112,540
    
    
    
    178,392Staffing, selling, general and administrative expenses
    
    
    117,252
    
    
    
    112,358
    
    
    
    155,453Management fees
    
    
    429
    
    
    
    931
    
    
    
    1,761Amortization of intangibles (a)
    
    
    4,903
    
    
    
    4,854
    
    
    
    5,082Impairment expense
    
    
    
    
    
    
    (50,000
    )
    
    
    Income (loss) from operations
    
    $
    25,229
    
    
    $
    (55,603
    )
    
    $
    16,096
 Combined results of operations of CBS Personnel and Staffmark for the year ended December
31, 2008 includes the following pro-forma adjustment to historical
results:
 
 (a)
    
    An increase in amortization of intangible assets totaling $0.3 million in 2008 reflecting
increased amortization expense as a result of, and derived from, the purchase price allocation in
connection with CBS Personnels acquisition of Staffmark LLC in January 2008. Fiscal Year Ended December 31, 2010 compared to Fiscal Year Ended December 31, 2009
 Revenues
  Cost of revenues
  Selling, general and administrative expense
  98




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##### Table of Contents



Management fees
  Impairment expense
  Income from operations
  Fiscal Year Ended December 31, 2009 compared to Pro-forma Fiscal Year Ended December 31, 2008
 Service revenues
  Cost of services
  Staffing, selling, general and administrative expenses
  Management fees
  Impairment expense
  99




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##### Table of Contents



Income (loss) from operations
  Tridien
 Overview
    Results of Operations
  Year Ended December 31,2010
    
    
    2009
    
    
    2008(in thousands)Net sales
    
    $
    61,101
    
    
    $
    54,075
    
    
    $
    54,199Cost of sales
    
    
    43,183
    
    
    
    37,982
    
    
    
    40,683Gross profit
    
    
    17,918
    
    
    
    16,093
    
    
    
    13,516Selling, general and administrative expenses
    
    
    7,646
    
    
    
    6,947
    
    
    
    7,455Management fees
    
    
    350
    
    
    
    263
    
    
    
    350Amortization of intangibles
    
    
    1,909
    
    
    
    1,483
    
    
    
    1,483Income from operations
    
    $
    8,013
    
    
    $
    7,400
    
    
    $
    4,228
 Fiscal Year Ended December 31, 2010 Compared to Fiscal Year Ended December 31, 2009
 Net sales
  100




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##### Table of Contents



Cost of sales
  Selling, general and administrative expenses
  Amortization expense
  Income from operations
  Fiscal Year Ended December 31, 2009 Compared to Fiscal Year Ended December 31, 2008
 Net sales
  Cost of sales
  Selling, general and administrative expenses
  Income from operations
  101




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##### Table of Contents



Liquidity and Capital Resources
      
    
    Advanced Circuits  $84.1 million;
    
    American Furniture  $26.2 million;
    
    ERGObaby  $47.5 million;
    
    Fox  $33.7 million;
    
    Halo  $41.4 million
    
    Liberty  $42.0 million
    
    Staffmark  $75.4 million; and
    
    Tridien  $5.8 million
      102




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##### Table of Contents



Description of Required Covenant Ratio
    
    Covenant Ratio Requirement
    
    Actual RatioFixed Charge Coverage Ratio
    
    greater than or equal to 1.5:1.0
    
    6.39:1.0Interest Coverage Ratio
    
    greater than or equal to 2.75:1.0
    
    9.75:1.0Leverage Ratio
    
    less than or equal to 3.5:1.0
    
    1.17:1.0
  103




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##### Table of Contents



104




---



##### Table of Contents



Year Ended
    
    
    Year Ended(in thousands)
    
    December 31, 2010
    
    
    December 31, 2009Net lossAdjustment to reconcile net loss to cash provided by operating activities
    
    $
    (44,770
    )
    
    $
    (39,645
    )Depreciation and amortization
    
    
    42,120
    
    
    
    32,996Supplemental put expense (reversal)
    
    
    32,516
    
    
    
    (1,329
    )Noncontrolling shareholders notes and other
    
    
    7,637
    
    
    
    1,555Deferred taxes
    
    
    (7,146
    )
    
    
    (24,964
    )Amortization of debt issuance cost
    
    
    1,789
    
    
    
    1,776Loss on debt extinguishment
    
    
    
    
    
    
    3,652Impairment charges
    
    
    38,835
    
    
    
    59,800Other
    
    
    441
    
    
    
    107Changes in operating assets and liabilities
    
    
    (26,581
    )
    
    
    (13,735
    )Net cash provided by operating activities
    
    
    44,841
    
    
    
    20,213Plus:Unused fee on Revolving Credit Facility (1)
    
    
    3,022
    
    
    
    3,454Staffmark integration and restructuring
    
    
    
    
    
    
    4,076Successful acquisition costs (2)
    
    
    3,974
    
    
    
    Changes in operating assets and liabilities
    
    
    26,581
    
    
    
    13,735Less:Interest income due from noncontrolling shareholders at Advanced Circuits (3)
    
    
    
    
    
    
    1,047Less:Maintenance capital expenditures (4)Advanced Circuits
    
    
    781
    
    
    
    251American Furniture
    
    
    236
    
    
    
    501ERGObaby
    
    
    75
    
    
    
    Fox
    
    
    877
    
    
    
    741Halo
    
    
    554
    
    
    
    496Liberty
    
    
    617
    
    
    
    Staffmark
    
    
    3,142
    
    
    
    901Tridien
    
    
    838
    
    
    
    513Estimated cash flow available for distribution (CAD)
    
    $
    71,298
    
    
    $
    37,028Distribution paid April
    
    $
    (14,238
    )
    
    $
    (10,718
    )Distribution paid July
    
    
    (14,238
    )
    
    
    (12,452
    )Distribution paid October
    
    
    (14,238
    )
    
    
    (12,453
    )Distribution paid January
    
    
    (15,886
    )
    
    
    (12,452
    )Total distributions
    
    $
    (58,600
    )
    
    $
    (48,075
    )
 
 (1)
    
    Represents the commitment fee on the unused portion of our Revolving Credit Facility.(2)
    
    Represents acquisition transaction costs for the 2010 acquisitions.(3)
    
    Represents interest income on loans to Advanced Circuits management (see Related Party Transactions).(4)
    
    Represents maintenance capital expenditures that were funded from operating cash flow and excludes
approximately $1.6 million of growth capital expenditures incurred by Fox for the year ended December 31,
2010. 105




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##### Table of Contents



Related Party Transactions and Certain Transactions Involving our Businesses
  
    
    Management Services Agreement
    
    LLC Agreement
    
    Supplemental Put Agreement
    
    Cost Reimbursement and Fees
 Management
Services Agreement
   LLC
Agreement
  Supplemental
Put Agreement
  Cost
Reimbursement and Fees
   106




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##### Table of Contents



We have entered into the following significant related party transactions with our businesses:
 Advanced
Circuits
     American
Furniture
   
    
    $1.0 million in unpaid M=management fees;
    
    $35.5 million in outstanding term loans; and
    
    $14.2 million in outstanding revolving loans.
  Fox
  Staffmark
  107




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##### Table of Contents



Tridien
    Contractual Obligations and Off-Balance Sheet Arrangements
    More thanTotal
    
    
    Less than 1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsLong-term debt obligations (a)
    
    $
    115,618
    
    
    $
    10,594
    
    
    $
    105,024
    
    
    $
    
    
    
    $
    Capital lease obligations
    
    
    693
    
    
    
    240
    
    
    
    436
    
    
    
    17
    
    
    
    Operating lease obligations (b)
    
    
    61,779
    
    
    
    12,120
    
    
    
    18,271
    
    
    
    11,827
    
    
    
    19,561Purchase obligations (c)
    
    
    188,874
    
    
    
    118,629
    
    
    
    36,845
    
    
    
    33,400
    
    
    
    Supplemental put obligation (d)
    
    
    44,598
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    411,562
    
    
    $
    141,583
    
    
    $
    160,576
    
    
    $
    45,244
    
    
    $
    19,561
 
 (a)
    
    Reflects commitment fees and letter of credit fees under our Revolving Credit Facility
and amounts due, together with interest on our Revolving Credit Facility and Term Loan
Facility.(b)
    
    Reflects various operating leases for office space, manufacturing facilities and equipment
from third parties.(c)
    
    Reflects non-cancelable commitments as of December 31, 2010, including: (i) shareholder
distributions of $67.3 million, (ii) estimated management fees of $16.7 million per year over
the next five years and; (iii) other obligations, including amounts due under employment
agreements. Distributions to our shareholders are approved by our board of directors each
fiscal quarter. The amount approved for future quarters may differ from the amount included
in this schedule.(d)
    
    The supplemental put obligation represents the long-term portion of an estimated liability
accrued as if our Management Services Agreement with CGM had been terminated. This agreement
has not been terminated and there is no basis upon which to determine a date in the future,
if any, that this amount will be paid.  108




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Critical Accounting Estimates
   Supplemental Put Agreement
      Revenue Recognition
   109




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.
 Business Combinations
  Goodwill and Intangible Assets
     110




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##### Table of Contents



Allowance for Doubtful Accounts
  Workers Compensation Liability
  111




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##### Table of Contents



Deferred Tax Assets
  Recent Accounting Pronouncements
  112




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ITEM 7A.  Quantitative and Qualitative Disclosures about Market Risk
 Interest Rate Sensitivity
   Exchange Rate Sensitivity
  Credit Risk
  113




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##### Table of Contents



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  114




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ITEM 9.  CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 NONE
 115




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##### Table of Contents



ITEM 9A   CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
 Managements Evaluation of Disclosure Controls and Procedures.
 Report of Management on Internal Control over Financial Reporting
 Report of Independent Registered Public Accounting Firm on
Internal Control over Financial Reporting
 Changes in Internal Control over Financial Reporting
 116




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ITEM 9B.  OTHER INFORMATION
  117




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PART III
 
 ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
     www.compassdiversifiedholdings.com .
 
 ITEM 11.  EXECUTIVE COMPENSATION
  
 ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
  
 ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
  118




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PART IV
 
 ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 1.
    
    Financial StatementsSee Index to Consolidated Financial Statements and Supplemental Data set forth on page
F-1.2.
    
    Financial Statement scheduleSee Index to Consolidated Financial Statements and Supplemental Data set forth on page
F-1.3.
    
    ExhibitsSee Index to Exhibits. Set forth on Page E-1.
 119




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INDEX TO EXHIBITS
 Exhibit Number
    
    Description2.1
    
    Stock and Note Purchase Agreement dated as of July 31, 2006, among Compass
Group Diversified Holdings LLC, Compass Group Investments, Inc. and Compass
Medical Mattress Partners, LP (incorporated by reference to Exhibit 2.1 of the
8-K filed on August 1, 2006)2.2
    
    Stock Purchase Agreement dated June 24, 2008, among Compass Group Diversified
Holdings LLC and the other shareholders party thereto, Compass Group
Diversified Holdings LLC, as Sellers Representative, Aeroglide Holdings, Inc.
and Bühler AG (incorporated by reference to Exhibit 2.1 of the 8-K filed on
June 26, 2008)3.1
    
    Certificate of Trust of Compass Diversified Trust (incorporated by reference
to Exhibit 3.1 of the S-1 filed on December 14, 2005)3.2
    
    Certificate of Amendment to Certificate of Trust of Compass Diversified Trust
(incorporated by reference to Exhibit 3.1 of the 8-K filed on September 13,
2007)3.3
    
    Certificate of Formation of Compass Group Diversified Holdings LLC
(incorporated by reference to Exhibit 3.3 of the S-1 filed on December 14,
2005)3.4
    
    Amended and Restated Trust Agreement of Compass Diversified Trust
(incorporated by reference to Exhibit 3.5 of the Amendment No. 4 to S-1 filed
on April 26, 2006)3.5
    
    Amendment No. 1 to the Amended and Restated Trust Agreement, dated as of April
25, 2006, of Compass Diversified Trust among Compass Group Diversified
Holdings LLC, as Sponsor, The Bank of New York (Delaware), as Delaware
Trustee, and the Regular Trustees named therein (incorporated by reference to
Exhibit 4.1 of the 8-K filed on May 29, 2007)3.6
    
    Second Amendment to the Amended and Restated Trust Agreement, dated as of
April 25, 2006, as amended on May 23, 2007, of Compass Diversified Trust among
Compass Group Diversified Holdings LLC, as Sponsor, The Bank of New York
(Delaware), as Delaware Trustee, and the Regular Trustees named therein
(incorporated by reference to Exhibit 3.2 of the 8-K filed on September 13,
2007)3.7
    
    Third Amendment to the Amended and Restated Trust Agreement dated as of April
25, 2006, as amended on May 25, 2007 and September 14, 2007, of Compass
Diversified Holdings among Compass Group Diversified Holdings LLC, as Sponsor,
The Bank of New York (Delaware), as Delaware Trustee, and the Regular Trustees
named therein (incorporated by reference to Exhibit 4.1 of the 8-K filed on
December 21, 2007)3.8
    
    Fourth Amendment dated as of November 1, 2010 to the Amended and Restated
Trust Agreement, as amended effective November 1, 2010, of Compass Diversified
Holdings, originally effective as of April 25, 2006, by and among Compass
Group Diversified Holdings LLC, as Sponsor, The Bank of New York (Delaware),
as Delaware Trustee, and the Regular Trustees named therein (incorporated by
reference to Exhibit 3.1 of the Form 10-Q filed on November 8, 2010)3.9
    
    Second Amended and Restated Operating Agreement of Compass Group Diversified
Holdings, LLC dated January 9, 2007 (incorporated by reference to Exhibit 10.2
of the 8-K filed on January 10, 2007)3.10
    
    Third Amended and Restated Operating Agreement of Compass Group Diversified
Holdings, LLC dated November 1, 2010 (incorporated by reference to Exhibit 3.2
of the Form 10-Q filed on November 8, 2010)4.1
    
    Specimen Certificate evidencing a share of trust of Compass Diversified
Holdings (incorporated by reference to Exhibit 4.1 of the S-3 filed on
November 7, 2007)4.2
    
    Specimen Certificate evidencing an interest of Compass Group Diversified
Holdings LLC (incorporated by reference to Exhibit 10.2 of the 8-K filed on
January 10, 2007)10.1
    
    Form of Registration Rights Agreement (incorporated by reference to Exhibit
10.3 of the Amendment No. 5 to S-1 filed on May 5, 2006)10.2
    
    Form of Supplemental Put Agreement by and between Compass Group Management LLC
and Compass Group Diversified Holdings LLC (incorporated by reference to
Exhibit 10.4 of the Amendment No. 4 to S-1 filed on April 26, 2006)10.3
    
    Amended and Restated Employment Agreement dated as of December 1, 2008 by and
between James J. Bottiglieri and Compass Group Management LLC (incorporated by
reference to Exhibit 10.1 of the 8-K filed on December 3, 2008)10.4
    
    Form of Share Purchase Agreement by and between Compass Group Diversified
Holdings LLC, Compass Diversified Trust and CGI Diversified Holdings, LP
(incorporated by reference to Exhibit 10.6 of the Amendment No. 5 to S-1 filed
on May 5, 2006)10.5
    
    Form of Share Purchase Agreement by and between Compass Group Diversified
Holdings LLC, Compass Diversified Trust and Pharos I LLC (incorporated by
reference to Exhibit 10.7 of the Amendment No. 5 to S-1 filed on May 5, 2006)10.6
    
    Credit Agreement among Compass Group Diversified Holdings LLC, the financial
institutions party thereto and Madison Capital Funding LLC, dated as of
November 21, 2006 (incorporated by reference to Exhibit 10.1 of the 8-K filed
on November 22, 2006)
 120




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Exhibit Number
    
    Description10.7
    
    First Amendment to Credit Agreement, entered into as of December 19, 2006,
among Compass Group Diversified Holdings LLC, the financial institutions party
thereto and Madison Capital Funding LLC (incorporated by reference to Exhibit
10.7 of the 10-K filed on March 14, 2008)10.8
    
    Increase Notice, Consent and Second Amendment to Credit Agreement, effective
as of May 23, 2007, by and among Compass Group Diversified Holdings LLC, the
financial institutions party thereto and Madison Capital Funding LLC
(incorporated by reference to Exhibit 10.1 of the 8-K filed on May 29, 2007)10.9
    
    Third Amendment to Credit Agreement as of December 7, 2007, among Madison
Capital Funding LLC, as Agent for the Lenders, the Existing Lenders and New
Lenders and Compass Group Diversified Holdings LLC (incorporated by reference
to Exhibit 10.1 of the 8-K filed on December 11, 2007)10.10
    
    Increase Notice and Fourth Amendment to Credit Agreement, entered into as of
January 30, 2008, among Compass Group Diversified Holdings LLC, the financial
institutions party thereto and Madison Capital Funding LLC (incorporated by
reference to Exhibit 10.7 of the 10-K on March 14, 2008)10.11
    
    Amended and Restated Management Services Agreement by and between Compass
Group Diversified Holdings LLC, and Compass Group Management LLC, dated as of
December 15, 2009 and originally effective as of May 16, 200610.12
    
    Registration Rights Agreement by and among Compass Group Diversified Holdings
LLC, Compass Diversified Trust and CGI Diversified Holdings, LP, dated as of
April 3, 2007 (incorporated by reference to Exhibit 10.3 of the Amendment No.
1 to the S-1 filed on April 20, 2007)10.13
    
    Form of Share Purchase Agreement by and between Compass Group Diversified
Holdings LLC, Compass Diversified Trust and CGI Diversified Holdings, LP
(incorporated by reference to Exhibit 10.16 of the Amendment No. 1 to the S-1
filed on April 20, 2007)21.1*
    
    List of Subsidiaries23.1*
    
    Consent of Independent Registered Public Accounting Firm31.1*
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Registrant31.2*
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Registrant32.1*
    
    Section 1350 Certification of Chief Executive Officer of Registrant32.2*
    
    Section 1350 Certification of Chief Financial Officer of Registrant99.1
    
    Note Purchase and Sale Agreement dated as of July 31, 2006 among Compass Group
Diversified Holdings LLC, Compass Group Investments, Inc. and Compass Medical
Mattress Partners, LP (incorporated by reference to Exhibit 99.1 of the 8-K
filed on August 1, 2006)99.2
    
    Stock Purchase Agreement, dated as of February 28, 2007, by and between HA-LO
Holdings, LLC and HALO Holding Corporation (incorporated by reference to
Exhibit 99.3 of the 8-K filed on March 1, 2007)99.3
    
    Purchase Agreement dated December 19, 2007, among CBS Personnel Holdings, Inc.
and Staffing Holding LLC, Staffmark Merger LLC, Staffmark Investment LLC, SF
Holding Corp., and Stephens-SM LLC (incorporated by reference to Exhibit 99.1
of the 8-K filed on December 20, 2007)99.4
    
    Share Purchase Agreement dated January 4, 2008, among Fox Factory Holding
Corp., Fox Factory, Inc. and Robert C. Fox, Jr. (incorporated by reference to
Exhibit 99.1 of the 8-K filed on January 8, 2008)99.5
    
    Stock Purchase Agreement dated May 8, 2008, among Mitsui Chemicals, Inc.,
Silvue Technologies Group, Inc., the stockholders of the Company and the
holders of Options listed on the signature pages thereto, and Compass Group
Management LLC, as the Stockholders Representative (incorporated by reference
to Exhibit 99.1 of the 8-K filed on May 9, 2008)99.6
    
    Stock Purchase Agreement dated March 31, 2010 by and among Gable 5, Inc.,
Liberty Safe and Security Products, LLC and Liberty Safe Holding Corporation
(incorporated by reference to Exhibit 99.1 of the 8-K filed on April 1, 2010)99.7
    
    Stock Purchase Agreement dated September 16, 2010, by and among ERGO Baby
Intermediate Holding Corporation, The ERGO Baby Carrier, Inc., Karin A. Frost,
in her individual capacity and as Trustee of the Revocable Trust of Karin A.
Frost dated February 22, 2008 and as Trustee of the Karin A. Frost 2009
Qualified Annuity Trust u/a/d 12/21/2009 (incorporated by reference to Exhibit
99.1 of the 8-K filed on September 17, 2010)
 
 *
    
    Filed herewith. 121




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SIGNATURE
  COMPASS GROUP DIVERSIFIED HOLDINGS LLCDate: March 10, 2011
    By:
    /s/ Alan B. OffenbergAlan B. OffenbergChief Executive Officer  Signature
    
    Title
    
    Date/s/ Alan B. Offenberg

Alan B. Offenberg
    
    Chief Executive Officer
(Principal Executive Officer)
and Director
    
    March 10, 2011/s/ James J. Bottiglieri

James J. Bottiglieri
    
    Chief Financial Officer
(Principal Financial and
Accounting Officer)
and Director
    
    March 10, 2011/s/ C. Sean Day
    
    Director
    
    March 10, 2011C. Sean Day/s/ D. Eugene Ewing
    
    Director
    
    March 10, 2011D. Eugene Ewing/s/ Harold S. Edwards
    
    Director
    
    March 10, 2011Harold S. Edwards/s/ Mark H. Lazarus
    
    Director
    
    March 10, 2011Mark H. Lazarus/s/ Gordon Burns
    
    Director
    
    March 10, 2011Gordon Burns
 122




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SIGNATURE
  COMPASS DIVERSIFIED HOLDINGSDate: March 10, 2011
    By:
    /s/ James J. BottiglieriJames J. BottiglieriRegular Trustee 123




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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTAL FINANCIAL DATA
 PageNumbersHistorical Financial Statements:Report of Management on Internal Control Over Financial Reporting
    
    F-2Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
    
    F-3Report of Independent Registered Public Accounting Firm
    
    F-4Consolidated Balance Sheets as of December 31, 2010 and December 31, 2009
    
    F-5Consolidated Statements of Operations for the Years Ended December 31, 2010, 2009 and 2008
    
    F-6Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2010, 2009 and 2008
    
    F-7Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008
    
    F-8Notes to Consolidated Financial Statements
    
    F-9Supplemental Financial Data:The following supplementary financial data of the registrant and its subsidiaries required to be
included in Item 15(a) (2) of Form 10-K are listed below:Schedule II  Valuation and Qualifying Accounts
    
    S-1All other schedules not listed above have been omitted as not applicable or because the required
information is included in the Consolidated Financial Statements or in the notes thereto.
 F-1




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REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 Management of Compass Diversified Holdings is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934. Compass internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation and fair presentation of financial statements issued for
external purposes in accordance with accounting principles generally accepted in the United
States of America (US GAAP). Compass internal control over financial reporting includes those
policies and procedures that:
 
    
    pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of assets of
the company;
    
    provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with U.S. GAAP, and
that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and
    
    provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of assets of the company that
could have a material effect on the consolidated financial statements.
   Internal
Control-Integrated Framework
   F-2




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 Board
of Directors and Shareholders
 Compass Diversified Holdings
 Internal ControlIntegrated Framework
    Internal ControlIntegrated Framework
   
 F-3




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 Board of Directors and Shareholders
 Compass Diversified Holdings
      
 F-4




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Compass Diversified Holdings
 
 Consolidated Balance Sheets
 December 31,
    
    
    December 31,(in thousands)
    
    2010
    
    
    2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    13,536
    
    
    $
    31,495Accounts receivable, less allowances of $5,481 at December 31, 2010
and $5,409 at
December 31,
2009
    
    
    208,487
    
    
    
    165,550Inventories
    
    
    77,412
    
    
    
    51,727Prepaid expenses and other current assets
    
    
    33,904
    
    
    
    26,255Total current assets
    
    
    333,339
    
    
    
    275,027Property, plant and
equipment, net
    
    
    33,484
    
    
    
    25,502Goodwill
    
    
    325,851
    
    
    
    288,028Intangible assets, net
    
    
    269,672
    
    
    
    216,365Deferred debt issuance costs, less accumulated amortization of
$6,882 at December 31, 2010 and $5,093 at December 31, 2009
    
    
    3,822
    
    
    
    5,326Other non-current assets
    
    
    17,873
    
    
    
    20,764Total assets
    
    $
    984,041
    
    
    $
    831,012Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    53,197
    
    
    $
    45,089Accrued expenses
    
    
    74,302
    
    
    
    54,306Due to related party
    
    
    2,692
    
    
    
    3,300Current
portion, long-term debt
    
    
    2,000
    
    
    
    2,500Current portion of workers compensation liability
    
    
    18,170
    
    
    
    22,126Other current liabilities
    
    
    1,043
    
    
    
    2,566Total current liabilities
    
    
    151,404
    
    
    
    129,887Supplemental
put obligation
    
    
    44,598
    
    
    
    12,082Deferred income taxes
    
    
    74,457
    
    
    
    60,397Long-term debt
    
    
    94,000
    
    
    
    74,000Workers compensation liability
    
    
    40,588
    
    
    
    38,913Other non-current
liabilities
    
    
    3,084
    
    
    
    7,667Total liabilities
    
    
    408,131
    
    
    
    322,946Stockholders equityTrust shares, no par
value, 500,000 authorized; 46,725 shares issued
and outstanding at December 31, 2010 and 36,625 shares issued and outstanding
at December 31, 2009
    
    
    638,763
    
    
    
    485,790Accumulated other comprehensive loss
    
    
    (143
    )
    
    
    (2,001
    )Accumulated deficit
    
    
    (150,550
    )
    
    
    (46,628
    )Total stockholders equity attributable to Holdings
    
    
    488,070
    
    
    
    437,161Noncontrolling interest
    
    
    87,840
    
    
    
    70,905Total stockholders equity
    
    
    575,910
    
    
    
    508,066Total liabilities and stockholders equity
    
    $
    984,041
    
    
    $
    831,012
  F-5




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##### Table of Contents



Compass Diversified Holdings
 
 Consolidated Statements of Operations
 Year ended December 31,(in thousands, except per share data)
    
    2010
    
    
    2009
    
    
    2008Net sales
    
    $
    655,098
    
    
    $
    503,400
    
    
    $
    532,127Service revenues
    
    
    1,002,511
    
    
    
    745,340
    
    
    
    1,006,346Total revenues
    
    
    1,657,609
    
    
    
    1,248,740
    
    
    
    1,538,473Cost of sales
    
    
    447,504
    
    
    
    344,191
    
    
    
    363,675Cost of services
    
    
    854,698
    
    
    
    632,800
    
    
    
    832,531Gross profit
    
    
    355,407
    
    
    
    271,749
    
    
    
    342,267Operating expenses:Staffing expense
    
    
    81,250
    
    
    
    74,279
    
    
    
    102,438Selling, general and administrative expense
    
    
    179,154
    
    
    
    145,948
    
    
    
    165,768Supplemental put expense (reversal)
    
    
    32,516
    
    
    
    (1,329
    )
    
    
    6,382Management fees
    
    
    15,380
    
    
    
    13,100
    
    
    
    15,205Amortization expense
    
    
    29,312
    
    
    
    24,609
    
    
    
    24,605Impairment expense
    
    
    38,835
    
    
    
    59,800
    
    
    
    Operating income (loss)
    
    
    (21,040
    )
    
    
    (44,658
    )
    
    
    27,869Other income (expense):Interest income
    
    
    20
    
    
    
    1,178
    
    
    
    1,377Interest expense
    
    
    (11,544
    )
    
    
    (11,736
    )
    
    
    (17,828
    )Amortization of debt issuance costs
    
    
    (1,789
    )
    
    
    (1,776
    )
    
    
    (1,969
    )Loss on debt extinguishment
    
    
    
    
    
    
    (3,652
    )
    
    
    Other income (expense), net
    
    
    718
    
    
    
    (282
    )
    
    
    894Income (loss) from continuing operations before income taxes
    
    
    (33,635
    )
    
    
    (60,926
    )
    
    
    10,343Provision (benefit) for income taxes
    
    
    11,135
    
    
    
    (21,281
    )
    
    
    6,526Income (loss) from continuing operations
    
    
    (44,770
    )
    
    
    (39,645
    )
    
    
    3,817Income from discontinued operations, net of income tax
    
    
    
    
    
    
    
    
    
    
    4,607Gain on sale of discontinued operations, net of income tax
    
    
    
    
    
    
    
    
    
    
    73,363Net income (loss)
    
    
    (44,770
    )
    
    
    (39,645
    )
    
    
    81,787Net income (loss) attributable to noncontrolling interest
    
    
    3,987
    
    
    
    (13,375
    )
    
    
    3,493Net income (loss) attributable to Holdings
    
    $
    (48,757
    )
    
    $
    (26,270
    )
    
    $
    78,294Amounts attributable to Holdings:Income (loss) from continuing operations
    
    $
    (48,757
    )
    
    $
    (26,270
    )
    
    $
    324Income from discontinued operations, net of income tax
    
    
    
    
    
    
    
    
    
    
    4,607Gain on sale of discontinued operations, net of income tax
    
    
    
    
    
    
    
    
    
    
    73,363Net income (loss) attributable to Holdings
    
    
    (48,757
    )
    
    $
    (26,270
    )
    
    $
    78,294Basic and fully diluted income (loss) per share attributable to Holdings:Continuing operations
    
    $
    (1.19
    )
    
    $
    (0.76
    )
    
    $
    0.01Discontinued operations
    
    
    
    
    
    
    
    
    
    
    2.47Basic and fully diluted income (loss) per share attributable to Holdings
    
    $
    (1.19
    )
    
    $
    (0.76
    )
    
    $
    2.48Weighted average number of shares of trust stock outstanding  basic and fully
diluted
    
    
    40,928
    
    
    
    34,403
    
    
    
    31,525Cash distributions declared per share
    
    $
    1.36
    
    
    $
    1.36
    
    
    $
    1.33
  F-6




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##### Table of Contents



Compass Diversified Holdings
 
 Consolidated Statements of Stockholders Equity
  TotalAccumulated
    
    
    StockholdersOther
    
    
    Equity
    
    
    Non-
    
    
    TotalNumber of
    
    
    
    
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Attributable
    
    
    Controlling
    
    
    Stockholders(in thousands)
    
    Shares
    
    
    Amount
    
    
    Deficit
    
    
    Loss
    
    
    to Holdings
    
    
    Interest
    
    
    EquityBalance  January 1, 2008
    
    
    31,525
    
    
    
    443,705
    
    
    
    (10,855
    )
    
    
    
    
    
    
    432,850
    
    
    
    21,867
    
    
    
    454,717Net income
    
    
    
    
    
    
    
    
    
    
    78,294
    
    
    
    
    
    
    
    78,294
    
    
    
    3,493
    
    
    
    81,787Other comprehensive loss  cash flow hedge loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,242
    )
    
    
    (5,242
    )
    
    
    
    
    
    
    (5,242
    )Comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    78,294
    
    
    
    (5,242
    )
    
    
    73,052
    
    
    
    3,493
    
    
    
    76,545Transfer from noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,900
    )
    
    
    (3,900
    )Issuance of stock by noncontrolling interest:Staffmark acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,899
    
    
    
    47,899Fox acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,725
    
    
    
    7,725Option activity attributable to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,347
    
    
    
    2,347Distributions paid
    
    
    
    
    
    
    
    
    
    
    (41,455
    )
    
    
    
    
    
    
    (41,455
    )
    
    
    
    
    
    
    (41,455
    )Balance  December 31, 2008
    
    
    31,525
    
    
    
    443,705
    
    
    
    25,984
    
    
    
    (5,242
    )
    
    
    464,447
    
    
    
    79,431
    
    
    
    543,878Net loss
    
    
    
    
    
    
    
    
    
    
    (26,270
    )
    
    
    
    
    
    
    (26,270
    )
    
    
    (13,375
    )
    
    
    (39,645
    )Other comprehensive income  cash flow hedge gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    724
    
    
    
    724
    
    
    
    
    
    
    
    724Other comprehensive income  cash flow hedge reclassification to earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,517
    
    
    
    2,517
    
    
    
    
    
    
    
    2,517Comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    (26,270
    )
    
    
    3,241
    
    
    
    (23,029
    )
    
    
    (13,375
    )
    
    
    (36,404
    )Issuance of Trust shares, net of offering costs
    
    
    5,100
    
    
    
    42,085
    
    
    
    
    
    
    
    
    
    
    
    42,085
    
    
    
    
    
    
    
    42,085Option activity attributable to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,303
    
    
    
    2,303Contribution
of noncontrolling interest related to Staffmark recapitalization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,497
    
    
    
    5,497Contribution from noncontrolling interest holders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    49Redemption of noncontrolling interest holders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,000
    )
    
    
    (3,000
    )Distributions paid
    
    
    
    
    
    
    
    
    
    
    (46,342
    )
    
    
    
    
    
    
    (46,342
    )
    
    
    
    
    
    
    (46,342
    )Balance  December 31, 2009
    
    
    36,625
    
    
    $
    485,790
    
    
    $
    (46,628
    )
    
    $
    (2,001
    )
    
    $
    437,161
    
    
    $
    70,905
    
    
    $
    508,066Net loss
    
    
    
    
    
    
    
    
    
    
    (48,757
    )
    
    
    
    
    
    
    (48,757
    )
    
    
    3,987
    
    
    
    (44,770
    )Other comprehensive income  cash flow hedge gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,858
    
    
    
    1,858
    
    
    
    
    
    
    
    1,858Comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    (48,757
    )
    
    
    1,858
    
    
    
    (46,899
    )
    
    
    3,987
    
    
    
    (42,912
    )Issuance of Trust shares, net of offering costs
    
    
    10,100
    
    
    
    152,973
    
    
    
    
    
    
    
    
    
    
    
    152,973
    
    
    
    
    
    
    
    152,973Contributions from noncontrolling interest holders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,485
    
    
    
    9,485Option activity attributable to noncontrolling interest holders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,913
    
    
    
    4,913Distribution to noncontrolling shareholder, net (see Note P)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,144
    )
    
    
    (6,144
    )Repayment of loan from noncontrolling shareholder (see Note P)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,694
    
    
    
    4,694Distributions paid
    
    
    
    
    
    
    
    
    
    
    (55,165
    )
    
    
    
    
    
    
    (55,165
    )
    
    
    
    
    
    
    (55,165
    )Balance  December 31, 2010
    
    
    46,725
    
    
    $
    638,763
    
    
    $
    (150,550
    )
    
    $
    (143
    )
    
    $
    488,070
    
    
    $
    87,840
    
    
    $
    575,910
  F-7




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##### Table of Contents



Compass Diversified Holdings
 
 Consolidated Statements of Cash Flows
 Year Ended December 31,(in thousands)
    
    2010
    
    
    2009
    
    
    2008Cash flows from operating activities:Net income (loss)
    
    $
    (44,770
    )
    
    $
    (39,645
    )
    
    $
    81,787Adjustments
to reconcile net income (loss) to net cash provided by operating activities:Gain on sales of dispositions
    
    
    
    
    
    
    
    
    
    
    (73,363
    )Depreciation expense
    
    
    9,025
    
    
    
    8,387
    
    
    
    9,276Amortization expense
    
    
    33,095
    
    
    
    24,609
    
    
    
    25,745Impairment expense
    
    
    38,835
    
    
    
    59,800
    
    
    
    Amortization of debt issuance costs
    
    
    1,789
    
    
    
    1,776
    
    
    
    1,969Loss on debt extinguishment
    
    
    
    
    
    
    3,652
    
    
    
    Supplemental put expense (reversal)
    
    
    32,516
    
    
    
    (1,329
    )
    
    
    6,382Noncontrolling interests related to discontinued operations
    
    
    
    
    
    
    
    
    
    
    549Noncontrolling stockholder charges and other
    
    
    7,637
    
    
    
    1,555
    
    
    
    2,827Deferred taxes
    
    
    (7,146
    )
    
    
    (24,964
    )
    
    
    (8,911
    )Other
    
    
    441
    
    
    
    107
    
    
    
    381Changes in operating assets and liabilities, net of acquisition:(Increase) decrease in accounts receivable
    
    
    (22,500
    )
    
    
    143
    
    
    
    29,970(Increase) decrease in inventories
    
    
    (13,030
    )
    
    
    (557
    )
    
    
    102Increase in prepaid expenses and other current assets
    
    
    (3,812
    )
    
    
    (4,442
    )
    
    
    (3,874
    )Increase (decrease) in accounts payable and accrued expenses
    
    
    12,761
    
    
    
    (8,879
    )
    
    
    (17,344
    )Payment of supplemental put liability
    
    
    
    
    
    
    
    
    
    
    (14,947
    )Net cash provided by operating activities
    
    
    44,841
    
    
    
    20,213
    
    
    
    40,549Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    (173,732
    )
    
    
    (1,435
    )
    
    
    (167,546
    )Purchases of property and equipment
    
    
    (8,668
    )
    
    
    (3,585
    )
    
    
    (11,576
    )Proceeds from dispositions
    
    
    
    
    
    
    
    
    
    
    154,156Other investing activities
    
    
    8
    
    
    
    38
    
    
    
    173Net cash used in investing activities
    
    
    (182,392
    )
    
    
    (4,982
    )
    
    
    (24,793
    )Cash flows from financing activities:Proceeds from the issuance of Trust shares, net
    
    
    152,973
    
    
    
    42,085
    
    
    
    Borrowings under Credit Agreement
    
    
    202,300
    
    
    
    3,000
    
    
    
    90,000Repayments under Credit Agreement
    
    
    (182,800
    )
    
    
    (79,500
    )
    
    
    (87,532
    )Distributions paid
    
    
    (55,165
    )
    
    
    (46,342
    )
    
    
    (41,455
    )Swap termination fee
    
    
    
    
    
    
    (2,517
    )
    
    
    Net proceeds provided by noncontrolling interest
    
    
    2,671
    
    
    
    2,546
    
    
    
    2,251Debt issuance costs
    
    
    (259
    )
    
    
    
    
    
    
    (552
    )Other
    
    
    (128
    )
    
    
    (481
    )
    
    
    (273
    )Net cash provided by (used in) financing activities
    
    
    119,592
    
    
    
    (81,209
    )
    
    
    (37,561
    )Foreign currency adjustment
    
    
    
    
    
    
    
    
    
    
    (80
    )Net decrease in cash and cash equivalents
    
    
    (17,959
    )
    
    
    (65,978
    )
    
    
    (21,885
    )Cash and cash equivalents  beginning of period
    
    
    31,495
    
    
    
    97,473
    
    
    
    119,358Cash and cash equivalents  end of period
    
    $
    13,536
    
    
    $
    31,495
    
    
    $
    97,473
 
 Supplemental non-cash financing and investing activity:-
    
    Issuance of CBS Personnels common stock valued at $47.9 million during 2008 in connection with the acquisition of Staffmark LLC.-
    
    Acquisition of $7.0 million of Tridien common stock
during 2008 in connection with the extinguishment of a promissory note due the Company by an employee of Tridien.-
    
    Capital leases totaling $0.9 million were entered into during 2008.  F-8




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##### Table of Contents



Compass Diversified Holdings
Notes to Consolidated Financial Statements
December 31, 2010
 Note A  Organization and Business Operations
    Note B  Summary of Significant Accounting Policies
 Accounting principles
  Basis of presentation
  Principles of consolidation
   Use of estimates
  F-9




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##### Table of Contents



Fair value of financial instruments
  Revenue recognition
  Advanced Circuits
  American Furniture, ERGObaby, Fox, Liberty, Tridien
  HALO
  Staffmark
  Cash equivalents
  Allowance for doubtful accounts
  Inventories
  F-10




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##### Table of Contents



in thousands
 December 31,
    
    
    December 31,2010
    
    
    2009Raw materials and supplies
    
    $
    47,444
    
    
    $
    34,764Finished goods
    
    
    31,830
    
    
    
    18,003Less: obsolescence reserve
    
    
    (1,862
    )
    
    
    (1,040
    )Total
    
    $
    77,412
    
    
    $
    51,727
 Property, plant and equipment
    Machinery, equipment and software
    
    2 to 15 yearsOffice furniture and equipment
    
    2 to 7 yearsLeasehold improvements
    
    Shorter of useful life or lease term
  in thousands
 December 31,
    
    
    December 31,2010
    
    
    2009Machinery, equipment and software
    
    $
    42,421
    
    
    $
    30,405Office furniture and equipment
    
    
    2,812
    
    
    
    2,274Leasehold improvements
    
    
    9,551
    
    
    
    6,18254,784
    
    
    
    38,861Less: accumulated depreciation
    
    
    (21,300
    )
    
    
    (13,359
    )Total
    
    $
    33,484
    
    
    $
    25,502
  Goodwill and intangible assets
   F-11




---



##### Table of Contents



Deferred debt issuance costs
  Workers compensation liability
  Warranties
  Supplemental put
    F-12




---



##### Table of Contents



Derivatives and hedging
  Noncontrolling interest
  Income taxes
  Earnings per share
  2008The weighted average number of Trust shares outstanding for fiscal 2008 was computed based
on 31,525,000 shares outstanding for the entire fiscal year.2009The weighted average number of Trust shares outstanding for fiscal 2009 was computed based
on 31,525,000 shares outstanding for the period from January 1, 2009 through December 31,
2009 and 5,100,000 additional shares outstanding issued in connection with the Companys
secondary offering for the period from June 9, 2009 through December 31, 2009.2010The weighted average number of Trust shares outstanding for fiscal 2010 was computed based
on 36,625,000 shares outstanding for the period from January 1, 2010 through December 31,
2010 and 5,100,000 additional shares outstanding issued in connection with the Companys
secondary offering for the period from April 16, 2010 through December 31, 2010, and
150,000 shares outstanding issued in connection with the over-allotment for the period from
April 23, 2010 through December 31, 2010. Further, the weighted average number of Trust
shares outstanding for fiscal 2010 included 4,300,000 additional shares outstanding issued
in connection with the Companys secondary offering for the period from November 17, 2010
through December 31, 2010, and 550,000 shares outstanding issued in connection with the
over-allotment for the period from December 8, 2010 through December 31, 2010.
  F-13




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##### Table of Contents



Advertising costs
  Research and development
  Employee retirement plans
  Seasonality
  Recent accounting pronouncements
      F-14




---



##### Table of Contents



Note C  Acquisition of Businesses
 Acquisition of The ERGO Baby Carrier, Inc
   F-15




---



##### Table of Contents



AmountsRecognized asERGO
    
    of Acquisition(in thousands)
    
    DateAssets:Cash
    
    $
    1,828Accounts receivable, net (1)
    
    
    1,489Inventory (2)
    
    
    8,250Other current assets
    
    
    829Property, plant and equipment
    
    
    181Intangible assets
    
    
    49,055Goodwill (3)
    
    
    33,312Other assets
    
    
    1,888Total assets
    
    $
    96,832Liabilities:Current liabilities
    
    $
    4,517Other liabilities
    
    
    48,360Noncontrolling interest
    
    
    7,400Total liabilities and noncontrolling interest
    
    $
    60,277Costs of net assets acquired
    
    $
    36,555Loans to businesses
    
    
    48,683$
    85,238
 
 (1)
    
    Includes $1.6 million of gross contractual accounts
receivable, of which $0.2 million was not expected to be
collected. The fair value of accounts receivable approximated
book value acquired.(2)
    
    Includes $4.3 million of inventory fair value step up.(3)
    
    The portion of goodwill deductible for tax purposes is
approximately $32.9 million. in thousands
 EstimatedIntangible assets
    
    Amount
    
    
    Useful LifeTrade name
    
    $
    26,155
    
    
    IndefiniteCustomer relationships
    
    
    21,310
    
    
    
    15Non-compete agreements
    
    
    1,360
    
    
    
    5Technology
    
    
    230
    
    
    
    10$
    49,055
 Acquisition of Liberty Safe and Security Products, Inc
   F-16




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##### Table of Contents



AmountsRecognized asLiberty
    
    of Acquisition(in thousands)
    
    DateAssets:Cash
    
    $
    2,438Accounts receivable, net (1)
    
    
    10,109Inventory
    
    
    7,435Other current assets
    
    
    1,552Property, plant and equipment
    
    
    5,991Intangible assets
    
    
    27,756Goodwill (2)
    
    
    33,075Other assets
    
    
    1,935Total assets
    
    $
    90,291Liabilities:Current liabilities
    
    $
    7,125Other liabilities
    
    
    55,884Noncontrolling interest
    
    
    1,085Total liabilities and noncontrolling interest
    
    $
    64,094Costs of net assets acquired
    
    $
    26,197Loans to businesses
    
    
    44,059$
    70,256
 
 (1)
    
    Includes $10.5 million of gross contractual accounts
receivable, of which $0.4 million was not expected to be
collected. The fair value of accounts receivable approximated
book value acquired.(2)
    
    Goodwill is not deductible for tax purposes. in thousands
 EstimatedIntangible assets
    
    Amount
    
    
    Useful LifeCustomer relationships
    
    $
    13,590
    
    
    
    5Technology
    
    
    6,690
    
    
    
    7License agreements
    
    
    3,300
    
    
    
    3Trade name
    
    
    3,020
    
    
    IndefiniteNon-compete agreements
    
    
    640
    
    
    
    5Training documents
    
    
    516
    
    
    
    2$
    27,756
 Acquisition of Circuit Express, Inc
   Other acquisition
  F-17




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##### Table of Contents



Unaudited pro forma information
  Year ended December 31,(in thousands)
    
    2010
    
    
    2009Net sales
    
    $
    1,698,702
    
    
    $
    1,361,716Operating loss
    
    
    (5,604
    )
    
    
    (43,363
    )Net loss
    
    
    (35,321
    )
    
    
    (43,805
    )
 Note D  Discontinued Operations
 2008 Dispositions
    F-18




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##### Table of Contents



AeroglideFor the PeriodJanuary 1, 2008through DispositionNet sales
    
    $
    34,294Operating income
    
    
    5,041Other expense
    
    
    (11
    )Provision (benefit) for income taxes
    
    
    1,274Noncontrolling interest
    
    
    239Income from
discontinued operations (1)
    
    $
    3,517
 
 (1)
    
    The results above for the period from January 1, 2008 through disposition exclude
$1.6 million of intercompany interest expense. SilvueFor the PeriodJanuary 1, 2008through DispositionNet sales
    
    $
    11,465Operating income
    
    
    2,416Other expense
    
    
    (83
    )Provision for income taxes
    
    
    933Noncontrolling interest
    
    
    310Income from
discontinued operations(1)
    
    $
    1,090
 
 (1)
    
    The results above for the period from January 1, 2008 through disposition
exclude $0.6 million of intercompany interest expense. thousands): Note E  Operating Segment Data
  
    
    Advanced Circuits, an electronic components manufacturing company, is a provider of
prototype, quick-turn and production rigid printed circuit boards. ACI manufactures and
delivers custom printed circuit boards to customers mainly in North America. ACI is
headquartered in Aurora, Colorado.
    
    American Furniture is a leading domestic manufacturer of upholstered furniture for the
promotional segment of the marketplace. AFM offers a broad product line of stationary and
motion furniture, including sofas, loveseats, sectionals, recliners and complementary
products, sold primarily at retail price points ranging between $199 and $1,399. AFM is a
low-cost manufacturer and is able to ship any product in its line within 48 hours of
receiving an order. AFM is headquartered in Ecru, Mississippi and its products are sold
in the United States.
    
    ERGObaby is a premier designer, marketer and distributor of babywearing products and
accessories. ERGObabys reputation for product innovation, reliability and safety has led
to numerous awards and accolades from consumer surveys and publications. ERGObaby offers a
broad range of wearable baby carriers and related products that are sold through more than
800 retailers and web shops in the United States and internationally. ERGObaby is
headquartered in Pukalani, Hawaii (Maui).
 F-19




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##### Table of Contents




    
    Fox is a designer, manufacturer and marketer of high end suspension products for
mountain bikes, all-terrain vehicles, snowmobiles and other off-road vehicles. Fox acts as
both a tier one supplier to leading action sport original equipment manufacturers and
provides after-market products to retailers and distributors. Fox is headquartered in
Watsonville, California and its products are sold worldwide.
    
    HALO serves as a one-stop shop for approximately 40,000 customers providing design,
sourcing, and management and fulfillment services across all categories of its customer
promotional product needs. HALO has established itself as a leader in the promotional
products and marketing industry through its focus on service through its approximately 700
account executives. HALO is headquartered in Sterling, Illinois.
    
    Liberty Safe is a designer, manufacturer and marketer of premium home and gun safes in
North America. From its over 200,000 square foot manufacturing facility, Liberty
produces a wide range of home and gun safe models in a broad assortment of sizes, features
and styles. Liberty is headquartered in Payson, Utah.
    
    Staffmark, a human resources outsourcing firm, is a provider of temporary staffing
services in the United States. Staffmark serves approximately 6,000 corporate and small
business clients. Staffmark also offers employee leasing services, permanent staffing and
temporary-to-permanent placement services. Staffmark is headquartered in Cincinnati,
Ohio.
    
    Tridien is a leading designer and manufacturer of powered and non-powered medical
therapeutic support surfaces and patient positioning devices serving the acute care,
long-term care and home health care markets. Tridien is headquartered in Coral Springs,
Florida and its products are sold primarily in North America.
   (in thousands)
 Year Ended December 31,Net sales of operating segments
    
    2010
    
    
    2009
    
    
    2008ACI
    
    $
    74,481
    
    
    $
    46,518
    
    
    $
    55,449American Furniture
    
    
    136,901
    
    
    
    141,971
    
    
    
    130,949ERGO
    
    
    12,227
    
    
    
    
    
    
    
    Fox
    
    
    170,983
    
    
    
    121,519
    
    
    
    131,734Halo
    
    
    159,940
    
    
    
    139,317
    
    
    
    159,797Liberty
    
    
    48,966
    
    
    
    
    
    
    
    Staffmark
    
    
    1,002,511
    
    
    
    745,340
    
    
    
    1,006,345Tridien
    
    
    61,101
    
    
    
    54,075
    
    
    
    54,199Intersegment eliminations
    
    
    (9,501
    )
    
    
    
    
    
    
    Total
    
    
    1,657,609
    
    
    
    1,248,740
    
    
    
    1,538,473Reconciliation of segment revenues to consolidated
revenues:Corporate and other
    
    
    
    
    
    
    
    
    
    
    Total consolidated revenues
    
    $
    1,657,609
    
    
    $
    1,248,740
    
    
    $
    1,538,473
 F-20




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##### Table of Contents



Year Ended December 31,Profit (loss) of operating segments(1)
    
    2010
    
    
    2009
    
    
    2008ACI
    
    $
    20,388
    
    
    $
    16,297
    
    
    $
    17,665American Furniture (2)
    
    
    (37,088
    )
    
    
    6,487
    
    
    
    5,123ERGO (3)
    
    
    (2,388
    )
    
    
    
    
    
    
    Fox
    
    
    19,576
    
    
    
    10,658
    
    
    
    10,707Halo
    
    
    4,870
    
    
    
    2,847
    
    
    
    5,289Liberty (4)
    
    
    (811
    )
    
    
    
    
    
    
    Staffmark(5)
    
    
    25,229
    
    
    
    (55,603
    )
    
    
    16,768Tridien
    
    
    8,013
    
    
    
    7,400
    
    
    
    4,228Total
    
    
    37,789
    
    
    
    (11,914
    )
    
    
    59,780Reconciliation of segment profit to consolidated
income (loss) before income taxes:Interest expense, net
    
    
    (11,524
    )
    
    
    (10,558
    )
    
    
    (16,451
    )Loss on debt extinguishment
    
    
    
    
    
    
    (3,652
    )
    
    
    Other income (expense)
    
    
    718
    
    
    
    (282
    )
    
    
    894Corporate and other (6)
    
    
    (60,618
    )
    
    
    (34,520
    )
    
    
    (33,880
    )Total consolidated income (loss) before income taxes
    
    $
    (33,635
    )
    
    $
    (60,926
    )
    
    $
    10,343
 
 (1)
    
    Segment profit (loss) represents operating income (loss).(2)
    
    Includes $38.8 million of goodwill and intangible asset impairment charges during the year
ended December 31, 2010. See Note G.(3)
    
    The year ended December 31, 2010 results include $2.0 million of acquisition-related costs
incurred in connection with the acquisition of ERGObaby.(4)
    
    The year ended December 31, 2010
results include $1.5 million of acquisition-related costs incurred in connection with the
acquisition of Liberty.(5)
    
    Includes $50.0 million of goodwill impairment charges during the year
ended December 31, 2009. See Note G.(6)
    
    Includes fair value adjustments related to the supplemental put liability and the call option
of a noncontrolling shareholder. See Note H. Accounts
    
    
    AccountsReceivable
    
    
    ReceivableAccounts receivable
    
    December 31, 2010
    
    
    December 31, 2009ACI
    
    $
    5,694
    
    
    $
    2,762American Furniture
    
    
    13,543
    
    
    
    12,032ERGO
    
    
    3,273
    
    
    
    Fox
    
    
    17,482
    
    
    
    15,590Halo
    
    
    29,761
    
    
    
    25,103Liberty
    
    
    9,720
    
    
    
    Staffmark
    
    
    128,491
    
    
    
    106,394Tridien
    
    
    6,004
    
    
    
    9,078Total
    
    
    213,968
    
    
    
    170,959Reconciliation of segment to consolidated totals:Corporate and other
    
    
    
    
    
    
    Total
    
    
    213,968
    
    
    
    170,959Allowance for doubtful accounts
    
    
    (5,481
    )
    
    
    (5,409
    )Total consolidated net accounts receivable
    
    $
    208,487
    
    
    $
    165,550
 F-21




---



##### Table of Contents



Depreciation andIdentifiable
    
    
    
    
    
    
    
    
    
    
    Amortization ExpenseGoodwill
    
    
    Goodwill
    
    
    Assets
    
    
    Identifiable
    
    
    
    
    
    
    for the YearDec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Assets
    
    
    Ended Dec. 31,2010
    
    
    2009
    
    
    2010(1)
    
    
    Dec. 31, 2009(1)
    
    
    2010
    
    
    2009
    
    
    2008Goodwill and identifiable assets of
operating segmentsACI
    
    $
    57,615
    
    
    $
    50,716
    
    
    $
    28,919
    
    
    $
    19,252
    
    
    $
    4,279
    
    
    $
    3,642
    
    
    $
    3,741American Furniture (3)
    
    
    5,900
    
    
    
    41,435
    
    
    
    60,067
    
    
    
    63,123
    
    
    
    3,119
    
    
    
    3,654
    
    
    
    3,704ERGO
    
    
    33,397
    
    
    
    
    
    
    
    59,248
    
    
    
    
    
    
    
    4,305
    
    
    
    
    
    
    
    Fox
    
    
    31,372
    
    
    
    31,372
    
    
    
    82,295
    
    
    
    73,714
    
    
    
    6,150
    
    
    
    6,509
    
    
    
    6,716Halo
    
    
    39,252
    
    
    
    39,060
    
    
    
    41,304
    
    
    
    43,647
    
    
    
    3,235
    
    
    
    3,351
    
    
    
    3,157Liberty
    
    
    32,870
    
    
    
    
    
    
    
    40,917
    
    
    
    
    
    
    
    5,161
    
    
    
    
    
    
    
    Staffmark
    
    
    89,715
    
    
    
    89,715
    
    
    
    77,830
    
    
    
    85,230
    
    
    
    7,564
    
    
    
    7,880
    
    
    
    8,214Tridien
    
    
    19,555
    
    
    
    19,555
    
    
    
    18,774
    
    
    
    20,584
    
    
    
    2,890
    
    
    
    2,623
    
    
    
    2,740Total
    
    
    309,676
    
    
    
    271,853
    
    
    
    409,354
    
    
    
    305,550
    
    
    
    36,703
    
    
    
    27,659
    
    
    
    28,272Reconciliation of segment to consolidated total:Corporate and other identifiable assets
    
    
    
    
    
    
    
    
    
    
    40,349
    
    
    
    71,884
    
    
    
    5,417
    
    
    
    5,337
    
    
    
    4,857Amortization of debt issuance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,789
    
    
    
    1,776
    
    
    
    1,969Goodwill carried at Corporate level (2)
    
    
    16,175
    
    
    
    16,175
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    325,851
    
    
    $
    288,028
    
    
    $
    449,703
    
    
    $
    377,434
    
    
    $
    43,909
    
    
    $
    34,772
    
    
    $
    35,098
 
 (1)
    
    Does not include accounts receivable balances per schedule above.(2)
    
    Represents goodwill resulting from purchase accounting adjustments not pushed down to the
segments. This amount is allocated back to the respective segments for purposes of goodwill
impairment testing.(3)
    
    Refer to Note G for discussion regarding American Furnitures goodwill impairment recorded
during the year ended December 31, 2010. Note F  Commitments and Contingencies
 Leases
 in thousands
 2011
    
    $
    12,1202012
    
    
    10,0162013
    
    
    8,2562014
    
    
    6,2632015
    
    
    5,565Thereafter
    
    
    19,558$
    61,778
  Legal Proceedings
  Note G  Goodwill and Other Intangible Assets
  F-22




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##### Table of Contents



2009
annual impairment test
   2010
annual impairment test
  Interim
goodwill impairment
  F-23




---



##### Table of Contents



(in thousands
 Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,2010
    
    
    2009Beginning balance:Goodwill
    
    $
    338,028
    
    
    $
    339,095Accumulated impairment losses
    
    
    (50,000
    )
    
    
    288,028
    
    
    
    339,095Impairment losses
    
    
    (35,535
    )
    
    
    (50,000
    )Acquisition of businesses (1)
    
    
    73,492
    
    
    
    1,009Adjustment to purchase accounting
    
    
    (134
    )
    
    
    (2,076
    )Total adjustments
    
    
    37,823
    
    
    
    (51,067
    )Ending balance:Goodwill
    
    
    411,386
    
    
    
    338,028Accumulated impairment losses
    
    
    (85,535
    )
    
    
    (50,000
    )$
    325,851
    
    
    $
    288,028
 
 1)
    
    Relates to the purchase of ERGObaby, Liberty Safe, Circuit Express and Relay
Gear. Refer to Note C.  (in thousands):
 December 30,
    
    
    December 31,
    
    
    Weighted Average2010
    
    
    2009
    
    
    Useful LivesCustomer relationships
    
    $
    231,783
    
    
    $
    188,773
    
    
    
    12Technology
    
    
    44,879
    
    
    
    37,959
    
    
    
    8Trade names, subject to amortization
    
    
    26,080
    
    
    
    25,300
    
    
    
    12Licensing and non-compete agreements
    
    
    10,048
    
    
    
    4,451
    
    
    
    4Distributor relations and other
    
    
    896
    
    
    
    1,380
    
    
    
    4313,686
    
    
    
    257,863Accumulated amortization customer relationships
    
    
    (68,304
    )
    
    
    (48,677
    )Accumulated amortization technology
    
    
    (16,663
    )
    
    
    (11,360
    )Accumulated amortization trade names, subject to amortization
    
    
    (4,963
    )
    
    
    (3,383
    )Accumulated amortization licensing and non-compete agreements
    
    
    (5,640
    )
    
    
    (3,613
    )Accumulated amortization distributor relations and other
    
    
    (574
    )
    
    
    (797
    )Total accumulated amortization
    
    
    (96,144
    )
    
    
    (67,830
    )Trade names, not subject to amortization
    
    
    52,130
    
    
    
    26,332Total intangibles, net
    
    $
    269,672
    
    
    $
    216,365
 (in thousands):
 2011
    
    $
    30,7192012
    
    
    30,1612013
    
    
    29,2242014
    
    
    28,8172015
    
    
    25,301$
    144,222
 F-24




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##### Table of Contents



Note H  Fair Value Measurement
 in thousands
 Fair Value Measurements at December 31, 2010CarryingLiabilities:
    
    Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Derivative liability  interest rate swap
    
    $
    143
    
    
    $
    
    
    
    $
    143
    
    
    $
    Supplemental put obligation
    
    
    44,598
    
    
    
    
    
    
    
    
    
    
    
    44,598Call option of noncontrolling shareholder (1)
    
    
    1,200
    
    
    
    
    
    
    
    
    
    
    
    1,200Put option of noncontrolling shareholders (2)
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50
 
 (1)
    
    Represents a noncontrolling shareholders call option to purchase additional common stock in Tridien.(2)
    
    Represents put options issued to noncontrolling shareholders in connection with the Liberty acquisition. Fair Value Measurements at December 31, 2009CarryingLiabilities:
    
    Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Derivative liability  interest rate swap
    
    $
    2,001
    
    
    $
    
    
    
    $
    2,001
    
    
    $
    Supplemental put obligation
    
    
    12,082
    
    
    
    
    
    
    
    
    
    
    
    12,082Call option of noncontrolling shareholder
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    200
 in thousands
 2010
    
    
    2009Balance at January 1
    
    $
    12,082
    
    
    $
    13,411Supplemental put expense (reversal)
    
    
    32,516
    
    
    
    (1,329
    )Balance at December 31
    
    $
    44,598
    
    
    $
    12,082
 in thousands
 2010Balance at January 1
    
    $
    200Fair Value adjustment to Call option (1)
    
    
    1,000Balance at December 31
    
    $
    1,200
 
 (1)
    
    Represents a fair value adjustment to the call option of a
noncontrolling shareholder of Tridien associated with an increase in the estimated fair value
of Tridien. Valuation Techniques
 Interest rate swap:
  Supplemental put:
  F-25




---



##### Table of Contents



Options
of noncontrolling shareholder:
   in thousands
 Gains/(losses)Fair Value Measurements at Dec. 31, 2010
    
    
    Year ended Dec. 31,Assets:
    
    Carrying Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    2010
    
    
    2009Goodwill (1)
    
    $
    5,900
    
    
    $
    
    
    
    $
    
    
    
    $
    5,900
    
    
    $
    (35,535
    )
    
    $
    Trade name (2)
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    3,000
    
    
    
    (3,300
    )
    
    $
    
 
 (1)
    
    Represents the fair value of goodwill at the AFM business segment subsequent
to the goodwill impairment charge recognized during the year ended December 31, 2010. See Note G
for further discussion regarding impairment and valuation techniques applied.(2)
    
    Represents the fair value of AFMs trade name at the AFM business segment subsequent
to the impairment charge recognized during the year ended December 31, 2010. Note I  Debt
  Term Loan Facility
  Revolving Credit Facility
  F-26




---



##### Table of Contents



Convenants
  Description of Required Covenant Ratio
    
    Covenant Ratio Requirement
    
    Actual RatioFixed Charge Coverage Ratio
    
    greater than or equal to 1.5:1.0
    
    6.39:1.0Interest Coverage Ratio
    
    greater than or equal to 2.75:1.0
    
    9.75:1.0Leverage Ratio
    
    less than or equal to 3.5:1.0
    
    1.17:1.0
  Letters of credit
  (in thousands):
 December 31,2010
    
    
    2009Revolving credit facility
    
    $
    22,000
    
    
    $
    500Term loan facility
    
    
    74,000
    
    
    
    76,000Total debt
    
    $
    96,000
    
    
    $
    76,500Less: Current portion, term loan facility
    
    
    (2,000
    )
    
    
    (2,000
    )Less: Current portion, revolving credit facility
    
    
    
    
    
    
    (500
    )Long term debt
    
    $
    94,000
    
    
    $
    74,000
  2011
    
    $
    2,0002012
    
    
    24,0002013
    
    
    70,0002014
    
    
    2015
    
    
    Thereafter
    
    
    $
    96,000
 F-27




---



##### Table of Contents



Note J  Derivative Instruments and Hedging Activities
      (in thousands)
 December 30,
    
    
    December 31,
    
    
    Balance Sheet2010
    
    
    2009
    
    
    LocationLiabilityCash flow hedge current
    
    $
    143
    
    
    $
    1,620
    
    
    Other current liabilitiesCash flow hedge non-current
    
    
    
    
    
    
    381
    
    
    Other non-current liabilitiesTotal
    
    $
    143
    
    
    $
    2,001
 Note K  Income Taxes
  F-28




---



##### Table of Contents



in thousands)
 Years ended December 31,2010
    
    
    2009
    
    
    2008Current taxesFederal
    
    $
    14,843
    
    
    $
    1,997
    
    
    $
    13,386State
    
    
    3,438
    
    
    
    1,686
    
    
    
    2,276Total current taxes
    
    
    18,281
    
    
    
    3,683
    
    
    
    15,662Deferred taxes:Federal
    
    
    (6,366
    )
    
    
    (24,519
    )
    
    
    (8,379
    )State
    
    
    (499
    )
    
    
    (445
    )
    
    
    (757
    )Foreign
    
    
    (281
    )
    
    
    
    
    
    
    Total deferred taxes
    
    
    (7,146
    )
    
    
    (24,964
    )
    
    
    (9,136
    )Total tax provision (benefit)
    
    $
    11,135
    
    
    $
    (21,281
    )
    
    $
    6,526
  December 31,(in thousands)
    
    2010
    
    
    2009Deferred tax assets:Tax credits
    
    $
    
    
    
    $
    43Accounts receivable and allowances
    
    
    1,739
    
    
    
    1,631Workers compensation
    
    
    17,961
    
    
    
    14,952Accrued expenses
    
    
    5,713
    
    
    
    4,340Loan forgiveness
    
    
    
    
    
    
    111Other
    
    
    3,084
    
    
    
    1,649Total deferred tax assets
    
    $
    28,497
    
    
    $
    22,726Deferred tax liabilities:Intangible assets
    
    $
    (65,172
    )
    
    $
    (54,867
    )Property and equipment
    
    
    (7,269
    )
    
    
    (3,636
    )Prepaid and other expenses
    
    
    (2,016
    )
    
    
    (1,894
    )Total deferred tax liabilities
    
    $
    (74,457
    )
    
    $
    (60,397
    )Total net deferred tax liability
    
    $
    (45,960
    )
    
    $
    (37,671
    )
   F-29




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##### Table of Contents



Years ended December 31,2010
    
    
    2009
    
    
    2008United States Federal Statutory Rate
    
    
    (35.0
    %)
    
    
    (35.0
    %)
    
    
    35.0
    %Foreign and State income taxes (net of Federal benefits)
    
    
    4.9
    
    
    
    1.3
    
    
    
    9.5Expenses of
Compass Group Diversified Holdings, LLC representing a pass through to shareholders
    
    
    39.7
    
    
    
    4.6
    
    
    
    36.5Credit utilization
    
    
    (12.8
    )
    
    
    (4.2
    )
    
    
    (24.1
    )Non-deductible acquisition costs
    
    
    1.5
    
    
    
    
    
    
    
    Impairment expense
    
    
    37.0
    
    
    
    
    
    
    
    Other
    
    
    (2.2
    )
    
    
    (1.7
    )
    
    
    6.2Effective income tax rate
    
    
    33.1
    %
    
    
    (35.0
    %)
    
    
    63.1
    %
 (in thousands):
 Balance at January 1, 2008
    
    
    118Additions for prior years tax positions
    
    
    27Reductions for prior years tax positions
    
    
    (44
    )Balance at December 31, 2008
    
    
    101Additions for current years tax positions
    
    
    1,635Reductions for prior years tax positions
    
    
    (11
    )Balance at December 31, 2009
    
    $
    1,725Additions for current years tax positions
    
    
    1,987Additions for prior years tax positions
    
    
    778Reductions for prior years tax positions
    
    
    (30
    )Balance at December 31, 2010
    
    $
    4,460
   Note L- Noncontrolling interest
  F-30




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##### Table of Contents



% Ownership (1)
    
    
    % Ownership (1)
    
    
    % Ownership (1)December 31, 2010
    
    
    December 31, 2009
    
    
    December 31, 2008Primary
    
    
    Fully Diluted
    
    
    Primary
    
    
    Fully Diluted
    
    
    Primary
    
    
    Fully DilutedAdvanced Circuits
    
    
    69.6
    
    
    
    69.4
    
    
    
    70.2
    
    
    
    70.2
    
    
    
    70.2
    
    
    
    70.2American Furniture
    
    
    99.9
    
    
    
    91.4
    
    
    
    93.9
    
    
    
    84.5
    
    
    
    93.9
    
    
    
    84.5ERGObaby
    
    
    83.9
    
    
    
    79.9
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aFOX
    
    
    75.7
    
    
    
    68.1
    
    
    
    75.5
    
    
    
    67.5
    
    
    
    75.5
    
    
    
    69.8HALO
    
    
    88.7
    
    
    
    72.8
    
    
    
    88.7
    
    
    
    72.8
    
    
    
    88.3
    
    
    
    73.6Liberty
    
    
    96.2
    
    
    
    87.7
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aStaffmark
    
    
    76.2
    
    
    
    68.5
    
    
    
    76.2
    
    
    
    69.4
    
    
    
    66.4
    
    
    
    62.4Tridien
    
    
    73.9
    
    
    
    61.8
    
    
    
    74.4
    
    
    
    61.7
    
    
    
    67.0
    
    
    
    57.0
 
 (1)
    
    The principal difference between primary and fully diluted percentages
of our operating segments is primarily due to stock option issuances of operating
segment stock to management of the respective operating segment. Noncontrolling Interest Balancesas of December 31,(in thousands)
    
    2010
    
    2009ACI
    
    $
    2,326
    
    
    $
    American Furniture
    
    
    (163
    )
    
    
    2,110ERGObaby
    
    
    7,087
    
    
    
    n/aFOX
    
    
    13,373
    
    
    
    10,946HALO
    
    
    3,211
    
    
    
    3,065Liberty
    
    
    1,156
    
    
    
    n/aStaffmark
    
    
    50,962
    
    
    
    46,286Tridien
    
    
    9,788
    
    
    
    8,398CGM
    
    
    100
    
    
    
    100$
    87,840
    
    
    $
    70,905
 ACI
   American Furniture
  Staffmark
  Tridien
  F-31




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##### Table of Contents



Note M- Stockholders Equity
 Trust Shares
  Initial public offering
  Secondary offerings
     Distributions
  
    
    On January 30, 2009, the Company paid a distribution of $0.34 per share to
holders of record as of January 23, 2009.
    
    On April 30, 2009, the Company paid a distribution of $0.34 per share to holders
of record as of April 23, 2009.
    
    On July 30, 2009, the Company paid a distribution of $0.34 per share to holders
of record as of July 24, 2009.
    
    On October 29, 2009, the Company paid a distribution of $0.34 per share to
holders of record as of October 23, 2009.
 F-32




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##### Table of Contents




    
    On January 28, 2010, the Company paid a distribution of $0.34 per share to
holders of record as of January 22, 2010.
    
    On April 30, 2010, the Company paid a distribution of $0.34 per share to holders
of record as of April 23, 2010.
    
    On July 30, 2010, the Company paid a distribution of $0.34 per share to holders
of record as of July 23, 2010.
    
    On October 29, 2010, the Company paid a distribution of $0.34 per share to
holders of record as of October 22, 2010.
   Note N  Unaudited Quarterly Financial Data
   December 31,
    
    September 30,
    
    June 30,
    
    March 31,(in thousands)
    
    2010
    
    
    2010
    
    
    2010
    
    
    2010Total revenues
    
    $
    438,901
    
    
    $
    460,767
    
    
    $
    404,322
    
    
    $
    353,619Gross profit
    
    
    99,158
    
    
    
    99,531
    
    
    
    85,692
    
    
    
    71,026Operating income (loss)
    
    
    6,261
    
    
    
    (21,212
    )
    
    
    9,086
    
    
    
    (15,175
    )Net income (loss) attributable to Holdings
    
    $
    (1,269
    )
    
    $
    (30,059
    )
    
    $
    (1,460
    )
    
    $
    (15,969
    )Basic and fully diluted loss per share attributable to Holdings:
    
    $
    (0.03
    )
    
    $
    (0.72
    )
    
    $
    (0.04
    )
    
    $
    (0.44
    )
 December 31,
    
    September 30,
    
    June 30,
    
    March 31,(in thousands)
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009Total revenues
    
    $
    362,059
    
    
    $
    324,239
    
    
    $
    287,528
    
    
    $
    274,914Gross profit
    
    
    78,910
    
    
    
    71,064
    
    
    
    64,166
    
    
    
    57,609Operating income (loss)
    
    
    6,461
    
    
    
    7,902
    
    
    
    2,974
    
    
    
    (61,995
    )Net income (loss) attributable to Holdings
    
    $
    (1,680
    )
    
    $
    2,101
    
    
    $
    627
    
    
    $
    (27,318
    )Basic and fully diluted income (loss) per share attributable to Holdings:
    
    $
    (0.05
    )
    
    $
    0.06
    
    
    $
    0.02
    
    
    $
    (0.87
    )
 F-33




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Note O  Supplemental Data
 Supplemental Balance Sheet Data (in thousands):
 December 31,
    
    
    December 31,2010
    
    
    2009Summary of accrued expenses:Accrued payroll and fringes
    
    $
    32,819
    
    
    $
    26,274Accrued taxes
    
    
    14,057
    
    
    
    9,816Income taxes payable
    
    
    7,605
    
    
    
    3,622Accrued interest
    
    
    1,771
    
    
    
    1,936Warranty payable
    
    
    3,237
    
    
    
    1,529Other accrued expenses
    
    
    14,813
    
    
    
    11,129Total
    
    $
    74,302
    
    
    $
    54,306
 December 31,
    
    
    December 31,2010
    
    
    2009Warranty liability:Beginning balance
    
    $
    1,529
    
    
    $
    1,577Accrual
    
    
    2,872
    
    
    
    1,451Warranty payments
    
    
    (1,726
    )
    
    
    (1,499
    )Other (1)
    
    
    562
    
    
    
    Ending balance
    
    $
    3,237
    
    
    $
    1,529
 
 (1)
    
    Represents warranty liabilities acquired related to Liberty and
ERGObaby. Supplemental Statement of Operations Data:
  Supplemental Cash Flow Statement Data (in thousands):
 December 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008Interest paid
    
    $
    12,033
    
    
    $
    12,527
    
    
    $
    15,754Taxes paid
    
    
    10,101
    
    
    
    7,709
    
    
    
    15,971
 Note P  Related Party Transactions
 The Company has entered into the following related party transactions with its Manager, CGM:
 
    
    Management Services Agreement
    
    LLC Agreement
    
    Supplemental Put Agreement
    
    Cost Reimbursement and Fees
 Management Services Agreement -
  F-34




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in thousands
 December 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008Advanced Circuits
    
    $
    500
    
    
    $
    375
    
    
    $
    500American Furniture
    
    
    500
    
    
    
    375
    
    
    
    500ERGObaby
    
    
    125
    
    
    
    n/a
    
    
    
    n/aFOX
    
    
    500
    
    
    
    375
    
    
    
    496HALO
    
    
    500
    
    
    
    375
    
    
    
    500Liberty
    
    
    375
    
    
    
    n/a
    
    
    
    n/aStaffmark
    
    
    304
    
    
    
    659
    
    
    
    1,715Tridien
    
    
    350
    
    
    
    263
    
    
    
    350Corporate
    
    
    12,226
    
    
    
    10,678
    
    
    
    11,144$
    15,380
    
    
    $
    13,100
    
    
    $
    15,205
   LLC Agreement
  Supplemental Put Agreement
  Cost Reimbursement and Fees
   F-35




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The Company has entered into the following significant related party transactions with its
businesses
 Advanced Circuits
     American Furniture
   
    
    $1.0 million in unpaid Management fees
    
    $35.5 million in outstanding term loans
    
    $14.1 million in outstanding revolving loans
  Fox
  F-36




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Tridien
      F-37




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SCHEDULE II Valuation and Qualifying Accounts
 Balance at
    
    
    Additionsbeginning of
    
    
    Charge to costs
    
    
    
    
    
    
    
    
    Balance at end(in thousands)
    
    year
    
    
    and expense
    
    
    Other
    
    
    Deductions
    
    
    of YearAllowance for doubtful accounts - 2008
    
    $
    3,204
    
    
    $
    3,917
    
    
    $
    1,778
    (1)
    
    $
    4,075
    (2)
    
    $
    4,824Allowance for doubtful accounts - 2009
    
    $
    4,824
    
    
    $
    5,999
    
    
    $
    
    
    
    $
    5,414
    (2)
    
    $
    5,409Allowance for doubtful accounts - 2010
    
    $
    5,409
    
    
    $
    3,645
    
    
    $
    400
    (1)
    
    $
    3,973
    
    
    $
    5,481Valuation allowance for deferred tax assets - 2008
    
    $
    359
    
    
    $
    
    
    
    $
    
    
    
    $
    359
    (3)
    
    $
    Valuation allowance for deferred tax assets - 2009
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Valuation allowance for deferred tax assets - 2010
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Represents opening allowance balances related to current year
acquisitions.(2)
    
    Represent write-offs and rebate payments.(3)
    
    Represents utilization of deferred tax asset and corresponding removal of
valuation allowance. S-1




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INDEX TO EXHIBITS
 ExhibitNumber
    
    Description2.1
    
    Stock and Note Purchase Agreement dated as of July 31, 2006, among Compass
Group Diversified Holdings LLC, Compass Group Investments, Inc. and Compass
Medical Mattress Partners, LP (incorporated by reference to Exhibit 2.1 of the
8-K filed on August 1, 2006)2.2
    
    Stock Purchase Agreement dated June 24, 2008, among Compass Group Diversified
Holdings LLC and the other shareholders party thereto, Compass Group
Diversified Holdings LLC, as Sellers Representative, Aeroglide Holdings, Inc.
and Bühler AG (incorporated by reference to Exhibit 2.1 of the 8-K filed on
June 26, 2008)3.1
    
    Certificate of Trust of Compass Diversified Trust (incorporated by reference
to Exhibit 3.1 of the S-1 filed on December 14, 2005)3.2
    
    Certificate of Amendment to Certificate of Trust of Compass Diversified Trust
(incorporated by reference to Exhibit 3.1 of the 8-K filed on September 13,
2007)3.3
    
    Certificate of Formation of Compass Group Diversified Holdings LLC
(incorporated by reference to Exhibit 3.3 of the S-1 filed on December 14,
2005)3.4
    
    Amended and Restated Trust Agreement of Compass Diversified Trust
(incorporated by reference to Exhibit 3.5 of the Amendment No. 4 to S-1 filed
on April 26, 2006)3.5
    
    Amendment No. 1 to the Amended and Restated Trust Agreement, dated as of April
25, 2006, of Compass Diversified Trust among Compass Group Diversified
Holdings LLC, as Sponsor, The Bank of New York (Delaware), as Delaware
Trustee, and the Regular Trustees named therein (incorporated by reference to
Exhibit 4.1 of the 8-K filed on May 29, 2007)3.6
    
    Second Amendment to the Amended and Restated Trust Agreement, dated as of
April 25, 2006, as amended on May 23, 2007, of Compass Diversified Trust among
Compass Group Diversified Holdings LLC, as Sponsor, The Bank of New York
(Delaware), as Delaware Trustee, and the Regular Trustees named therein
(incorporated by reference to Exhibit 3.2 of the 8-K filed on September 13,
2007)3.7
    
    Third Amendment to the Amended and Restated Trust Agreement dated as of April
25, 2006, as amended on May 25, 2007 and September 14, 2007, of Compass
Diversified Holdings among Compass Group Diversified Holdings LLC, as Sponsor,
The Bank of New York (Delaware), as Delaware Trustee, and the Regular Trustees
named therein (incorporated by reference to Exhibit 4.1 of the 8-K filed on
December 21, 2007)3.8
    
    Fourth Amendment dated as of November 1, 2010 to the Amended and Restated
Trust Agreement, as amended effective November 1, 2010, of Compass Diversified
Holdings, originally effective as of April 25, 2006, by and among Compass
Group Diversified Holdings LLC, as Sponsor, The Bank of New York (Delaware),
as Delaware Trustee, and the Regular Trustees named therein (incorporated by
reference to Exhibit 3.1 of the Form 10-Q filed on November 8, 2010)3.9
    
    Second Amended and Restated Operating Agreement of Compass Group Diversified
Holdings, LLC dated January 9, 2007 (incorporated by reference to Exhibit 10.2
of the 8-K filed on January 10, 2007)3.10
    
    Third Amended and Restated Operating Agreement of Compass Group Diversified
Holdings, LLC dated November 1, 2010 (incorporated by reference to Exhibit 3.2
of the Form 10-Q filed on November 8, 2010)4.1
    
    Specimen Certificate evidencing a share of trust of Compass Diversified
Holdings (incorporated by reference to Exhibit 4.1 of the S-3 filed on
November 7, 2007)4.2
    
    Specimen Certificate evidencing an interest of Compass Group Diversified
Holdings LLC (incorporated by reference to Exhibit 10.2 of the 8-K filed on
January 10, 2007)10.1
    
    Form of Registration Rights Agreement (incorporated by reference to Exhibit
10.3 of the Amendment No. 5 to S-1 filed on May 5, 2006)10.2
    
    Form of Supplemental Put Agreement by and between Compass Group Management LLC
and Compass Group Diversified Holdings LLC (incorporated by reference to
Exhibit 10.4 of the Amendment No. 4 to S-1 filed on April 26, 2006)10.3
    
    Amended and Restated Employment Agreement dated as of December 1, 2008 by and
between James J. Bottiglieri and Compass Group Management LLC (incorporated by
reference to Exhibit 10.1 of the 8-K filed on December 3, 2008)10.4
    
    Form of Share Purchase Agreement by and between Compass Group Diversified
Holdings LLC, Compass Diversified Trust and CGI Diversified Holdings, LP
(incorporated by reference to Exhibit 10.6 of the Amendment No. 5 to S-1 filed
on May 5, 2006)10.5
    
    Form of Share Purchase Agreement by and between Compass Group Diversified
Holdings LLC, Compass Diversified Trust and Pharos I LLC (incorporated by
reference to Exhibit 10.7 of the Amendment No. 5 to S-1 filed on May 5, 2006)10.6
    
    Credit Agreement among Compass Group Diversified Holdings LLC, the financial
institutions party thereto and Madison Capital Funding LLC, dated as of
November 21, 2006 (incorporated by reference to Exhibit 10.1




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##### Table of Contents



ExhibitNumber
    
    Descriptionof the 8-K filed on November 22, 2006)10.7
    
    First Amendment to Credit Agreement, entered into as of December 19, 2006,
among Compass Group Diversified Holdings LLC, the financial institutions party
thereto and Madison Capital Funding LLC (incorporated by reference to Exhibit
10.7 of the 10-K filed on March 14, 2008)10.8
    
    Increase Notice, Consent and Second Amendment to Credit Agreement, effective
as of May 23, 2007, by and among Compass Group Diversified Holdings LLC, the
financial institutions party thereto and Madison Capital Funding LLC
(incorporated by reference to Exhibit 10.1 of the 8-K filed on May 29, 2007)10.9
    
    Third Amendment to Credit Agreement as of December 7, 2007, among Madison
Capital Funding LLC, as Agent for the Lenders, the Existing Lenders and New
Lenders and Compass Group Diversified Holdings LLC (incorporated by reference
to Exhibit 10.1 of the 8-K filed on December 11, 2007)10.10
    
    Increase Notice and Fourth Amendment to Credit Agreement, entered into as of
January 30, 2008, among Compass Group Diversified Holdings LLC, the financial
institutions party thereto and Madison Capital Funding LLC (incorporated by
reference to Exhibit 10.7 of the 10-K on March 14, 2008)10.11
    
    Amended and Restated Management Services Agreement by and between Compass
Group Diversified Holdings LLC, and Compass Group Management LLC, dated as of
December 15, 2009 and originally effective as of May 16, 200610.12
    
    Registration Rights Agreement by and among Compass Group Diversified Holdings
LLC, Compass Diversified Trust and CGI Diversified Holdings, LP, dated as of
April 3, 2007 (incorporated by reference to Exhibit 10.3 of the Amendment No.
1 to the S-1 filed on April 20, 2007)10.13
    
    Form of Share Purchase Agreement by and between Compass Group Diversified
Holdings LLC, Compass Diversified Trust and CGI Diversified Holdings, LP
(incorporated by reference to Exhibit 10.16 of the Amendment No. 1 to the S-1
filed on April 20, 2007)21.1*
    
    List of Subsidiaries23.1*
    
    Consent of Independent Registered Public Accounting Firm31.1*
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Registrant31.2*
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Registrant32.1*
    
    Section 1350 Certification of Chief Executive Officer of Registrant32.2*
    
    Section 1350 Certification of Chief Financial Officer of Registrant99.1
    
    Note Purchase and Sale Agreement dated as of July 31, 2006 among Compass Group
Diversified Holdings LLC, Compass Group Investments, Inc. and Compass Medical
Mattress Partners, LP (incorporated by reference to Exhibit 99.1 of the 8-K
filed on August 1, 2006)99.2
    
    Stock Purchase Agreement, dated as of February 28, 2007, by and between HA-LO
Holdings, LLC and HALO Holding Corporation (incorporated by reference to
Exhibit 99.3 of the 8-K filed on March 1, 2007)99.3
    
    Purchase Agreement dated December 19, 2007, among CBS Personnel Holdings, Inc.
and Staffing Holding LLC, Staffmark Merger LLC, Staffmark Investment LLC, SF
Holding Corp., and Stephens-SM LLC (incorporated by reference to Exhibit 99.1
of the 8-K filed on December 20, 2007)99.4
    
    Share Purchase Agreement dated January 4, 2008, among Fox Factory Holding
Corp., Fox Factory, Inc. and Robert C. Fox, Jr. (incorporated by reference to
Exhibit 99.1 of the 8-K filed on January 8, 2008)99.5
    
    Stock Purchase Agreement dated May 8, 2008, among Mitsui Chemicals, Inc.,
Silvue Technologies Group, Inc., the stockholders of the Company and the
holders of Options listed on the signature pages thereto, and Compass Group
Management LLC, as the Stockholders Representative (incorporated by reference
to Exhibit 99.1 of the 8-K filed on May 9, 2008)99.6
    
    Stock Purchase Agreement dated March 31, 2010 by and among Gable 5, Inc.,
Liberty Safe and Security Products, LLC and Liberty Safe Holding Corporation
(incorporated by reference to Exhibit 99.1 of the 8-K filed on April 1, 2010)99.7
    
    Stock Purchase Agreement dated September 16, 2010, by and among ERGO Baby
Intermediate Holding Corporation, The ERGO Baby Carrier, Inc., Karin A. Frost,
in her individual capacity and as Trustee of the Revocable Trust of Karin A.
Frost dated February 22, 2008 and as Trustee of the Karin A. Frost 2009
Qualified Annuity Trust u/a/d 12/21/2009 (incorporated by reference to Exhibit
99.1 of the 8-K filed on September 17, 2010)
 
 *
    
    Filed herewith.