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, 2009
 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
    
    57-6218917(Jurisdiction of
incorporation or organization)
    
    (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
    
    20-3812051(Jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 Sixty One Wilton Road 
Second Floor 
Westport, CT
    
    06880(Address of principal executive offices)
    
    (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)
    
    NASDAQ Stock Market, Inc.
 Securities registered pursuant to Section 12 (g) of the Act: None
 o þ
 o þ
  þ o
 o o
 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
    
    
    46Item 1B. Unresolved Staff Comments
    
    
    62Item 2. Properties
    
    
    63Item 3. Legal Proceedings
    
    
    64Item 4. Submission of Matters to a Vote of Security Holders
    
    
    65PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    66Item 6 Selected Financial Data
    
    
    68Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    70Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    97Item 8. Financial Statements and Supplementary Data
    
    
    98Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    99Item 9A Controls and Procedures
    
    
    100Item 9B. Other Information
    
    
    101PART IIIItem 10. Directors, and Executive Officers and Corporate Governance
    
    
    102Item 11. Executive Compensation
    
    
    102Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    102Item 13. Certain Relationships and Related Transactions and Director Independence
    
    
    102Item 14. Principal Accountant Fees and Services
    
    
    102PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    103
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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, CBS Personnel 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 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 $76.0 million Term Loan Facility, as of
December 31, 2009, 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.
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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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2009 Highlights
 Term Loan Facility pay down
  Equity offering
  2009 distributions
  The following is a brief summary of the businesses in which we own a controlling interest at
December 31, 2009:
 Advanced Circuits
  American Furniture
  Anodyne
  Fox
  HALO
  5




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Staffmark
     Tax Reporting
  WHERE YOU CAN FIND ADDITIONAL INFORMATION
 http://www.compassdiversifiedholdings.com
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(1)
    
    CGI and its affiliates beneficially own approximately 21.0% of the Trust shares and is our
single largest holder. Mr. Massoud is not a director, officer or member 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. 7




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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.
  8




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Our Strategy
  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
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
    
    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.
  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.
    10




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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.
  11




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Financing
      Our Businesses
 Advanced Circuits
 Overview
  12




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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.
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
    
    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 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
   14




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TM
   Gross Sales by Products and Services (1)
 Year Ended December 31,2009
    
    
    2008
    
    
    2007Prototype Production
    
    
    30.6
    %
    
    
    31.6
    %
    
    
    32.2
    %Quick-Turn Production
    
    
    36.4
    %
    
    
    34.4
    %
    
    
    33.0
    %Volume Production (including assembly)
    
    
    30.1
    %
    
    
    27.5
    %
    
    
    22.3
    %Third Party
    
    
    2.9
    %
    
    
    6.5
    %
    
    
    12.5
    %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, 2009, Advanced
Circuits received an average approximately 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,
2009, Advanced Circuits did business with over 10,000 customers and added approximately
214 new customers per month. For each of the years ended December 31, 2009, 2008 and
2007 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
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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.
    
    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.
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Research and Development
  Customers
  2009 Customer
    
    
    2008 Customer
    
    
    2007 CustomerIndustry Sector
    
    Distribution
    
    
    Distribution
    
    
    DistributionElectrical Equipment and Components
    
    
    33
    %
    
    
    32
    %
    
    
    35
    %Measuring Instruments
    
    
    13
    %
    
    
    12
    %
    
    
    15
    %Electronics Manufacturing Services
    
    
    15
    %
    
    
    16
    %
    
    
    13
    %Engineer Services
    
    
    5
    %
    
    
    5
    %
    
    
    5
    %Industrial and Commercial Machinery
    
    
    8
    %
    
    
    8
    %
    
    
    5
    %Business Services
    
    
    2
    %
    
    
    2
    %
    
    
    5
    %Wholesale Trade-Durable Goods
    
    
    1
    %
    
    
    2
    %
    
    
    3
    %Educational Institutions
    
    
    8
    %
    
    
    6
    %
    
    
    5
    %Transportation Equipment
    
    
    10
    %
    
    
    8
    %
    
    
    5
    %All Other Sectors Combined
    
    
    5
    %
    
    
    9
    %
    
    
    9
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  Sales and Marketing
     17




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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
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Regulatory Environment
  Employees
  American Furniture
 Overview
     History of American Furniture
  19




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Industry
   
     Off-shore Imports
   20




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Products and Services
  
  Product Development
  Manufacturing
  21




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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 customersWhile 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
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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. On line sales expanded in 2009 growing to approximately 7% of sales. This
was accomplished through sales to national and regional internet marketing firms.
    
    Product developmentAFM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 componentsIn 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 acquisitionsAFM 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 initiativesCurrently, AFM is aggressively pursuing expense reduction, cost cutting programs and cash
preservation initiatives throughout all parts of its business.
 Customers
  Sales and Marketing
     23




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Competition
  Suppliers
  Regulatory Environment
  Employees
  Anodyne
 Overview
   24




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History
      Industry
    25




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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. Anodyne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. Anodyne 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.
    
    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 Anodyne manufactures a broad
range of non-powered mattress systems using air, foam and gel.
    
    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. Anodyne offers a complete range of foam positioning devices.
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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 Anodyne 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 Anodyne 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.
Anodyne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 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
  27




---



##### 



Customers
   Sales and Marketing
    Suppliers
  Intellectual Property
  Regulatory Environment
  28




---



##### 



Employees
  Fox
 Overview
     History of Fox
     Industry
  Mountain Biking 
 29




---



##### 



Snowmobiles
  All-Terrain Vehicles
  Motorcycles/Motocross
 Off-Road Vehicles
 Products and Services
   30




---



##### 



Competitive Strengths
 Proprietary Engineering Expertise 
 Highly Recognizable Brand
 Strong Blue-Chip Customer Relationships
 Business Strategies
 Expand Revenues from Powered Vehicles Business 
 Expand Aftermarket Sales 
 International Growth
 Pursue New Market Trends and Opportunities
 Research and Development
    31




---



##### 



Customers
   Sales and Marketing
      Competition
   Mountain Biking
 32




---



##### 



Snowmobiles
 All-Terrain Vehicles
  Off-Road Vehicles
 Suppliers
    Intellectual Property
   Regulatory Environment
   33




---



##### 



Employees
  HALO
 Overview
    History of HALO
    Industry
    34




---



##### 



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
   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, 2009, 2008 and 2007, HALOs top ten customers
represented less than 20% of its revenues. HALOs team of
account executives are often deeply involved in their
 35




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##### 



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.
    
    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.
    
    Restructure costs In light
of the severe economic pressures HALO
has reduced its expenses to more
appropriately align its cost
structure with anticipated reductions
in revenue due to the current economic
downturn. These expense reductions
address most aspects of HALOs
business.
    
    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
  Sales and Marketing
    (Percent of sales by product category is not available for fiscal 2007)
 Product category
    
    Percent of salesApparel
    
    
    20.0
    %Office accessories
    
    
    15.0
    %Bags
    
    
    14.0
    %Writing instruments
    
    
    14.0
    %Calendars
    
    
    12.0
    %Jewelry/awards
    
    
    5.0
    %Drink ware
    
    
    4.0
    %Other
    
    
    16.0
    %100.0
    %
 36




---



##### 



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.
  Suppliers
  Employees
  Staffmark
 Overview
 www.staffmark.com
 37




---



##### 



History of Staffmark
      Industry
   38




---



##### 



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,
healthcare, construction, transportation, professional and technical staffing;
    
    employee leasing and related administrative services; and
    
    temporary-to-hire and permanent placement 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
light manufacturing (such as assembly-line work in factories) sectors of the economy.
Approximately 72%, 72% and 58% of Staffmarks temporary staffing revenues were derived
from light industrial in the years 2009, 2008 and 2007, respectively.
    
    Clerical Staffmark provides clerical workers that have been screened,
reference-checked and tested for computer ability, typing speed, word processing and
data entry capabilities. Clerical workers are often employed at client call centers and
corporate offices. Approximately 20%, 21% and 31% of Staffmarks temporary staffing
revenues were derived from clerical in the years 2009, 2008 and 2007, respectively.
    
    Technical Staffmark provides placement candidates in a variety of skilled technical
capacities, including plant managers, engineering management, operations managers,
designers, draftsmen, engineers, materials
 39




---



##### 



management, line supervisors, electronic assemblers, laboratory assistants and quality
control personnel. Approximately 2%, 3% and 3% of Staffmarks temporary staffing
revenues were derived from technical for the fiscal years ended December 31, 2009, 2008
and 2007, respectively.
    
    Healthcare Through its expert placement agents in its Columbia Healthcare division,
Staffmark provides trained candidates in the following healthcare categories: medical
office personnel, medical technicians, rehabilitation professionals, management and
administrative personnel and radiology technicians, among others. Approximately 1% of
Staffmarks temporary staffing revenues were derived from healthcare for the fiscal
years ended December 31, 2009 and 2008 and 2% of Staffmarks temporary staffing revenues
were derived from healthcare in fiscal 2007.
    
    Niche/Other In addition to the light industrial, clerical, healthcare and technical
categories, Staffmark also provides certain niche staffing services, placing candidates
in the skilled industrial, construction and transportation sectors, among others.
Staffmarks wide array of niche service offerings allows it to meet a broad range of
client needs. Moreover, these niche services typically generate higher margins for
Staffmark. Approximately 5%, 4% and 6% of Staffmarks temporary staffing revenues were
derived from niche/other for the fiscal years ended December 31, 2009, 2008 and 2007,
respectively.
  Employee Leasing Services
   Temporary-to-Hire and Permanent Placement Services
  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
 40




---



##### 



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 current economic downturn, Staffmark has enacted a
strategy which includes reducing costs and closing offices. Staffmark is capitalizing
on synergies from the Staffmark acquisition, which allows for further contraction of
offices and reduction of costs without abandoning clients or employees in markets.
    
    Marketing Synergies By having a number of 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 use
selling branch managers who split time between operations and sales, Staffmark uses
outside sales reps that are exclusively 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.
    
    Build a Presence in Contiguous Markets Staffmark plans on opening new branch
locations in markets contiguous to those in which it operates when it is economically
prudent. Staffmark believes that the cost and time required to establish profitable
branch locations is minimized through expansion into contiguous markets as costs
associated with advertising and administrative overhead are reduced due to proximity.
    
    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
  Sales, Marketing and Recruiting Efforts
   41




---



##### 



Competition
   
    
    multiple offices in its core markets;
    
    long-standing relationships with its clients;
    
    a large database of qualified temporary workers which enables Staffmark to fill
orders rapidly;
    
    well-recognized brands and leadership positions in its core markets; and
    
    a reputation for treating employees well and offering competitive benefits.
   42




---



##### 



Trade names
 CBS Personnel TM , CBS Personnel
Services TM , Columbia Staffing TM, Columbia Healthcare
Services TM, Venturi Staffing Partners TM and
Staffmark TM.
 43




---



##### 



Facilities
  EmployeeNumber of
    
    
    HoursState
    
    Branch Offices
    
    
    Billed (000s)CA
    
    
    30
    
    
    
    7,404OH
    
    
    23
    
    
    
    6,418TN
    
    
    14
    
    
    
    6,108AR
    
    
    17
    
    
    
    3,900TX
    
    
    17
    
    
    
    4,234KY
    
    
    10
    
    
    
    2,202NC
    
    
    12
    
    
    
    2,181PA
    
    
    8
    
    
    
    2,462IL
    
    
    10
    
    
    
    2,226IN
    
    
    8
    
    
    
    2,070GA
    
    
    7
    
    
    
    2,092SC
    
    
    8
    
    
    
    1,449MD
    
    
    5
    
    
    
    1,168MA
    
    
    2
    
    
    
    225VA
    
    
    4
    
    
    
    1,115NV
    
    
    4
    
    
    
    715NJ
    
    
    4
    
    
    
    1,102WA
    
    
    3
    
    
    
    278AZ
    
    
    3
    
    
    
    475NY
    
    
    3
    
    
    
    416KS
    
    
    2
    
    
    
    911MS
    
    
    2
    
    
    
    396AL
    
    
    2
    
    
    
    509CO
    
    
    2
    
    
    
    490CT
    
    
    2
    
    
    
    324OK
    
    
    2
    
    
    
    185DE
    
    
    1
    
    
    
    1,000OR
    
    
    1
    
    
    
    291MO
    
    
    1
    
    
    
    196WI
    
    
    1
    
    
    
    230208
    
    
    
    52,772
  Regulatory Environment
  44




---



##### 



Workers Compensation Program
    Employees
   Rebranding of CBS Personnel to Staffmark
  45




---



##### 



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 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.
  46




---



##### 



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;
    
    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;
 47




---



##### 




    
    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.
  48




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##### 



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.
  49




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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 our Chief Executive Officer, 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.
  50




---



##### 



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.
  51




---



##### 



Our Managers influence on conducting our operations, including on our conducting of
transactions, gives it the ability to increase its fees and compensation to our Chief Executive
Officer, 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.
  52




---



##### 



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.
  53




---



##### 



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.
 54




---



##### 



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.
  55




---



##### 



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.
   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.
  56




---



##### 



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.
  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.
  57




---



##### 



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.
  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 Anodyne
 Certain of Anodynes products are subject to regulation by the FDA.
  A change in Medicare Reimbursement Guidelines may reduce demand for Anodynes products.
  Two of Anodynes largest customers represented approximately 50% of its gross sales in 2009.
  58




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##### 



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.
  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 affect 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
 59




---



##### 



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.
  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 .
    60




---



##### 



61




---



##### 



ITEM 1B. UNRESOLVED STAFF COMMENTS
  62




---



##### 



ITEM 2.  PROPERTIES
 Advanced Circuits
  American Furniture
  Anodyne
  Fox
  HALO
   State
    
    Function
    
    Offices
    

Square feetCalifornia
    
    Sales
    
    2
    
    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
    
    800Florida
    
    Sales
    
    1
    
    1,000Oklahoma
    
    Administration
    
    1
    
    5,500Georgia
    
    Sales
    
    1
    
    1,550
 Staffmark
    63




---



##### 



ITEM 3.  LEGAL PROCEEDINGS
  64




---



##### 



ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  65




---



##### 



Part II
 
 Item 5.  Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
 Market Information
  Quarter Ended
    
    High
    
    Low
    
    
    Distribution DeclaredDecember 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
    
    
    
    0.34December 31, 2008
    
    14.44
    
    
    7.52
    
    
    
    0.34September 30, 2008
    
    14.64
    
    
    9.51
    
    
    
    0.34June 30, 2008
    
    13.75
    
    
    10.75
    
    
    
    0.325March 31, 2008
    
    15.58
    
    
    10.89
    
    
    
    0.325
 COMPARATIVE PERFORMANCE OF SHARES OF TRUST STOCK
  
 66




---



##### 



Data
    
    June 30, 2006
    
    September 30, 2006
    
    December 31, 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
    
    
    $
    107.59
 September 30,Data
    
    March 31, 2007
    
    June 30, 2007
    
    2007
    
    December 31, 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
    
    
    $
    108.11
 September 30,Data
    
    March 31, 2008
    
    June 30, 2008
    
    2008
    
    December 31, 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
    
    
    $
    57.91
 September 30,Data
    
    March 31, 2009
    
    June 30, 2009
    
    2009
    
    December 31, 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
    
    
    $
    75.76
 Shareholders
  Distributions
  Quarter Ended
    
    Declaration Date
    
    Payment Date
    
    Distribution Per ShareDecember 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
    
    $0.34December 31, 2008
    
    January 8, 2009
    
    January 30, 2009
    
    $0.34September 30, 2008
    
    October 9, 2008
    
    October 31, 2008
    
    $0.34June 30, 2008
    
    July 10, 2008
    
    July 29, 2008
    
    $0.325March 31, 2008
    
    April 5, 2008
    
    April 25, 2008
    
    $0.325
  67




---



##### 



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, 2008Anodyne
    
    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/a
 
 (1)
    
    Represent initial operating subsidiaries.(2)
    
    Staffmark LLC was acquired by CBS Personnel.  Year ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Statements of Operations Data:Net sales
    
    $
    1,248,740
    
    
    $
    1,538,473
    
    
    $
    841,791
    
    
    $
    395,173
    
    
    $
    Cost of sales
    
    
    976,991
    
    
    
    1,196,206
    
    
    
    636,008
    
    
    
    307,014
    
    
    
    Gross profit
    
    
    271,749
    
    
    
    342,267
    
    
    
    205,783
    
    
    
    88,159
    
    
    
    Operating expenses:Staffing
    
    
    74,279
    
    
    
    102,438
    
    
    
    56,207
    
    
    
    34,345
    
    
    
    Selling, general and administrative
    
    
    145,948
    
    
    
    165,768
    
    
    
    94,426
    
    
    
    31,605
    
    
    
    1Supplemental put expense (reversal)
    
    
    (1,329
    )
    
    
    6,382
    
    
    
    7,400
    
    
    
    22,456
    
    
    
    Management fees
    
    
    13,100
    
    
    
    15,205
    
    
    
    10,120
    
    
    
    4,158
    
    
    
    Amortization expense
    
    
    24,609
    
    
    
    24,605
    
    
    
    12,679
    
    
    
    5,814
    
    
    
    Impairment expense
    
    
    59,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    (44,658
    )
    
    
    27,869
    
    
    
    24,951
    
    
    
    (10,219
    )
    
    
    (1
    )Income (loss) from continuing operations
    
    
    (39,645
    )
    
    
    3,817
    
    
    
    10,051
    
    
    
    (27,973
    )
    
    
    (1
    )Income and gain from discontinued operations
    
    
    
    
    
    
    77,970
    
    
    
    41,314
    
    
    
    9,831
    
    
    
    Net income (loss)
    
    
    (39,645
    )
    
    
    81,787
    
    
    
    51,365
    
    
    
    (18,142
    )
    
    
    (1
    )Net income (loss) attributable to noncontrolling interest
    
    
    (13,375
    )
    
    
    3,493
    
    
    
    10,997
    
    
    
    1,107
    
    
    
    Net income (loss) attributable to Holdings (1), (2)
    
    $
    (26,270
    )
    
    $
    78,294
    
    
    $
    40,368
    
    
    $
    (19,249
    )
    
    $
    (1
    )Basic and fully diluted income (loss) per share attributable to Holdings:Continuing operations
    
    $
    (0.76
    )
    
    $
    0.01
    
    
    $
    (0.04
    )
    
    $
    (2
    )
    
    $
    Discontinued operations
    
    
    
    
    
    
    2.47
    
    
    
    1.50
    
    
    
    0.77
    
    
    
    Basic and fully diluted income (loss) per share attributable to Holdings
    
    $
    (0.76
    )
    
    $
    2.48
    
    
    $
    1.46
    
    
    $
    (1.52
    )
    
    $
    Cash Flow Data:Cash provided by operating activities
    
    $
    20,213
    
    
    $
    40,549
    
    
    $
    41,772
    
    
    $
    20,563
    
    
    $
    Cash used in investing activities
    
    
    (4,982
    )
    
    
    (24,793
    )
    
    
    (114,158
    )
    
    
    (362,286
    )
    
    
    Cash (used in) provided by financing activities
    
    
    (81,209
    )
    
    
    (37,561
    )
    
    
    184,882
    
    
    
    351,073
    
    
    
    100Net (decrease) increase in cash and cash equivalents
    
    
    (65,978
    )
    
    
    (21,885
    )
    
    
    112,352
    
    
    
    9,610
    
    
    
    100
 
 (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. 68




---



##### 



December 31,2009
    
    2008
    
    2007
    
    2006
    
    2005Balance Sheet Data:Current assets
    
    $
    275,027
    
    
    $
    335,201
    
    
    $
    299,241
    
    
    $
    135,121
    
    
    $
    3,408Total assets
    
    
    831,012
    
    
    
    984,336
    
    
    
    828,002
    
    
    
    496,382
    
    
    
    3,408Current liabilities
    
    
    129,887
    
    
    
    139,370
    
    
    
    106,613
    
    
    
    155,534
    
    
    
    3,309Long-term debt
    
    
    74,000
    
    
    
    151,000
    
    
    
    148,000
    
    
    
    
    
    
    
    Total liabilities
    
    
    322,946
    
    
    
    440,458
    
    
    
    373,285
    
    
    
    221,934
    
    
    
    3,309Noncontrolling interests
    
    
    70,905
    
    
    
    79,431
    
    
    
    21,867
    
    
    
    17,734
    
    
    
    100Shareholders equity (deficit) attributable to Holdings
    
    
    437,161
    
    
    
    464,447
    
    
    
    432,850
    
    
    
    255,711
    
    
    
    (1
    )
 69




---



##### 



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.
  70




---



##### 



Initial public offering and Company formation
    Acquisitions
 
    
    On May 16, 2006, we made loans to and purchased a controlling interest in
CBS Personnel Holdings, Inc., which we refer to as Staffmark,for approximately
$128 million. As of December 31, 2009, we own approximately 76.2% of the common stock
on a primary basis and 69.4% 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, 2009, we
own approximately 70.2% of the common stock on a primary and 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
Anodyne for approximately $31 million. As of December 31, 2009, we own
approximately 74.4% of the common stock on a primary basis and 61.7% 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 was purchased for approximately $62 million. As of December 31, 2009,
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, 2009, we
own approximately 93.9% of the common stock on a primary basis and 84.5% on a fully
diluted basis.
    
    On January 4, 2008, we made loans to and purchased a controlling interest in
Fox for approximately $80.4 million. As of December 31, 2009, we own
approximately 75.5% of the common stock on a primary basis and 67.5% on a fully diluted
basis.
 71




---



##### 



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.
 2009 Highlights
 Term
Loan Facility pay down
 Equity offering
 2009 Distributions
 Areas for focus in 2010
  
    
    Taking advantage, where possible, of the current 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;
    
    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; and
 72




---



##### 



Results of Operations
  May 16, 2006
    
    August 1, 2006
    
    February 28, 2007
    
    August 31, 2007
    
    January 4, 2008Advanced Circuits
    
    Anodyne
    
    HALO
    
    American Furniture
    
    FoxStaffmark
  Consolidated Results of Operations  Compass Diversified Holdings
 Years Ended December 31,2009
    
    
    2008
    
    
    2007(in thousands)Net sales
    
    $
    1,248,740
    
    
    
    1,538,473
    
    
    $
    841,791Cost of sales
    
    
    976,991
    
    
    
    1,196,206
    
    
    
    636,008Gross profit
    
    
    271,749
    
    
    
    342,267
    
    
    
    205,783Staffing, selling, general and administrative expense
    
    
    220,227
    
    
    
    268,206
    
    
    
    150,633Management fees
    
    
    13,100
    
    
    
    15,205
    
    
    
    10,120Supplemental put expense (reversal)
    
    
    (1,329
    )
    
    
    6,382
    
    
    
    7,400Amortization of intangibles
    
    
    24,609
    
    
    
    24,605
    
    
    
    12,679Impairment expense
    
    
    59,800
    
    
    
    
    
    
    
    Operating income (loss)
    
    $
    (44,658
    )
    
    $
    27,869
    
    
    $
    24,951
 Net sales
   Cost of sales
  Staffing, selling, general and administrative expense
  73




---



##### 



Management fees
  Supplemental put expense
  Impairment expense
   Results of Operations  Our Businesses
  74




---



##### 



Advanced Circuits
 Overview
    Results of Operations
  Year Ended December 31,2009
    
    
    2008
    
    
    2007(in thousands)Net sales
    
    $
    46,518
    
    
    $
    55,449
    
    
    $
    52,292Cost of sales
    
    
    19,958
    
    
    
    23,781
    
    
    
    23,139Gross profit
    
    
    26,560
    
    
    
    31,668
    
    
    
    29,153Selling, general and administrative expenses
    
    
    7,367
    
    
    
    10,872
    
    
    
    8,914Management fees
    
    
    375
    
    
    
    500
    
    
    
    500Amortization of intangibles
    
    
    2,521
    
    
    
    2,631
    
    
    
    2,661Income from operations
    
    $
    16,297
    
    
    $
    17,665
    
    
    $
    17,078
 Fiscal Year Ended December 31, 2009 Compared to Fiscal Year Ended December 31, 2008
 Net sales
  75




---



##### 



Cost of sales
  Selling, general and administrative expenses
 Significant Related Party
Transactions  Advanced Circuits.
 Income from operations
  Fiscal Year Ended December 31, 2008 Compared to Fiscal Year Ended December 31, 2007
 Net sales
  Cost of sales
  Selling, general and administrative expenses
  Income from operations
  76




---



##### 



American Furniture
 Overview
     Results of Operations
  Year Ended December 31,2009
    
    
    2008
    
    
    2007(Pro-forma)(in thousands)Net sales
    
    $
    141,971
    
    
    $
    130,949
    
    
    $
    156,635Cost of sales
    
    
    114,345
    
    
    
    104,540
    
    
    
    120,739Gross profit
    
    
    27,626
    
    
    
    26,409
    
    
    
    35,896Selling, general and administrative expenses (a)
    
    
    18,081
    
    
    
    17,853
    
    
    
    20,672Management fees
    
    
    375
    
    
    
    500
    
    
    
    500Amortization of intangibles (b)
    
    
    2,683
    
    
    
    2,933
    
    
    
    2,933Income from operations
    
    $
    6,487
    
    
    $
    5,123
    
    
    $
    11,791
 
 Prior period results of operations of American Furniture for the year ended December 31,
2007 include the following pro-forma adjustments:(a)
    
    Selling, general and administrative expenses were reduced by $2.8 million, representing
one-time transaction costs incurred by the seller.(b)
    
    A reduction in charges to amortization of intangible assets totaling $0.7 million, as a
result of, and derived from, the purchase price allocation in connection with our acquisition of
American Furniture in August 2007. 77




---



##### 



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
  Fiscal Year Ended December 31, 2008 Compared to Pro-forma Fiscal Year Ended December 31, 2007
 Net sales
  Cost of sales
  78




---



##### 



Selling, general and administrative expenses
  Income from operations
  Anodyne
 Overview
   Results of Operations
  Year Ended December 31,2009
    
    
    2008
    
    
    2007(in thousands)Net sales
    
    $
    54,075
    
    
    $
    54,199
    
    
    $
    44,189Cost of sales
    
    
    37,982
    
    
    
    40,683
    
    
    
    33,073Gross profit
    
    
    16,093
    
    
    
    13,516
    
    
    
    11,116Selling, general and administrative expenses
    
    
    6,947
    
    
    
    7,455
    
    
    
    6,502Management fees
    
    
    263
    
    
    
    350
    
    
    
    350Amortization of intangibles
    
    
    1,483
    
    
    
    1,483
    
    
    
    1,328Income from operations
    
    $
    7,400
    
    
    $
    4,228
    
    
    $
    2,936
 79




---



##### 



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
  Fiscal Year Ended December 31, 2008 Compared to Fiscal Year Ended December 31, 2007
 Net sales
  Cost of sales
  Selling, general and administrative expenses
  80




---



##### 



Amortization expense
  Income from operations
  Fox
 Overview
    Results of Operations
  Year Ended December 31,2009
    
    
    2008
    
    
    2007(Pro-forma)(in thousands)Net sales
    
    $
    121,519
    
    
    $
    131,734
    
    
    $
    105,726Cost of sales (a)
    
    
    87,038
    
    
    
    95,844
    
    
    
    81,765Gross profit
    
    
    34,481
    
    
    
    35,890
    
    
    
    23,961Selling, general and administrative expenses (b)
    
    
    18,231
    
    
    
    19,182
    
    
    
    15,818Management fees (c )
    
    
    375
    
    
    
    500
    
    
    
    500Amortization of intangibles (d)
    
    
    5,217
    
    
    
    5,501
    
    
    
    5,233Income from operations
    
    $
    10,658
    
    
    $
    10,707
    
    
    $
    2,410
 
 Prior period results of operations of Fox for the year ended December 31, 2007 include the
following pro-forma adjustments:(a)
    
    An increase in cost of sales totaling $0.3 million, reflecting additional depreciation expense
as a result of, and derived from, the purchase price allocation in connection with our acquisition
of Fox in January 2008. 81




---



##### 



(b)
    
    An increase in selling, general and administrative expense totaling $0.1 million reflecting
additional depreciation expense as a result of, and derived from, the purchase price allocation in
connection with our acquisition of Fox in January 2008.(c)
    
    An increase in management fees totaling $0.5 million reflecting quarterly fees that would have
been due to our Manager in connection with our Management Services Agreement.(d)
    
    An increase in amortization of intangible assets totaling $5.2 million reflecting amortization
expense as a result of, and derived from, the purchase price allocation in connection with our
acquisition of Fox in January 2008. 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
  Fiscal Year Ended December 31, 2008 Compared to Pro-forma Fiscal Year Ended December 31, 2007
 Net sales
  82




---



##### 



Cost of sales
  Selling, general and administrative expenses
  Income from operations
  HALO
 Overview
    Results of Operations
  Year Ended December 31,2009
    
    
    2008
    
    
    2007(Pro-forma)(in thousands)Net sales
    
    $
    139,317
    
    
    $
    159,797
    
    
    $
    144,342Cost of sales
    
    
    84,883
    
    
    
    98,845
    
    
    
    88,939Gross profit
    
    
    54,434
    
    
    
    60,952
    
    
    
    55,403Selling, general and administrative expenses (a)
    
    
    48,714
    
    
    
    52,806
    
    
    
    47,069Management fees (b)
    
    
    375
    
    
    
    500
    
    
    
    500Amortization of intangibles (c)
    
    
    2,498
    
    
    
    2,357
    
    
    
    2,110Income from operations
    
    $
    2,847
    
    
    $
    5,289
    
    
    $
    5,724
 
 Prior period results of operations of HALO for the year ended December 31, 2007 includes
the following pro-forma adjustments:(a)
    
    An increase in selling, general and administrative expense totaling $0.3 million
reflecting additional depreciation expense as a result of, and derived from, the purchase price
allocation in connection with our acquisition of HALO in February 2007.(b)
    
    An increase in management fees totaling $0.1 million, reflecting additional quarterly fees that
would have been due to our Manager in connection with our Management Services Agreement.(c)
    
    An increase in amortization of intangible assets totaling $0.3 million reflecting
additional amortization expense as a result of, and derived from, the purchase price allocation in
connection with our acquisition of HALO in February 2007. 83




---



##### 



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
  Income from operations
  Fiscal Year Ended December 31, 2008 Compared to Pro-forma Fiscal Year Ended December 31, 2007
 Net sales
  84




---



##### 



Cost of sales
  Selling, general and administrative expenses
  Amortization expense
  Income from operations
  Staffmark
 Overview
     Results of Operations
  85




---



##### 



Years Ended December 31,2009
    
    
    2008
    
    
    2007Pro-forma
    
    
    Pro-forma(in thousands)Service revenues
    
    $
    745,340
    
    
    $
    1,037,418
    
    
    $
    1,153,144Cost of services
    
    
    632,800
    
    
    
    859,026
    
    
    
    951,272Gross profit
    
    
    112,540
    
    
    
    178,392
    
    
    
    201,872Staffing, selling, general and administrative expenses
    
    
    112,358
    
    
    
    155,453
    
    
    
    163,193Management fees (a)
    
    
    931
    
    
    
    1,761
    
    
    
    1,930Amortization of intangibles (b)
    
    
    4,854
    
    
    
    5,082
    
    
    
    5,155Impairment expense
    
    
    50,000
    
    
    
    
    
    
    
    Income (loss) from operations
    
    $
    (55,603
    )
    
    $
    16,096
    
    
    $
    31,594
 
 Combined results of operations of CBS Personnel and Staffmark for the years ended December
31, 2008 and 2007 include the following pro-forma adjustments:(a)
    
    An increase in management fees totaling $0.9 million in 2007 reflecting quarterly fees that
would have been due to our Manager in connection with our Management Services Agreement based on
the incremental Staffmark LLC net revenues(b)
    
    An increase in amortization of intangible assets totaling $0.3 million and $4.0 million in 2008
and 2007, respectively, 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, 2009 compared to Pro-forma Fiscal Year Ended December 31, 2008
 Service revenues
  Cost of services
  Staffing, selling, general and administrative expenses
  Management fees
  86




---



##### 



Impairment expense
  Income (loss) from operations
  Pro-forma Fiscal Year Ended December 31, 2008 compared to Pro-forma Fiscal Year Ended December 31, 2007
 Service revenues
  Cost of services
  Staffing, selling, general and administrative expenses
  Management fees
  Income from operations
  87




---



##### 



Liquidity and Capital Resources
      
    
    Advanced Circuits  $48.0 million;
    
    American Furniture  $70.4 million;
    
    Anodyne  $16.1 million;
    
    Staffmark  $83.7 million;
    
    Fox  $40.5 million; and
    
    HALO  $44.8 million.
     88




---



##### 



Description of Required Covenant Ratio
    
    Covenant Ratio Requirement
    
    Actual RatioFixed Charge Coverage Ratio
    
    greater than or equal to 1.5:1.0
    
    3.09:1.0Interest Coverage Ratio
    
    greater than or equal to 2.75:1.0
    
    4.25:1.0Total Debt to Consolidated EBITDA
    
    less than or equal to 3.5:1.0
    
    1.65:1.0
     89




---



##### 



Reporting Unit
    
    Goodwill allocatedAmerican Furniture
    
    $41.4 millionHalo
    
    $39.1 million
  90




---



##### 



Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,(in thousands)
    
    2009
    
    
    2008Net income attributable to Holdings
    
    $
    (39,645
    )
    
    $
    81,787Adjustment to reconcile net income (loss) to cash provided by operating activitiesDepreciation and amortization
    
    
    32,996
    
    
    
    35,021Supplemental put (reversal) expense
    
    
    (1,329
    )
    
    
    6,382Noncontrolling shareholders notes and other
    
    
    1,555
    
    
    
    3,376Deferred taxes
    
    
    (24,964
    )
    
    
    (8,911
    )Gain (loss) on sales of businesses
    
    
    
    
    
    
    (73,363
    )Amortization of debt issuance cost
    
    
    1,776
    
    
    
    1,969Loss on Term Facility payment
    
    
    3,652
    
    
    
    Impairment charges
    
    
    59,800
    
    
    
    Other
    
    
    107
    
    
    
    381Changes in operating assets and liabilities
    
    
    (13,735
    )
    
    
    (6,093
    )Net cash provided by operating activities
    
    
    20,213
    
    
    
    40,549Plus:Unused fee on Revolving Credit Facility (1)
    
    
    3,454
    
    
    
    3,139Staffmark integration and restructuring
    
    
    4,076
    
    
    
    8,826Changes in operating assets and liabilities
    
    
    13,735
    
    
    
    6,093Less:Interest income due from minority shareholders at Advanced Circuits (2)
    
    
    1,047
    
    
    
    Less:Maintenance capital expenditures (3)Advanced Circuits
    
    
    251
    
    
    
    983Aeroglide
    
    
    
    
    
    
    210American Furniture
    
    
    501
    
    
    
    1,438Anodyne
    
    
    513
    
    
    
    1,425Fox
    
    
    741
    
    
    
    1,601Staffmark
    
    
    901
    
    
    
    1,589HALO
    
    
    496
    
    
    
    795Silvue
    
    
    
    
    
    
    Estimated cash flow available for distribution (CAD)
    
    $
    37,028
    
    
    $
    50,566Distribution paid April
    
    $
    (10,718
    )
    
    $
    (10,246
    )Distribution paid July
    
    
    (12,452
    )
    
    
    (10,246
    )Distribution paid October
    
    
    (12,453
    )
    
    
    (10,718
    )Distribution paid January
    
    
    (12,452
    )
    
    
    (10,718
    )Total distributions
    
    $
    (48,075
    )
    
    $
    (41,928
    )
 
 (1)
    
    Represents the commitment fee on the unused portion of our Revolving Credit Facility.(2)
    
    Represents interest income on loans to Advanced Circuits management (see related parties).(3)
    
    Represents maintenance capital expenditures that were funded from operating cash flow and
excludes approximately $3.5 million of growth capital expenditures for the year ended December
31, 2008. 91




---



##### 



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
   92




---



##### 



We have entered into the following significant related party transactions with our businesses:
 Anodyne
   Advanced Circuits
     American Furniture
  Fox
  Staffmark
  93




---



##### 



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)
    
    $
    103,800
    
    
    $
    10,348
    
    
    $
    20,487
    
    
    $
    72,965
    
    
    $
    Capital lease obligations
    
    
    765
    
    
    
    261
    
    
    
    412
    
    
    
    92
    
    
    
    Operating lease obligations (b)
    
    
    58,083
    
    
    
    12,120
    
    
    
    14,480
    
    
    
    8,667
    
    
    
    22,816Purchase obligations (c)
    
    
    144,414
    
    
    
    84,440
    
    
    
    32,972
    
    
    
    27,002
    
    
    
    Supplemental put obligation (d)
    
    
    12,082
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    319,144
    
    
    $
    107,169
    
    
    $
    68,351
    
    
    $
    108,726
    
    
    $
    22,816
 
 (a)
    
    Reflects commitment fees and letter of credit fees under our Revolving Credit Facility and
amounts due, together with interest on our 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, 2009, including: (i) shareholder
distributions of $49.8 million, (ii) management fees of $13.5 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.  Critical Accounting Estimates
   Supplemental Put Agreement
  94




---



##### 



Revenue Recognition
  .
 Business Combinations
  Goodwill and Intangible Assets
     95




---



##### 



Allowance for Doubtful Accounts
  Workers Compensation Liability
  Deferred Tax Assets
  Recent Accounting Pronouncements
  96




---



##### 



ITEM
7A.  Quantitative and Qualitative Disclosures about Market Risk
 Interest Rate Sensitivity
   Exchange Rate Sensitivity
  Credit Risk
  97




---



##### 



ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  98




---



##### 



ITEM 9.   CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 NONE
 99




---



##### 



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
 100




---



##### 



ITEM 9B.   OTHER INFORMATION
  101




---



##### 



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
  102




---



##### 



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.
 103




---



##### 



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
    
    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)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)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
 104




---



##### 



Exhibit Number
    
    DescriptionGroup 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)
 
 *
    
    Filed herewith. 105




---



##### 



SIGNATURE
  COMPASS GROUP DIVERSIFIED HOLDINGS LLCDate: March 9, 2010
    By:
    /s/ I. Joseph MassoudI. Joseph MassoudChief Executive Officer  Signature
    
    Title
    
    Date/s/ I. Joseph
Massoud

I. Joseph Massoud
    
    Chief Executive Officer
(Principal Executive Officer)
and Director
    
    March 9, 2010/s/ James J. Bottiglieri

James J. Bottiglieri
    
    Chief Financial Officer
(Principal Financial and Accounting
Officer)
and Director
    
    March 9, 2010/s/ C. Sean Day

C. Sean Day
    
    Director
    
    March 9, 2010/s/ D. Eugene Ewing

D. Eugene Ewing
    
    Director
    
    March 9, 2010/s/ Harold S. Edwards

Harold S. Edwards
    
    Director
    
    March 9, 2010/s/ Mark H. Lazarus

Mark H. Lazarus
    
    Director
    
    March 9, 2010/s/ Gordon Burns

Gordon Burns
    
    Director
    
    March 9, 2010
 106




---



##### 



SIGNATURE
  COMPASS DIVERSIFIED HOLDINGS LLCDate: March 9, 2010
    By:
    /s/ James J. BottiglieriJames J. BottiglieriRegular Trustee 107




---



##### 



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, 2009 and December 31, 2008
    
    F-5Consolidated Statements of Operations for the Years Ended December 31, 2009, 2008 and 2007
    
    F-6Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2009, 2008 and 2007
    
    F-7Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007
    
    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




---



##### 



REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
  
    
    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




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  Internal ControlIntegrated Framework
    Internal ControlIntegrated Framework
     F-3




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
         F-4




---



##### 



Compass Diversified Holdings
 
 Consolidated Balance Sheets
 December 31,(in thousands)
    
    2009
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    31,495
    
    
    $
    97,473Accounts receivable, less allowances of
$5,409 at December 31, 2009
and $4,824 at December 31, 2008
    
    
    165,550
    
    
    
    164,035Inventories
    
    
    51,727
    
    
    
    50,909Prepaid expenses and other current assets
    
    
    26,255
    
    
    
    22,784Total current assets
    
    
    275,027
    
    
    
    335,201Property, plant and equipment, net
    
    
    25,502
    
    
    
    30,763Goodwill
    
    
    288,028
    
    
    
    339,095Intangible assets, net
    
    
    216,365
    
    
    
    249,489Deferred
debt issuance costs, less accumulated amortization of $5,093 at December 31, 2009 and $3,317 at
December 31, 2008
    
    
    5,326
    
    
    
    8,251Other non-current assets
    
    
    20,764
    
    
    
    21,537Total assets
    
    $
    831,012
    
    
    $
    984,336Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    45,089
    
    
    $
    48,699Accrued expenses
    
    
    54,306
    
    
    
    57,109Due to related party
    
    
    3,300
    
    
    
    604Current portion, long-term debt
    
    
    2,500
    
    
    
    2,000Current portion of workers compensation liability
    
    
    22,126
    
    
    
    26,916Other current liabilities
    
    
    2,566
    
    
    
    4,042Total current liabilities
    
    
    129,887
    
    
    
    139,370Supplemental put obligation
    
    
    12,082
    
    
    
    13,411Deferred income taxes
    
    
    60,397
    
    
    
    86,138Long-term debt
    
    
    74,000
    
    
    
    151,000Workers compensation liability
    
    
    38,913
    
    
    
    40,852Other non-current liabilities
    
    
    7,667
    
    
    
    9,687Total liabilities
    
    
    322,946
    
    
    
    440,458Stockholders equityTrust shares, no par value, 500,000 authorized; 36,625
shares issued and outstanding at December 31, 2009 and
31,525 shares issued and outstanding at December 31, 2008
    
    
    485,790
    
    
    
    443,705Accumulated other comprehensive loss
    
    
    (2,001
    )
    
    
    (5,242
    )Accumulated earnings (deficit)
    
    
    (46,628
    )
    
    
    25,984Total stockholders equity attributable to Holdings
    
    
    437,161
    
    
    
    464,447Noncontrolling interest
    
    
    70,905
    
    
    
    79,431Total stockholders equity
    
    
    508,066
    
    
    
    543,878Total liabilities and stockholders equity
    
    $
    831,012
    
    
    $
    984,336
  F-5




---



##### 



Compass Diversified Holdings
 
 Consolidated Statements of Operations
 Year ended December 31,(in thousands, except per share data)
    
    2009
    
    
    2008
    
    
    2007Net sales
    
    $
    503,400
    
    
    $
    532,127
    
    
    $
    271,911Service revenues
    
    
    745,340
    
    
    
    1,006,346
    
    
    
    569,880Total revenues
    
    
    1,248,740
    
    
    
    1,538,473
    
    
    
    841,791Cost of sales
    
    
    344,191
    
    
    
    363,675
    
    
    
    171,665Cost of services
    
    
    632,800
    
    
    
    832,531
    
    
    
    464,343Gross profit
    
    
    271,749
    
    
    
    342,267
    
    
    
    205,783Operating expenses:Staffing expense
    
    
    74,279
    
    
    
    102,438
    
    
    
    56,207Selling, general and administrative expense
    
    
    145,948
    
    
    
    165,768
    
    
    
    94,426Supplemental put expense (reversal)
    
    
    (1,329
    )
    
    
    6,382
    
    
    
    7,400Management fees
    
    
    13,100
    
    
    
    15,205
    
    
    
    10,120Amortization expense
    
    
    24,609
    
    
    
    24,605
    
    
    
    12,679Impairment expense
    
    
    59,800
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    (44,658
    )
    
    
    27,869
    
    
    
    24,951Other income (expense):Interest income
    
    
    1,178
    
    
    
    1,377
    
    
    
    2,520Interest expense
    
    
    (11,736
    )
    
    
    (17,828
    )
    
    
    (6,994
    )Amortization of debt issuance costs
    
    
    (1,776
    )
    
    
    (1,969
    )
    
    
    (1,232
    )Loss on debt extinguishment
    
    
    (3,652
    )
    
    
    
    
    
    
    Other income (expense), net
    
    
    (282
    )
    
    
    894
    
    
    
    (26
    )Income (loss) from continuing operations before income taxes
    
    
    (60,926
    )
    
    
    10,343
    
    
    
    19,219Provision (benefit) for income taxes
    
    
    (21,281
    )
    
    
    6,526
    
    
    
    9,168Income (loss) from continuing operations
    
    
    (39,645
    )
    
    
    3,817
    
    
    
    10,051Income from discontinued operations, net of income tax
    
    
    
    
    
    
    4,607
    
    
    
    5,480Gain on sale of discontinued operations, net of income tax
    
    
    
    
    
    
    73,363
    
    
    
    35,834Net income (loss)
    
    
    (39,645
    )
    
    
    81,787
    
    
    
    51,365Net income (loss) attributable to noncontrolling interest
    
    
    (13,375
    )
    
    
    3,493
    
    
    
    10,997Net income (loss) attributable to Holdings
    
    $
    (26,270
    )
    
    $
    78,294
    
    
    $
    40,368Amounts attributable to Holdings:Income (loss) from continuing operations
    
    $
    (26,270
    )
    
    $
    324
    
    
    $
    (946
    )Income from discontinued operations, net of income tax
    
    
    
    
    
    
    4,607
    
    
    
    5,480Gain on sale of discontinued operations, net of income tax
    
    
    
    
    
    
    73,363
    
    
    
    35,834Net income (loss) attributable to Holdings
    
    $
    (26,270
    )
    
    $
    78,294
    
    
    $
    40,368Basic and fully diluted income (loss) per share attributable to Holdings:Continuing operations
    
    $
    (0.76
    )
    
    $
    0.01
    
    
    $
    (0.04
    )Discontinued operations
    
    
    
    
    
    
    2.47
    
    
    
    1.50Basic and fully diluted income (loss) per share attributable to Holdings
    
    $
    (0.76
    )
    
    $
    2.48
    
    
    $
    1.46Weighted
average number of shares of trust stock outstanding  basic and
fully diluted
    
    
    34,403
    
    
    
    31,525
    
    
    
    27,629Cash distributions declared per share
    
    $
    1.36
    
    
    $
    1.33
    
    
    $
    1.25
  F-6




---



##### 



Compass Diversified Holdings
 
 Consolidated Statements of Stockholders Equity
 TotalAccumulated
    
    
    StockholdersAccumulated
    
    
    Other
    
    
    Equity
    
    
    Non-
    
    
    TotalNumber of
    
    
    
    
    
    
    Earnings
    
    
    Comprehensive
    
    
    Attributable
    
    
    Controlling
    
    
    Stockholders(in thousands)
    
    Shares
    
    
    Amount
    
    
    (Deficit)
    
    
    Loss
    
    
    to Holdings
    
    
    Interest
    
    
    EquityBalance  January 1, 2007
    
    
    20,450
    
    
    $
    274,961
    
    
    $
    (19,250
    )
    
    $
    
    
    
    $
    255,711
    
    
    $
    17,734
    
    
    $
    273,445Net income
    
    
    
    
    
    
    
    
    
    
    40,368
    
    
    
    
    
    
    
    40,368
    
    
    
    10,997
    
    
    
    51,365Comprehensive income
    
    
    
    
    
    
    
    
    
    
    40,368
    
    
    
    
    
    
    
    40,368
    
    
    
    10,997
    
    
    
    51,365Issuance of Trust shares, net of offering costs
    
    
    11,075
    
    
    
    168,744
    
    
    
    
    
    
    
    
    
    
    
    168,744
    
    
    
    
    
    
    
    168,744Distribution to noncontrolling interest (See Note N)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,987
    )
    
    
    (13,987
    )Issuance of stock by noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,270
    
    
    
    7,270Option activity attributable to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    728
    
    
    
    728Redemption of noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (875
    )
    
    
    (875
    )Distributions paid
    
    
    
    
    
    
    
    
    
    
    (31,973
    )
    
    
    
    
    
    
    (31,973
    )
    
    
    
    
    
    
    (31,973
    )Balance  December 31, 2007
    
    
    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 (See Note N)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,900
    )
    
    
    (3,900
    )Issuance of stock by noncontrolling interest:Staffmark acquisition (See Note C)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,899
    
    
    
    47,899Fox acquisition (See Note C)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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 toStaffmark recapitalization (see Note N)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    
    
    $
    508,066
  F-7




---



##### 



Compass Diversified Holdings
 
 Consolidated Statements of Cash Flows
 Year ended December 31,(in thousands)
    
    2009
    
    
    2008
    
    
    2007Cash flows from operating activities:Net income (loss) attributable to Holdings
    
    $
    (39,645
    )
    
    $
    81,787
    
    
    $
    51,365Adjustments
to reconcile net income (loss) to net cash provided by operating activities:Gains on sales of dispositions
    
    
    
    
    
    
    (73,363
    )
    
    
    (35,834
    )Depreciation expense
    
    
    8,387
    
    
    
    9,276
    
    
    
    5,010Amortization expense
    
    
    24,609
    
    
    
    25,745
    
    
    
    19,097Impairment expense
    
    
    59,800
    
    
    
    
    
    
    
    Amortization of debt issuance costs
    
    
    1,776
    
    
    
    1,969
    
    
    
    1,224Loss on debt extinguishment
    
    
    3,652
    
    
    
    
    
    
    
    Supplemental put expense (reversal)
    
    
    (1,329
    )
    
    
    6,382
    
    
    
    7,400Noncontrolling interests related to discontinued operations
    
    
    
    
    
    
    549
    
    
    
    943Noncontrolling stockholder charges and other
    
    
    1,555
    
    
    
    2,827
    
    
    
    1,080Deferred taxes
    
    
    (24,964
    )
    
    
    (8,911
    )
    
    
    (1,295
    )Other
    
    
    107
    
    
    
    381
    
    
    
    86Changes in operating assets and liabilities, net of acquisition:(Increase)/decrease in accounts receivable
    
    
    143
    
    
    
    29,970
    
    
    
    (13,233
    )(Increase)/decrease in inventories
    
    
    (557
    )
    
    
    102
    
    
    
    (5,772
    )(Increase)/decrease in prepaid expenses and other current assets
    
    
    (4,442
    )
    
    
    (3,874
    )
    
    
    2,003Increase/(decrease) in accounts payable and accrued expenses
    
    
    (8,879
    )
    
    
    (17,344
    )
    
    
    17,578Payment of supplemental put obligation
    
    
    
    
    
    
    (14,947
    )
    
    
    (7,880
    )Net cash provided by operating activities
    
    
    20,213
    
    
    
    40,549
    
    
    
    41,772Cash flows from investing activities:Acquisition of businesses, net of cash acquired
    
    
    (1,435
    )
    
    
    (167,546
    )
    
    
    (225,112
    )Purchases of property and equipment
    
    
    (3,585
    )
    
    
    (11,576
    )
    
    
    (8,698
    )Proceeds from dispositions
    
    
    
    
    
    
    154,156
    
    
    
    119,652Other investing activities
    
    
    38
    
    
    
    173
    
    
    
    Net cash used in investing activities
    
    
    (4,982
    )
    
    
    (24,793
    )
    
    
    (114,158
    )Cash flows from financing activities:Proceeds from the issuance of Trust shares, net
    
    
    42,085
    
    
    
    
    
    
    
    168,744Borrowings under Credit Agreement
    
    
    3,000
    
    
    
    90,000
    
    
    
    311,977Repayments under Credit Agreement
    
    
    (79,500
    )
    
    
    (87,532
    )
    
    
    (246,800
    )Distributions paid
    
    
    (46,342
    )
    
    
    (41,455
    )
    
    
    (31,973
    )Distributions paid Advanced Circuits
    
    
    
    
    
    
    
    
    
    
    (13,987
    )Swap termination fee
    
    
    (2,517
    )
    
    
    
    
    
    
    Net proceeds provided by noncontrolling interest
    
    
    2,546
    
    
    
    2,251
    
    
    
    Debt issuance costs
    
    
    
    
    
    
    (552
    )
    
    
    (5,776
    )Other
    
    
    (481
    )
    
    
    (273
    )
    
    
    2,697Net cash (used in) provided by financing activities
    
    
    (81,209
    )
    
    
    (37,561
    )
    
    
    184,882Foreign currency adjustment
    
    
    
    
    
    
    (80
    )
    
    
    (144
    )Net increase/(decrease) in cash and cash equivalents
    
    
    (65,978
    )
    
    
    (21,885
    )
    
    
    112,352Cash and cash equivalents  beginning of period
    
    
    97,473
    
    
    
    119,358
    
    
    
    7,006Cash and cash equivalents  end of period
    
    $
    31,495
    
    
    $
    97,473
    
    
    $
    119,358Cash related to discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    3,858
 Supplemental non-cash financing and investing activity:
     F-8




---



##### 



Compass Diversified Holdings
 
 Notes to Consolidated Financial Statements
December 31, 2009
 Note A  Organization and Business Operations
   Note B  Summary of Significant Accounting Policies
 Accounting principles
  Basis of presentation
  Principles of consolidation
   Discontinued operations
   Use of estimates
  F-9




---



##### 



Fair value of financial instruments
  Revenue recognition
  Advanced Circuits
  American Furniture
  Anodyne
  Fox
  HALO
  Staffmark
  Cash equivalents
  Allowance for doubtful accounts
  F-10




---



##### 



Inventories
  Property, plant and equipment
    Machinery,equipment and software
    
    2 to 10 yerasOffice furniture and equpiment
    
    2 to 7 yearsLeasedhold improvements
    
    Shorter of useful life or lease term
  Goodwill and intangible assets
   Deferred debt issuance costs
  Workers compensation liability
   Warranties
  F-11




---



##### 



Supplemental put
  Derivatives and hedging
   Noncontrolling interest
   Income taxes
  Earnings per share
    F-12




---



##### 



Advertising costs
  Research and development
  Employee retirement plans
  Seasonality
  Recent accounting pronouncements
     The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles
 F-13




---



##### 



Note C  Acquisition of Businesses
  January 4, 2008
    
    January 21, 2008FOX
    
    Staffmark LLC(1)
 
 (1)
    
    Staffmark Investment LLC (Staffmark LLC) was acquired by the Staffmark
operating segment. In February 2009, CBS Personnel rebranded under the Staffmark trade name,
as a result the Company renamed its CBS Personnel operating segment to Staffmark. Allocation of Purchase Price
  F-14




---



##### 



2008 Acquisitions
 Fox Factory
     Staffmark
     F-15




---



##### 



Other acquisitions
 Note D  Discontinued Operations
 2007 Disposition
 2008 Dispositions
   F-16




---



##### 



AeroglideFor the PeriodJanuary 1, 2008
    
    
    For the Yearthrough Disposition
    
    
    Ended December 31, 2007Net sales
    
    $
    34,294
    
    
    $
    53,591Operating income
    
    
    5,041
    
    
    
    2,488Other expense
    
    
    (11
    )
    
    
    (17
    )Provision (benefit) for income taxes
    
    
    1,274
    
    
    
    (323
    )Noncontrolling interest
    
    
    239
    
    
    
    156Income from
discontinued operations (1)
    
    $
    3,517
    
    
    $
    2,638
 
 (1)
    
    The results above for the period from January 1, 2008 through disposition exclude
$1.6 million of intercompany interest expense. The results for the year ended December 31, 2007
exclude $3.3 million of intercompany interest expense. SilvueFor the PeriodJanuary 1, 2008
    
    
    For the Yearthrough Disposition
    
    
    Ended December 31, 2007Net sales
    
    $
    11,465
    
    
    $
    22,521Operating income
    
    
    2,416
    
    
    
    5,536Other expense
    
    
    (83
    )
    
    
    (61
    )Provision for income taxes
    
    
    933
    
    
    
    1,846Noncontrolling interest
    
    
    310
    
    
    
    787Income from
discontinued operations(1)
    
    $
    1,090
    
    
    $
    2,842
 
 (1)
    
    The results above for the period from January 1, 2008 through disposition
exclude $0.6 million of intercompany interest expense. The results for the year ended December
31, 2007 exclude $1.5 million of intercompany interest expense. Note E  Operating Segment Data
   
    
    Compass AC Holdings, Inc. (ACI or 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 Manufacturing, Inc. (AFM or 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 $999. 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.
 F-17




---



##### 




    
    Anodyne Medical Device, Inc. (Anodyne), 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 market Anodyne is
headquartered in Coral Springs, Florida and its products are sold primarily in North
America.
 
    
    Fox Factory, Inc. (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 Branded Solutions, Inc. (HALO), operating under the brand names of HALO and Lee
Wayne, serves as a one-stop shop for approximately 38,000 customers providing design, sourcing,
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 1,000 account
executives. Halo is headquartered in Sterling, Illinois.
 
    
    CBS Personnel Holdings, Inc. (doing business as Staffmark) (Staffmark), a human
resources outsourcing firm, is a provider of temporary staffing services in the United
States. Staffmark serves approximately 6,500 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.
   (in thousands)
 Year Ended December 31,Net
sales of operating segments
    
    2009
    
    
    2008
    
    
    2007ACI
    
    $
    46,518
    
    
    $
    55,449
    
    
    $
    52,292American Furniture
    
    
    141,971
    
    
    
    130,949
    
    
    
    46,981Anodyne
    
    
    54,075
    
    
    
    54,199
    
    
    
    44,189Fox
    
    
    121,519
    
    
    
    131,734
    
    
    
    Halo
    
    
    139,317
    
    
    
    159,797
    
    
    
    128,449Staffmark
    
    
    745,340
    
    
    
    1,006,345
    
    
    
    569,880Total
    
    
    1,248,740
    
    
    
    1,538,473
    
    
    
    841,791Reconciliation of segment revenues to consolidated revenues:Corporate and other
    
    
    
    
    
    
    
    
    
    
    Total consolidated revenues
    
    $
    1,248,740
    
    
    $
    1,538,473
    
    
    $
    841,791
 F-18




---



##### 



Year Ended December 31,Profit
of operating
segments(1)
    
    2009
    
    
    2008
    
    
    2007ACI
    
    $
    16,297
    
    
    $
    17,665
    
    
    $
    17,078American Furniture
    
    
    6,487
    
    
    
    5,123
    
    
    
    2,702Anodyne
    
    
    7,400
    
    
    
    4,228
    
    
    
    2,936Fox
    
    
    10,658
    
    
    
    10,707
    
    
    
    Halo
    
    
    2,847
    
    
    
    5,289
    
    
    
    7,006Staffmark(2)
    
    
    (55,603
    )
    
    
    16,768
    
    
    
    22,542Total
    
    
    (11,914
    )
    
    
    59,780
    
    
    
    52,264Reconciliation of segment profit to consolidated income (loss)
from continuing operations before income taxes:Interest expense, net
    
    
    (10,558
    )
    
    
    (16,451
    )
    
    
    (4,474
    )Loss on debt extinguishment
    
    
    (3,652
    )
    
    
    
    
    
    
    Other income (expense)
    
    
    (282
    )
    
    
    894
    
    
    
    (26
    )Corporate and other (3)
    
    
    (34,520
    )
    
    
    (33,880
    )
    
    
    (28,545
    )Total consolidated income (loss) from continuing operations before
income taxes
    
    $
    (60,926
    )
    
    $
    10,343
    
    
    $
    19,219
 
 (1)
    
    Segment profit represents operating income (loss).(2)
    
    Includes $50.0 million of goodwill impairment during the year ended December 31, 2009.
See Note I.(3)
    
    Corporate and other consists of charges at the corporate level and purchase accounting
adjustments not pushed down to the segment. In addition, Corporate and other includes
$9.8 million of Staffmarks intangible asset impairment during the year ended December 31,
2009, not pushed down to the segment. See Note I. Accounts
    
    
    AccountsReceivable
    
    
    ReceivableAccounts
receivable
    
    December 31, 2009
    
    
    December 31, 2008ACI
    
    $
    2,762
    
    
    $
    3,131American Furniture
    
    
    12,032
    
    
    
    11,149Anodyne
    
    
    9,078
    
    
    
    6,919Fox
    
    
    15,590
    
    
    
    10,201Halo
    
    
    25,103
    
    
    
    29,358Staffmark
    
    
    106,394
    
    
    
    108,101Total
    
    
    170,959
    
    
    
    168,859Reconciliation
of segment to consolidated totals:Corporate and other
    
    
    
    
    
    
    Total
    
    
    170,959
    
    
    
    168,859Allowance for doubtful accounts
    
    
    (5,409
    )
    
    
    (4,824
    )Total consolidated net accounts receivable
    
    $
    165,550
    
    
    $
    164,035
 F-19




---



##### 



Depreciation andAmortization ExpenseIdentifiable
    
    
    Identifiable
    
    
    for the YearGoodwill
    
    
    Goodwill
    
    
    Assets
    
    
    Assets
    
    
    Ended December 31,Dec. 31, 2009
    
    
    Dec. 31, 2008
    
    
    Dec. 31, 2009(1)
    
    
    Dec. 31, 2008(1)
    
    
    2009
    
    
    2008
    
    
    2007Goodwill and identifiable assets
of operating segmentsACI
    
    $
    50,716
    
    
    $
    50,659
    
    
    $
    19,252
    
    
    $
    20,309
    
    
    $
    3,642
    
    
    $
    3,741
    
    
    $
    3,588American Furniture
    
    
    41,435
    
    
    
    41,435
    
    
    
    63,123
    
    
    
    67,752
    
    
    
    3,654
    
    
    
    3,704
    
    
    
    1,160Anodyne
    
    
    19,555
    
    
    
    19,555
    
    
    
    20,584
    
    
    
    23,784
    
    
    
    2,623
    
    
    
    2,740
    
    
    
    2,338Fox
    
    
    31,372
    
    
    
    31,372
    
    
    
    73,714
    
    
    
    83,246
    
    
    
    6,509
    
    
    
    6,716
    
    
    
    Halo
    
    
    39,060
    
    
    
    40,184
    
    
    
    43,647
    
    
    
    46,291
    
    
    
    3,351
    
    
    
    3,157
    
    
    
    2,280Staffmark (3)
    
    
    89,715
    
    
    
    139,715
    
    
    
    85,230
    
    
    
    84,947
    
    
    
    7,880
    
    
    
    8,214
    
    
    
    2,316Total
    
    
    271,853
    
    
    
    322,920
    
    
    
    305,550
    
    
    
    326,329
    
    
    
    27,659
    
    
    
    28,272
    
    
    
    11,682Reconciliation of segment to consolidated total:Corporate and other identifiable assets
    
    
    
    
    
    
    
    
    
    
    71,884
    
    
    
    154,877
    
    
    
    5,337
    
    
    
    4,857
    
    
    
    4,806Identifiable assets of disc. ops.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of debt issuance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,776
    
    
    
    1,969
    
    
    
    1,232Goodwill carried at Corporate level (2)
    
    
    16,175
    
    
    
    16,175
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    288,028
    
    
    $
    339,095
    
    
    $
    377,434
    
    
    $
    481,206
    
    
    $
    34,772
    
    
    $
    35,098
    
    
    $
    17,720
 
 (1)
    
    Not including accounts receivable scheduled above.(2)
    
    Represents goodwill resulting from purchase accounting adjustments not pushed down to the
respective segment. Goodwill is allocated back to the respective segment for purposes of
impairment testing.(3)
    
    Includes $50.0 million of goodwill impairment during the year ended December 31, 2009. See
Note I. Note F  Inventories
 in thousands
 December 31,
    
    
    December 31,2009
    
    
    2008Raw materials and supplies
    
    $
    34,764
    
    
    $
    34,405Finished goods
    
    
    18,003
    
    
    
    17,571Less: obsolescence reserve
    
    
    (1,040
    )
    
    
    (1,067
    )Total
    
    $
    51,727
    
    
    $
    50,909
 Note G  Property, Plant and Equipment
 in thousands
 December 31,
    
    
    December 31,2009
    
    
    2008Machinery, equipment and software
    
    $
    23,842
    
    
    $
    26,024Office furniture and equipment
    
    
    8,837
    
    
    
    10,501Leasehold improvements
    
    
    6,182
    
    
    
    6,03038,861
    
    
    
    42,555Less: accumulated depreciation
    
    
    (13,359
    )
    
    
    (11,792
    )Total
    
    $
    25,502
    
    
    $
    30,763
  F-20




---



##### 



Note H  Commitments and Contingencies
 Leases
 in
thousands
 2010
    
    $
    12,1202011
    
    
    8,2782012
    
    
    6,2022013
    
    
    4,6272014
    
    
    4,040Thereafter
    
    
    22,816$
    58,083
  Legal Proceedings
  Note I  Goodwill and Other Intangible Assets
 Goodwill impairment
     F-21




---



##### 



(in thousands
 2009
    
    
    2008Beginning balance as of January 1:Goodwill
    
    $
    339,095
    
    
    $
    218,817Accumulated impairment losses
    
    
    
    
    
    
    339,095
    
    
    
    218,817Impairment losses
    
    
    (50,000
    )
    
    
    Acquisition of businesses (1)
    
    
    1,009
    
    
    
    117,031Acquired goodwill in connection with Anodyne CEO promissory note (See Note R)
    
    
    
    
    
    
    3,191Adjustment to purchase accounting (2)
    
    
    (2,076
    )
    
    
    56Total adjustments
    
    
    (51,067
    )
    
    
    120,278Ending balance as of December 31:Goodwill
    
    
    338,028
    
    
    
    339,095Accumulated impairment losses
    
    
    (50,000
    )
    
    
    $
    288,028
    
    
    $
    339,095
 
 (1)
    
    The Companys HALO and ACI business segments each acquired one add-on
acquisition during the year ended December 31, 2009.(2)
    
    Primarily represents adjustments to purchase accounting related to three
acquisitions in 2008 by the HALO operating segment.  Other intangible assets
  F-22




---



##### 



(in thousands):
 WeightedDecember 31,
    
    
    Average2009
    
    
    2008
    
    
    Useful LivesCustomer relationships
    
    $
    188,773
    
    
    $
    187,669
    
    
    
    12Technology
    
    
    37,959
    
    
    
    37,959
    
    
    
    8Trade names, subject to amortization
    
    
    25,300
    
    
    
    24,500
    
    
    
    12Licensing and non-compete agreements
    
    
    4,451
    
    
    
    4,416
    
    
    
    3Distributor relations
    
    
    1,380
    
    
    
    1,380
    
    
    
    4257,863
    
    
    
    255,924Accumulated amortization customer relationships
    
    
    (48,677
    )
    
    
    (32,287
    )Accumulated amortization technology
    
    
    (11,360
    )
    
    
    (6,388
    )Accumulated amortization trade names, subject to amortization
    
    
    (3,383
    )
    
    
    (1,531
    )Accumulated amortization licensing and non-compete agreements
    
    
    (3,613
    )
    
    
    (2,369
    )Accumulated amortization distributor relations
    
    
    (797
    )
    
    
    (630
    )Total accumulated amortization
    
    
    (67,830
    )
    
    
    (43,205
    )Trade names, not subject to amortization (1)
    
    
    26,332
    
    
    
    36,770Total
    
    $
    216,365
    
    
    $
    249,489
 
 (1)
    
    As discussed above, the Companys CBS Personnel trade name was impaired during the
year ended December 31, 2009. As a result, the Company recorded an impairment charge of $9.8
million during the year ended December 31, 2009. (in thousands):
 2010
    
    $
    23,5802011
    
    
    22,9212012
    
    
    22,5582013
    
    
    22,4382014
    
    
    22,272$
    113,769
  Note J  Fair Value Measurement
  in thousands
 Fair Value Measurements at December 31, 2009CarryingValue
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Liabilities:Derivative liability  interest rate swap
    
    $
    2,001
    
    
    $
    
    
    
    $
    2,001
    
    
    $
    Supplemental put obligation
    
    
    12,082
    
    
    
    
    
    
    
    
    
    
    
    12,082Stock option of minority shareholder (1)
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    200
 
 (1)
    
    Represents a former employees option to purchase additional common stock in
Anodyne. See Note R. F-23




---



##### 



Fair Value Measurements at December 31, 2008CarryingValue
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Liabilities:Derivative liability  interest rate swap
    
    $
    5,242
    
    
    $
    
    
    
    $
    5,242
    
    
    $
    Supplemental put obligation
    
    
    13,411
    
    
    
    
    
    
    
    
    
    
    
    13,411Stock option of minority shareholder (1)
    
    
    200
    
    
    
    
    
    
    
    200
    
    
    
    
 
 (1)
    
    Represents a former employees option to purchase additional common stock in
Anodyne. See Note R. in thousands
 2009
    
    
    2008Balance at January 1
    
    $
    13,411
    
    
    $
    21,976Supplemental put expense (reversal)
    
    
    (1,329
    )
    
    
    6,382Payment of supplemental put liability
    
    
    
    
    
    
    (14,947
    )Balance at December 31
    
    $
    12,082
    
    
    $
    13,411
 Valuation
Techniques
  (in thousands):
 Balance at January 1, 2009
    
    $
    Transfer in from Level 2
    
    
    200Balance at December 31, 2009
    
    $
    200
 in thousands
 Fair Value Measurements at Dec. 31, 2009
    
    
    Gains/(losses)Carrying
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Year Ended Dec. 31,Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    2009
    
    
    2008Assets:Goodwill (1)
    
    $
    88,640
    
    
    $
    
    
    
    $
    
    
    
    $
    88,640
    
    
    $
    (50,000
    )
    
    $
    
 
 (1)
    
    Represents the fair value of goodwill at the Staffmark
operating segment, including a $1.1 million reduction in goodwill
allocated from the corporate level, subsequent to the goodwill
impairment charge recognized during the year ended December 31, 2009.
See Note I for further discussion regarding impairment and valuation
techniques. F-24




---



##### 



Note K  Debt
     Description of Required Covenant Ratio
    
    Covenant Ratio Requirement
    
    Actual RatioFixed Charge Coverage Ratio
    
    greater than or equal to 1.5:1.0
    
    3.09:1.0Interest Coverage Ratio
    
    greater than or equal to 2.75:1.0
    
    4.25:1.0Total Debt to Consolidated EBITDA
    
    less than or equal to 3.5:1.0
    
    1.65:1.0
     F-25




---



##### 



2010
    
    $
    2,0002011
    
    
    2,0002012
    
    
    2,5002013
    
    
    70,0002014
    
    
    Thereafter
    
    
    $
    76,500
 Note L  Derivative Instruments and Hedging Activities
      F-26




---



##### 



(in thousands)
 December 31,
    
    
    December 31,
    
    
    Balance Sheet2009
    
    
    2008
    
    
    LocationLiabilityCash flow hedge current
    
    $
    1,620
    
    
    $
    2,691
    
    
    Other current liabilitiesCash flow hedge non-current
    
    
    381
    
    
    
    2,551
    
    
    Other non-current liabilitiesTotal
    
    $
    2,001
    
    
    $
    5,242
 Note M  Income Taxes
  in thousands)
 Years ended December 31,2009
    
    
    2008
    
    
    2007Current taxesFederal
    
    $
    1,997
    
    
    $
    13,386
    
    
    $
    8,422State
    
    
    1,686
    
    
    
    2,276
    
    
    
    1,094Total current taxes
    
    
    3,683
    
    
    
    15,662
    
    
    
    9,516Deferred taxes:Federal
    
    
    (24,519
    )
    
    
    (8,379
    )
    
    
    (50
    )State
    
    
    (445
    )
    
    
    (757
    )
    
    
    (298
    )Total deferred taxes
    
    
    (24,964
    )
    
    
    (9,136
    )
    
    
    (348
    )Total tax provision (benefit)
    
    $
    (21,281
    )
    
    $
    6,526
    
    
    $
    9,168
  December 31,(in thousands)
    
    2009
    
    
    2008Deferred tax assets:Tax credits
    
    $
    43
    
    
    $
    266Accounts receivable and allowances
    
    
    1,631
    
    
    
    1,127Workers compensation
    
    
    14,952
    
    
    
    14,716Accrued expenses
    
    
    4,340
    
    
    
    3,901Loan forgiveness
    
    
    111
    
    
    
    677Other
    
    
    1,649
    
    
    
    2,892Total deferred tax assets
    
    $
    22,726
    
    
    $
    23,579Deferred tax liabilities:Intangible assets
    
    $
    (54,867
    )
    
    $
    (81,334
    )Property and equipment
    
    
    (3,636
    )
    
    
    (2,516
    )Prepaid and other expenses
    
    
    (1,894
    )
    
    
    (2,288
    )Total deferred tax liabilities
    
    $
    (60,397
    )
    
    $
    (86,138
    )Total net deferred tax liability
    
    $
    (37,671
    )
    
    $
    (62,559
    )
  F-27




---



##### 



Years ended December 31,2009
    
    
    2008
    
    
    2007United States Federal Statutory Rate
    
    
    (35.0
    %)
    
    
    35.0
    %
    
    
    35.0
    %State income taxes (net of Federal benefits)
    
    
    1.3
    
    
    
    9.5
    
    
    
    2.7Expenses of
Compass Group Diversified Holdings, LLC representing a pass through to shareholders
    
    
    4.6
    
    
    
    36.5
    
    
    
    12.9Credit utilization
    
    
    (4.2
    )
    
    
    (24.1
    )
    
    
    (4.5
    )Other
    
    
    (1.7
    )
    
    
    6.2
    
    
    
    1.6Effective income tax rate
    
    
    (35.0
    %)
    
    
    63.1
    %
    
    
    47.7
    %
 (in thousands):
 Balance at January 1, 2007
    
    $
    Additions for 2007 tax positions
    
    
    15Additions for prior years tax positions
    
    
    103Balance at December 31, 2007
    
    
    118Additions for prior years tax positions
    
    
    27Reductions for prior years tax positions
    
    
    (44
    )Balance at December 31, 2008
    
    
    101Additions for prior years tax positions
    
    
    1,635Reductions for prior years tax positions
    
    
    (11
    )Balance at December 31, 2009
    
    $
    1,725
   Note
N Noncontrolling interest
  F-28




---



##### 



% Ownership
    
    
    % Ownership
    
    
    % OwnershipDecember 31, 2009
    
    
    December 31, 2008
    
    
    December 31, 2007ACI
    
    
    70.2
    
    
    
    70.2
    
    
    
    70.2American Furniture
    
    
    93.9
    
    
    
    93.9
    
    
    
    93.9Anodyne
    
    
    74.4
    
    
    
    67.0
    
    
    
    43.5FOX
    
    
    75.5
    
    
    
    75.5
    
    
    
    HALO
    
    
    88.7
    
    
    
    88.3
    
    
    
    88.3Staffmark
    
    
    76.2
    
    
    
    66.4
    
    
    
    96.5
 Noncontrolling Interest
    
    
    Noncontrolling InterestBalances as of
    
    
    Balances as of(in thousands)
    
    December 31, 2009
    
    
    December 31, 2008ACI
    
    $
    
    
    
    $
    American Furniture
    
    
    2,110
    
    
    
    1,910Anodyne
    
    
    8,398
    
    
    
    10,146FOX
    
    
    10,946
    
    
    
    9,290HALO
    
    
    3,065
    
    
    
    3,060Staffmark
    
    
    46,286
    
    
    
    54,925Compass
    
    
    100
    
    
    
    100$
    70,905
    
    
    $
    79,431
 ACI
  Anodyne
  Staffmark
 F-29




---



##### 



Note
O Stockholders Equity
 Trust
Shares
     Distributions
 
    
    On January 30, 2008, the Company paid a distribution of
$0.325 per share to holders of record as of January 25,
2008;
    
    On April 25, 2008, the Company paid a distribution of
$0.325 per share to holders of record as of April 22, 2008;
    
    On July 29, 2008, the Company paid a distribution of
$0.325 per share to holders of record as of July 24, 2008;
and
    
    On October 31, 2008, the Company paid a distribution of
$0.34 per share to holders of record as of October 24, 2008.
  
    
    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-30




---



##### 



Note P  Unaudited Quarterly Financial Data
  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
    
    
    6,461
    
    
    
    7,902
    
    
    
    2,974
    
    
    
    (61,995
    )Income (loss) from continuing operations
    
    
    (1,680
    )
    
    
    2,101
    
    
    
    627
    
    
    
    (27,318
    )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
    )
 December 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,(in thousands)
    
    2008
    
    
    2008
    
    
    2008
    
    
    2008Total revenues
    
    $
    374,827
    
    
    $
    413,601
    
    
    $
    398,910
    
    
    $
    351,135Gross profit
    
    
    88,603
    
    
    
    90,995
    
    
    
    87,861
    
    
    
    74,808Operating income
    
    
    8,952
    
    
    
    13,362
    
    
    
    4,598
    
    
    
    957Income (loss) from continuing operations
    
    
    797
    
    
    
    4,622
    
    
    
    (2,271
    )
    
    
    (2,824
    )Income from discontinued operations, net of income taxes
    
    
    431
    
    
    
    636
    
    
    
    74,873
    
    
    
    2,030Net income (loss) attributable to Holdings
    
    $
    1,228
    
    
    $
    5,258
    
    
    $
    72,602
    
    
    $
    (794
    )Basic and fully diluted income (loss) per share attributable to
Holdings:Continuing operations
    
    $
    0.03
    
    
    $
    0.15
    
    
    $
    (0.07
    )
    
    $
    (0.09
    )Discontinued operations
    
    
    0.01
    
    
    
    0.02
    
    
    
    2.37
    
    
    
    0.06Basic and fully diluted income (loss) per share
attributable to Holdings
    
    $
    0.04
    
    
    $
    0.17
    
    
    $
    2.30
    
    
    $
    (0.03
    )
 Note Q  Supplemental Data
 Supplemental Balance Sheet Data (in thousands):
 December 31,
    
    
    December 31,2009
    
    
    2008Summary of accrued expenses:Accrued payroll and fringes
    
    $
    23,480
    
    
    $
    25,035Accrued taxes
    
    
    9,758
    
    
    
    9,034Income taxes payable
    
    
    3,597
    
    
    
    1,762Accrued interest
    
    
    1,912
    
    
    
    3,512Other accrued expenses
    
    
    15,559
    
    
    
    17,766Total
    
    $
    54,306
    
    
    $
    57,109
 F-31




---



##### 



December 31,
    
    
    December 31,2009
    
    
    2008Warrantly liability:Beginning balance
    
    $
    1,577
    
    
    $
    1,059Acrual
    
    
    1,451
    
    
    
    2,050Warranty payments
    
    
    (1,499
    )
    
    
    (1,532
    )Ending balance
    
    $
    1,529
    
    
    $
    1,577
 Supplemental Statement of Operations Data:
  Supplemental Cash Flow Statement Data (in thousands):
 December 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007Interest paid
    
    $
    12,527
    
    
    $
    15,754
    
    
    $
    6,489Taxes paid
    
    
    7,709
    
    
    
    15,971
    
    
    
    12,136
 Note R  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 -
 in thousands
 December 31,
    
    
    December 31,
    
    
    December 31,2009
    
    

2008
    
    

2007Advanced Circuits
    
    $
    375
    
    
    $
    500
    
    
    $
    500American Furniture
    
    
    375
    
    
    
    500
    
    
    
    167Anodyne
    
    
    263
    
    
    
    350
    
    
    
    350FOX
    
    
    375
    
    
    
    496
    
    
    
    HALO
    
    
    375
    
    
    
    500
    
    
    
    417Staffmark
    
    
    389
    
    
    
    1,241
    
    
    
    1,055Corporate
    
    
    10,678
    
    
    
    11,144
    
    
    
    7,631$
    12,830
    
    
    $
    14,731
    
    
    $
    10,120
  F-32




---



##### 



LLC Agreement 
 Supplemental
Put Agreement 
 Cost
Reimbursement and Fees
  The Company has entered into the following significant related party transactions with its
subsidiaries
 Anodyne
    Advanced
Circuits
 F-33




---



##### 



American
Furniture
 Fox
 Staffmark
 F-34




---



##### 



SCHEDULE II Valuation and Qualifying Accounts
 Balance at
    
    
    Additionsbeginning
    
    
    Charge to Costs and
    
    
    
    
    
    
    
    
    
    
    Balance at end of(in thousands)
    
    of Year
    
    
    Expense
    
    
    Other
    
    
    Deductions
    
    
    YearAllowance for doubtful accounts  2007
    
    $
    3,307
    
    
    $
    2,134
    
    
    $
    825
    (1)
    
    $
    3,062
    (2)
    
    $
    3,204Allowance 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)
    
    $
    5,409Valuation allowance for deferred tax
assets  2007
    
    $
    
    
    
    $
    359
    
    
    $
    
    
    
    $
    
    
    
    $
    359Valuation allowance for deferred tax
assets  2008
    
    $
    359
    
    
    $
    
    
    
    $
    
    
    
    $
    359
    (3)
    
    $
    Valuation allowance for deferred tax
assets  2009
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (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




---



##### 



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
    
    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)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)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)
 E-1




---



##### 



Exhibit Number
    
    Description10.10
    
    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 10.10 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, 2006.10.12
    
    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)
 
 *
    
    Filed herewith. E-2