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Fair Value Measurement

12 Months Ended

Dec. 31, 2022

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2022 and 2021 (in thousands):


	Fair Value Measurements at December 31, 2022
	Carrying Value		Level 1		Level 2		Level 3
Liabilities:
Put option of noncontrolling shareholders (1)	$	(142)	$	—	$	—	$	(142)
Contingent consideration - acquisition (2)	$	(1,300)	$	—	$	—	$	(1,300)
Total recorded at fair value	$	(1,442)	$	—	$	—	$	(1,442)

(1)Represents a put option issued to a noncontrolling shareholder in connection with the 5.11 acquisition.

(2)Represents potential earn-out payable as additional purchase price consideration by Velocity in connection with the acquisition of King's Camo.


	Fair Value Measurements at December 31, 2021
	Carrying Value		Level 1		Level 2		Level 3
Liabilities:
Put option of noncontrolling shareholders (1)	$	(151)	$	—	$	—	$	(151)
Contingent consideration - acquisition (2)	(1,350)		—		—		(1,350)
Total recorded at fair value	$	(1,501)	$	—	$	—	$	(1,501)

(1)Represents a put option issued to a noncontrolling shareholder in connection with the 5.11 acquisition.

(2)Represents potential earn-out payable as additional purchase price consideration by Altor Solutions in connection with the acquisition of Polyfoam. The payment of the earn-out occurred on March 31, 2022.

A reconciliation of the change in the carrying value of the Company’s Level 3 fair value measurements is as follows:


	Year ended December 31,
(in thousands)	2022		2021

Balance at January 1st	$	(1,501)	$	(1,785)
Termination of put option of noncontrolling shareholder- Liberty	—		314
Contingent consideration - King's Camo	(1,600)		—
Adjustment to contingent consideration - King's Camo	300		—
Payment of contingent consideration - Polyfoam	1,350		—
Increase (decrease) in the fair value of put option of noncontrolling shareholder - 5.11	9		(30)
Balance at December 31st	$	(1,442)	$	(1,501)

Valuation Techniques

Options of noncontrolling shareholders

The put options of noncontrolling shareholders were determined based on inputs that were not readily available in public markets or able to be derived from information available in publicly quoted markets. As such, the Company categorized the put options of the noncontrolling shareholders as Level 3. The primary inputs associated with this valuation are earnings before interest, taxes amortization and depreciation times a multiple established in the

shareholder put option agreement, which is used to determine a per share equity value for the shares that can be put back to the Company. An increase or decrease in these primary inputs would not have a material impact on the determination of the fair value of these put options.

Contingent Consideration

For certain acquisition of businesses that the Company or its subsidiaries make, a portion of the acquisition price will be contingent consideration. The following is a summary of the contingent consideration arrangements entered into by the Company's subsidiaries in the prior three years and the valuation methodologies:

•Velocity entered into a contingent consideration arrangement in connection with their purchase of King's Camo in July 2022. The purchase price of King's Camo included a potential earn-out of $3.0 million if King's Camo achieved certain financial metrics. The contingent consideration was valued at $1.6 million using probability weighted models. The earnout was reduced to $1.3 million at December 31, 2022 based on the expected payout amount.

•Altor Solutions entered into a contingent consideration arrangement in connection with their purchase of Polyfoam in July 2020. The purchase price of Polyfoam included a potential earn-out of $1.4 million if Polyfoam achieved certain financial metrics. The payment of the earn-out occurred on March 31, 2022.

Senior Notes

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


				Fair Value Hierarchy Level	December 31, 2022
	Maturity Date	Rate			Carrying Value		Fair Value
2032 Senior Notes	January 15, 2032	5.000	%	2	$	300,000	$	237,750
2029 Senior Notes	April 15, 2029	5.250	%	2	$	1,000,000	$	855,000

2022 Term Loan

At December 31, 2022, the carrying value of the principal under the Company's outstanding 2022 Term Loan, including the current portion, was $395 million, which approximates fair value because it bears interest at a variable interest rate that reflects changes in interest rates and changes in the Company's net leverage ratio. The estimated fair value of the outstanding 2022 Term Loan is classified as Level 2 in the fair value hierarchy.

Nonrecurring Fair Value Measurements

The following table provides the assets and liabilities carried at fair value measured on a non-recurring basis as of December 31, 2022. Refer to "Note H – Goodwill and Intangible Assets", for a description of the valuation techniques used to determine fair value of the assets measured on a non-recurring basis in the table below. There were no assets and liabilities carried at fair value measured on a non-recurring basis as of December 31, 2021 and 2020.


							Expense
	Fair Value Measurements at December 31, 2022						Year ended
(in thousands)	Carrying Value		Level 1	Level 2	Level 3		December 31, 2022
Goodwill - Ergo	$	40,896	—	—	$	40,896	$	20,552

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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