UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

COMPASS DIVERSIFIED HOLDINGS

(Exact name of registrant as specified in its charter)

Delaware		0-51937		57-6218917
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

COMPASS GROUP DIVERSIFIED HOLDINGS LLC

(Exact name of registrant as specified in its charter)

Delaware		0-51938		20-3812051
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (203) 221-1703

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Section 8		Other Events

Item 8.01		Other Events

     On each of January 8, 2008 and January 23, 2008, Compass Group Diversified Holdings LLC (the “Company”) and Compass Diversified Holdings (the “Trust” and, together with the Company, collectively “CODI,” “us” or “we”) filed a Current Report on Form 8-K to report the completion of its acquisition of Fox Factory, Inc. (“Fox”) and the acquisition of Staffmark Investment LLC (“Staffmark”) by its subsidiary CBS Personnel Holdings, Inc., respectively. We are filing this Current Report on Form 8-K to report the audited financial statements of Fox and Staffmark and the unaudited pro forma financial information described in Item 9.01 of Form 8-K, respectively.

Section 9		Financial Statements and Exhibits

Item 9.01		Financial Statements and Exhibits

(d) Exhibits.

23.1		Consent of Hutchinson and Bloodgood LLP
23.2		Consent of Grant Thornton LLP
99.1		December 31, 2006 audited financials and September 30, 2007 interim financials for Fox Factory, Inc.
99.2		December 31, 2006 audited financials and September 30, 2007 interim financials for Staffmark Investment LLC.
99.3		December 31, 2006 Unaudited condensed combined pro forma financials and September 30, 2007 interim condensed combined pro forma financials for Compass Diversified Holdings.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

INDEX TO EXHIBITS

Exhibit No.
23.1		Consent of Hutchinson and Bloodgood LLP
23.2		Consent of Grant Thornton LLP
99.1		December 31, 2006 audited financials and September 30, 2007 interim financials for Fox Factory, Inc.
99.2		December 31, 2006 audited financials and September 30, 2007 interim financials for Staffmark Investment LLC.
99.3		December 31, 2006 Unaudited condensed combined pro forma financials and September 30, 2007 interim condensed combined pro forma financials for Compass Diversified Holdings.

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated December 14, 2007 accompanying the financial statements of Fox Factory, Inc. included in Compass Group Diversified Holdings LLC’s and Compass Diversified Holdings’ Current Report on Form 8-K dated February 22, 2008. We hereby consent to the incorporation by reference in the Registration Statements of Compass Group Diversified Holdings LLC and Compass Diversified Holdings on Forms S-3 (File No. 333-147218, effective November 7, 2007 and File No. 333-147217, effective November 7, 2007).

/s/ Hutchinson and Bloodgood LLP

Watsonville, California
February 21, 2008

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated January 14, 2008 accompanying the consolidated financial statements of Staffmark Investment LLC and Subsidiaries included in Compass Group Diversified Holdings LLC’s and Compass Diversified Holdings’ Current Report on Form 8-K dated February 22, 2008. We hereby consent to the incorporation by reference in the Registration Statements of Compass Group Diversified Holdings LLC and Compass Diversified Holdings on Forms S-3 (File No. 333-147218, effective November 7, 2007 and File No. 333-147217, effective November 7, 2007).

/s/ Grant Thornton LLP

Cincinnati, Ohio
February 22, 2008

Exhibit 99.1

To the Board of Directors
Fox Factory, Inc.
Watsonville, California

We have audited the accompanying balance sheet of Fox Factory, Inc. (a California S-Corporation) as of December 31, 2006 and the related statements of income and retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of Fox Factory, Inc. as of December 31, 2006, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Hutchinson and Bloodgood LLP

December 14, 2007
Watsonville, California

FOX FACTORY, INC.

BALANCE SHEETS

		September 30				December 31
		2007				2006
		(Unaudited)				(Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	—			$	539,665
Accounts receivable, less allowance for doubtful accounts of $143,989 in 2007 and $125,000 in 2006			15,022,932				8,700,535
Inventories			13,971,220				10,490,552
Advances			6,668				6,862
Deferred tax asset, current portion (Note 6)			198,500				315,000
Prepaid expenses and deposits			92,715				89,552
Total current assets			29,292,035				20,142,166
PROPERTY AND EQUIPMENT, at cost
Shop equipment			4,704,921				3,137,078
Office equipment and furniture			1,970,904				1,705,871
Transportation equipment			532,417				401,902
Leasehold improvements			285,651				255,868
			7,493,893				5,500,719
Less accumulated depreciation			3,161,300				2,673,096
			4,332,593				2,827,623
OTHER ASSET
Deferred tax asset, less current portion (Note 6)			285,000				185,000
		$	33,909,628			$	23,154,789

See accompanying notes.

		September 30				December 31
		2007				2006
		(Unaudited)				(Audited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		$	8,624,653				2,354,288
Accrued wages and payroll taxes			1,702,400				1,905,149
Accrued expenses			1,023,178				2,199,379
Line of credit (Note 3)			2,303,092				—
Current portion of long-term debt (Note 4)			81,061				178,295
Liability under capital lease, current portion (Note 5)			3,368				6,043
Total current liabilities			13,737,752				6,643,154
LONG-TERM LIABILITIES
Long-term debt, less current portion (Note 4)			1,126,117				588,691
Liability under capital lease, less current portion (Note 5)			—				1,573
			1,126,117				590,264
COMMITMENTS AND CONTINGENCIES (Notes 10, 11 & 12)
STOCKHOLDER’S EQUITY
Common stock, No par value, 50,000 shares authorized, issued and outstanding			50,000				50,000
Retained earnings			18,995,759				15,871,371
			19,045,759				15,921,371
		$	33,909,628			$	23,154,789

FOX FACTORY, INC.

STATEMENTS OF INCOME AND RETAINED EARNINGS

		Nine-Months Ended				Nine-Months Ended				Year Ended
		September 30				September 30				December 31
		2007				2006				2006
		(Unaudited)				(Unaudited)				(Audited)
Sales		$	75,724,464			$	64,841,795			$	87,845,619
Cost of goods sold			54,222,718				44,852,858				61,792,622
Gross profit			21,501,746				19,988,937				26,052,997
General and administrative expense			14,526,054				13,014,728				17,449,522
Income from operations			6,975,692				6,974,209				8,603,475
Other income (expense)
Interest expense			(85,732	)			(126,688	)			(151,865	)
Other income			740				272				283
Forgiveness of debt			24,000				24,000				32,000
Royalty income			9,075				17,000				27,500
Loss on disposal of property and equipment			—				—				(1,177	)
Total other income (expense)			(51,917	)			(85,416	)			(93,259	)
Income before income tax (provision) benefit			6,923,775				6,888,793				8,510,216
Income tax (provision) benefit (Note 6)			(17,300	)			24,000				29,200
Net income			6,906,475				6,912,793				8,539,416
Retained earnings, beginning			15,871,371				12,092,989				12,092,989
Stockholder distributions			(3,782,087	)			(3,650,187	)			(4,761,034	)
Retained earnings, ending		$	18,995,759			$	15,355,595			$	15,871,371

See accompanying notes.

		Nine-Months Ended				Nine-Months Ended				Year Ended
		September 30				September 30				December 31
		2007				2006				2006
		(Unaudited)				(Unaudited)				(Audited)
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers		$	69,900,086			$	58,763,364				84,891,720
Cash paid to suppliers and employees			(67,340,994	)			(58,218,158	)			(79,228,850	)
Interest paid			(85,732	)			(126,688	)			(151,865	)
Income taxes paid			(800	)			(800	)			(800	)
Net cash provided by operating activities			2,472,560				417,718				5,510,205
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment			—				—				25,500
Cash paid to purchase property and equipment			(1,993,174	)			(1,321,471	)			(1,914,483	)
Net cash used by investing activities			(1,993,174	)			(1,321,471	)			(1,888,983	)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to stockholder			(3,782,087	)			(3,650,187	)			(4,761,034	)
Decrease in loan from stockholder			—				(212,214	)			(212,214	)
Proceeds from issuance of long-term debt			620,000				600,000				600,000
Repayments of long-term debt			(155,808	)			(70,436	)			(116,118	)
Net borrowings on line of credit			2,303,092				3,258,534				—
Payments of principal on capital leases			(4,248	)			(4,248	)			(5,664	)
Net cash used by financing activities			(1,019,051	)			(78,551	)			(4,495,030	)
Net decrease in cash and cash equivalents			(539,665	)			(982,304	)			(873,808	)
CASH AND CASH EQUIVALENTS, BEGINNING			539,665				1,413,473				1,413,473
CASH AND CASH EQUIVALENTS, ENDING		$	—			$	431,169			$	539,665

See accompanying notes.

		Nine-Months Ended				Nine-Months Ended				Year Ended
		September 30				September 30				December 31
		2007				2006				2006
		(Unaudited)				(Unaudited)				(Audited)
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net income		$	6,906,475			$	6,912,793			$	8,539,416
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			488,204				394,200				500,904
Forgiveness of debt			(24,000	)			(24,000	)			(32,000	)
Loss on disposal of property and equipment			—				—				1,177
(Increase) decrease in:
Accounts receivable			(6,322,397	)			(6,489,903	)			(3,281,472	)
Inventories			(3,480,668	)			(5,694,966	)			(1,482,467	)
Advances			194				317				35,904
Deferred taxes			16,500				(24,800	)			(30,000	)
Prepaid expenses and deposits			(3,163	)			44,476				23,671
Increase (decrease) in:
Accounts payable			6,270,365				6,351,699				96,971
Accrued wages and payroll taxes			(202,749	)			(391,876	)			185,979
Accrued expenses			(1,176,201	)			(660,222	)			952,122
Net cash provided by operating activities		$	2,472,560			$	417,718			$	5,510,205

FOX FACTORY, INC.

NOTES TO FINANCIAL STATEMENTS

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Fox Factory, Inc. (a California S-corporation), was incorporated in 1978 under the laws of the State of California. The Company is engaged in the manufacture of shock absorbers and other parts for motorcycles, snowmobiles, bicycles, and related equipment under the name of Fox Racing Shox, which are sold throughout the world.

Accounting Policies

Preparing the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management believes that the judgments, estimates, and assumptions used in preparation of the Company’s financial statements are appropriate given the factual circumstances as of September 30, 2007.

Revenue Recognition

Revenue on sales of shock absorbers and other parts for motorcycles, snowmobiles, bicycles, and related equipment is recognized upon shipment and the collection of the resulting receivables is considered probable.

Cash and Cash Equivalents

For purposes of the statement of cash flows, cash equivalents include all highly liquid investments with original maturities of three months or less.

Bank Sweep Account

The Company has a sweep arrangement with its bank. Under this arrangement, available cash balances are applied against the Company’s line of credit. The resulting liability for items outstanding on the bank account are reflected as a line of credit on the Company’s balance sheets.

FOX FACTORY, INC.

NOTES TO FINANCIAL STATEMENTS

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial Instruments

The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, and debt instruments. The carrying amounts of these financial instruments approximate their fair value.

Accounts Receivable

Accounts receivable are unsecured customer obligations which generally require payment within various terms from the invoice date. Accounts receivable are stated at the invoice amount. Financing terms vary by customer.

Payments of accounts receivable are applied to the specific invoices identified on the customer’s remittance advice or, if unspecified, to the earliest unpaid invoices.

The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management’s best estimate of amounts that will not be collected. The allowance for doubtful accounts is based on management’s assessment of the collectability of specific customer accounts, the aging of the accounts receivable, and historical experience. If there is a deterioration of a major customer’s creditworthiness, or actual defaults are higher than the historical experience, management’s estimates of the recoverability of amounts due the Company could be adversely affected. All accounts or portions thereof deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for doubtful accounts.

Inventories

Inventories include materials, labor, and manufacturing overhead valued at the lower of standard cost (which generally approximates actual cost on a first-in, first-out basis) or market value and consist of the following at September 30, 2007 and December 31, 2006:

		9/30/2007				12/31/2006
		(Unaudited)				(Audited)
Raw materials		$	10,963,800			$	8,517,980
Finished goods			2,417,234				1,368,656
Work-in-process			990,186				1,003,916
Inventory reserve			(400,000	)			(400,000	)
		$	13,971,220			$	10,490,552

FOX FACTORY, INC.

NOTES TO FINANCIAL STATEMENTS

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Research and Development Costs

Research and development costs consist of salaries, contract service fees, travel, materials, and supplies and are charged to expense as incurred.

The Company has elected to be treated as an S-Corporation. Accordingly, except for a California S-Corporation tax of 1.5%, income taxes on net earnings are paid personally by the stockholder. Deferred income taxes result primarily from (1) the recognition of certain items of expense for income tax purposes in years different from those in which they are recognized in the financial statements, and (2) the availability of tax credit carryforwards for use in future years.

Depreciation

The straight-line and declining-balance methods of depreciation are used over the estimated useful lives of the depreciable assets as follows:

Shop equipment		5 -7 years
Office equipment and furniture		5-7 years
Transportation equipment		5 years
Leasehold improvements		5-7 years

Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability would be performed.

Advertising and promotion costs are expensed as incurred. Total costs incurred for advertising and promotion totaled $386,459 and $312,840 for the nine month periods ended September 30, 2007 and 2006, respectively, and $442,257 for the year ended December 31, 2006.

FOX FACTORY, INC.

NOTES TO FINANCIAL STATEMENTS

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fin 48

In June 2006, the Financial Accounting Standards Board issued FIN 48, “Accounting for Uncertainty in Income Taxes” (the “Interpretation”). The Interpretation clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB 109, “Accounting for Income Taxes” by defining a criterion that an individual tax position must be met for any part of the benefit to be recognized in the financial statements. The Interpretation is effective for fiscal years beginning after December 15, 2007.

The provisions of FIN 48 are effective for the Company beginning January 1, 2008. The Company has not yet determined the impact of the recognition and measurement provisions of FIN 48 on its existing tax positions. Upon adoption, the cumulative effect of applying the provisions of FIN 48, if any, shall be reported as an adjustment to the opening balance of retained earnings.

On September 30, 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS No. 157). This new standard provides guidance for using fair value to measure assets and liabilities as required by other accounting standards. Under SFAS No. 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. SFAS no. 157 must be adopted by the Company effective January 1, 2008, although early application is permitted. The Company is currently evaluating the effects of SFAS No. 157 upon adoption; however at this time it does not believe that adoption of this standard will have a material affect on its operating results or financial position.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115” (SFAS No. 159). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. This statement is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the effects of SFAS No. 159 upon adoption; however at this time it does not believe that adoption of this standard will have a material affect on its operating results or financial position.

FOX FACTORY, INC.

NOTES TO FINANCIAL STATEMENTS

Note 2. CONCENTRATION OF CREDIT RISK

The Company maintains cash balances at one bank, where balances are insured by the Federal Deposit Insurance Corporation up to $100,000. Amounts in excess of insured limits were approximately $458,741 at September 30, 2007,

Note 3. LINE OF CREDIT

The Company has a borrowing agreement with Comerica Bank. The agreement establishes an operating line of credit with a limit of a $5,750,000, which is due on demand. The note bears interest at the bank’s prime rate plus .25%; the effective rate at September 30, 2007 and 2006 was 8% and 8.5%, respectively, and 8.5% at December 31, 2006. The line is secured by substantially all assets of the Company and is personally guaranteed by the stockholder. The balance on the line of credit was $2,303,092 and $0 at September 30, 2007 and December 31, 2006, respectively.

Note 4. LONG-TERM DEBT

Long-term debt and the related current portion consist of the following:

		9/30/2007				12/31/2006
		(Unaudited)				(Audited)
Note payable-City of Watsonville		$	168,000			$	192,000
Note payable-Comerica Bank #1			16,456				51,376
Note payable-Comerica Bank #2			443,263				523,610
Note payable-Comerica Bank #3			161,017				—
Note payable-Comerica Bank #4			418,442				—
			1,207,178				766,986
Less current portion			81,061				178,295
		$	1,126,117			$	588,691

The Note payable-City of Watsonville is due to the Redevelopment Agency, with an original balance of $320,000. Interest accrues on the note at a variable rate equal to the prime rate earned.The effective at September 30, 2007 2006 was 8% and 8.5%, respectively, 8.5% at December 31, 2006. Terms of the note include performance by the Company of a Relocation and Rehabilitation Agreement with the City of Watsonville, whereby the Company is to maintain a minimum number of full-time employees that are Watsonville residents. If the

FOX FACTORY, INC.

NOTES TO FINANCIAL STATEMENTS

Note 4. LONG-TERM DEBT (Continued)

Company complies with this agreement, it is entitled to an annual credit against the principal and accrued interest due in the amount of $32,000. Noncompliance with this agreement will alter the payment terms of the note. The Company was in compliance with the agreement at December 31, 2006 and September 30, 2007. In accordance with the agreement, the note was reduced by $32,000 and $24,000 at December 31, 2006 and September 30, 2007, respectively. This amount has been included in Forgiveness of Debt in the accompanying Statement of Income and Retained Earnings. The note is unsecured and is also personally guaranteed by the stockholder.

The Note payable-Comerica #1 is payable in monthly installments of $4,078, including interest at 7.1%. Final payment is due in January of 2008. The note is secured by the Company’s cash balances held in its Comerica bank accounts.

The Note payable-Comerica #2 is payable in monthly installments of $12,098, including interest at 7.65%. Final payment is due in April of 2011. The note is secured by the Company’s cash balances held in its Comerica bank accounts.

The Note payable-Comerica #3 is payable in monthly installments of $3,412, including interest at 7.57%. Final payment is due in May of 2012. The note is secured by the Company’s cash balances held in its Comerica bank accounts.

The Note payable-Comerica #4 is payable in monthly installments of $9,046, including interest at 7.57%. Final payment is due in May of 2012. The note is secured by the Company’s cash balances held in its Comerica bank accounts.

Aggregate maturities of principal under long-term debt for each of the succeeding years ending September 30, 2007 and December 31, 2006 and thereafter are as follows:

		9/30/2007				12/31/2006
		(Unaudited)				(Audited)
2007		$	81,061			$	178,295
2008			264,414				153,356
2009			277,793				158,030
2010			297,167				168,017
2011			216,561				77,288
Thereafter			70,182				32,000
		$	1,207,178			$	766,986

FOX FACTORY, INC.

NOTES TO FINANCIAL STATEMENTS

Note 5. CAPITAL LEASES

During the year ended December 31, 2003, the Company entered into an office equipment capital lease. Equipment under the lease had an original cost of $27,088 and accumulated depreciation of $14,738 and $14,835 at September 30, 2007 and December 31, 2006, respectively. The office equipment lease is payable in monthly installments of $530, including interest at an effective rate of 6.5%. Final payment is due March 2008 at which time the Company may purchase the respective equipment for $1.

The following is a schedule of future minimum lease payments under capital leases for each of the succeeding years ending September 30, 2007 and December 31, 2006 and thereafter:

		9/30/2007				12/31/2006
		(Unaudited)				(Audited)
2007		$	1,444			$	6,360
2008			1,590				1,590
Total minimum lease payments			3,034				7,950
Less amount representing interest			334				334
Present value of lease payments		$	2,700			$	7,616
Current portion of capital leases		$	3,368			$	6,043
Long-term portion of capital leases			—				1,573
		$	3,368			$	7,616

FOX FACTORY, INC.

NOTES TO FINANCIAL STATEMENTS

Note 6. INCOME TAXES

The provision for, or benefit from income taxes represents the California S-Corporation franchise tax on the income of the Company net of the utilization of the Company’s available tax credits. The income tax provision (benefit) is as follows:

		9/30/2007				9/30/2006				12/31/2006
		(Unaudited)				(Unaudited)				(Audited)
Current:
State franchise tax at statutory rates		$	108,394			$	108,890			$	127,313
Utilization of Enterprise Zone Credits			(107,594	)			(101,005	)			(115,473	)
Utilization of Research Credits			—				(7,085	)			(11,040	)
Total current			800				800				800
Deferred:
State			16,500				(24,800	)			(30,000	)
Income tax provision (benefit)		$	17,300			$	(24,000	)		$	(29,200	)

The deferred tax (assets) liabilities consist of the following:

		9/30/2007				9/30/2006				12/31/2006
		(Unaudited)				(Unaudited)				(Audited)
State:
Depreciation and other timing differences		$	24,310			$	30,050			$	3,215
Inventory amount under the uniform capitalization rule			(27,270	)			(33,690	)			(44,797	)
Non-deductible reserves and allowances			(55,540	)			(128,160	)			(99,450	)
State income tax credits deductible in the future			(425,000	)			(363,000	)			(358,965	)
Net deferred tax asset		$	(483,500	)		$	(494,800	)		$	(499,997	)
As presented on the balance sheet:
Deferred tax asset, current portion		$	(198,500	)		$	(315,000	)		$	(315,000	)
Deferred tax asset, long-term			(285,000	)			(179,800	)			(185,000	)
		$	(483,500	)		$	(494,800	)		$	(500,000	)

FOX FACTORY, INC.

NOTES TO FINANCIAL STATEMENTS

Note 6. INCOME TAXES (Continued)

Management has evaluated the deferred tax asset required to be recognized in order to establish a valuation allowance for the portion of the deferred asset that does not meet the more likely than not recognition criterion, since all deductible temporary differences may not be offset against taxable temporary differences and expected future taxable income. Management does not believe a valuation allowance is necessary as of September 30, 2007,

The Company has the following credits as of December 31, 2006 which can be used to offset future state income tax liabilities:

Research credit		$	105,849
Manufacturer’s Investment Credit			9,385
Enterprise Zone Hire/Sales and Use Tax Credits			254,114
		$	369,348

The Manufacturer’s Investment Credit was originally set to expire beginning in 2008. The remaining credits do not have expiration dates. However, effective with the sale of the company discussed in Note 13, the Company changed its tax status from an S-Corporation to a C-Corporation. As a result of this change in tax status, the tax credits accumulated while the Company was an S-Corporation cannot be carried forward to the C-Corporation. Accordingly, the Company’s deferred tax asset will be reduced by approximately $425,000 upon the conversion to a C-Corporation.

Note 7. RELATED PARTY TRANSACTIONS

On July 1, 2003, the Company entered into a triple-net building lease with the stockholder for its manufacturing and office facilities in Watsonville. The term of the lease is fifteen years, beginning July 1, 2003 and ending July 30, 2018, with monthly rental payments of $86,000, which can be adjusted annually for a cost-of-living increase based upon the consumer price index. Payments made for the year ended December 31, 2006 under this lease totaled $1,032,000. Payments made for the nine months ended September 30, 2007 and 2006 under this lease were $774,000 for each period.

FOX FACTORY, INC.

NOTES TO FINANCIAL STATEMENTS

Note 7. RELATED PARTY TRANSACTIONS (Continued)

The following is a schedule of future minimum rental payments under the operating lease with the stockholder that has a remaining noncancelable lease term in excess of one year at September 30, 2007:

2007		$	258,000
2008			1,032,000
2009			1,032,000
2010			1,032,000
2011			1,032,000
Thereafter			6,794,000
		$	11,180,000

Note 8. PROFIT SHARING PLAN

The Company maintains a qualified profit sharing plan and deferred salary 401 (k) plan that was adopted in 1991 and restated in 1998. The plan covers all employees that meet the length of service requirement of one year and are over the age of 18. The Company’s contribution to the plan is determined annually by the Board of Directors. Expenses under the plan for the Company’s discretionary contributions were $150,000, $112,000, and $112,000 for the year ended December 31, 2006, and for the nine months ended September 30, 2007, and September 30, 2006, respectively. These amounts are included in accrued expenses in the accompanying balance sheets.

Note 9. SIGNIFICANT CUSTOMERS AND VENDORS

For the year ended December 31, 2006. 49% of total sales were attributed to ten customers. At December 31, 2006 amounts due from these customers represented 49% of accounts receivable.

The Company purchased approximately 62% of its product components for the year ended December 31, 2006 from ten vendors. At December 31, 2006, amounts due from these vendors represented 72% of accounts payable.

FOX FACTORY, INC.

NOTES TO FINANCIAL STATEMENTS

Note 10. LEGAL CONTINGENCIES

From time to time, the Company is subject to lawsuits and claims that arise out of their operations in the normal course of business. In 2005, The Company settled an on-going patent infringement lawsuit. The settlement required the Company to pay an ongoing royalty to the plaintiff on certain products it sells unless and until a contingency event occurred. That contingency event occurred on August 8, 2006. Between June 1, 2006 and August 8, 2006, the royalty was $341,372, which was paid to the plaintiff in September 2006, ending any further financial obligations under the settlement agreement absent unforeseen and extraordinary circumstances.

The Company is currently the defendant in a personal injury lawsuit which involves claims for damages that are potentially substantial in amount. The Company believes that the disposition of the claims currently pending will not have a material adverse effect on its financial position or the results of its operations.

Note 11. WARRANTIES

The Company accrues an estimate of its exposure to warranty claims based on both current and historical product sales data and warranty costs incurred. The majority of the Company’s products carry a one- to two-year warranty. The Company assesses the adequacy of its recorded warranty liability annually and adjusts the amount as necessary. The warranty liability of $600,000 at December 31, 2006, and $800,000 at September 30, 2007, is included in accrued expenses in the accompanying balance sheet.

Note 12. LEASE COMMITTMENT

On January 5, 2004, the Company entered into a building lease with an unrelated party for its warehouse and office facilities in Santee, California. The lease expires January 15, 2009. The lease provides for monthly rent of $11,230 with annual increases of 3% beginning January 1, 2007. Payments made for the year ended December 31, 2006 under this lease totaled $128,007. Payments made for the nine months ended September 30, 2007 and 2006 under this lease were $104,102 and $101,070, respectively.

In July of 2006, the Company entered into a building lease with an unrelated party for additional warehouse facilities in Watsonville. The term of the lease is two years beginning July 2006 and ending July 2008. The lease provides for monthly rent of $8,415. Payments made for the year ended December 31, 2006 under this lease totaled $42,078. Payments made for the nine months ended September 30, 2007 and 2006 under this lease were $75,735 and $16,830, respectively.

FOX FACTORY, INC.

NOTES TO FINANCIAL STATEMENTS

Note 12. LEASE COMMITMENT (Continued)

In June of 2007, the Company entered into a building lease with an unrelated party for additional warehouse facilities in Watsonville. The term of the lease is three years beginning June 2007 and ending June 2010. The lease provides for monthly rent of $9,900. Payments made for the nine months ended September 30, 2007 under this lease totaled $39,600.

The following is a schedule of future minimum rental payments under operating leases with unrelated parties that have a remaining noncancelable lease term in excess of one year at September 30, 2007:

2007		$	77,271
2008			320,673
2009			266,057
2010			49,500
		$	713,501

Note 13. SALE OF THE COMPANY

On January 4, 2008 the Company and the stockholder of the Company entered into a Stock Purchase Agreement with Compass Group Diversified Holdings LLC, whereby the stockholder sold all of the outstanding stock of the Company. The purchase price was $85,000,000 and is subject to certain adjustments, including a working capital adjustment.

In connection with the acquisition, the Company awarded key members of management approximately $20,800,000 in bonus compensation.

Exhibit 99.2

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Management Committee
Staffmark Investment LLC

We have audited the consolidated balance sheets of Staffmark Investment LLC and subsidiaries (the “Company”) as of December 31, 2006 and December 25, 2005, and the consolidated statements of operations, members’ equity, and cash flows for the year ended December 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America as established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Staffmark Investment LLC and subsidiaries as of December 31, 2006 and December 25, 2005, and the results of their operations and their cash flows for the year ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

/s/ Grant Thornton LLP

Cincinnati, Ohio
January 14, 2008

STAFFMARK INVESTMENT LLC

CONSOLIDATED BALANCE SHEETS

										September 30,
		December 25,				December 31,				2007
		2005				2006				(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	7,913,823			$	10,176,579			$	10,947,018
Accounts receivable trade, less allowance for doubtful accounts of $2,712,488 at December 25, 2005, $2,368,166 at December 31, 2006, and $2,265,053 (unaudited) at September 30, 2007			67,621,940				61,302,851				54,817,692
Unbilled revenue			11,684,936				8,023,355				12,470,490
Prepaid expenses and other current assets			2,631,681				1,902,354				1,294,492
Total current assets			89,852,380				81,405,139				79,529,692
PROPERTY AND EQUIPMENT, net			4,486,904				3,712,387				3,247,038
OTHER ASSETS
Goodwill, net			64,294,380				64,294,380				64,294,380
Other intangibles, net			25,596,633				25,564,299				25,540,049
Other			2,768,527				931,337				938,548
Total other assets			92,659,540				90,790,016				90,772,977
Total assets		$	186,998,824			$	175,907,542			$	173,549,707

The accompanying notes are an integral part of these financial statements.

STAFFMARK INVESTMENT LLC

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND MEMBERS’ EQUITY
CURRENT LIABILITIES
Current portion of long-term debt		$	9,700,000			$	11,600,000			$	14,500,000
Trade accounts payable			17,067,524				12,985,617				12,811,326
Accrued expenses and other current liabilities:
Accrued payroll, bonuses and commissions			12,785,593				10,942,611				12,718,987
Payroll taxes and other withholdings			8,599,721				7,324,913				7,815,416
Current portion of workers’ compensation obligation			12,959,000				14,346,800				14,522,955
Other			2,545,888				1,892,027				2,199,489
Total current liabilities			63,657,726				59,091,968				64,568,173
DUE TO PARENT			44,909,105				39,905,367				34,757,929
LONG-TERM DEBT, net of current portion			58,166,964				43,666,964				34,966,964
WORKERS’ COMPENSATION OBLIGATION, net of current portion			17,634,800				19,232,600				19,468,745
Total liabilities			184,368,595				161,896,899				153,761,811
MINORITY INTEREST			356,388				356,388				356,388
COMMITMENTS AND CONTINGENCIES
MEMBERS’ EQUITY
Common units, 52,525,000 units issued and outstanding at December 25, 2005, December 31, 2006 and September 30, 2007			—				—				—
Class A preferred units, 42,201,370 units issued and outstanding at December 25, 2005, December 31, 2006 and September 30, 2007			—				—				—
Class B preferred units, 24,425,198 units issued and outstanding at December 25, 2005, December 31, 2006 and September 30, 2007			2,014,551				12,825,945				18,498,344
Participating units, 1,556,722 units issued and outstanding at December 25, 2005, December 31, 2006 and September 30, 2007			259,290				828,310				933,164
Total members’ equity			2,273,841				13,654,255				19,431,508
Total liabilities and members’ equity		$	186,998,824			$	175,907,542			$	173,549,707

The accompanying notes are an integral part of these financial statements.

STAFFMARK INVESTMENT LLC

CONSOLIDATED STATEMENTS OF OPERATIONS

			Year ended			Nine months ended
			December			September				September
		31,				24,				30,
		2006				2006				2007
						(unaudited)				(unaudited)
Revenue		$	624,484,296			$	455,958,011			$	434,771,625
Cost of revenue			520,409,460				380,336,741				360,403,796
Gross profit			104,074,836				75,621,270				74,367,829
Operating expenses:
Staffing expense			54,270,316				39,764,422				41,535,001
Selling, general & administrative expenses			27,590,786				21,432,748				19,967,956
Depreciation and amortization			2,237,302				1,710,313				1,678,813
Total operating expenses			84,098,404				62,907,483				63,181,770
Income from operations			19,976,432				12,713,787				11,186,059
Other expense:
Interest expense, net			6,373,677				4,183,858				4,951,896
Other (income) expense, net			2,088,861				(338,745	)			24,077
Total other expense			8,462,538				3,845,113				4,975,973
Income before income taxes			11,513,894				8,868,674				6,210,086
Income taxes			133,480				133,480				239,140
Net income		$	11,380,414			$	8,735,194			$	5,970,946

The accompanying notes are an integral part of these financial statements.

STAFFMARK INVESTMENT LLC

CONSOLIDATED STATEMENT OF MEMBERS’ EQUITY

For the year ended December 31, 2006

																		Total
						Class A												Members’
		Common				Preferred				Class B Preferred				Participating				Equity
Balances at December 25, 2005		$	—			$	—			$	2,014,551			$	259,290			$	2,273,841
Net income			—				—				10,811,394				569,020				11,380,414
Balances at December 31, 2006		$	—			$	—			$	12,825,945			$	828,310			$	13,654,255

The accompanying notes are an integral part of these financial statements.

STAFFMARK INVESTMENT LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

			Year ended			Nine months ended
			December			September				September
		31,				24,				30,
		2006				2006				2007
						(unaudited)				(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	11,380,414			$	8,735,194			$	5,970,946
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			2,269,636				1,734,563				1,703,063
Loss on disposal of property and equipment			48,804				24				11,348
Bad debt expense			1,397,591				1,394,064				355,847
Changes in assets and liabilities:
Accounts receivable and unbilled revenue			8,583,079				7,889,218				1,682,177
Prepaid expenses and other assets			2,566,517				943,259				600,651
Accounts payable, accrued expenses and other liabilities			(4,867,958	)			(4,853,752	)			2,812,350
Net cash provided by operating activities			21,378,083				15,842,570				13,136,382
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(1,511,589	)			(1,118,380	)			(1,224,812	)
Net cash used in investing activities			(1,511,589	)			(1,118,380	)			(1,224,812	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to members			—				—				(193,693	)
Repayments of third party debt			(12,600,000	)			(7,275,000	)			(5,800,000	)
Borrowings of related party debt			3,555,963				2,598,461				4,111,028
Repayments of related party debt			(8,559,701	)			(6,704,044	)			(9,258,466	)
Net cash used in financing activities			(17,603,738	)			(11,380,583	)			(11,141,131	)
Net increase in cash and cash equivalents			2,262,756				3,343,607				770,439
Cash and cash equivalents, beginning of year			7,913,823				7,913,823				10,176,579
Cash and cash equivalents, end of year		$	10,176,579			$	11,257,430			$	10,947,018
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest		$	6,680,094			$	6,622,125			$	6,217,066
Cash paid for income taxes		$	133,480			$	133,480			$	239,140

The accompanying notes are an integral part of these financial statements.

STAFFMARK INVESTMENT LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A — NATURE OF OPERATIONS AND ORGANIZATION

Staffmark Investment LLC (the “Company”) is a subsidiary of SF Holding Corporation (Stephens or Parent) that provides various staffing services including temporary help and permanent placement, which constitutes one segment for financial reporting purposes. The Company has staffing offices located throughout the United States. The Company’s headquarters are in Little Rock, Arkansas. The Company was organized on June 28, 2000 under the laws of the state of Delaware.

NOTE B — SUMMARY OF ACCOUNTING POLICIES

1. Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the company and its majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

2. Cash and Cash Equivalents

Cash and equivalents are comprised of highly liquid instruments with original maturities of three months or less.

3. Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount, net of discounts, and do not bear interest. The Company records an allowance for doubtful accounts based on historical loss experience, customer payment patterns and current economic trends. The Company reviews the adequacy of the allowance for doubtful accounts on a periodic basis and adjusts the balance, if necessary. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers.

4. Revenue Recognition

Revenue from temporary staffing services is recognized at the time services are provided by Company employees or subcontractors and is reported based on gross billings to customers. The Company recognizes revenue for permanent placement services at the employee start date, which management believes is the culmination of the earnings process. Permanent placement services are fully guaranteed to the satisfaction of the customer for a specified period, usually 30 to 90 days. Revenue from subcontracted temporary staffing services is reported on a net basis pursuant to Emerging Issues Task Force No. 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent. Net charges recorded in revenue from subcontracted temporary staffing services were $416,364 in 2006, $399,176 (unaudited) for the nine months ended September 24, 2006 and $201,263 (unaudited) for the nine months ended September 30, 2007.

5. Property and Equipment

Property and equipment consisted of the following at December 25, 2005, December 31, 2006, and September 30, 2007:

		December 25,				December 31,				September 30,
		2005				2006				2007
										(unaudited)
Furniture and fixtures		$	2,920,366			$	3,031,948			$	3,165,406
Office equipment			5,686,412				6,387,078				6,823,640
Computer software			6,138,980				6,258,113				6,534,962
Transportation equipment			120,294				148,154				167,782
Leasehold improvements			2,102,986				2,510,343				2,692,804
			16,969,038				18,335,636				19,384,594
Less: accumulated depreciation			(12,482,134	)			(14,623,249	)			(16,137,556	)
Total property and equipment, net		$	4,486,904			$	3,712,387			$	3,247,038

Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the related assets, using the straight-line method. Leasehold improvements are depreciated over the shorter of the lease term or estimated useful life of the asset. Estimated useful lives are as follows:

Description		Useful Life
Office equipment		3-5 years
Furniture and fixtures		7 years
Transportation equipment		5 years
Leasehold improvements		4 years
Computer software		3 years

6. Impairment of Long-Lived Assets

Long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of (if any) would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and would no longer be depreciated. The assets and liabilities of a disposal group classified as held for sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheets.

7. Software Development Costs

The company accounts for costs incurred to develop computer software for internal use in accordance with the Statement of Position (SOP) 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. As required by SOP 98-1, the Company capitalizes the costs incurred during the application development stage, which include costs to design the software configuration and interfaces, coding, installation, and testing. Costs incurred during the preliminary phase along with post-implementation stages of internal use computer software are expensed as incurred. Capitalized development costs are amortized over various periods up to three years. Costs incurred to maintain existing product offerings are expensed as incurred. The capitalization and ongoing assessment of recoverability of development costs requires considerable judgment by management with respect to certain factors, including, but not limited to, technological and economic feasibility, and estimated economic life. For the year ended December 31, 2006, the company capitalized software development costs of $119,133. As of December 31, 2006 and December 25, 2005, net capitalized software costs totaled $268,576 and $421,390, respectively. As of September 30, 2007, net capitalized software costs totaled $371,671 (unaudited).

8. Goodwill and Other Intangible Assets

Goodwill and other purchased intangible assets not subject to amortization are tested for impairment at least annually, or if an event occurs or circumstances change that may reduce the fair value of the reporting unit below its book value. If the fair value of the reporting unit tested has fallen below its book value, the estimated fair value of goodwill is compared to its book value. If the book value of goodwill exceeds the estimated fair value of goodwill, an impairment loss would be recognized in an amount equal to that excess. The Company uses a discounted cash flow methodology to determine fair value. No impairment was recognized in 2006 or for the nine months ended September 30, 2007.

9. Workers’ Compensation Liability

The Company self-insures its workers’ compensation exposure for its employees. The Company engages an actuarial firm to help determine its estimated workers’ compensation liability, which is calculated using a weighted average of the incurred method, paid method and case method. The determination of this liability and reserve amount is based on the use of certain actuarial assumptions and estimates. Actual results could differ from these projections. The Company has purchased stop-loss insurance coverage which limits the Company’s exposure to $1,000,000 per claim as of December 31, 2006, December 25, 2005 and September 30, 2007.

10. Income taxes

The Company is a limited liability company, and therefore the results of its operations are included in the determination of taxable income or loss of its members for federal income tax purposes. The company has provided for various local and state income and franchise taxes payable by the Company and reports such amounts as income taxes in the accompanying consolidated statements of operations.

11. Advertising

The Company expenses the cost of advertising as incurred. Advertising expense was approximately $2,585,000 for the year ended December 31, 2006, $1,872,000 (unaudited) for the nine months ended September 24, 2006, and $1,789,000 (unaudited) for the nine months ended September 30, 2007.

12. Use of Estimates

The preparation of consolidated financial statements requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Significant estimates included in the Company’s financial statements include the accrual for workers’ compensation and the assumptions used in the goodwill and intangible asset valuation testing.

13. Fiscal Year

The Company ends its fiscal year on the closest Sunday on or prior to December 31, and operates on a 52-53 week fiscal year. The year ended December 31, 2006 has been designated Fiscal 2006 and is a 53-week year. The nine months ended September 30, 2007 and September 24, 2006 are 39-week periods.

NOTE C — DEBT

1. Term Loan

On September 30, 2004, the Company entered into a credit agreement with a group of financial institutions that provided for a term loan of $77,566,964. The proceeds from these borrowings were utilized to repay amounts outstanding under the Company’s former credit agreements.

Borrowings under the term loan bears interest equal to LIBOR plus a margin equal to 0.625%. Payments of principal and interest are due quarterly with a balloon payment due at maturity in 2008. The rate on the term loan at December 31, 2006 was 5.793%. Borrowings under the term loan are secured by the assets of the Company and its subsidiaries and are guaranteed by Stephens.

The terms of these borrowings impose certain ownership and financial restrictions on the Company. The Company’s debt agreement contains affirmative and negative covenants including financial covenants requiring Stephens to maintain a minimum liquidity ratio and net worth multiple. Additionally, these covenants limit the Company’s ability to incur additional debt, distribute dividends and limit capital expenditures, among other restrictions. The agreement also contains a provision that requires additional payments of principal, upon asset sale or fundamental change in the business.

At December 25, 2005, the Company was party to an interest rate swap agreement to manage its exposure to interest rate movements in its variable rate debt. As the swap was not designated as a hedge instrument, changes in the market value of the instrument are recorded in the statement of operations. The swap expired on September 30, 2006 and the Company recorded a charge of $1,886,800 which is included in other expense on the accompanying statement of operations.

The maturities of long-term debt for each of the years subsequent to December 31, 2006 are as follows:

2007		$	11,600,000
2008			43,666,964
		$	55,266,964

2. Due to Parent

Stephens periodically advances funds to the Company to finance company operations. Amounts due to Stephens bear interest equal to the Prime Rate plus 5.00%. The rate at December 31, 2006 and December 25, 2005 was 13.25% and 12%, respectively. Interest expense on amounts due to Stephens was $4,663,135 for the year ended December 31, 2006. The rate at September 30, 2007 was 13.25%. Interest expense for the nine months ended September 30, 2007 and September 24, 2006 was $2,748,482 (unaudited) and $3,389,808 (unaudited), respectively.

3. Letters of Credit

Letters of credit outstanding at December 31, 2006 were $53,167,000, the majority of which are related to the Company’s workers’ compensation arrangements. These letters of credit are guaranteed by Stephens and are issued under a credit facility maintained by Stephens. Letters of credit outstanding at September 30, 2007 were $53,167,000 (unaudited).

NOTE D — CAPITAL ACTIVITIES

The Company was formed in June 2000 as a Delaware limited liability company. Contributions of $1 per unit were made in exchange for 52,625,000 common units (Common Shares). In June 2001, notes payable were converted by the Company into preferred units (Preferred Shares) at $1 per unit. The former note holders received 42,201,370 shares of Class A Preferred Shares and 24,471,370 of Class B Preferred Shares.

On January 1, 2004, the members of the Company entered into an Amended and Restated Operating Agreement (Operating Agreement). In exchange for services rendered and to be rendered by certain Company executives, 1,556,722 additional units were issued (Participating Shares). These shares vest 20% per year subsequent to the date of grant. Holders of the Participating Shares will be fully vested in these shares on January 1, 2009. The Company determined these shares had minimal value at the date of grant.

Under the Operating Agreement, net income is first allocated to offset previously allocated losses in the following order:

•		Class B Preferred and Participating Shares		95% and 5% of net income, respectively
•		Class A Preferred and Participating Shares		95% and 5% of net income, respectively
•		Common and Participating Shares		95% and 5% of net income, respectively

Once all previously allocated net losses are reduced to zero, holders of Class B Preferred Shares and Participating Shares are entitled to 95% and 5%, respectively, per year of net income until the cumulative net income allocated to the Class B Preferred Shares is equal to the Class B Priority Return, as defined. Once Class B priority allocations are satisfied, the holders of Class A Preferred Shares and Participating Shares are then entitled to 95% and 5%, respectively, per year of net income until the cumulative net income allocated to the Class A Preferred Shares is equal to the Class A Priority Return, as defined. Once all Preferred priority allocations are satisfied, the holders of Common Shares and Participating Shares are then entitled to 95% and 5%, respectively, of any remaining net income. Any losses incurred offset previously allocated income in the following order: Class B Preferred Shares, then Class A Preferred Shares then Common Shares. Once all previously allocated net income is reduced to zero, additional losses reduce capital accounts in the following order, until such capital accounts are reduced to zero:

•		Common and Participating Shares		95% and 5% of net losses, respectively
•		Class A Preferred and Participating Shares		95% and 5% of net income, respectively
•		Class B Preferred and Participating Shares		95% and 5% of net income, respectively

Upon liquidation, after determining that all known debts and liabilities of the Company have been paid, the remaining assets are distributed to the members in accordance with their respective capital account balances.

During 2000, the Company issued warrants to certain note holders to purchase 15.05% of the fully diluted common units for a $1 per unit. These warrants are exercisable from the date of grant through June 28, 2010. The Company determined these warrants had minimal value at the date of issuance.

During 2003, the Company issued options to one of the Company’s executives for 586,024 common units of the Company with an exercise price of $0.20 per unit. The options are fully vested on the date of grant and can only be exercised all at

once. The Company determined these options had minimal value at the date of grant. The options expire on September 30, 2010.

NOTE E — INTANGIBLE ASSETS

Intangible assets, excluding goodwill, consisted of the following at December 25, 2005, December 31, 2006 and September 30, 2007:

		December 25,				December 31,				September 30,
		2005				2006				2007
										(unaudited)
Trade name		$	25,500,000			$	25,500,000			$	25,500,000
Deferred financing costs			129,336				129,336				129,336
			25,629,336				25,629,336				25,629,336
Less: accumulated amortization, deferred financing costs			(32,703	)			(65,037	)			(89,287	)
Total intangible assets, net		$	25,596,633			$	25,564,299			$	25,540,049

The trade name is considered an indefinite-lived intangible asset and is therefore not amortized. Deferred financing costs are amortized over the lives of the respective loans. Amortization of deferred financing costs is recorded on the straight-line basis, which approximates the effective interest method. Amortization expense for the year ended December 31, 2006, was $32,334 and is recorded as a component of interest expense. Amortization expense for the nine month periods ended September 24, 2006 and September 30, 2007 was $24,250 (unaudited).

NOTE F — RELATED PARTY TRANSACTIONS

1. Revenue

The company services a small number of affiliates of Stephens. Revenues from affiliates were approximately $1,218,000 for the year ended December 31, 2006, $877,000 (unaudited) for the nine months ending September 24, 2006, and $778,000 (unaudited) for the nine months ending September 30, 2007.

2. Costs

Support services are provided by Stephens including legal, information technology, accounts payable, rent and other. For the year ended December 31, 2006 fees for these services were approximately $2,539,000. For the nine month periods ended September 24, 2006 and September 30, 2007 the fees for these services were approximately $1,825,000 (unaudited) and $2,185,000 (unaudited), respectively.

3. Insurance Policy

During 2006, the Company held a general liability insurance policy for which Stephens Insurance Services acted as the insurance broker. For the year ended December 31, 2006 expense for the policy, including broker fees, was $463,279. Expense for the policy, including broker fees, was $358,626 (unaudited) for the nine months ending September 24, 2006, and $427,042 (unaudited) for the nine months ending September 30, 2007.

NOTE G — COMMITMENTS AND CONTINGENCIES

1. Leases

The Company has entered into various operating lease agreements for its premises, office equipment and automobiles. Rental expense under operating leases for the year ended December 31, 2006 was $5,473,132. The Company’ corporate headquarters are leased from Stephens on a month-to-month basis. Rental expense under this related party lease for the year ended December 31, 2006 was $211,220. The Company subleases certain of its office premises to a third party.

Future minimum lease payments and sublease receipts as of December 31, 2006 are as follows:

		Minimum lease								Net Operating
		payments				Sublease Receipts				Lease Commitments
2007		$	5,098,248			$	(535,000	)		$	4,563,248
2008			4,209,476				(535,000	)			3,674,476
2009			3,065,124				(267,000	)			2,798,124
2010			1,850,224				—				1,850,224
2011			572,073				—				572,073
Thereafter			149,255				—				149,255
		$	14,944,400			$	(1,337,000	)		$	13,607,400

2. Employment Agreements

Certain of the Company’s executives are covered by employment agreements which include, among other terms, base compensation, incentive-bonus determinations and payments in the event of termination or change in control of the Company.

3. Workers’ Compensation Liability

The following is a summary of amounts recorded related to workers’ compensation:

		2006				2005
Amounts Payable		$	36,894,973			$	33,658,023
Unamortized discount			(3,315,573	)			(3,064,223	)
Present value amounts payable		$	33,579,400			$	30,593,800

Expected aggregate undiscounted amounts payable are as follows at December 31, 2006:

2007		$	14,701,098
2008			8,507,550
2009			5,221,765
2010			3,208,589
2011			2,131,172
Thereafter			3,124,799
		$	36,894,973