Compass Diversified Holdings
For the period ended Mar 31, 2026. Filed May 6, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 6, 2026
CODI$11.31-1.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2026-01-14.
0001345126-26-000011
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-06.
0001345126-26-000040
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 304 previous paragraphs and 176 current paragraphs.
81 unchanged; 41 reworded; 53 added; 176 removed; 6 previous and 1 current paragraphs rearranged.
Tables are not compared: 66 previous and 36 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (53)
Current report
Lugano was deconsolidated on November 16, 2025. The Company retained its equity interest in Lugano at March 31, 2026.
Current report
2026 Outlook and Significant Trends Impacting our Subsidiary Businesses
Current report
Macroeconomic Trends
Current report
The macroeconomic environment remains choppy, as geopolitical uncertainty and evolving trade dynamics continue to impact the operating environment; however, we believe that our diversified businesses have characteristics that may help them navigate these conditions, including leading positions in a number of categories and a disciplined focus on operating execution. Macroeconomic conditions affect our subsidiaries differently given our mix of branded consumer and industrial businesses. For our branded consumer businesses, changes in consumer confidence, discretionary spending and promotional intensity can affect demand, channel inventory levels and pricing, while persistent inflation in household essentials may continue to pressure consumer budgets in certain categories. For our industrial businesses, end-market activity and customer capital spending may be influenced by interest rates and broader manufacturing and infrastructure conditions, which can impact order patterns and project timing. Across the portfolio, we continue to experience input-cost volatility (including labor, freight and certain commodities and packaging materials), and the extent to which we can offset higher costs through pricing actions depends on competitive dynamics, contractual terms and customer demand. While changes in benchmark rates and credit spreads can affect financing markets more broadly, a significant portion of our outstanding debt is fixed-rate and, as a result, our consolidated interest expense is generally less sensitive in the near term to changes in market rates and credit spreads than it would be under a predominantly variable-rate capital structure. However, higher rates and tighter credit conditions may still affect the availability and cost of incremental financing (including for refinancings), as well as consumer and business demand and our customers’ spending decisions. Finally, evolving trade and tariff policies and supply chain reconfiguration may require certain subsidiaries to adjust sourcing, manufacturing footprint and inventory positioning, which can increase working capital requirements and, in some cases, create intermittent disruptions (including those experienced by Arnold in connection with export licensing requirements in China).
Current report
Geopolitics and Trade Policy
Current report
Geopolitical conditions remained volatile in the first quarter of 2026, and that volatility has continued to contribute to variability in energy markets, freight and logistics. In particular, the conflict in the Middle East involving Iran has increased volatility in global energy markets and shipping conditions, including heightened risk of disruption in key maritime chokepoints and higher freight costs. During the quarter, crude oil and refined product prices experienced significant volatility, which has flowed through to higher (and more variable) energy, transportation and logistics costs for certain of our businesses and, in some cases, has contributed to changes in consumer and customer demand patterns. In addition, trade and tariff policy uncertainty has remained elevated. Our subsidiaries have continued to diversify sourcing and reduce concentrated exposure to China; however, the risk of new or expanded tariffs across multiple regions and product categories has persisted, and our businesses have continued to manage this risk through sourcing actions, pricing initiatives and, where appropriate, inventory positioning. Further, a recent U.S. Supreme Court ruling related to certain tariff authorities has increased uncertainty regarding the interpretation and administration of certain tariffs, including uncertainty regarding the entitlement to, and timing of, refunds of previously paid tariffs. While we may be entitled to refunds of certain previously paid tariffs, the timing and magnitude of any such recoveries remain uncertain, which has contributed to variability in cost recovery expectations and working capital planning. Wealso continue to experience regulatory and trade restrictions affecting certain cross-border shipments, including constraints on one of our subsidiaries, Arnold Magnetic Technologies, to export certain products from China due to heightened export licensing requirements. While these dynamics may support higher longer-term demand for Arnold’s solutions as customers seek more resilient and predictable supply chains, the timing and magnitude of any such demand shift remains uncertain. We continue to monitor geopolitical developments, tariff policies and related government actions and will adjust our strategies to mitigate impacts as conditions evolve.
Current report
Business Outlook
Current report
Our near-term focus remains on strengthening the balance sheet, maintaining liquidity, and executing our day-to-day operating plan across our subsidiaries. Reducing leverage is our top financial priority, which we are pursuing through organic free cash flow generation and targeted divestitures, including the sale of Sterno's food service business, which closed in the second quarter of 2026, the net proceeds of which we expect to apply to repayment of senior secured debt.
Current report
Our operating priorities for 2026 include: (i) generating free cash flow through improved operating performance, disciplined capital spending, and focused working capital management; (ii) driving profitable growth through product innovation, distribution expansion, and customer wins where returns are attractive; (iii) protecting margins through pricing actions, productivity initiatives, and active management of input-cost volatility; and (iv) enhancing resilience and oversight through supply chain diversification, selective technology investments, and continued improvement of governance and financial reporting processes.
Current report
Lugano Restatement and Deconsolidation
Current report
Sterno Sale
Current report
On March 28, 2026, we signed an Agreement and Plan of Merger (the “Merger Agreement”) to sell Sterno, which we own approximately 92% of on a fully diluted basis. Under the Merger Agreement, WCHG Buyer, Inc. (the “Buyer”) will acquire Sterno’s food service business through the merger of a Buyer subsidiary with and into Sterno, with Sterno surviving as a wholly owned subsidiary of the Buyer. Immediately before the closing, Sterno is expected to distribute all of the equity interests in its indirect wholly owned subsidiary, Rimports, LLC (“Rimports”), to Sterno’s stockholders (the “Rimports Distribution”). After the Rimports Distribution, Rimports (which holds Sterno’s home fragrance business) will to remain a majority owned subsidiary of CODI.
Current report
The Sterno sale closed on May 1, 2026. The sale price was based on an enterprise value of $292.5 million, subject to customary adjustments (including for transaction expenses, change-of-control payments, and Sterno’s net working capital, cash and debt at closing), excluding Rimports and its subsidiaries. After the allocation of the sale price to Sterno’s non-controlling Stockholders and payment of transaction costs, CODI received approximately $282 million of total proceeds at closing. This amount is in respect to the Company's outstanding loans to Sterno (including accrued interest) and its equity interests in Sterno. The proceeds will be used to pay down outstanding debt under the Company’s senior credit facility. CODI expects to record a gain on the sale of Sterno’s food service business in the quarter ending June 30, 2026.
Current report
As of March 31, 2026, the assets and liabilities to be sold in the Sterno transaction were classified as held for sale in accordance with applicable U.S. GAAP.
Current report
Altor Sale Leaseback
Current report
On January 23, 2026, Altor completed a sale leaseback transaction for its manufacturing facilities in Bloomsburg, Pennsylvania; New Albany, Indiana; and El Dorado Springs, Missouri (the “Properties”). Under the purchase and sale agreement, Altor sold the land, buildings and certain integrated fixtures to the buyer/lessor for total consideration of $11.75 million. At the same time, Altor entered into a 20 year triple-net master lease to lease back all three Properties. As required by the Fifth amendment to the 2022 Credit Facility, the Company made a payment of the amount of the net proceeds to reduce the term loan under the 2022 Credit Facility by $11 million.
Current report
Lugano Bankruptcy -In November 2025, Lugano and certain of its subsidiaries filed the Lugano Bankruptcy. As a result of the bankruptcy filing, the Company no longer maintained a controlling financial interest in Lugano and, accordingly, deconsolidated Lugano and its subsidiaries in accordance with ASC 810 -Consolidation. The results of operations of Lugano are included in the Company’s consolidated results through the date control was lost. From that date forward, Lugano is no longer included as an operating segment of the Company. Following deconsolidation, the Company’s continuing involvement with Lugano is limited to its claims in the bankruptcy proceedings, including any secured positions.
Current report
On a consolidated basis, gross profit decreased approximately $6.7 million during the three months ended March 31, 2026 compared to the corresponding period in 2025. We saw notable increases in gross profit at BOA ($2.9 million increase), The Honey Pot Co. ($6.8 million increase) and Arnold($3.6 million increase) during the quarter. We saw decreases in gross profit at 5.11 ($2.2 million decrease) and Altor ($5.9 million decrease)that correlates with the decrease in net revenue in the first three months of 2026. Lugano recognized $13.2 million in gross profit during the three months ended March 31, 2025 that was nonrecurring due to the Lugano bankruptcy.
Current report
Consolidated selling, general and administrative expense decreased approximately $18.4 million during the three months ended March 31, 2026, compared to the corresponding period in 2025, driven primarily by the impact of Lugano's bankruptcy. Lugano had selling, general and administrative expense of $26.6 million in the quarter ended March 31, 2025. This decrease was offset by an increase in corporate expenses of $8.4 million.
Current report
At the corporate level, general and administrative expense was $13.0 million in the three months ended March 31, 2026 and $4.6 million in the three months ended March 31, 2025. The increase was primarily attributable to one-time costs associated with our Lugano subsidiary and the ongoing lawsuits and corporate governance changes that we are making. Because the Lugano investigation commenced in April 2025, the prior-year quarter included no related costs. We continue to incur significant investigation-related and other associated costs, which may pressure corporate expenses in subsequent periods.
Current report
For the three months ended March 31, 2026, we incurred approximately $15.9 million in management fees as compared to $18.9 million in fees in the three months ended March 31, 2025. The decrease in the management fee in the first quarter of 2026 is primarily due to the deconsolidation of Lugano in November 2025 which reduced the net assets used in the calculation of the management fee.
Current report
Amortization expense for the three months ended March 31, 2026 decreased $0.5 million as compared to the three months ended March 31, 2025 due primarily to certain intangible assets at Sterno being fully amortized in the prior year and the Lugano deconsolidation.
Current report
In connection with the Company's annual goodwill impairment test as of March 31, 2026, the Company recorded a goodwill impairment charge at the PrimaLoft reporting unit of$20.5 million. Refer to "Note E - Goodwill and Other Intangible Assets"in the "Notes to the Condensed Consolidated Financial Statements" for additional information.
Current report
We recorded interest expense totaling $27.5 million for the three months ended March 31, 2026 compared to $35.9 million for the comparable period in 2025, a decrease of $8.4 million. Interest expense in the quarter ended March 31, 2025 includes $8.9 million related to financing arrangements at Lugano, which was deconsolidated in November 2025. Excluding the impact of the Lugano financing arrangement in the prior-year period, interest expense increased $0.5 million, primarily due to higher interest expense on the Company’s Senior Notes resulting from the increased principal amount of the Senior Notes following the paid-in-kind payments made in 2025 in connection with the indenture forbearance agreement described in the 2025 Form 10-K.
Current report
Net sales for thethree months ended March 31, 2026 were $124.0 million as compared to net sales of $129.4 million for thethree months ended March 31, 2025, a decrease of $5.4 million, or 4.2%. The decline was driven primarily by decreases in direct-to-consumer sales of approximately $4.0 million, reflecting a reduction in promotional activity compared to the prior year period, and international sales of approximately $1.8 million, primarily due to the timing of large contracts. These decreases were partially offset by an increase in domestic wholesale sales of approximately $0.5 million, driven by increased demand from key national accounts during the quarter.
Current report
Segment operating income for the three months ended March 31, 2026 was $7.7 million, a decrease of $0.9 million when compared to segment operating income of $8.6 million for the same period in 2025. The decline in operating income primarily reflects lower net sales, which resulted in reduced gross profit dollars, partially offset by an improvement in gross margin rate. These impacts were further offset by lower selling, general and administrative expenses, driven by a reduction in payroll as well as lower variable expenses, including marketing and fulfillment, in line with reduced revenue volume. Segment operating margin was 6.2% in the three months ended March 31, 2026 and 6.6% in the three months ended March 31, 2025.
Current report
Segment operating income for thethree months ended March 31, 2026 was$16.1 million, an increase of$2.5 million when compared to segment operating income of$13.7 million for the same period in 2025. The increase in operating income was driven by an increase in net sales and improved gross profit margins, partially offset by an increase in selling, general, and administrative costs. Segment operating margin was 31.0% in the three months ended March 31, 2026 and 27.9% in the three months ended March 31, 2025.
Current report
Net sales for thethree months ended March 31, 2026 were $21.9 million, a decrease of $1.7 million as compared to net sales of $23.6 million for thethree months ended March 31, 2025. The decrease in net sales in the current period versus the three months ended March 31, 2025 is primarily attributable to timing effects, with a shift in the timing of seasonal demand to the prior year.
Current report
Segment operating loss for the three months ended March 31, 2026 was $17.6 million, a decrease of $21.8 million when compared to segment operating income of $4.2 million for the same period in 2025. PrimaLoft recorded a goodwill impairment charge of $20.5 million in the first quarter of 2026, which was the primary driver of the decrease. The remainder of the decrease was attributable to lower sales volume, partially offset by higher gross margins in the first quarter of 2026 based on sales mix. Segment operating margin was (80.3)% in the three months ended March 31, 2026 as compared to 17.6% in the three months ended March 31, 2025.
Current report
Net sales for the three months ended March 31, 2026 were $45.2 million, an increase of $9.0 million or 24.8% from net sales of $36.2 million for the three months ended March 31, 2025. The increase in net sales is primarily due to strong volume growth across retail channels, the benefits of price pack architecture optimization implemented in late 2025, and modestly lower trade investment versus the prior year.
Current report
Segment operating income for the three months ended March 31, 2026 was$9.6 million, an increase of$4.7 million when compared to segment operating loss of$4.8 million for the same period in 2025. The increase was primarily driven by higher net sales and improved operating leverage, partially offset by increased investments in marketing and human capital. Segment operating margin in the three months ended March 31, 2026 was 21.2% as compared to 13.4% in the three months ended March 31, 2025.
Current report
Net sales for thethree months ended March 31, 2026 were $13.8 million, an increase of $0.6 million or 4.7%, compared to net sales of $13.2 million inthe same period in 2025. The increase in net sales for thethree months ended March 31, 2026 was primarily driven by increases in King's Camo apparel sales and incremental increases in net sales of crossbows.
Current report
Segment operating loss for the three months ended March 31, 2026 was$1.1 million compared to segment operating loss of$2.8 million for the same period in 2025. Segment operating margin was (8.1)% in the three months ended March 31, 2026 as compared to (21.4)% in the three months ended March 31, 2025. The improvement was driven by higher gross margins in the current quarter, with gross margins of 33.1% in the three months ended March 31, 2026 as compared to 25.5% in the three months ended March 31, 2025.
Current report
Altor Solutions
Current report
Net sales for the three months ended March 31, 2026 were $64.6 million, a decrease of $11.6 million, or (15.2)%, compared to net sales of $76.3 million in the three months ended March 31, 2025. The decrease in net sales during the period was primarily attributable to reduced consumer demand in the industrial white goods market, the introduction of alternative shipping materials in the GLP-1 market, and a life science customer's transition from a direct supply model to third-party distribution. Net sales in the perishables market remained consistent with the prior year period.
Current report
Segment operating income was $1.2 million in thethree months ended March 31, 2026, a decrease of $3.8 million as compared to thethree months ended March 31, 2025. Segment operating margin was 1.8% in the first three months of 2026 as compared to 6.5% in the first three months of 2025, with the decrease driven by a reduced sales volumes and the deleveraging effect of fixed costs, which negatively impacted gross margins in the current period. Gross profit as a percentage of net sales was 20.3% in the three months ended March 31, 2026 and 25.0% in the three months ended March 31, 2025.
Current report
Net sales for the three months ended March 31, 2026 were approximately$40.2 million, an increase of$6.2 million compared to net sales of$34.0 million in the same period in 2025. The increase in net sales was primarily attributable to growing demand for non-China sourced permanent magnets. The uncertain geopolitical climate and heightened licensing requirements to export certain rare earth and strategic minerals out of China is causing significant supply chain disruptions. As a result, Arnold is seeing increased demand from customers seeking more predictable and sustainable, non-China sourced magnet materials. Arnold also benefitted during the current quarter from a softer year over year comparison, with the first quarter of 2025 down 18% from the first quarter of 2024.
Current report
Segment operating income for thethree months ended March 31, 2026 was approximately $2.3 million, an increase of $3.2 million when compared to the same period in 2025. The improvement in segment operating results was driven primarily by strong sales growth and resulting operating leverage, combined with non-recurring costs incurred in the first quarter of 2025. Segment operating margin was 5.8% in the first three months of 2026 as compared to(2.7)% in the first three monthsof 2025.
Current report
Net sales for thethree months ended March 31, 2026 were approximately$65.1 million, a decrease of$0.3 million, or 0.5%, compared to net sales of$65.4 million inthe same period in 2025. The net sales variance reflects an increase in the Sterno business unit related to distribution gains within most major channels that was more than offset by a decline in the Rimports business unit related to distribution losses in key channels.
Current report
Segment operating income for the three months ended March 31, 2026 was approximately $7.2 million, an increase of $0.9 million compared to the three months ended March 31, 2025, driven primarily by improved gross profit due to productivity initiatives across manufactured and procured items and beneficial deflation across key input costs. Gross profit as a percentage of net sales was 28.4% in the three months ended March 31, 2026 as compared to 26.5% in the three months ended March 31, 2025. Segment operating margin was 11.1% in the first three months of 2026 as compared to 9.7% in the first three months of 2025.
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Removed paragraphs (176)
Previous report
As described in Part 1, Item 1., Note A to the Condensed Consolidated Financial Statements, the Company has restated its Condensed Consolidated Financial Statements as of September 30, 2024 and for the three and nine months ended September 30, 2024. As a result, the previously reported financial information as of September 30, 2024 and for the three and nine months ended September 30, 2024 in this Management's Discussion and Analysis ("MD&A") have been updated to reflect the restatements. See Item 1. Note A - Presentation and principles of consolidation in the Consolidated Financial Statements for additional information related to these restatements, including descriptions of the adjustments and the impacts on the Consolidated Financial Statements.
Previous report
Please see the section titled “Going Concern” under the heading “Liquidity and Capital Resources” in this MD&A for information concerning management’s determination that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements set forth in this Form 10-Q are issued.
Previous report
Lugano- Lugano is a designer, manufacturer, and retailer of high-end jewelry. Lugano conducts sales via its own retail salons as well as pop-up showrooms at Lugano-hosted or sponsored events in partnership with organizations in the equestrian, art, and philanthropic communities. Lugano is headquartered in Newport Beach, California.
Previous report
Management Strategy and Business Outlook
Previous report
Our management strategy involves the proactive financial and operational management of the subsidiaries we own in order to increase cash flows and shareholder value. While our subsidiary businesses have different growth opportunities and potential rates of growth, we actively manage each of our subsidiary businesses to increase the value of, and cash generated by, each business through various initiatives, including making selective capital investments to expand geographic reach, increase capacity or reduce manufacturing costs of our subsidiary businesses; improving and expanding existing sales and marketing programs; and assisting in the acquisition and integration of complementary businesses.
Previous report
The Company'sareas of focus for 2025, which were generally applicable to each of our businesses, included:
Previous report
•Pursuing sales growth through a combination of new product development, increasing distribution, new customer acquisitions and selective international expansion;
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•Driving free cash flow through increased net income and effective working capital management, enabling continued investment in our businesses;
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•Raising prices, when appropriate, on our goods due to rising input costs to preserve operating margins;
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•Taking market share, where possible, in each of our niche market leading companies, generally at the expense of less focused or less well capitalized competitors;
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•Striving for excellence in supply chain management, manufacturing and technological capabilities;
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•Continuing to pursue expense reduction and cost savings in lower margin business lines or in response to lower production volume; and
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•Continuing to grow through disciplined, strategic acquisitions and rigorous integration processes.
Previous report
On July 25, 2025, the LLC entered into a Second Forbearance Agreement and Third Amendment to Credit Agreement (the “Third Amendment”) to its Credit Agreement. The Third Amendment was by and among the LLC, the lenders party thereto, and the Administrative Agent.
Previous report
The Third Amendment provided that the Administrative Agent and the Lenders would refrain from exercising rights and remedies available to them with respect to the Lugano Events of Default until the earliest of: (a) 11:59 p.m. (Eastern Time) on October 24, 2025; (b) the occurrence of any event of default other than a Lugano Event of Default; (c) the breach by the LLC of any covenant or provision of the Third Amendment; (d) a declaration by the trustee or any holders of the LLC’s 2029 Senior Unsecured Notes of any default or event of default under the Indenture dated as of March 23, 2021 between the LLC and U.S. Bank National Association, as trustee, for which a forbearance agreement was not executed with the LLC within five business days after the date of such declaration; and (e) the declaration by the trustee or any holder of the 2032 Senior Unsecured Notes of any default or event of default under the Indenture dated as of November 27, 2021 between the LLC and U.S. Bank National Association, as trustee, for which a forbearance agreement was not executed with the LLC within five business days after the date of such declaration (the period from July 25, 2025 through the earliest of events (a) through (e) above, the “Second Forbearance Period”).
Previous report
During the Second Forbearance Period, the Lenders under the Credit Agreement would honor requests for credit extensions from the LLC for revolving loans composed of term SOFR loans with an applicable rate of 2.50% per annum and an interest period of one month; provided, however, that such credit extensions shall not cause the Lenders’ revolving credit exposures (inclusive of letters of credit obligations) to exceed $60 million. Lenders representing at least 50% of the total credit exposure of all Lenders under the Credit Agreement were able to, in their discretion, approve additional revolving borrowings by the LLC in an amount not to exceed an aggregate of $10 million. During the Second Forbearance Period, the LLC was able to make Restricted Payments (as defined in the Credit Agreement), including any dividend or other distribution with respect to equity interests, if, after giving effect to any indebtedness incurred in connection with such payment (a) all cash of the LLC on deposit with the Administrative Agent or subject to a qualifying control account, plus (b) unused borrowing availability, was not less than $10 million; provided, however, that the forgoing was not the exclusive method by which the LLC was able to make Restricted Payments.
Previous report
In addition to the forbearance of the Lenders described above, the Third Amendment also amended the Credit Agreement to (i) limit the management fees that were able to be paid by the LLC to CGM to no more than $5 million per fiscal quarter (with the amount of such management fees that could not be paid due to this limitation being available to offset any potential future reduction in management fees as a result of any adjustments for deemed overpayments) and (ii) limit the management fees that could be paid by the LLC’s subsidiaries to the Manager to no more than $2.0 million per fiscal quarter. The Third Amendment contained customary representations and warranties.
Previous report
Please see "Note Q – Subsequent Events” for additional information concerning the Credit Agreement included in the "Notes to the to the Condensed Consolidated Financial Statements" included in this Form 10-Q.
Previous report
In connection with the Lugano matters, the LLC has maintained regular communication with holders of the LLC’s Notes concerning the existence of the potential for default under the terms of the Indentures in respect of the Lugano matters. To provide the Company with adequate time to complete the restatement of its 2022, 2023, and 2024 financial statements and to file its quarterly reports for the first and second quarters of 2025, on August 29, 2025, the LLC entered into a Forbearance Agreement (the “Indenture Forbearance Agreement”) with certain holders of the Notes (collectively, the “Supporting Holders”) and, for certain limited purposes described therein, the Trustee, pursuant to which, during the Indenture Forbearance Period (as defined below), the Supporting Holders agreed to forbear, and to direct the Trustee to forbear, from exercising rights and remedies available to them with respect to (i) actual or potential defaults or events of default under the Indentures resulting from any breach of the Indentures’ requirement to provide certain financial within specified time periods, and (ii) any other default or event of default mutually agreed upon between the Supporting Holders and the LLC in writing and delivered to the Trustee (events (i) and (ii), collectively, the “Specified Defaults”) until the earliest of: (a) the occurrence or existence of any event of default under the Indentures, other than the Specified Defaults, that is not cured or waived within any applicable grace or cure period under the Indentures; (b) the failure of the LLC to timely comply with any term, condition, or covenant of the Indenture Forbearance Agreement; (c) the termination of the forbearance period provided under the Second Forbearance Agreement with respect to the Credit Agreement, such forbearance period having not been extended or replaced by another forbearance or similar agreement among the parties thereto within three (3) business days of such termination; (d) the cure of any Specified Default related to any breach of the requirement to provide certain financial information within specified time periods pursuant to Section 4.03 of the Indentures; (e) the LLC’s failure to cause the execution and the delivery of supplemental indentures in respect of each series of Notes substantially in the form provided in the Indenture Forbearance Agreement providing for the payment to the holders of the Notes of the fees specified in the Indenture Forbearance Agreement (or another form reasonably acceptable to the Supporting Holders providing for the payment of the same fees) (the “Supplemental Indentures”), or alternatively the LLC failed to make certain cash fee payment within fifteen business days of August 29, 2025, and (f) 11:59 p.m. ET on October 24, 2025 (the period from August 29, 2025 through the earliest of events (a) through (f) above, the “Indenture Forbearance Period”).
Previous report
During the Indenture Forbearance Period, the Supporting Holders also agreed (1) in the event that the Trustee or any holder or group of holders of the Notes declares the 2029 Notes and/or the 2032 Notes to be due and payable immediately solely as a result of any Specified Default (an “Acceleration”), the Supporting Holders would (a) deliver written notice and direction to the Trustee to rescind and not seek any remedy under the Indenture in connection with such Acceleration in accordance with the terms of the Indentures and (b) take all other action in the Supporting Holders’ power to cause such Acceleration to be rescinded and cancelled, to the extent permitted by the Indentures, and (2) not to transfer any right, title or interest in their respective Notes, unless (x) such transferee was a party to the Indenture Forbearance Agreement or (y) the transferee executed a joinder agreeing to be bound by the terms of the Indenture Forbearance Agreement if such transferee was not already a party to the Indenture Forbearance Agreement.
Previous report
As consideration for entering into Indenture Forbearance Agreement, the LLC agreed to pay to each holder of Notes such holder’s pro rata share of (a) an upfront fee, paid in kind by increasing the principal amount of the applicable series of Notes, equal to 1.75% of the aggregate principal amount of Notes outstanding, and (b) additional interest, paid in kind by increasing the principal amount of the applicable series of Notes, equal to the equivalent of a 5.00% per annum increase in the interest rate for the applicable series of Notes for the period between August 1, 2025 and October 24, 2025.
Previous report
On September 9, 2025, the LLC entered into (a) a second supplemental indenture by and between the LLC and the Trustee amending and supplementing the 2029 Notes Indenture (the “2029 Second Supplemental Indenture”); and (b) a second supplemental indenture (the “2032 Second Supplemental Indenture” and, together with the 2029 Second Supplemental Indenture, the “Supplemental Indentures”) by and between the LLC and the Trustee, amending and supplementing the 2032 Notes Indenture.
Previous report
The Supplemental Indentures: (a) amended and restated Section 2.01(a) of each of the Indentures to (i) require all Notes to be in minimum denominations of $1.00 and integral multiples of $1.00 in excess thereof and (ii) authorize the payment of the PIK Payments (defined below), payable in kind as an increase in the principal amount of the Global Notes (as defined in the Indentures) held by Cede & Co., as nominee for the Depositary (as defined in the Indentures); and (b) added a new Section 4.19 to each of the Indentures (i) requiring the LLC to make (A) a special one-time payment in kind (the “Fixed PIK Payment”) on September 17, 2025 (the “Fixed PIK Payment Date”) in an amount equal to $17.50 per $1,000 of the principal amount of the Notes outstanding to the holders of such Notes as of September 16, 2025; and (B) an additional interest payment on the Notes (the “Interest PIK Payment” and, together with the Fixed PIK Payment, the “PIK Payments”) at a rate of 5.00% per annum for each day during the period beginning on, and including, August 1, 2025 and ending on the earlier of (X) October 24, 2025 and (Y) the date of delivery to the Trustee of restated audited annual financials for fiscal years 2022, 2023, and 2024 and unaudited financials for the first quarter of fiscal year 2025.
Previous report
Pursuant to Section 4.19(c), PIK Payments on the Notes were payable by increasing the principal amount of the outstanding Global Notes by an amount equal to the amount of the applicable PIK Payment (rounded down to the nearest whole dollar) as directed by the LLC. Such increased principal amount is fungible with the Notes issued prior to the applicable date of such PIK Payment and will bear interest from the most recent interest payment date on the Notes prior to the applicable date of such PIK Payment. The principal of all Notes resulting from a PIK Payment will mature on the maturity dates of the Notes.
Previous report
On October 27, 2025, the Trustee delivered a notice of default under the Indentures related to the Company’s failure to deliver to the Trustee the Company’s consolidated financial statements for the fiscal quarter ending March 31, 2025 within the time period required under the Indenture Forbearance Agreement. The Company completed the delivery of its consolidated financial statements for the fiscal quarter ending March 31, 2025 on December 19, 2025, within a sixty (60) day cure period provided under the Indentures to remedy such defaults.
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Consolidated Results of Operations - Quarter-to-Date
Previous report
Consolidated selling, general and administrative expense increased approximately $33.4 million during the three months ended September 30, 2025, compared to the corresponding period in 2024, driven primarily by increases at the corporate level ($26.8 million increase), 5.11 ($1.2 million increase) due to increases in sales and marketing investments and an increase in the bonus pool versus the prior year, Lugano ($1.5 million increase) and Altor ($3.9 million increase) due to the acquisition of Lifoam in the fourth quarter of 2024.
Previous report
At the corporate level, general and administrative expense was $32.6 million in the third quarter of 2025 and $5.9 million in the third quarter of 2024, an increase of $26.8 million. The increase in general and administrative expense in the third quarter of 2025 was primarily due to $27.7 million of costs incurred in the third quarter of 2025 relating to the Lugano Investigation. The remainder of the increase related to increased professional fees incurred during the quarter. The Company will continue to incur significant costs related to the Lugano Investigation during the remainder of 2025.
Previous report
Under the Management Services Agreement ("MSA"), we pay CGM (i) a base management fee equal to (a) 2% of the Company’s adjusted net assets when the adjusted net assets are less than or equal to $3.5 billion (the “Initial Threshold Fee”), (b) the Initial Threshold Fee plus 1.25% of the amount of adjusted net assets exceeding $3.5 billion when the adjusted net assets are more than $3.5 billion but less than $10 billion, or (c) 1.5% of the adjusted net assets when the adjusted net assets are $10 billion or more and (ii) an incentive management fee equal to 0.25% of the amount of adjusted net assets exceeding $3.5 billion only when the adjusted net assets are more than $3.5 billion but less than $10 billion and only if the Company’s annualized internal rate of return on equity for the trailing three-years exceeds 12%. Any incentive management fee paid to the Manager may only be distributed by the Manager among the then-current Employees (as defined in the MSA) of the Manager. Such incentive management fee is subject to approval by the Compensation Committee of the Company’s board of directors. For the three months ended September 30, 2025, we incurred approximately $16.2 million in management fees as compared to $18.6 million in fees in the three months ended September 30, 2024. The Management fee incurred in the three months ended September 30, 2025 and 2024 reflects the amount incurred prior to the restatement of the Company's financial statements as the Company is not permitted under the MSA to adjust the amount owed to the Manager until the time when the restated financial information was available, which occurred upon the filing of the Company's 10-K/A on December 8, 2025. Therefore the expense recorded in the quarter ended September 30, 2025 and 2024 reflects the amount that would have been due to the Manager at the time calculated, prior to the restatement of the Company's financial statements. The calculation of the adjusted management fee incurred as of September 30, 2025 resulted in a total amount of $13.8 million that should have been due to the Manager.
Previous report
In connection with the entry into the Third Amendment on July 5, 2025, the Credit Agreement was modified to (i) limit the management fees that were able to be paid by the LLC to the "Manager to no more than $5.0 million per fiscal quarter (with the amount of such management fees that could not be paid due to this limitation being available to offset any potential future reduction in management fees as a result of any adjustments for deemed overpayments) and (ii) limit the management fees that could be paid by the LLC’s subsidiaries to the Manager to no more than $2.0 million per fiscal quarter. For the quarter ended September 30, 2025, the total management fee incurred was $16.2 million, however, due to the restrictions imposed by the Third Amendment, the total amount paid to the Manager was $6.6 million.
Previous report
Amortization expense for the three months ended September 30, 2025 decreased $0.5 million as compared to the three months ended September 30, 2024 due to the reduction in expense associated with the sale of Crosman in the second quarter of 2024, the reduction in intangible assets at Lugano resulting from the restatement and certain intangibles at Sterno that were fully amortized in 2024. These decreases were partially offset by the amortization expense associated with the intangibles that were recognized in conjunction with the purchase price allocation for Lifoam, the add-on acquisition that Altor completed in the fourth quarter of 2024.
Previous report
We recorded interest expense totaling $66.7 million for the three months ended September 30, 2025 compared to $31.6 million for the comparable period in 2024, an increase of $35.1 million. As consideration for entering into Indenture Forbearance Agreement, the LLC agreed to pay to each holder of Notes such holder’s pro rata share of (a) an upfront fee, paid in kind by increasing the principal amount of the applicable series of Notes, equal to 1.75% of the aggregate principal amount of Notes outstanding, and (b) additional interest, paid in kind by increasing the principal amount of the applicable series of Notes, equal to the equivalent of a 5.00% per annum increase in the interest rate for the applicable series of Notes for the period between August 1, 2025 and October 24, 2025. The Company recorded $22.8 million in paid-in-kind interest expense in the third quarter of 2025 related to the upfront fee required by the Indenture Forbearance Agreement, and accrued approximately $11.5 million related to the increase in interest rate during the third quarter of 2025.
Previous report
The interest expense also reflects an increase of $0.8 million in interest expense related to financing arrangements at our Lugano business.
Previous report
Gain (loss) on sale of Crosman
Previous report
On April 30,2024, Velocity Outdoor sold Crosman Corporation ("Crosman"), its airgun product division. Velocity received net proceeds of approximately $58.5 million related to the sale of Crosman, which was used to repay amounts outstanding under the intercompany credit agreement. The Company recorded a gain on the sale of Crosman in the quarter ending September 30, 2024 of $0.4 million
Previous report
Provision for income taxes
Previous report
Results of Operations - Operating Segments - Quarter-to-Date
Previous report
Net sales for the three months ended September 30, 2025 were $143.2 million as compared to net sales of $139.2 million for the three months ended September 30, 2024, an increase of $4.0 million, or 2.9%. The increase was driven primarily by a $3.7 million rise in domestic wholesale sales, reflecting strong demand and improved inventory availability; a $1.0 million increase in direct-to-consumer sales, attributable to heightened promotional activity; and a $1.8 million increase in international sales, supported by continued demand across key markets. These gains were partially offset by a $2.1 million decline in direct-to-agency sales, primarily due to the timing of large contracts.
Previous report
Segment operating income for the three months ended September 30, 2025 was $16.3 million, a decrease of $1.3 million when compared to segment operating income of $14.9 million for the same period in 2024. The increase in segment operating income reflects higher net sales and gross margin dollars that were partially offset by increased selling, general and administrative expenses, primarily driven by increased marketing investments to support sales growth. Segment operating margin was 11.4% in the third quarter of 2025 and 10.7% in the third quarter of 2024.
Previous report
Net sales for the three months ended September 30, 2025 were $43.9 million as compared to net sales of $45.6 million for the three months ended September 30, 2024, a decrease of $1.7 million, or 3.7%. The decrease was a result of reduced kids-based business in China, partially offset by continued growth in performance-based business in Snow Sports, Cycling, and Outdoor.
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Previous wording
This Item 2 contains forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q 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 section entitled "Forward-Looking Statements" included elsewhere in this Quarterly Report on Form 10-Q as well as those risk factors discussed in the section entitled "Risk Factors" Amendment No. 1 to the Company's Annual Report on Form 10-K (“Form 10-K/A”) for the fiscal year ended December 31, 2024 and in the section entitled "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q.
Current wording
This Item 2 contains forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q 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 section entitled "Forward-Looking Statements" included elsewhere in this Quarterly Report on Form 10-Q as well as those risk factors discussed in the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025 and in the section entitled "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q.
Previous wording
Compass Diversified Holdings ("Holdings", or the "Trust") was incorporated in Delaware on November 18, 2005. Compass Group Diversified Holdings LLC (the "LLC") was also formed on November 18, 2005. Holdings and the LLC (collectively, the "Company") were formed to acquire and manage a group of small and middle-market businesses headquartered in North America. The LLC is a controlling owner of nine businesses, or operating segments, at September 30, 2025. The segments are as follows: 5.11 Acquisition Corp. ("5.11"), Boa Holdings Inc. ("BOA"), Lugano Holding, Inc. ("Lugano Diamonds" or "Lugano"), Relentless Topco, Inc. ("PrimaLoft"), THP Topco, Inc. ("The Honey Pot Co." or "THP"), CBCP Products, LLC ("Velocity Outdoor" or "Velocity"), AMTAC Holdings LLC ("Arnold"), FFI Compass, Inc. ("Altor Solutions" or "Altor"), and SternoCandleLamp Holdings, Inc. ("Sterno").
Current wording
Compass Diversified Holdings ("Holdings", or the "Trust") was formed in Delaware on November 18, 2005. Compass Group Diversified Holdings LLC (the "LLC") was also formed on November 18, 2005. Holdings and the LLC (collectively, the "Company") were formed to acquire and manage a group of small and middle-market businesses headquartered in North America. The LLC is a controlling owner of eight businesses, or operating segments, at March 31, 2026. The segments are as follows: 5.11 Acquisition Corp. ("5.11"), Boa Holdings Inc. ("BOA"), Relentless Topco, Inc. ("PrimaLoft"), THP Topco, Inc. ("The Honey Pot Co." or "THP"), CBCP Products, LLC ("Velocity Outdoor" or "Velocity"), AMTAC Holdings LLC ("Arnold"), FFI Compass, Inc. ("Altor Solutions" or "Altor"), and SternoCandleLamp Holdings, Inc. ("Sterno"). Lugano Holding, Inc. ("Lugano") was an operating segment of the Company until November 16, 2025 when Lugano was deconsolidated. The results of operations of Lugano are included in the Company's results of operations through the date of the deconsolidation.
Previous wording
We acquired our existing businesses (operating segments) that we own at September 30, 2025 as follows:
Current wording
We acquired our existing businesses that we own at March 31, 2026 as follows:
Previous wording
5.11 - 5.11 is a leading provider of purpose-built technical apparel and gear for law enforcement, firefighters, EMS, and military special operations as well as outdoor and adventure enthusiasts. 5.11 is a brand known for innovation and authenticity, and works directly with end users to create purpose-built apparel and gear designed to enhance the safety, accuracy, speed and performance of tactical professionals and enthusiasts worldwide. 5.11 products are widely distributed in uniform stores, military exchanges, outdoor retail stores, its own retail stores and on 511tactical.com.
Current wording
5.11 - 5.11 is a global apparel, footwear, and gear company serving consumers who demand performance, durability, and versatility across work, training, and adventure. 5.11 is a brand known for innovation and authenticity and works directly with end users to create purpose-built apparel, footwear and gear designed to enhance the safety, accuracy, speed and performance of tactical professionals and enthusiasts worldwide. 5.11 operates sales offices and distribution centers globally, and 5.11 products are widely distributed in uniform stores, military exchanges, outdoor retail stores, its own retail stores and on 511tactical.com.
Previous wording
BOA- creator of the revolutionary, award-winning, patented BOA Fit System, partners with market-leading brands to make the best gear even better. Delivering fit solutions purpose-built for performance, the BOA Fit System is featured in footwear across snow sports, cycling, outdoor, athletic, workwear as well as performance headwear and bracing. The system consists of three integral parts: a micro-adjustable dial, high-tensile lightweight laces, and low friction lace guides creating a superior alternative to laces, buckles, Velcro, and other traditional closure mechanisms. Each unique BOA configuration is designed with brand partners to deliver superior fit and performance for athletes, is engineered to perform in the toughest conditions and is backed by The BOA Lifetime Guarantee.
Current wording
BOA- BOA, creatorof the award-winning, patented BOA Fit System, partners with market-leading brands to make the best gear even better. Delivering fit solutions purpose-built for performance, the BOA Fit System is featured in footwear across snow sports, cycling, outdoor, athletic, workwear as well as performance headwear and bracing. The system consists of three integral parts: a micro-adjustable dial, high-tensile lightweight laces, and low friction lace guides creating a superior alternative to laces, buckles, Velcro, and other traditional closure mechanisms. Each unique BOA configuration is designed with brand partners to deliver superior fit and performance for athletes, is engineered to perform in the toughest conditions and is backed by The BOA Lifetime Guarantee. BOA is headquartered in Denver, Colorado and has operations in Austria, China, South Korea, Japan and Vietnam.
Previous wording
PrimaLoft - PrimaLoft is a leading provider of branded, high-performance synthetic insulation and materials used primarily in consumer outerwear, and accessories. The portfolio of PrimaLoft synthetic insulations offers products that can both mimic natural down aesthetics and provide the freedom to design garments ranging from stylish puffers to lightweight performance apparel. PrimaLoft insulations also offer superior economics to the brand partner and enable better sustainability characteristics through the use of recycled, low-carbon inputs.
Current wording
PrimaLoft - PrimaLoft is a leading provider of branded, high-performance synthetic insulation and materials used primarily in consumer outerwear and accessories. The portfolio of PrimaLoft synthetic insulations offers products that can both mimic natural down aesthetics and provide the freedom to design garments ranging from stylish puffers to lightweight performance apparel. PrimaLoft insulations also offer superior economics to the brand partner and enable better sustainability characteristics through the use of recycled, low-carbon inputs. PrimaLoft is headquartered in Latham, New York.
Previous wording
The Honey Pot Co.- The Honey Pot Co. is a leading “better-for-you” feminine care brand, powered by plant-derived ingredients and clinically tested formulas. The Honey Pot Co. is rooted in the belief that all products should be made with healthy and efficacious ingredients that are kind to and safe for skin. The company offers an extensive range of holistic wellness products across the feminine hygiene, menstrual, personal care, and sexual wellness categories. The Honey Pot Co.'s mission is to educate, support, and provide consumers around the world with tools and resources that promote menstrual health and vaginal wellness. Its products can be found in stores across the U.S. through mass merchants, drug and grocery retail chains, and online.
Current wording
The Honey Pot Co. - The Honey Pot Co. is a leading “better-for-you” feminine care brand, powered by plant-derived ingredients and clinically tested formulas. Founded in 2012, The Honey Pot Co. is rooted in the belief that all products should be made with healthy and efficacious ingredients that are kind to and safe for skin. The Honey Pot Co. offers an extensive range of holistic wellness products across the feminine hygiene, menstrual, personal care, and sexual wellness categories. The Honey Pot Co.'s mission is to educate, support, and provide consumers around the world with tools and resources that promote menstrual health and vaginal wellness. Its products can be found in more than 33,000 stores across the U.S. through mass merchants, drug and grocery retail chains, and online. The Honey Pot Co. is headquartered in Atlanta, Georgia.
Previous wording
Velocity Outdoor- is a leading designer, manufacturer, and marketer of archery products, hunting apparel and related accessories. The archery product category consists of products including Ravin crossbows and CenterPoint archery products, and the apparel category offers high-performance, feature rich hunting and casual apparel under the King's Camo brand, utilizing King’s own proprietary camo patterns. Velocity Outdoor offers its products through national retail chains and dealer and distributor networks.
Current wording
Velocity Outdoor- Velocity Outdoor is a leading designer, manufacturer, and marketer of archery products, hunting apparel and related accessories. The archery product category consists of products including Ravin crossbows and CenterPoint archery products, and the apparel category offers high-performance, feature rich hunting and casual apparel under the King's Camo brand, utilizing King’s own proprietary camo patterns. Velocity Outdoor offers its products through national retail chains and dealer and distributor networks. Velocity Outdoor is headquartered in Rochester, New York.
Previous wording
Altor Solutions - Altor Solutions is a designer and manufacturer of custom molded protective foam solutions and original equipment manufacturer components made from expanded polystyrene and expanded polypropylene. Altor provides products to a variety of end markets, including appliances and electronics, pharmaceuticals, health and wellness, automotive, building and other products.
Current wording
Altor Solutions - Founded in 1957 and headquartered in St. Louis, Missouri, Altor Solutions is a designer and manufacturer of custom molded cold chain and protective foam solutions including OEM components made from EPS and EPP. Altor operates molding and fabricating facilities across North America and provides products to a variety of end-markets, including appliances and electronics, pharmaceuticals, health and wellness, building products and others.
Previous wording
Arnold - Arnold is a global solutions provider and manufacturer of engineered solutions for a wide range of specialty applications and end-markets, including aerospace and defense, general industrial, motorsport/transportation, oil and gas, medical, energy, semiconductor and advertising specialties. Arnold engineers solutions for and produces high performance permanent magnets (PMAG), stators, rotors and full electric motors ("Ramco"), precision foil products (Precision Thin Metals or "PTM"), and flexible magnets (Flexmag™) that are mission critical in motors, generators, sensors and other systems and components. Based on its long-term relationships, Arnold has built a diverse and blue-chip customer base totaling more than 2,000 customers and leading systems-integrators worldwide with a focus on North America, Europe, and Asia. Arnold has built a preferred rare earth supply chain and has leading rare earth and other permanent magnet production capabilities.
Current wording
Arnold - Arnold serves a variety of markets including aerospace and defense, general industrial, motorsport/ transportation, oil and gas, medical, energy, semiconductor and advertising specialties. Over the course of more than 100 years, Arnold has successfully evolved and adapted its products, technologies, and manufacturing presence to meet the demands of current and emerging markets. Arnold engineers solutions for and produces high performance permanent magnets (PMAG), stators, rotors and full electric motors (Ramco), precision foil products (Precision Thin Metals), and flexible magnets (Flexmag™) that are mission critical in motors, generators, sensors and other systems and components. Based on its long-term relationships, Arnold has built a diverse and blue-chip customer base totaling more than 2,000 customers and leading systems-integrators worldwide with a focus on North America, Europe, and Asia. Arnold has built a preferred rare earth supply chain and has leading rare earth and other permanent magnet production capabilities.
Previous wording
Sterno - Sterno is a leading manufacturer and marketer of portable food warming systems, creative indoor and outdoor lighting, and home fragrance solutions for the consumer markets. Sterno offers a broad range of wick and gel chafing systems, butane stoves and accessories, liquid and traditional wax candles, catering equipment and lamps through Sterno Products, as well as scented wax cubes, warmer products, outdoor lighting and essential oils used for home decor and fragrance systems through Rimports.
Current wording
Sterno -Sterno, headquartered in Texarkana, Texas, is the parent company of Sterno and Rimports. Sterno is a leading manufacturer and marketer of portable food warming systems. Sterno also produces creative indoor and outdoor lighting and home fragrance solutions for consumer markets. Sterno offers a broad range of wick and gel chafing systems, butane stoves and accessories, liquid and traditional wax candles, catering equipment and lamps through Sterno Products, as well as scented wax cubes, warmer products, outdoor lighting and essential oils used for home decor and fragrance systems, through Rimports.
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Restatement of Previously Issued Financial Statements
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As previously disclosed, following concerns reported to the Company’s management, the Company commenced the Lugano Investigation. As a result of the Lugano Investigation, the Company determined that the Company’s previously issued financial statements for fiscal years 2022, 2023 and 2024, including other interim and full-year financial information, should no longer be relied upon. In connection with the restatement process, the Company corrected these errors in its 2024 Form 10‑K/A, which was filed on December 8, 2025. The Company then filed its Quarterly Reports on Form 10‑Q for the first, second and third quarters of 2025, on December 18, 2025, December 29, 2025, and January 14, 2026, respectively. In addition, as a result of the Lugano Bankruptcy, effective November 16, 2025, Lugano and its subsidiaries were deconsolidated from the Company’s consolidated financial statements in accordance with ASC 810 –Consolidation. Accordingly, the results of Lugano are included in the Company’s consolidated results through November 16, 2025, and periods subsequent to that date do not include Lugano’s results of operations, assets or liabilities, except to the extent of any retained interest or other continuing involvement recognized in accordance with applicable accounting guidance.
Previous wording
The following discussion reflects a comparison of the historical results of operations of our consolidated business for the three and nine months ended September 30, 2025 and September 30, 2024, and components of the results of operations for each of our operating segments on a stand-alone basis.
Current wording
The following discussion reflects a comparison of the historical results of operations of our consolidated business for the three months ended March 31, 2026 and March 31, 2025, and components of the results of operations for each of our operating segments on a stand-alone basis.
Previous wording
In the following results of operations, we provide (i) our actual Consolidated Results of Operations for the three and nine months ended September 30, 2025 and 2024, which includes the historical results of operations of each of our businesses (operating segments) from the date of acquisition in accordance with US GAAP, and (ii) comparative historical components of the results of operations for each of our businesses on a stand-alone basis for the three and nine months ended September 30, 2025 and 2024, where all periods presented include relevant pro forma adjustments for pre-acquisition periods and explanations where applicable. For the acquisition of The Honey Pot Co. in January 2024, the pro forma results of operations for The Honey Pot Co. business segment has been prepared as if we purchased this business on January 1, 2024. We believe this is the most meaningful comparison for the operating results of acquired business segments. The following results of operations at each of our businesses are not necessarily indicative of the results to be expected for a full year.
Current wording
In the following results of operations, we provide (i) our actual Consolidated Results of Operations for the three months ended March 31, 2026 and 2025, which includes the historical results of operations of each of our businesses (operating segments) from the date of acquisition in accordance with US GAAP, and (ii) comparative historical components of the results of operations for each of our businesses on a stand-alone basis for the three months ended March 31, 2026 and 2025. The following results of operations at each of our businesses are not necessarily indicative of the results to be expected for a full year.
Previous wording
Consolidated net revenues for the three months ended September 30, 2025 increased by approximately $16.0 million, or 3.5%, compared to the corresponding period in 2024. During the three months ended September 30, 2025 compared to 2024, we saw notable increases in net revenues at 5.11 ($4.0 million increase), Lugano ($3.1 million increase), The Honey Pot Co. ($3.2 million increase), and Altor ($27.7 million increase). The increase in net revenue at Altor was attributable to the acquisition of Lifoam in October 2024. These increases in net revenue were offset by decreases in net revenue at BOA ($1.7 million decrease), Arnold ($8.4 million decrease), and Sterno ($11.7 million decrease). Refer to "Results of Operations - Operating Segments - Quarter-to-Date" for a more detailed analysis of net revenues by operating segment.
Current wording
Consolidated net revenues for the three months ended March 31, 2026 decreased by approximately $26.9 million, or 5.9%, compared to the corresponding period in 2025. During the three months ended March 31, 2026 compared to 2025, we saw notable increases in net revenues at BOA ($3.2 million increase), The Honey Pot Co. ($9.0 million increase), and Arnold ($6.2 million increase). These increases in net revenue were offset by decreases in net revenue at 5.11 ($5.4 million decrease) and Altor ($11.6 million decrease). Lugano recognized $26.8 million in revenue in the quarter ended March 31, 2025 which was nonrecurring due to the Lugano bankruptcy in November 2025. Refer to "Results of Operations - Operating Segments - Year-to-Date" for a more detailed analysis of net revenues by operating segment.
Previous wording
On a consolidated basis, gross profit increased approximately $11.1 million during the three months ended September 30, 2025 compared to the corresponding period in 2024. We saw increases in gross profit at 5.11 ($2.5 million increase), Lugano ($5.4 million increase), The Honey Pot Co. ($2.3 million increase), Altor ($4.1 million increase due to the timing of the Lifoam acquisition) and Sterno ($1.2 million increase). We saw decreases in gross profit at BOA ($0.4 million decrease) and Arnold ($4.3 million decrease) that corresponded to the decrease in net revenue noted above. Gross profit as a percentage of net revenues was approximately 44.0% in the three months ended September 30, 2025 compared to 43.1% in the three months ended September 30, 2024. The increase in gross profit as a percentage of net revenue in the quarter ended September 30, 2025 as compared to the quarter ended September 30, 2024 is driven by the increase in gross margin at our consumer businesses during the quarter. Our branded consumer businesses had gross profit as a percentage of net revenues of 55.3% in the third quarter of 2025 as compared to 53.4% in the third quarter of 2024, while our industrial businesses had gross profit as a percentage of net revenues of 27.2% in the third quarter of 2025 as compared to 27.8% in the third quarter of 2024. The decrease in gross profit as a percentage of net revenues at our indus trial businesses was attributable to higher fixed overhead costs absorbed on a lower revenue base at the legacy Altor business (exclusive of Lifoam) and at Arnold.
Current wording
Gross profit as a percentage of net revenues was 44.4% in the three months ended March 31, 2026 and 43.2% the three months ended March 31, 2025. Our branded consumer businesses had gross profit as a percentage of net revenues of 57.3% in the three months ended March 31, 2026 as compared to 54.9% in the three months ended March 31, 2025, with increases at each of our branded consumer business quarter over quarter. Our industrial businesses had gross profit as a percentage of net revenues of 24.8% in the three months ended March 31, 2026 as compared to 24.7% in the three months ended March 31, 2025. The decrease in gross profit as a percentage of net revenues at our indus trial businesses was attributable to higher fixed overhead costs absorbed on a lower revenue base at Altor, offset by improved gross margins at Arnold and Sterno during the quarter.
Previous wording
For the quarter ended September 30, 2025, we recorded $2.3 million in other expense as compared to $37.8 million in other expense in the quarter ended September 30, 2024, a decrease in expense of $35.4 million. The other expense in the quarter ended September 30, 2024 primarily represents expense recognized at Lugano related to losses resulting fromthe accounting for the transactions associated with the off-balance sheet arrangements ($37.7 million in expense in the three months ended September 30, 2024). A significant portion of the expense associated with the Lugano financing arrangements was recognized in the historical restatement period (the years ending December 31, 2024, 2023 and 2022) which resulted in limited impact in the current year. Other income (expense) typically reflects the movement in foreign currency at our subsidiary businesses with international operations, gains or (losses) realized on the sale of property, plant and equipment, and expenses incurred or income earned that are not considered a part of our operations.
Current wording
For the three months ended March 31, 2026, other income was $7.7 million, an increase of $21.4 million as compared to $13.7 million in other expense in the three months ended March 31, 2025. Other income (expense) typically reflects the movement in foreign currency at our subsidiary businesses with international operations, gains or (losses) realized on the sale of property, plant and equipment, and expenses incurred or income earned that are not considered a part of our operations. In the current year, other income includes the proceeds from the sale-leaseback transaction completed by Altor in the first quarter, offset by a finance charge at the corporate entity related to Lugano. The other expense in the three months ended March 31, 2025 primarily represents expense recognized at Lugano related to losses resulting fromthe accounting for the transactions associated with the off-balance sheet arrangements ($13.8 million in expense in the three months ended March 31, 2025).
Previous wording
We had an income tax provision of $5.8 million during the three months ended September 30, 2025 compared to an income tax provision of $2.8 million during the same period in 2024, an increase of $3.0 million. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. In the current quarter, the Trust recognized approximately $9.9 million related to income from the tax effect of the Indenture Forbearance Agreement. In addition to state income taxes, the item with the most significant impact on the difference between our statutory U.S. federal income tax rate of 21% and our effective income tax rate was the limitations on the net operating loss carryforwards and utilization of tax credits at our subsidiaries and at the Trust.
Current wording
We had an income tax provision of $7.1 million during the three months ended March 31, 2026 compared to an income tax provision of $2.5 million during the same period in 2025, an increase of $4.5 million due to the reduction in the loss from continuing operation before income taxes. Our effective tax rate in the three months ended March 31, 2026 was 29.7%, compared to an effective income tax rate of 5.4% during the same period in 2025. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. In the current year, the effe ctive tax rate was impacted by the goodwill impairment at PrimaLoft, the effect of foreign taxes and changes in valuation allowances.
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Three months ended September 30, 2025 compared to three months ended September 30, 2024 (as restated)
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Three months ended March 31, 2026 compared to three months ended March 31, 2025
Previous wording
Net sales for the nine months ended September 30, 2025 were $141.2 million as compared to net sales of $142.7 million for the nine months ended September 30, 2024, a decrease of $1.5 million, or 1.0%. Sales increased across key industries including Cycling, Workwear, Helmets, Outdoor, and Snow Sports, offset by reduced kids-based business in China. This continued momentum was primarily a result of market share gains in many of BOA's key industries.
Current wording
Net sales for the three months ended March 31, 2026 were $52.1 million as compared to net sales of $48.9 million for the three months ended March 31, 2025, an increase of $3.2 million, or 6.6%. BOA adult premium performance sales increased across key industries including Cycling, Workwear, Outdoor, and Snow Sports, offset by reduced kids-based business in China. This continued momentum was primarily a result of market share gains in many of BOA's key industries.
Previous wording
We generate cash primarily from the operations of our subsidiaries, and we have the ability to borrow under our 2022 Credit Facility to fund our operating, investing and financing activities. Our principal uses of cash are operating expenses, payment of management fees, capital expenditures, working capital needs, debt service, dividends on the preferred shares of the Trust, and strategic growth initiatives, including potential acquisitions. In connection with the Lugano Investigation, we have incurred unanticipated costs for accounting, financing and legal fees in connection with the restatements, including those associated with our entry into forbearance agreements with respect to our credit agreement and indentures due to potential defaults or events of default thereunder. We expect to continue to incur costs, including financing and legal fees related to our financing arrangements and costs related to ongoing securities litigation, resulting from the Lugano Investigation and the restatement of our previously issued financial statements.
Current wording
We generate cash primarily from the operations of our subsidiaries, and we have the ability to borrow under our 2022 Credit Facility to fund our operating, investing and financing activities. Our principal uses of cash are operating expenses, management fees, capital expenditures, working capital needs, debt service, distributions on the preferred shares of the Trust and strategic growth initiatives, including acquisitions. In connection with the Lugano Investigation and the restatement of our previously issued financial statements, we incurred significant accounting, financing, legal and other professional costs, including costs related to litigation, governmental investigations, financing arrangements and internal control remediation. We also expect to continue to incur costs associated with ongoing securities litigation, derivative litigation, governmental investigations and efforts to remediate and strengthen internal controls.
Previous wording
At September 30, 2025, we had approximately $61.1 million of cash and cash equivalents on hand, an increase of $1.5 million as compared to the year ended December 31, 2024. The majority of our cash is in non-interest bearing checking accounts or invested in short-term money market accounts and is maintained in accordance with the Company’s investment policy, which identifies allowable investments and specifies credit quality standards. Net availability under the 2022 Revolving Credit Facility after giving effect to the Third Amendment and during the Second Forbearance Period at September 30, 2025 was $30.0 million.
Current wording
At March 31, 2026, we had approximately $65.2 million of cash and cash equivalents on hand, a decrease of $2.8 million as compared to the year ended December 31, 2025. The majority of our cash is held in non-interest bearing checking accounts or invested in short-term money market accounts in accordance with the Company’s investment policy, which identifies allowable investments and specifies credit quality standards.
Previous wording
Below is a summary of the change in cash and cash equivalents for the nine months ended September 30, 2025 and 2024 is as follows :
Current wording
Below is a summary of the change in cash and cash equivalents for the three months ended March 31, 2026 and 2025 is as follows :
Previous wording
For the nine months ended September 30, 2025, cash flows used in operating activities totaled approximately $53.8 million, which represents a $81.1 million decrease in cash use compared to cash used in operating activities of $135.0 million during the nine-month period ended September 30, 2024. Cash used in operating activities for working capital for the nine months ended September 30, 2025 was $12.5 million, as compared to cash used in operating activities for working capital of $31.7 million for the nine months ended September 30, 2024. We typically have a higher usage of cash for working capital in the first half of the year as most of our subsidiaries will build up inventories after the fourth quarter of the prior year. The decrease in cash used for working capital in the current year primarily reflects the impact of the Lugano Investigation on inventory purchases at Lugano. In the prior year, Lugano had higher levels of inventory purchases (as restated) while in the current year, there was limited inventory purchases after the Lugano Investigation began in April 2025. Working capital usage at the Company's other eight operating segments was consistent with the prior year.
Current wording
For the three months ended March 31, 2026, net cash provided by operating activities totaled approximately $23.9 million, which represents a $53.3 million decrease in cash use compared to cash used in operating activities of $29.3 million during the three-month period ended March 31, 2025. This change reflects improvements in operating results and other operating cash flow drivers, including working capital activity. Cash provided by working capital for the three months ended March 31, 2026 was $7.7 million, as compared to cash used for working capital of $12.6 million for the three months ended March 31, 2025. We typically use more cash for working capital in the first half of the year as we build inventories following the fourth quarter of the prior year. During the prior year period, we accelerated certain inventory receipts ahead of anticipated tariff implementations, which increased inventory levels and contributed to higher working capital cash outflows. Exclusive of inventory, working capital usage at the LLC and the Company’s other operating segments was generally consistent with the prior year. The prior period working capital usage also reflects the operating activities of Lugano, which is no longer an operating segment of the Company after filing for bankruptcy in November 2025.
Previous wording
Cash flows used in investing activities for the nine months ended September 30, 2025 totaled $33.1 million, compared to cash used in investing activities of $352.3 million in the same period of 2024. In the prior year, cash used in investing activities reflects our acquisition of The Honey Pot Co. in January 2024 and the proceeds of $58.5 million from the sale of the Crosman division of Velocity Outdoor, while investing activities in the current year is primarily capital expenditures. Capital expenditures spend increased $0.3 million during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, with $34.2 million in capital expenditures in 2025 and $33.8 million in capital expenditures in 2024. We expect capital expenditures for the full year of 2025 to be between approximately $50 million to $60 million.
Current wording
Cash flows provided by investing activities for the three months ended March 31, 2026 totaled $6.2 million, compared to cash used in investing activities of $12.9 million in the same period of 2025. In the current year, cash provided by investing activities reflects cash proceeds from a sale leaseback transaction that occurred in the first quarter at our Altor business. The remainder of investing activities in the current year and investing activities in the prior year is primarily capital expenditures. Capital expenditures decreased $8.0 million during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, with $5.1 million in capital expenditures in 2026 and $13.1 million in capital expenditures in 2025. Capital expenditures in the prior year included expenditures at Lugano, which is no longer an operating segment of the Company after filing for bankruptcy in November 2025, and higher than usual capital expenditures at Arnold as they relocated two of their product divisions to a new facility in the United States. We expect capital expenditures for the full year of 2026 to be approximately $30 million to $40 million.
Previous wording
Cash flows provided by financing activities totaled approximately $86.1 million during the nine months ended September 30, 2025 compared to cash flows provided by financing activities of $108.3 million during the nine months ended September 30, 2024. Financing activities in the current year reflects $58.9 million in Trust preferred shares issued under our at-the-market share offering program while financing activities in the first nine months of 2024 reflects $35.0 million in Trust common and preferred shares issued under our at-the-market share offering program. In the current year, we added an additional $200 million in outstanding term loan, a portion of which was used to repay amounts outstanding under our revolving credit facility. The total net borrowings under the credit facility in the nine months ended September 30, 2025 were $81 million. In the prior year comparable period, we had net borrowings under the credit facility of $46 million. The prior year cash provided by financing activities also reflects the amount of equity investment made by noncontrolling shareholders related to the acquisition of The Honey Pot Co. ($41.7 million). Financing activities in both periods reflect the payment of our preferred share distributions, and prior period financing cash flows includes the payment of the profit allocation from the sale of Marucci to the Allocation Interest Holders of $48.9 million. Financing Activities also reflect payment of the Company's common share distribution of $37.6 million in the nine months ended September 30, 2025 and $56.6 million in the nine months ended September 30, 2024. In the current year, the Company suspended common share distributions in May, therefore no common distribution was made subsequent to May 2025.
Current wording
Cash flows used by financing activities totaled approximately $32.8 million during the three months ended March 31, 2026 compared to cash flows provided by financing activities of $128.2 million during the three months ended March 31, 2025. Financing activities in the current year reflected repayments of term loans under the 2022 Credit Facility of $18.5 million, payment of the Trust preferred share distribution of $9.7 million and transactions with noncontrolling shareholders at the Company's subsidiaries. In the prior year, we added an additional $200 million in outstanding term loan, a portion of which was used to repay amounts outstanding under our revolving credit facility. Financing activities in the first three months of 2025 also reflects $58.1 million in proceeds from the issuance of Trust preferred shares, the payment of the Company's preferred share distribution of $8.4 million and the payment of the Company's common share distribution of $18.8 million. The Company suspended common share distributions in May 2025, therefore no common distribution was made subsequent to May 2025.
Previous wording
Our Lugano business entered into various financing arrangements with third parties that resulted in debt being recorded. In the six months ended September 30, 2025 and 2024, the net cash flows provided by these financing arrangements totaled $18.6 million and $57.4 million, respectively.
Current wording
Our Lugano business entered into various financing arrangements with third parties that resulted in debt being recorded. In the three months ended March 31, 2025, the net cash flows provided by these financing arrangements totaled $15.6 million.
Previous wording
In the third quarter of 2024, we amended the Arnold intercompany credit agreement to increase the amount of the term loan outstanding under the credit agreement. Arnold was in the process of relocating two of their product divisions to a new facility at the time of the amendment. Arnold incurred total expense of approximately $13.0 million in the year ended December 31, 2024, and an additional $0.9 million in costs in the first quarter of 2025 related to the relocation of the two facilities. Arnold exceeded the capital expenditure spend that was permitted under the amendment and was granted a waiver at December 31, 2024, March 31, 2025 and June 30, 2025. At September 30, 2025, Arnold was not in compliance with the fixed charge coverage ratio and leverage ratio covenants contained within its intercompany credit agreement. In the fourth quarter of 2025, we amended the Arnold credit agreement to increase the amount of availability under the revolving credit facility and to waive the covenant violations at September 30, 2025.
Current wording
At September 30, 2025, Arnold was not in compliance with the fixed charge coverage ratio and leverage ratio covenants contained within its intercompany credit agreement. In the fourth quarter of 2025, we amended the Arnold credit agreement to increase the amount of availability under the revolving credit facility and to waive the covenant violations that existed as of September 30, 2025. Arnold was not in compliance with the fixed charge coverage ratio and leverage ratio covenants contained within its intercompany credit agreement at December 31, 2025, and was not in compliance with the fixed charge coverage ratio at March 31, 2026 and was granted a waiver for the covenant violations in each period.
Previous wording
In the first quarter of 2025, we amended the Velocity intercompany credit agreement to amend the applicable fixed charge coverage ratio covenant and the applicable Total Debt to EBITDA ratio covenant. Velocity was not in compliance with the fixed charge coverage ratio or leverage ratio in their intercompany credit agreement at September 30, 2025 and was granted a waiver for the covenant violations.
Current wording
In the first quarter of 2025, we amended the Velocity intercompany credit agreement to amend the applicable fixed charge coverage ratio covenant and the applicable Total Debt to EBITDA ratio covenant. Velocity was not in compliance with the fixed charge coverage ratio or leverage ratio in their intercompany credit agreement at September 30, 2025, December 31, 2025 and March 31, 2026 and was granted a waiver for the covenant violations in each period.
Previous wording
All of our subsidiaries were in compliance with the financial covenants included within their intercompany credit arrangements at September 30, 2025 except Lugano, Velocity and Arnold. Velocity and Arnold received waivers related to the fixed charge ratio and leverage ratio covenants in their intercompany credit agreement. As a result of the restatement of Lugano's historical financial information, Lugano was not in compliance with the covenants in its intercompany credit agreement with the Company at March 31, 2025. On June 6, 2025, the Company issued a Notice of Default to Lugano for failure to comply with the intercompany credit agreement (the "Lugano Defaults"). On August 29, 2025, the Company entered into a forbearance agreement with Lugano (the Lugano Forbearance Agreement"). In accordance with the Lugano Forbearance Agreement, as amended, the Company agreed to forbear from exercising its rights and remedies as a lender under the Lugano intercompany credit agreement due to the Lugano Defaults. The Lugano Forbearance Agreement, as amended, was in effect until November 16, 2025 when Lugano filed for bankruptcy protection.
Current wording
All of our subsidiaries were in compliance with the financial covenants under their intercompany credit arrangements at March 31, 2026 except Velocity and Arnold, each of which received waivers for the applicable covenant violations.
Previous wording
Net availability under the 2022 Revolving Credit Facility after giving effect to the First Forbearance Agreement and during the First Forbearance Period was approximately $30.0 million at September 30, 2025. The outstanding borrowings under the 2022 Revolving Credit Facility include $4.0 million of outstanding letters of credit at September 30, 2025, which are not reflected on our balance sheet.
Current wording
Net availability under the 2022 Revolving Credit Facility after giving effect to the Fifth Amendment was approximately $99.1 million at March 31, 2026. The outstanding borrowings under the 2022 Revolving Credit Facility include $0.9 million of outstanding letters of credit at March 31, 2026, which are not reflected on our balance sheet.
Previous wording
(1) Other interest expense includes interest amounts related to Lugano financing arrangements.
Current wording
(1) Other interest expense in the three months ended March 31, 2025 includes interest amounts related to Lugano financing arrangements.
Previous wording
For the three and nine months ended September 30, 2025 and 2024, the Company incurred the following management fees to CGM, by entity:
Current wording
For the three months ended March 31, 2026 and 2025, the Company incurred the following management fees to CGM, by entity:
Previous wording
(1) Lugano ceased paying a management fee to CGM upon the Lugano Event of Default (as previously defined) in June 2025.
Current wording
(1) Lugano ceased paying a management fee to CGM in June 2025.
Previous wording
As a result of the restatement of the financial statements as of December 31, 2024, 2023 and 2022 and for the years ended December 31, 2024, 2023 and 2022, as well as for the period ended December 31, 2021 and revisions made in the quarter ended March 31, 2025, the management fees paid to CGM were in excess of the amounts that should have been due under the MSA. While the MSA does not contain an express mechanism that permits the Company to immediately clawback the overpayment of management fees during the aforementioned periods, the MSA provides that future payments under the MSA will be reduced, on a dollar-for-dollar basis, by the aggregate amount of all overpaid management fees. The Company estimated the aggregate amount of overpaid management fees as of March 31, 2025 was approximately $42.7 million, which amount will reduce future payments on a dollar-for-dollar basis. The Company's board of directors intends to direct the Company to pursue its right to recover all such excess management fees paid to the Manager as soon as is reasonably practicable in light of the facts and circumstances.
Current wording
As a result of the restatement of the financial statements as of December 31, 2024, 2023 and 2022 and for the years ended December 31, 2024, 2023 and 2022, as well as for the period ended December 31, 2021 and revisions made in the quarter ended March 31, 2025, the management fees paid to CGM were in excess of the amounts that should have been due under the MSA. While the MSA did not, prior to the MSA amendment, contain an express mechanism that permitted the Company to immediately clawback the overpayment of management fees during the aforementioned periods, the MSA provided that future payments under the MSA would be reduced, on a dollar-for-dollar basis, by the aggregate amount of all overpaid management fees. The Company calculated the total aggregate amount of excess management fees paid as a result of the restatement of the financial statements as$50.4 million. In 2025, restrictions in the Company’s forbearance and amendment arrangements under the 2022 Credit Facility limited the Company’s ability to pay management fees, resulting in management fee expense being incurred but not fully paid. As a result, the Company determined that the amount of management fees that had been overpaid at December 31, 2025 was $33.8 million, which was recorded as an asset (“Due from CGM”) and reduced management fee expense for the year ended December 31, 2025. For the three months ended March 31, 2026, the Company recorded management fee expense of $15.9 million. During the quarter, the Company applied the MSA’s repayment and netting provisions and, beginning February 23, 2026, the repayment protocol and elective interim funding mechanics under the MSA Amendment (including the Company’s ability, subject to interest, to pay all or a portion of the quarterly management fee otherwise payable while an overpayment balance remains outstanding). As of March 31, 2026, the Due from CGM balance of$11.5 million reflects amounts due from CGM, net of management fees accrued and amounts paid (or funded) in accordance with the MSA Amendment, and the Company expects to continue to reduce future management fee payments until the overpayment has been fully recouped.
Previous wording
At the time of our Initial Public Offering, we issued Allocation Interests governed by our LLC agreement that entitled the holders (the "Holders") to receive distributions pursuant to a profit allocation formula upon the occurrence of certain events. The Holders are entitled to receive, if due pursuant to the profit allocation formula, an allocation payment upon the sale of a business (a "Sale Event") and upon election of the Holder during the 30-day period following the fifth anniversary of the date upon which we acquired a controlling interest in a business (a "Holding Event"). Payments of profit allocation to the Holders are accounted for as dividends declared on Allocation Interests and recorded in stockholders' equity once they are approved by the Company’s board of directors.
Current wording
We have issued Allocation Interests, governed by our LLC agreement, to Sostratus, LLC (the "Holder") to receive distributions pursuant to a profit allocation formula upon the occurrence of certain events. The Holder is entitled to receive, if due pursuant to the profit allocation formula, an allocation payment upon the sale of a business (a "Sale Event") and upon election of the Holder during the 30-day period following the fifth anniversary of the date upon which we acquired a controlling interest in a business (a "Holding Event"). Payments of profit allocation to the Holder are accounted for as dividends declared on Allocation Interests and recorded in stockholders' equity once they are approved by the Company’s board of directors.
Previous wording
The Lugano Bankruptcy will be a Sale Event and any corresponding loss on such Sale Event will have the effect of reducing future allocation payments. The LLC Agreement also contains a mechanism to adjust future profit allocation payments by over-paid and under-paid profit distributions. The Company intends to cause future allocation payments to be adjusted, as necessary, to reflect the impact of the restatement of the Company’s financial statements as described in the 2024 Form 10-K/A.
Current wording
The Lugano Bankruptcy was a Sale Event and any corresponding loss on such Sale Event will have the effect of reducing future allocation payments. The LLC Agreement also contains a mechanism to adjust future profit allocation payments by over-paid and under-paid profit distributions. The Company intends to cause future allocation payments to be adjusted, as necessary, to reflect the impact of the restatement of the Company’s financial statements.
Previous wording
Related Party Vendor Purchases -5.11 purchases inventory from a vendor who is a related party to 5.11 through one of the executive officers of 5.11 via the executive's 40% ownership interest in the vendor. 5.11 purchased approximately $0.3 million and $0.8 million during the three and nine months ended September 30, 2025, respectively and approximately $0.4 million and $1.0 million during the three and nine months ended September 30, 2024, respectively in inventory from the vendor.
Current wording
Related Party Vendor Purchases -5.11 purchases inventory from a vendor who is a related party to 5.11 through one of the executive officers of 5.11 via the executive's 40% ownership interest in the vendor. 5.11 purchased approximately $0.1 million and $0.2 million during the three months ended March 31, 2026 and March 31, 2025, respectively in inventory from the vendor.
Previous wording
Related Party Vendor Purchases -A contract manufacturer used by BOA as the primary supplier of molded injection parts is a noncontrolling shareholder of BOA. BOA purchased approxim ately $10.1 million and $33.2 million from this supplier during the three and nine months ended September 30, 2025, respectively and approxim ately $11.7 million and $35.9 million from this supplier during the three and nine months ended September 30, 2024, respectively.
Current wording
Related Party Vendor Purchases -A contract manufacturer used by BOA as the primary supplier of molded injection parts is a noncontrolling shareholder of BOA. BOA purchased approxim ately $11.1 million and $12.0 million from this supplier during the three months ended March 31, 2026 and March 31, 2025, respectively.
Previous wording
Except as set forth below, our critical accounting estimates have not changed materially from those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2024 Form 10-K/A.
Current wording
Except as set forth below, our critical accounting estimates have not changed materially from those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2025 Form 10-K.
Showing the first 40 of 41 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
(1) Other represents non-recurring operating expenses that are included by management in the calculation of Adjusted EBITDA when analyzing monthly operating results of our subsidiaries.
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
The following table sets forth our unaudited results of operations for the periods indicated, in dollars and as a percentage of net revenues:
Previous report — wording carried elsewhere
We do not generate any revenues apart from those generated by our subsidiaries. We may generate interest income on the investment of available funds, but expect such earnings to be minimal. We make loans from the Company to our subsidiary businesses and also hold equity interests in those businesses. Cash flows coming to the Trust and the LLC are the result of interest payments on those loans, amortization of those loans and additional principal payments on those loans. However, on a consolidated basis, these items will be eliminated.
Previous report — wording carried elsewhere
Refer to "Note O - Related Party Transactions" in the "Notes to the Condensed Consolidated Financial Statements" for a description of the effect of the restatement on the Management Fees.
Previous report — wording carried elsewhere
For the nine months ended September 30, 2025, we recorded $14.3 million in other expense as compared to $125.9 million in other expense in the nine months ended September 30, 2024, a decrease in expense of $111.5 million. Other income (expense) typically reflects the movement in foreign currency at our subsidiary businesses with international operations, gains or (losses) realized on the sale of property, plant and equipment, and expenses incurred or income earned that are not considered a part of our operations. The other expense in the nine months ended September 30, 2024 primarily represents expense recognized at Lugano related to losses resulting fromthe accounting for the transactions associated with the off-balance sheet arrangements ($121.5 million in expense in the nine months ended September 30, 2024). A significant portion of the expense associated with the Lugano financing arrangements was recognized in the historical restatement period (the years ending December 31, 2024, 2023 and 2022) which resulted in limited impact in the current year, primarily in the first quarter of 2025. In the nine months ended September 30, 2024, the expense reflected a non-recurring loss on an equity method investment at Altor Solutions.
Previous report — wording carried elsewhere
We had an income tax provision of $25.7 million during the nine months ended September 30, 2025 compared to an income tax provision of $21.5 million during the same period in 2024, an increase of $4.2 million due to the increase in income from continuing operation before income taxes. Our effective tax rate in the nine months ended September 30, 2025 was (13.4)%, compared to an effective income tax rate of (9.1)% during the same period in 2024. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. In the current year, the Trust recognized approximately $9.9 million related to income from the tax effect of the Indenture Forbearance Agreement. In addition to state income taxes, the items with the most significant impact on the difference between our statutory U.S. federal income tax rate of 21% and our effective income tax rate in the nine months ended September 30, 2025 was state income taxes and the limitations on the net operating loss carryforwards and utilization of tax credits at our subsidiaries, while in the prior year, the most significant impact on the effective tax rate was the impairment expense recognized at Velocity in the first quarter of 2024, the loss on the sale of Crosman in the second quarter of 2024 and the limitations on the net operating loss carryforwards and utilization of tax credits at our subsidiaries.
Previous report — wording carried elsewhere
For our annual impairment testing at March 31, 2024, we performed a qualitative assessment of our reporting units. The results of the qualitative analysis indicated that it was more-likely-than-not that the fair value of each of our reporting units except Velocity exceeded their carrying value. Based on our analysis, we determined that the Velocity operating segment required quantitative testing because we could not conclude that the fair value of this reporting unit significantly exceeded the carrying value based on qualitative factors alone. We performed a quantitative test of Velocity and the results of the testing indicated that the fair value of Velocity did not exceed the carrying value, resulting in goodwill impairment expense of $8.2 million as of March 31, 2024, which represented the remaining balance of goodwill at Velocity.